1


                   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 September 30, 2000

                                      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 October 31, 2000, 1,868,074,357 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.......................... 16

3.  Qualitative and Quantitative Disclosures about Market Risk ..... 29

                                   Part II
6.  Exhibits and Reports on Form 8-K ............................... 31
<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 Nine Months
                                    Ended September 30,      Ended September 30,
                                      1999       2000         1999        2000
<S>                                   <C>         <C>           <C>         <C>
Operating revenues:
Wireline communications:
     Local service                 $ 2,747     $ 2,857       $ 8,113     $ 8,540
     Network access                  1,200       1,198         3,578       3,706
     Long distance                     158         133           461         399
     Other wireline                    310         370           845       1,012
        Total wireline
          communications             4,415       4,558        12,997      13,657
Domestic Wireless                      815         942         2,355       2,714
International operations               575         709         1,701       2,031
Advertising and publishing             540         587         1,290       1,422
Other                                   77         107           200         318
        Total operating revenues     6,422       6,903        18,543      20,142

Operating expenses:
     Operational and support
       expenses                      3,541       3,665        10,153      10,798
     Depreciation and amortization   1,207       1,301         3,475       3,759
     Severance accrual                   -           -             -          78
     Provision for asset impairment      -           -           320           -
        Total operating expenses     4,748       4,966        13,948      14,635

Operating income                     1,674       1,937         4,595       5,507

Interest expense                       266         344           737         982
Gain (loss) on sale of operations       39         (14)           55        (14)
Net earnings (losses) of equity
   affiliates                          (26)         10          (235)        163
Other income, net                       15          35           188         164

Income before income taxes           1,436       1,624         3,866       4,838
Provision for income taxes             442         588         1,471       1,737

        Net income                   $ 994     $ 1,036       $ 2,395     $ 3,101


Weighted-average common shares
   outstanding:
     Basic                           1,885       1,871         1,903       1,878
     Diluted                         1,904       1,885         1,921       1,894
Dividends declared per common
   share                            $ 0.19      $ 0.19        $ 0.57      $ 0.57
Earnings per share:
     Basic                          $ 0.53      $ 0.55        $ 1.26      $ 1.65
     Diluted                        $ 0.52      $ 0.55        $ 1.25      $ 1.64

</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)

<TABLE>
<CAPTION>

                                         December 31,             September 30,
                                             1999                      2000
                                                                   (Unaudited)
<S>                                           <C>                      <C>
ASSETS
Current assets:
     Cash and cash equivalents                $ 1,287                  $ 1,176
     Temporary cash investments                   105                       36
     Accounts receivable, net
       of allowance for
       uncollectibles of
       $312 and $389                            5,177                    5,268
     Material and supplies                        451                      511
     Other current assets                         367                      968
         Total current assets                   7,387                    7,959

Investments and advances                        6,097                    7,002

Property, plant and equipment                  61,009                   64,560
Less:  accumulated depreciation                36,378                   38,673
     Property, plant and
        equipment, net                         24,631                   25,887

Deferred charges and other assets               1,564                    1,853
Intangible assets, net                          3,774                    6,284

         Total assets                        $ 43,453                 $ 48,985

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Debt maturing within one year            $ 7,653                  $ 8,987
     Accounts payable                           1,961                    2,021
     Other current liabilities                  3,781                    4,093
         Total current liablities              13,395                   15,101

Long-term debt                                  9,113                   11,036

Noncurrent liabilities:
     Deferred income taxes                      2,705                    3,130
     Unamortized investment tax credits           126                       96
     Other noncurrent liabilities               3,299                    3,123
         Total noncurrent liabilities           6,130                    6,349

Shareholders' equity:
     Common stock, $1 par value
        (4,400 shares authorized;
         1,883 and 1,866 shares
         outstanding)                           2,020                    2,020
     Paid-in capital                            6,771                    6,775
     Retained earnings                         11,456                   13,421
     Accumulated other comprehensive income      (358)                     (58)
     Shares held in trust and treasury         (4,798)                  (5,452)
     Guarantee of ESOP debt                      (276)                    (207)
         Total shareholders' equity            14,815                   16,499

         Total liabilities and
           shareholders' equity              $ 43,453                 $ 48,985
</TABLE>

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 Nine Months
                                                                        Ended September 30,
                                                                        1999             2000
<S>                                                                    <C>            <C>


Cash Flows from Operating Activities:
     Net income                                                        $ 2,395         $ 3,101
     Adjustments to net income:
         Depreciation and amortization                                   3,475           3,759
         Severance accrual                                                   -              78
         (Gain) loss on sale of operations                                 (55)             14
         Provision for asset impairment                                    320               -
         Provision for uncollectibles                                      260             278
         Net losses (earnings) of equity affiliates                        235            (163)
         Dividends received from equity affiliates                          59              55
         Recognition of foreign investment tax credits                    (120)              -
         Minority interests in income of subsidiaries                       67              12
         Deferred income taxes and investment tax credits                  (92)            150
     Net change in:
         Accounts receivable and other current assets                     (548)           (529)
         Accounts payable and other current liabilities                    710             434
         Deferred charges and other assets                                (391)           (486)
         Other liabilities and deferred credits                             76            (138)
     Other reconciling items, net                                           80             107

         Net cash provided by operating activities                       6,471           6,672

Cash Flows from Investing Activities:
     Capital expenditures                                               (4,456)         (4,940)
     Investments in and advances to equity affiliates                     (140)           (497)
     Acquisitions, net of cash acquired                                 (3,791)         (1,836)
     Purchases of wireless licenses                                       (123)            (72)
     Proceeds from sale of operations                                      215              29
     Proceeds from disposition of short-term investments                   144             372
     Purchases of short-term investments                                  (243)           (311)
     Proceeds from repayment of loans and advances                          60              45
     Other investing activities, net                                        80              60

         Net cash used for investing activities                         (8,254)         (7,150)

Cash Flows from Financing Activities:
     Net borrowings (repayments) of short-term debt                      3,451             411
     Proceeds from long-term debt                                          508           2,118
     Repayments of long-term debt                                         (205)           (334)
     Dividends paid                                                     (1,091)         (1,072)
     Purchase of treasury shares                                        (3,032)           (779)
     Funds distributed to minority partners                                  -             (32)
     Other financing activities, net                                        27              55

         Net cash (used for) provided by financing activities             (342)            367

     Net (decrease) increase in cash and cash equivalents               (2,125)           (111)
     Cash and cash equivalents at beginning of period                    3,143           1,287
     Cash and cash equivalents at end of period                        $ 1,018         $ 1,176

</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 Nine Months Ended September 30, 2000

                                         Number of Shares                               Amount
                                                                                            Accum.
                                                  Shares                                    Other     Shares   Guaran-
                                                  Held in                                   Compre-  Held in   tee of
                                         Common   Trust and    Common   Paid-in  Retained   hensive  Trust and  ESOP
                                          Stock   Treasury      Stock   Capital  Earnings   Income   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                                     -                                    3,101                                  3,101
Other comprehensive income, net of tax:
    Foreign currency translation adjustment    -                                                50                            50
    Net unrealized gains on securities         -                                               259                           259
    Minimum pension liability adjustment       -                                                (9)                           (9)

Total comprehensive income (b)                 -                                                                           3,401
Dividends declared                             -                                   (1,070)                                (1,070)
Share issuances for employee benefit plans     -        3                             (66)                125                 59
Purchase of treasury stock                     -      (19)                                               (779)              (779)
Tax benefit related to stock options           -                              4                                                4
ESOP activities and related tax benefit        -                                                                    69        69

Balance at September 30, 2000              2,020     (154)     $ 2,020  $ 6,775  $ 13,421    $ (58)  $ (5,452)  $ (207) $ 16,499

</TABLE>




(a)  Trust  and  treasury  shares  are  not  considered  to be  outstanding  for
     financial  reporting  purposes.  As  of  September  30,  2000,  there  were
     approximately 36 shares held in trust and 118 shares held in treasury.

(b)  Total comprehensive income for third quarter 2000 was $983.


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 Nine Months Ended September 30, 1999

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

<S>                                        <C>        <C>        <C>      <C>       <C>        <C>      <C>       <C>      <C>
Balance at December 31, 1998              2,020      (70)     $ 2,020  $ 6,766   $ 9,479     $ (64) $ (1,752)  $ (339) $ 16,110

Net income                                    -                                    2,395                                  2,395
Other comprehensive income, net of tax:
    Foreign currency translation adjustment   -                                               (145)                        (145)
    Net unrealized losses on securities       -                                               (848)                        (848)

Total comprehensive income (b)                -                                                                           1,402
Dividends declared                            -                                   (1,079)                                (1,079)
Share issuances for employee benefit plans    -        2                             (38)                 66                 28
Purchase of treasury stock                    -      (68)                                             (3,032)            (3,032)
Purchase of stock by grantor trust            -                                                           (3)                (3)
ESOP activities and related tax benefit       -                                       10                           29        39

Balance at September 30, 1999             2,020     (136)     $ 2,020  $ 6,766  $ 10,767  $ (1,057) $ (4,721)  $ (310) $ 13,465
</TABLE>




(a)  Trust  and  treasury  shares  are  not  considered  to be  outstanding  for
     financial  reporting  purposes.  As  of  September  30,  1999,  there  were
     approximately 36 shares held in trust and 100 shares held in treasury.

