SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549


                                    FORM 10-Q
          (Mark One)

              |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2001

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                        For the transition period from    to


                          Commission file number 1-8607


                              BELLSOUTH CORPORATION
             (Exact name of registrant as specified in its charter)


                 Georgia                                  58-1533433
         (State of Incorporation)                      (I.R.S. Employer
                                                    Identification Number)


      1155 Peachtree Street, N. E.,                       30309-3610
            Atlanta, Georgia                              (Zip Code)
  (Address of principal executive offices)

                   Registrant's telephone number 404 249-2000

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 X No ___

At July 31, 2001, 1,875,285,201 common shares were outstanding.
<PAGE>


                                Table of Contents


Item                                                                   Page
                                     Part I
 1.    Financial Statements
          Consolidated Statements of Income .........................    3
          Consolidated Balance Sheets ...............................    4
          Consolidated Statements of Cash Flows .....................    5
          Consolidated Statements of Shareholders' Equity
             and Comprehensive Income ...............................    6
          Notes to Consolidated Financial Statements ................    8

 2.    Management's Discussion and Analysis of Financial
          Condition and Results of Operations........................    21

 3.    Qualitative and Quantitative Disclosures about Market Risk ...    33



                                     Part II

 4.    Submission of Matters to a Vote of Security Holders ..........    34

 6.    Exhibits and Reports on Form 8-K .............................    34

<PAGE>


-------------------------------------------------------------------------------
 PART I - FINANCIAL INFORMATION
-------------------------------------------------------------------------------

                              BELLSOUTH CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
                     (In Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>

                                                             For the Three Months                 For the Six Months
                                                                Ended June 30,                      Ended June 30,
                                                            2000             2001               2000              2001
<S>                                                         <C>               <C>                 <C>              <C>
Operating revenues:
Communications group                                        $ 4,601           $ 4,764             $ 9,114          $ 9,429
Domestic wireless                                               936                 -               1,803                -
Latin America                                                   689               744               1,367            1,517
Domestic advertising and publishing                             441               436                 790              870
All other                                                        34                41                  67               88
        Total operating revenues                              6,701             5,985              13,141           11,904

Operating expenses:
     Operational and support expenses                         3,514             3,232               7,035            6,393
     Depreciation and amortization                            1,240             1,203               2,458            2,360
     Severance accrual                                            -                 -                  78                -
        Total operating expenses                              4,754             4,435               9,571            8,753

Operating income                                              1,947             1,550               3,570            3,151

Interest expense                                                332               334                 638              694
Net earnings of equity affiliates                                22               108                 153              190
Other income, net                                                46                80                 129              164

Income before income taxes                                    1,683             1,404               3,214            2,811
Provision for income taxes                                      619               524               1,149            1,040

        Net income                                          $ 1,064             $ 880             $ 2,065          $ 1,771


Weighted-average common shares outstanding:
     Basic                                                    1,882             1,874               1,881            1,873
     Diluted                                                  1,900             1,886               1,899            1,886
Dividends declared per common share                          $ 0.19            $ 0.19              $ 0.38           $ 0.38
Earnings per share:
     Basic                                                   $ 0.57            $ 0.47              $ 1.10           $ 0.95
     Diluted                                                 $ 0.56            $ 0.47              $ 1.09           $ 0.94
</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

<PAGE>


                              BELLSOUTH CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                     (In Millions, Except Per Share Amounts)


                                                  December 31,       June 30,
                                                      2000             2001
                                                                   (Unaudited)
ASSETS
Current assets:
     Cash and cash equivalents                      $ 1,061           $ 658
     Accounts receivable, net of
        allowance for uncollectibles
        of $377 and $411                              5,157           4,962
     Material and supplies                              379             434
     Other current assets                               809           1,046
         Total current assets                         7,406           7,100

Investments and advances                             11,010           9,845

Property, plant and equipment                        60,912          63,043
Less:  accumulated depreciation                      36,755          37,986
     Property, plant and equipment, net              24,157          25,057

Deferred charges and other assets                     4,180           4,668
Intangible assets, net                                4,172           4,295

         Total assets                              $ 50,925        $ 50,965

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Debt maturing within one year                  $ 7,569         $ 6,057
     Accounts payable                                 2,233           1,734
     Other current liabilities                        3,468           3,695
         Total current liablities                    13,270          11,486

Long-term debt                                       12,463          13,043

Noncurrent liabilities:
     Deferred income taxes                            3,580           3,607
     Other noncurrent liabilities                     4,700           4,949
         Total noncurrent liabilities                 8,280           8,556

Shareholders' equity:
     Common stock, $1 par value (8,650
        shares authorized; 1,872 and
        1,874 shares outstanding)                     2,020           2,020
     Paid-in capital                                  6,740           6,763
     Retained earnings                               14,074          15,102
     Accumulated other comprehensive income           (488)           (747)
     Shares held in trust and treasury              (5,222)         (5,126)
     Guarantee of ESOP debt                           (212)           (132)
         Total shareholders' equity                  16,912          17,880

         Total liabilities and
                shareholders' equity               $ 50,925        $ 50,965


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
<PAGE>


                              BELLSOUTH CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                  (In Millions)
<TABLE>
<CAPTION>
                                                                       For the Six Months
                                                                         Ended June 30,
                                                                    2000               2001
   <S>                                                                <C>                <C>
Cash Flows from Operating Activities:
     Net income                                                    $ 2,065            $ 1,771
     Adjustments to net income:
         Depreciation and amortization                               2,458              2,360
         Curtailment charge                                              -                 72
         Severance accrual                                              78                  -
         Loss on sale of investment                                      -                 50
         Provision for uncollectibles                                  179                219
         Net earnings of equity affiliates                            (153)              (190)
         Dividends received from equity affiliates                      39                214
         Minority interests in income of subsidiaries                   22                (10)
         Deferred income taxes and investment tax credits               98                156
     Net change in:
         Accounts receivable and other current assets                 (199)              (199)
         Accounts payable and other current liabilities                641               (287)
         Deferred charges and other assets                            (337)              (519)
         Other liabilities and deferred credits                       (182)               138
     Other reconciling items, net                                       89                (63)
         Net cash provided by operating activities                   4,798              3,712

Cash Flows from Investing Activities:
     Capital expenditures                                           (3,268)            (3,357)
     Investments in and advances to equity affiliates                 (582)              (160)
     Purchases of wireless licenses                                    (73)               (10)
     Proceeds from sale of investment                                    -              1,018
     Proceeds from disposition of short-term investments               247                108
     Purchases of short-term investments                              (177)               (76)
     Proceeds from repayment of loans and advances                      14                100
     Investments in debt securities                                      -               (176)
     Other investing activities, net                                    44                (42)
         Net cash used for investing activities                     (3,795)            (2,595)

Cash Flows from Financing Activities:
     Net borrowings (repayments) of short-term debt                 (1,708)            (2,130)
     Proceeds from long-term debt                                    2,083              1,819
     Repayments of long-term debt                                     (335)              (547)
     Dividends paid                                                   (715)              (712)
     Purchase of treasury shares                                      (148)                 -
     Other financing activities, net                                    53                 50
         Net cash used for financing activities                       (770)            (1,520)

     Net decrease in cash and cash equivalents                         233               (403)
     Cash and cash equivalents at beginning of period                1,287              1,061
     Cash and cash equivalents at end of period                    $ 1,520              $ 658

</TABLE>



The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
<PAGE>

                              BELLSOUTH CORPORATION
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                                   (Unaudited)
                                  (In Millions)
<TABLE>
<CAPTION>

                                                             For the Six Months Ended June 30, 2000

                                         Number of Shares                          Amount
                                                                                          Accum.
                                                                                          Other
                                                  Shares                                  Compre-   Shares    Guaran-
                                                 Held in                                  hensive   Held in   tee of
                                        Common   Trust and    Common   Paid-in  Retained  Income/  Trust and   ESOP
                                         Stock   Treasury     Stock    Capital  Earnings  (Loss)   Treasury    Debt    Total
                                                   (a)                                               (a)

<S>                                        <C>        <C>        <C>      <C>      <C>        <C>     <C>        <C>     <C>
Balance at December 31, 1999              2,020      (138)    $ 2,020  $ 6,771  $ 11,456   $ (358) $ (4,798)  $ (276) $ 14,815

Net income                                                                         2,065                                 2,065
Other comprehensive income, net of tax:
    Foreign currency translation adjustment                                                    27                           27
    Net unrealized gains on securities                                                        335                          335
    Minimum pension liability adjustment                                                       (9)                          (9)

Total comprehensive income (b)                                                                                           2,418
Dividends declared                                                                  (715)                                 (715)
Share issuances for employee benefit plans              2                            (60)               114                 54
Purchase of treasury stock                             (3)                                             (148)              (148)
Tax benefit related to stock options                                         4                                               4
ESOP activities and related tax benefit                                                                           74        74

Balance at June 30, 2000                  2,020      (139)    $ 2,020  $ 6,775  $ 12,746     $ (5) $ (4,832)  $ (202) $ 16,502

</TABLE>


(a)  Trust  and  treasury  shares  are  not  considered  to be  outstanding  for
     financial reporting purposes. As of June 30, 2000, there were approximately
     36 shares held in trust and 103 shares held in treasury.

(b)  Total comprehensive income for second quarter 2000 was $1,104.
<PAGE>



The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
<PAGE>

                              BELLSOUTH CORPORATION
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                                   (Unaudited)
                                  (In Millions)
<TABLE>
<CAPTION>

                                                                 For the Six Months Ended June 30, 2001

                                         Number of Shares                        Amount
                                                                                          Accum.
                                                                                           Other
                                                  Shares                                  Compre-   Shares    Guaran-
                                                 Held in                                  hensive   held in   tee of
                                        Common   Trust and    Common   Paid-in  Retained  Income/  Trust and   ESOP
                                         Stock   Treasury     Stock    Capital  Earnings  (Loss)   Treasury    Debt    Total
                                                   (a)                                               (a)

<S>                                        <C>        <C>        <C>      <C>      <C>        <C>     <C>        <C>     <C>
Balance at December 31, 2000              2,020      (148)    $ 2,020  $ 6,740  $ 14,074   $ (488) $ (5,222)  $ (212) $ 16,912

Net income                                                                         1,771                                 1,771
Other comprehensive income, net of tax:
    Foreign currency translation adjustment                                                 (12)                           (12)
    Net unrealized losses on securities                                                     (236)                          (236)
    Net unrealized losses on derivatives                                                    (11)                           (11)

Total comprehensive income (b)                                                                                           1,512
Dividends declared                                                                  (713)                                 (713)
Share issuances for employee benefit plans              2                    3       (32)                96                 67
Purchase of treasury stock                              -                                                 -                  -
Tax benefit related to stock options                                        20                                              20
ESOP activities and related tax benefit                                                2                          80        82

Balance at June 30, 2001                  2,020      (146)    $ 2,020  $ 6,763  $ 15,102   (747)   $ (5,126)  $ (132) $ 17,880

</TABLE>


(a)  Trust  and  treasury  shares  are  not  considered  to be  outstanding  for
     financial reporting purposes. As of June 30, 2001, there were approximately
     36 shares held in trust and 110 shares held in treasury.

(b)  Total comprehensive income for second quarter 2001 was $770.


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
<PAGE>

                              BELLSOUTH CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                              (Dollars In Millions)

Note A - Preparation of Interim Financial Statements

In this report,  BellSouth  Corporation and its  subsidiaries are referred to as
"we" or "BellSouth".

