SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549


                                    FORM 10-Q
                                   (Mark One)

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

                For the quarterly period ended September 30, 2001

                                       OR

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

                        For the transition period from ___ to ___


                          Commission file number 1-8607


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


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


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

                   Registrant's telephone number 404 249-2000

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

At October 31, 2001,  1,876,968,949 common shares were outstanding.


<PAGE>







                                Table of Contents


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

2. Management's Discussion and Analysis of Financial Condition and
    Results of Operations............................................ 22

3. Qualitative and Quantitative Disclosures about Market Risk ....... 35



                           Part II

6. Exhibits and Reports on Form 8-K ................................. 36

<PAGE>



 PART I - FINANCIAL INFORMATION

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

                                        For the Three Months                For the Nine Months
                                        Ended September 30,                 Ended September 30,
                                       2000             2001               2000              2001


<S>                                    <C>               <C>                <C>               <C>
Operating revenues:
Communications group                   $ 4,565           $ 4,770            $ 13,679          $14,199
Domestic wireless                          963                 -               2,766                -
Latin America                              757               710               2,124            2,227
Domestic advertising and publishing        539               493               1,329            1,363
All other                                   26                40                  93              128
        Total operating revenues         6,850             6,013              19,991           17,917

Operating expenses:
     Operational and support expenses    3,612             3,138              10,647            9,531
     Depreciation and amortization       1,301             1,178               3,759            3,538
     Severance accrual                       -                 -                  78                -
        Total operating expenses         4,913             4,316              14,484           13,069

Operating income                         1,937             1,697               5,507            4,848

Interest expense                           344               304                 982              998
Gain (loss) on sale
  of operations                            (14)               24                 (14)              24
Net earnings of
  equity affiliates                         10               167                 163              357
Other income (loss), net                    35            (1,527)                164           (1,363)

Income before income taxes               1,624                57               4,838            2,868
Provision for income taxes                 588                50               1,737            1,090

        Net income                     $ 1,036               $ 7             $ 3,101          $ 1,778


Weighted-average common
 shares outstanding:
     Basic                               1,871             1,875               1,878            1,874
     Diluted                             1,885             1,887               1,894            1,886
Dividends declared per
 common share                           $ 0.19            $ 0.19              $ 0.57           $ 0.57
Earnings per share:
     Basic                              $ 0.55            $ 0.00              $ 1.65           $ 0.95
     Diluted                            $ 0.55            $ 0.00              $ 1.64           $ 0.94

</TABLE>




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

<PAGE>



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

<TABLE>
<CAPTION>

                                              December 31,      September 30,
                                                  2000               2001
                                                                 (Unaudited)

<S>                                            <C>               <C>
ASSETS
Current assets:
     Cash and cash equivalents                    $ 1,061             $ 854
     Accounts receivable, net of
       allowance for uncollectibles
         of $377 and $428                           5,157             5,132
     Material and supplies                            379               377
     Other current assets                             809               950
         Total current assets                       7,406             7,313

Investments and advances                           11,010            10,546

Property, plant and equipment                      60,912            63,882
Less:  accumulated depreciation                    36,755            38,649
     Property, plant and equipment, net            24,157            25,233

Deferred charges and other assets                   4,180             4,876
Intangible assets, net                              4,172             4,273

         Total assets                            $ 50,925          $ 52,241

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Debt maturing within one year                $ 7,569           $ 6,961
     Accounts payable                               2,233             1,613
     Other current liabilities                      3,468             4,241
         Total current liablities                  13,270            12,815

Long-term debt                                     12,463            13,105

Noncurrent liabilities:
     Deferred income taxes                          3,580             3,290
     Other noncurrent liabilities                   4,700             4,991
         Total noncurrent liabilities               8,280             8,281

Shareholders' equity:
     Common stock, $1 par value (8,650
         shares authorized; 1,872
         and 1,877 shares outstanding)              2,020             2,020
     Paid-in capital                                6,740             6,766
     Retained earnings                             14,074            14,704
     Accumulated other comprehensive
        loss                                         (488)             (277)
     Shares held in trust and treasury             (5,222)           (5,034)
     Guarantee of ESOP debt                          (212)             (139)
         Total shareholders' equity                16,912            18,040

         Total liabilities and
          shareholders' equity                   $ 50,925          $ 52,241
</TABLE>


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


<PAGE>



                              BELLSOUTH CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                  (In Millions)
<TABLE>
<CAPTION>

                                                              For the Nine Months
                                                                Ended September 30,
                                                               ---------------------
                                                               ---------------------
                                                                  2000       2001
                                                               ----------  ---------
                                                               ----------  ---------


<S>                                                              <C>        <C>

Cash Flows from Operating Activities:
     Net income ..............................................   $ 3,101    $ 1,778
     Adjustments to net income:
         Depreciation and amortization .......................     3,759      3,538
         Net losses on sale or impairment of equity securities      --        1,704
         Postretirement benefit curtailment charge ...........      --           72
         Severance accrual ...................................        78       --
         (Gain) loss on sale of operations ...................        14        (24)
         Provision for uncollectibles ........................       278        370
         Net losses (earnings) of equity affiliates ..........      (163)      (357)
         Dividends received from equity affiliates ...........        55        279
         Minority interests in income of subsidiaries ........        12          5
         Deferred income taxes and investment tax credits ....       150       (343)
     Net change in:
         Accounts receivable and other current assets ........      (529)      (505)
         Accounts payable and other current liabilities ......       434        255
         Deferred charges and other assets ...................      (486)      (730)
         Other liabilities and deferred credits ..............       (60)       119
     Other reconciling items, net ............................       107        200
                                                                 -------    -------
                                                                 -------    -------

         Net cash provided by operating activities ...........     6,750      6,361
                                                                 -------    -------
                                                                 -------    -------

Cash Flows from Investing Activities:
     Capital expenditures ....................................    (4,940)    (4,724)
     Investments in and advances to equity affiliates ........      (497)    (1,597)
     Acquisitions, net of cash acquired ......................    (1,836)      --
     Purchases of wireless licenses ..........................       (72)       (10)
     Proceeds from sale of investments .......................      --        1,147
     Proceeds from sale of operations ........................        29         21
     Proceeds from disposition of short-term investments .....       372        108
     Purchases of short-term investments .....................      (311)       (76)
     Proceeds from repayment of loans and advances ...........        45         25
     Investments in debt securities ..........................      --         (279)
     Other investing activities, net .........................        60          1
                                                                 -------    -------
                                                                 -------    -------
         Net cash used for investing activities ..............    (7,150)    (5,384)
                                                                 -------    -------
                                                                 -------    -------

Cash Flows from Financing Activities:
     Net borrowings (repayments) of short-term debt ..........       411     (1,405)
     Proceeds from long-term debt ............................     2,118      1,865
     Repayments of long-term debt ............................      (412)      (727)
     Dividends paid ..........................................    (1,072)    (1,068)
     Purchase of treasury shares .............................      (779)      --
     Other financing activities, net .........................        23        151
                                                                 -------    -------
                                                                 -------    -------

         Net cash used for financing activities ..............       289     (1,184)
                                                                 -------    -------
                                                                 -------    -------

     Net decrease in cash and cash equivalents ...............      (111)      (207)
     Cash and cash equivalents at beginning of period ........     1,287      1,061
                                                                 -------    -------
                                                                 -------    -------
     Cash and cash equivalents at end of period ..............   $ 1,176    $   854
                                                                 =======    =======

</TABLE>

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

<PAGE>



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

<TABLE>
<CAPTION>



                                For the Nine Months Ended September 30, 2000
                               --------------------------------------------------------------------------------------------------
                               --------------------------------------------------------------------------------------------------

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

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

Net income                            -                                       3,101                                        3,101
Other comprehensive
 income, net of tax:

 Foreign currency
  translation adjustment              -                                                    50                                 50

 Net unrealized gains
  on securities                       -                                                   259                                259

 Minimum pension
  liability adjustment                -                                                    (9)                                (9)
                                                                                      -----------                      -----------

Total comprehensive
 income (b)                           -                                                                                    3,401

Dividends declared                    -                                      (1,070)                                      (1,070)

Share issuances for
 employee benefit plans               -          3                              (66)                  125                     59

Purchase of treasury
 stock                                -        (19)                                                  (779)                  (779)

Tax benefit related to
 stock options                        -                               4                                                        4

ESOP activities and
 related tax benefit                  -                                                                          69           69
                               --------- ----------  -------- ---------- ----------- ---------  ---------- ---------  -----------
                               --------- ----------  -------- ---------- ----------- ---------  ---------- ---------  -----------

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

<FN>


(a)    Trust and treasury shares are not considered to be outstanding for
     financial reporting purposes. As of September 30, 2000, there were
     approximately 36 shares held in trust and 118 shares held in treasury.
(b)      Total comprehensive income for third quarter 2000 was $983.