(b)  Total comprehensive income for third quarter 1999 was $115.




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 reports 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 - Recent Accounting Pronouncements

Revenue  Recognition
In December 1999, the SEC issued Staff Accounting  Bulletin Number 101, "Revenue
Recognition in Financial  Statements"  (SAB 101). SAB 101 requires that revenues
and costs of revenues  derived  from  services  rendered at the  beginning  of a
contract or business  relationship  be deferred and recognized  over the life of
the  related  contract  or  relationship.  In June 2000,  the SEC  deferred  the
required  adoption date of the  guidelines  in SAB 101 to the fourth  quarter of
2000.  We do not  expect the  adoption  of these  guidelines  to have a material
impact on our results of operations, financial position or cash flows.

Derivative Instruments and Hedging Activities
In June 1998, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting for Derivative
Instruments and Hedging  Activities".  Among other provisions,  it 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
would be accounted  for  depending on the use of the  derivative  and whether it
qualifies for hedge accounting.  The effective date of this standard was delayed
via the issuance of SFAS No. 137,  "Accounting  for Derivative  Instruments  and
Hedging  Activities - Deferral of the Effective Date of FASB Statement No. 133 -
an amendment of FASB Statement  133". The effective date for SFAS No. 133 is now
for fiscal years  beginning  after June 15,  2000,  though  earlier  adoption is
encouraged and  retroactive  application is prohibited.  This means that we must
adopt  the  standard,  as  amended  by SFAS No.  138,  "Accounting  for  Certain
Derivative  Instruments  and Certain  Hedging  Activities - an amendment of FASB
Statement No. 133," no later than January 1, 2001. We do not expect the adoption
of this standard will have a material impact on results of operations, financial
position or cash flows.

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:

<PAGE>


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

Note C - Earnings Per Share (continued)

                                           Third Quarter         Year-to-Date
                                          1999      2000         1999       2000
Basic common shares outstanding .........1,885     1,871        1,903      1,878
Incremental shares from stock options.......19        14           18         16
Diluted common shares outstanding .......1,904     1,885        1,921      1,894

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

Note D - Workforce Reduction

In February  2000,  we announced  that we would reduce our domestic  general and
administrative staff by approximately 2,100 positions.  These reductions are the
result of the  streamlining of work processes in conjunction with our shift to a
more  simplified  management  structure.  As a result  of these  reductions,  we
recorded  a  one-time  charge  of $78,  or $48  after  tax,  for  severance  and
post-employment health benefits.

Note E - E-Plus Restructuring

In February  2000, we closed on a previously  announced  alliance with KPN Royal
Dutch  Telecom.  We utilized  our right of first  refusal  which  enabled KPN to
acquire a 77.5  percent  interest  in E-Plus and  allows us the option  after 18
months of converting our 22.5 percent interest in E-Plus into either 200 million
shares of KPN or  shares  representing  at the time an  estimated  33.3  percent
ownership interest in KPN's wireless subsidiary.

As a result of this transaction, we recognized income of $143, or $68 after tax.
The gain relates to a settlement payment from the selling shareholder  regarding
a dispute  over the terms of the  E-Plus  shareholder  agreement  governing  the
provisions of the sale.

As part of this  transaction,  we also  agreed to make up to $3 billion of loans
available  to KPN to be used for  further  wireless  investments  in Europe  and
received non-detachable warrants to purchase approximately 90 million additional
shares of KPN. We loaned  approximately  $412 to KPN during  September 2000. KPN
applied the  proceeds  towards the  purchase  of new third  generation  wireless
licenses from the German  government for use by our German  operations.  We also
guaranteed $1.35 billion in bank loans to our German operations, the proceeds of
which were also applied  towards the purchase of the new  licenses.  The loan to
KPN is included in Other  current  assets in our  consolidated  balance sheet at
September 30, 2000.

Note F - Asset Impairment Loss

In June 1999,  we executed a contract  with  Ericsson to replace  infrastructure
equipment,  including  switches,  base  stations  and  software,  in 14 wireless
markets in the  southeastern  United  States.  The new  equipment is intended to
improve  network  performance  and to lay the  foundation  for  migration of the
network to Third Generation  wireless (3G) and wireless Internet.  We expect the
conversion to be substantially completed by December 2000.

The  planned  disposals  of the  existing  infrastructure  equipment  require an
evaluation of asset  impairment  in accordance  with  SFAS 121.  As a result,  a
non-cash  charge of $320, or $187 after tax, was recorded in the second  quarter
of 1999 to write  these  assets  down to their  fair  market  value,  which  was
estimated as the expected  future cash flows of these assets through the date of
disposal.  We will continue to use the assets until the  conversion  process has
been completed and depreciate the remaining net book value over this period.

<PAGE>
                                   BELLSOUTH CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                        (Unaudited)
                                   (Dollars In Millions)

Note G - Devaluation of Brazilian Currency

In mid January 1999,  the  Brazilian  Government  changed its monetary  exchange
policy,  extinguishing  the exchange band through which it had managed the range
of the  fluctuation  of the Real in relation to the U.S.  Dollar,  allowing  the
market to freely  determine the exchange  rate. As a consequence of this change,
the Real devalued  significantly  in relation to the U.S.  Dollar in early 1999.
The devaluation and subsequent fluctuations in the exchange rate resulted in our
Brazilian wireless properties  recording net currency losses related to net U.S.
Dollar-denominated liabilities. Our share of the foreign currency losses was $75
for third quarter 1999 and $355 for year-to-date 1999.

Note H - Segment Information

We have four reportable  operating segments:  (1) Wireline  communications;  (2)
Domestic  wireless;  (3)  International  operations;  and  (4)  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,   intercompany   eliminations  and  other  nonoperating  items.  The
following table provides information for each operating segment:
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                               Third Quarter           %                     Year-to-Date             %
----------------------------------------------------------------------------------------------------------------------------
                                             1999        2000       Change                 1999         2000       Change
----------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>         <C>            <C>               <C>          <C>              <C>
Wireline communications
----------------------------------------------------------------------------------------------------------------------------
External revenues                            $ 4,415     $ 4,558        3.2               $ 12,997     $ 13,657         5.1
----------------------------------------------------------------------------------------------------------------------------
Intersegment revenues                             66          87       31.8                    233          245         5.2
----------------------------------------------------------------------------------------------------------------------------
   Total revenues                            $ 4,481     $ 4,645        3.7               $ 13,230     $ 13,902         5.1
----------------------------------------------------------------------------------------------------------------------------
Operating income                             $ 1,438     $ 1,564        8.8                 $4,241       $4,705        10.9
----------------------------------------------------------------------------------------------------------------------------
Segment net income                             $ 817       $ 870        6.5                 $2,399       $2,641        10.1
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
Domestic wireless
----------------------------------------------------------------------------------------------------------------------------
External revenues                              $ 815       $ 942       15.6                 $2,355       $2,714        15.2
----------------------------------------------------------------------------------------------------------------------------
Intersegment revenues                              5           6       20.0                     12           14        16.7
----------------------------------------------------------------------------------------------------------------------------
   Total revenues                              $ 820       $ 948       15.6                 $2,367       $2,728        15.3
----------------------------------------------------------------------------------------------------------------------------
Operating income                                $ 71       $ 175      146.5                  $ 260        $ 460        76.9
----------------------------------------------------------------------------------------------------------------------------
Net earnings (losses) of equity affiliates      $ 36        $ 41       13.9                  $ 108        $ 121        12.0
----------------------------------------------------------------------------------------------------------------------------
Segment net income                              $ 55       $ 118      114.5                  $ 186        $ 305        64.0
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
International operations
----------------------------------------------------------------------------------------------------------------------------
External revenues                              $ 575       $ 709       23.3                 $1,701       $2,031        19.4
----------------------------------------------------------------------------------------------------------------------------
Intersegment revenues                              1          11       N/M*                      1           32         N/M
----------------------------------------------------------------------------------------------------------------------------
   Total revenues                              $ 576       $ 720       25.0                 $1,702       $2,063        21.2
----------------------------------------------------------------------------------------------------------------------------
Operating income                                $ 31        $ 13      (58.1)                 $ 152         $ 69       (54.6)
----------------------------------------------------------------------------------------------------------------------------
Net earnings (losses) of equity affiliates      $ (3)      $ (29)       N/M                    $ 5        $ (41)        N/M
----------------------------------------------------------------------------------------------------------------------------
Segment net income (loss)                        $ 9       $ (68)       N/M                   $ 39        $ (72)        N/M
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
Advertising and publishing
----------------------------------------------------------------------------------------------------------------------------
External revenues                              $ 540       $ 587        8.7                 $1,290       $1,422        10.2
----------------------------------------------------------------------------------------------------------------------------
Intersegment revenues                              2           6        N/M                      8           17         N/M
----------------------------------------------------------------------------------------------------------------------------
   Total revenues                              $ 542       $ 593        9.4                 $1,298       $1,439        10.9
----------------------------------------------------------------------------------------------------------------------------
Operating income                               $ 259       $ 298       15.1                  $ 561        $ 642        14.4
----------------------------------------------------------------------------------------------------------------------------
Net earnings (losses) of equity affiliates       $ 1        $ (2)       N/M                   $ (4)         $ 2         N/M
----------------------------------------------------------------------------------------------------------------------------
Segment net income                             $ 160       $ 181       13.1                  $ 342        $ 396        15.8
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Not Meaningful

