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Verizon Communications comes out of its first full year as a merged company with a mixed report card, expanding its next-generation services successfully while cutting the fat from money-losing operations and dealing with the afteraffects of 9-11.

Executives at the nation's largest incumbent local exchange carrier (ILEC), formed through the merger of GTE and Bell Atlantic in mid-2000, announced fourth quarter and 2001 numbers Thursday.

Verizon lost $2 billion in the fourth quarter of 2001, the result, officials say, of job cuts and the extensive damage caused by the events of 9-11.

Charles Lee, Verizon chairman and co-chief executive officer, pointed out the highlights of an otherwise-gloomy quarter, mainly gains in digital subscriber line (DSL) customers, expansion of its long-distance service in the region and the continued growth of Verizon Wireless.

"We achieved solid results for the quarter and for the year despite the continuing downturn in the economy," he said. "Synergies have enabled us to continuously reduce expenses, while our combined assets have given us a more diverse geographic base and product line. With Verizon's great businesses, the company is well-positioned for profitable growth in the years ahead."

Officials reported Verizon experienced an increase in its DSL presence in 2001, to 1.2 million customers, and 29.4 million Verizon Wireless customers.

Continued growth in DSL and Verizon Wireless proves to executives the staying power of next-generation services and its ability to keep the company profitable. Incumbent telephone companies are loathe to incorporate new technologies for fear of the initial costs involved to deploy the services.

Now, Verizon (though officials have dragged their feet for years) are embracing these technologies and look to continually expand over the coming years.

In the DSL department, officials told investors and reporters at its fourth quarter conference call Thursday morning that it had DSL access multiplexers (DSLAMs, which handle and separate voice and data communications for every customer) in 79 percent of its central offices (COs).

Verizon gained 225,000 DSL customers in the fourth quarter of 2001, part of the 660,000 total customers acquired in 2001. Officials expect little growth in DSL sales, hoping to garner another 600,000 to 800,000 more in 2002, despite operational improvements like self-installation in eight days, which usually brings new customers to the fold.

Verizon Wireless announced this week the launch of its 3G service running on the CDMA2000 1XRTT platform. While not the service many expect of the wireless digital phone technology, it's further proof the company is willing to invest in the future, despite costs.

The division added 715,000 new customers in the fourth quarter, giving them a total of 29.4 million wireless phone customers. Of that 29.4 million, 22 million are digital phone customers and officials hope to upsell their 3G service to that large customer base.

So far, the service is only available in New York, Boston, Washington, Salt Lake City and San Francisco.

In 2002, executives hope to shore up their resources and go from there. Ivan Seidenberg, Verizon president and co-chief executive officer, predicts further cost-cutting measures.

"In 2001, we moved early and aggressively to head off the effects of the economy with cost-reduction efforts," he said. "At the same time, we had the management discipline and skilled workforce to respond effectively to Sept. 11, remain focused on operational metrics, and accelerate our merger integration and transition efforts. The solid foundation we built in 2001 will lead to continued quality growth and continued customer-service improvements in 2002."

In 2002, Verizon expects revenue growth of three to five percent -- not optimistic, but considering the market environment these days, not out of line with Wall Street expectations of four percent growth.