[Please refer to Appendix. Verizon Communications, Inc. (VZ) Competition Weighing on Revenue, but Cash Flow Solid RAISING PRICE TARGET

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1 July 26, 2016 Baird Equity Research Connected Technology Verizon Communications, Inc. (VZ) Competition Weighing on Revenue, but Cash Flow Solid Maintain Neutral rating. This morning, Verizon reported mixed Q2 financial and operating results, though maintained full year guidance. Importantly, the cash flow outlook remains solid, with the company betting on a return to GDP like revenue growth in We remain constructive on the solid cash flow and dividend yield, but with fierce wireless and wireline competition, coupled with valuation, we are maintaining our Neutral rating. RAISING PRICE TARGET 1-Year Price Chart Q2 financials mixed. Consolidated Q2 revenue of $30.5 billion missed our $30.9 billion estimate and consensus due to lower equipment sales, though adjusted EPS of $0.94 beat our $0.90 forecast due to higher wireless margins. Wireless growth weaker. VZ added 615,000 retail postpaid subscribers, below our 872,758 estimate. Results included 86,000 phone net additions, better than AT&T but below Sprint and expected results from T-Mobile. Wireless margins strong. Segment wireless EBITDA margins of 47.5% compared with 43.9% a year ago. Lower smartphone sales a driver. Total retail device activations of 9.5 million compared with 11.3 million a year ago. VZ noted that it expects 2H'16 smartphone volumes to be similar to Strike impacts wireline. Strike related costs negatively impacted EPS by roughly $0.07, and also resulted in weaker FiOS results. VZ lost 13,000 FiOS Internet customers and 41,000 FiOS TV customers. Labor savings update. Verizon expects the recent union agreement to generate $500 million in cash savings over the life of the contract. Pension funding. VZ noted that it expects minimum pension funding requirements of $550 million this year guidance largely reiterated. VZ continues to expect flat EPS YOY, though now excluding the $0.07 strike impact, with capex of $ billion. VZ expects revenue growth to return to GDP levels in G coming in 2017? Verizon plans to press forward with further 5G tests in 2017, with commercial deployments beginning in either late 2017 or early Yahoo! comments. VZ plans to become a major player in digital advertising, with significant growth in the future. We acknowledge the opportunity, though it will face a tough battle against Google and Facebook. Revised forecasts. Forecast 2016 and 2017 adjusted EPS of $3.91 and $4.10, unchanged from our previous estimates. Valuation update. VZ is currently trading at 7.1x our 2016 EBITDA forecast and 6.8x 2017, vs. the Telco average of close to 7x A-15 S O-15 Stock Data N-15 D-15 J-16 Rating: Neutral Suitability: Average Risk Price Target/Previous: $55/$54 Price (7/26/16): $54.74 Market Cap (mil): $223,613 Shares Out (mil): 4,085.0 Average Daily Vol (mil): Dividend Yield: 4.1% Estimates FY Dec 2015A 2016E 2017E Q A 1.06 A Q A 0.94 A Q A 1.01 E Q A 0.91 E Fiscal EPS 3.99 A 3.91 E 4.10 E Fiscal P/E 13.7x 14.0x 13.4x Chart/Table Sources: FactSet and Baird Data. Price chart reflects most recent closing price. F-16 M-16 A-16 M-16 J-16 J-16 Verizon Communications is the largest wireless carrier in the U.S. [Please refer to Appendix - Important Disclosures and Analyst Certification] William V. Power, CFA Sr. Research Analyst wpower@rwbaird.com Charles Erlikh Research Analyst cerlikh@rwbaird.com