<PAGE>

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

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

----------------------------------------------------------------------------------------------------------------------
                                             Third Quarter          %                    Year-to-Date            %
----------------------------------------------------------------------------------------------------------------------
                                           1999        2000      Change                1999         2000      Change
----------------------------------------------------------------------------------------------------------------------
<S>                                           <C>        <C>        <C>                  <C>          <C>        <C>
All other
----------------------------------------------------------------------------------------------------------------------
External revenues                             $ 77       $ 107      39.0                 $ 200        $ 318      59.0
----------------------------------------------------------------------------------------------------------------------
Intersegment revenues                          102         115      12.7                   264          309      17.0
----------------------------------------------------------------------------------------------------------------------
   Total revenues                            $ 179       $ 222      24.0                 $ 464        $ 627      35.1
----------------------------------------------------------------------------------------------------------------------
Operating loss                               $ (72)      $ (68)      5.6                $ (224)      $ (197)     12.1
----------------------------------------------------------------------------------------------------------------------
Net earnings (losses) of equity affiliates     $ 3        $ (3)      N/M                   $ 3         $ (4)      N/M
----------------------------------------------------------------------------------------------------------------------
Segment net loss                             $ (39)      $ (45)    (15.4)               $ (155)      $ (144)      7.1
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Reconciling items
----------------------------------------------------------------------------------------------------------------------
External revenues                              $ -         $ -         -                   $ -          $ -         -
----------------------------------------------------------------------------------------------------------------------
Intersegment revenues                         (176)       (225)    (27.8)                 (518)        (617)    (19.1)
----------------------------------------------------------------------------------------------------------------------
   Total revenues                            $(176)      $(225)    (27.8)               $ (518)      $ (617)    (19.1)
----------------------------------------------------------------------------------------------------------------------
Operating loss                               $ (53)      $ (45)     15.1                $ (395)      $ (172)     56.5
----------------------------------------------------------------------------------------------------------------------
Net earnings (losses) of equity affiliates   $ (63)        $ 3       N/M                $ (347)        $ 85       N/M
----------------------------------------------------------------------------------------------------------------------
Segment net loss                              $ (8)      $ (20)      N/M                $ (416)       $ (25)      N/M
----------------------------------------------------------------------------------------------------------------------
Reconciliation to Consolidated Financial Information
----------------------------------------------------------------------------------------------------------------------
Operating Revenues
----------------------------------------------------------------------------------------------------------------------
Wireline communications                    $ 4,481     $ 4,645       3.7              $ 13,230     $ 13,902       5.1
----------------------------------------------------------------------------------------------------------------------
Domestic wireless                              820         948      15.6                 2,367        2,728      15.3
----------------------------------------------------------------------------------------------------------------------
International operations                       576         720      25.0                 1,702        2,063      21.2
----------------------------------------------------------------------------------------------------------------------
Advertising and publishing                     542         593       9.4                 1,298        1,439      10.9
----------------------------------------------------------------------------------------------------------------------
All other                                      179         222      24.0                   464          627      35.1
----------------------------------------------------------------------------------------------------------------------
    Total segments                         $ 6,598     $ 7,128       8.0              $ 19,061     $ 20,759       8.9
----------------------------------------------------------------------------------------------------------------------
Reconciling items                            $(176)      $(225)    (27.8)               $ (518)      $ (617)    (19.1)
----------------------------------------------------------------------------------------------------------------------
Total consolidated                         $ 6,422     $ 6,903       7.5              $ 18,543     $ 20,142       8.6
----------------------------------------------------------------------------------------------------------------------
Net Income
----------------------------------------------------------------------------------------------------------------------
Wireline communications                      $ 817       $ 870       6.5                $2,399       $2,641      10.1
----------------------------------------------------------------------------------------------------------------------
Domestic wireless                               55         118     114.5                   186          305      64.0
----------------------------------------------------------------------------------------------------------------------
International operations                         9         (68)      N/M                    39          (72)      N/M
----------------------------------------------------------------------------------------------------------------------
Advertising and publishing                     160         181      13.1                   342          396      15.8
----------------------------------------------------------------------------------------------------------------------
All other                                      (39)        (45)    (15.4)                 (155)        (144)      7.1
----------------------------------------------------------------------------------------------------------------------
    Total segments                         $ 1,002     $ 1,056       5.4                $2,811       $3,126      11.2
----------------------------------------------------------------------------------------------------------------------
Reconciling items                             $ (8)      $ (20)      N/M                $ (416)       $ (25)      N/M
----------------------------------------------------------------------------------------------------------------------
Total consolidated                           $ 994     $ 1,036       4.2                $2,395       $3,101      29.5
----------------------------------------------------------------------------------------------------------------------
</TABLE>


Note I - Investment Activity

Investment in Brazil

In May 2000, we completed  the purchase of a combination  of voting common stock
and American Depository Receipts representing  nonvoting preferred stock of Tele
Centro Oeste Celular Participacoes SA, a Brazilian company, for a total purchase
price of  approximately  $240.  Tele Centro Oeste provides  cellular  service in
central-west Brazil,  including Brasilia, as well as northern Brazil. The common
stock  portion of the  investment  represents  11.8% of the voting power of Tele
Centro Oeste.  The combined  investment in common and preferred stock represents
17.3% of the total  capital of Tele Centro Oeste.  This  investment is accounted
for under the cost  method,  subject  to the  guidelines  of  available-for-sale
securities under SFAS 115.

<PAGE>

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

Note I - Investment Activity (continued)

Investment in Colombia
In June 2000, we acquired a 50.4% controlling  equity interest in Celumovil S.A.
for a purchase price of  approximately  $399,  funded by $299 of cash and a $100
note payable due December 2000. We have commenced  cobranding Celumovil with the
BellSouth brand.  Celumovil/BellSouth  provides  wireless service in the Eastern
region of  Colombia,  which  includes  the  capital  city of Bogota,  and in the
Atlantic or coastal region.

In July 2000,  Celumovil/BellSouth acquired 100% of Cocelco, a wireless operator
that since 1994 has been serving the Western region of Colombia,  which includes
the cities of Medellin and Cali.  This  acquisition was funded by a $384 capital
contribution  and  a $30  shareholder  loan  from  BellSouth.  This  transaction
increased BellSouth's ownership interest in Celumovil to approximately 66.0%.

In conjunction with these transactions, we have entered into a series of put and
call agreements whereby we can acquire,  or be compelled to acquire,  additional
shares of Celumovil from our primary  partner in Celumovil,  up to our partner's
entire  interest,  at or close to an appraised fair value between the second and
ninth  anniversary  of our June 2000  acquisition  of our  initial  interest  in
Celumovil. Our partner's first put option for up to a number of shares currently
equal to approximately 14% of Celumovil's outstanding stock is first exercisable
in June 2002. Our first call option for up to a number of shares currently equal
to approximately  9% of Celumovil's  outstanding  stock is first  exercisable in
December 2003.

Acquisition of Additional Interest in Carolinas PCS Partnership
In September 2000, we acquired the remaining 44.2% interest in the Carolinas PCS
partnership  bringing our ownership  interest to 100%. The partnership  provides
PCS  service in North  Carolina,  South  Carolina  and  Northeast  Georgia.  The
purchase price of $885 was funded through the issuance of commercial  paper. The
PCS property and related debt was subsequently contributed to the wireless joint
venture with SBC Communications which is discussed in note Q.

Note J - 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 a 5% equity interest in Qwest and are classified as available-for-sale  under
SFAS 115.  Under SFAS 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.  The table below shows certain summarized information related
to these investments at September 30:

                                       Gross        Gross
                                    Unrealized    Unrealized
  1999                    Cost         gains        losses      Fair Value

  Investment in Qwest  ..$3,500        $ --        $ 1,309       $ 2,191
  Other investments .....   132          9             --            141
      Total  ............$3,632        $ 9         $ 1,309       $ 2,332

                                       Gross        Gross
                                    Unrealized    Unrealized
  2000                    Cost         gains        losses      Fair Value

  Investment in Qwest  ..$3,500        $ 65          $ --         $3,565
  Other investments .....   482         146            --            628
      Total  ............$3,982       $ 211          $ --         $4,193

<PAGE>

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

Note K - Sublease of Communications Towers

In June 1999, we signed a definitive  agreement with Crown Castle  International
Corporation for the sublease of all unused space on  approximately  1,850 of our
wireless  communications towers in exchange for $610 to be paid in a combination
of cash and Crown common stock. As of September 30, 2000 we have closed on 1,836
towers and received  $604.  Subleases  of the  remaining  towers  covered by the
agreement  are expected to be closed  throughout  the remainder of 2000. We also
entered into a five-year,  build-to-suit agreement with Crown covering up to 500
towers.

