SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549


                                   FORM 10-Q/A
          (Mark One)

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

                  For the quarterly period ended June 30, 1999

                                       OR

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

                        For the transition period from  to


                          Commission file number 1-8607


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


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


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

                   Registrant's telephone number 404 249-2000

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No ___

At July 31, 1999, 1,885,383,506 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 Results of
        Operations and Financial Condition ......................      14

3.   Qualitative and Quantitative Disclosures about Market Risk .      26

5.   Other Items ................................................      26

                                     Part II
6.   Exhibits and Reports on Form 8-K ...........................      28



This  quarterly  report  on Form  10-Q/A  is  being  filed  as a  result  of the
restatement  of our  consolidated  financial  statements  for the  three and six
months ended June 30, 1999.  To the extent this amended  filing is  inconsistent
with our  original  quarterly  report on Form 10-Q for the three and six  months
ended June 30, 1999, the original  filing is hereby  superseded and amended.  To
the extent the original  filing is unaffected by the  restatement,  the original
filing has not been updated or corrected to reflect events occurring  subsequent
to the date of the original filing.

<PAGE>
-------------------------------------------------------------------------------
 PART I - FINANCIAL INFORMATION
-------------------------------------------------------------------------------

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

                                                     For the Three Months               For the Six Months
                                                        Ended June 30,                    Ended June 30,
                                                    1999              1998           1999                1998
<S>                                               <C>                <C>             <C>                <C>
Operating Revenues:
   Wireline communications:
      Local service ........................      $2,712             $2,502          $5,366             $4,916
      Network access .......................       1,187              1,160           2,378              2,311
      Long distance ........................         153                177             303                352
      Other wireline .......................         255                249             535                485
        Total wireline communications ......       4,307              4,088           8,582              8,064
   Domestic wireless .......................         796                672           1,540              1,316
   International operations ................         565                484           1,126                936
   Advertising and publishing ..............         407                394             750                730
   Other ...................................          73                 26             123                 44
      Total Operating Revenues..............       6,148              5,664          12,121             11,090

Operating Expenses:
   Operational and support expenses ........       3,359              3,156           6,612              6,085
   Depreciation and amortization ...........       1,155              1,074           2,268              2,117
   Provision for asset impairment ..........         320                  -             320                 -
     Total Operating Expenses ..............       4,834              4,230           9,200              8,202

Operating Income ...........................       1,314              1,434           2,921              2,888

Interest Expense ...........................         245                203             471                393
Gain on Sale of Operations .................          16                  -              16                155
Net Equity in Earnings (Losses) of
   Unconsolidated Businesses ...............          57                 36           (209)                 47
Other Income, net ..........................         114                 82             173                 99

Income Before Income Taxes .................       1,256              1,349           2,430              2,796
Provision for Income Taxes .................         470                531           1,029              1,086

     Net Income ............................       $ 786              $ 818          $1,401             $1,710

Weighted-Average Common Shares
  Outstanding (Note C):
   Basic ...................................       1,891              1,978           1,912              1,980
   Diluted .................................       1,909              1,990           1,930              1,992
Dividends Declared Per Common Share ........       $ .19              $ .18           $ .38              $ .36
Earnings Per Share:
   Basic ...................................       $ .42              $ .41           $ .73              $ .86
   Diluted .................................       $ .41              $ .41           $ .73              $ .86
</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>

                                                 June 30,         December 31,
                                                   1999               1998
                                                (Unaudited)
<S>                                               <C>             <C>
ASSETS
Current Assets:
 Cash and cash equivalents ..................     $ 573           $ 3,003
 Temporary cash investments .................       345               184

 Accounts receivable, net of
   allowance for uncollectibles
   of $284 and $251 .........................     4,583             4,629
 Material and supplies ......................       476               431
 Other current assets .......................       497               459
   Total Current Assets .....................     6,474             8,706

Investments and Advances ....................     6,267             2,861

Property, Plant and Equipment ...............    59,605            57,974
Less: accumulated depreciation ..............    35,621            34,034
   Property, Plant and Equipment, net........    23,984            23,940

Deferred Charges and Other Assets ...........     1,176             1,028

Intangible Assets, net ......................     3,283             2,875

Total Assets ................................   $41,184           $39,410

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
 Debt maturing within one year ..............    $7,693            $3,454
 Accounts payable ...........................     2,030             2,219
 Other current liabilities ..................     3,916             3,477
   Total Current Liabilities ................    13,639             9,150

Long-Term Debt ..............................     8,391             8,715

Noncurrent Liabilities:
 Deferred income taxes ......................     2,539             2,512
 Unamortized investment tax credits .........       147               167
 Other noncurrent liabilities  ..............     2,708             2,756
   Total Noncurrent Liabilities .............     5,394             5,435

Shareholders' Equity:
 Common stock, $1 par value (4,400
   shares authorized; 1,885
   and 1,950 shares outstanding) ............     2,020             2,020
 Paid-in capital ............................     6,766             6,766
 Retained earnings ..........................    10,145             9,479
 Accumulated other comprehensive income .....     (178)              (64)
 Shares held in trust and treasury ..........   (4,687)           (1,752)
 Guarantee of ESOP debt......................     (306)             (339)
   Total Shareholders' Equity ...............    13,760            16,110

Total Liabilities and Shareholders' Equity ..   $41,184           $39,410
</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 Six Months
                                                                                       Ended June 30,
                                                                                   1999               1998
<S>                                                                             <C>                 <C>
 Cash Flows from Operating Activities:
  Net income ..............................................................     $1,401              $1,710
  Adjustments to net income:
      Depreciation and amortization .......................................      2,268               2,117
      Provision for asset impairment ......................................        320                   -
      Gain on sale of operations ..........................................       (16)               (155)
      Net equity in losses (earnings) of unconsolidated businesses  .......        209                (47)
      Provision for uncollectibles ........................................        165                 153
      Deferred income taxes and unamortized investment tax credits ........        (7)                 (7)
      Dividends received from unconsolidated businesses....................         37                 109
  Net change in:
      Accounts receivable and other current assets ........................      (208)                 259
      Accounts payable and other current liabilities ......................        332               (240)
      Deferred charges and other assets ...................................      (279)               (216)
      Other liabilities and deferred credits ..............................       (61)                  58
  Other reconciling items, net ............................................       (68)                (43)
      Net cash provided by operating activities ...........................      4,093               3,698

 Cash Flows from Investing Activities:
  Capital expenditures ....................................................    (2,885)             (2,480)
  Purchases of licenses and other intangible assets .......................       (97)               (466)
  Proceeds from sale of operations ........................................         21                 155
  Proceeds from disposition of short-term investments .....................        133                  21
  Purchases of short-term investments .....................................      (314)                (98)
  Investments in and advances to unconsolidated businesses ................    (3,711)               (474)
  Proceeds from repayment of loans and advances............................         50                  43
  Other investing activities, net .........................................        108                  23
      Net cash used for investing activities ..............................    (6,695)             (3,276)

 Cash Flows from Financing Activities:
  Net borrowings (repayments) of short-term debt ..........................      4,049               (379)
  Proceeds from long-term debt ............................................          6               1,453
  Repayments of long-term debt ............................................      (193)               (737)
  Dividends paid ..........................................................      (733)               (714)
  Purchase of treasury shares .............................................    (2,968)               (452)
  Other financing activities, net .........................................         11                  59
      Net cash provided by (used for) financing activities ................        172               (770)

 Net Decrease in Cash and Cash Equivalents ................................    (2,430)               (348)
 Cash and Cash Equivalents at Beginning of Period .........................      3,003               2,570
 Cash and Cash Equivalents at End of Period ...............................      $ 573             $ 2,222
</TABLE>



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

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

                                                        For the Six Months Ended June 30, 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 ......................                                             1,401                                          1,401

Other comprehensive income, net of tax:

  Foreign currency
    translation adjustment ......                                                       (114)                                (114)

Total comprehensive income (b) ..                                                                                            1,287

Dividends declared ..............                                             (720)                                          (720)

Share issuances for
   employee benefit plans .......                   1                         (18)                     33                      15

Purchase of treasury stock ......                 (66)                                             (2,965)                 (2,965)

Purchase of stock by grantor
   trust ........................                                                                     (3)                     (3)

ESOP activities and related
   tax benefit ..................                                                3                                 33          36
                                       ------    -----     -----   -----     ------      ----      ------        ----       ------
Balance at June 30, 1999 ........      2,020     (135)    $2,020  $6,766    $10,145    $(178)     $(4,687)      $(306)     $13,760
</TABLE>


(a)  Trust  and treasury  shares are not  considered to be  outstanding  for
     financial reporting purposes. As of June 30, 1999, there were approximately
     35.7 shares held in trust and 99.6 shares held in treasury.

(b) Total comprehensive income for second quarter 1999 was $830.

