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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-K

(Mark One)

|/x/ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ------------------------------------------------------------------------------------

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

OR

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period from  to

COMMISSION FILE NUMBER 1-8607

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BELLSOUTH CORPORATION

|A GEORGIA CORPORATION |  | I.R.S. EMPLOYER
NO. 58-1533433
|--------------------- |  | ------------------------------

1155 Peachtree Street, N.E., Room 15G03, Atlanta, Georgia 30309-3610
Telephone number 404 249-2000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

|TITLE OF EACH CLASSCommon Stock
(par value $1 per share)
and
Preferred Stock Purchase Rights                                           |  | NAME OF EACH EXCHANGE
ON WHICH REGISTEREDNew York, Boston, Chicago,
Pacific and Philadelphia
Stock Exchanges
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------
|Support Obligations for
7.12% Debentures due 2097 and
73/8% Quarterly Interest Bonds due 2039 of
BellSouth Capital Funding Corporation |  | New York Stock Exchange                                                                                     

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None.

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At
February 1, 2000, 1,881,843,977 shares of Common Stock and Preferred Stock Purchase Rights were outstanding.

At
February 1, 2000, the aggregate market value of the voting stock held by nonaffiliates was $88,329,992,592.

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
/ /

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 / /

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement dated March 13, 2000, issued in connection with the 2000 annual meeting of shareholders (Part III).

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## 

TABLE OF CONTENTS

|Item                                                                                     |  | Page
|---------------------------------------------------------------------------------------- |  | ----
|PART I                                                                                   |  |     
|Cautionary Language Concerning Forward-Looking Statements                                |  | 3   
|1. Business                                                                              |  | 4   
|General                                                                                  |  | 4   
|Wireline Communications                                                                  |  | 5   
|Domestic Wireless                                                                        |  | 12  
|International Operations                                                                 |  | 14  
|Advertising and Publishing                                                               |  | 16  
|Other                                                                                    |  | 17  
|Research and Development                                                                 |  | 18  
|Employees                                                                                |  | 18  
|2. Properties                                                                            |  | 19  
|General                                                                                  |  | 19  
|Capital Expenditures                                                                     |  | 19  
|Environmental Matters                                                                    |  | 20  
|3. Legal Proceedings                                                                     |  | 20  
|4. Submission of Matters to a Vote of Shareholders                                       |  | 20  
|Additional InformationDescription of BellSouth Stock                                    |  | 21  
|Executive Officers                                                                       |  | 23  
|PART II                                                                                  |  |     
|5. Market for Registrant's Common Equity and Related Stockholder Matters                 |  | 24  
|6. Selected Financial and Operating Data                                                 |  | 25  
|7. Management's Discussion and Analysis of Results of Operations and Financial Condition |  | 26  
|Consolidated Results of Operations                                                       |  | 26  
|Results by Segment                                                                       |  | 27  
|Wireline Communications                                                                  |  | 28  
|Domestic Wireless                                                                        |  | 31  
|International Operations                                                                 |  | 32  
|Advertising and Publishing                                                               |  | 33  
|Other                                                                                    |  | 34  
|Other Nonoperating Items                                                                 |  | 35  
|Financial Condition                                                                      |  | 36  
|Market Risk                                                                              |  | 37  
|Operating Environment and Trends of the Business                                         |  | 38  
|Cautionary Language Concerning Forward-Looking Statements                                |  | 41  
|8. Consolidated Financial Statements                                                     |  |     
|Report of Management                                                                     |  | 42  
|Audit Committee Chairman's Letter                                                        |  | 43  
|Report of Independent Accountants                                                        |  | 43  
|Consolidated Statements of Income                                                        |  | 44  
|Consolidated Balance Sheets                                                              |  | 45  
|Consolidated Statements of Cash Flows                                                    |  | 46  
|Consolidated Statements of Shareholders' Equity and Comprehensive Income                 |  | 47  
|Notes to Consolidated Financial Statements                                               |  | 48  
|9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 67  

2



|PART III                                                            |  |   
|------------------------------------------------------------------- |  | --
|10. Directors and Executive Officers of the Registrant              |  | 67
|11. Executive Compensation                                          |  | 67
|12. Security Ownership of Certain Beneficial Owners and Management  |  | 67
|13. Certain Relationships and Related Transactions                  |  | 67
|PART IV                                                             |  |   
|14. Exhibits, Financial Statement Schedules and Reports on Form 8-K |  | 67
|Signatures                                                          |  | 71
|Consent of Independent Accountants                                  |  | 72

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PART I

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.