</FN>
</TABLE>


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



<PAGE>



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


<TABLE>
<CAPTION>

                                 For the Nine Months Ended September 30, 2001
                                --------------------------------------------------------------------------------------------------
                                --------------------------------------------------------------------------------------------------

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

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

Net income                            -                                      1,778                                          1,778
Other comprehensive income,
 net of tax:

 Foreign currency translation
  adjustment                          -                                                   (27)                                (27)

 Net unrealized losses on
  securities:

   Unrealized losses
    on securities                     -                                                  (241)                               (241)

   Adjustments for
    other-than-temporary
    losses included in
    net income                        -                                                   525                                 525

 Net unrealized losses
  on derivatives                      -                                                   (46)                                (46)
                                                                                                                   -----------
                                                                                                                   -----------

Total comprehensive
  income (b)                          -                                                                                     1,989

Dividends declared                    -                                     (1,069)                                        (1,069)

Share issuances for
 employee benefit plans               -          5                   6         (81)                   200                     125

Share issuances for
 Grantor Trust                        -                                                               (12)                    (12)

Tax benefit related to
 stock options                        -                             20                                                         20

ESOP activities and
 related tax benefit                  -                                          2                                73           75
                               --------- ---------- --------- ---------  ---------- ---------- -----------  ---------  -----------
                               --------- ---------- --------- ---------  ---------- ---------- -----------  ---------  -----------

Balance at September
 30, 2001                         2,020       (143)  $ 2,020    $ 6,766     $14,704     $ (277)    $(5,034)     $(139)     $18,040
                               ========= ========== ========= =========  ========== ========== ===========  =========  ===========
                               ========= ========== ========= =========  ========== ========== ===========  =========  ===========


<FN>


(a)    Trust and treasury shares are not considered to be outstanding for
     financial reporting purposes. As of September 30, 2001, there were
     approximately 36 shares held in trust and 107 shares held in treasury.
(b)      Total comprehensive income for third quarter 2001 was $477.
</FN>
</TABLE>


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


<PAGE>



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

Note A - Preparation of Interim Financial Statements

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

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

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

Note B - New Accounting Pronouncements

BUSINESS COMBINATIONS AND GOODWILL AND OTHER INTANGIBLE ASSETS

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS 141 requires the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. Use of the pooling-of-interests method is prohibited. SFAS
141 also provides new criteria to determine whether an acquired intangible asset
should be recognized separately from goodwill.


Upon adoption of SFAS 142, amortization of existing goodwill would cease and the
remaining book value would be tested for impairment at least annually at the
reporting unit level using a new two-step impairment test. Amortization of
goodwill recorded on equity investments would also cease, but this embedded
goodwill will continue to be tested for impairment under current accounting
rules for equity investments. In addition, we will have adjustments to the
equity in net income of affiliates line item to reflect the impact of adopting
these new statements on the operations of our equity investments.


We will adopt both statements on January 1, 2002 and are currently evaluating
the impact of these statements. We have not yet quantified the impact of these
statements on the operations of our equity investments, including Cingular and
our Latin America group segment. Annual pre-tax amortization expense of our
existing and embedded goodwill for 2001 will be $84. During 2002, we will
perform the first of the required impairment tests of goodwill as of January 1,
2002, and we have not yet determined what the effect of these tests will be on
our earnings and financial position. Any impairment resulting from our initial
application of the statements will be recorded as a cumulative effect of
accounting change as of January 1, 2002.


Derivative Instruments and Hedging Activities

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
requires that entities recognize all derivatives as either assets or liabilities
in the statement of financial position and measure those instruments at fair
value. Gains and losses resulting from changes in the fair values of those
derivatives are to be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. We adopted SFAS No. 133 on January 1,
2001. The impact of implementation was not material.   The fair value of
derivative instruments at September 30, 2001 was $(72).



<PAGE>



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

Note C - Earnings Per Share

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

                          For the Three Months            For the Nine Months
                           Ended September 30,            Ended September 30,
                           -------------------            -------------------
                           2000           2001           2000            2001
                           ----           ----           ----            ----
Basic common shares
  outstanding              1,871           1,875          1,878          1,874
Incremental shares
 from stock options
  and benefit plans           14              12             16             12
                           -----           -----          -----          -----
Diluted common shares
 outstanding               1,885           1,887          1,894          1,886
                           =====           =====          =====          =====

The earnings amounts used for per-share calculations are the same for both the
basic and diluted methods. Outstanding options for 52 million shares for the
three months ended September 30, 2001 and 50 million for the nine months ended
September 30, 2001 were not included in the computation of diluted earnings per
share because the exercise price of these options was greater than the average
market price of the common stock. Outstanding options for 33 million and 29
million shares were excluded for the same reason for the quarter and
year-to-date 2000 periods, respectively.

Note D - Sale of Qwest Shares

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

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

In July 2001, we sold an additional 4.5 million shares of Qwest common stock for
$135 in cash, or $30 per share.

Note E - Restructuring of Wireless Video Entertainment Business

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

We recorded charges of approximately $498, or $323 net of tax, related to this
restructuring in the fourth quarter of 2000. These charges consisted of
approximately $289 for asset writeoffs and writedowns and $209 for contract
termination penalties, migration of customers to alternative service providers
and for severance and related benefit expenses. As of September 30, 2001, we
have charged $156 against the $209 accrued, leaving the accrual at $53 as of
that date. We expect to substantially complete the plan by the end of 2001.
Operating revenues generated by this business were $15 in third quarter 2000 and
$3 in third quarter 2001, while operating losses were $25 in third quarter 2000
and $9 in third quarter 2001. For the year-to-date periods, operating revenues
were $43 in 2000 and $22 in 2001, while operating losses were $75 in 2000 and
$25 in 2001.

Note F - Curtailment charge

In first quarter  2001,  we  recognized a curtailment  loss of $72 in accordance
with  provisions  of SFAS No. 106,  "Employers'  Accounting  for  Postretirement
Benefits Other Than Pension". The loss resulted from accelerated
<PAGE>

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

Note F - Curtailment charge (continued)

recognition of prior service cost in excess of the decrease in our
postretirement benefit obligation for the wireless employees that will be
covered under Cingular's postretirement benefit plans.

Note G - Contribution of AB Cellular to Cingular

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

Note H - Segment Information

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

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

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

                                            For the Three Months                For the Nine Months
                                            Ended September 30,        %        Ended September 30,         %
                                            2000         2001       Change       2000         2001       Change

<S>                                         <C>           <C>            <C>    <C>           <C>             <C>

Communications group
External revenues                           $ 4,539       $4,770         5.1    $ 13,601      $ 14,186        4.3
Intersegment revenues                            99           37       (62.6)        280           106      (62.1)
   Total revenues                           $ 4,638       $4,807         3.6    $ 13,881      $ 14,292        3.0
Operating income                            $ 1,508       $1,354       (10.2)     $4,552       $ 4,294       (5.7)
Segment net income                            $ 837        $ 766        (8.5)     $2,540       $ 2,440       (3.9)

Domestic wireless
External revenues                           $ 1,061       $1,465        38.1      $3,033       $ 4,189       38.1
Intersegment revenues                            10            -        N/M*          24             -        N/M
   Total revenues                           $ 1,071       $1,465        36.8      $3,057       $ 4,189       37.0
Operating income                              $ 144        $ 291       102.1       $ 359         $ 799      122.6
Net earnings (losses) of equity affiliates     $ 41          $ -         N/M       $ 121           $ -        N/M
Segment net income                             $ 98        $ 128        30.6       $ 245         $ 345       40.8

</TABLE>

* Not Meaningful


<PAGE>



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

Note H - Segment Information (continued)

<TABLE>
<CAPTION>


                                             For the Three Months                  For the Nine Months
                                             Ended September 30,       %            Ended September 30,       %
                                             2000         2001       Change         2000         2001       Change

<S>                                            <C>          <C>         <C>          <C>          <C>           <C>
Latin America
External revenues                              $ 757        $ 710       (6.2)        $2,124       $2,227        4.8
Intersegment revenues                             15            6      (60.0)            47           20      (57.4)
   Total revenues                              $ 772        $ 716       (7.3)        $2,171       $2,247        3.5
Operating income                                $ 24         $ 86      258.3           $ 64        $ 173      170.3
Net earnings (losses) of equity affiliates     $ (19)       $ (50)       N/M          $ (61)      $ (187)       N/M
Segment net income (loss)                      $ (62)       $ (52)       N/M         $ (116)      $ (277)       N/M

Domestic advertising and publishing
External revenues                              $ 539        $ 493       (8.5)        $1,329       $1,363        2.6
Intersegment revenues                              6            3      (50.0)            17           13      (23.5)
   Total revenues                              $ 545        $ 496       (9.0)        $1,346       $1,376        2.2
Operating income                               $ 293        $ 257      (12.3)         $ 652        $ 679        4.1
Segment net income                             $ 181        $ 158      (12.7)         $ 399        $ 414        3.8