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

<PAGE>

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

                                                       For the Six Months Ended June 30, 1998

                                    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, 1997 .....     1,010      (18)    $1,010   $7,714     $7,382      $ 36       $(575)      $(402)     $15,165

Net income .......................                                            1,710                                          1,710

Other comprehensive income, net of tax:

  Foreign currency
    translation adjustment .......                                                        (31)                                 (31)

Total comprehensive income (b)....                                                                                           1,679

Dividends declared ...............                                             (712)                                          (712)

Share issuances for
   employee benefit plans ........                 1                (23)                                56                      33

Acquisition-related
   transactions ..................                 1                 92                                 33                     125

Purchase of treasury stock .......                (8)                                                (452)                   (452)

Purchase of stock by grantor
   trust .........................                (1)                                                 (30)                    (30)

ESOP activities and related
   tax benefit ...................                                                3                                32          35
                                       -----      ----    ------    -----     -----      ---        -----       -----      ------
Balance at June 30, 1998 .........     1,010      (25)    $1,010   $7,783    $8,383      $ 5       $(968)      $(370)     $15,843
</TABLE>


(a)  Trust  and  treasury  shares  are  not  considered  to be  outstanding  for
     financial reporting purposes. As of June 30, 1998, there were approximately
     17.7 shares held in trust and 6.9 shares held in treasury.

(b)  Total comprehensive income for second quarter 1998 was $783.

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

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

Note B - New Accounting Pronouncements

In the first  quarter of 1999, we adopted a new  accounting  standard (SOP 98-1)
related  to the  capitalization  of  certain  costs  for  internal-use  software
development.  Adoption of the new  standard  caused an increase in earnings as a
result of the  capitalization  of costs that had previously  been expensed.  The
impacts on income before income taxes, net income and earnings per share were as
follows:

                                          Second Quarter       Year-to-Date
                                               1999                1999
Income before income taxes ............        $ 152               $ 260
Net income ............................        $ 95                $ 160
Earnings per share ....................        $0.05               $0.08

The  adoption  also  changed the  classification  of these  expenditures  in the
consolidated statements of cash flows from operating to investing activities.

Note C -  Earnings Per Share

Prior period  amounts  related to  weighted-average  common shares and dividends
declared per common share have been  adjusted  for the  two-for-one  stock split
which  occurred in December  1998.  The  following  is a  reconciliation  of the
weighted-average  share amounts (in millions) used in  calculating  earnings per
share:
<TABLE>
<CAPTION>

                                                  Second Quarter                Year-to-Date
                                                1999           1998          1999          1998
<S>                                            <C>            <C>           <C>            <C>
Basic common shares outstanding ............   1,891          1,978         1,912          1,980
Incremental shares from stock options ......      18             12            18             12
Diluted common shares outstanding ..........   1,909          1,990         1,930          1,992
</TABLE>

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


<PAGE>

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


Note D - 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 "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>

                                            Second Quarter          %              Year-to-Date             %
                                          1999         1998      Change         1999          1998        Change
<S>                                         <C>          <C>          <C>          <C>           <C>         <C>
Wireline communications
External revenues ....................      $4,307       $4,088       5.4          $8,582        $8,064      6.4
Intersegment revenues ................         119           48       N/M*            167            92      N/M*

  Total revenues .....................      $4,426       $4,136       7.0          $8,749        $8,156      7.3
Operating income .....................      $1,390       $1,179       17.9         $2,803        $2,402     16.7
Segment net income ...................       $ 781        $ 644       21.3         $1,582        $1,327     19.2

Domestic wireless
External revenues ....................       $ 796        $ 672      18.5          $1,540        $1,316     17.0
Intersegment revenues ................           3            2       N/M               7             4      N/M
  Total revenues .....................       $ 799        $ 674      18.5          $1,547        $1,320     17.2
Operating income .....................       $ 102         $ 94       8.5           $ 189         $ 185      2.2
Net equity in earnings (losses) of
  unconsolidated  businesses..........        $ 41         $ 43     (4.7)            $ 72          $ 78     (7.7)
Segment net income ...................        $ 71         $ 74     (4.1)           $ 131         $ 143     (8.4)

International operations
External revenues ....................       $ 565        $ 484      16.7          $1,126         $ 936       20.3
Intersegment revenues ................          -            -         -             -               -          -
  Total revenues .....................       $ 565        $ 484      16.7          $1,126         $ 936       20.3
Operating income .....................       $  70        $  65        7.7          $ 121         $ 116         4.3
Net equity in earnings (losses) of
  unconsolidated  businesses..........       $  21       $ (14)       N/M            $  8        $ (35)        N/M
Segment net income (loss) ............       $  50       $ (22)       N/M           $  30        $ (27)        N/M

Advertising and publishing
External revenues ....................       $ 407        $ 394       3.3           $ 750         $ 730        2.7
Intersegment revenues ................           3          (2)       N/M              6             -         N/M

  Total revenues .....................       $ 410        $ 392       4.6           $ 756         $ 730        3.6
Operating income .....................       $ 162        $ 157        3.2          $ 302         $ 294        2.7
Net equity in earnings (losses) of
  unconsolidated  businesses..........       $ (4)         $  -       N/M           $ (5)          $  -        N/M
Segment net income ...................        $ 98        $ 102     (3.9)           $ 182         $ 188      (3.2)

</TABLE>


*  Not Meaningful
<PAGE>

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

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

                                            Second Quarter          %              Year-to-Date             %
                                          1999         1998      Change         1999          1998        Change
<S>                                          <C>        <C>         <C>          <C>           <C>        <C>
Other
External revenues ....................       $  73      $  26       N/M         $ 123         $ 44        N/M
Intersegment revenues ................          92         53       N/M           162           107       N/M

  Total revenues .....................       $ 165      $  79       N/M         $ 285         $ 151       88.7
Operating loss .......................       $ (68)     $ (76)      10.5        $(152)        $(140)      (8.6)
Net equity in earnings (losses) of
  unconsolidated  businesses..........        $  -       $  7       N/M         $   -         $  4        N/M
Segment net loss .....................       $ (59)     $ (31)    (90.3)        $(116)        $ (71)     (63.4)

Reconciling items
External revenues ....................        $  -       $  -        -          $  -          $            -
Intersegment revenues ................        (217)      (101)      N/M          (342)         (203)      N/M

  Total revenues .....................     $ (217)      $(101)      N/M         $(342)        $(203)      N/M
Operating income (loss) ..............     $ (342)       $ 15       N/M         $(342)          $ 31      N/M
Net equity in earnings (losses) of
  unconsolidated  businesses
  (Note E)............................        $  -       $  -        -          $(284)         $  -        N/M
Segment net income (loss).............      $ (155)      $ 51       N/M         $(408)         $ 150       N/M
</TABLE>


Note E - Investment in Qwest

In  May  1999,  we  acquired  a 10%  equity  interest  in  Qwest  Communications
International  Inc. (Qwest) through the purchase of 74,000,000  shares of common
stock for a total of $3.5  billion.  The  investment  is accounted for under the
cost  method  of  accounting.  The stock  purchase  agreement  includes  certain
restrictions  on our ability to  transfer  these  shares for a two-year  period.
Accordingly,  these  securities  do not  currently  fall  within  the  scope  of
Statement of Financial  Accounting  Standards No. 115,  "Accounting  for Certain
Investments in Debt and Equity Securities" (SFAS 115).

The market value of the investment at June 30, 1999 was $2.45 billion.  Based on
an evaluation of the facts and  circumstances  surrounding the decline in value,
we believe this represents a temporary  condition and that the investment is not
impaired. Therefore, no reserve for loss has been recorded.


Note F -  Devaluation of Brazilian Currency

We hold equity  interests in two wireless  communications  operations in Brazil.
During  January 1999,  the  government  of Brazil  allowed its currency to trade
freely against other currencies.  As a result,  the Brazilian Real experienced a
devaluation  against the US Dollar.  The  devaluation  resulted in our Brazilian
wireless   properties   recording  exchange  losses  related  to  their  net  US
Dollar-denominated  liabilities.  Our share of the foreign  exchange rate losses
associated with the devaluation recorded during the first quarter was $280.

<PAGE>


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

Note G -  Sublease of Communications Towers

In June 1999, we signed a definitive agreement with Crown Castle  International,
Inc. (Crown) 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.  The  transaction  will occur in several  phases
that began in second  quarter 1999 and will  continue  through the  remainder of
1999. We will retain,  outside of the leases, a portion of the towers for use in
operating our wireless network. Under the agreement, Crown will manage, maintain
and remarket the remaining space on the towers.  In addition,  we entered into a
five-year, build-to-suit agreement with Crown covering up to 500 towers.