Under a similar  agreement,  Crown will  sublease  all  unused  space on 773 PCS
towers in exchange for $317 in cash. As of September 30, 2000, we have closed on
728 towers and received $298.  Subleases of the remaining  towers covered by the
agreement  are  expected  to be closed  throughout  the  remainder  of 2000.  In
connection  with  this  agreement,  we  entered  into an  exclusive  three-year,
build-to-suit agreement.

Note L - 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.

                          Third Quarter      %            Year-to-Date      %
                        1999       2000    Change        1999     2000    Change
Revenues  ............ $1,363    $1,584     16.2       $3,822   $4,697     22.9
Operating income ..... $ 152       $ 80    (47.4)         293      364     24.2
Net income (loss) .... $(127)      $(25)    80.3       $(735)     $ 47      N/M



Note M - Debt Issuance

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

Note N - Sale of Operations

In July 2000,  we sold our  ownership  interests  in mobile data  operations  in
Belgium, the Netherlands and the United Kingdom for total proceeds of $28. These
sales  generated a pre-tax net loss of $14 and a $30  after-tax  gain  resulting
from tax  benefits  associated  with the sale of the  operations  in the  United
Kingdom.

In August 1999,  we sold our 100%  ownership  interest in Honolulu  Cellular for
total  proceeds of $194.  In April 1999, we sold our 100% interest in a wireless
property located in Dothan,  Alabama for total proceeds of $21. The pretax gains
on these sales were $39, or $23 after tax,  for  Honolulu  and $16, or $10 after
tax, for Dothan.

Note O - 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
<PAGE>

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

Note O - Contingencies (continued)

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.  At September  30, 2000,  the
exposure related to unrecorded  amounts withheld from competitive local carriers
was  approximately   $280,   including  accrued  interest.   We  have  commenced
discussions with several  competitive  local carriers  concerning  settlement of
some claims, and agreements have been reached in certain circumstances.

Other reciprocal compensation issues.
In a related  matter,  a  competitive  local  carrier was  claiming  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.

U.S. Electronics.
In October  1999,  two of the  Company's  wholly-owned  subsidiaries,  BellSouth
Products,  Inc. (BSP) and BST filed a complaint against U. S. Electronics,  Inc.
(USE), in the United States District Court for the Northern District of Georgia.
The  complaint  alleges  that  USE,  a  distributor  of  residential   telephone
equipment,  breached  its  distributorship  contract  with BSP and  violated the
Robinson-Patman Act. It also seeks a ruling invalidating certain exclusivity and
post-term  non-competition  covenants contained in the distributorship contract.
USE denied the material  allegations  of the complaint  and filed  counterclaims
against the Company,  BSP, BST, and several other BellSouth  entities,  alleging
that the BellSouth companies are in breach of the distributorship  contract. The
counterclaims  seek an unspecified  amount of damages as well as declaratory and
injunctive  relief. The BellSouth  companies denied the material  allegations of
USE's  counterclaims and filed a Motion for Judgment on the Pleadings seeking an
early ruling that the exclusivity and post-term non-competition  provisions were
invalid and  unenforceable  as a matter of law.  The court denied that motion in
August 2000. At the end of September 2000, BSP informed USE that, as a result of
USE's  contractual  violations and other factors,  BSP would be unable to supply
USE with sufficient  products for distribution  until at least the third quarter
of 2001. On October 11, 2000,  USE filed a Motion for a Preliminary  Injunction,
seeking to require  BSP to  continue  to supply USE with  residential  telephone
equipment  for  distribution.  The  BellSouth  companies  intend to pursue their
claims and defend against the counterclaims vigorously. Discovery has commenced.
At this early stage of the  proceedings,  the Company  cannot predict the likely
outcome of the case.

Compliance Matters
Foreign Corrupt Practices Act.
The SEC is conducting an investigation that is focused on determining whether we
and  one of  our  Latin  American  subsidiaries  violated  the  Foreign  Corrupt
Practices Act. We had previously  engaged  outside  counsel to investigate  this
matter,  and they concluded that those  activities did not violate the Act. More
recently 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  businesses.  Our
internal investigation of this matter is continuing. We have informed the SEC as
to this matter,  and we expect the SEC to expand its  investigation to encompass
it. 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
South Carolina.
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
<PAGE>


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

Note O - Contingencies (continued)

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 this year. In July, the Consumer  Advocate appealed the Commission's
dismissal of the petition.

Note P - Tracking Stock

In October 2000, we filed with the SEC a definitive proxy statement  relating to
a  special  shareholders'  meeting  to be  held  in  December  2000  to  approve
amendments to our charter.  The  amendments  would permit us to issue our common
stock in series, of which our Board of Directors would initially  designate two:
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 have also filed a registration  statement for the offering of shares of Latin
America group stock for sale to the public.  The registration  statement remains
subject to further  review by the SEC.  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 shareholder approval, completion of the SEC
review process,  market  conditions and other factors.  The  implementation  and
timing of these transactions are uncertain.

Note Q - Subsequent Events

Domestic Wireless Joint Venture
In  October  2000,  we  combined  substantially  all  of our  domestic  wireless
businesses with those of SBC Communications  into a joint venture that comprises
the nation's second largest wireless  company,  with service in 42 of the top 50
U.S. markets. The venture,  Cingular Wireless,  covers a total population of 190
million  people and serves  more than 19.0  million  customers,  is owned 40% by
BellSouth  and  60%  by  SBC  Communications  but  is  jointly  controlled.  The
investment  in  Cingular  will  be  accounted  for  under  the  equity   method;
accordingly,  in the future,  we will not  consolidate  Cingular's  revenues and
expenses  but will include our  proportionate  share of  Cingular's  earnings as
Earnings of Equity Affiliates in our consolidated income statement.

<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 and previous  quarterly
reports on Form 10-Q.

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

Key  financial  and  operating  data  for  third  quarter  2000 and 1999 and the
respective  year-to-date  periods are as follows. All references to earnings per
share are on a diluted basis:
<TABLE>
<CAPTION>

                                               ------------------------ ----------- --- ------------------------- ----------
                                                    Third Quarter           %                 Year-to-Date            %
                                               ------------ -----------             --- ------------ ------------
                                                  1999         2000       Change           1999         2000       Change
                                               ------------ ----------- ----------- --- ------------ ------------ ----------
Results of operations:
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
<S>                                                <C>         <C>             <C>          <C>          <C>            <C>
Operating revenues                                 $ 6,422     $ 6,903         7.5          $18,543      $20,142        8.6
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Operating expenses                                  4,748       4,966          4.6          13,948       14,635         4.9
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Operating income                                     1,674       1,937        15.7            4,595        5,507       19.8
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Interest expense                                       266         344        29.3              737          982       33.2
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Net earnings (losses) of equity affiliates            (26)          10        N/M*            (235)          163        N/M
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Gain (loss) on sale of operations                       39        (14)         N/M               55         (14)        N/M
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Other income, net                                       15          35         N/M              188          164     (12.8)
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Provision for income taxes                             442         588        33.0            1,471        1,737       18.1
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
         Net income                                  $ 994      $1,036         4.2           $2,395       $3,101       29.5
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
As Reported:
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
   Net income                                        $ 994      $1,036         4.2          $ 2,395       $3,101       29.5
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
   Earnings per share                                $ .52       $ .55         5.8            $1.25       $ 1.64       31.2
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Normalized:
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
   Net income                                        $ 951      $1,036         8.9          $ 2,819       $3,081        9.3
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
   Earnings per share                                $ .50       $ .55        10.0            $1.47       $ 1.63       10.9
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Cash flow data:
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Cash provided by operating activities               $2,378      $1,874      (21.2)           $6,471       $6,672        3.1
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Cash used for investing activities                $(1,602)    $(3,355)        N/M          $(8,254)      $(7,150)       13.4
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Cash (used for) provided by financing             $  (514)     $1,137         N/M          $  (342)        $ 367        N/M
activities
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------

---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Other:
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Effective tax rate                                   30.8%       36.2%     +540bps            38.0%        35.9%    -210bps
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
Average debt balances:
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
   Short-term debt                                  $7,361      $7,002       (4.9)          $ 5,804       $6,475       11.6
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
   Long-term debt                                   $8,620     $10,914        26.6          $ 8,531      $10,617       24.4
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
     Total average debt balance                    $15,981     $17,916        12.1          $14,335      $17,092       19.2
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
EBITDA(1)                                           $2,881      $3,238        12.4          $ 8,390       $9,344       11.4
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
EBITDA margin(2)                                     44.9%       46.9%     +200bps            45.2%        46.4%    +120bps
---------------------------------------------- ------------ ----------- ----------- --- ------------ ------------ ----------
</TABLE>

(1)  EBITDA  represents  income  before  net  interest  expense,  income  taxes,
     depreciation and amortization,  provision for asset  impairment,  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,  results  reflect  revenue  growth in the core wireline
business,  driven  by  digital  and  data  services  revenues,  and  significant
increases in our international  and domestic  wireless  customer bases.  Expense
growth was driven by volume increases at our international and domestic wireless
businesses  and  expenses  for   development   and  promotion  of  new  business
initiatives, including high-speed data and Internet service offerings.