All other
External revenues                               $ 21         $ 28       33.3           $ 69         $ 83       20.3
Intersegment revenues                              2            7        N/M              5           19        N/M
   Total revenues                               $ 23         $ 35       52.2           $ 74        $ 102       37.8
Operating income                                 $ 8          $ 6        N/M           $ 13         $ 19        N/M
Net earnings (losses) of equity affiliates     $ (12)        $ 14        N/M           $ 22        $ (15)       N/M
Segment net income (loss)                      $ (10)        $ 18        N/M           $ 23         $ (3)       N/M

Reconciling items
External revenues                              $ (67)     $(1,453)       N/M         $ (165)     $(4,131)       N/M
Intersegment revenues                           (132)         (53)       N/M           (373)        (158)       N/M
   Total revenues                              $(199)     $(1,506)       N/M         $ (538)     $(4,289)       N/M
Operating income (loss)                        $ (40)      $ (297)       N/M         $ (133)     $(1,116)       N/M
Net earnings (losses) of equity affiliates       $ -        $ 203        N/M           $ 81        $ 559        N/M
Segment net income (loss)                       $ (8)     $(1,011)       N/M           $ 10      $(1,141)       N/M

Reconciliation to Consolidated Financial Information
Operating Revenues
Communications group                         $ 4,638       $4,807        3.6       $ 13,881      $14,292        3.0
Domestic wireless                              1,071        1,465       36.8          3,057        4,189       37.0
Latin America                                    772          716       (7.3)         2,171        2,247        3.5
Domestic advertising and publishing              545          496       (9.0)         1,346        1,376        2.2
All other                                         23           35       52.2             74          102       37.8
    Total segments                           $ 7,049       $7,519        6.7       $ 20,529      $22,206        8.2
Reconciling items                              $(199)     $(1,506)       N/M         $ (538)     $(4,289)       N/M
Total consolidated                           $ 6,850       $6,013      (12.2)      $ 19,991      $17,917      (10.4)
</TABLE>



<PAGE>

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

Note H - Segment Information (continued)

<TABLE>
<CAPTION>


                                            For the Three Months                 For the Nine Months
                                            Ended September 30,        %          Ended September 30,        %
                                            2000         2001       Change        2000         2001       Change

<S>                                           <C>          <C>          <C>        <C>          <C>           <C>
Reconciliation to Consolidated Financial Information, continued
Net Income
Communications group                          $ 837        $ 766        (8.5)      $2,540       $2,440        (3.9)
Domestic wireless                                98          128        30.6          245          345        40.8
Latin America                                   (62)         (52)        N/M         (116)        (277)        N/M
Domestic advertising and publishing             181          158       (12.7)         399          414         3.8
All other                                       (10)          18         N/M           23           (3)        N/M
    Total segments                          $ 1,044       $1,018        (2.5)      $3,091       $2,919        (5.6)
Reconciling items                              $ (8)     $(1,011)        N/M         $ 10      $(1,141)        N/M
Total consolidated                          $ 1,036          $ 7       (99.3)      $3,101       $1,778       (42.7)

</TABLE>




Note I - Investment Activity

Advance to Affiliate
(Euros in millions)
In August 2001, we loaned Euro 1,510, or $1,382, directly to E-Plus, an equity
investment, with an expected March 1, 2004 due date, at LIBOR plus 310 basis
points.   E-Plus used the proceeds to pay down existing third party debt
previously guaranteed by BellSouth.   Simultaneously with this transaction, in
order to mitigate foreign currency risk, we also entered into a forward contract
to sell Euro with a March 1, 2004 settlement date. The forward, which qualifies
as a cash flow hedge, enables us to receive $1,382 equivalent to Euro 1,510,
based on a forward rate of 0.9158.

Note J - Marketable Securities

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

Over the course of the year, there has been a broad decline in the public equity
markets, particularly in technology and communications stocks, including
investments held in our portfolio. Similarly, we experienced significant
declines in the value of certain privately held investments and restricted
securities. As a result, we recorded a $1,566 noncash pretax charge to reduce
the carrying value of certain strategic investments in publicly traded and
private equity securities, principally our investment in Qwest. We concluded
that the continuing depressed market of these investments, as well as the
difficulties experienced by similar companies, indicated that the decline was
other than temporary. This charge is included in other income in the
accompanying consolidated statements of income.

<PAGE>

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

Note J - Marketable Securities (continued)

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

                                     Gross        Gross
                                  Unrealized    Unrealized     Recorded
  2000                  Cost         Gains        Losses        Basis
                        ----         -----        ------        -----

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

                                     Gross      Fair Value/
                       Original    Impairment    New Cost
  2001                   Cost        Losses        Basis
                         ----        ------        -----

  Investment in Qwest   $1,988      $(1,286)       $ 702
  Other investments        500         (280)         220
                        ------     ---------       -----
      Total             $2,488     $(1,566)        $ 922
                        ======     =========       =====

Note K - Summary Financial Information for Equity Investees

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

                       For the Three                   For the Nine
                       Months Ended                    Months Ended
                       September 30,                   September 30,
                       -------------                   -------------
                     2000         2001               2000         2001
                     ----         ----               ----         ----
Revenues  ..........$1,562       $4,713             $4,628      $13,819
                    ======       ======             ======      =======
Operating income ...   $80        $ 927             $  364      $ 2,210
                    ======       ======             ======      =======

Net income ......... $(25)        $ 482             $   47       $ 833
                    ======       ======             ======      =======



Note L- Debt Issuance

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

NOTE M - Sale of Operations

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

In August 2001, we sold our 24.5% ownership interest in SkyCell Communications,
a wireless communications provider in India, for total proceeds of $21. The
pretax gain on the sale was $24, or $19 after tax.






<PAGE>



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

Note N - Contingencies

Litigation Matters

Reciprocal compensation

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

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

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

Other reciprocal compensation issues
In a related matter, a competitive local carrier has claimed terminating
compensation of approximately $165 for service arrangements that we did not
believe involved "traffic" under our interconnection agreements. We filed a
complaint with the state regulatory commission asking that agency to declare
that we did not owe reciprocal compensation for these arrangements. In March
2000, the state commission ruled in our favor finding that compensation was not
owed to the competitive local carrier. The parties have agreed to a settlement
of this matter. In October, a stipulation of dismissal was filed with the court
to effect the settlement.


Compliance Matters

Foreign Corrupt Practices Act

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


<PAGE>



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

Note N - Contingencies (continued)

are cooperating with the SEC in its investigation, but we cannot predict the
duration or the outcome of the SEC's investigation or whether the scope of the
investigation will be expanded beyond the matters currently identified.

Regulatory matters

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

Also in 2000, the Florida Public Service Commission issued a proposed agency
action stating that our change in 1999 from a late charge based on a percentage
of the amounts overdue to a flat rate fee plus an interest charge violated the
Florida price regulation statute and voted that approximately $65 should be
refunded. We protested the decision. On August 30, 2001, the Commission issued
an order adopting its proposed action. We have appealed to the Florida Supreme
Court and continue to collect the charges subject to refund.

Other Claims

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

Note O - Tracking Stock

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

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

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

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

Note P - Subsidiary Financial Information

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

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

CONDENSED CONSOLIDATING STATEMENTS OF INCOME
<TABLE>
<CAPTION>

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

<S>                                                        <C>          <C>             <C>              <C>         <C>
Total operating revenues                                   $ 4,528      $ 2,646         $ 566            $ (890)     $ 6,850
Total operating expenses                                     3,166        2,281           360              (894)       4,913

Operating income                                             1,362          365           206                 4        1,937

Interest expense                                               179           81           266              (182)         344
Net earnings (losses) of equity affiliates                       4           (5)        1,360            (1,349)          10
Other income (expense), net                                      1            -           220              (200)          21

Income before income taxes                                   1,188          279         1,520            (1,363)       1,624
Provision for (benefit from) income taxes                      441           78            70                (1)         588

Net income                                                   $ 747        $ 201       $ 1,450          $ (1,362)     $ 1,036
</TABLE>
<TABLE>
<CAPTION>


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

<S>                                                        <C>          <C>             <C>              <C>         <C>
Total operating revenues                                   $ 4,662      $ 1,536         $ 755            $ (940)     $ 6,013
Total operating expenses                                     3,531        1,248           482              (945)       4,316

Operating income                                             1,131          288           273                 5        1,697

Interest expense                                               140           40           213               (89)         304
Net earnings (losses) of equity affiliates                       3          177         1,112            (1,125)         167
Other income (expense), net                                      4         (139)       (1,272)              (96)      (1,503)

Income before income taxes                                     998          286          (100)           (1,127)          57
Provision for  income taxes                                    362          149          (529)               68           50

