CONSOLIDATED STATEMENTS OF INCOME (1,2) U S WEST, INC. (UNAUDITED) Quarter Ended Six Months Ended June 30, % June 30, % In millions 1998 1997 Change 1998 1997 Change - ---------------------- --------------------- ------- ------- ------- OPERATING REVENUES Local service $1,369 $ 1,194 14.7 $ 2,719 $ 2,425 12.1 Interstate access 711 678 4.9 1,409 1,365 3.2 Intrastate access 202 200 1.0 408 400 2.0 Long-distance network 195 240 (18.8) 396 490 (19.2) Directory services 313 296 5.7 620 583 6.3 Other services 263 222 18.5 510 434 17.5 --------------- ---------------- Total operating rev. 3,053 2,830 7.9 6,062 5,697 6.4 --------------- ---------------- OPERATING EXPENSES Employee-related 1,069 971 10.1 2,075 1,897 9.4 Other operating 676 462 46.3 1,231 978 25.9 Taxes other than income taxes 89 102 (12.7) 190 214 (11.2) Depreciation & amort 535 539 (0.7) 1,067 1,075 (0.7) --------------- ---------------- Total operating exp. 2,369 2,074 14.2 4,563 4,164 9.6 --------------- ---------------- Operating income 684 756 (9.5) 1,499 1,533 (2.2) Interest expense 109 101 7.9 206 204 1.0 Gains on sales of rural telephone exchanges - 29 - - 47 - Other expense 33 17 94.1 58 39 48.7 --------------- ---------------- Income before income taxes 542 667 (18.7) 1,235 1,337 (7.6) Income tax provision 215 251 (14.3) 474 501 (5.4) --------------- ---------------- NET INCOME $ 327 $ 416 (21.4)$ 761 $ 836 (9.0) =============== ================ <FN> <F1> (1)The historical results prior to the Separation present unaudited historical financial information as if the businesses that comprise New U S WEST operated as a separate entity for the periods presented. The effects of the Separation, including the assumption of indebtedness and the issuance of shares in connection with the Dex transaction, have been included in the historical results as of the Separation Date. <F2> (2)The financial effects of the Separation and the Dex transaction are not fully reflected in the historical financial statements. Therefore, historical earnings per share is not presented as it is not meaningful. See pro forma basic and diluted earnings per share and pro forma average shares outstanding. </FN>