The accompanying  unaudited consolidated financial statements have been prepared
based upon  Securities and Exchange  Commission  (SEC) rules that permit reduced
disclosure for interim periods.  In our opinion,  these  statements  include all
adjustments  necessary  for a fair  presentation  of the  results of the interim
periods shown. All adjustments are of a normal recurring nature unless otherwise
disclosed.  Revenues,  expenses,  assets and  liabilities  can vary  during each
quarter  of the  year.  Therefore,  the  results  and  trends  in these  interim
financial  statements may not be the same as those for the full year. For a more
complete   discussion  of  our   significant   accounting   policies  and  other
information,  you should read this report in conjunction  with the  consolidated
financial  statements  included  in our  latest  annual  report on Form 10-K and
previous quarterly report on Form 10-Q.

Certain amounts within the prior year's  information  have been  reclassified to
conform to the current year's presentation.

Note B - NEW Accounting Pronouncements

BUSINESS COMBINATIONS AND GOODWILL AND OTHER INTANGIBLE ASSETS

In July 2001, the Financial  Accounting Standards Board (FASB) issued Statements
of Financial Accounting Standards No. 141, "Business Combinations", and No. 142,
"Goodwill  and Other  Intangible  Assets".  Under these new  Standards  the FASB
eliminated  accounting  for  certain  mergers  and  acquisitions  as poolings of
interests,  eliminated  amortization  of goodwill and indefinite life intangible
assets, and established new impairment  measurement procedures for goodwill. For
calendar-year  reporting  companies,  the  standards  become  effective  for all
acquisitions completed on or after June 30, 2001. Changes in financial statement
treatment  for  goodwill  and   intangible   assets  arising  from  mergers  and
acquisitions  completed prior to June 30, 2001 become effective January 1, 2002.
We are currently assessing the impact of implementing these standards.

Derivative Instruments and Hedging Activities

FASB Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative  Instruments and Hedging Activities" requires that entities recognize
all  derivatives  as either assets or  liabilities in the statement of financial
position and measure those instruments at fair value. Gains and losses resulting
from changes in the fair values of those  derivatives  are to be  accounted  for
depending  on the use of the  derivative  and  whether  it  qualifies  for hedge
accounting.  We  adopted  SFAS  No.  133 on  January  1,  2001.  The  impact  of
implementation  was not material.  The fair value of derivative  instruments  at
June 30, 2001 was not material.

<PAGE>

                              BELLSOUTH CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                              (Dollars In Millions)

Note C - Earnings Per Share

Basic  earnings per share is computed on the  weighted-average  number of common
shares  outstanding  during each period.  Diluted earnings per share is based on
the  weighted-average  number of common shares  outstanding plus net incremental
shares arising out of employee stock options and benefit plans. The following is
a  reconciliation  of the  weighted-average  share amounts (in millions) used in
calculating earnings per share:
<TABLE>
<CAPTION>

                                                         For the Three Months          For the Six Months
                                                            Ended June 30,               Ended June 30,
                                                          2000          2001           2000          2001
<S>                                                      <C>           <C>            <C>            <C>
Basic common shares outstanding                          1,882         1,874          1,881          1,873
Incremental shares from stock options and benefit plans     18            12             18             13
Diluted common shares outstanding                        1,900         1,886          1,899          1,886
</TABLE>

The earnings  amounts used for per-share  calculations are the same for both the
basic and diluted methods.

Note D - Sale of Qwest Shares

In  January  2001,  we  sold   approximately   22.2  million   shares  of  Qwest
Communications common stock to Qwest for $1.0 billion in cash, or $45 per share.

In addition,  we entered an agreement to purchase  $250 of services and products
from Qwest over a five-year  period,  with payment being made in shares of Qwest
stock  we  currently  own.  Accordingly,   5.3  million  shares  are  considered
restricted and are no longer classified as available-for-sale.  Minimum payments
under the agreement are required to be made  annually.  The stock prices used to
compute the number of shares for such payments is fixed per the  agreement.  All
such prices are above our original cost.

Note E - Restructuring of Wireless Video Entertainment Business

In December 2000, we announced that we would restructure our video entertainment
service and  concentrate  our  entertainment  business on our fiber  optic-based
wireline video operations. This move was made to better align our resources with
our strategic priorities in broadband services.

We recorded charges of  approximately  $498, or $323 net of tax, related to this
restructuring  in the  fourth  quarter  of  2000.  These  charges  consisted  of
approximately  $289 for asset  writeoffs  and  writedowns  and $209 for contract
termination  penalties,  migration of customers to alternative service providers
and for severance  and related  benefit  expenses.  As of June 30, 2001, we have
charged  $148  against the $209  accrued,  leaving the accrual at $61 as of that
date.  We expect to  complete  the plan by the end of 2001.  Operating  revenues
generated  by this  business  were $14 in second  quarter  2000 and $6 in second
quarter 2001,  while operating  losses were $26 in second quarter 2000 and $9 in
second quarter 2001. For the year-to-date  periods,  operating revenues were $28
in 2000  and $19 in 2001,  while  operating  losses  were $50 in 2000 and $16 in
2001.

NOTE F - Curtailment charge

In first quarter  2001,  we  recognized a curtailment  loss of $72 in accordance
with  provisions  of SFAS No. 106,  "Employers'  Accounting  for  Postretirement
Benefits Other Than Pension". The loss resulted from accelerated  recognition of
prior  service  cost in excess of the  decrease  in our  postretirement  benefit
obligation  for the wireless  employees  that will be covered  under  Cingular's
postretirement benefit plans.

<PAGE>

                              BELLSOUTH CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                              (Dollars In Millions)

NOTE G - Contribution of AB Cellular to Cingular

In December  2000 we exercised  our option to redeem  AT&T's  55.6%  partnership
interest in AB Cellular  through the  distribution  of our Los Angeles  Cellular
operations to AT&T. This  redemption  resulted in our ownership of the remaining
AB  Cellular  investment,  including  100% of the Houston  cellular  operations,
87.35% of the Galveston cellular  operations,  and approximately $1,100 of cash.
In January 2001, we received FCC approval and transferred  these  properties and
the  cash  to  Cingular,  as  contemplated  by  the  October  2,  2000  Cingular
contribution and formation agreement.

Note H - Segment Information

We have four  reportable  operating  segments:  (1)  Communications  group;  (2)
Domestic  wireless;   (3)  Latin  America;  and  (4)  Domestic  advertising  and
publishing.  We have  included the  operations of all other  businesses  falling
below the  reporting  threshold  in the "All other"  segment.  The  "Reconciling
items"  shown  below  include   Corporate   Headquarters   and  capital  funding
activities,  the  reversal of our  proportionate  share of  Cingular's  reported
results,  intercompany  eliminations  and other  special  items  that may arise.
Special  items  are  transactions  or  events  that  are  included  in  reported
consolidated  results  but  are  excluded  from  segment  results  due to  their
nonrecurring or nonoperational nature.

During fourth quarter 2000, we contributed our domestic  wireless  operations to
Cingular, and we account for our investment in Cingular under the equity method.
For management  purposes,  however,  we evaluate our domestic  wireless  segment
based  on our  proportionate  share  of  Cingular's  results.  Accordingly,  the
operating  revenues and expenses  reported for our domestic wireless segment for
second quarter and  year-to-date  2001 reflect 40% of Cingular's  total revenues
and  expenses,   whereas  second  quarter  and  year-to-date  2000  reflect  the
historical  results of our wireless  businesses  that have been  contributed  to
Cingular.

The following table provides information for each operating segment:
<TABLE>
<CAPTION>

                                               Second Quarter           %                     Year-to-Date            %
                                              2000        2001        Change                2000        2001       Change
<S>                                           <C>         <C>             <C>               <C>         <C>             <C>
Communications group
External revenues                             $ 4,571     $ 4,764         4.2               $ 9,062     $ 9,416         3.9
Intersegment revenues                              94          35       (62.8)                  181          69       (61.9)
   Total revenues                             $ 4,665     $ 4,799         2.9               $ 9,243     $ 9,485         2.6
Operating income                              $ 1,541     $ 1,430        (7.2)              $ 3,044     $ 2,940        (3.4)
Segment net income                              $ 871       $ 819        (6.0)              $ 1,703     $ 1,674        (1.7)

Domestic wireless
External revenues                             $ 1,028     $ 1,414        37.5               $ 1,972     $ 2,724        38.1
Intersegment revenues                               8           -        N/M*                    14           -         N/M
   Total revenues                             $ 1,036     $ 1,414        36.5               $ 1,986     $ 2,724        37.2
Operating income                                $ 158       $ 303        91.8                 $ 215       $ 508       136.3
Net earnings (losses) of equity affiliates       $ 48         $ -         N/M                  $ 80         $ -         N/M
Segment net income                              $ 106       $ 129        21.7                 $ 147       $ 217        47.6

* Not Meaningful
</TABLE>
<PAGE>


                              BELLSOUTH CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                              (Dollars In Millions)

Note H - Segment Information (continued)
<TABLE>
<CAPTION>

                                               Second Quarter           %                      Year-to-Date            %
                                             2000         2001        Change                 2000         2001       Change
<S>                                            <C>          <C>           <C>                 <C>          <C>          <C>
Latin America
External revenues                              $ 689        $ 744         8.0                 $1,367       $1,517       11.0
Intersegment revenues                             15            5       (66.7)                    32           14      (56.3)
   Total revenues                              $ 704        $ 749         6.4                 $1,399       $1,531        9.4
Operating income                                $ 52         $ 89        71.2                   $ 40         $ 87      117.5
Net earnings (losses) of equity affiliates     $ (36)       $ (95)        N/M                  $ (42)      $ (137)       N/M
Segment net income (loss)                      $ (34)      $ (119)        N/M                  $ (54)      $ (225)       N/M

Domestic advertising and publishing
External revenues                              $ 441        $ 436        (1.1)                 $ 790        $ 870       10.1
Intersegment revenues                              7            7           -                     11           10       (9.1)
   Total revenues                              $ 448        $ 443        (1.1)                 $ 801        $ 880        9.9
Operating income                               $ 204        $ 196        (3.9)                 $ 359        $ 422       17.5
Segment net income                             $ 124        $ 119        (4.0)                 $ 218        $ 256       17.4

All other
External revenues                               $ 25         $ 27         8.0                   $ 48         $ 55       14.6
Intersegment revenues                              1            7         N/M                      3           12        N/M
   Total revenues                               $ 26         $ 34        30.8                   $ 51         $ 67       31.4
Operating income                                 $ 3          $ 7         N/M                    $ 5         $ 13        N/M
Net earnings (losses) of equity affiliates      $ 11         $ (9)        N/M                   $ 34        $ (29)       N/M
Segment net income (loss)                       $ 12         $ (4)        N/M                   $ 33        $ (21)       N/M

Reconciling items
External revenues                              $ (53)     $(1,400)        N/M                  $ (98)     $(2,678)       N/M
Intersegment revenues                           (125)         (54)        N/M                   (241)        (105)       N/M
   Total revenues                              $(178)     $(1,454)        N/M                 $ (339)     $(2,783)       N/M
Operating income(loss)                          $ 11       $ (475)        N/M                  $ (93)      $ (819)       N/M
Net earnings (losses) of equity affiliates      $ (1)       $ 212         N/M                   $ 81        $ 356        N/M
Segment net income (loss)                      $ (15)       $ (64)        N/M                   $ 18       $ (130)       N/M

Reconciliation to Consolidated Financial Information
Operating Revenues
Communications group                         $ 4,665       $4,799         2.9                 $9,243       $9,485        2.6
Domestic wireless                              1,036        1,414        36.5                  1,986        2,724       37.2
Latin America                                    704          749         6.4                  1,399        1,531        9.4
Domestic advertising and publishing              448          443        (1.1)                   801          880        9.9
All other                                         26           34        30.8                     51           67       31.4
    Total segments                           $ 6,879       $7,439         8.1               $ 13,480      $14,687        9.0
Reconciling items                              $(178)     $(1,454)        N/M                 $ (339)     $(2,783)       N/M
Total consolidated                           $ 6,701       $5,985       (10.7)              $ 13,141      $11,904       (9.4)
</TABLE>
<PAGE>