2 Details Valuation Current valuation. VZ is currently trading at 7.1x our 2016 EBITDA forecast and 6.8x 2017, vs. the Telco average of close to 7x Target price. Our revised $55 target price is based on 6.7x our 2017 EBITDA forecast, which puts it roughly in line with the wider Telco group. Revised Forecasts Q3'16 Estimates ($000s) Estimates Previous % Change Revenue Wireless $22,242,118 $22,712, % Wireline $7,546,607 $7,842, % Total Revenue $30,850,424 $31,391, % Adjusted EBITDA 11,606,281 11,667, % EBITDA Margin 37.6% 37.2% 40 bps Adjusted Operating Income 7,583,981 7,695, % Operating Margin 24.6% 24.5% 10 bps Adjusted Operating EPS $1.01 $ % Wireless Postpay Net Adds 908,070 1,344, % FiOS Video Net Adds 19,740 19, % Total Broadband Net Adds 3,480 3, % Total Access Lines 14,229,880 13,843, % Source: Estimates 2016 Estimates ($000s) Estimates Previous % Change Revenue Wireless $89,264,829 $90,775, % Wireline $32,189,279 $32,903, % Total Revenue $125,660,568 $127,335, % Adjusted EBITDA 45,679,668 45,720, % EBITDA Margin 36.4% 35.9% 50 bps Adjusted Operating Income 29,628,818 29,801, % Operating Margin 23.6% 23.4% 20 bps Adjusted Operating EPS $3.91 $ % Wireless Postpay Net Adds 3,243,178 4,078, % FiOS Video Net Adds 33,740 48, % Total Broadband Net Adds (93,340) (154,740) NM Total Access Lines 13,983,960 13,597, % Source: Estimates 2

3 Q2 Summary Q2 Summary Q2'16A Year-Ago % Change Estimate % Change Revenue W ireless $21,704,000 $22,613, % $22,147, % W ireline $7,823,000 $9,423, % $7,937, % Total Revenue $30,532,000 $32,224, % $30,932, % Adjusted EBITDA 11,079,000 11,801, % 10,943, % EBITDA Margin 36.3% 36.6% (30 bps) 35.4% 90 bps Adjusted Operating Income 7,097,000 7,821, % 6,988, % Operating Margin 23.2% 24.3% (100 bps) 22.6% 60 bps Adjusted EPS $0.94 $ % $ % W ireless Postpay Net Adds 615,000 1,134, % 872, % FiOS Video Net Adds (41,000) 26,000 NM (26,000) NM Total Broadband Net Adds (83,000) (25,000) NM (144,400) NM Total Access Lines 14,476,000 19,079, % 18,141, % Source: Estimates Investment Thesis Industry competition taking toll. Although Verizon continues to lead the industry on most metrics, the highly competitive wireless environment is taking a toll. Retail postpay ARPA continues to decline. Shifting away from subsidies. In Q2, 67% of new customers signed up with equipment installment plans, compared to 68% in Q1. Data demand driving consolidated revenue growth. The adoption of connected devices like smartphones, tablets, and MiFi devices is fueling increased data usage and should be a driver of revenue growth going forward. New initiatives in content and advertising. Verizon's Go90 video product and its acquisitions of Yahoo and AOL point to new opportunities in content and advertising, which could become material opportunities over the long-run. Best-in-class wireless performance. Verizon has both the best collection of wireless assets and the best wireless financial performance in the group. With 500 LTE markets launched, and more than 305 million POPs under coverage, Verizon leads in overall LTE coverage. This has translated into postpay churn at 0.94% in Q2'16 Risks & Caveats Regulatory. The regulatory environment remains difficult to forecast, and can significantly impact results. Slowing wireless industry growth. With U.S. wireless penetration now over 100%, we expect industry subscriber growth to continue to slow and for competitive pressures to continue to increase. 3

4 Competition. The company's wireline business faces competition from competitive local exchange carriers, wireless carriers, and cable operators. Verizon Wireless competes against an average of five competitors in each of its larger markets. Company Description Headquartered in NYC, Verizon is the largest wireless carrier in the U.S. Verizon was formed on June 30, 2000, with the merger of Bell Atlantic, one of the original seven RBOCs, and GTE, the largest independent phone company at the time. The company has over 107 million retail postpay wireless customers and serves over 14 million wireline voice lines. 4

