Welcome back. In the bear market of 2001 and 2002, investors have lost much of their wealth from a handful of groups, one of the hardest hit has been telecom, which has lost 60 percent of its market value, $2 trillion over the last two years. Joining us to discuss what has happened and whether we have seen the worse, Verizon Co-CEO, Ivan Seidenberg.

Bartiromo: Nice to have you with us.

Seidenberg: How are you? Good.

Bartiromo: I'm good. Today, let's talk about some of the statistics that I just mentioned. Today in The Wall Street Journal there was an article talking about telecom and some comments from Federal Communications Commission chairman, Michael Powell. He said your industry is in quote, "utter crisis."What happened?

Seidenberg: Well, you know, when I saw that article, the first thing I did is call Chairman Powell today to make sure that we matched cards. And the simple answer to us is, our industry, potentially, could be very strong. What's happened to us is that we have too many competitors, we have too much capital being thrown into the industry. There's over capacity to some extent, there's lack of pricing power, too much regulation. So we have a series of issues that need to be addressed to really jump start the growth of the industry going forward. And Michael understands that; I think he really truly understands that we need to change the paradigm here of how we think about regulating the industry and put us on a sounder footing. Fewer companies, more control over pricing, less flow of capital to not have over building.

Bartiromo: Because it was very easy for certain companies to go public, raise money and then there were too many companies.

Seidenberg: Actually too many companies. Sure, low interest rates helped. I think the Telecom Act of '96 helped. And in general, when you see all of the turmoil going on with the Global Crossings and the . . .

Bartiromo: WorldCom.

Seidenberg: . . . WorldComs and so on and so forth, you can see that there's a dynamic operating on the regulatory front that needs to be addressed.

Bartiromo: So there was WorldCom restating $4 billion in expenses. We thought it was more profitable than it was for five straight quarters. You have Global Crossing filing the fourth largest bankruptcy ever. Quest confirming that an SEC investigation is also going on into its accounting. Can you sit here and categorically promise us that your name will not be on that list as one of the companies being investigated?

Seidenberg: What I can categorically promise is we have checks and balances in our company that I have a lot confidence in that would suggest that the kinds of things that you've been reading about are things that would be caught in our system. It's not a question of whether our company occasionally will make a mistake, but it's a systemic issue that I think a company like ours who's been around a long time, I think we have an institutional process in place that I have a lot of confidence in and therefore I'm very comfortable in supporting the numbers that we would be filing anyplace.

Bartiromo: Mm-hmm. Now Michael Powell also told the Journal today that he thinks other telecoms may be hiding accounting irregularities. I'm going to put it up on screen, exactly the quote that he gave today and he said, "It wouldn't shock me if there were more companies that could not resist these pressures." Do you agree?

Seidenberg: I hope that's not correct. And to the extent that the chairman might know of these things, they ought to be made much more visible a lot quicker because the negative shadow that's cast over the industry by just the inference of this is not a good thing and that's one of the reasons I called him. So to the extent that he has any suspicions, he ought to address that with those companies and try to create the visibility a lot quicker and wash it clean. I don't think that there are a lot of companies that have similar issues. But to the extent that there are, I'm sure the SEC and others will find them out.

Bartiromo: The other issue that, of course, he brought up today in the paper was that he suggested that a Baby Bell would be able to acquire the assets of WorldCom, which, of course, is a combination that once was seen as unthinkable. Did you talk about that today when you called him?

Seidenberg: What I wanted to do is clarify with him that he shouldn't be telling us how to think about the future. In our view, it's pretty simple. In the current industry environment, I don't think consolidation's a practical issue. I think we have to fix the underlying economic incentives that are creating all this bizarre behavior, get the industry on a sound basis and then if consolidation happens to be the order of the day, that's fine. Now in our case, each day that goes by, we gain more and more experience by being in the long-distance business, so I think we're gaining our wings every day by earning the customer's trust here.

Bartiromo: I'm sure. And you have said that in the past, that you want to wait a couple of years before you start doing more deals or see more consolidation. But I wonder, I mean, sometimes timing is -- you know, you can't really control the timing. So WorldCom is struggling now, and, I mean, maybe you would be able to get assets cheaper than you will in two years. Would you consider buying the assets of WorldCom?

Seidenberg: The problem with looking at any of these things, it's a hypothetical question. Right now no one really knows the underlying economic fundamentals of WorldCom. And therefore I think it's something that we just have to wait and see. And as I said earlier, it's not practical. So it's just not something that we'd consider at this point.

Bartiromo: Mm-hmm. Because if they restated expenses who knows where, really, the revenue is.

Seidenberg: Well, there were all sorts of rumors about that. And, I think, by the way, they deserve a chance to make their case and explain their situation. But there's all sorts of issues surrounding the newspaper articles about bankruptcy and all sorts of other things like that. So all that has to be washed through before anybody can look at this thing realistically.

Bartiromo: The issue of debt, obviously, one of the more prominent issues in your business. Verizon now has $61 billion in debt, is that correct?

Seidenberg: About $60 billion.

Bartiromo: OK, so how are you planning on -- on beginning that -- to pay that back? Is that what you're focusing on right now?

Seidenberg: Well, in the first quarter our plan all along has been to continue to invest in the growth markets like wireless and broadband and generate expense savings from our mergers that we have been doing and then pay down debt. We reduced that in the first quarter, we have every expectation of continuing that cycle in the second quarter and continue to reduce debt going forward. In this market without the top-line growth for the whole industry, it's much more important to focus on your balance sheet. And we've made it clear that's our goal, is to make significant improvements in our balance sheet throughout the year 2002.

Bartiromo: And, of course, improving the balance sheet has been topic one on everybody's agenda from Washington down to Wall Street. And today the big issue is expensing options. Why don't you expense options?

Seidenberg: Well, you know, H.L. Mencken once said, that for every complex problem there's a simple answer and it's usually wrong. I think -- here's the issue, for us if the Accounting Standards Board, FASB, wanted to create a consistent method for expensing options that applied to all companies, we would be more than comfortable in dealing with that. Right now what we don't really have is a consistent way for people to think about options nor a consistent accounting method to expense them. You know, today we read about Coke deciding to do that. Coca-Cola.

Bartiromo: Right.

Seidenberg: But nobody knows what math they used. And I think it's a question of we need to understand that. I'm sure what they did is fine, but we all need to do it the same way. The other point I'd make is options. There are cases where, you know, as a start-up company you defer a current expense for a future gain and in some cases that's been working well for companies. Microsoft is a good example where options help to generate a lot of future value and people up front work for less money. So I'm not sure that the expensing options is a good thing or a bad thing. I would really like for the experts to spend some time and come up with a consistent method that we all can use and I'd be happy with that.

Bartiromo: And that's probably one reason we actually did not see it make it into the Sarbanes bill, because people are really unsure about the --

Seidenberg: I think Sen. (Paul) Sarbanes (D-Md.) made the same point on another show I saw over the weekend, which -- he's not sure which way to go, but we really need the experts to make sure we look at all sides of this before we create something that -- that the cure becomes worse than the disease sort of speak.

Bartiromo: Mr. Seidenberg, thanks so much for your time.

Seidenberg:Thank you.

Bartiromo: Good to have you with us. Ivan Seidenberg, president and co-CEO of Verizon Communications.