                              BELLSOUTH CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                              (Dollars In Millions)

Note H - Segment Information (continued)
<TABLE>
<CAPTION>

                                               Second Quarter           %                      Year-to-Date            %
                                             2000         2001        Change                 2000         2001       Change
Reconciliation to Consolidated Financial Information, continued
<S>                                            <C>          <C>          <C>                  <C>          <C>          <C>
Net Income
Communications group                           $ 871        $ 819        (6.0)                $1,703       $1,674       (1.7)
Domestic wireless                                106          129        21.7                    147          217       47.6
Latin America                                    (34)        (119)        N/M                    (54)        (225)       N/M
Domestic advertising and publishing              124          119        (4.0)                   218          256       17.4
All other                                         12           (4)        N/M                     33          (21)       N/M
    Total segments                           $ 1,079        $ 944       (12.5)                $2,047       $1,901       (7.1)
Reconciling items                              $ (15)       $ (64)        N/M                   $ 18       $ (130)       N/M
Total consolidated                           $ 1,064        $ 880       (17.3)                $2,065       $1,771      (14.2)
</TABLE>



Note I - Marketable Securities

We have investments in marketable securities, primarily common stocks, which are
accounted for under the cost method.  These investments are comprised  primarily
of our equity interest in Qwest and are classified as  available-for-sale  under
SFAS No. 115. Under SFAS No. 115, available-for-sale  securities are required to
be carried at their fair value, with unrealized gains and losses,  net of income
taxes,  recorded  in  accumulated  other  comprehensive  income  (loss)  in  our
statement of changes in shareholders' equity and comprehensive  income. The fair
values of our  investments  in marketable  securities  are  determined  based on
market quotations.  Equity securities that are restricted for more than one year
or not publicly traded are recorded at cost.

The tables below show certain summarized  information related to our investments
which are adjusted to their fair value at June 30:

                                          Gross        Gross
                                       Unrealized    Unrealized     Recorded
  2000                       Cost         gains        losses        Basis

  Investment in Qwest  ...  $3,500        $ 200         $ --        $ 3,700
  Other investments ......     458         167           (31)           594
      Total  .............  $3,958       $ 367         $ (31)       $ 4,294

                                          Gross        Gross
                                       Unrealized    Unrealized     Recorded
  2001                       Cost         gains        losses        Basis

  Investment in Qwest  ...   $2,198       $ --         $(714)        $1,484
  Other investments ......      509          3          (127)           385
      Total  .............   $2,707        $ 3         $(841)        $1,869


<PAGE>

                              BELLSOUTH CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                              (Dollars In Millions)

Note J - Summary Financial Information for Equity Investees

The following table displays the summary combined  financial  information of our
equity method businesses. These amounts are shown on a 100-percent basis.

                          For the Three                    For the Six
                          Months Ended                    Months Ended
                            June 30,                        June 30,
                        2000         2001               2000         2001
Revenues  ...........  $1,550      $4,695             $3,049       $9,106
Operating income ....  $ 173        $ 812              $ 284       $1,283
Net income ..........    $34        $ 233                $72        $ 351


Note K - Debt Issuance

In February  2000 we issued  $2,000 of long-term  debt,  consisting of $1,000 of
Ten-year, 7 3/4% Notes and $1,000 of Thirty-year, 7 7/8% Debentures. We received
total proceeds of $1,974, which were used to retire commercial paper.

In April 2001, we privately sold $1,000 of 20-year annual put reset  securities.
The notes bear  interest at 4.287% until April 2002,  at which time the interest
rate will be reset if certain  investment  banks  holding call options  exercise
their  options and remarket the notes.  If the banks do not exercise  their call
options  on that  date,  we will be  required  to redeem  the notes at par.  The
proceeds were used to pay down short-term borrowings.

Note L - Contingencies

Litigation Matters

Reciprocal compensation

Following the  enactment of the  Telecommunications  Act of 1996,  our telephone
company  subsidiary,  BellSouth  Telecommunications,  Inc.  (BST),  and  various
competitive  local exchange  carriers  entered into  interconnection  agreements
providing for, among other things,  the payment of reciprocal  compensation  for
local calls  initiated by the customers of one carrier that are completed on the
network of the other carrier.  Numerous  competitive local carriers have claimed
entitlement from BST for compensation  associated with dial-up calls originating
on BST's network and connecting with Internet  service  providers  served by the
competitive local carriers'  networks.  BST has maintained that dial-up calls to
Internet   service   providers  are  not  local  calls  for  which   terminating
compensation is due under the interconnection  agreements;  however,  the courts
and  state  regulatory  commissions  in  BST's  operating  territory  that  have
considered  the matter have, in most cases,  ruled that BST is  responsible  for
paying reciprocal compensation on these calls.

During the second  quarter of 2001,  we adjusted  our accrual for these  claims.
This  adjustment  increased our expenses by  approximately  $140 and reduced net
income by $88. The adjustment reflects our current estimate of the liability for
these claims.  We have  commenced  discussions  with several  competitive  local
exchange  carriers  concerning  settlement of these claims,  and agreements have
been reached in certain circumstances.

Also during the second  quarter of 2001, the FCC released an Order on Remand and
Report and Order  addressing the issue of compensation  for ISP traffic.  In its
Order, the FCC acknowledged that dial-up calls to Internet service providers are
not local calls,  but instead are  "information  access" traffic exempt from the
reciprocal  compensation  provisions of the 1996 Act. The FCC has  implemented a
three-year  interim  period during which local  carriers will pay  inter-carrier
compensation  for such  calls in  decreasing  increments.  After the  three-year
interim  period,  the new rules on  inter-carrier  compensation to be adopted in
connection with a Notice of Proposed  Rulemaking  released on April 27, 2001 are
expected  to be in  effect.  If no rules have been  adopted  by that  time,  the
inter-carrier  compensation  in effect at the end of the third year would remain
in effect.
<PAGE>

                              BELLSOUTH CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                              (Dollars In Millions)

Note L - Contingencies (continued)

Other reciprocal compensation issues

In a related  matter,  a  competitive  local  carrier  has  claimed  terminating
compensation  of  approximately  $165 for service  arrangements  that we did not
believe  involved  "traffic" under our  interconnection  agreements.  We filed a
complaint  with the state  regulatory  commission  asking that agency to declare
that we did not owe reciprocal  compensation  for these  arrangements.  In March
2000, the state commission ruled in our favor finding that  compensation was not
owed to the competitive local carrier. This matter is currently on appeal.

Compliance Matters

Foreign Corrupt Practices Act

In July 2000, the SEC began a formal  investigation of whether we and others may
have violated the Foreign Corrupt  Practices Act (FCPA).  The SEC has subpoenaed
documents  relating to the activities of our foreign  subsidiaries,  and we have
produced  responsive  documents.  Prior to the  commencement of the SEC's formal
investigation,  we had engaged  outside  counsel to  investigate  an FCPA matter
relating to the activities of one of our foreign  subsidiaries in Latin America,
and outside  counsel  concluded  that those  activities did not violate the Act.
Thereafter and independent of these developments,  our internal auditors, in the
ordinary course of conducting  compliance reviews,  identified issues concerning
accounting entries made by another of our Latin American  subsidiaries.  We have
informed the SEC as to this matter,  and the SEC has expanded its  investigation
to  encompass  it. Our  internal  investigation  of the FCPA  compliance  of our
foreign  subsidiaries  is  continuing.  We are  cooperating  with the SEC in its
investigation,  but we cannot  predict the  duration or the outcome of the SEC's
investigation or whether the scope of the investigation  will be expanded beyond
the matters currently identified.

Regulatory matters

Beginning in 1996,  we operated  under a price  regulation  plan approved by the
South  Carolina  Public Service  Commission  under existing state laws. In April
1999,  however,   the  South  Carolina  Supreme  Court  invalidated  this  price
regulation  plan.  In July 1999,  we elected to be  regulated  under a new state
statute,  adopted  subsequent to the Commission's  approval of the earlier plan.
The new statute  allows  telephone  companies in South Carolina to operate under
price regulation  without obtaining  approval from the Commission.  The election
became  effective  during  August 1999.  The South  Carolina  Consumer  Advocate
petitioned the Commission seeking review of the level of our earnings during the
1996-1998  period  when we operated  under the  subsequently  invalidated  price
regulation  plan. The Commission  voted to dismiss the petition in November 1999
and issued  orders  confirming  the vote in February  and June of 2000.  In July
2000, the Consumer Advocate appealed the Commission's dismissal of the petition.

Also  in  2000,  the  Florida  Public   Service   Commission   adopted  a  staff
recommendation  that our change in 1999 from a late charge based on a percentage
of the amounts  overdue to a flat rate fee plus an interest  charge violated the
Florida  price  regulation  statute  and voted  that  certain  monies  should be
refunded.  We protested the decision and the Commission  should issue a decision
by the end of 2001.

CWA Agreement

Our existing collective bargaining agreements with the Communications Workers of
America  (CWA) are  scheduled to expire on August 4, 2001.  We are  currently in
negotiations  with the CWA over the terms of new  agreements.  Negotiations  are
proceeding,  but we cannot  predict  at this  time  whether  agreements  will be
reached by August 4, 2001.

Other Claims

We are subject to claims  arising in the ordinary  course of business  involving
allegations of personal injury,  breach of contract,  anti-competitive  conduct,
employment law issues, regulatory matters and other actions. BST is also subject
to  claims  attributable  to  pre-divestiture  events  involving   environmental
liabilities,  rates, taxes,  contracts and torts. Certain contingent liabilities
for  pre-divestiture  events are shared with AT&T Corp. While complete assurance
cannot be given as to the outcome of these claims, we believe that any financial
impact would not be material to our results of operations, financial position or
cash flows.
<PAGE>

                              BELLSOUTH CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                              (Dollars In Millions)

Note M - Tracking Stock

In December 2000, our shareholders  approved amendments to our charter that will
permit us to issue  our  common  stock in  series,  and our  Board of  Directors
intends to initially designate two series:  Latin America group stock,  intended
to reflect the separate  performance of our Latin American  businesses,  and BLS
group stock,  intended to reflect the separate  performance  of all of our other
businesses.

We plan a public  offering of shares of Latin America group stock to finance our
expansion in Latin America. At the time of a public offering, a number of shares
of Latin  America group stock will be reserved for the BLS group or for issuance
to the  holders of BLS group  stock.  We expect that we would  distribute,  as a
dividend to the holders of BLS group stock, the reserved shares of Latin America
group stock within six to 12 months following the public offering.

Our plans to create,  issue and distribute Latin America group stock are subject
to a number of conditions,  including market  conditions and other factors.  The
implementation and timing of these transactions are uncertain.

Note N - Subsidiary Financial Information

We  have  fully  and  unconditionally  guaranteed  all of the  outstanding  debt
securities  of BST that are  subject to the  reporting  requirements  of Section
13(a) or 15(d)  of the  Securities  Exchange  Act of 1934.  BST is a 100%  owned
subsidiary of BellSouth.  In accordance with SEC rules, BST is no longer subject
to the reporting requirements of the Securities Exchange Act of 1934, and we are
providing the following condensed consolidating financial information.

BST is listed  separately  because it has debt  securities,  registered with the
SEC, that we have guaranteed.  All other operating subsidiaries that do not have
registered  securities  guaranteed by us are presented in the Other column.  The
Parent column is comprised of headquarters  entities which provide,  among other
services, executive management,  administrative support and financial management
to operating subsidiaries. The Adjustments column includes the necessary amounts
to eliminate the intercompany  balances and transactions  between BST, Other and
Parent to reconcile to our consolidated financial information.