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:



This
list of cautionary statements is not exhaustive. These and other developments could cause our actual results to differ materially from those forecast or implied in the forward-looking statements.
You are cautioned not to place undue reliance on these forward-looking statements, which are current only as of the date of this filing. We have no obligation, and we do not intend, to publicly
release the results of any revisions to these forward-looking statements to reflect events or circumstances after the date of this filing.

3



BUSINESS

GENERAL

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

We
are a $25 billion communications company serving more than 37 million customers in 20 countries. We provide on our wireline network local, long distance and network
access services for voice communications, digital and data services, cable and digital TV and advertising services. We also market e-commerce services, web design and hosting and Internet
access to residential, business and institutional customers of all sizes. We are one of the world's largest wireless communications companies, providing local and long distance, voice and data
communications services to more than 11 million customers in major markets throughout the US and in key growth areas around the world. With one of the largest shareholder bases in America, we
have assets of more than $43 billion and employ more than 96,000 individuals. Our principal executive offices are located at 1155 Peachtree Street, N.E., Atlanta, Georgia 30309-3610
(telephone number 404 249-2000). We are incorporated under the laws of the State of Georgia.

We
were incorporated and became a publicly traded company in December 1983 as a result of the breakup of The Bell System. The breakup also created several other local exchange
companies, which are referred to as "Baby Bells" in this document. From 1983 through 1996, the services which we and the other Baby Bells could offer were governed by the settlement terms of the
antitrust suit which led to the breakup of The Bell System. Under the terms of that settlement, we could provide local exchange, network access, information access and long distance telecommunications
services within assigned geographical territories, termed "Local Access and Transport Areas" (LATAs). Although prohibited from providing wireline service between LATAs, we were allowed to provide
network access services that linked our customers' telephone or other equipment in one of our LATAs to the transmission facilities of other, nonaffiliated carriers, which provided telecommunications
services between LATAs.

The
Telecommunications Act of 1996 (the 1996 Act) superseded the governing terms of the 1983 settlement and provides for the development of competition in local telecommunications
markets and the conditions under which the Baby Bells can provide interLATA wireline telecommunications and other services. Our ability to enter businesses previously proscribed to us by the terms of
the 1983 settlement is, however, subject to compliance with the regulations of the 1996 Act and the Federal Communications Commission (FCC).

We
are subject to increasing competition in all areas of our business. Regulatory, legislative and judicial actions and technological developments have expanded the types of available
services and products and the number of companies that may offer them. Increasingly, this competition is from large companies and joint ventures that have substantial capital, technological and
marketing resources and are subject to less regulatory constraints.

We
have developed three key strategies that govern our business decisions in the increasingly competitive telecommunications industry.

COMMUNICATIONS
LEADERSHIP. Grow by solidifying our company as the leading choice of customers for an expanding array of voice, data, Internet, video and advertising services, and
meeting their national needs through organic expansion and teaming arrangements with other companies.

DOMESTIC
WIRELESS STRATEGY. Grow the domestic wireless business profitably, emphasizing strong in-region synergies to develop customers and meeting their national needs
through nationwide roaming agreements.

INTERNATIONAL
STRATEGY. Expand and diversify the existing operations.

We
market domestic and many international services and products under the BellSouth brand name to give them a clear, consistent identity in the marketplace. We believe that the
BellSouth brand name is widely recognized and held in high esteem by our customers. A primary marketing strategy is to enhance the recognition and reputation of this brand throughout our service
territory by jointly marketing our services and products with special attention to each customer base. Our goal is for the BellSouth brand name to be synonymous with quality service and
state-of-the-art technology. We advertise in the various media in our territory, in connection with major events, such as the Super Bowl, PGA tournaments, Atlanta
Braves baseball games and NASCAR events, and through affiliations with several professional and collegiate sports organizations, which offer us a broad platform to showcase our services and products.

4



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WIRELINE COMMUNICATIONS

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BUSINESS OPERATIONS

GENERAL

BellSouth
Telecommunications, Inc. (BST) is the predominant telephone service provider in the southeastern US serving substantial portions of the population within Alabama, Florida,
Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina and Tennessee. BST provides wireline communications services, including local exchange, network access and intraLATA long
distance services. BST generated 69% of our total operating revenues for 1999, 71% for 1998 and 74% for 1997. Total equivalent access lines, which include traditional switched access lines as well as
digital and data transmission lines, increased 15.7% over the prior year to 44,852,000 at December 31, 1999. This growth is attributable to increasing demand for high-capacity
digital and data services, continued economic expansion in the region and secondary access lines ordered by existing customers.