There were no normalizing items for the third quarter 2000.

Normalized results for year-to-date 2000 exclude the impacts of:

 .    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. This gain is included in Net Earnings (Losses) of Equity Affiliates.
     See note E to our  consolidated  interim  financial  statements for further
     discussion of this matter; and

 .    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.  See  note D to our  consolidated  interim  financial
     statements for further discussion of this matter.

Normalized results for third quarter 1999 exclude the impacts of:

 .    The  devaluation of the Brazilian  Real. Our share of the foreign  currency
     losses in our Brazilian  wireless  properties reduced net income by $75, or
     $0.04 per share,  for the  quarter  and $355,  or $0.18 per share,  for the
     year.  These  losses  are  included  in Net  Earnings  (Losses)  of  Equity
     Affiliates. See note G to our consolidated interim financial statements for
     further discussion of this matter;

 .    The  recognition of certain  foreign  investment  tax credits  generated in
     prior years, which increased net income by $95, or $0.05 per share; and

 .    The gain on sale of our 100% ownership interest in Honolulu Cellular, which
     increased net income by $23, or $0.01 per share.

In addition to the third quarter items, the year-to-date 1999 normalized results
exclude  the impact of an asset  impairment  loss,  which  reduced net income by
$187,  or $0.10 per  share.  See note F to our  consolidated  interim  financial
statements for further discussion of this matter.


Operating Revenues

Operating  revenues  increased $481 during third quarter 2000 and $1,599 for the
year-to-date period. The increase reflects:

 .    growth in our  wireline  communications  operations,  spurred by demand for
     digital and data services and calling features;

 .    growth from higher  access,  airtime and  equipment  sales in our  domestic
     wireless operations,  driven by a 22.0% expansion in the customer base from
     third quarter 1999 to third quarter 2000;

 .    higher  revenues from our  international  operations  resulting  from 76.5%
     growth in the customer bases of our current  operations  from third quarter
     1999 to third quarter 2000 and the addition of new  international  wireless
     operations in Colombia;

 .    the  addition  of and  growth  in our  international  directory  publishing
     businesses,  volume growth and price increases in our domestic  advertising
     and   publishing   operations  and  increases  in  revenues  from  domestic
     electronic media offerings; and

 .    growth in new lines of business.

Growth  in  wireline  revenues  was  partially  offset  by the  effects  of rate
reductions  related to access charge reform and competition in the long distance
market.  Growth in  international  revenues  attributable to customer growth was
partially  offset by changes in foreign  currency rates and decreases in average
monthly revenue per customer, resulting from penetration into lower usage market
segments and a growing percentage of customers  selecting  lower-volume  prepaid
services.  The average  monthly  revenue  per  international  wireless  customer
decreased 38.0% for the quarter and 41.8% for the year-to-date period.

Operating Expenses

Total  operating  expenses  increased  $218 during  third  quarter 2000 and $687
during the year-to-date period. Operating expenses for year-to-date 2000 include
a $78 severance  accrual  related to a previously  announced  plan to reduce our
domestic general and administrative staff. Year-to-date 1999 expenses included a
$320 charge to write down network equipment in the domestic wireless operations.
Excluding these items, total operating expenses increased $929 year-to-date.

Operational  and  support  expenses  increased  $124 during the quarter and $645
year-to-date as a result of increased spending in the core wireline business for
customer service and network support functions,  volume-driven  increases at our
international and domestic wireless  businesses and expenses for development and
promotion of new business  initiatives,  including  high-speed data and Internet
service  offerings.  Operational  and  support  expenses  of  our  international
operations  were  favorably  impacted  by the  weakening  of foreign  currencies
against the U.S. Dollar.  Depreciation  and  amortization  increased $94 for the
quarter and $284 for the year-to-date period, primarily as a result of additions
of  property,   plant  and  equipment  to  support  expansion  of  our  wireline
communications and international  wireless  networks.  Also included in the 2000
periods are $56 in expense from our recently acquired properties in Colombia.

Interest expense

Higher  interest  expense  in both the  quarterly  and  year-to-date  periods is
attributable to higher average long-term debt balances resulting from borrowings
associated  with the  financing  of our  investments  in Colombia and Brazil and
increases in interest  rates.  The increase in the  year-to-date  period is also
attributable  to higher  average  long-term  debt  balances  resulting  from the
financing of our investment in Qwest.

Gain (loss) on sale of operations

In July 2000,  we sold our  ownership  interests  in mobile data  operations  in
Belgium, the Netherlands and the United Kingdom. These sales generated a pre-tax
net loss of $14. During third quarter 1999, we recognized a gain of $39 from the
sale of our ownership interest in Honolulu Cellular. During second quarter 1999,
we recognized a gain of $16 from the sale of a wireless property in Alabama.

Net earnings (losses) of equity affiliates

Earnings from our unconsolidated  businesses increased $36 in third quarter 2000
and $398 on a  year-to-date  comparative  basis.  The  year-to-date  2000 period
results  include $68 in income  related to the  restructuring  of our  ownership
interest  in our  German  wireless  operations.  See note E to our  consolidated
interim  financial  statements  for  further  discussion  of  this  matter.  The
quarter-to-date  1999  period  includes  $75 and the  year-to-date  1999  period
includes $355 of foreign  exchange  losses related to our Brazilian  properties.
See  note  G to  our  consolidated  interim  financial  statements  for  further
discussion  of this  matter.  Excluding  the  impact  of these  items,  earnings
decreased  $39  for the  quarter-to-date  period  and  $25 for the  year-to-date
period.  These  results  are  addressed  in the  discussions  for  the  Domestic
wireless, International operations 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. The
increase  of $20 for the quarter is  attributable  to higher  minority  interest
income of $57 related to our less-than-100-percent owned subsidiaries and higher
interest   income  of  $9.  These   increases  are  offset  by  decreased  other
non-operational  income,  primarily gains from cellular property exchanges,  and
increased foreign currency losses. The year-to-date decrease of $24 is primarily
attributable  to $70 in higher  foreign  currency  losses  and  decreased  other
non-operational income, partially offset by lower minority interest expense.

Provision for income taxes

The provision for income taxes increased $146 quarter-over-quarter and $266 on a
year-to-date  comparative  basis. Our effective tax rate increased from 30.8% in
third quarter 1999 to 36.2% in third  quarter  2000.  Third quarter 1999 results
were  significantly  impacted  by the  recognition  of  foreign  investment  tax
credits,   partially   offset  by  foreign  exchange  losses  at  our  Brazilian
operations.  Excluding  these  items,  our  effective  rate was  36.8% for third
quarter 1999 and 36.2% for third quarter 2000. The decrease in the effective tax
rate is due  primarily to the  recognition  of tax  incentives  and tax benefits
generated by the sale of our international wireless data properties.

For the year-to-date  period, the effective tax rate was 35.9% compared to 38.0%
in 1999.  Year-to-date 2000 results were favorably impacted by additional income
related to the restructuring of our ownership in our German wireless operations.
Year-to-date  1999 results were unfavorably  impacted by foreign currency losses
recorded at our  unconsolidated  Brazilian  businesses,  partially offset by the
recognition of foreign  investment tax credits in third quarter 1999.  Excluding
these  and  other  special  items,  our  effective  rate was  37.6% for the 1999
year-to-date period and 36.5% for the 2000 year-to-date  period. The decrease in
the effective rate for the year-to-date  period is due to the recognition of tax
incentives,  tax benefits  generated by the sale of our  international  wireless
data properties and more favorable results from equity-method  investees,  which
are recorded net of tax benefits or expense.

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

Our  reportable  segments  reflect  strategic  business units that offer similar
products and services  and/or serve similar  customers.  We have four reportable
operating segments:

 .        Wireline communications;
 .        Domestic wireless;
 .        International operations; and
 .        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  rights 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  results of  businesses  in which we own  noncontrolling  interests  are not
included in our  reported  revenues  and  expenses  but are  included in the Net
earnings (losses) of equity affiliates line item.