5 BAIRD 777 EAST WISCONSIN AVENUE MILWAUKEE, WI Senior Research Analyst: William V. Power, CFA (214) Verizon Communications Income Statement ($000, Except per-share amounts) Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Year (03/31) (06/30) (09/30) (12/31) (03/31) (06/30) (09/30) (12/31) Act. Act. Act. Act. Act. Act. Act. Act. Est. Est. Est. Est. Revenue Wireless 87,646,000 22,328,000 22,613,000 23,005,000 23,734,000 91,680,000 22,004,000 21,704,000 22,242,118 23,314,711 89,264,829 90,715,944 Wireline 38,429,000 9,469,000 9,423,000 9,355,000 9,473,000 37,720,000 9,290,000 7,823,000 7,546,607 7,529,672 32,189,279 31,086,737 Other 1,004, , , ,000 1,047,000 2,220, ,000 1,005,000 1,061,700 1,262,760 4,206,460 4,725,449 Total Revenue 127,079,000 31,984,000 32,224,000 33,158,000 34,254, ,620,000 32,171,000 30,532,000 30,850,424 32,107, ,660, ,528,130 YOY Growth Wireless 8.2% 6.9% 5.3% 5.4% 1.2% 4.6% -1.5% -4.0% -3.3% -1.8% -2.6% 1.6% Wireline -0.5% -2.0% -2.2% -2.3% -0.9% -1.8% -1.6% -2.4% -6.6% -6.5% -4.0% -3.4% Total Revenue 5.4% 3.8% 2.4% 5.0% 3.2% 3.6% 0.6% -5.3% -7.0% -6.3% -4.5% 0.7% GAAP Expenses Cost of Services and Sales 49,931,000 12,096,000 12,449,000 13,305,000 14,707,000 52,557,000 12,612,000 12,221,000 12,031,834 13,457,793 50,322,627 49,400,582 Selling, General & Administrative 41,016,000 7,939,000 7,974,000 8,309,000 5,764,000 29,986,000 7,600,000 9,775,000 7,212,309 7,613,963 32,201,272 30,049,713 Depreciation & Amortization 16,533,000 3,989,000 3,980,000 4,009,000 4,039,000 16,017,000 4,017,000 3,982,000 4,022,300 4,054,550 16,075,850 16,159,043 Total Expenses 107,480,000 24,024,000 24,403,000 25,623,000 24,510,000 98,560,000 24,229,000 25,978,000 23,266,443 25,126,306 98,599,749 95,609,338 Adjusted EBITDA 43,600,000 11,949,000 11,801,000 11,544,000 11,033,000 46,327,000 11,959,000 11,079,000 11,606,281 11,035,387 45,679,668 47,077,835 Adjusted EBITDA Margin 34.3% 37.4% 36.6% 34.8% 32.2% 35.2% 37.2% 36.3% 37.6% 34.4% 36.4% 37.2% Adjusted Operating Income 26,733,000 7,960,000 7,821,000 7,535,000 6,994,000 30,310,000 7,967,000 7,097,000 7,583,981 6,980,837 29,628,818 30,918,792 Adjusted Operating Margin 21.0% 24.9% 24.3% 22.7% 20.4% 23.0% 24.8% 23.2% 24.6% 21.7% 23.6% 24.4% GAAP Operating Income 19,599,000 7,960,000 7,821,000 7,535,000 9,744,000 33,060,000 7,942,000 4,554,000 7,583,981 6,980,837 27,060,818 30,918,792 GAAP Operating Margin 15.4% 24.9% 24.3% 22.7% 28.4% 25.1% 24.7% 14.9% 24.6% 21.7% 21.5% 24.4% Other Expense Equity Income 1,780,000 (34,000) (18,000) (18,000) (16,000) (86,000) (20,000) (20,000) (18,750) (18,750) (77,500) (75,000) Other, net (1,194,000) 75,000 32,000 51,000 28, ,000 32,000 (1,826,000) - - (1,794,000) - Interest Expense, net (4,915,000) (1,332,000) (1,208,000) (1,202,000) (1,178,000) (4,920,000) (1,188,000) (1,013,000) (992,250) (1,017,250) (4,210,500) (4,089,000) Total Other Expense (4,329,000) (1,291,000) (1,194,000) (1,169,000) (1,166,000) (4,820,000) (1,176,000) (2,859,000) (1,011,000) (1,036,000) (6,082,000) (4,164,000) Adjusted Minority Interest (2,331,000) (119,000) (122,000) (133,000) (122,000) (496,000) (120,000) (129,000) (120,000) (120,000) (489,000) (480,000) Adjusted Income Before Income Taxes 15,270,000 6,669,000 6,627,000 6,366,000 5,828,000 28,240,000 6,791,000 4,238,000 6,572,981 5,944,837 20,978,818 26,754,792 Adjusted Provision for Income Taxes 6,547,860 2,334,150 2,274,000 2,195,000 2,082,399 8,885,549 2,344,631 2,160,255 2,333,408 2,110,417 8,948,712 9,497,951 Adjusted Net Income 14,226,250 4,215,850 4,231,000 4,241,900 3,623,601 16,312,351 4,326,369 3,827,845 4,119,573 3,714,420 15,988,207 16,776,841 GAAP Net Income 9,625,000 4,219,000 4,231,000 4,038,000 5,391,000 17,879,000 4,310, ,000 4,119,573 3,714,420 12,845,993 16,776,841 Adj. Operating EPS $3.42 $1.02 $1.04 $1.04 $0.89 $3.99 $1.06 $0.94 $1.01 $0.91 $3.91 $4.10 GAAP EPS $2.42 $1.02 $1.04 $0.99 $1.32 $4.37 $1.06 $0.17 $1.01 $0.91 $3.14 $4.10 Diluted Shares Outstanding 3,974,750 4,121,000 4,085,000 4,078,000 4,083,000 4,091,750 4,085,000 4,085,000 4,085,000 4,085,000 4,085,000 4,090,000 Source: Estimates, Company Data **2014 Estimates Pro Forma for the Vodafone Transaction 7/26/2016 5