<PAGE>

                              BELLSOUTH CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                              (Dollars In Millions)

Note N - Subsidiary Financial Information (continued)

CONDENSED CONSOLIDATING STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                                    For the Three Months Ended June 30, 2000
                                                         BST          Other        Parent        Adjustments       Total

<S>                                                        <C>          <C>             <C>              <C>         <C>
Total operating revenues                                   $ 4,552      $ 2,422         $ 376            $ (649)     $ 6,701
Total operating expenses                                     3,173        2,094           141              (654)       4,754

Operating income                                             1,379          328           235                 5        1,947

Interest expense                                               176           56           210              (110)         332
Net earnings (losses) of equity affiliates                       4           22         1,320            (1,324)          22
Other income (expense), net                                      1          (27)          188              (116)          46

Income before income taxes                                   1,208          267         1,533            (1,325)       1,683
Provision for (benefit from) income taxes                      431          115            75                (2)         619

Net income                                                   $ 777        $ 152       $ 1,458          $ (1,323)     $ 1,064


                                                                    For the Three Months Ended June 30, 2001
                                                         BST          Other        Parent        Adjustments       Total

Total operating revenues                                   $ 4,657      $ 1,603         $ 648            $ (923)     $ 5,985
Total operating expenses                                     3,528        1,383           452              (928)       4,435

Operating income                                             1,129          220           196                 5        1,550

Interest expense                                               164           80           179               (89)         334
Net earnings (losses) of equity affiliates                       4           98         1,117            (1,111)         108
Other income (expense), net                                      1           29           143               (93)          80

Income before income taxes                                     970          267         1,277            (1,110)       1,404
Provision for income taxes                                     344          154            23                 3          524

Net income                                                   $ 626        $ 113       $ 1,254          $ (1,113)       $ 880
</TABLE>
<PAGE>

                              BELLSOUTH CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                              (Dollars In Millions)

Note N - Subsidiary Financial Information (continued)
<TABLE>
<CAPTION>


                                                                     For the Six Months Ended June 30, 2000
                                                         BST          Other        Parent        Adjustments       Total

<S>                                                        <C>          <C>             <C>            <C>          <C>
Total operating revenues                                   $ 9,019      $ 4,600         $ 755          $ (1,233)    $ 13,141
Total operating expenses                                     6,332        4,204           326            (1,291)       9,571

Operating income                                             2,687          396           429                58        3,570

Interest expense                                               337          120           385              (204)         638
Net earnings (losses) of equity affiliates                       7          139         2,565            (2,558)         153
Other income (expense), net                                      3          (14)          369              (229)         129

Income before income taxes                                   2,360          401         2,978            (2,525)       3,214
Provision for income taxes                                     866          145           134                 4        1,149

Net income                                                 $ 1,494        $ 256       $ 2,844          $ (2,529)     $ 2,065


                                                                     For the Six Months Ended June 30, 2001
                                                         BST          Other        Parent        Adjustments       Total

Total operating revenues                                   $ 9,233      $ 3,180       $ 1,193          $ (1,702)    $ 11,904
Total operating expenses                                     6,745        2,785           932            (1,709)       8,753

Operating income                                             2,488          395           261                 7        3,151

Interest expense                                               331          168           367              (172)         694
Net earnings (losses) of equity affiliates                       8          176         2,274            (2,268)         190
Other income (expense), net                                     10           91           243              (180)         164

Income before income taxes                                   2,175          494         2,411            (2,269)       2,811
Provision for (benefit from) income taxes                      783          293           (39)                3        1,040

Net income                                                 $ 1,392        $ 201       $ 2,450          $ (2,272)     $ 1,771
</TABLE>
<PAGE>


                              BELLSOUTH CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                              (Dollars In Millions)

Note N - Subsidiary Financial Information (continued)

CONDENSED CONSOLIDATING BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                          December 31, 2000
                                                    BST          Other          Parent        Adjustments        Total
<S>                                                  <C>           <C>               <C>               <C>        <C>
ASSETS
Current assets:
Cash and cash equivalents                            $ 62          $ 999             $ -               $ -      $ 1,061
Accounts receivable, net                            3,195          2,162           5,522            (5,722)       5,157
Other current assets                                  271            837             184              (104)       1,188
Total current assets                                3,528          3,998           5,706            (5,826)       7,406

Investments and advances                              322          7,505          10,592            (7,409)      11,010
Property, plant and equipment, net                 21,277          2,518             362                 -       24,157
Deferred charges and other assets                   3,868            219             186               (93)       4,180
Intangible assets, net                                692          3,291             189                 -        4,172

Total assets                                     $ 29,687       $ 17,531        $ 17,035         $ (13,328)    $ 50,925

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Debt maturing within one year                     $ 1,830        $ 1,724         $ 8,791          $ (4,776)     $ 7,569
Other current liabilities                           3,514          4,054           1,105            (2,972)       5,701
Total current liablities                            5,344          5,778           9,896            (7,748)      13,270

Long-term debt                                      7,641          1,594           8,139            (4,911)      12,463

Noncurrent liabilities:
Deferred income taxes                               2,306          1,271               3                 -        3,580
Other noncurrent liabilities                        3,209          1,316             321              (146)       4,700
Total noncurrent liabilities                        5,515          2,587             324              (146)       8,280

Shareholders' equity:                              11,187          7,572          (1,324)             (523)      16,912

Total liabilities and shareholders' equity       $ 29,687       $ 17,531        $ 17,035         $ (13,328)    $ 50,925
</TABLE>
<PAGE>

                              BELLSOUTH CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                              (Dollars In Millions)

Note N - Subsidiary Financial Information (continued)

<TABLE>
<CAPTION>

                                                    June 30, 2001
                                    BST      Other    Parent  Adjustments   Total
<S>                                  <C>       <C>     <C>           <C>      <C>
ASSETS
Current assets:
Cash and cash equivalents            $ 102     $ 596   $ (121)       $ 81     $ 658
Accounts receivable, net             3,185     1,995    3,597      (3,815)    4,962
Other current assets                   359       942      281        (102)    1,480
Total current assets                 3,646     3,533    3,757      (3,836)    7,100

Investments and advances               310     5,569    7,141      (3,175)    9,845
Property, plant and equipment, net  22,010     2,577      470           -    25,057
Deferred charges and other assets    4,380       211      324        (247)    4,668
Intangible assets, net                 906     3,174      200          15     4,295

Total assets                      $ 31,252  $ 15,064 $ 11,892    $ (7,243) $ 50,965

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Debt maturing within one year      $ 2,723     $ 594  $ 5,800    $ (3,060)  $ 6,057
Other current liabilities            3,442     1,888      940        (841)    5,429
Total current liablities             6,165     2,482    6,740      (3,901)   11,486

Long-term debt                       7,683     2,206    5,853      (2,699)   13,043

Noncurrent liabilities:
Deferred income taxes                2,476     1,283       15        (167)    3,607
Other noncurrent liabilities         3,321     1,360      391        (123)    4,949
Total noncurrent liabilities         5,797     2,643      406        (290)    8,556

Shareholders' equity:               11,607     7,733   (1,107)       (353)   17,880

Total liabilities and shareholders
        equity                    $ 31,252  $ 15,064 $ 11,892    $ (7,243) $ 50,965
</TABLE>
<PAGE>

                              BELLSOUTH CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)
                              (Dollars In Millions)

Note N - Subsidiary Financial Information (continued)

CONDENSED CONSOLIDATING CASH FLOW STATEMENTS
<TABLE>
<CAPTION>

                                                   For the Six Months Ended June 30, 2000
                                               BST         Other        Parent      Adjustments         Total
<S>                                             <C>          <C>          <C>             <C>              <C>
Cash flows from operating activities            $3,408       $ 1,162      $(1,337)        $ 1,565          $ 4,798
Cash flows from investing activities            (2,390)         (739)       1,490          (2,156)          (3,795)
Cash flows from financing activities              (911)         (404)         (46)            591             (770)
Net increase in cash                             $ 107          $ 19        $ 107             $ -            $ 233

                                                   For the Six Months Ended June 30, 2001
                                               BST         Other        Parent      Adjustments         Total
Cash flows from operating activities            $3,217         $ 599       $ (380)          $ 276          $ 3,712
Cash flows from investing activities            (2,859)         (301)        (610)          1,175           (2,595)
Cash flows from financing activities              (317)         (327)         575          (1,451)          (1,520)
Net increase (decrease) in cash                   $ 41         $ (29)      $ (415)            $ -           $ (403)

</TABLE>
<PAGE>





                              BELLSOUTH CORPORATION
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
                 (Dollars in Millions, Except Per Share Amounts)

For a more complete  understanding of our industry,  the drivers of our business
and our  current  period  results,  you should read the  following  Management's
Discussion  and Analysis of Financial  Condition  and Results of  Operations  in
conjunction  with our latest annual report on Form 10-K, our previous  quarterly
report on Form 10-Q, and our other filings with the SEC.

-------------------------------------------------------------------------------
Consolidated Results of Operations
-------------------------------------------------------------------------------

Key  financial  and  operating  data for  second  quarter  2000 and 2001 and the
respective  year-to-date  periods are as follows. All references to earnings per
share are on a diluted basis:
<TABLE>
<CAPTION>

                                                   Second Quarter           %                 Year-to-Date           %
                                                  2000         2001       Change            2000        2001       Change
<S>                                                 <C>         <C>         <C>            <C>         <C>            <C>
Results of operations:
Operating revenues                                  $6,701      $5,985      (10.7)         $ 13,141    $ 11,904       (9.4)
Operating expenses                                   4,754       4,435       (6.7)            9,571       8,753       (8.5)
Operating income                                     1,947       1,550      (20.4)            3,570       3,151      (11.7)
Interest expense                                       332         334         0.6              638         694         8.8
Net earnings (losses) of equity affiliates              22         108        N/M*              153         190        24.2
Other income, net                                       46          80         N/M              129         164         N/M
Provision for income taxes                             619         524      (15.3)            1,149       1,040       (9.5)
         Net income                                 $1,064       $ 880      (17.3)           $2,065    $ 1,771       (14.2)

As Reported:
   Net income                                       $1,064        $880      (17.3)           $2,065     $ 1,771      (14.2)
   Earnings per share                               $ 0.56      $ 0.47      (16.1)           $ 1.09      $ 0.94      (13.8)

Cash flow data:
Cash provided by operating activities               $2,448      $2,108      (13.9)           $4,798      $3,712      (22.6)
Cash used for investing activities                $(2,239)    $(1,655)      (26.1)         $(3,795)    $(2,595)      (31.6)
Cash provided by (used for) financing                $ 157      $(507)         N/M          $ (770)    $(1,520)        97.4
activities

Other:
Effective tax rate                                   36.8%       37.3%     +50 bps            35.8%       37.0%    +120 bps
Average debt balances:
   Short-term debt                                  $5,607     $ 6,039         7.7           $6,212     $ 6,281         1.1
   Long-term debt                                  $11,015     $13,431        21.9          $10,462     $13,197        26.1
     Total average debt balance                    $16,622     $19,470        17.1          $16,674     $19,478        16.8
EBITDA(1)                                           $3,187      $2,753      (13.6)          $ 6,106     $ 5,511       (9.7)
EBITDA margin(2)                                     47.6%       46.0%     -160bps            46.5%       46.3%     -20 bps
</TABLE>

(1)  EBITDA  represents  income  before  net  interest  expense,  income  taxes,
     depreciation and amortization,  severance accrual, net earnings (losses) of
     equity affiliates and other income,  net. We present EBITDA because it is a
     widely accepted financial  indicator used by certain investors and analysts
     to analyze and compare companies on the basis of operating  performance and
     because we  believe  that  EBITDA is an  additional  meaningful  measure of
     performance  and  liquidity.  EBITDA does not represent  cash flows for the
     period, nor is it an alternative to operating income (loss) as an indicator
     of operating  performance.  You should not consider it in isolation or as a
     substitute  for  measures  of  performance   prepared  in  accordance  with
     generally  accepted  accounting  principles.  The items  excluded  from the
     calculation  of EBITDA are  significant  components  in  understanding  and
     assessing our financial  performance.  Our computation of EBITDA may not be
     comparable  to the  computation  of  similarly  titled  measures  of  other
     companies.  EBITDA does not represent  funds  available  for  discretionary
     uses.