Net income                                                   $ 636        $ 137         $ 429          $ (1,195)         $ 7
</TABLE>



<PAGE>

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

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

                                                                  For the Nine Months Ended September 30, 2000
                                                         BST          Other        Parent        Adjustments       Total

<S>                                                       <C>           <C>           <C>              <C>          <C>
Total operating revenues                                  $ 13,547      $ 7,283       $ 1,321          $ (2,160)    $ 19,991
Total operating expenses                                     9,498        6,485           686            (2,185)      14,484

Operating income                                             4,049          798           635                25        5,507

Interest expense                                               516          201           651              (386)         982
Net earnings (losses) of equity affiliates                      11          149         3,925            (3,922)         163
Other income (expense), net                                      4          (27)          589              (416)         150

Income before income taxes                                   3,548          719         4,498            (3,927)       4,838
Provision for income taxes                                   1,307          223           204                 3        1,737

Net income                                                 $ 2,241        $ 496       $ 4,294          $ (3,930)     $ 3,101
</TABLE>
<TABLE>
<CAPTION>

                                                                  For the Nine Months Ended September 30, 2001
                                                         BST          Other        Parent        Adjustments       Total

<S>                                                       <C>           <C>           <C>              <C>          <C>
Total operating revenues                                  $ 13,895      $ 4,717       $ 1,947          $ (2,642)    $ 17,917
Total operating expenses                                    10,277        4,033         1,414            (2,655)      13,069

Operating income                                             3,618          684           533                13        4,848

Interest expense                                               471          210           580              (263)         998
Net earnings (losses) of equity affiliates                      11          353         3,386            (3,393)         357
Other income (expense), net                                     14          (48)       (1,029)             (276)      (1,339)

Income before income taxes                                   3,172          779         2,310            (3,393)       2,868
Provision for (benefit from) income taxes                    1,146          441          (569)               72        1,090

Net income                                                 $ 2,026        $ 338       $ 2,879          $ (3,465)     $ 1,778
</TABLE>












<PAGE>


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

Note P - Subsidiary Financial Information (continued)

CONDENSED CONSOLIDATING BALANCE SHEETS


<TABLE>
<CAPTION>

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

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

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

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

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

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

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

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

















<PAGE>

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

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

                                                September 30, 2001
                                    BST     Other   Parent   Adjustments  Total

ASSETS

<S>                               <C>     <C>      <C>        <C>       <C>
Current assets:
Cash and cash equivalents          $     - $   500  $    354  $       -     $ 854
Accounts receivable, net             3,339   2,103     3,433     (3,743)    5,132
Other current assets                   377     649       334        (33)    1,327
Total current assets                 3,716   3,252     4,121     (3,776)    7,313

Investments and advances               303   5,838     7,675     (3,270)   10,546
Property, plant and
 equipment, net                     22,155   2,583       495          -    25,233
Deferred charges and
 other assets                        4,626     194       128        (72)    4,876
Intangible assets, net                 946   3,100       213         14     4,273

Total assets                      $ 31,746 $ 14,967 $ 12,632   $ (7,104) $ 52,241

LIABILITIES AND
 SHAREHOLDERS' EQUITY
Current liabilities:
Debt maturing within one year      $ 2,654   $ 459   $ 6,655   $ (2,807)  $ 6,961
Other current liabilities            3,664   1,894     1,182       (886)    5,854
Total current liablities             6,318   2,353     7,837     (3,693)   12,815

Long-term debt                       7,589   2,327     5,964     (2,775)   13,105

Noncurrent liabilities:
Deferred income taxes                2,624   1,166      (553)        53     3,290
Other noncurrent liabilities         3,376   1,388       369       (142)    4,991
Total noncurrent liabilities         6,000   2,554      (184)       (89)    8,281

Shareholders' equity:               11,839   7,733      (985)      (547)   18,040

Total liabilities and
 shareholders' equity             $ 31,746 $ 14,967 $ 12,632   $ (7,104) $ 52,241

</TABLE>



<PAGE>

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

Note P - Subsidiary Financial Information (continued)

 CONDENSED CONSOLIDATING CASH FLOW STATEMENTS
<TABLE>
<CAPTION>

                                                For the Nine Months Ended September 30, 2000
                                               BST         Other        Parent      Adjustments         Total

<S>                                            <C>          <C>          <C>               <C>            <C>
Cash flows from operating activities            $4,861       $ 1,760          $ 5           $ 124          $ 6,750
Cash flows from investing activities            (3,654)       (2,170)      (3,445)          2,119           (7,150)
Cash flows from financing activities            (1,148)          593        3,087          (2,243)             289
Net increase (decrease) in cash                   $ 59         $ 183       $ (353)            $ -           $ (111)

</TABLE>

<TABLE>
<CAPTION>
                                                For the Nine Months Ended September 30, 2001
                                               BST         Other        Parent      Adjustments         Total

<S>                                            <C>          <C>           <C>            <C>              <C>
Cash flows from operating activities            $4,605       $ 1,218       $ (629)        $ 1,167          $ 6,361
Cash flows from investing activities            (3,948)         (744)      (1,102)            409           (5,384)
Cash flows from financing activities              (719)         (582)       1,693          (1,576)          (1,184)
Net increase (decrease) in cash                  $ (62)       $ (108)       $ (37)            $ -           $ (207)

</TABLE>





Note Q - Other Matters

CWA AGREEMENT

In August 2001, we reached an agreement with the Communications Workers of
America (CWA), which was ratified in September 2001, on new three-year contracts
covering approximately 56,000 employees. The contracts include basic wage
increases totaling 13% over the three years covered by the contracts. In
addition, the agreement provides for a standard award of two percent of base
salary and overtime compensation which is subject to adjustment based on company
performance measures for plan years 2002 and 2003. Other terms of the agreement
include pension band increases and pension plan cash balance improvements for
active employees.

Note R - Subsequent Events

In October 2001, we filed applications with the Federal Communications
Commission to offer long distance service to customers in Louisiana and Georgia.
These filings followed the unanimous approval by the Public Service Commissions
(PSC) in Louisiana (September 19) and Georgia (October 2). In October 2001, the
Mississippi PSC unanimously endorsed BellSouth's state-level filing to provide
long distance service.

In October 2001, we announced that we would record an after-tax charge of $170
to $200, or $0.09 to $0.10 per share, during the fourth quarter reflecting
restructuring actions and related asset impairments. These actions are being
taken to reduce operating costs in response to a slowing economy and increased
competition. Targeted reductions will be largely focused on staff support
functions, resulting in the elimination of approximately 3,000 positions.


<PAGE>

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

Note R - Subsequent Events (continued)

In October 2001, we issued long term notes of $1,000, $1,000, and $750 with
interest rates of 5%, 6%, and 6.875%, respectively and maturing October 2006,
2011, and 2031, respectively. The net proceeds of $2,725 were used to pay down
commercial paper.

In October 2001, we loaned Euro 525 million, or $468, directly to E-Plus, an
equity investment, with an expected March 1, 2004 due date, at LIBOR plus 310
basis points. E-Plus used the proceeds to pay down existing third party debt
previously guaranteed by BellSouth. Simultaneously with this transaction, in
order to mitigate foreign currency risk, we also entered into a forward contract
to sell Euro with a March 1, 2004 settlement date. The forward, which qualifies
as a cash flow hedge under the scope of FAS 133, enables us to receive $468
equivalent to Euro 525 million, based on a forward rate of 0.8914.




<PAGE>



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

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

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

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


                                        For the Three Months
                                         Ended September 30,         %
                                          2000         2001        Change
                                       ------------ ----------- -------------
Results of operations:
Operating revenues                          $6,850     $ 6,013     (12.2)
Operating expenses                           4,913       4,316     (12.2)
                                            ------      ------
Operating income                             1,937       1,697     (12.4)
Interest expense                               344         304     (11.6)
Net earnings (losses) of equity
 affiliates                                     10         167       N/M*
Gain (loss) on sale of operations              (14)         24       N/M
Other income, net                               35      (1,527)      N/M
Provision for income taxes                     588          50     (91.5)
                                            ------      ------
         Net income                         $1,036     $     7     (99.3)
                                            ======     =======
   Earnings per share                       $ 0.55      $ 0.00    (100.0)
-------------------------------------- ------------ ----------- -------------
Cash flow data:
Cash provided by operating activities      $ 1,952     $ 2,434       24.7
Cash used for investing activities         $(3,355)    $(2,695)     (19.7)
Cash provided by (used for) financing      $ 1,059     $   457        N/M
activities
-------------------------------------- ------------ ----------- -------------