6 BAIRD 777 EAST WISCONSIN AVENUE MILWAUKEE, WI Senior Research Analyst: William V. Power, CFA (214) Wireless Operating Metrics ($000, Except per-share amounts) Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Year (03/31) (06/30) (09/30) (12/31) (03/31) (06/30) (09/30) (12/31) Act. Act. Act. Act. Act. Act. Act. Act. Est. Est. Est. Est. Retail Postpay Gross Adds 17,795,564 3,727,862 3,919,968 4,420,310 4,565,334 16,633,475 3,717,266 3,645,809 4,155,091 4,291,414 15,809,580 15,888,628 Gross Adds Growth Rate 18.1% 2.0% -6.7% -1.7% -16.1% -6.5% -0.3% -7.0% -6.0% -6.0% 0.5% 0.5% Monthly Churn Rate 1.04% 1.03% 0.90% 1.00% 0.96% 0.97% 0.96% 0.94% 1.00% 0.98% 0.97% 1.00% Net Additions 5,482, ,000 1,134,000 1,289,000 1,519,000 4,507, , , ,070 1,080,107 3,243,178 2,562,686 Ending Subscribers 102,079, ,637, ,731, ,023, ,528, ,528, ,171, ,780, ,688, ,768, ,768, ,330,864 Growth % 5.5% 5.5% 5.2% 4.9% 4.4% 4.4% 4.4% 3.9% 3.5% 3.0% 3.0% 2.3% Retail Prepay Gross Adds 4,456, , , , ,580 3,417, , , , ,980 3,408,033 3,442,113 Gross Adds Growth Rate -4.6% -13.9% -15.6% -47.1% -16.9% -23.3% -8.5% 2.1% 20.0% -7.0% -0.3% 1.0% Monthly Churn Rate 6.01% 6.42% 6.09% 5.00% 6.28% 5.95% 6.48% 6.18% 5.50% 6.00% 6.03% 6.00% Net Additions 86,000 (188,000) (126,000) (281,000) (157,000) (752,000) (177,000) (30,000) (169,214) (84,295) (460,509) (179,353) Ending Subscribers 6,132,000 5,945,000 5,817,000 5,737,000 5,580,000 5,580,000 5,402,000 5,374,000 5,204,786 5,120,491 5,119,491 4,940,138 Growth % 1.4% -1.8% -3.8% -5.2% -9.0% -9.0% -9.1% -7.6% -9.3% -8.2% -8.3% -8.5% Total Retail Wireless Gross Adds 22,251,729 4,702,020 4,868,901 5,006,590 5,473,915 20,051,426 4,608,364 4,614,227 4,858,628 5,136,394 19,217,613 19,330,741 Gross Adds Growth Rate 12.7% -1.7% -8.6% -10.7% -16.3% -9.9% -2.0% -5.2% -3.0% -6.2% -4.2% 319.5% Monthly Churn Rate 1.33% 1.33% 1.18% 1.21% 1.23% 1.24% 1.23% 1.19% 1.21% 1.21% 4.71% 4.75% Net Additions 5,568, ,000 1,008,000 1,008,000 1,362,000 3,755, , , , ,812 2,782,669 2,383,332 Ending Subscribers 108,211, ,582, ,548, ,760, ,108, ,108, ,573, ,154, ,892, ,888, ,671, ,054,670 Growth % 5.3% 5.1% 4.7% 4.3% 3.6% 3.6% 3.7% 3.3% 2.8% 2.5% 5.0% 6.6% Retail Postpay Accounts Connections Per Account Net Account Additions 533,000 (100,000) 44, ,000 59, ,000 (16,000) (83,000) 115,655 84, ,819 71,983 Ending Accounts 35,616,000 35,516,000 35,560,000 35,677,000 35,736,000 35,736,000 35,720,000 35,637,000 35,752,655 35,836,819 35,836,819 36,353,030 Growth % 1.5% 1.3% 1.1% 0.7% 0.3% 0.3% 0.6% 0.2% 0.2% 0.3% 0.3% 1.4% Retail Postpay ARPA Growth % 3.9% -2.2% -3.8% -5.5% -6.6% -4.5% -7.2% -5.6% -5.0% -2.5% -5.1% -0.5% Total Service Revenue 72,630,000 17,914,000 17,689,000 17,598,000 17,195,000 70,396,000 16,809,000 16,741,000 16,810,905 16,840,237 67,201,142 67,739,488 Growth % 5.2% -0.4% -2.2% -4.1% -5.6% -3.1% -6.2% -5.4% -4.5% -2.1% -4.5% 0.8% Equipment Sales 10,959,000 3,373,000 3,861,000 4,292,000 5,398,000 16,924,000 3,954,000 3,704,000 4,160,113 5,173,735 16,991,847 17,836,653 Growth % 35.1% 80.4% 61.8% 73.1% 27.9% 54.4% 17.2% -4.1% -3.1% -4.2% 0.4% 5.0% Other Revenue 4,057,000 1,041,000 1,063,000 1,115,000 1,141,000 4,360,000 1,241,000 1,259,000 1,271,100 1,300,740 5,071,840 5,139,803 Growth % 4.6% 1.9% 4.4% 11.6% 12.1% 7.5% 19.2% 18.4% 14.0% 14.0% 16.3% 1.3% Total Revenue 87,646,000 22,328,000 22,613,000 23,005,000 23,734,000 91,680,000 22,004,000 21,704,000 22,242,118 23,314,711 89,264,829 90,715,944 Growth % 8.2% 6.9% 5.3% 5.4% 1.2% 4.6% -1.5% -4.0% -3.3% -1.8% -2.6% 1.6% Expenses Cost of Service 7,200,000 1,851,000 1,948,000 2,010,000 1,994,000 7,803,000 1,942,000 1,984,000 2,033,251 2,021,277 7,980,528 8,132,045 % of Revenue 9.9% 10.3% 11.0% 11.4% 11.6% 11.1% 11.6% 11.9% 12.1% 12.0% 11.9% 12.0% Cost Per Subscriber Cost of Equipment 21,625,000 5,108,000 5,455,000 5,716,000 6,840,000 23,119,000 4,998,000 4,644,000 5,215,214 6,661,183 21,518,397 22,204,813 % of Revenue 197.3% 151.4% 141.3% 133.2% 126.7% 136.6% 126.4% 125.4% 125.4% 128.8% 126.6% 124.5% Cost Per Retail Gross Add , , Subsidy Loss Selling, General & Administrative 23,602,000 5,369,000 5,289,000 