In a similar transaction, we announced in July 1999 a preliminary agreement with
Crown to sublease  through a master  sublease  agreement all unused space on 773
personal  communications  service (PCS) towers for $317 in cash. In addition, we
have agreed to enter into a new exclusive three-year, build-to-suit agreement.

Note H -  Gain on Sale of Operations

In 1997,  we sold our 20%  interest  in ITT  World  Directories  (ITTWD)  to ITT
Corporation  (ITT).  The sale  agreement  contained  provisions  that called for
additional  sales  proceeds to be paid to us in the event that ITT  subsequently
resold  ITTWD above a certain  price.  As a result of ITT's  subsequent  sale of
ITTWD,  we received  additional  proceeds that resulted in a pretax gain of $155
($96 after tax) in the first quarter of 1998.

In April  1999,  we sold our 100%  interest  in a wireless  property  located in
Dothan,  Alabama for total  proceeds of $21. The pretax gain on the sale was $16
($10 after tax).


Note I - Supplemental Cash Flow Information

                                        Year-to-Date
                                     1999            1998
Cash Paid For:

   Income taxes ..............       $ 391          $ 881
   Interest ..................       $ 436          $ 383


Note J - Summary Financial Information for Equity Investees

The following table displays the summary unaudited financial information for our
equity method businesses. These amounts are shown on a 100-percent basis.
<TABLE>
<CAPTION>

                               Second Quarter           %                 Year-to-Date           %
                             1999         1998       Change           1999          1998      Change
<S>                        <C>           <C>             <C>         <C>          <C>          <C>
 Revenues  .............. $ 1,229       $ 852           44.2        $ 2,439       $ 1,567      55.6
 Operating income .......  $  129       $  65           98.5        $   162       $   131      23.7
 Net income (loss) ......  $  320       $  22            N/M        $  (618)      $    16       N/M
</TABLE>
<PAGE>

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


Note K - Contingencies

Following the  enactment of the  Telecommunications  Act of 1996,  our telephone
company  subsidiary,  BellSouth  Telecommunications,  Inc.  (BST),  entered into
interconnection  agreements  with various  competitive  local exchange  carriers
(CLECs).  These  agreements  provide  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 CLECs
have claimed entitlement from BST for compensation associated with dial-up calls
originating  on BST's network and  connecting  with Internet  service  providers
(ISPs) served by the CLECs'  networks.  It is our position that dial-up calls to
ISPs are not local  calls for which  terminating  compensation  is due under the
interconnection agreements. The courts and state regulatory commissions in BST's
operating territory that have considered the matter to date, however, have ruled
that such calls invoke the reciprocal compensation obligation.

In February 1999, the Federal Communications  Commission (FCC) issued a decision
that  such  ISP  traffic  does  not  terminate  at the ISP  and,  therefore,  is
interstate in nature,  rather than local.  The FCC stated  further that it would
not interfere  with prior state  commissions'  decisions  regarding this matter.
Because previous state regulatory decisions were based upon a view that Internet
access calls are "local" rather than  interstate in nature,  we have asked those
regulators to revisit their prior interpretations. BST has subsequently received
unfavorable rulings in Florida and Alabama but has appealed these decisions.  We
believe  that we have a good  basis  for our  position.  At June 30,  1999,  our
exposure  related to these disputed  claims was  approximately  $140,  including
accrued interest.

Other reciprocal compensation issues

In a related matter, we uncovered other service  arrangements for which at least
one CLEC is claiming  terminating  compensation of approximately $115 that we do
not believe  involves  traffic under BST's  interconnection  agreement.  BST has
filed a complaint  with the state  regulatory  commission  asking that agency to
hold a hearing  regarding this  arrangement and to declare that BST does not owe
reciprocal compensation for these minutes of use. The CLEC has filed a complaint
with the state regulatory  commission  asking it to order BST to pay the amounts
the CLEC claims it is owed.  Hearings on this  matter are  scheduled  for August
1999. We believe that we have a good basis for our position and, accordingly, no
provision has been recorded for this claim in these financial statements.

Note L - South Carolina Regulatory Matters

Beginning in 1996,  BST operated under a price  regulation  plan approved by the
South Carolina Public Service  Commission  (SCPSC) under existing state laws. In
April 1999,  however,  the South Carolina Supreme Court  invalidated the SCPSC's
order  approving  this price  regulation  plan. In July 1999,  BST elected to be
regulated under a new state statute,  adopted subsequent to the SCPSC's approval
of the  earlier  plan.  The new  statute  allows  telephone  companies  in South
Carolina to operate under price regulation  without obtaining  approval from the
SCPSC. The election will become effective August 13, 1999.

The South Carolina  Consumer Advocate has petitioned the SCPSC seeking review of
the level of BST's earnings  during the 1996-1998  period when it operated under
the previously invalidated price regulation plan. We have filed a motion seeking
to have that petition dismissed.

During the second quarter of 1999, BST settled  several other  challenges to its
earnings and rates in South Carolina. Under the terms of the settlement,  it has
reduced access charges and other services (principally  convenience features) by
an  aggregate  of $21 on an annual basis and will,  as of January  2000,  reduce
certain business and residence rates by one dollar per line, per month to remain
in effect for a minimum of five years.



<PAGE>

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


Note M - Subsequent Event

On August 6,  1999,  we issued  $500 of 7 3/8%  bonds due  August 1,  2039.  The
purpose  of this  issue  was to  refinance  a  portion  of the $2.5  billion  in
commercial  paper  borrowings  associated  with  the  initial  financing  of our
investment in Qwest.


Note N - Restatement of Second Quarter 1999 Results

We have restated our consolidated  financial  statements for second quarter 1999
to  revise  the  accounting  treatment  for a  previously  reported  asset  swap
transaction.  In June 1999,  we  executed a contract  with  Ericsson  to replace
infrastructure equipment,  including switches, base stations and software, in 14
wireless markets.  We entered into the agreement 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 completed
over a 12-month period beginning in December 1999.

We previously  determined the accounting  treatment for the  transaction did not
result in an  impairment  of the assets.  Upon review of  clarifying  accounting
guidance and further analysis, we revised the reporting of the transaction. As a
result,  a non-cash  charge of $320 ($187 after tax) was  recorded in the second
quarter of 1999 to write these assets down to their  estimated fair market value
of approximately $320.

We  will  continue  to use  the  existing  infrastructure  equipment  until  the
conversion  process  has  been  completed  and  accelerate  the  recognition  of
depreciation  expense on these  assets over their  shortened  remaining  service
life.  As a result,  additional  depreciation  expense of $12 ($7 after tax) was
recorded for the second quarter.

The significant effects of the restatement are as follows:
<TABLE>
<CAPTION>

                                              ------------------------------------    -----------------------------------
                                                  For the Three Months Ended               For the Six Months Ended
                                                         June 30, 1999                          June 30, 1999
                                              ------------------------------------    -----------------------------------

                                                As previously                           As previously
                                                  reported         As restated            reported        As restated

<S>                                                   <C>               <C>                   <C>              <C>
  Depreciation and amortization .............            $1,143            $1,155                $2,256           $2,268
  Total operating expenses...................            $4,502            $4,834                $8,868           $9,200
  Operating income...........................            $1,646            $1,314                $3,253           $2,921
  Income before income taxes.................            $1,573            $1,256                $2,747           $2,430
  Provision for income taxes.................             $ 593             $ 470                $1,152           $1,029
  Net income.................................             $ 980             $ 786                $1,595           $1,401
  Earnings per share:
     Basic...................................             $ .52             $ .42                 $ .83            $ .73
     Diluted.................................             $ .51             $ .41                 $ .83            $ .73

  Total assets...............................           $41,516           $41,184
  Total shareholders' equity.................           $13,954           $13,760
</TABLE>




<PAGE>

                              BELLSOUTH CORPORATION
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
                       OPERATIONS AND FINANCIAL CONDITION
                 (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 Results of Operations and Financial  Condition (MD&A)
in  conjunction  with the MD&A in our  latest  annual  report  on Form  10-K and
previous quarterly report on Form 10-Q.