While
BST provides telephone service to the majority of the metropolitan areas in its region, there are many localities and some sizable geographic areas within the region that are
served by nonaffiliated telephone providers. In addition, BST is facing increasing competition for local and intraLATA business customers, and to a lesser extent, residential customers, within its
territory from both wireless and competing wireline telephone companies and cable television operators.

BST
has organized its marketing efforts to parallel its four major customer bases: consumer, small business, large business and interconnection services.



Customers
in all the above categories are increasingly demanding bundled offerings of two or more of our service offerings, and we offer a wide array of communications services consisting of
combinations and prices responsive to our customers' needs.

LOCAL SERVICE

Local
service revenues accounted for approximately 43% of our total operating revenues in 1999 and 1998, and 44% in 1997. Local service operations provide lines from telephone exchange offices to
customers' premises for the origination and termination of telecommunications, including the following:



5





BST
also offers various convenience features, such as Caller ID, Call Waiting, Call Return and 3-Way Calling on a monthly subscription or per-use basis.
Additional local service revenues are derived from charges for inside wire maintenance contracts, voice messaging services, information and directory assistance and public payphone services.

NETWORK ACCESS

BST
provides network access and interconnection services by connecting the equipment and facilities of its subscribers with the communications networks of long distance carriers, CLECs, competitive
switched and special access providers, and wireless providers. These connections are provided by linking these carriers and subscribers through BST's public switched network or through dedicated
private lines furnished by BST.

Network
access charges, which are payable by long distance carriers, CLECs, wireless providers (including BellSouth's wireless service business) and end-user subscribers,
provided approximately 19% of total operating revenues for 1999, 20% for 1998 and 22% for 1997. Historically, network access charges paid by long distance carriers have been structured so that they
subsidize the cost of providing local residential service to rural and other high-cost areas. In recent years, however, the FCC has modified this structure significantly to reduce the
subsidy. (See "RegulationNetwork Access.")

LONG DISTANCE

IntraLATA
long distance services provided approximately 2% of total operating revenues for 1999, 3% for 1998 and 4% for 1997. These services include the following: service beyond the local calling
area; Wide Area Telecommunications Service (WATS or 800 services) for customers with highly concentrated demand; and special services, such as transport of data and video. These revenues have
decreased as competition for such customers has intensified and as more customers have subscribed to wider local area calling plans offered by BST. Long distance revenues from intraLATA calls are
expected to continue to decline. Domestic wireless long distance service revenues are included in our domestic wireless segment and are not included here.

DIGITAL AND DATA

A
key driver in BST's growth in local service and network access revenues is the provision of digital and data services to all of its customer groups. Revenues from these services were
$2.7 billion for 1999, $2.0 billion for 1998 and $1.4 billion for 1997, and, depending on the type of service provided, are recorded as local, access, long distance or other
wireline revenues. These
services and products are provided primarily over non-switched access lines that typically have significantly greater capacity per line than a traditional switched access line. These lines
are well suited for high-capacity applications that previously could not be provided over traditional switched access lines. Uses of these lines include bulk data transmission, video
conferencing, automated teller machines, check/credit card authentication, multimedia and interconnection with wireless networks.

We
believe that the data telecommunications business will eventually become substantially larger than the traditional voice telephony market, and that we will have to expand
significantly operations in the data communications market. Data communications provided over wireline facilities, however, are generally subject to the same laws and regulations as fixed line voice
communications.

We
have continuously updated our network with new advances in digital technology. Our deployment of ATM (asynchronous transfer mode) based broadband services and existing
fiber-to-the-curb (FTTC) systems enables us to provide high-speed Internet access and entertainment services. ATM technology is a packet-switched technology using ATM switches and fiber optics to
simultaneously transport voice, data, imaging and video data. We have deployed nearly 400 Frame Relay and ATM switches throughout the southeastern US.

Since
1995, fiber optics has been our technology of choice for servicing new housing developments. Currently, 95 percent of our customers in our top 30 markets and 85 percent of all
customers are within 12,000 feet of fiber. Nearly 500,000 homes are now served by FTTC systems. Of these, some 200,000 will have access to high-speed Internet services provided by an integrated
fiber-in-the-loop architecture (IFITL), which we began deploying in Atlanta and South Florida during 1999. Integrated fiber also enables the delivery of 70 channels of analog TV and
160 channels of digital entertainment in Atlanta and South Florida.