-------------------------------------- ------------ ----------- -------------
Other:
Effective tax rate                           36.2%       87.7%       N/M
Average debt balances:
   Short-term debt                          $7,019      $6,434      (8.3)
   Long-term debt                          $10,899     $13,123      20.4
                                           -------     -------
     Total average debt balance            $17,918     $19,557       9.1
                                           =======     =======
EBITDA(1)                                   $3,238      $2,875     (11.2)
EBITDA margin(2)                             47.3%       47.8%    +50 bps


                                          For the Nine Months
                                          Ended September 30,        %
                                           2000        2001        Change
                                        ----------- ------------ -----------
Results of operations:
Operating revenues                        $ 19,991     $ 17,917      (10.4)
Operating expenses                          14,484       13,069       (9.8)
                                            ------      -------
Operating income                             5,507        4,848      (12.0)
Interest expense                               982          998         1.6
Net earnings (losses) of equity
 affiliates                                    163          357         N/M
Gain (loss) on sale of operations              (14)          24         N/M
Other income, net                              164       (1,363)        N/M
Provision for income taxes                   1,737        1,090      (37.2)
                                            ------     --------
         Net income                         $3,101     $ 1,778       (42.7)
                                            ======     ========
   Earnings per share                       $ 1.64        $0.94      (42.7)
--------------------------------------  ----------- ------------ -----------
Cash flow data:
Cash provided by operating activities      $ 6,750      $ 6,361       (5.8)
Cash used for investing activities         $(7,150)     $(5,384)     (24.7)
Cash provided by (used for) financing      $   289      $(1,184)       N/M
activities
--------------------------------------  ----------- ------------ -----------

--------------------------------------  ----------- ------------ -----------
Other:
Effective tax rate                           35.9%        38.0%    +210 bps
Average debt balances:
   Short-term debt                          $6,481      $ 6,332       (2.3)
   Long-term debt                          $10,608      $13,172        24.2
                                           -------      -------
     Total average debt balance            $17,089      $19,504        14.1
                                           =======      =======
EBITDA(1)                                  $ 9,344       $8,386      (10.3)
EBITDA margin(2)                             46.7%        46.8%     +10 bps


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

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

* - Not meaningful.

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

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



The results for year-to-date 2000 include:

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

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

The results for third quarter 2001 include:

     o    Losses  related  to the  write  down  of  our  investments  in  equity
          securities, which reduced net income by $1,017, or $0.54 per share.

     o    Gain  related to the sale of our 24.5%  ownership  interest in SkyCell
          Communications, which increased net income by $19, or $0.01 per share.

     o    A loss  recorded as a result of selling  4.5  million  shares of Qwest
          common stock, which reduced net income by $52, or $0.03 per share.

     o    Losses incurred as we exit our wireless video entertainment  business,
          which  reduced  net income by $6 for the quarter and $16, or $0.01 per
          share, for the year-to-date period.

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

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

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

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

Events Affecting Comparability

Formation of Cingular Wireless

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

Operating Revenues

Our reported operating revenues decreased $837 in third quarter 2001 and $2,074
for the year-to-date period compared to the same periods in 2000. These changes
reflect:

o           A decrease of $963 for the third quarter and $2,766 for the
         year-to-date period from our domestic wireless operations due to the
         contribution of our domestic wireless operations to Cingular, as
         explained above.

o           Increases in our communications group of $205 for the third
         quarter and $520 for the year-to-date period driven by strong growth in
         digital and data revenues, wholesale revenues, and by the company's
         marketing of calling features. These increases were offset by declines
         in basic service revenues, reflecting competition and a slowing
         economy. Also impacting revenues was the decline in our public payphone
         business.

o           Revenues from our Latin America group decreased $47 for the
         third quarter and increased $103 for the year-to-date period. The
         decrease for the quarter was driven by the impact of deteriorating
         foreign currencies in Latin America and an unfavorable change in the
         interconnection agreements at our Venezuelan operations. The
         year-to-date increase was driven by the acquisition of Colombia in June
         2000. We added approximately 1.4 million customers quarter over
         quarter. The impact of customer additions on revenue growth was offset
         by declining monthly revenue per customer resulting from increased
         penetration of cellular service into the mass-consumer market and
         exchange rate declines in some countries.

o           A decrease in revenues from our domestic advertising and
         publishing group of $46 for the third quarter driven by the timing of
         book publications. Revenues for the year-to-date period grew $34, or
         2.6%, which were negatively impacted by slowing economic conditions,
         which have negatively impacted revenue growth.

Operating Expenses

Total operating expenses decreased $597 during third quarter 2001 and $1,415
during the year-to-date period. Operating expenses for year-to-date 2000 include
a $78 severance accrual related to domestic general and administrative staff
reductions. Operating expenses for year-to-date 2001 were impacted by
approximately $140 of expense related to our adjustment of the accrual for
reciprocal compensation. Operating expenses for year-to-date 2001 were also
impacted by a curtailment loss related to postretirement medical benefits which
increased expenses by $72. The decrease of $597 for the third quarter and the
remaining decrease of $1,549 for the year-to-date period reflect:

o       A decrease of $474 for the third quarter and $1,328 for the
     year-to-date period in operational and support expenses. Included in this
     change were decreases of $678 for the third quarter and $1,959 for the
     year-to-date period attributable to the domestic wireless operations which
     were contributed to Cingular. Offsetting these decreases were higher
     expenses in the communications group driven by our accelerated DSL growth
     initiative and customer service initiatives.

o       A decrease of $123 for the third quarter and $221 for the
     year-to-date period in depreciation and amortization due primarily to $151
     for the third quarter and $472 for the year-to-date period of expense
     recorded by our former domestic wireless operations in 2000. These
     decreases were offset by increases at the communications group reflecting
     increased deployment of capitalized software and investment in broadband
     since the third quarter of 2000.

Interest Expense

Interest expense decreased 11.6% in third quarter 2001 and increased 1.6% in
year-to-date 2001 as compared to the same 2000 periods. Lower average interest
rates on commercial paper were the primary reason for the third quarter decrease
and reduced the impact of the year-to-date increase. The higher interest expense
in the year-to-date period is attributed to higher average debt balances driven
by increased debt related to increased investment acquisition activity.

Net Earnings (Losses) of Equity Affiliates

Earnings from our unconsolidated businesses increased $157 in third quarter 2001
and $194 for the year-to-date period. These increases were driven primarily by
earnings in our equity investment in Cingular, which totaled $209 for the
quarter and $563 for the year-to-date.   Prior year quarter and year-to-date
amounts include AB Cellular earnings of $39 and $114, respectively, which were
subsequently contributed to Cingular. These net domestic wireless increases were
offset by higher losses of $31 in the third quarter and $126 year-to-date from
our equity investments in Latin America, driven by foreign exchange losses in
Brazil.   In addition, the year-to-date 2000 period results included $68 of
income related to the restructuring of our ownership interest in our German
wireless operations. These results are addressed in the discussions for the
domestic wireless, Latin America group and all other segments.

Gain (loss) on Sale of Operations

In July 2000, we sold our ownership interest in mobile data operations in
Belgium, the Netherlands and the United Kingdom. These sales generated a pre-tax
net loss of $14.

In August 2001, we sold our 24.5% ownership interest in SkyCell Communications,
a wireless communications provider in India. The pretax gain on the sale was
$24.

Other Income

Other income, net includes interest income, gains/losses on disposition of
assets, foreign currency gains/losses and miscellaneous nonoperating income. The
decreases of $1,562 in third quarter 2001 and $1,527 for the year-to-date period
were primarily driven by the pre-tax charge of $1,566 related to the write-down
of certain investments to appropriately reflect their fair value.

Provision for Income Taxes

The provision for income taxes decreased $538 in third quarter 2001 and $647 for
the year-to-date period. Our effective tax rate increased from 36.2% in third
quarter 2000 to 87.7% in third quarter 2001. The increase in the effective tax
rate was primarily driven by significantly lower pre-tax earnings as a result of
the investment write down.

For the year-to-date period, the effective tax rate increased from 35.9% in 2000
to 38.0% in 2001. The increase in the effective tax rate is due primarily to the
impact of the investment write down. These losses were recorded at corporate
entities with full valuation allowances on state tax benefits. In addition, the
effective tax rate was impacted by higher losses from our Brazilian equity
investments, a one-time gain related to the restructuring of E-Plus in first
quarter 2000 and increases in valuation allowances from foreign operations.