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

Key  financial  and  operating  data for second  quarter 1999 and 1998,  and the
respective year-to-date periods are as follows:
<TABLE>
<CAPTION>

                                                  ----------------------- ------------ -- ----------------------- ------------
                                                      Second Quarter           %               Year-to-Date            %
                                                  ----------- -----------                 ----------- -----------
                                                     1999        1998       Change           1999        1998       Change
                                                  ----------- ----------- ------------ -- ----------- ----------- ------------
<S>                                                   <C>         <C>             <C>        <C>        <C>               <C>
Revenues                                              $6,148      $5,664          8.5        $12,121    $ 11,090          9.3
------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ------------
Expenses                                              $4,834      $4,230         14.3        $ 9,200      $8,202         12.2
------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ------------
EBITDA (a)                                            $2,789      $2,508         11.2        $ 5,509      $5,005         10.1
------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ------------
EBITDA margin                                          45.4%       44.3%      +110bps          45.5%       45.1        +40bps
------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ------------
Access line counts (000's):
------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ------------
   Switched access lines                              24,370      23,660          3.0
   Access line equivalents(b)                         16,925      12,346         37.1
     Total equivalent access lines                    41,295      36,006         14.7
------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ------------
Digital and data services revenues                     $ 615       $ 465         32.3        $ 1,170       $ 891         31.3
------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ------------
Convenience feature revenues                           $ 466       $ 390         19.5          $ 900       $ 747         20.5
------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ------------
Access minutes of use (millions)                      27,627      26,240          5.3         54,452      51,322          6.1
----------------------------------------------------- ------- ----------- ------------ -- ----------- ----------- ------------
Proportionate wireless customers (000's):
   Domestic(c)                                         5,155       4,376         17.8
   International(d)                                    4,475       2,317         93.1
------------------------------------------------- ----------- ----------- ------------ -- ----------- ----------- ------------
</TABLE>

(a)  EBITDA  represents  income  before  net  interest  expense,  income  taxes,
     provision for asset impairment,  depreciation and amortization,  net equity
     in earnings (losses) of unconsolidated businesses 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.

(b)  Represents the  approximate  number of switched  access lines that would be
     functionally equal to non-switched, high-capacity digital and data circuits
     in service.

(c)  During  fourth   quarter  1998,   we   reorganized   our  Los  Angeles  and
     Houston/Galveston  cellular  partnerships  with AT&T. We have restated 1998
     domestic wireless customers to reflect this reorganization and provide more
     meaningful comparative information for existing operations.

(d)  During fourth  quarter 1998, we sold our interest in BellSouth New Zealand.
     We have  restated  1998  international  wireless  customers  to exclude the
     customers of BellSouth New Zealand and provide more meaningful  comparative
     information for existing operations.
<PAGE>

-------------------------------------------------------------------------------
Overview
-------------------------------------------------------------------------------

Net income and earnings per share for second quarter and  year-to-date  1999 and
1998 are as  follows  (all  references  to  earnings  per share are on a diluted
basis):
<TABLE>
<CAPTION>

                             ----------------------- ----------- --- ----------------------- ------------
                                 Second Quarter          %                Year-to-Date            %
                             -----------------------                 -----------------------
                                1999        1998       Change           1999        1998       Change
                             ----------- ----------- ----------- --- ----------- ----------- ------------
<S>                                <C>        <C>         <C>            <C>         <C>          <C>
As Reported:
---------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
  Net income                       $786       $ 818       (3.9)          $1,401      $1,710       (18.1)
---------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
  Earnings per share              $ .41       $ .41          -           $ .73       $ .86       (15.1)
---------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
Normalized:
---------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
  Net income                       $973       $ 818        18.9          $1,868      $1,614         15.7
---------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
  Earnings per share              $ .51       $ .41        24.4           $ .97       $ .81         19.8
---------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
</TABLE>

On a  quarter-over-quarter  and year-to-date  comparative basis, results reflect
strong 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 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.

Normalized results for the 1999 periods exclude the impacts of:

o    A write-down of network equipment in our domestic wireless  operations that
     decreased net income in the second quarter and year-to-date periods by $187
     or $.10 per share. See Note N to the consolidated  financial statements for
     further information; and
o    The  devaluation  of the Brazilian Real in early January 1999. Our share of
     the foreign currency losses in our Brazilian  wireless  properties  reduced
     net income for the year-to-date  period by $280 or $.15 per share (included
     in Net Equity in Earnings (Losses) of Unconsolidated Businesses).

The  year-to-date  comparison  is also  impacted by the first  quarter 1998 gain
related to the sale of our  investment in ITT World  Directories  of $96 or $.05
per share.

On January 1, 1999, we adopted a new accounting  standard on  capitalization  of
internal-use software. The quarter-over-quarter  impact of capitalizing software
costs under the new  standard  was a benefit of $95 or $.05 per share for second
quarter 1999 and a benefit of $160 or $.08 per share for year-to-date 1999.


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

Our reportable  segments reflect  strategic  business units that offer different
products and services and/or serve different customers.  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 "Other" segment. We evaluate the performance of each strategic business unit
based on net  income,  exclusive  of charges  for use of  intellectual  property
rights and adjustments for special items that may arise.  Intersegment  revenues
and expenses are not eliminated.  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
Equity in Earnings (Losses) of Unconsolidated Businesses line item.

<PAGE>

-------------------------------------------------------------------------------
Wireline Communications
-------------------------------------------------------------------------------

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

------------------------------------------------- ----------------------- ----------- --- ----------------------- ------------
                                                      Second Quarter          %                Year-to-Date            %
                                                  -----------------------                 -----------------------
                                                     1999        1998       Change           1999        1998       Change
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
<S>                                                   <C>         <C>            <C>          <C>         <C>             <C>
Operating revenues:
   Local service                                      $2,712      $2,502         8.4          $5,366      $4,916          9.2
   Network access                                      1,187       1,160         2.3           2,378       2,311          2.9
   Long distance                                         153         177      (13.6)             303         352       (13.9)
   Other wireline:
     External                                            255         249         2.4             535         485         10.3
     Intersegment                                        119          48         N/M             167          92          N/M
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
       Total operating revenues                       $4,426      $4,136         7.0          $8,749      $8,156          7.3
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
Operating expenses                                    $3,036      $2,957         2.7          $5,946      $5,754          3.3
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
Operating income                                      $1,390      $1,179        17.9          $2,803      $2,402         16.7
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
Segment net income                                     $ 781       $ 644        21.3          $1,582      $1,327         19.2
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------

------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
EBITDA                                                $2,240      $2,015        11.2          $4,486      $4,064         10.4
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------

EBITDA margin                                          50.6%       48.7%     +190bps           51.3%       49.8%  +150bps
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
</TABLE>


Operating Revenues

Local service
The  $210  and  $450   increases  in  local   service   revenues  for  the  1999
quarter-to-date  and  year-to-date  periods,  respectively,  are attributable to
growth in switched  access lines and strong demand for digital and data services
and convenience features.

We ended the second quarter with over 41 million total equivalent  access lines,
an increase of 14.7% since June 30, 1998.  Residential access lines rose 3.7% to
16,782,000, driven by economic growth in our nine-state region as well as demand
for additional  residence  lines for home office  purposes,  Internet access and
children's phones. We added 363,000 second lines since June 30, 1998,  extending
the total to over 2.4  million  lines and  increasing  the  penetration  rate to
17.0%.  Business  access lines,  including  both switched  access lines and data
circuits,  grew 24.0%  propelled  by  expanding  demand for our digital and data
services.

Revenues from optional  convenience  features  such as custom  calling  features
(e.g., Caller ID, Call Waiting, Call Return) and MemoryCall(R) service increased
$76 (19.5%) quarter-over-quarter and $153 or 20.5% on a year-to-date comparative
basis.  We continued to drive growth of  convenience  feature  usage through our
Complete Choice package, a one-price bundled offering of over 20 features.

Increased  penetration  of  extended  local area  calling  plans also  increased
revenues by  approximately  $48 compared to second quarter 1998 and $92 compared
to the first six months of 1998.

Network access
Network  access  revenues  grew $27 in second  quarter and $67 for the first six
months of 1999 when  compared  to the same 1998  periods,  due largely to higher
demand. Access minutes of use rose 5.3% to 27,627 million in second quarter 1999
from 26,240 million in second quarter 1998. For the year-to-date period,  access
minutes  of use grew 6.1% from  51,322 in 1998 to 54,452 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.  The
February 1999  introduction  of 1+ dialing  parity for  intraLATA  long distance
calls in all states in our wireline  territory  has also begun to  contribute to
growth in minutes.
<PAGE>

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  dedicated  circuits which are  fixed-charge  based rather than
per-minute-of-use  based.  Revenues from these dedicated  circuit  services grew
approximately  $38  quarter-over-quarter  and $72  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 rate  reductions  related to the
Federal  Communications  Commission's  productivity factor adjustment and access
reform that decreased revenues by $30 compared to second quarter 1998 and by $63
compared to the first six months of 1998.

Long distance
The decrease for both the quarter- and year-to-date periods compared to the same
1998 periods is primarily  attributable  to a decrease in long distance  message
volumes  (16.4% for the quarter- and 14.2% for the  year-to-date  periods).  The
year-to-date  period also includes the impact of a regulatory  ruling related to
compensation we receive from long distance carriers for  interconnection  to our
public payphones.  Partially  offsetting these decreases were increased revenues
from the  provision  of digital and data  services  during both 1999 periods and
independent company settlements occurring in first quarter 1999.