Wireline Communications

Wireline  communications  includes local exchange,  network access and intraLATA
long  distance  services   provided  by  wireline   transport  to  business  and
residential customers in a nine-state region located in the southeastern U.S.
<TABLE>
<CAPTION>

-------------------------------------------- ------------------------- ----------- ----- -------------------------- -----------
                                                  Third Quarter            %                   Year-to-Date             %
                                             -------------------------                   --------------------------
                                                1999         2000        Change             1999          2000        Change
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
<S>                                              <C>           <C>            <C>             <C>           <C>            <C>
Results of Operations
Operating revenues:
   Local service                                 $ 2,747       $2,857         4.0             $8,113        $8,540         5.3
   Network access                                  1,200        1,198       (0.2)              3,578         3,706         3.6
   Long distance                                     158          133      (15.8)                461           399      (13.4)
   Other wireline                                    310          370        19.4                845         1,012        19.8
   Intersegment revenues                              66           87        31.8                233           245         5.2
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
       Total operating revenues                   $4,481       $4,645         3.7            $13,230       $13,902         5.1
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
Operating expenses                                $3,043       $3,081         1.2            $ 8,989        $9,197         2.3
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
Operating income                                  $1,438       $1,564         8.8            $ 4,241        $4,705        10.9
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
Segment net income                                 $ 817         $870         6.5            $ 2,399        $2,641        10.1
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------

-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
Key Indicators
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
Access line counts (000s):
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
   Switched access lines:
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
      Residential                                 16,889       17,228         2.0
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
      Business                                     7,282        7,165       (1.6)
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
      Other                                          269          255       (5.2)
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
   Total switched access lines                    24,440       24,648         0.9
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
    Access line equivalents (1)                   16,539       26,679        61.3
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
      Total equivalent access lines               40,979       51,327        25.3
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------

-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
Access minutes of use (millions)                  27,858       28,551         2.5             82,310        86,065         4.6
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
Long distance messages (millions)                    160          125      (21.9)                505           390      (22.8)
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
Digital and data services revenues                 $ 667        $ 847        27.0            $ 1,919       $ 2,423        26.3
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
Calling feature revenues                           $ 491        $ 550        12.0            $ 1,412       $ 1,597        13.1
-------------------------------------------- ------------ ------------ ----------- ----- ------------ ------------- -----------
</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 increases in local service  revenues of $110 for third quarter 2000 and $427
for the  year-to-date  period are  attributable to strong demand for digital and
data services and calling features and growth in switched access lines.

We ended the third quarter with over 51 million total  equivalent  access lines,
an increase of 25.3% since  September  30, 1999.  Residential  access lines rose
2.0% to 17,228,000,  driven by economic growth in our nine-state  region as well
as demand for secondary residence lines, which accounted for 55.6% of the growth
in residential  access lines. We added 189,000  secondary  residence lines since
September 30, 1999, extending the total to over 2.9 million lines and ending the
current  period  with a  penetration  rate  of  20.5%.  Business  access  lines,
including both switched access lines and data circuits, grew 42.1%, propelled by
expanding  demand for our digital and data services.  Switched  business  access
lines decreased 1.6% reflecting  competition and the continued  migration of new
and existing business customers to high-capacity data lines.

Revenues from optional  calling  features such as Caller ID, Call Waiting,  Call
Return and voicemail service increased $59, or 12.0%,  quarter-over-quarter  and
$185, or 13.1%, on a year-to-date comparative basis. 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  $36 compared to third quarter 1999 and $130
compared to the first nine months of 1999.

Network access
Network  access  revenues  remained  relatively  flat in the third  quarter  and
increased  $128 for the first nine months of 2000 when compared to the same 1999
periods. Access minutes of use rose 2.5% to 28,551 million in third quarter 2000
from 27,858 million in third quarter 1999. For the year-to-date  period,  access
minutes of use grew 4.6% to 86,065  million in 2000 from 82,310 million in 1999.
Increases in switched access lines and  promotional  activities by long distance
carriers  continue to be the primary  drivers of the increase in minutes of use.
Year-to-date  2000  growth  in  minutes  was  also  positively  impacted  by the
additional day of activity resulting from the leap year.

The growth rate in total minutes of use  continues to be negatively  impacted by
the trend of business customers migrating from traditional  switched circuits to
higher  capacity data line offerings  which are  fixed-charge  based rather than
minute-of-use  based.  Revenues  from  these  dedicated  circuit  services  grew
approximately  $99  quarter-over-quarter  and $236 year-to-date on a comparative
basis as Internet service providers and high-capacity  users increased their use
of our  network.  The  growth  rate in  switched  minutes  of use has also  been
negatively  impacted by competition  from  competitive  local exchange  carriers
whose traffic completely bypasses our network.

Volume-related  growth was largely  offset by net rate  impacts  that  decreased
revenues by $88 compared to third quarter 1999 and by $221 compared to the first
nine months of 1999.  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 in both 2000 periods.

Long distance
The $25 decrease for the quarter and $62  decrease for the  year-to-date  period
compared to the same 1999 periods are primarily attributable to a 21.9% decrease
in long  distance  message  volumes  compared  to third  quarter  1999 and 22.8%
compared  to the first nine months of 1999.  For the  year-to-date  period,  the
decrease in revenues attributable to loss of message volumes was offset by a $30
revenue  reduction in 1999 for a regulatory  ruling related to  compensation  we
received  from  long  distance  carriers  for   interconnection  to  our  public
payphones.  Also  offsetting  the  decreases  were  increased  revenues from the
provision  of digital  and data  services of $13 for the quarter and $27 for the
year-to-date period.

Competition  and  increased  penetration  of extended  local area calling  plans
continue to have an adverse  impact on the number of customers  who use our long
distance  service and ultimately  reduce our long distance  message  volumes and
revenues.  We believe that  competition  will  continue to adversely  impact our
customer base, and  ultimately our long distance  message  volumes and revenues,
until we are granted full long distance relief under the  Telecommunications Act
of 1996.

Other wireline and intersegment revenues
Other wireline and intersegment  revenues  increased  21.5%,  from $376 in third
quarter 1999 to $457 in third quarter 2000. For the year-to-date  period,  these
revenues increased 16.6%, from $1,078 in 1999 to $1,257 in 2000. Higher revenues
of $91 for the quarter and $269 for the year-to-date period, resulting primarily
from  resale  of  paging  products  and  services,  sales of  unbundled  network
elements, collocation of competing carriers' equipment in our facilities, demand
for our Internet access offering,  interconnection  charges to wireless carriers
and proceeds from universal  service funds, were offset by decreases in revenues
from sales of customer premises equipment.  At September 30, 2000 we had 871,000
subscribers to our BellSouth Internet Service(R),  an increase of 36.7% compared
to the same 1999  period.  Increases  in  intersegment  revenues  of $21 for the
quarter  and $12 for  the  year-to-date  period  primarily  represent  increased
business activity with our other operating segments.

Operating Expenses

Operational and support expenses
Operational and support  expenses  decreased $18, or 0.8%, for the third quarter
2000 and increased $50, or 0.8%, for the first nine months of 2000 when compared
to the same 1999  periods.  The  decrease  for the quarter was  attributable  to
reductions  in  discretionary  expenses  and  decreases  in costs  from sales of
customer  premises  equipment  totaling  $45.  The  decrease for the quarter was
further  affected  by $12 of lower  pension and benefit  costs  attributable  to
favorable pension plan investment returns. These decreases were partially offset
by increases  in labor costs  resulting  from  additions to network and customer
service personnel.

For the year-to-date period, the change was primarily  attributable to increases
in  labor  costs  and  reciprocal  compensation  expense  totaling  $150.  These
increases were partially  offset by a $73 reduction in pension and benefit costs
attributable  to favorable  pension plan  investment  returns.  The increase was
further  offset by reductions in  discretionary  expenses and decreases in costs
from sales of customer  premises  equipment.  Also contributing to these changes
were expenses related to new data  initiatives,  including  high-speed  Internet
access and optical  fiber-based  broadband  services,  and promotional  expenses
related to expanding our Internet customer base.

Depreciation and amortization
Depreciation and amortization  expense increased $56, or 6.5%, for third quarter
2000 and $158,  or 6.2%,  for the first nine months of 2000 when compared to the
same 1999 periods.  The increases are primarily  attributable to amortization of
capitalized internally developed software and depreciation resulting from higher
levels of net property, plant and equipment.