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

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

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


<PAGE>




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

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


                                     For the Three Months
                                     Ended September 30,       %
                                     ---------------------
                                       2000       2001      Change
------------------------------------ ---------- ---------- ----------
Results of Operations
Operating revenues:
   Local service                        $2,888     $3,003        4.0
   Network access                        1,154      1,252        8.5
   Long distance                           178        192        7.9
   Other communications                    418        360     (13.9)
------------------------------------ ---------- ---------- ----------
       Total operating revenues          4,638      4,807        3.6
------------------------------------ ---------- ---------- ----------
Operating expenses:
   Operational and support expenses      2,168      2,439       12.5
   Depreciation and amortization           962      1,014        5.4
------------------------------------ ---------- ---------- ----------
       Total Operating expenses          3,130      3,453       10.3
------------------------------------ ---------- ---------- ----------
Operating income                         1,508      1,354     (10.2)
------------------------------------ ---------- ---------- ----------
Segment net income                   $    837      $ 766       (8.5)
------------------------------------ ---------- ---------- ----------



------------------------------------ ---------- ---------- ----------
Key Indicators
------------------------------------ ---------- ---------- ----------
Access line counts (000's):
   Access lines:
      Residential                       17,205     16,915      (1.7)
      Business                           8,481      8,441      (0.5)
      Other                                256        218     (14.8)
        Total access lines              25,942     25,574      (1.4)
   Access line equivalents (1)          24,937     36,693       47.1
        Total equivalent
        access lines                    50,879     62,267       22.4
------------------------------------ ---------- ---------- ----------
Resold lines and unbundled
 network elements (000's)                1,188      1,596       34.3
------------------------------------ ---------- ---------- ----------
Access minutes of use (millions)        28,859     26,922      (6.7)
------------------------------------ ---------- ---------- ----------
IntraLATA toll messages (millions)         125        109     (12.8)
------------------------------------ ---------- ---------- ----------
Internet customers (000's)                 871      1,141       31.0
------------------------------------ ---------- ---------- ----------
ADSL customers (000's)                     134        463      245.5
------------------------------------ ---------- ---------- ----------
Digital and data services revenues        $860     $1,110       29.1
------------------------------------ ---------- ---------- ----------
Calling feature revenues                  $551       $580        5.3
------------------------------------ ---------- ---------- ----------


                                       For the Nine Months
                                       Ended September 30,       %
                                     ------------------------
                                        2000        2001      Change
------------------------------------ ----------- ----------- ----------
Results of Operations
Operating revenues:
   Local service                         $8,607      $8,877        3.1
   Network access                         3,596       3,715        3.3
   Long distance                            517         539        4.3
   Other communications                   1,161       1,161        0.0
------------------------------------ ----------- ----------- ----------
       Total operating revenues          13,881      14,292        3.0
------------------------------------ ----------- ----------- ----------
Operating expenses:
   Operational and support expenses       6,516       6,995        7.4
   Depreciation and amortization          2,813       3,003        6.8
------------------------------------ ----------- ----------- ----------
       Total Operating expenses           9,329       9,998        7.2
------------------------------------ ----------- ----------- ----------
Operating income                          4,552       4,294      (5.7)
------------------------------------ ----------- ----------- ----------
Segment net income                       $2,540      $2,440      (3.9)
------------------------------------ ----------- ----------- ----------



------------------------------------ ----------- ----------- ----------
Key Indicators
------------------------------------ ----------- ----------- ----------
Access minutes of use (millions)         86,786      83,338      (4.0)
------------------------------------ ----------- ----------- ----------
IntraLATA toll messages (millions)          390         331     (15.1)
------------------------------------ ----------- ----------- ----------
Digital and data services revenues       $2,466      $3,171       28.6
------------------------------------ ----------- ----------- ----------
Calling feature revenues                 $1,598      $1,724        7.9
------------------------------------ ----------- ----------- ----------



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

Operating Revenues

Local service
The increase in local service revenues of $115 in the third quarter and $270 for
the year-to-date period is attributable to strong growth in digital and data
revenues, wholesale revenues, and by our marketing of calling features. Those
increases were offset by a decrease in basic service revenues reflecting
competition, rate reductions and a slowing economy as well as reduced payphone
related revenues at our telephone operations.

Since third quarter 2000, residential access lines declined 1.7% to 16,915 and
business access lines decreased 0.5% to 8,441. The core business was affected by
a slowing economy, as well as competitive and technological changes. The
technological changes are manifested in the shifting of customers from wireline
to wireless and second line customers to high-speed access service. In addition,
at September 30, 2001, we provided 1.6 million wholesale lines to competitors,
on both a resale and unbundled network elements (UNE) basis. At September 30,
2000, UNEs accounted for approximately 33% of our wholesale lines and at
September 30, 2001 they represented 57%. Because of the larger discounts
associated with UNEs versus resale, this shift to UNEs is negatively impacting
our revenue growth. We also estimate that we have lost an additional 1.9 million
lines to facilities-based competitors.

Due to expanding demand for our digital and data services, we ended the third
quarter with over 62 million total equivalent access lines, an increase of 22.4%
since September 30, 2000.

Revenues from optional calling features such as Caller ID, Call Waiting, Call
Return and voicemail service increased $29, or 5.3%, quarter over quarter and
$126, or 7.9%, year over year. These increases were driven by growth in calling
feature usage through our Complete Choice(R) Package, a one-price bundled
offering of over 20 services.

Increased penetration of extended local area calling plans also increased local
service revenues by approximately $11 compared to third quarter 2000 and $57
compared to the first nine months of 2000.

Network access
Network access revenues increased $98 in the third quarter of 2001 when compared
to the same 2000 period, and $119 year over year. Revenues from dedicated
high-capacity data line offerings grew approximately $108 quarter over quarter
and $319 year over year as Internet service providers and high-capacity users
increased their use of our network. The increases were offset by a $12 decline
in the third quarter 2001 and a $210 decline for the year-to-date period in
revenues derived from switched access services resulting from a decrease in
access minutes-of-use volumes and the impacts of access charge rate reductions.

Access minutes of use fell 6.7% to 26,922 million in third quarter 2001 from
28,859 million in third quarter 2000. For the year-to-date period, access
minutes of use decreased 4.0% to 83,338 million in 2001 from 86,786 million in
2000. These decreases resulted from: Continued migration of minutes to dedicated
digital and data services offerings which are fixed-charge based rather than
minute-of-use based; competition from competitive local exchange carriers whose
traffic completely bypasses our network; and the effect of competitive services
such as wireless and Internet e-mail.

The year-to-date period was negatively impacted by $50 of access charge rate
reductions. These rate reductions are primarily related to the FCC's access
reform and productivity factor adjustments. The reductions were partially offset
by recoveries of local number portability costs. The quarter over quarter impact
related to the rate reductions was insignificant.

Long distance
Long distance revenue increased $14 in the third quarter 2001 and $22 for the
year-to-date period. Strong growth in wireless long distance and prepaid long
distance cards was partially offset by losses in intralata toll as toll messages
declined 12.8% for the quarter, and 15.1% year-to-date. These losses are driven
by increased demand for Area Plus, a BellSouth package that combines a basic
telephone line with an expanded local calling area. Area Plus packages grew
15.1% in the past year to over 2 million.

Other communications
Other communications revenue decreased $58 in the third quarter 2001 and
remained flat for the year-to-date period. Two factors driving the decrease are
a reduction in payphone revenues as BellSouth continues to transition out of
this business by year-end 2003 and impacts related to exiting the wireless
entertainment business.

Operating Expenses

Operational and support expenses
Operational and support expenses increased $271, quarter over quarter and $479
year over year. Included in these changes were expenses primarily attributable
to labor costs to support data growth initiatives, customer service initiatives,
wholesale long distance business and expenses related to information technology,
which increased $151 for the third quarter 2001 and $500 for the year-to-date
period. In addition, the provision for uncollectibles increased $43 for the
quarter 2001 and $99 for the year-to-date period as the slowing economy caused
an increase in CLEC and small business failures. The increases were offset by
income generated as favorable pension plan returns exceeded expenses from other
employee benefits.

Depreciation and amortization
Depreciation and amortization expense increased $52 in third quarter 2001 and
$190 for the year-to-date period when compared to the same 2000 periods. The
increases are primarily attributable to amortization of capitalized software and
depreciation resulting from higher levels of net property, plant and equipment.