We
have deployed ADSL (asymmetrical digital subscriber line) which provides Internet access speeds up to 1.5 Mbps (Megabits per second), 30 times faster than today's fastest
dial-up modems. We offer ADSL in

6



31
markets and ended 1999 with 30,000 customers. Access is currently available to over 7 million access lines and we plan to increase this to 11.5 million by the end of 2000. In January
2000, we began offering a self-install kit for ADSL in seven cities and announced a partnership with Darwin Networks to expand ADSL offerings to additional areas in the southeastern US.

OTHER WIRELINE

Other
wireline revenues accounted for approximately 5% of total operating revenues for 1999, 4% for 1998 and 5% for 1997. Other wireline revenues are comprised primarily of charges for billing and
collection services for long distance carriers, customer premises equipment sales and maintenance services, provision of unbundled network elements to competitors, enhanced consumer white pages
listings and interconnection to unaffiliated wireless carriers.

Other
wireline also includes BellSouth.net's Internet service offerings of dial-up and dedicated Internet and intranet connections to consumers and businesses. This service
is deployed on local Internet Protocol (IP) networks across the southeastern US. Customers are provided with a variety of public-switched and dedicated IP networking capabilities to meet their data
communications, electronic commerce, web design and hosting and customer network management needs. BellSouth provided Internet services to approximately 680,000 customers at December 31, 1999.
We expect continued strong growth associated with our alliance with MyWay.com, an Internet portal operated by CMGI.

REGULATION

LOCAL SERVICE

BST
is subject to regulation of its local services by a state authority in each state where it provides intrastate telecommunications services. Such regulation covers prices, services, competition and
other issues.

Traditionally,
BST's rates were set at levels that were anticipated to generate revenues sufficient to cover allowed expenses and to provide an opportunity to earn a fair rate of
return on capital investment. Such a regulatory structure, generally known as rate of return regulation, was acceptable in a less competitive era. However, the regulatory processes have changed in
response to the increasingly competitive telecommunications environment.

Under
the first generation of alternative regulation, generally known as incentive regulation, economic incentives were provided to lower costs and increase productivity through the
potential availability of "shared" earnings over a benchmark rate of return. Generally, when levels above targeted returns were
reached, earnings were "shared" by providing refunds or price reductions to customers.

Under
the next generation of alternative regulation, generally known as price regulation, the state regulatory commissions or state legislatures established maximum prices that could
be charged for certain telecommunications services. While such plans limit the amount of increases in prices for specified services, they enhance BST's ability to adjust prices and service options to
respond more effectively to changing market conditions and competition and provide an opportunity to benefit more fully from productivity enhancements. The majority of these plans have price cap
provisions in effect on basic local exchange services during the early years with provisions for inflation-based price increases in later years.

While
some plans are not subject to either review or renewal, other plans contain specified termination dates and/or review periods. The plans in Kentucky, Louisiana and Mississippi
were reviewed in 1999. In Kentucky, the review resulted in our proposing certain changes to the existing plan that remain under consideration by the Commission. In Louisiana, the existing plan was
extended and the cap on interconnection services was extended from 3 to 5 years. In Mississippi, the review did not result in any changes to the existing plan. We expect that the plan in North
Carolina will be reviewed prior to June 2002. Upon review or renewal, a regulatory commission could require substantial modifications to prices and other terms of these plans.

NETWORK ACCESS

The
FCC regulates rates and other aspects of interstate network access services through its price cap and access charge rules. State regulatory commissions have jurisdiction over the provision of
network access to the long distance carriers to complete intrastate telecommunications.

Historically,
network access charges paid by long distance carriers have been set at levels that subsidize the cost of providing local residential service. The 1996 Act requires that
the FCC identify the local service subsidy implicitly provided by such network access charges, provide for the removal of such subsidy from network access rates, arrange for a Universal Service Fund
to ensure the continuation of service to high-cost, low-income service areas, and develop the arrangements for payments into that fund by all carriers.

Price Caps

The
FCC's price cap plan limits aggregate price changes to the rate of inflation minus a productivity

7



offset,
plus or minus other cost changes recognized by the FCC. In May 1997, the FCC adopted orders regarding revisions to the price cap plan, access charge reform and the establishment of the
Universal Service Fund. The orders on the price cap plan and access charge reform resulted in access rate reductions related to per-minute-of-use charges and
increases to per-line charges. BST has been pricing its services based on a 6.5% productivity factor, which means that price increases could only occur to the extent that the Gross
Domestic Product Price Index of the US (the Index) increased by greater than 6.5% over an annual period. If the Index increases by less than 6.5%, BST would reduce prices. Interstate prices have been
decreasing over the last few years as a result of low inflation in the US economy.