(2)  EBITDA margin is EBITDA divided by operating revenues.

* - Not meaningful.


-------------------------------------------------------------------------------
Overview of consolidated results of operations
-------------------------------------------------------------------------------

On a comparative  basis,  our results reflect the effects of the contribution of
our former domestic  wireless  operations to Cingular Wireless in fourth quarter
2000, and our acquisition of operations in Colombia in July 2000.

The results for year-to-date 2000 include:

-    Income related to the restructuring of our ownership interest in the German
     wireless operator,  E-Plus, which increased net income by $68, or $0.04 per
     share.

-    Expense recorded as a result of our previously announced plan to reduce our
     domestic general and administrative staff, which reduced net income by $48,
     or $0.03 per share.

The results for second quarter 2001 include:

-    Our adjustment to an accrual for reciprocal compensation, which reduced net
     income by $88, or $0.05 per share.

-    Losses incurred as we exit our wireless video entertainment business, which
     reduced net income by $5 for the  quarter and $10, or $0.01 per share,  for
     the year-to-date period.

In addition to the second quarter items, the year-to-date 2001 period includes:

-    A loss recorded as a result of selling 22.2 million  shares of Qwest common
     stock.  We received  total proceeds of $1,000 and recognized a loss of $50,
     or $32 after tax, or $0.02 per share.

-    Expense   recorded  for  changes  in  post   retirement   medical   benefit
     obligations, which reduced net income by $47, or $0.02 per share.

Events Affecting Comparability

Formation of Cingular Wireless

In October 2000, we contributed our domestic  wireless voice and data operations
to a  joint  venture  with  SBC  Communications  and  formed  Cingular  Wireless
(Cingular). We own an approximate 40% stake in Cingular, and share joint control
with SBC. Accordingly,  we account for our share of Cingular's results using the
equity method.  Prior to October 2000, we consolidated the revenues and expenses
of  these  operations.  As a result  of this  change,  our  second  quarter  and
year-to-date 2000 results include the revenues and expenses  attributable to our
former domestic wireless operations and our second quarter and year-to-date 2001
results include equity in earnings attributable to Cingular.

Operating Revenues

Our reported operating revenues decreased $716 in second quarter 2001 and $1,237
for the year-to-date  period compared to the same periods in 2000. These changes
reflect:

-    A decrease of $936 for the second  quarter and $1,803 for the  year-to-date
     period from our domestic wireless operations due to the contribution of our
     domestic wireless operations to Cingular, as explained above.

-    Increases in our  communications  group of $163 for the second  quarter and
     $315 for the  year-to-date  period  driven by strong  growth in digital and
     data  revenues,  wholesale  revenues,  and by the  company's  marketing  of
     calling features.  These increases were offset by declines in basic service
     revenues,  reflecting  competition  and a slowing  economy.  Also impacting
     revenues was the decline in our public payphone business.

-    Higher  revenues  from our Latin  America  group of $55,  or 8.0%,  for the
     second quarter and $150, or 11.0%,  for the  year-to-date  period driven by
     the  acquisition  of  Colombia  in June 2000.  We added  approximately  2.4
     million  customers  quarter over quarter,  with 1.2 million of those coming
     from the  acquisition and subsequent  expansion of Colombia.  The impact of
     customer  additions  on  revenue  growth was  offset by  declining  monthly
     revenue per  customer  resulting  from  increased  penetration  of cellular
     service into the  mass-consumer  market and exchange  rate declines in some
     countries.

-    A decrease in revenues from our domestic  advertising and publishing  group
     of $5 for the second quarter driven by slowing volume growth.  Revenues for
     the  year-to-date  period  grew  $80,  or  10.1%,  driven by timing of book
     publications.

Operating Expenses

Total  operating  expenses  decreased  $319 during second  quarter 2001 and $818
during the year-to-date period. Operating expenses for year-to-date 2000 include
a $78  severance  accrual  related to a plan to reduce our domestic  general and
administrative  staff.  Operating  expenses for second quarter and  year-to-date
2001 were impacted by approximately $140 of expense related to our adjustment of
the accrual for reciprocal  compensation.  Operating  expenses for  year-to-date
2001 were also impacted by a curtailment loss related to postretirement  medical
benefits which  increased  expenses by $72. The remaining  decreases of $459 for
the second quarter and $952 for the year-to-date period reflect:

-    A decrease  of $422 for the second  quarter  and $854 for the  year-to-date
     period in operational  and support  expenses.  Included in this change were
     decreases  of $633 for the second  quarter and $1,281 for the  year-to-date
     period   attributable  to  the  domestic  wireless  operations  which  were
     contributed to Cingular. Offsetting these decreases were higher expenses in
     the  communications  group driven by our accelerated DSL growth  initiative
     and customer service initiatives.

-    A  decrease  of $37 for the  second  quarter  and $98 for the  year-to-date
     period in  depreciation  and  amortization  due  primarily  to $154 for the
     second quarter and $321 for the year-to-date  period of expense recorded by
     our former  domestic  wireless  operations in 2000.  These  decreases  were
     offset by increases at the communications group and Latin America group due
     to  additions  of  property,  plant,  equipment  and  software  to  support
     expansion  of our  domestic  wireline  communications  and  Latin  American
     wireless   networks  and  amortization  of  intangibles   relating  to  our
     acquisitions in Colombia.

Interest Expense

Interest expense  remained  relatively flat in second quarter 2001 and increased
8.8% in  year-to-date  2001 as  compared  to the same 2000  periods.  The higher
interest expense in the year-to-date period is attributed to higher average debt
balances  driven by debt related to Colombia,  and the buyout of our partners in
our Carolina PCS operations.  Lower average  interest rates on commercial  paper
reduced the impact of these increases  significantly  in second quarter and to a
lesser extent in the year-to-date period.

Net Earnings (Losses) of Equity Affiliates

Earnings from our unconsolidated businesses increased $86 in second quarter 2001
and $37 for the year-to-date period. These increases were driven by the addition
of earnings from our equity investment in Cingular, which totaled $211 in second
quarter 2001 and $354 for  year-to-date  2001. The increases were  significantly
offset  by  higher  losses  of $59  for  the  second  quarter  and  $95  for the
year-to-date  period from our equity  investments  in Latin  America,  driven by
foreign exchange losses in Brazil. The year-to-date 2000 period results included
$68 of income  related to the  restructuring  of our  ownership  interest in our
German wireless  operations.  These results are addressed in the discussions for
the domestic wireless, Latin America group and all other segments.

Other Income, net

Other income,  net includes  interest  income,  gains/losses  on  disposition of
assets,  foreign currency  gains/losses and miscellaneous  nonoperating  income.
Other income,  net remained  relatively  flat quarter over quarter and year over
year.

Provision for Income Taxes

The provision for income taxes decreased $95 in second quarter 2001 and $109 for
the year-to-date  period.  Our effective tax rate increased from 36.8% in second
quarter 2000 to 37.3% in second  quarter 2001. The increase in the effective tax
rate was driven by higher losses at our Brazilian equity  investments  which are
recorded net of tax.

For the year-to-date period, the effective tax rate increased from 35.8% in 2000
to 37.0% in 2001. The increase in the effective tax rate is due primarily to the
higher  losses at our  Brazilian  equity  investments,  and to the one-time gain
related to the restructuring of E-Plus in first quarter 2000.


-------------------------------------------------------------------------------
Results by Segment
-------------------------------------------------------------------------------

We have four  reportable  operating  segments:  (1)  Communications  group;  (2)
Domestic  wireless;   (3)  Latin  America;  and  (4)  Domestic  advertising  and
publishing.  We have  included the  operations of all other  businesses  falling
below the  reporting  threshold  in the "All other"  segment.  We  evaluate  the
performance of each business unit based on net income,  exclusive of charges for
use of  intellectual  property and adjustments for special items that may arise.
Special  items  are  transactions  or  events  that  are  included  in  reported
consolidated  results  but  are  excluded  from  segment  results  due to  their
nonrecurring or nonoperational nature.

The following  discussion  highlights  our  performance  in the context of these
segments.  For a more complete understanding of our industry, the drivers of our
business,  and our current period  results,  you should read this  discussion in
conjunction with our consolidated  financial  statements,  including the related
notes.

-------------------------------------------------------------------------------
Communications Group
-------------------------------------------------------------------------------

The communications  group includes our core domestic businesses  including:  All
domestic wireline voice, data, broadband,  e-commerce,  long distance,  Internet
services and advanced voice  features.  Services are marketed across three major
customer segments: residential, business and wholesale.
<TABLE>
<CAPTION>

---------------------------------------------------- --------------------- ---------- --- ------------------------ ---------
                                                        Second Quarter         %               Year-to-Date           %
                                                     ---------------------                ------------------------
                                                       2000       2001      Change           2000        2001      Change
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
<S>                                                     <C>        <C>           <C>          <C>         <C>           <C>
Results of Operations
Operating revenues:
   Local service                                        $2,891     $2,964        2.5          $5,719      $5,874        2.7
   Network access                                        1,210      1,226        1.3           2,442       2,463        0.9
   Long distance                                           169        176        4.1             339         347        2.4
   Other communications                                    395        433        9.6             743         801        7.8
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
       Total operating revenues                          4,665      4,799        2.9           9,243       9,485        2.6
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
Operating expenses:
   Operational and support expenses                      2,184      2,356        7.9           4,348       4,556        4.8
   Depreciation and amortization                           940      1,013        7.8           1,851       1,989        7.5
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
       Total Operating expenses                          3,124      3,369        7.8           6,199       6,545        5.6
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
Operating income                                         1,541      1,430      (7.2)           3,044       2,940      (3.4)
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
Segment net income                                   $     871  $     819      (6.0)          $1,703      $1,674      (1.7)
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------

---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
Key Indicators
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
Access line counts (000's):
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
   Access lines:
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
      Residential                                       17,203     17,011      (1.1)
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
      Business                                           8,401      8,426        0.3
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
      Other                                                260        229     (11.9)
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
        Total access lines                              25,864     25,666      (0.8)
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
   Access line equivalents (1)                          21,821     33,877       55.2
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
        Total equivalent access lines                   47,685     59,543       24.9
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
Resold lines and unbundled network elements (000's)      1,036      1,478       42.7
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
Access minutes of use (millions)                        28,798     27,413      (4.8)          57,514      55,355      (3.8)
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------

---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
IntraLATA toll messages (millions)                         129        111     (14.0)             265         219     (17.4)
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
Internet customers (000's)                                 788      1,097       39.2
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
ADSL customers (000's)                                      74        381      414.9
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
Digital and data services revenues                        $830     $1,056       27.2          $1,606      $2,061       28.3
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
Calling feature revenues                                  $532       $577        8.5          $1,047      $1,144        9.3
---------------------------------------------------- ---------- ---------- ---------- --- ----------- ----------- ----------
</TABLE>

(1)  Access  line  equivalents  represent  a  conversion  of  non-switched  data
     circuits to a switched access line basis and is presented for comparability
     purposes. Equivalents are calculated by converting high-speed/high-capacity
     data  circuits  to the  equivalent  of a  switched  access  line  based  on
     transport capacity. While the revenues generated by access line equivalents
     have a directional  relationship with these counts,  growth rates cannot be
     compared on an equivalent basis.