5,351,000 5,796,000 21,805,000 4,891,000 4,777,000 4,812,429 5,255,321 19,735,749 19,549,764 % of Revenue 32.5% 30.0% 29.9% 30.4% 33.7% 31.0% 29.1% 28.5% 28.6% 31.2% 29.4% 28.9% Cost Per Subscriber Total Expenses 52,427,000 12,328,000 12,692,000 13,077,000 14,630,000 52,727,000 11,831,000 11,405,000 12,060,893 13,937,781 49,234,674 49,886,621 Growth % 12.0% 7.2% 2.4% 2.6% -7.4% 0.6% -4.0% -10.1% -7.8% -4.7% -6.6% 1.3% Total Wireless EBITDA 35,219,000 10,000,000 9,921,000 9,928,000 9,104,000 38,953,000 10,173,000 10,299,000 10,181,224 9,376,930 40,030,155 40,829,323 EBITDA Margin (% of Total Rev) 40.2% 44.8% 43.9% 43.2% 38.4% 42.5% 46.2% 47.5% 45.8% 40.2% 44.8% 45.0% EBITDA Margin (% of Service Rev) 48.5% 55.8% 56.1% 56.4% 52.9% 55.3% 60.5% 61.5% 60.6% 55.7% 59.6% 60.3% Growth % 3.0% 6.6% 9.1% 9.2% 18.9% 10.6% 1.7% 3.8% 2.6% 3.0% 2.8% 2.0% Depreciation & Amortization 8,459,000 2,190,000 2,225,000 2,260,000 2,305,000 8,980,000 2,293,000 2,282,000 2,350,000 2,397,000 9,322,000 9,788,000 Operating Income 26,760,000 7,810,000 7,696,000 7,668,000 6,799,000 29,973,000 7,880,000 8,017,000 7,831,224 6,979,930 30,708,155 31,041,323 Operating Margin 30.5% 35.0% 34.0% 33.3% 28.6% 32.7% 35.8% 36.9% 35.2% 29.9% 34.4% 34.2% Wireless CapEx 10,515,000 2,419,000 3,126,000 2,921,000 3,600,000 12,066,000 2,572,000 2,815,000 3,600,000 3,800,000 12,787,000 13,700,000 Source: Estimates, Company Data 7/26/2016 6

7 BAIRD 777 EAST WISCONSIN AVENUE MILWAUKEE, WI Senior Research Analyst: William V. Power, CFA (214) Wireline Operating Metrics ($000, Except per-share amounts) FiOS Video Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Year (03/31) (06/30) (09/30) (12/31) (03/31) (06/30) (09/30) (12/31) Act. Act. Act. Act. Act. Act. Act. Act. Est. Est. Est. Est. Beginning Subscribers 5,262,000 5,649,000 5,739,000 5,765,000 5,807,000 5,649,000 5,827,000 4,678,000 4,637,000 4,656,740 5,827,000 4,675,740 Net Additions 387,000 90,000 26,000 42,000 20, ,000 36,000 (41,000) 19,740 19,000 33,740 28,342 Ending Subscribers 5,649,000 5,739,000 5,765,000 5,807,000 5,827,000 5,827,000 5,863,000 4,637,000 4,656,740 4,675,740 4,675,740 4,704,082 Growth % 7.4% 7.9% 6.4% 5.0% 3.2% 3.2% 3.2% 1.6% 1.0% 0.9% 0.9% 0.6% FiOS Broadband Beginning Subscribers 6,072,000 6,616,000 6,749,000 6,821,000 6,935,000 6,616,000 7,034,000 5,508,000 5,495,000 5,588,480 7,034,000 5,669,660 Net Additions 544, ,000 72, ,000 99, ,000 98,000 (13,000) 93,480 81, , ,501 Ending Subscribers 6,616,000 6,749,000 6,821,000 6,935,000 7,034,000 7,034,000 7,132,000 5,495,000 5,588,480 5,669,660 5,669,660 5,898,161 Growth % 9.0% 9.4% 8.1% 7.2% 6.3% 6.3% 6.4% 4.9% 4.7% 4.6% 4.6% 4.0% FiOS Voice Beginning Subscribers 4,248,000 4,602,000 4,661,000 4,661,000 4,703,000 4,602,000 4,754,000 3,917,000 3,879,000 3,917,640 4,754,000 3,964,560 Net Additions 354,000 59,000-42,000 51, ,000 46,000 (38,000) 38,640 46,920 93,560 60,814 Ending Subscribers 4,602,000 4,661,000 4,661,000 4,703,000 4,754,000 4,754,000 4,800,000 3,879,000 3,917,640 3,964,560 3,964,560 4,025,374 Growth % 8.3% 7.1% 5.0% 4.2% 3.3% 3.3% 3.2% 2.4% -15.0% -14.5% -14.5% 1.5% Total Broadband Beginning Subscribers 9,015,000 9,205,000 9,246,000 9,221,000 9,223,000 9,205,000 9,223,000 7,594,000 7,014,000 7,017,480 9,223,000 7,008,660 Net Additions 190,000 41,000 (25,000) 2,000-18,000 (5,000) (83,000) 3,480 (8,820) (93,340) (141,499) Ending Subscribers 9,205,000 9,246,000 9,221,000 9,223,000 9,228,000 9,228,000 9,218,000 7,014,000 7,017,480 7,008,660 7,008,660 6,867,161 Growth % 2.1% 2.4% 1.6% 0.8% 0.2% 0.2% 0.4% -0.7% -0.8% -1.1% -1.1% -2.0% Total Voice Access Lines 19,795,000 19,475,000 19,079,000 18,740,000 18,387,000 18,387,000 18,037,000 14,476,000 14,229,880 13,983,960 13,983,960 13,061,743 YOY Decline % -6.1% -6.1% -6.4% -6.7% -7.1% -7.1% -7.0% -7.1% -7.1% -7.0% -7.0% -6.6% FiOS Revenue 12,674,000 3,352,000 3,438,000 3,439,000 3,534,000 13,763,000 3,521,000 2,776,000 2,729,307 2,677,292 11,703,599 11,569,280 Growth % 13.6% 10.2% 10.0% 7.5% 6.8% 8.6% 6.1% 3.7% 1.3% -3.5% 1.7% -1.1% Consumer Revenue 15,583,000 3,992,000 4,037,000 4,012,000 4,082,000 16,123,000 4,022,000 3,165,000 2,929,857 2,869,092 12,985,949 12,595,160 Growth % 5.0% 4.0% 4.5% 2.8% 2.6% 3.5% 1.7% -0.3% -7.5% -11.1% -4.3% -3.0% Small & Medium Business Revenue 2,464, , , , ,000 2,350, , , , ,680 1,774,330 1,508,181 Growth % -3.0% -3.8% -4.5% -4.6% -5.6% -4.6% 0.8% -7.5% -7.0% -6.9% -6.6% -15.0% Mass Markets Revenue 18,047,000 4,592,000 4,630,000 4,597,000 4,654,000 18,473,000 4,590,000 3,573,000 3,333,507 3,263,772 14,760,279 14,103,340 Growth % 3.8% 2.9% 3.2% 1.8% 1.5% 2.4% -3.0% -1.2% -7.5% -10.6% -4.6% -4.5% Global Enterprise Revenue 13,684,000 3,263,000 3,225,000 3,208,000 3,247,000 12,943,000 3,161,000 2,907,000 2,887,200 2,922,300 11,877,500 11,758,725 Growth % -3.5% -6.2% -6.5% -5.2% -3.7% -5.4% -3.0% -3.3% -3.4% -2.8% -3.1% -1.0% Global Wholesale Services Revenue 6,222,000 1,524,000 1,491,000 1,466,000 1,498,000 5,979,000 1,463,000 1,256,000 1,246,100 1,273,300 5,238,400 4,924,096 Growth % -5.6% -4.2% -5.0% -5.5% -0.7% -3.9% -4.2% -4.1% -3.3% -3.9% -3.9% -6.0% Other Revenue 476,000 90,000 77,000 84,000 74, ,000 76,000 87,000 79,800 70, , ,576 Growth % 2.4% -30.2% -38.4% -32.8% -23.7% -31.7% -9.9% 7.4% -9.3% -13.2% -6.4% -4.0% Total Wireline Revenue 38,429,000 9,469,000 9,423,000 9,355,000 9,473,000 37,720,000 9,290,000 7,823,000 7,546,607 7,529,672 32,189,279 31,086,737 Growth % -0.5% -2.0% -2.2% -2.3% -0.9% -1.8% -1.6% -2.4% -6.6% -6.5% -4.0% -3.4% Wireline Adj. EBITDA 8,917,000 2,151,000 2,210,000 2,200,000 2,292,000 8,853,000 2,177,000 1,099,000 1,472,957 1,505,897 6,254,854 6,048,853 EBITDA Margin 23.2% 22.7% 23.5% 23.5% 24.2% 23.5% 23.4% 14.0% 19.5% 20.0% 19.4% 19.5% Depreciation & Amortization 7,882,000 1,746,000 1,706,000 1,623,000 1,603,000 6,678,000 1,588,000 1,562,000 1,540,000 1,520,000 6,210,000 5,800,000 Wireline Operating Income 1,035, , , , ,000 2,175, ,000 (463,000) (67,043) (14,103) 44, ,853 Operating Margin 2.7% 4.3% 5.3% 6.2% 7.3% 5.8% 6.3% -5.9% -0.9% -0.2% 0.1% 0.8% Wireline CapEx 5,750,000 1,077,000 1,134,000 1,202,000 1,350,000 4,763,000 1,018, ,000 1,000,000 1,200,000 4,032,000 3,500, YOY growth rates are adjusted for the impact of reclassified results Source: Estimates, Company Data 7/26/2016 7

8 BAIRD 777 EAST WISCONSIN AVENUE MILWAUKEE, WI Senior Research Analyst: William V. Power, CFA (214) Verizon Communications Condensed Annual Balance Sheet & Cash Flow Projections Y 2014A Q1 2015A Q2 2015A Q3 2015A Q4 2015A Y 2015A Q1 2016A Q2 2016A Q3 2016E Q4 2016E Y 2016E Y 2017E Balance Sheet Cash 11,153,000 4,933,000 3,317,000 4,181,000 4,820,000 5,846,000 2,857,000 4,576,784 7,180,491 8,248,643 A/R 13,993,000 12,698,000 13,444,000 13,105,000 13,457,000 12,485,000 13,294,000 11,736,575 11,516,693 11,439,530 Inventory 1,153,000 1,076,000 1,149,000 1,319,000 1,252,000 1,142, ,000 1,024,240 1,226,869 1,080,491 Other Current Assets 3,324,000 4,129,000 3,592,000 3,163,000 2,751,000 4,142,000 3,762,000 3,762,000 3,762,000 3,762,000 PP&E, net 89,947,000 81,642,000 82,532,000 82,562,000 83,541,000 83,011,000 83,172,000 83,949,700 85,095,150 86,993,108 Intangibles, net 105,708, ,205, ,733, ,777, ,244, ,410, ,797, ,797, ,797, ,797,000 Other Assets 6,628,000 16,107,000 16,986,000 17,966,000 18,575,000 17,551,000 8,057,000 8,038,250 8,019,500 7,944,500 Total Assets 232,708, ,790, ,753, ,073, ,640, ,587, ,870, ,884, ,597, ,265,271 A/P 16,680,000 15,189,000 16,953,000 17,721,000 19,362,000 18,118,000 19,090,000 19,113,850 20,241,460 19,759,187 Other Current Liabilities 8,649,000 9,085,000 9,486,000 9,507,000 9,201,000 8,929,000 8,515,000 8,515,000 8,515,000 8,515,000 ST Debt 2,735,000 4,439,000 4,206,000 7,264,000 6,489,000 6,265,000 6,803,000 6,803,000 6,803,000 6,803,000 LT Debt 110,536, ,949, ,465, ,060, ,705, ,615,000 92,922,000 91,922,000 97,922,000 92,922,000 Total Debt 113,271, ,388, ,671, ,324, ,194, ,880,000 99,725,000 