Domestic Wireless

Domestic wireless is comprised of cellular and personal  communications  service
(PCS) businesses principally within the southeastern U.S.
<TABLE>
<CAPTION>

-------------------------------------------------- ----------------------- ------------ ----- ----------------------- -----------
                                                       Third Quarter            %                  Year-to-Date           %
                                                   -----------------------                    -----------------------
                                                      1999        2000       Change              1999        2000       Change
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------

-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
<S>                                                      <C>        <C>           <C>             <C>         <C>           <C>
External revenues                                        $815       $ 942         15.6            $2,355      $2,714        15.2
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Intersegment revenues                                       5           6         20.0                12          14        16.7
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
       Total operating revenues                          $820       $ 948         15.6            $2,367      $2,728        15.3
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Operating expenses                                       $749       $ 773          3.2            $2,107      $2,268         7.6
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Operating income                                         $ 71       $ 175        146.5             $ 260        $460        76.9
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Net earnings (losses) of equity affiliates               $ 36        $ 41         13.9             $ 108        $121        12.0
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Segment net income                                       $ 55       $ 118        114.5             $ 186        $305        64.0
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------

-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Customers (a)                                           4,680       5,711         22.0
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Average monthly revenue per customer (a)                 $ 51        $ 51           --              $ 51        $ 51          --
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
</TABLE>

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

Operating Revenues
Total operating revenues grew $128, or 15.6%,  quarter-over-quarter and $361, or
15.3%,  on a  year-to-date  basis when compared to the same 1999  periods.  This
growth is attributable  to higher  airtime,  access and equipment sales revenues
driven by a 22.0% increase in the customer base.  Customer growth since 1999 has
been driven by advertising,  enhanced volume pricing strategies such as one-rate
plans, rollover minute plans, bundled minutes at lower rates and prepaid calling
plans and competitive  incentive programs such as discounted  wireless handsets.
Average monthly usage by customers  increased during third quarter 2000 and on a
year-to-date  basis,  and, when  combined with the increase in total  customers,
drove  increases in total minutes of use.  Average  monthly revenue per customer
remained  relatively  flat,  due  primarily to declines in  per-minute  rates in
response to competition. The declines in average per-minute rates occurred as we
expanded  our  product  offering  and  further  penetrated   lower-usage  market
segments.  We expect rates to continue  decreasing as more customers opt for our
one-rate plans and other bundled-minute packages.

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 $65, or 11.5%,  during third quarter
2000 and $193, or 11.8%, on a year-to-date  basis when compared to the same 1999
periods.  These increases are due to higher customer  acquisition costs,  higher
network  costs  associated  with network usage and costs related to new customer
promotions.  Higher  customer  acquisition  costs resulted from increases in net
customer  additions  of 125.5% for the  quarter  and 76.3% for the  year-to-date
period.  Network  usage and the related  expense  have  increased as a result of
customer and volume growth in established markets.

Depreciation and amortization
Depreciation  and  amortization  decreased  $41, or 22.5%,  to $141 during third
quarter 2000 and decreased  $32, or 6.7%, to $443  year-to-date  compared to the
same 1999 periods. Depreciation expense in 2000 has been favorably impacted by a
lower asset base,  resulting from our equipment  exchange  program  initiated in
June 1999. See note F to our consolidated interim financial statements.

Net Earnings (Losses) of Equity Affiliates

Compared to the same 1999  periods,  net  earnings  (losses)  of  unconsolidated
domestic wireless businesses increased $5, or 13.9%, for the quarter and $13, or
12.0%,  for the  year-to-date  period.  Higher  earnings at our  business in Los
Angeles were partially offset by decreases in earnings at other properties.


International Operations

International operations is comprised principally of our investments in wireless
businesses in eleven countries in Latin America as well as in Denmark,  Germany,
India and Israel.  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>

-------------------------------------------------- ----------------------- ------------ ----- ----------------------- -----------
                                                       Third Quarter            %                  Year-to-Date           %
                                                   -----------------------                    -----------------------
                                                      1999        2000       Change              1999        2000       Change
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------

-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
<S>                                                      <C>        <C>           <C>             <C>         <C>           <C>
External revenues                                        $575       $ 709         23.3            $1,701      $2,031        19.4
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Intersegment revenues                                       1          11          N/M                 1          32         N/M
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
       Total operating revenues                          $576       $ 720         25.0            $1,702      $2,063        21.2
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Operating expenses                                       $545       $ 707         29.7            $1,550      $1,994        28.6
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Operating income                                         $ 31         $13       (58.1)             $ 152        $ 69      (54.6)
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Net earnings (losses) of equity affiliates              $ (3)       $(29)          N/M              $  5      $ (41)         N/M
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Segment net income (loss)                                 $ 9       $(68)          N/M              $ 39      $ (72)         N/M
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------

-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Customers (a)                                           3,777       6,668         76.5
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Average monthly revenue per customer (a)                 $ 50        $ 31       (38.0)              $ 55        $ 32      (41.8)
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
</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  $144   quarter-over-quarter   and  $361  year-to-date  on  a
comparative basis are primarily due to substantial  growth in the customer bases
of our consolidated  operations,  which  collectively have increased 76.5% since
September 30, 1999.  Also  contributing to these increases are the revenues from
our new  Colombian  wireless  operations.  Partially  offsetting  the impacts of
customer  growth is  declining  monthly  revenue  per  customer  resulting  from
continued expansion into lower-usage customer segments through offerings such as
prepaid cellular service and competitive pressures in certain countries.  We now
offer  prepaid  cellular  products  to all of the  countries  we  serve in Latin
America.  Revenues from our operations in Nicaragua that were  consolidated  for
the first time in first  quarter 2000  contributed  $12 to the increase in third
quarter 2000 and $34 to the increase for 2000 year-to-date.

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 $212 for the quarter and $602 for the year-to-date
period.

Operating Expenses

Operational and support expenses
For the 2000 periods,  these  expenses  increased $108 compared to third quarter
1999 and $349  compared to the first nine months of 1999.  These  increases  are
primarily the result of operational and customer  acquisition  costs  associated
with growth in customer  levels and expanded  operations.  Also  contributing to
these  increases are the expenses from our new  Colombian  wireless  operations.
Since September 30, 1999, our existing  operations have added almost 2.0 million
customers  in  Argentina,  Chile  and  Venezuela.  We have  also  added  900,000
customers  through the  acquisition  and  development of businesses in Colombia,
Ecuador, Nicaragua and Peru.

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 $144 for the quarter and $497 for the year-to-date
period.




Depreciation and amortization
Depreciation   expense   increased  $27   quarter-over-quarter   and  $58  on  a
year-to-date  comparative  basis primarily due to higher gross depreciable plant
resulting from the continued investment in our wireless network  infrastructure.
Amortization   expense   increased  $27   quarter-over-quarter   and  $37  on  a
year-to-date  comparative basis as a result of growth in intangibles  related to
our  purchase  of  additional  ownership  interests  in several  Latin  American
operations.

Net Earnings (Losses) of Equity Affiliates

Net earnings (losses) from our international  equity affiliates decreased $26 to
$(29) in third  quarter  2000 and $46 to $(41)  during the first nine  months of
2000. The decline in earnings from our unconsolidated  international  businesses
is due to lower  operating  results from our  investments in Brazil and Germany.
Both of these businesses  experienced  significant  increases in operational and
customer  acquisition costs resulting from substantial  growth in their customer
bases. In addition,  the impact of foreign  currency  fluctuations in Brazil for
third quarter 2000 was a loss of $1 and year-to-date 2000 was a loss of $35.

Advertising and Publishing

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

-------------------------------------------------- ----------------------- ------------ ----- ----------------------- -----------
                                                       Third Quarter            %                  Year-to-Date           %
                                                   -----------------------                    -----------------------
                                                      1999        2000       Change              1999        2000       Change
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------

-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
<S>                                                      <C>         <C>           <C>            <C>         <C>           <C>
External revenues                                        $540        $587          8.7            $1,290      $1,422        10.2
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Intersegment revenues                                       2           6          N/M                 8          17         N/M
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
       Total operating revenues                          $542        $593          9.4            $1,298      $1,439        10.9
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Operating expenses                                       $283        $295          4.2             $ 737       $ 797         8.1
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Operating income                                         $259        $298         15.1             $ 561       $ 642        14.4
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Net earnings (losses) of equity affiliates                $ 1       $ (2)          N/M             $ (4)        $  2         N/M
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Segment net income                                       $160        $181         13.1             $ 342       $ 396        15.8
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
</TABLE>

Operating Results

External revenues increased $47 for third quarter 2000 and $132 for year-to-date
2000 when compared to the same 1999 periods.  These  increases are principally a
result of growth in revenues at our directory publishing  operations in Peru and
Brazil totaling $17 for third quarter and $61 for the year-to-date  period.  The
growth is also attributable to volume growth and price increases in the domestic
operations,  offset by the effects of shifts in directory production  schedules.
Adjusted  for book  shifts,  external  revenues  for  this  segment  would  have
increased by  approximately  9.4% for the quarter and 10.7% for the year-to-date
period.  Also  contributing  are increases of $9 for the quarter and $29 for the
year-to-date   period  in  the  revenues  from  our  domestic  electronic  media
offerings.

Operational  and support  expenses  increased $13 for third quarter 2000 and $55
for  year-to-date  2000 when compared to the same 1999 periods.  These increases
are primarily due to growth at our operations in Peru and Brazil totaling $7 for
the  quarter  and $62 for the  year-to-date  period.  Also  contributing  to the
increases  are costs of $8 for the quarter and $19 for the  year-to-date  period
associated  with growth in electronic  media  offerings.  These  increases  were
offset by lower costs of $2 for the quarter and $27 for the year-to-date  period
in the domestic  directory  businesses due to the shift in directory  production
schedules.  Depreciation and amortization  remained relatively flat during third
quarter 2000 and increased $5 on a year-to-date comparative basis due to the new
international publishing operations.