Operating Revenues

Local service
The increase in local service revenues of $73 in the second quarter and $155 for
the  year-to-date  period is  attributable  to strong growth in digital and data
revenues,  wholesale revenues,  and by our marketing of calling features.  Those
increases  were  offset  by a  decrease  in basic  service  revenues  reflecting
competition,  rate reductions and a slowing economy as well as reduced  payphone
related revenues at our telephone operations.

Since second  quarter 2000,  residential  access lines  declined 1.1% to 17,011,
while  business  access lines  increased  0.3% to 8,426.  The core  business was
affected by a slowing economy, as well as competitive and technological changes.
The  technological  changes are  manifested  in the shifting of  customers  from
wireline to wireless and second line customers to high-speed access service.  At
June 30, 2001, we provided 1.5 million wholesale lines to competitors, on both a
resale and  unbundled  network  elements  (UNE) basis.  At June 30,  2000,  UNEs
accounted for approximately 25% of our wholesale lines and at June 30, 2001 they
represented  50%.  Because  of the  larger  discounts,  this  shift  to  UNEs is
negatively  impacting our revenue growth.  We also estimate that we have lost an
additional 1.8 million lines to facilities-based competitors.

Due to expanding  demand for our digital and data services,  we ended the second
quarter with over 59 million total equivalent access lines, an increase of 24.9%
since June 30, 2000.

Revenues from optional  calling  features such as Caller ID, Call Waiting,  Call
Return and voicemail  service  increased $45, or 8.5%,  quarter over quarter and
$97, or 9.3%,  year over year.  These increases were driven by growth in calling
feature  usage  through our  Complete  Choice(R)  Package,  a one-price  bundled
offering of over 20 services.

Increased  penetration of extended local area calling plans also increased local
service  revenues by  approximately  $20 compared to second quarter 2000 and $46
compared to the first six months of 2000.

Network access
Network  access  revenues  increased $16, or 1.3%, in the second quarter of 2001
when  compared  to the same 2000  period,  and $21,  or 0.9%,  year  over  year.
Revenues from dedicated high-capacity data line offerings grew approximately $89
quarter over quarter and $211 year over year as Internet  service  providers and
high-capacity  users  increased  their use of our network.  The  increases  were
substantially  offset by a $100  decline in the second  quarter  2001 and a $198
decline for the  year-to-date  period in revenues  derived from switched  access
services  resulting  from a decrease  in access  minute-of-use  volumes  and the
impacts of access charge rate reductions.

Access  minutes of use fell 4.8% to 27,413  million in second  quarter 2001 from
28,798  million in second  quarter 2000.  For the  year-to-date  period,  access
minutes of use decreased  3.8% to 55,355  million in 2001 from 57,514 million in
2000. These decreases resulted from: Continued migration of minutes to dedicated
digital and data services  offerings  which are  fixed-charge  based rather than
minute-of-use based;  competition from competitive local exchange carriers whose
traffic completely bypasses our network;  and the effect of competitive services
such as wireless and Internet e-mail.  Year-to-date 2000  minute-of-use  volumes
were also positively  impacted by the additional day of activity  resulting from
the leap year.

Access charge rate  reductions  negatively  impacted  these  revenues $27 in the
second quarter 2001 and $53 for the year-to-date  period.  These rate reductions
are  primarily  related  to the FCC's  access  reform  and  productivity  factor
adjustments.  The reductions were partially offset by recoveries of local number
portability costs.

Long distance Long distance revenue increased $7, or 4.1%, in the second quarter
2001 and $8, or 2.4%,  for the  year-to-date  period.  Strong growth in wireless
long distance and prepaid long distance cards was partially  offset by losses in
intralata  toll as toll  messages  declined  14.0%  for the  quarter,  and 17.4%
year-to-date.  These  losses are  driven by  increased  demand for Area Plus,  a
BellSouth  package that combines a basic  telephone  line with an expanded local
calling area. Area Plus packages grew 21% in the past year to over 2 million.

Other communications
Other communications  revenue increased 9.6% in the second quarter 2001 and 7.8%
for the  year-to-date  period,  driven  by growth  in  wireless  interconnection
revenues  and  offset  by a  reduction  in  payphone  revenues,  as we  begin  a
transition out of this business that will be completed by December 2002.

Operating Expenses

Operational and support expenses
Operational and support expenses  increased $172, or 7.9%,  quarter over quarter
and $208,  or 4.8%,  year over year.  Included in these  changes  were  expenses
primarily  attributable  to labor  costs to support  data and  customer  service
initiatives,  which  increased $212 for the second quarter 2001 and $416 for the
year-to-date period. The increases were substantially offset by income generated
as  favorable  pension  plan  returns  exceeded  expenses  from  other  employee
benefits.

Depreciation and amortization
Depreciation and amortization  expense increased $73, or 7.8%, in second quarter
2001 and $138, or 7.5%,  for the  year-to-date  period when compared to the same
2000  periods.  The  increases are primarily  attributable  to  amortization  of
capitalized  software  and  depreciation  resulting  from  higher  levels of net
property, plant and equipment.

-------------------------------------------------------------------------------
Domestic Wireless
-------------------------------------------------------------------------------

During fourth quarter 2000, we contributed our domestic  wireless  operations to
Cingular, and we account for our investment in Cingular under the equity method.
For management  purposes,  however,  we evaluate our domestic  wireless  segment
based  on our  proportionate  share  of  Cingular's  results.  Accordingly,  the
operating  revenues and expenses  reported for our domestic wireless segment for
second quarter and  year-to-date  2001 reflect 40% of Cingular's  total revenues
and  expenses,   whereas  second  quarter  and  year-to-date  2000  reflect  the
historical  results of our wireless  businesses  that have been  contributed  to
Cingular.

Certain  reclassifications  of  prior  period  amounts  have  been  made,  where
appropriate, to reflect comparable operating results.
<TABLE>
<CAPTION>

-------------------------------------------------- ----------------------- ------------ ----------------------- -----------
                                                       Second Quarter           %            Year-to-date           %
                                                   -----------------------              -----------------------
                                                      2000        2001       Change        2000        2001       Change
-------------------------------------------------- ----------- ----------- ------------ ----------- ----------- ------------

<S>                                                    <C>         <C>            <C>       <C>         <C>            <C>
Total operating revenues                               $1,036      $1,414         36.5      $1,986      $2,724         37.2
-------------------------------------------------- ----------- ----------- ------------ ----------- ----------- ------------
Operating expenses:
   Operational and support expenses                       724         921         27.2       1,450       1,846         27.3
   Depreciation and amortization                          154         190         23.4         321         370         15.3
       Total operating expenses                           878       1,111         26.5       1,771       2,216         25.1
-------------------------------------------------- ----------- ----------- ------------ ----------- ----------- ------------
Operating income                                          158         303         91.8         215         508        136.3
Segment net income                                       $106       $ 129         21.7  $     147        $ 217         47.6
-------------------------------------------------- ----------- ----------- ------------ ----------- ----------- ------------
Customers (a)                                           5,482       8,487         54.8
-------------------------------------------------- ----------- ----------- ------------ ----------- ----------- ------------
Average monthly revenue per customer (a)                 $ 61        $ 52       (14.8)         $60        $ 51       (15.0)
-------------------------------------------------- ----------- ----------- ------------ ----------- ----------- ------------
</TABLE>

(a)  For second  quarter and  year-to-date  2000,  the amounts shown are for our
     consolidated   properties  and  do  not  include   customer  data  for  our
     unconsolidated  properties.  Customer  data  for  the  second  quarter  and
     year-to-date  2001 is  comprised  of  BellSouth's  40% share of the managed
     results of Cingular Wireless.

Operating Revenues

Total  operating  revenues  grew $378 for second  quarter  2001 and $738 for the
year-to-date  period when compared to the same 2000 periods.  These growth rates
are  attributable to higher airtime,  access and equipment sales revenues driven
by the higher  customer  base created by the  formation of Cingular.  Cingular's
revenues  increased  13.6% from proforma  second  quarter 2000 results and 14.1%
from proforma year-to-date results,  driven by an 16.9% increase in cellular and
PCS customer levels.

We expect  competition  to continue to  intensify  and  pressure  pricing in our
markets.  We believe this will further stimulate  customer growth and demand and
continue to increase usage as the overall market is expanded.

Operating Expenses

Operational and support expenses
Operational and support expenses increased $197, or 27.2%, during second quarter
2001 and $396, or 27.3%, for the  year-to-date  period when compared to the same
2000 periods. These increases were also attributable to the change in operations
between  periods.  Cingular's  expenses  increased  10.9% over  proforma  second
quarter 2000 results and 15.1% over proforma year-to-date 2000 results, impacted
by  higher  levels of gross  subscriber  additions,  higher  cash  expenses  for
marketing and advertising related to Cingular's national branding campaign,  and
merger and integration related expenses.

Depreciation and amortization
Depreciation  and  amortization  increased $36, or 23.4%,  to $190 during second
quarter  2001 and  $49,  or  15.3%,  to $370 for the  year-to-date  period  when
compared  to the same 2000  periods.  Cingular's  expenses  increased  7.2% over
proforma  second quarter 2000 results and 1.3% over proforma  year-to-date  2000
results, impacted by higher levels of gross property, plant and equipment.

-------------------------------------------------------------------------------
Latin America Group
-------------------------------------------------------------------------------

The Latin America group is comprised of our  investments in wireless  businesses
in eleven  countries  in Latin  America.  Consolidated  operations  include  our
businesses  in  Argentina,   Chile,  Colombia,   Ecuador,  Nicaragua,  Peru  and
Venezuela.  All other businesses are accounted for under the equity method,  and
accordingly  their  results  are  reported  as Net  earnings  (losses) of equity
affiliates.
<TABLE>
<CAPTION>

-------------------------------------------------- ----------------------- ------------ -- ----------------------- ---------
                                                       Second Quarter           %               Year-to-Date          %
                                                   -----------------------                 -----------------------
                                                      2000        2001       Change           2000        2001      Change
-------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ---------

<S>                                                      <C>         <C>           <C>         <C>         <C>          <C>
Total operating revenues                                 $704        $749          6.4         $1,399      $1,531       9.4
-------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ---------
Operating expenses:
   Operational and support expenses                       522         505        (3.3)          1,103       1,135       2.9
   Depreciation and amortization                          130         155         19.2            256         309      20.7
        Total operating expenses                          652         660          1.2          1,359       1,444       6.3
-------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ---------
Operating income                                           52          89         71.2             40          87     117.5
-------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ---------
Net earnings (losses) of equity affiliates               (36)        (95)         N/M*           (42)       (137)       N/M
-------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ---------
Segment net income (loss)                               $(34)      $(119)          N/M     $     (54)      $(225)       N/M
-------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ---------
Customers (a)                                           5,584       8,008         43.4
-------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ---------
Average monthly revenue per customer (a)                  $35        $ 26       (25.7)     $       37        $ 27    (27.0)
-------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ---------
* - Not Meaningful.
</TABLE>

(a)  The amounts shown are for our  consolidated  properties  and do not include
     customer data for our unconsolidated properties.

Operating Revenues

The  increases of $45 quarter over quarter and $132 year over year are primarily
due to the  addition  of the  Colombia  operations.  Since  June 30,  2000,  our
existing operations have added approximately 1.2 million customers,  and we also
added another 1.2 million customers with the acquisition and growth of Colombia.
Primarily offsetting the impacts of customer growth is declining monthly revenue
per customer  resulting from increased  penetration of our cellular service into
the mass-consumer market and exchange rate declines in some countries.  Revenues
were also negatively  impacted by competitive and economic  pressures on Listel,
one of our advertising and publishing subsidiaries in Brazil.