Competition  from  alternative  intraLATA  long distance  carriers and increased
penetration  of extended  local area calling  plans  continue to have an adverse
impact  on our long  distance  message  volumes.  Effective  February  1999,  we
implemented  1+  dialing  parity  for all  states in our  region,  which  allows
customers to choose a competing  intraLATA long distance  carrier without having
to dial a special access code. We believe that competition in the intraLATA long
distance market will continue to adversely  impact long distance message volumes
and revenues.

Other wireline
The increase in external revenues is attributable to higher revenues in the 1999
second  quarter  and  year-to-date  periods  from  sales  of  customer  premises
equipment,  sales of  unbundled  network  elements,  revenues  from our Internet
access offering and  interconnection  revenues from wireless carriers.  We ended
the quarter with over 565,000  subscribers to our BellSouth.net (sm) service, an
increase  of  125.1%  compared  to  the  same  1998  period.   The  increase  in
intersegment  revenues  in  the  1999  periods  primarily  represents  increased
business activity with our communications group companies.

Operating Expenses

Operational and support expenses
Operational and support  expenses  increased $65 or 3.1% for second quarter 1999
and $171 or 4.2% for the first six  months  of 1999  when  compared  to the same
periods in 1998.  Adjusted  for the impact of adopting the new rules on software
capitalization,  expenses  increased $210 (9.9%)  quarter-over-quarter  and $409
(10.0%) on a year-to-date comparative basis.

Increased  labor  costs,  primarily  in customer  service  and  network  support
functions, growth in reciprocal compensation expense, increased spending related
to Year 2000  remediation and other increased costs in the telephone  operations
associated  with  higher  business  volumes  were  the  primary  drivers.   Also
contributing  to the increase  were  expenses  related to new data  initiatives,
including   Asymmetric   Digital   Subscriber   Line   (ADSL)   and   integrated
fiber-in-the-loop  (IFITL),  and promotional  expenses  related to expanding our
Internet customer base.

We  anticipate  making ADSL service  available in 30 markets this year,  with an
addressable  market of  approximately  6 million access lines.  We are deploying
IFITL in nearly all newly built  neighborhoods  and also expect to retrofit some
200,000 existing homes in Atlanta and Miami by the end of 1999.
<PAGE>

Depreciation and amortization
Depreciation  and  amortization  expense  was  relatively  flat  compared to the
corresponding prior year periods, increasing $14 or 1.7% for the quarter and $21
or 1.3% year-to-date.  While gross depreciable plant increased by $2,690 or 5.5%
since June 30, 1998, the overall composite depreciation rate was slightly lower,
resulting in flat depreciation expense.

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

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

-------------------------------------------------- ------------------------ ----------- -- ------------------------ -----------
                                                       Second Quarter           %               Year-to-Date            %
                                                   ------------------------                ------------------------
                                                      1999        1998        Change          1999        1998        Change
-------------------------------------------------- ----------- ------------ ----------- -- ----------- ------------ -----------


                                                                                        -- ----------- ------------ -----------
-------------------------------------------------- ----------- ------------ ----------- -- ----------- ------------ -----------
<S>                                                      <C>          <C>         <C>          <C>          <C>           <C>
Operating revenues                                       $799         $674        18.5         $1,547       $1,320        17.2
-------------------------------------------------- ----------- ------------ ----------- -- ----------- ------------ -----------
Operating expenses                                       $697         $580        20.2         $1,358       $1,135        19.6
-------------------------------------------------- ----------- ------------ ----------- -- ----------- ------------ -----------
Operating income                                         $102          $94         8.5           $189         $185         2.2
-------------------------------------------------- ----------- ------------ ----------- -- ----------- ------------ -----------
Net equity in earnings (losses) of
  unconsolidated businesses                               $41          $43       (4.7)            $72          $78       (7.7)
-------------------------------------------------- ----------- ------------ ----------- -- ----------- ------------ -----------
Segment net income                                        $71          $74       (4.1)           $131         $143       (8.4)
-------------------------------------------------- ----------- ------------ ----------- -- ----------- ------------ -----------

-------------------------------------------------- ----------- ------------ ----------- -- ----------- ------------ -----------
EBITDA                                                   $257         $221        16.3           $482         $435        10.8
-------------------------------------------------- ----------- ------------ ----------- -- ----------- ------------ -----------
EBITDA margin                                           32.2%        32.8%      -60bps          31.2%        33.0%     -180bps
-------------------------------------------------- ----------- ------------ ----------- -- ----------- ------------ -----------

-------------------------------------------------- ----------- ------------ ----------- -- ----------- ------------ -----------
Customers (a)                                           4,724        3,963        19.2
-------------------------------------------------- ----------- ------------ ----------- -- ----------- ------------ -----------
Average monthly revenue per customer (a)                  $51          $51           -            $51          $53       (3.8)
-------------------------------------------------- ----------- ------------ ----------- -- ----------- ------------ -----------
</TABLE>

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

Operating Revenues

Revenue  growth of $125 for the quarter and $227  year-to-date,  compared to the
same  1998  periods,  in the  consolidated  domestic  wireless  business  can be
attributed  to a 19.2%  increase  in the  customer  base  since  June 30,  1998.
Advertising,  enhanced volume pricing  strategies  (including bundled minutes at
lower rates and prepaid calling plans) and competitive  incentive programs (such
as  discounted  wireless  handsets)  were key  drivers of the  customer  growth.
Average  monthly  revenue per  customer in second  quarter  1999  remained  flat
reflecting  increased usage offset by declines in per-minute  rates. The decline
in per-minute rates is due to the increasingly competitive market environment.

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

Operating Expenses

Operational and support expenses
These expenses  increased $89 or 19.7% to $542 for the quarter and $180 or 20.3%
to $1,065 for the first six months of 1999  compared  to the same 1998  periods.
These increases resulted from greater customer acquisition costs associated with
higher  customer  additions  in the  1999  periods  compared  to  1998.  Average
acquisition  costs per customer,  however,  have  benefited as we shift to lower
cost,  direct sales channels.  In our continuing  effort to migrate our customer
base from analog to digital  service,  we have moved over 40% of our  subscriber
base to digital and have increased  digital  minutes of use to over 50% of total
network  usage.  The  combination  of  higher  customer  additions  and  digital
conversion  negatively  impacted the comparison of margins between 1999 and 1998
periods but will enable greater revenue growth and operational efficiency.
<PAGE>

Expenses related to our new PCS markets also contributed to the increase. During
second  quarter  1999,  we  initiated  service  in several  BTAs in Florida  and
Mississippi  and will  continue our build-out of these  markets  throughout  the
remainder of 1999.

Depreciation and amortization
Depreciation  and  amortization  increased  $28 or 22.0% to $155  during  second
quarter  1999 and $43 or 17.2% to $293  year-to-date  compared  to the same 1998
periods.  The  increase  was  primarily  attributable  to  the  acceleration  of
depreciation  on network  equipment  that will be retired and replaced  over the
next 18 months, as well as higher levels of property,  plant and equipment since
June 30, 1998.  The  increased  investment is the result of the build-out of PCS
markets,  expansion of the network  related to growth in the  customer  base and
deployment of digital cellular across all of our consolidated markets.

Net Equity in Earnings (Losses) of Unconsolidated Businesses

Compared  to the  same  1998  periods,  1999  equity  in  earnings  (losses)  of
unconsolidated  domestic wireless businesses decreased $2 for the quarter and $6
for the  year-to-date  periods.  These  decreases are  principally  due to lower
earnings at our business in Los Angeles.  Earnings were lower due to acquisition
costs  associated  with higher  customer  additions and  increased  amortization
expense that resulted  from the  reorganization  of our  ownership  interests in
fourth quarter 1998.  This decrease was partially  offset by stronger  operating
results at our other unconsolidated markets.