Net  earnings  (losses)  of  equity  affiliates  includes  the  results  of  our
investment in a Brazilian directory publisher.


All other
<TABLE>
<CAPTION>

-------------------------------------------------- ----------------------- ------------ ----- ----------------------- -----------
                                                       Third Quarter            %                  Year-to-Date           %
                                                   -----------------------                    -----------------------
                                                      1999        2000       Change              1999        2000       Change
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------

-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
<S>                                                      <C>        <C>           <C>               <C>        <C>          <C>
External revenues                                        $ 77       $ 107         39.0              $200       $ 318        59.0
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Intersegment revenues                                     102         115         12.7               264         309        17.0
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
       Total operating revenues                         $ 179       $ 222         24.0              $464       $ 627        35.1
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Operating expenses                                      $ 251       $ 290         15.5              $688       $ 824        19.8
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Operating loss                                          $(72)       $(68)          5.6            $(224)      $(197)        12.1
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Net earnings (losses) of equity affiliates                $ 3        $(3)          N/M              $  3       $ (4)         N/M
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
Segment net loss                                        $(39)       $(45)       (15.4)            $(155)     $ (144)         7.1
-------------------------------------------------- ----------- ----------- ------------ ----- ----------- ----------- -----------
</TABLE>


Operating Results

External  revenues   increased  $30  for  third  quarter  2000  and  $118  on  a
year-to-date  comparative  basis,  primarily driven by growth in revenues of $11
for the quarter and $55 for the year from the resale of long  distance  services
in markets  outside of our wireline  region,  $4 for the quarter and $22 for the
year from  interactive  paging  services  and $5 for the quarter and $20 for the
year from wireless television offerings.

Operating expenses reflect increased spending associated with new product and/or
market  introductions in all of these  businesses.  Higher headcount  associated
with  customer  support  and  installation  functions  also  contributed  to the
increase in operational and support  expenses of $26 for the quarter and $99 for
the  year-to-date  period.  Depreciation and amortization has increased $13 on a
quarter-over-quarter  basis  and  $37 on a  year-to-date  basis  reflecting  our
continuing   investment  of  resources  associated  with  the  growth  of  these
businesses.


------------------------------------------------------------------------------
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):
---------------------------------------------------------------------------
                        Year-to-Date  Year-to-Date
                            1999          2000             Change
                       ----------------------------------------------------

Operating activities...    $ 6,471      $ 6,672        $ 201       3.1%
Investing activities...   $(8,254)      $(7,150)      $1,104       13.4
Financing activities...    $ (342)       $ 367         $ 709        N/M

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

Net cash provided by operating activities
The increase in cash from  operations  between 1999 and 2000 primarily  reflects
better working  capital  management and higher net income from operations due to
strong  revenue  growth.  Operating cash flows also include cash proceeds of $92
for the 2000 period and $604 for the 1999 period associated with the sublease of
wireless communications towers to Crown Castle International.

Net cash used in investing activities
During the first nine  months of 2000,  we  invested  $4.9  billion  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   for  the  first  nine  months  of  2000  is
approximately  $524  in  costs  related  to  the  purchase  and  development  of
internal-use software.

Also  during  the first nine  months of 2000,  we have paid  approximately  $1.8
billion to acquire new or additional interests in our domestic and international
wireless  businesses.  Included  in this  amount is $299 for our  investment  in
Celumovil (Colombia),  $414 for the purchase of Cocelco (Colombia),  $885 to buy
out our partners in the Carolinas DCS partnerships,  and $240 for our investment
in Tele Centro Oeste (Brazil).

In addition to amounts paid for purchases, we advanced approximately $412 to our
partner in our German wireless  operations which was used toward the purchase of
new third generation wireless licenses from the German government.

We  funded  these  activities  through  the  issuance  of  new  debt,  including
commercial paper and short term loans with banks.

Net cash provided (used) in financing activities
During first quarter 2000, we issued $2 billion 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 54.8% at September 30, 2000 compared
to 53.1% at December 31,  1999.  The change is primarily a function of increases
in  short-term  debt driven by  borrowings  to finance  acquisitions  of new and
additional interests in wireless businesses and other investing activities.

At November 1, 2000, we had shelf  registration  statements on file with the SEC
under which $2.7 billion of debt securities could be publicly offered.

We repurchase  our common stock from time to time when we consider it attractive
to do so based on stock prices.  Reacquired  shares are held as treasury  shares
pending reissuance in employee benefit plans and for other purposes.


Market Risk

For a complete  discussion of our market risks,  you should refer to the caption
"Market  Risk" in our 1999 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 operating 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.

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.

In July  2000,  the  Kentucky  Public  Service  Commission  approved a new price
regulation plan. The new plan eliminates the 4% productivity factor contained in
the previous  plan in return for the  company's  commitment  to bring high speed
access services to certain rural areas. The level of company investment in rural
high speed  access  services is under  review at the  Commission.  The plan also
permits the company to rebalance  rates in a manner that will align  residential
rates more closely to the cost of providing such service.

In July 2000, the Florida Public  Service  Commission  commenced a proceeding to
determine  whether  we  violated  certain  Commission  rules  regarding  service
quality.  Hearings originally scheduled for November 2000 are being moved to the
first half of 2001. Also in July 2000, the Commission determined 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 hearings are scheduled for late 2001.

In October 2000, the Georgia Public Service  Commission orally voted to approve,
with certain  modifications,  the Commission Staff's Recommendation with respect
to new company performance measures. These new performance measures will be used
as one means to assess  our  wholesale  service  quality  to  competitive  local
exchange  carriers.  In its written decision,  which has not been received,  the
Commission is expected to adopt additional  performance  measurements  that will
apply to our  performance to our wholesale  competitive  local exchange  carrier
customers.  In addition,  the Commission will adopt a Self 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.  It is  anticipated  that the
Commission's  written  decision will be entered before year end. The Enforcement
Plan will go into effect 45 days after the Commission  enters an order. When the
written   decision  is   entered,   we  will  have  the   opportunity   to  seek
reconsideration of the order, as necessary.

We are currently conducting  third-party tests of our operations support systems
in Georgia and Florida and expect to file our Georgia long distance  application
with the FCC when testing and  verification of our performance data are complete
and all other legal  requirements  have been met. We do not know if the FCC will
require further changes in our interconnection and network element offerings and
operations  support  systems before it will approve our petition.  These changes
could result in  significant  additional  expenses and delays in obtaining  full
long-distance relief in these states.

In July 2000, the U.S.  Court of Appeals for the Eighth Circuit  vacated the FCC
methodology  for pricing  unbundled  network  elements and the  methodology  for
determining  wholesale  rates for retail  services.  The order also affirmed the
previous  decision of the Eighth  Circuit that  vacated FCC rules that  required
incumbent  carriers to combine  previously  uncombined  elements for  requesting
carriers.  The United States Supreme Court has been asked to review the decision
of the Eighth Circuit.

With  respect to federal  access  charges,  FCC policies  strongly  favor access
reform,  whereby the  historical  subsidy for local service that is contained in
network  access  charges paid by long distance  carriers is  eliminated.  In May
2000, the FCC implemented a comprehensive reform package that adjusted its price
cap,  access  charge  and  universal  service  rules for  those  price cap local
exchange carriers electing to adopt the new rules. The new rules are designed to
result in lower consumer  prices for long distance  service by reforming the way
in which access costs are recovered. The new rules, which we adopted during June
2000,  reduced the access charges paid to us by other carriers,  and at the same
time  authorized an increase to the subscriber  line charges paid by residential
and single-line business customers.  The new rules also allow us to increase the
subscriber  line charges each year through 2003,  although any increase which we
request  after July 2001 is subject to a cost  review.  We  estimate  that these
modifications will result in interstate price decreases of approximately $270 on
an annual basis.

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  O 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.


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,  management's  discussion  and analysis
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.

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;

 .    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;

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

 .    unsatisfactory   results  in   regulatory   actions   including   terms  of
     interconnection and unbundled network elements and resale rates.

This  list  of  cautionary  statements  is  not  exhaustive.   These  and  other
developments  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 have no obligation,  and we do not intend, to
publicly  release  the  results  of  any  revisions  to  these   forward-looking
statements to reflect events or circumstances after the date of this filing.


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

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.

     11   Computation of Earnings Per Common Share.

     12   Computation of Ratio of Earnings to Fixed Charges.

     27   Financial Data Schedule as of September 30, 2000.



(b) Reports on Form 8-K:

 Date of Event             Subject

July 20, 2000              BellSouth 2Q00 Earnings Release


<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)



November 3, 2000

<PAGE>

                                EXHIBIT INDEX

     Exhibit
     Number

     11           Computation of Earnings Per Common Share.

     12           Computation of Ratio of Earnings to Fixed Charges.

     27           Financial Data Schedule as of September 30, 2000.