A stronger U.S. Dollar against  foreign  currencies has had a negative impact on
reported revenues.  Absent changes in foreign currency exchange rates,  reported
revenues  would  have  increased  an  additional  $28  for  the  quarter  and an
additional $64 for the year-to-date period.

Operating Expenses

Operational and support expenses
For the 2001 periods,  these  expenses  decreased $17 compared to second quarter
2000 and increased $32 on a year-to-date  comparative basis. The changes in both
the quarter and  year-to-date  periods were favorably  affected by reductions in
expenses resulting from lower gross customer  additions.  The expense reductions
were offset by increased expenses from the addition of the Colombia operations.

Operational and support expenses  denominated in local currencies were favorably
impacted by the weakening of foreign currencies against the U.S. Dollar.  Absent
changes in foreign  currency  exchange rates,  reported  operational and support
expenses  would have increased an additional $15 for the quarter and $38 for the
year-to-date period.

Depreciation and amortization
Depreciation expense remained relatively flat quarter over quarter and increased
$5 year over year primarily due to higher gross depreciable plant resulting from
the continued investment in our wireless network infrastructure, offset by lower
depreciation  in Venezuela due to an extension of useful lives  effective  first
quarter 2001.  Amortization  expense  increased $25 quarter over quarter and $48
year over year as a result of growth in  intangibles  related to our purchase of
Colombia.

Net Earnings (Losses) of Equity Affiliates

Net earnings (losses) from our international  equity affiliates decreased $59 to
$(95) in second quarter 2001 and $95 to $(137) for the year-to-date  period. The
decline in earnings from our unconsolidated  international  businesses is due to
lower operating  results from our two principal  investments in Brazil.  Both of
these businesses experienced  significant foreign exchange losses as a result of
the weakening of the Brazilian Real against the U.S. Dollar.

-------------------------------------------------------------------------------
Domestic Advertising and Publishing
-------------------------------------------------------------------------------

Our Domestic advertising and publishing segment is comprised of companies in the
U.S. that publish,  print,  sell  advertising  in and perform  related  services
concerning  alphabetical  and classified  telephone  directories  and electronic
product offerings.
<TABLE>
<CAPTION>

-------------------------------------------------- ----------------------- ------------ -- ----------------------- ---------
                                                       Second Quarter           %               Year-to-Date          %
                                                   -----------------------                 -----------------------
                                                      2000        2001       Change           2000        2001      Change
-------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ---------

<S>                                                      <C>         <C>         <C>             <C>         <C>        <C>
Total operating revenues                                 $448        $443        (1.1)           $801        $880       9.9
-------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ---------
Operating expenses:
   Operational and support expenses                       237         241          1.7            428         445       4.0
   Depreciation and amortization                            7           6       (14.3)             14          13     (7.1)
        Total operating expenses                          244         247          1.2            442         458       3.6
-------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ---------
Operating income                                          204         196        (3.9)            359         422      17.5
-------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ---------
Segment net income                                       $124        $119        (4.0)           $218        $256      17.4
-------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ---------
</TABLE>

Operating Results

Revenues  decreased  $5 for  second  quarter  2001  and  increased  $79  for the
year-to-date  period  when  compared  to the same 2000  periods.  Timing of book
publications primarily drove the year-to-date increase.  Adjusted for these book
shifts, external revenues for this segment would have increased by approximately
0.7% for the year-to-date period.

Operational  and support  expenses  increased $4 for second quarter 2001 and $17
for the year-to-date period when compared to the same 2000 periods.

-------------------------------------------------------------------------------
All Other
-------------------------------------------------------------------------------

This   segment   primarily   includes   our  equity   investments   in  wireless
communications  operations in Israel,  Germany,  Denmark and India. In addition,
other minor revenue sources are included.
<TABLE>
<CAPTION>

-------------------------------------------------- ----------------------- ------------ -- ------------------------ --------
                                                       Second Quarter           %               Year-to-Date           %
                                                   -----------------------                 ------------------------
                                                      2000        2001       Change           2000         2001     Change
-------------------------------------------------- ----------- ----------- ------------ -- ------------ ----------- --------

<S>                                                       <C>         <C>         <C>              <C>         <C>     <C>
Total operating revenues                                  $26         $34         30.8             $51         $67     31.4
-------------------------------------------------- ----------- ----------- ------------ -- ------------ ----------- --------
Operating expenses                                         23          27         17.4              46          54     17.4
-------------------------------------------------- ----------- ----------- ------------ -- ------------ ----------- --------
Operating income                                            3           7         N/M*               5          13      N/M
-------------------------------------------------- ----------- ----------- ------------ -- ------------ ----------- --------
Net earnings (losses) of equity affiliates                 11         (9)          N/M              34        (29)      N/M
-------------------------------------------------- ----------- ----------- ------------ -- ------------ ----------- --------
Segment net income (loss)                                 $12       $ (4)          N/M             $33       $(21)      N/M
-------------------------------------------------- ----------- ----------- ------------ -- ------------ ----------- --------
* - Not Meaningful.
</TABLE>

Operating Results

Revenues remained relatively flat, increasing $8 for second quarter 2001 and $16
for the  year-to-date  period when compared to the same 2000  periods.  Expenses
also  remained  relatively  flat in both 2001  periods with  operating  expenses
increasing $4 quarter over quarter and $8 year over year.

Net earnings (losses) from equity affiliates  decreased $20 quarter over quarter
and $63 year  over  year due to  higher  losses  from our  equity  affiliate  in
Germany.

-------------------------------------------------------------------------------
Financial Condition
-------------------------------------------------------------------------------

Cash  flows from  operations  are our  primary  source of  funding  for  capital
requirements of existing  operations,  debt service and dividends.  We also have
ready access to capital  markets in the event  additional  funding is necessary.
While  current  liabilities  exceed  current  assets,  our  sources  of funds --
primarily from operations and, to the extent  necessary,  from readily available
external   financing   arrangements  --  are  sufficient  to  meet  all  current
obligations  on a timely  basis.  We believe that these sources of funds will be
sufficient to meet the needs of our business for the foreseeable future.

Net cash provided by (used for):
---------------------- --------------------------------------------------
                             2000        2001                Change
                       --------------------------------------------------

Operating activities..      $ 4,798    $ 3,712    $ (1,086)    (22.6)%
Investing activities..     $ (3,795)  $ (2,595)    $ 1,200     (31.6)%
Financing activities..        $(770)  $ (1,520)    $ (750)      97.4%

---------------------- --------------------------------------------------

Net cash provided by operating activities
The decrease in cash from  operations  between 2000 and 2001 primarily  reflects
working capital  expenditures  to support our strategic  initiatives on data and
Latin American wireless. We also paid $200 related to a contract termination and
$115 related to exiting the wireless entertainment  business.  Year-to-date 2000
included  operating  cash flow of  approximately  $440 from our former  domestic
wireless operations which were contributed to Cingular.  Also, 2000 year-to-date
cash flows were favorably impacted by the timing of tax payments.

Net cash used in investing activities
During the first six months of 2001, we invested $3,357 for capital expenditures
to support our wireline and wireless  networks,  to promote the  introduction of
new products and services and increase  operating  efficiency and  productivity.
Significant  investments are also being made to support deployment of high-speed
Internet access and optical fiber-based  broadband  services.  Included in these
expenditures  is  approximately  $389  in  costs  related  to the  purchase  and
development   of   internal-use   software.   Also,   during  2001  we  invested
approximately $100 into our wireless operations in Brazil and invested $176 in a
loan participation agreement related to our Colombian operations.  The first six
months of 2001 investing  activities  also include the receipt of  approximately
$1,000 from the sale of Qwest common stock.

Net cash used in financing activities
During  the  first  six  months  of 2001 we  reduced  our net  commercial  paper
borrowings primarily with $1,000 of proceeds from the sale of Qwest common stock
shares and $1,000 of proceeds from the private sale of debt securities.  We also
refinanced  certain debt at our Colombian  operations.  During the first half of
2000,  we issued  $2,000 of  long-term  debt.  The  proceeds of $1,974 from this
issuance were used to retire commercial paper borrowings.

Our debt to total  capitalization  ratio was 51.6% at June 30, 2001  compared to
54.2% at December 31,  2000.  The change is primarily a function of decreases in
short-term debt driven by reductions in commercial paper.

At July 31,  2001,  we had shelf  registration  statements  on file with the SEC
under which $1,200 of debt securities could be publicly offered.

Market Risk

For a complete  discussion of our market risks,  you should refer to the caption
"Market  Risk" in our 2000 Annual Report on Form 10-K.  Our primary  exposure to
market risks  relates to  unfavorable  movements  in interest  rates and foreign
currency  exchange rates.  We do not anticipate any  significant  changes in our
objectives and strategies with respect to managing such exposures.


-------------------------------------------------------------------------------
Operating Environment and Trends of the Business
-------------------------------------------------------------------------------

Regulatory Developments

Our future operations and financial results will be substantially  influenced by
developments in a number of federal and state  regulatory  proceedings.  Adverse
results in these proceedings could materially affect our revenues,  expenses and
ability to compete effectively against other telecommunications carriers.

Federal policies implemented by the Federal Communications Commission (FCC) have
strongly favored access reform, whereby the historical subsidy for local service
that is contained in network  access  charges paid by long distance  carriers is
moved to end-user  charges or universal  service  funds,  or both.  On April 27,
2001,  the FCC released a Notice of Proposed  Rulemaking  that commences a broad
inquiry that will begin a fundamental  examination of all forms of inter-carrier
compensation--payments  among  telecommunications  carriers resulting from their
interconnecting   networks.   In  general,   there  are  two  broad  classes  of
intercarrier  compensation:  (1) reciprocal  compensation  that applies to local
calls;  and (2) access charges that apply to long distance calls.  The objective
of the Notice of Proposed Rulemaking is to examine the existing rules pertaining
to  inter-carrier  compensation and explore  alternative  forms of inter-carrier
compensation.   This  proceeding   could  lead  to  permanent   changes  in  the
compensation that BellSouth  currently  receives from other carriers and its end
user customers. One alternative under consideration is "bill and keep," a policy
that requires carriers to exchange traffic freely with each other and to recover
from end user customers the costs of originating  and  terminating  traffic.  In
addition,  there are other aspects of access charges and universal  service fund
contribution  requirements  that  continue  to be  considered  by the  state and
federal  regulatory  commissions  that could result in greater expense levels or
reduced revenues.

The FCC has considerable  authority to establish  pricing,  interconnection  and
other policies that had once been considered  within the exclusive  jurisdiction
of the state public service commissions.  We expect the FCC to continue policies
that promote local service competition.

We have petitioned the FCC for permission  under the  Telecommunications  Act of
1996 to offer full long distance  services in South Carolina and Louisiana.  The
FCC has denied  these  petitions.  In Georgia,  an  independent  third party has
issued a final report on its testing of our operating  support systems,  and the
Georgia  Public  Service  Commission  has requested and received the comments of
interested  parties  concerning the testing and other issues relating to a grant
of long distance authority. The Georgia Commission is reviewing the comments. At
the completion of its  consideration,  we expect to file a petition with the FCC
for long  distance  authority  in Georgia.  We have also made  filings  with the
public service  commissions in each of Alabama,  Florida,  Kentucky,  Louisiana,
Mississippi,  North  Carolina,  South  Carolina  and  Tennessee  to  review  our
compliance  with the  requirements  for obtaining  long distance  authority.  We
expect to file an  application  with the FCC for each  state at the  appropriate
point in the state  commission's  consideration.  We do not know if the FCC will
require  further changes in our network  interconnection  elements and operating
systems  before it will approve such  petitions.  These  changes could result in
significant additional expenses and promote local service competition.