98,725, ,725,000 99,725,000 Other Liabilities 80,432,000 87,369,000 87,769,000 87,979,000 88,041,000 87,557,000 71,884,000 71,984,000 72,084,000 72,384,000 Minority Interest 1,378,000 1,420,000 1,459,000 1,404,000 1,414,000 1,462,000 11,912,000 12,032,000 12,152,000 12,632,000 Stockholders' Equity 13,676,000 10,759,000 12,874,000 14,542,000 17,842,000 20,103,000 32,656,000 34,546,698 36,032,243 43,882,084 Total Liabilities & SE 232,708, ,790, ,753, ,073, ,640, ,587, ,870, ,884, ,597, ,265,271 Cash Flow Analysis Net Cash from Operations 30,631,000 10,169,000 8,737,000 9,520,000 10,504,000 38,930,000 7,419,000 5,411,000 9,868,659 9,152,582 31,851,241 33,532,153 Capital Expenditures (17,191,000) (3,665,000) (4,488,000) (4,387,000) (5,150,000) (17,775,000) (3,387,000) (3,886,000) (4,800,000) (5,200,000) (17,273,000) (18,057,000) Free Cash Flow* 13,440,000 6,504,000 4,249,000 5,133,000 5,354,000 21,240,000 4,032,000 1,525,000 5,068,659 3,952,582 14,578,241 15,475,153 Spectrum Purchases (343,000) (9,555,000) - - (9,942,000) (19,497,000) - 131,000 - (5,000,000) (4,869,000) - Free Cash Flow After Spectrum 13,368,000 (3,051,000) 4,249,000 5,133,000 (4,588,000) 1,743,000 4,032,000 1,525,000 5,068,659 (1,047,418) 9,578,241 15,475,153 Dividends (7,803,000) (2,153,000) (2,113,000) (2,107,000) (2,165,000) (8,538,000) (2,302,000) (2,303,000) (2,348,875) (2,348,875) (9,302,750) (9,407,000) Free Cash Flow After Dividends 5,565,000 (5,204,000) 2,136,000 3,026,000 (6,753,000) (6,795,000) 1,730,000 (778,000) 2,719,784 (3,396,293) 275,491 6,068,153 EBITDA 43,600,000 11,949,000 11,801,000 11,544,000 11,033,000 46,327,000 11,959,000 11,079,000 11,606,281 11,035,387 45,679,668 47,077,835 EBITDA Margin 34.3% 37.4% 36.6% 34.8% 32.2% 35.2% 37.2% 36.3% 37.6% 34.4% 36.4% 37.2% Debt Beginning Debt 93,591, ,271, ,388, ,671, ,324, ,271, ,194, ,880,000 99,725,000 98,725, ,194, ,725,000 Debt Added 19,680, , ,000 (1,347,000) (2,130,000) (3,077,000) (314,000) (10,155,000) (1,000,000) 6,000,000 (5,469,000) (5,000,000) Ending Debt 113,271, ,388, ,671, ,324, ,194, ,194, ,880,000 99,725,000 98,725, ,725, ,725,000 99,725,000 Balance Sheet Analysis Total Debt / Total Cap 89.3% 90.4% 91.4% 93.2% 93.0% 93.0% 91.6% 88.1% 84.2% 81.0% 81.0% 72.9% Current Ratio 0.9x 0.9x 0.9x 0.8x 0.7x 0.7x 0.7x 0.6x 0.6x 0.6x 0.6x 0.7x Cash / Share $1.67 $1.69 $1.53 $1.33 $0.96 $0.96 $1.05 $1.04 $1.09 $1.25 $1.25 $2.02 Days Sales Outstanding (Total) Book Value / Share $3.87 $3.52 $3.35 $3.15 $3.42 $3.42 $4.00 $5.21 $6.44 $7.55 $7.55 $10.73 Return on Assets 6.3% 6.4% 6.5% 6.6% 6.8% 6.8% 6.8% 6.7% 6.7% 6.7% 6.7% 6.9% Return on Invested Capital 16.0% 16.0% 15.9% 16.4% 17.0% 17.0% 16.9% 14.6% 14.7% 14.2% 14.2% 16.0% Du Pont Analysis Tax Burden 63.5% 63.2% 63.8% 66.6% 62.2% 64.0% 63.7% 90.3% 62.7% 62.5% 67.9% 62.7% Interest Burden 0.8x 0.8x 0.8x 0.8x 0.8x 0.8x 0.9x 0.6x 0.9x 0.9x 0.8x 0.9x Operating Margin 21.0% 24.9% 24.3% 22.7% 20.4% 23.0% 24.8% 23.2% 24.6% 21.7% 23.6% 24.4% Turnover 0.5x 0.5x 0.5x 0.5x 0.6x 0.5x 0.5x 0.5x 0.5x 0.5x 0.5x 0.5x Leverage 17.0x 21.9x 18.7x 16.6x 13.7x 13.7x 12.2x 7.1x 6.7x 6.7x 6.7x 5.6x ROE 104.0% 156.7% 131.5% 116.7% 81.2% 91.4% 86.1% 46.9% 47.7% 41.2% 44.4% 38.2% *Q1'15 FCF includes non-recurring $2.4 billion related to tower sale Source: Estimates, Company Data 7/26/2016 8

9 Appendix - Important Disclosures and Analyst Certification Approved on 26 July :20EDT/ Published on 26 July :17EDT. Rating and Price Target History for: Verizon Communications, Inc. (VZ) as of /04/13 O:$53 10/18/13 O:$54 07/23/14 O:$55 10/22/14 O:$54 12/09/14 N:$50 01/23/15 N:$48 04/07/15 N:$49 01/22/16 N:$48 03/31/16 N:$ Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q Created by BlueMatrix 1 Incorporated makes a market in the securities of VZ. Appendix Important Disclosures and Analyst Certification Incorporated and/or its affiliates expect to receive or intend to seek investment-banking related compensation from the company or companies mentioned in this