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

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

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


                                     For the Three Months
                                     Ended September 30,         %
                                    -----------------------
                                       2000        2001       Change
----------------------------------- ----------- ----------- ------------

Total operating revenues                $1,071      $1,465         36.8
----------------------------------- ----------- ----------- ------------
Operating expenses:
   Operational and support expenses        776         975         25.6
   Depreciation and amortization           151         199         31.8
       Total operating expenses            927       1,174         26.6
----------------------------------- ----------- ----------- ------------
Operating income                           144         291        102.1
Segment net income                      $   98      $  128         30.6
----------------------------------- ----------- ----------- ------------

----------------------------------- ----------- ----------- ------------
Customers (a)                            5,711       8,512         49.0
----------------------------------- ----------- ----------- ------------
Average monthly revenue per
  customer (a)                            $ 60        $ 53       (11.7)
----------------------------------- ----------- ----------- ------------

                                      For the Nine Months
                                      Ended September 30,        %
                                     -----------------------
                                        2000        2001       Change
-----------------------------------  ----------- ----------- ------------

Total operating revenues                 $3,057      $4,189         37.0
-----------------------------------  ----------- ----------- ------------
Operating expenses:
   Operational and support expenses       2,226       2,821         26.7
   Depreciation and amortization            472         569         20.6
       Total operating expenses           2,698       3,390         25.6
-----------------------------------  ----------- ----------- ------------
Operating income                            359         799        122.6
Segment net income                        $ 245       $ 345         40.8
-----------------------------------  ----------- ----------- ------------

-----------------------------------  ----------- ----------- ------------
Average monthly revenue per
  customer (a)                             $ 60        $ 52       (13.3)
-----------------------------------  ----------- ----------- ------------

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

Operating Revenues

Total operating revenues grew $394 for third quarter 2001 and $1,132 for the
year-to-date period when compared to the same 2000 periods. These growth rates
are attributable to higher airtime, access and equipment sales revenues driven
by the higher customer base created by the formation of Cingular. Cingular's
revenues increased 11.4% from proforma third quarter 2000 results and 13.1% from
proforma year-to-date results, driven by a 12.8% increase in cellular and PCS
customer levels.

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

Operating Expenses

Operational and support expenses
Operational and support expenses increased $199 during third quarter 2001 and
$595 for the year-to-date period when compared to the same 2000 periods. These
increases were also attributable to the change in operations between periods.
Cingular's expenses increased 10.4% over proforma third quarter 2000 results and
13.4% over proforma year-to-date 2000 results. Cingular's pro forma expense
growth was driven by increased service costs resulting from a rise in minutes of
use, higher bad debt expense due to the slowing economy, higher cash expenses
for marketing and advertising related to Cingular's national branding campaign
and merger and integration related expenses.

Depreciation and amortization
Depreciation and amortization increased $48 during third quarter 2001 and $97
for the year-to-date period when compared to the same 2000 periods. Cingular's
expenses increased 13.6% over proforma third quarter 2000 results and 5.2% over
proforma year-to-date 2000 results, impacted by higher levels of gross property,
plant and equipment.


<PAGE>




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

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


                                    For the Three Months
                                    Ended September 30,         %
                                   -----------------------
                                      2000        2001       Change
---------------------------------------------- ----------- ------------

Total operating revenues                 $772        $716        (7.3)
---------------------------------------------- ----------- ------------
Operating expenses:
   Operational and support expenses       581         492       (15.3)
   Depreciation and amortization          167         138       (17.4)
        Total operating expenses          748         630       (15.8)
---------------------------------------------- ----------- ------------
Operating income                           24          86         N/M*
---------------------------------------------- ----------- ------------
Net earnings (losses) of
 equity affiliates                        (19)        (50)          N/M
---------------------------------------------- ----------- ------------
Segment net income (loss)               $(62)       $(52)          N/M
---------------------------------------------- ----------- ------------

---------------------------------------------- ----------- ------------
Customers (a)                           6,668       8,092         21.4
---------------------------------------------- ----------- ------------
Average monthly revenue
 per customer (a)                         $31         $24       (22.6)

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

                                      For the Nine Months
                                      Ended September 30,       %
                                     -----------------------
                                        2000        2001      Change
------------------------------------ ----------- ----------- ---------

Total operating revenues                 $2,171      $2,247       3.5
------------------------------------ ----------- ----------- ---------
Operating expenses:
   Operational and support expenses       1,684       1,627     (3.4)
   Depreciation and amortization            423         447       5.7
        Total operating expenses          2,107       2,074     (1.6)
------------------------------------ ----------- ----------- ---------
Operating income                             64         173       N/M
------------------------------------ ----------- ----------- ---------
Net earnings (losses) of
 equity affiliates                          (61)       (187)       N/M
------------------------------------ ----------- ----------- ---------
Segment net income (loss)                $(116)      $(277)       N/M
------------------------------------ ----------- ----------- ---------

------------------------------------ ----------- ----------- ---------
Average monthly revenue
 per customer (a)                    $       32       $ 26    (18.8)
------------------------------------ ----------- ----------- ---------



* - Not Meaningful.

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

Operating Revenues

For the 2001 periods, segment revenues decreased $56 compared to third quarter
2000 and increased $76 on a year-to-date comparative basis. These changes were
favorably affected by the addition of the Colombia operations, which increased
$30 for the quarter and $182 for the year-to-date period. Adjusted for Colombia,
revenues decreased $86 quarter over quarter and $106 year over year.

The decrease of $86 quarter over quarter and $106 year over year is due to a
change in the interconnection agreements at our Venezuelan operations, which
reduced revenues approximately $40 in the third quarter, and by a stronger U.S.
Dollar against foreign currencies. Absent changes in foreign currency exchange
rates, reported revenues would have increased an additional $46 for the quarter
and an additional $110 for the year-to-date period.

Absent the impacts of the interconnection agreements and foreign currency
losses, revenue growth for the quarter and the year remained relatively flat.
Since September 30, 2000, our existing operations have added approximately 1.4
million customers, largely due to expansion in our Colombian and Venezuelan
operations. However, offsetting the impacts of customer growth is declining
monthly revenue per customer resulting from increased penetration of our
cellular service into the mass-consumer market and exchange rate declines in
some countries. Revenues were also negatively impacted by competitive and
economic pressures on Listel, one of our advertising and publishing subsidiaries
in Brazil.

Operating Expenses

Operational and support expenses
For the 2001 periods, these expenses decreased $89 compared to third quarter
2000 and $57 on a year-to-date comparative basis. The changes in both the
quarter and year-to-date periods were favorably affected by reductions in
expenses resulting from lower gross customer additions. The expense reductions
were offset by increased expenses from the addition of the Colombian operations.

Operational and support expenses denominated in local currencies were favorably
impacted by the weakening of foreign currencies against the U.S. Dollar. Absent
changes in foreign currency exchange rates, reported operational and support
expenses would have increased an additional $36 for the quarter and $74 for the
year-to-date period.


Depreciation and amortization
Depreciation expense decreased $12 quarter over quarter and $6 year over year as
a result of lower depreciation in Venezuela due to a change in the useful life
of certain network equipment effective first quarter 2001 offset by higher gross
depreciable plant resulting from the continued investment in our wireless
network infrastructure. Amortization expense decreased $17 quarter over quarter.
During the third quarter of 2001, we finalized the purchase price allocation of
the Colombia acquisition, which resulted in a reclassification of intangibles
and related reduction of amortization expense.   Amortization expense
increased $30 for the year-to-date period as a result of the addition and
expansion of Colombia.

Net Earnings (Losses) of Equity Affiliates

Net earnings (losses) from our international equity affiliates decreased $31 to
$(50) in third quarter 2001 and $126 to $(187) for the year-to-date period. The
decline in earnings from our unconsolidated international businesses is due to
lower operating results from our two principal investments in Brazil. Both of
these businesses experienced significant foreign exchange losses as a result of
the weakening of the Brazilian Real against the U.S. Dollar. A portion of our
costs and expenses (e.g., handsets, depreciation and interest expense) is
denominated in U.S. Dollars, while all of our revenues are denominated in Reals.
In a period of devaluation, this relationship causes a negative impact on our
margins. In addition, a substantial portion of our indebtedness is denominated
in U.S. Dollars. As a result, the local currency balance of such debt increases
to reflect the additional Reals required to meet such U.S. Dollar liabilities.

Third quarter and year-to-date foreign exchange losses in our Brazil equity
investments decreased our net income by $47 and $163, respectively. In order to
mitigate the risk of future foreign currency exchange losses, our Brazilian
operations have recently increased the level of hedging activities to both lock
in foreign exchange rates on known U.S. Dollar payments and to convert U.S.
Dollar debt to local currency debt.

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

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


                                       For the Three Months
                                       Ended September 30,         %
                                      -----------------------
                                         2000        2001       Change
------------------------------------- ----------- ----------- ------------

Total operating revenues                    $545        $496        (9.0)
------------------------------------- ----------- ----------- ------------
Operating expenses:
   Operational and support expenses          244         232        (4.9)
   Depreciation and amortization               8           7       (12.5)
        Total operating expenses             252         239        (5.2)
------------------------------------- ----------- ----------- ------------
Operating income                             293         257       (12.3)
------------------------------------- ----------- ----------- ------------
Segment net income                          $181        $158       (12.7)
------------------------------------- ----------- ----------- ------------

                                       For the Nine Months
                                       Ended September 30,       %
                                      -----------------------
                                         2000        2001      Change
------------------------------------- ----------- ----------- ---------

Total operating revenues                  $1,346      $1,376       2.2
------------------------------------- ----------- ----------- ---------
Operating expenses:
   Operational and support expenses          672         677       0.7
   Depreciation and amortization              22          20     (9.1)
        Total operating expenses             694         697       0.4
------------------------------------- ----------- ----------- ---------
Operating income                             652         679       4.1
------------------------------------- ----------- ----------- ---------
Segment net income                          $399        $414       3.8
------------------------------------- ----------- ----------- ---------


Operating Results

Revenues decreased $49 for third quarter 2001 and increased $30 for the
year-to-date period when compared to the same 2000 periods. Operational and
support expenses decreased $12 for third quarter 2001 and increased $5 for the
year-to-date period when compared to the same 2000 periods.   Revenues for
third quarter were affected by book shifts, however year-to-date revenues were
not impacted. Overall results were negatively impacted by a deterioration of
economic conditions which have negatively impacted both revenue growth and bad
debt expense.