On April 27,  2001,  the FCC  released  an Order on Remand  and Report and Order
addressing  the issue of  compensation  for ISP traffic.  In its Order,  the FCC
acknowledged  that dial-up  calls to Internet  service  providers  are not local
calls, but instead are  "information  access" traffic exempt from the reciprocal
compensation  provisions  of the 1996 Act. The FCC has  implemented a three-year
interim period during which local carriers will pay  inter-carrier  compensation
for such calls in decreasing  increments.  After the three-year  interim period,
the new rules on inter-carrier compensation to be adopted in connection with the
Notice of Proposed Rulemaking referred to above are expected to be in effect. If
no rules have been  adopted  by that time,  the  inter-carrier  compensation  in
effect at the end of the third year would remain in effect.

Our intrastate  prices are regulated  under price  regulation  plans provided by
statute or approved by state public service commissions.  Some plans are subject
to periodic  review and may require  renewal.  The  commissions  reviewing these
plans may require price  reductions and other  concessions from us as conditions
to approving these plans.

The  Mississippi  Public  Service  Commission  has  commenced  its review of the
Mississippi  price  regulation  plan that we operate under today as required by
the plan. We have requested that the plan be renewed for an additional six years
with certain  modifications.  As a part of the renewal and review  process,  the
Mississippi  Commission could require modifications to prices and other terms of
the plan.

In January 2001, the Georgia Public Service Commission entered an order adopting
new company performance measures,  which will be used as one means to assess our
wholesale service quality to competitive local exchange  carriers.  In addition,
the Commission  adopted an Enforcement  Plan. The  Enforcement  Plan consists of
three  tiers.  Under  tier  1,  we  will be  required  to pay  remedial  sums to
individual  competitive  local  exchange  carriers  if we fail  to meet  certain
performance criteria set by the Commission. Under tier 2, we will pay additional
sums  directly to the State  Treasury  for failing to meet  certain  performance
metrics. Under tier 3, if we fail to meet certain performance criteria,  then we
will suspend additional marketing and sales of long distance services allowed by
the  Telecommunications Act of 1996. Our annual liability under the Plan will be
capped at 44% of net  revenues  in  Georgia.  The  decision  also  adopts  other
remedial measures for the filing of late or incomplete  performance reports, and
a market penetration  adjustment for new and advanced services,  which increases
the amount of the payments where low volumes of advanced or nascent services are
involved.  The Enforcement  Plan went into effect on March 1, 2001. We have made
payments under the  Enforcement  Plan and we may be required to make payments in
the future.

In May 2001, the Louisiana  Public Service  Commission  issued an order adopting
new company  performance  measures,  in addition  to  clarification  of existing
measures,  which  will be used as one  means to  assess  our  wholesale  service
quality to competitive  local  exchange  carriers.  In addition,  the Commission
adopted an Enforcement Plan. The Enforcement Plan consists of three tiers. Under
tier 1, we will be required to pay remedial sums to individual competitive local
exchange  carriers if we fail to meet  certain  performance  criteria set by the
Commission.  Under tier 2, we will pay  additional  sums  directly  to the State
Treasury for failing to meet certain  performance  metrics.  Under tier 3, if we
fail to meet certain  performance  criteria,  then the Louisiana  Public Service
Commission  may initiate a proceeding  to determine  whether to recommend to the
FCC suspension of our marketing and sales of long distance  services  allowed by
the  Telecommunications Act of 1996. Our annual liability under the Plan will be
capped at $59 in Louisiana.  The order also adopts other  remedial  measures for
the filing of late or incomplete  performance  reports, and a market penetration
adjustment  for new and advanced  services,  which  increases  the amount of the
payments where low volumes of advanced or nascent services are involved.

In 2000,  the  Florida  Public  Service  Commission  commenced a  proceeding  to
determine  whether  we  violated  certain  Commission  rules  regarding  service
quality.  This  matter has been  resolved  with the  adoption  of a new  service
guaranty  plan  and  the  payment  of  monies  to a  fund  promoting  access  to
telecommunication  services  by  people  with  low  income.  Also in  2000,  the
Commission  adopted a staff  recommendation  that our change in 1999 from a late
charge based on a percentage  of the amounts  overdue to a flat rate fee plus an
interest  charge  violated the Florida price  regulation  statute and voted that
certain monies should be refunded.  We protested the decision and the Commission
should issue a decision by the end of 2001.

We are involved in numerous legal proceedings  associated with state and federal
regulatory  matters,  the  disposition  of which  could  materially  impact  our
operating  results  and  prospects.  See  note  L to  our  consolidated  interim
financial statements.

International Operations

Our reporting  currency is the U.S.  Dollar.  However,  most of our revenues are
generated in the  currencies of the countries in which we operate.  In addition,
many of our operations and equity investees hold U.S.  Dollar-denominated short-
and  long-term  debt.  The  currencies  of many Latin  American  countries  have
experienced substantial volatility and depreciation in the past. Declines in the
value of the local  currencies in which we are paid relative to the U.S.  Dollar
will cause  revenues in U.S.  Dollar  terms to decrease  and  dollar-denominated
liabilities to increase.  Where we consider it to be economically  feasible,  we
attempt to limit our exposure to exchange  rate  fluctuations  by using  foreign
currency  forward  exchange  contracts or similar  instruments  as a vehicle for
hedging; however, a substantial amount of our exposures are unhedged.

The impact of a devaluation or depreciating currency on an entity depends on the
residual  effect  on the local  economy  and the  ability  of an entity to raise
prices  and/or reduce  expenses.  Our ability to raise prices is limited in many
instances by government regulation of tariff rates and competitive  constraints.
Due to our constantly  changing currency exposure and the potential  substantial
volatility of currency  exchange rates, we cannot predict the effect of exchange
rate fluctuations on our business.

Economic,  social  and  political  conditions  in  Latin  America  are,  in some
countries,  unfavorable  and volatile,  which may impair our  operations.  These
conditions  could  make  it  difficult  for us to  continue  development  of our
business,  generate revenues or achieve or sustain profitability.  Historically,
recessions  and  volatility  have been  primarily  caused by:  mismanagement  of
monetary,   exchange  rate  and/or  fiscal  policies;   currency   devaluations;
significant  governmental  influence  over  many  aspects  of  local  economies;
political   and  economic   instability;   unexpected   changes  in   regulatory
requirements;  social  unrest or  violence;  slow or negative  economic  growth;
imposition of trade barriers; and wage and price controls.

Most or all of these  factors  have  occurred  at various  times in the last two
decades  in our core  Latin  American  markets.  We have no  control  over these
matters. Economic conditions in Latin America are generally less attractive than
those in the U.S.,  and poor  social,  political  and  economic  conditions  may
inhibit use of our services which may adversely impact our business.

New Accounting Pronouncements

See note B to our consolidated interim financial statements.

<PAGE>

Item 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

See the caption labeled "Market Risk" in Management's Discussion and Analysis of
Financial Condition and Results of Operations.

-------------------------------------------------------------------------------
Cautionary Language Concerning Forward-Looking Statements
-------------------------------------------------------------------------------

In addition to historical  information,  this document contains  forward-looking
statements  regarding  events and  financial  trends  that may affect our future
operating results, financial position and cash flows. These statements are based
on our assumptions and estimates and are subject to risks and uncertainties. For
these statements, we claim the protection of the safe harbor for forward-looking
statements provided by the Private Securities Litigation Reform Act of 1995.

There are possible  developments  that could cause our actual  results to differ
materially from those forecast or implied in the forward-looking statements. You
are cautioned not to place undue reliance on these  forward-looking  statements,
which are current only as of the date of this filing.  We disclaim any intention
or obligation to update or revise any forward-looking  statements,  whether as a
result of new information, future events or otherwise.

While the below list of cautionary  statements is not  exhaustive,  some factors
that could affect future operating  results,  financial  position and cash flows
and could cause actual results to differ  materially from those expressed in the
forward-looking statements are:

-    a change in economic conditions in domestic or international  markets where
     we operate or have material  investments  which would affect demand for our
     services;

-    significant deterioration in foreign currencies relative to the U.S. Dollar
     in foreign countries in which we operate;

-    changes   in  U.S.   or   foreign   laws  or   regulations,   or  in  their
     interpretations,  which could result in the loss, or reduction in value, of
     our licenses,  concessions  or markets,  or in an increase in  competition,
     compliance costs or capital expenditures;

-    a decrease in the growth rate of demand for the services which we offer;

-    the intensity of competitive  activity and its resulting  impact on pricing
     strategies and new product offerings;

-    protracted delay in our entry into the interLATA long distance market;

-    higher than anticipated  start-up costs or significant up-front investments
     associated with new business initiatives;

-    the outcome of pending litigation;

-    unanticipated higher capital spending from, or delays in, the deployment of
     new technologies; and

-    the  impact  and  the  success  of the  wireless  joint  venture  with  SBC
     Communications, known as Cingular Wireless, including marketing and product
     development efforts and financial capacity.


-------------------------------------------------------------------------------
PART II -- OTHER INFORMATION
-------------------------------------------------------------------------------

Item 4.  Submission of Matters to a Vote of Security Holders

Our  annual  meeting  of  shareholders  was held on April 23,  2001.  The voting
results were as follows:

Number of Shares Outstanding as of Record Date:   1,908,679,660

Number of Shares Present:  1,573,404,800

Percent of Shares Present:  82.43%

Proposal 1:
Election of Directors

                               For                    Withheld
James H. Blanchard         1,543,363,216             30,041,584
Armando M. Codina          1,542,880,181             30,524,619
Joseph M. Magliochetti     1,542,444,208             30,960,592
Leo F. Mullin              1,542,942,173             30,462,627

The terms of the following directors continued after the meeting:

F. Duane Ackerman
Reuben V. Anderson
J. Hyatt Brown
Kathleen F. Feldstein, PhD
James R. Kelly
John G. Medlin
Eugene F. Murphy
Robin B. Smith
William S. Stavropoulos

Proposal 2:
Ratification of Auditors

                     For                 Against          Abstain
               1,525,352,609            35,776,980       12,275,211


Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits:

     Exhibit
     Number

     4a   No  instrument  which  defines  the rights of holders of our long- and
          intermediate-term  debt is filed herewith  pursuant to Regulation S-K,
          Item  601(b)(4)(iii)(A).  Pursuant  to this  regulation,  we  agree to
          furnish a copy of any such instrument to the SEC upon request.

     10aa-5  Amendment  dated  June 15,  2001 to the  BellSouth  Employee  Stock
          Investment Plan.

     11   Computation of Earnings Per Common Share.

     12   Computation of Ratio of Earnings to Fixed Charges.





(b) Reports on Form 8-K:

Date of Event              Subject
April 19, 2001             BellSouth 1Q01 Earnings Release

May 17, 2001               Cingular Proforma First Quarter 2000 and 2001 Results

June 1, 2001               Discussion of Foreign Exchange losses on 2Q01 Results


<PAGE>


                                    SIGNATURE


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.



                                                  BELLSOUTH CORPORATION

                                              By /s/ W. Patrick Shannon
                                                     W. PATRICK SHANNON
                   Vice President - Finance and Supply Chain Management
                                         (Principal Accounting Officer)


August 3, 2001
<PAGE>


                                  EXHIBIT INDEX

     Exhibit
     Number

     10aa-5       Amendment  dated  June 15,  2001 to the  BellSouth  Employee
                  Stock Investment Plan.

     11           Computation of Earnings Per Common Share.

     12           Computation of Ratio of Earnings to Fixed Charges.