-------------------------------------------------------------------------------
International Operations
-------------------------------------------------------------------------------

International operations is comprised principally of our investments in cellular
and PCS  businesses  in nine  countries in Latin  America as well as in Denmark,
Germany, India and Israel.
<TABLE>
<CAPTION>

--------------------------------------------------- --------------------- ----------- --- ----------------------- ------------
                                                       Second Quarter         %                Year-to-Date            %
                                                    ---------------------                 -----------------------
                                                      1999       1998       Change           1999        1998       Change
--------------------------------------------------- --------- ----------- ----------- --- ----------- ----------- ------------
<S>                                                     <C>         <C>         <C>           <C>           <C>          <C>
Operating revenues                                      $565        $484        16.7          $1,126        $936         20.3
--------------------------------------------------- --------- ----------- ----------- --- ----------- ----------- ------------
Operating expenses                                      $495        $419        18.1          $1,005        $820         22.6
--------------------------------------------------- --------- ----------- ----------- --- ----------- ----------- ------------
Operating income                                         $70         $65         7.7            $121        $116          4.3
--------------------------------------------------- --------- ----------- ----------- --- ----------- ----------- ------------
Net equity in earnings (losses) of
  unconsolidated businesses                              $21       $(14)         N/M             $ 8       $(35)          N/M
--------------------------------------------------- --------- ----------- ----------- --- ----------- ----------- ------------
Segment net income (loss)                                $50       $(22)         N/M             $30       $(27)          N/M
--------------------------------------------------- --------- ----------- ----------- --- ----------- ----------- ------------

--------------------------------------------------- --------- ----------- ----------- --- ----------- ----------- ------------
EBITDA                                                  $178        $146        21.9            $332        $267         24.3
--------------------------------------------------- --------- ----------- ----------- --- ----------- ----------- ------------
EBITDA margin                                          31.5%       30.2%     +130bps           29.5%       28.5%      +100bps
--------------------------------------------------- --------- ----------- ----------- --- ----------- ----------- ------------

--------------------------------------------------- --------- ----------- ----------- --- ----------- ----------- ------------
Customers (a)                                          3,233       2,058        57.1
--------------------------------------------------- --------- ----------- ----------- --- ----------- ----------- ------------
Average monthly revenue per customer (a)                 $57         $74      (23.0)             $59         $74       (20.3)
--------------------------------------------------- --------- ----------- ----------- --- ----------- ----------- ------------
</TABLE>

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

Operating Revenues

Consolidated  revenues are from our operations in Venezuela,  Argentina,  Chile,
Ecuador and Peru and, in the prior  year,  New  Zealand.  The  increases  of $81
quarter-over-quarter  and $190 year-to-date on a comparative basis are primarily
due to  substantial  growth in the  customer  bases of these  operations,  which
collectively have grown over 57% since June 30, 1998.  Partially  offsetting the
impacts of customer  growth is declining  monthly  revenue per customer  that is
driven  by  continued  expansion  into  lower-usage  customer  segments  through
offerings  such as  prepaid  cellular  service.  Both  the  quarter-to-date  and
year-to-date  periods are  negatively  impacted by the absence of revenues  from
BellSouth  New  Zealand,  which was sold during  fourth  quarter  1998.  Overall
weakening of local currencies also impacted revenue growth on a US-Dollar basis.
<PAGE>

Operating Expenses

Operational and support expenses
For the 1999 periods,  these  expenses  increased $49 compared to second quarter
1998 and $125  compared  to the first six months of 1998.  These  increases  are
primarily the result of customer  acquisition  costs associated with significant
increases  in  customer   additions.   The  increases  also  reflect  additional
operational   costs   associated   with  higher  customer  levels  and  expanded
operations.  Offsetting  the increases  were prior period  expenses  incurred by
BellSouth New Zealand.

Depreciation and amortization
Depreciation   expense   increased  $13   quarter-over-quarter   and  $31  on  a
year-to-date  comparative  basis due primarily to higher gross depreciable plant
resulting from the continued  investment in our wireless network  infrastructure
and  digital  conversion  of our  network  in  Venezuela.  Amortization  expense
increased $14  quarter-over-quarter  and $29 on a year-to-date comparative basis
as a result of  increased  intangibles  related to our  purchase  of  additional
ownership interests in several Latin American operations.

Net Equity in Earnings (Losses) of Unconsolidated Businesses

The  improvement  in  equity  in  earnings  (losses)  from  our   unconsolidated
international businesses in the 1999 periods is due to stronger results from our
investments  in  Germany,  Panama  and  Nicaragua,   all  of  which  experienced
substantial growth in their customer bases compared to the same periods in 1998.
Offsetting these  improvements were start-up losses related to our operations in
Brazil,   which  were  launched  in  May  1998.   Improvements  in  the  current
year-to-date period were also offset by less favorable results from our business
in Denmark due to customer  acquisition  costs  associated  with higher customer
additions.

Operations  in Brazil have been  affected by weaknesses in the local economy and
currency.  While the government has proposed  economic reforms and the Brazilian
Real has  strengthened  and  begun to  stabilize,  the  long-term  impact on our
Brazilian operations is not known.


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

Our advertising  and publishing  segment is comprised of companies that publish,
print, sell advertising in and perform related services concerning  alphabetical
and classified telephone directories and electronic product offerings.
<TABLE>
<CAPTION>
------------------------------------------------- ----------------------- ----------- --- ----------------------- ------------
                                                      Second Quarter          %                Year-to-Date            %
                                                  -----------------------                 -----------------------
                                                     1999        1998       Change           1999        1998       Change
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
<S>                                                     <C>         <C>          <C>            <C>         <C>           <C>
External revenues                                       $407        $394         3.3            $750        $730          2.7
Intersegment revenues                                      3         (2)         N/M               6           -          N/M
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
Total operating revenues                                $410        $392         4.6            $756        $730          3.6
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
Operating expenses                                      $248        $235         5.5            $454        $436          4.1
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
Operating income                                        $162        $157         3.2            $302        $294          2.7
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
Net equity in earnings (losses) of
  unconsolidated businesses                            $ (4)          $-         N/M           $ (5)         $ -          N/M
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
Segment net income                                       $98        $102       (3.9)            $182        $188        (3.2)
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------

------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
EBITDA                                                  $169        $163         3.7            $315        $306          2.9
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
EBITDA margin                                          41.2%       41.6%      -40bps           41.7%       41.9%       -20bps
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
</TABLE>


<PAGE>

Operating Results

External revenues increased $13 for second quarter and $20 for year-to-date 1999
when compared to the same 1998 periods. These increases are principally a result
of increased  pricing and volumes,  offset by the effects of shifts in directory
production  schedules.  Adjusted for book shifts,  external  revenues would have
increased by  approximately  5.0% for the quarter and 3.6% for the  year-to-date
period.  To a lesser  extent,  the increased  revenues of our  electronic  media
offerings also contributed.

Operational  and support  expenses  increased $13 for second quarter and $18 for
year-to-date  1999,  when  compared to the same 1998  periods,  due primarily to
increases in advertising and other  marketing  related costs.  Depreciation  and
amortization was flat as there were no significant increases in property,  plant
and equipment.

Net equity in  earnings  (losses)  of  unconsolidated  businesses  includes  the
results of our new international investments in directory publishers in Peru and
Brazil. We plan to continue exploring  international  growth  opportunities that
capitalize on existing directory core competencies.


-------------------------------------------------------------------------------
Other
-------------------------------------------------------------------------------

This segment is  primarily  comprised of our  communications  group  companies--
including new business  initiatives  such as  entertainment  (cable and wireless
television),  Internet  access,  wireless data and interLATA long distance.  The
stand-alone revenues and expenses of our Internet access marketing company which
are included in this segment are  eliminated  in  consolidation  and reported as
part of the wireline  communications results. Also included are businesses whose
primary purpose is to support our other operating segments.
<TABLE>
<CAPTION>

------------------------------------------------- ----------------------- ------------- -- -------------------------- ----------
                                                      Second Quarter           %                 Year-to-Date             %
                                                  -----------------------                  --------------------------
                                                     1999        1998        Change            1999         1998       Change
------------------------------------------------- ----------- ----------- ------------ -- ------------- ------------ ----------
<S>                                                     <C>          <C>           <C>            <C>           <C>        <C>
External revenues                                       $ 73         $26           N/M            $ 123         $ 44        N/M
Intersegment revenues                                     92          53           N/M              162          107        N/M
------------------------------------------------- ----------- ----------- ------------- -- ------------- ------------ ----------
Total operating revenues                               $ 165         $79           N/M            $ 285        $ 151        N/M
------------------------------------------------- ----------- ----------- ------------- -- ------------- ------------ ----------
Operating expenses                                      $233        $155          50.3            $ 437        $ 291       50.2
------------------------------------------------- ----------- ----------- ------------- -- ------------- ------------ ----------
Operating loss                                         $(68)       $(76)          10.5           $(152)       $(140)      (8.6)
------------------------------------------------- ----------- ----------- ------------- -- ------------- ------------ ----------
Net equity in earnings (losses) of
  unconsolidated businesses                              $ -         $ 7           N/M              $-         $  4        N/M
------------------------------------------------- ----------- ----------- ------------- -- ------------- ------------ ----------
Segment net loss                                       $(59)       $(31)        (90.3)           $(116)       $ (71)     (63.4)
------------------------------------------------- ----------- ----------- ------------- -- ------------- ------------ ----------

------------------------------------------------- ----------- ----------- ------------- -- ------------- ------------ ----------
EBITDA                                                 $(35)       $(53)          34.0            $(88)       $(100)       12.0
------------------------------------------------- ----------- ----------- ------------- -- ------------- ------------ ----------
EBITDA margin                                        (21.2%)     (67.1%)           N/M          (30.9%)      (66.2%)        N/M
------------------------------------------------- ----------- ----------- ------------- -- ------------- ------------ ----------
</TABLE>

Operating Results

External  revenues were up $47 for second quarter and $79 for year-to-date  1999
when compared to the same 1998 periods. These increases were driven by growth in
revenues from interactive paging services, wireless television offerings and the
resale of interLATA  long distance  services in markets  outside of our wireline
region.  Since  second  quarter  1998,  we have rolled out  wireless  television
service in four new markets  and  introduced  interactive  paging  service  with
nationwide coverage.