report within the next three months. Incorporated may not be licensed to execute transactions in all foreign listed securities directly. Transactions in foreign listed securities may be prohibited for residents of the United States. Please contact a Baird representative for more information. Investment Ratings: Outperform (O) - Expected to outperform on a total return, risk-adjusted basis the broader U.S. equity market over the next 12 months. Neutral (N) - Expected to perform in line with the broader U.S. equity market over the next 12 months. Underperform (U) - Expected to underperform on a total return, risk-adjusted basis the broader U.S. equity market over the next 12 months. Risk Ratings: L - Lower Risk - Higher-quality companies for investors seeking capital appreciation or income with an emphasis on safety. Company characteristics may include: stable earnings, conservative balance sheets, and an established history of revenue and earnings. A - Average Risk - Growth situations for investors seeking capital appreciation with an emphasis on safety. Company characteristics may include: moderate volatility, modest balance-sheet leverage, and stable patterns of revenue and earnings. H - Higher Risk - Higher-growth situations appropriate for investors seeking capital appreciation with the acceptance of risk. Company characteristics may include: higher balance-sheet leverage, dynamic business environments, and higher levels of earnings and price volatility. S - Speculative Risk - High-growth situations appropriate only for investors willing to accept a high degree of volatility and risk. Company characteristics may include: unpredictable earnings, small capitalization, aggressive growth strategies, rapidly changing market dynamics, high leverage, extreme price volatility and unknown competitive challenges. Valuation, Ratings and Risks. The recommendation and price target contained within this report are based on a time horizon of 12 months but there is no guarantee the objective will be achieved within the specified time horizon. Price targets are determined by a subjective review of fundamental and/or quantitative factors of the issuer, its industry, and the security type. A variety of methods may be used to determine the value of a security including, but not limited to, discounted cash flow, earnings multiples, peer group comparisons, and sum of the parts. Overall market risk, interest rate risk, and general economic risks impact all securities. Specific information regarding the price target and recommendation is provided in the text of our most recent research report. Distribution of Investment Ratings. As of June 30, 2016, Baird U.S. Equity Research covered 711 companies, with 51% rated Outperform/Buy, 48% rated Neutral/Hold and 1% rated Underperform/Sell. Within these rating categories, 13% of Outperform/Buy-rated and 5% of Neutral/Hold-rated companies have compensated Baird for investment banking services in the past 12 months and/or Baird managed or co-managed a public offering of securities for these companies in the past 12 months. Analyst Compensation. Analyst compensation is based on: 1) the correlation between the analyst's recommendations and stock price performance; 2) ratings and direct feedback from our investing clients, our institutional and retail sales force (as applicable) and from independent rating services; 3) the analyst's productivity, including the quality of the analyst's research and the analyst's contribution to the growth and development of our overall research effort and 4) compliance with all of Robert W. Baird s internal policies and procedures. This compensation criteria and actual compensation is reviewed and approved on an annual basis by Baird's Research Oversight Committee. Analyst compensation is derived from all revenue sources of the firm, including revenues from investment banking. Baird does not 9

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