<PAGE>




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

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


                             For the Three Months
                             Ended September 30,         %
                            -----------------------
                               2000        2001       Change
--------------------------- ----------- ----------- ------------

Total operating revenues           $23         $35         52.2
--------------------------- ----------- ----------- ------------
Operating expenses                  15          29         93.3
--------------------------- ----------- ----------- ------------
Operating income                     8           6         N/M*
--------------------------- ----------- ----------- ------------
Net earnings (losses) of
 equity affiliates                 (12)          14        N/M
--------------------------- ----------- ----------- ------------
Segment net income (loss)         $(10)         $18        N/M
--------------------------- ----------- ----------- ------------

                              For the Nine Months
                              Ended September 30,       %
                            ------------------------
                               2000         2001     Change
--------------------------- ------------ ----------- --------

Total operating revenues            $74        $102     37.8
--------------------------- ------------ ----------- --------
Operating expenses                   61          83     36.1
--------------------------- ------------ ----------- --------
Operating income                     13          19      N/M
--------------------------- ------------ ----------- --------
Net earnings (losses) of
 equity affiliates                   22         (15)     N/M
--------------------------- ------------ ----------- --------
Segment net income (loss)           $23        $ (3)     N/M
--------------------------- ------------ ----------- --------
* - Not Meaningful.

Operating Results

Revenues increased $12 for third quarter 2001 and $28 for the year-to-date
period when compared to the same 2000 periods. Operating expenses increased $14
quarter over quarter and $22 year over year.

Net earnings (losses) from equity affiliates increased $26 quarter over quarter
and decreased $37 year over year. The increase in the current quarter was driven
primarily by our equity affiliate in Israel, while prior year quarter and
current year-to-date losses are due to our equity affiliate in Germany.

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

Cash flows from operations are our primary source of funding for capital
requirements of existing operations, debt service and dividends. At September
30, 2001, our corporate debt rating was Aa3 by Moody's and A+ by S&P, which we
believe gives us 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):

                        For the Nine Months Ended September
                                        30,
                       ------------------- ----------------------------
---------------------- --------- --------- ----------------------------
                         2000       2001              Change
                       --------- --------- ----------------------------

Operating activities   $  6,750  $  6,361   $ (389)            (5.8)%
Investing activities   $ (7,150) $ (5,384)  $ 1,766            (24.7)%
Financing activities   $    289  $ (1,184) $ (1,473)            N/M*

* - Not Meaningful.

Net cash provided by operating activities
The decrease in cash from operations between 2000 and 2001 primarily reflects
traditional working capital requirements including supporting strategic
initiatives on data. Year-to-date 2000 included operating cash flows of
approximately $633 from our former domestic wireless operations, which were
contributed to Cingular. This decrease was to some extent offset by favorable
timing of tax and other payments supporting operational activity.

Net cash used in investing activities
During the first nine months of 2001, we invested $4,724 for capital
expenditures to support our wireline and wireless networks, to promote the
introduction of new products and services and to increase operating efficiency
and productivity. Significant investments are also being made to support
deployment of high-speed Internet access and optical fiber-based broadband
services. Also, during 2001 we invested approximately $130 into our wireless
operations in Brazil and invested $279 in loan participation agreements related
to our Colombian operations and advanced $1,382 to E-plus via a demand note
replacing previously guaranteed debt. The first nine months of 2001 investing
activities also include the receipt of approximately $1,100 from the sale of
Qwest common stock.


<PAGE>



Net cash used in financing activities
During the first nine months of 2001 we reduced our net commercial paper
borrowings primarily with $1,100 of proceeds from the sale of Qwest common stock
shares and $1,000 of proceeds from the private sale of debt securities. These
reductions were substantially offset by new borrowings to fund advances to
affiliates. During the first nine months of 2000, we issued $2,000 of long-term
debt. The proceeds of $1,974 from this issuance were used to retire commercial
paper borrowings.

Our debt to total capitalization ratio was 52.6% at September 30, 2001 compared
to 54.2% at December 31, 2000. The change is primarily a function of decreases
in short-term debt driven by reductions in commercial paper.

At October 31, 2001, we had a shelf registration statement on file with the SEC
under which $2,250 of debt securities could be publicly offered.

Market Risk

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

During the third quarter 2001, our equity investees in Brazil increased hedging
activity to reduce exposure to foreign currency risk. See discussion in Latin
America group segment.

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

Regulatory Developments

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

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

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

In 1997 and 1998, we petitioned the FCC for permission under the
Telecommunications Act of 1996 to offer full long distance services in South
Carolina and Louisiana. The FCC has denied these petitions. In October 2001,
after unanimous endorsements by the Georgia and Louisiana Public Service
Commissions, we filed applications with the FCC for long distance authority for
those two states. In October 2001, the Mississippi Public Service Commission
unanimously endorsed our seeking long distance relief in that state. We have
also made filings with the public service commissions in each of Alabama,
Florida, Kentucky, North Carolina, South Carolina and Tennessee to review our
compliance with the requirements for obtaining long distance authority. We
expect to file an application with the FCC for each state at the appropriate
point in the state commission's consideration. We do not know if the FCC will
require further changes in our network interconnection elements and operating
systems before it will approve such petitions. These changes could result in
significant additional expenses and increase local service competition from
CLEC's that use our network.

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

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

The Mississippi Public Service Commission has completed its review of the
Mississippi price regulation plan.   In this order dated October 31, 2001, the
Mississippi Commission approved the plan for an additional six year term with
certain modifications, including new performance measures. As a part of the
renewal and review process, the Mississippi Commission could require
modifications to prices and other terms of the plan.

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

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

In 2000, the Florida Public Service Commission commenced a proceeding to
determine whether we violated certain Commission rules regarding service
quality. This matter has been resolved with the adoption of a new service
guaranty plan and the payment of monies to a fund promoting access to
telecommunication services by people with low income. Also in 2000, the
Commission issued a proposed agency action stating that our change in 1999 from
a late charge based on a percentage of the amounts overdue to a flat rate fee
plus an interest charge violated the Florida price regulation statute and voted
that approximately $65 should be refunded. We protested the decision. On August
30, 2001, the Commission issued an order adopting its proposed action. We have
appealed to the Florida Supreme Court and continue to collect the charges
subject to refund.

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

International Operations

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

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

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

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

Cingular

In October 2001, Cingular entered into a joint venture with VoiceStream which
enables Cingular to accelerate time-to-market in New York City. This agreement
allows Cingular to share 40mhz of spectrum in New York and California. Also
during 2001, Cingular, through an 85% non-controlling equity interest in Salmon
PCS, was the bidding winner of 79 licenses in total including 30 licenses
previously owned by NextWave. The total amount owed by Salmon related to these
winning bids is approximately $2,300, which includes a previous deposit of $470.

New Accounting Pronouncements

See note B to our consolidated interim financial statements.




<PAGE>



Item 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

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

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

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

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

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

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

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

o    protracted 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    the outcome of pending litigation;

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

o    the impact of terrorist attacks on our business;

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





<PAGE>




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

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits:

     Exhibit
     Number

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


  10q-12  Amendment  dated  September  15, 2001 to the  BellSouth  Personal
          Retirement Account Pension Plan.

     10z  BellSouth Compensation Deferral Plan as amended and restated effective
          January 1, 2002.

    10jj  BellSouth Officer Compensation Deferral Plan.

     11   Computation of Earnings Per Common Share.

     12   Computation of Ratio of Earnings to Fixed Charges.


(b) Reports on Form 8-K:

 Date of Event             Subject

July 10, 2001              Reciprocal Compensation Accrual Adjustment

July 23, 2001              BellSouth 2Q01 Earnings Release






<PAGE>




                                    SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                                   BELLSOUTH CORPORATION

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


November 5, 2001


<PAGE>



                                  EXHIBIT INDEX

     Exhibit
     Number

     10q-12 Amendment  dated  September  15, 2001 to the  BellSouth  Personal
            Retirement Account Pension Plan.

     10z    BellSouth Compensation Deferral Plan as amended and restated
            effective January 1, 2002.

     10jj   BellSouth Officer Compensation Deferral Plan.

     11     Computation of Earnings Per Common Share.

     12     Computation of Ratio of Earnings to Fixed Charges.