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 expenses. Depreciation and amortization has increased reflecting our
continuing   investment  of  resources  associated  with  the  growth  of  these
businesses.
<PAGE>

-------------------------------------------------------------------------------
Other Nonoperating Items
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

------------------------------------------------- ----------------------- ----------- --- ----------------------- ------------
                                                      Second Quarter          %                Year-to-Date            %
                                                  -----------------------                 -----------------------
                                                     1999        1998       Change           1999        1998       Change
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------

<S>                                                     <C>           <C>        <C>             <C>           <C>       <C>
Provision for Asset Impairment                          $320          $-         N/M            $320          $-          N/M
Interest Expense                                         245         203        20.7             471         393         19.8
Gain on Sale of Operations                                16           -         N/M              16         155          N/M
Net Equity in Earnings (Losses) of
  Unconsolidated Businesses                               57          36        58.3           (209)          47          N/M
Other Income, net                                        114          82        39.0             173          99         74.7
Provision for Income Taxes                               470         531      (11.5)           1,029       1,086        (5.2)

------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
</TABLE>

Provision for asset impairment
This  non-cash  charge is the result of an asset write-down effective June 1999
related to network  equipment  in our  domestic  wireless  operations.  For more
information, see Note N to the consolidated financial statements.

Interest expense
Higher interest  expense in 1999 is attributable to higher average debt balances
in the  quarter-  and  year-to-date  periods  relative to the 1998 periods and a
higher proportion of capitalized  interest in the 1998 periods.  The higher debt
balances in second  quarter 1999 are the result of commercial  paper  borrowings
associated with the interim financing of our investment in Qwest  Communications
International  Inc.  (Qwest).  We also  capitalized a greater  proportion of our
interest in 1998 due to our  start-up  investments  in Brazil.  Our average debt
balances were as follows:
<TABLE>
<CAPTION>

------------------------------------------------- ----------------------- ----------- --- ----------------------- ------------
                                                      Second Quarter          %                Year-to-Date            %
                                                  -----------------------                 -----------------------
                                                     1999        1998       Change           1999        1998       Change

------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
<S>                                                  <C>         <C>            <C>          <C>         <C>             <C>
Average short-term debt balance                      $ 5,848     $ 3,390        72.5         $ 5,025     $ 3,448         45.7
------------------------------------------------- ----------- ----------- -----------     ----------- ----------- ------------
Average long-term debt balance                       $ 8,401     $ 7,883         6.6         $ 8,487     $ 7,703         10.2
------------------------------------------------- ----------- ----------- -----------     ----------- ----------- ------------
 Total average debt balance                          $14,249     $11,273        26.4         $13,512     $11,151         21.2
------------------------------------------------- ----------- ----------- ----------- --- ----------- ----------- ------------
</TABLE>

We have refinanced $500 of commercial paper with a like amount of 7 3/8% 40-year
bonds. We plan to refinance an additional $2.0 billion of commercial  paper when
we believe conditions are favorable.

Gain on sale of operations
During second quarter 1999, we recognized a gain of $16 ($10 after tax) from the
sale of a wireless property in Alabama.  The 1998 year-to-date period includes a
gain of $155 ($96 or $.05 per share after tax) from our receipt in first quarter
1998 of  additional  proceeds  related to the 1997 sale of our  interest  in ITT
World Directories.

Net equity in earnings (losses) of unconsolidated businesses
Earnings from our unconsolidated  businesses increased $21 in the second quarter
and decreased $256 in the  year-to-date  period when compared with the same 1998
periods. The year-to-date decrease was driven by foreign exchange losses of $280
recorded in first quarter 1999 related to our Brazilian  properties  (see Note F
to the consolidated financial statements for further discussion of this matter).
Excluding  the impact of this event,  year-to-date  earnings  increased $24 when
compared to the same 1998 period. These results are addressed in the discussions
for the Domestic wireless and International operations 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 $32 over  second  quarter  1998 and $74 over the 1998  year-to-date
period is attributable to higher net foreign  exchange gains in our consolidated
international  businesses and increases in other  nonoperating  income in second
quarter 1999.  Partially  offsetting  these increases was a decrease in interest
income due to lower average cash balances.
<PAGE>

Provision for income taxes
The provision for income taxes decreased $61  quarter-over-quarter  and $57 on a
year-to-date  comparative  basis. The effective tax rate for second quarter 1999
was  37.4%  compared  to 39.4% in  second  quarter  1998.  The  decrease  in the
effective tax rate for second quarter 1999 is due primarily to improved  results
in foreign equity-method  subsidiaries which are recorded net of tax benefits or
expense. The effective rate was further reduced by a change in the mix of income
among taxing jurisdictions.

For the year-to-date  period, the effective tax rate was 42.3% compared to 38.8%
in 1998. The effective tax rate for the  year-to-date  period was  significantly
impacted by the foreign exchange losses recorded at our unconsolidated Brazilian
businesses during first quarter 1999.  Excluding the effect of these losses, our
effective rate for the 1999  year-to-date  period was 38.1%. The lower effective
rate for the  year-to-date  period is due to the same factors as the decrease in
our quarterly effective rate.


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

Cash  flows from  operations  are our  primary  source of  funding  for  capital
requirements  of  existing  operations,   debt  service,   dividends  and  share
repurchases.  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):
------------------------------------------------------ ------------------------
                                   1999            1998             Change
                             -------------- ---------------- ------------------

Operating activities.......       $4,093         $3,698         $395       10.7%
Investing activities.......      $(6,695)       $(3,276)       $3,419       N/M
Financing activities.......        $172          $(770)         $942        N/M

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

Net cash provided by operating activities
The increase in cash from operations primarily reflects higher EBITDA, partially
offset by an increase in working capital requirements.

Operating cash flows for 1999 also include $68 in cash proceeds  associated with
the initial closing of our agreement to sublease wireless  communications towers
to Crown Castle  International,  Inc.  Additional  closings are  scheduled to be
completed  throughout the remainder of 1999. These  transactions are expected to
generate total cash proceeds in excess of $700.

Net cash used in investing activities
During the first half of 1999, we invested $2.9 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 ADSL and
fast packet switching technologies as well as our IFITL initiative.  Included in
these  expenditures for the first half of 1999 are  approximately  $280 in costs
related to the purchase and development of internal-use software.

Our Argentine  wireless  communications  company recently won its bid to acquire
additional  PCS licenses.  It will pay  approximately  $262 for the licenses and
anticipates investing an additional $600 to build out the areas covered by these
licenses. Our share of the capital required,  based on our 65 percent ownership,
will be approximately $560 over the duration of the build-out period.

During  April  1999,  we  announced  a new  business  agreement  with Qwest that
included our purchasing a ten percent stake for $3.5 billion.  This  transaction
closed during May 1999. We initially funded this purchase by utilizing  existing
cash  reserves and issuing $2.5 billion in  commercial  paper,  $500 of which we
have  refinanced with 7 3/8% 40-year bonds. We intend to refinance an additional
$2.0  billion  of  commercial  paper  when  we  believe  market  conditions  are
favorable.
<PAGE>

Net cash used in financing activities
During the first half of 1999,  we purchased  66 million  shares as part of a $3
billion  repurchase  plan  announced  in  December  1998.   Combined  with  1998
repurchases  under a previous  plan,  we have reduced our number of  outstanding
shares by 86 million since June 30, 1998. We completed the December 1998 buyback
plan during May 1999.

Our debt to total  capitalization  ratio was 53.8% at June 30, 1999  compared to
43.0% at  December  31,  1998.  The  increase  is a  function  of  increases  in
short-term debt  attributable  to higher net borrowings of commercial  paper and
the reduction in shareholders' equity, driven by the effect of our stock buyback
program.

At August 6, 1999,  we had shelf  registration  statements  on file with the SEC
under which $4.7 billion of debt securities could be publicly offered.

Market Risk

For a complete  discussion of our market risks,  you should refer to the caption
"Market  Risk" in our 1998 Annual Report on Form 10-K.  Our primary  exposure to
market risks  relates to  unfavorable  movements  in interest  rates and foreign
currency  exchange rates. Our exposure to interest rate risk increased in second
quarter 1999 due to the  borrowing of $2.5 billion in  commercial  paper for our
investment in Qwest.  We have refinanced $500 with fixed-rate debt and intend to
refinance  $2.0  billion  of  that  commercial  paper  when  we  believe  market
conditions are favorable.  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

Reciprocal Compensation. See Note K to the consolidated financial statements.

South Carolina  Regulatory  Matters.  See Note L to the  consolidated  financial
statements.

International Operations

Fluctuations in foreign exchange rates
Our equity investments in international wireless systems are viewed as long-term
assets valued in the local currency, translated into US Dollars, and reported in
our  consolidated   financial   statements.   Foreign  currency   exchange  rate
fluctuations may be material to results of operations.  A significant  weakening
against the US Dollar of the  currency of a country  where we generate  revenues
and earnings may adversely impact our results, such as occurred in Brazil during
first quarter 1999.

Any weakening of the US Dollar against foreign  currencies could have an adverse
impact   on   cash   flows   if   we   are   obligated   to   make   significant
foreign-currency-denominated  capital  investments.  We attempt to mitigate  the
effect of  certain  foreign  currency  fluctuations  through  the use of foreign
currency hedging contracts.

During  January 1999,  the  government  of Brazil  allowed its currency to trade
freely against other  currencies.  As a result,  the Brazilian Real  experienced
devaluation  against the US Dollar.  The  devaluation  resulted in our Brazilian
wireless   properties   recording  exchange  losses  related  to  their  net  US
Dollar-denominated  liabilities.  Our share of the foreign exchange rate losses,
which was recorded during first quarter 1999, was $280.

The impact of the  devaluation  on an  operation  depends  on the  devaluation's
effect on the local  economy and the  ability of an  operation  to raise  prices
and/or reduce expenses.  Additionally, the economies of other countries in Latin
America could be adversely impacted by economic and monetary problems in Brazil.
For instance,  Ecuador  recently  experienced  devaluation in its currency.  The
impact,  however, was not material to our operations.  The likelihood and extent
of further devaluation and deteriorating  economic conditions in Brazil or other
Latin  American  countries  experiencing  similar  conditions  and the resulting
impacts on our results of operations,  financial  position and cash flows is not
known.
<PAGE>


Euro conversion
In January 1999,  certain  member  countries of the European  Union  established
permanent,  fixed  conversion  rates between their  existing  currencies and the
European  Union's common currency (the Euro).  The Euro will be phased in over a
transition  period  culminating  on January  1, 2002 at which time all  existing
currencies will be withdrawn from circulation.  We have investments in companies
operating in Germany,  Belgium and the Netherlands,  which are  participating in
the Euro  conversion.  We do not believe  that the Euro  conversion  will have a
material effect on these investments.

Year 2000 Readiness Disclosure

     You should note that the following  discussion about the Year 2000 includes
     certain   forward-looking   statements   that  are  subject  to  risks  and
     uncertainties. Factors that could cause actual results to differ materially
     from those expressed in the forward-looking statements include, but are not
     limited to:

     o    Remaining  implementation  and  testing  could  reveal  the  need  for
          additional unplanned remedial efforts and

     o    Third-party  vendors  and  suppliers  could fail to meet their  stated
          objectives, timetables or cost estimates.

     Inability  to reach  substantial  Year 2000  compliance  in our systems and
     integral    third-party   systems   could   result   in   interruption   of
     telecommunications  services,  interruption  or  failure  of  our  customer
     billing,  operating  and other  information  systems and failure of certain
     date-sensitive equipment. These failures could result in substantial claims
     by customers as well as loss of revenue due to service interruption, delays
     in our ability to bill our customers  accurately and timely,  and increased
     expenses associated with litigation,  stabilization of operations following
     such failures or execution of contingency plans.

During 1997, we initiated a company-wide  program to identify and address issues
associated  with the ability of our  date-sensitive  information,  telephony and
business systems and certain equipment to properly  recognize the Year 2000 as a
result of the century change on January 1, 2000. The program is also designed to
assess the readiness of other entities with which we do business.

As of July 1999, we have  completed  the majority of our Year 2000  conversions,
tests and  implementations.  We have completed all the work on systems that make
up our key business  processes,  and they have been tested in our labs in a Year
2000 environment.  All of our landline and wireless central office switches have
been remediated, tested and implemented into our production environment. We have
also completed 100% of the upgrades and replacements to the equipment  necessary
for E9-1-1 services within our nine-state wireline region.

Our Year 2000 program is divided into six phases:  planning;  inventory;  impact
analysis;  conversion;  testing;  and implementation.  Our progress within these
phases is based on the number of inventoried  items that have been addressed and
covers those business  processes that we consider  "mission  critical."  Mission
critical applications include those that:

o        directly affect delivery of primary services to our customers;

o        directly affect our revenue recognition and collection; and

o        would create noncompliance with any statutes or laws.
<PAGE>

The three main areas of focus for our Year 2000 program are network  components,
information  technology  systems and building and  environmental  systems.  Each
focus area includes the hardware,  software, embedded chips, third-party vendors
and  suppliers as well as  third-party  networks  that are  associated  with the
identified  systems.  We have  completed  the  planning,  inventory  and  impact
analysis  phases  and our  completion  status  for the  remaining  phases  is as
follows:  Network  components - 99%;  Information  technology systems - 95%; and
Building and environmental systems - 99%.

We will continue to monitor and track the conversion, testing and implementation
for all remaining mission-critical and non-mission-critical  applications.  Many
of the  applications  scheduled to be completed after July 1999 are of low or no
impact to our customers and/or internal  business  operations and were therefore
specifically targeted for remediation after the more critical applications.

Contingency  plans. We have developed  numerous  continuity plans for conducting
our business  operations in the event of crises,  including  system  outages and
natural disasters.  We have chartered a Year 2000 Business  Contingency Planning
project to ensure that  contingency  plans are  developed and tested and support
infrastructures  are in place.  This effort is not limited to the risks posed by
the potential Year 2000 failures of our networks,  internal  information systems
or  infrastructures,  but also includes the potential  secondary impact on us of
Year 2000 failures,  including  potential  systems failures of business partners
and  infrastructure  service  providers.  Business impact  assessments have been
substantially  completed,  and the  completion of  contingency  plan testing and
sign-off is scheduled for third quarter 1999.

Costs of project.  Some of the costs  associated  with our Year 2000  compliance
efforts were incurred in 1997 and 1998. We will incur the remainder  during 1999
and 2000. At June 30, 1999, we have spent  approximately  $199 in external costs
towards  Year 2000  compliance.  We  estimate  the total  external  costs of our
compliance efforts will be approximately $300 over the life of the project.

Expected  completion.  We currently  anticipate that the remaining  applications
will be Year 2000  compliant  between  September and December  1999.  Unforeseen
circumstances  such as those  discussed  previously  could  affect  our  current
assessments.  As a result, we are unable to determine the impact that any system
interruption  would have on our results of  operations,  financial  position and
cash flows.

New Accounting Pronouncements

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." The standard  requires that all derivative
instruments  be recognized as assets or  liabilities  and adjusted to fair value
each period.  During June 1999,  the FASB  postponed the required  adoption date
until  January 1, 2001. We plan to adopt SFAS No. 133 on January 1, 2001 and are
currently  assessing  the  impact  that  adoption  will have on our  results  of
operations and financial position.


Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Item 5.  OTHER ITEMS

We still expect EPS growth from  operations  in the range of 12%-14% ( excluding
the change in accounting for software,  or 19% to 21% if the change is included)
in 1999. These ranges exclude the impact of the write-down of domestic  wireless
assets,  impact of the currency devaluation in Brazil, and the other normalizing
items in the current year. For 2000, we expect EPS growth from operations in the
13%-15% range (excluding the change in accounting for software).
<PAGE>


-------------------------------------------------------------------------------
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 and financial position. 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 and financial  position and
could cause  actual  results to differ  materially  from those  expressed in the
forward-looking statements are:

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

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

o    further delay in our entry into the interLATA long distance market;

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

o    unanticipated   higher   capital   spending  from  the  deployment  of  new
     technologies;

o    unsatisfactory  results in  regulatory  actions  including  access  reform,
     universal service,  terms of interconnection and unbundled network elements
     and resale rates; and

o    failure to  satisfactorily  identify  and complete  Year 2000  software and
     hardware revisions by us and entities with which we do business.

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  to publicly  release the
results of any revisions to these  forward-looking  statements to reflect events
or circumstances after the date of this filing.

<PAGE>

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


Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits:

     Exhibit
     Number

     11           Computation of Earnings Per Common Share.

     12           Computation of Ratio of Earnings to Fixed Charges.

     27           Financial Data Schedule as of June 30, 1999.



(b) Reports on Form 8-K:

 Date of Event             Subject


 April 19, 1999            BellSouth/Qwest agreement and 1Q99 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 and Controller
                                                (Principal Accounting Officer)


December 10, 1999

<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 June 30, 1999.