In
May 1999, the United States Court of Appeals for the District of Columbia Circuit overturned the FCC's order establishing the 6.5% productivity factor and remanded the matter
to the FCC. In November 1999, the FCC initiated a rulemaking proceeding to review the 6.5% productivity factor. Any changes to the productivity factor would affect the rate of annual price
changes for interstate access, and any increase in this factor would result in reductions of network access charges paid to BellSouth by long distance carriers, subscribers or both.

Access Charge Reform

The
FCC's 1997 network access charge reform order resulted in several changes to the existing interstate network access rate structure. The reforms are designed to move network access charges, over
time, to more economically efficient levels and to create more efficient rate structures. Non-traffic-sensitive costs, that were previously recovered on a
per-minute-of-use basis, were changed to be recovered on a flat-rate, per-line basis. As part of this plan, subscriber line charges (SLCs)
were increased. In addition, a new presubscribed long distance carrier charge (PICC) was established during 1998 and is charged to long distance carriers for recovery of
non-traffic-sensitive costs not recovered through SLCs. As SLC and PICC levels are increased over time, usage charges are reduced. These charges were established for primary residence and
single-line business access lines,
non-primary residence access lines and multi-line business access lines. We believe that the net effect of these changes has been substantially revenue-neutral.

Universal Service

The
universal service order established new funding mechanisms for high-cost, low-income service areas. BST began contributing to the new funds on January 1, 1998 and is
allowed recovery of its contributions through increased interstate charges.

In
October 1999, the FCC announced the details of its universal service mechanism for non-rural carriers serving high-cost areas to ensure that customers in
those areas receive telephone service at affordable rates. We expect to receive support for service to residents in Alabama, Kentucky, Mississippi and South Carolina. We believe the net financial
effect of the new arrangement will not be material.

The
order established significant discounts to be provided to eligible schools and libraries for all telecommunications services, internal connections and Internet access. It also
established support for rural health care providers so that they may pay rates comparable to those that urban health care providers pay for similar services. Industry-wide annual costs of
the program, estimated at approximately $2.3 billion, are to be funded out of the Universal Service Fund. Local and long distance carriers' contributions to the education and health care funds
would be assessed by the fund administrator on the basis of their interstate end-user revenues.

INTERLATA LONG DISTANCE SERVICE

As
a result of the 1996 Act, BellSouth and the other Baby Bells are freed from the judicial restrictions of the 1983 settlement that generally prohibited the provision of interLATA long distance
communications throughout their wireline service territories and elsewhere. However, the 1996 Act established new restrictions on providing interLATA long distance communications in our wireline
service area and procedures for the removal of the new restrictions. These companies may apply to the FCC on a state-by-state basis to offer in-region interLATA
wireline service, and the FCC must act on each such application within 90 days. The FCC must grant such application if it determines that the applicant:



8





The
FCC is required to consult with state regulatory authorities and the Justice Department when reviewing the application.

We
believe that, in order to remain competitive, we must aggressively pursue a corporate strategy of expanding service offerings beyond our traditional businesses and markets. These
offerings include interLATA voice, information and data communications. We plan to begin offering interLATA wireline service in each of our southeastern US states as soon as the FCC approves our
application for each state. We have received favorable determinations from the regulatory commissions in Louisiana, Mississippi and South Carolina, but the FCC has rejected our applications to provide
in-region interLATA service.

During
December 1999, the FCC approved Bell Atlantic's request to enter the long-distance market in New York, making it the first Baby Bell to obtain interLATA relief in any state. We
are currently conducting third-party tests of our operations support systems in Georgia and expect to submit to the FCC in the second quarter of 2000 a petition to offer interLATA long-distance
service in that state. In addition, the Florida Public Service Commission in December 1999 approved a third-party testing plan for our systems in Florida that we expect to be completed by mid-2000.

We
have a three-pronged approach to gain authorization to provide in-region interLATA service: (a) continue to modify our facilities and operations support systems
to facilitate competition and aggressively seek approvals from the FCC and state commissions; (b) seek judicial review of adverse decisions, which we believe to be erroneous; and
(c) participate in actions by Congress to urge the FCC to implement the 1996 Act in a timely fashion. Because of the scrutiny of interLATA applications by the FCC and the Justice Department,
the time required to obtain
judicial review of adverse decisions, and the possible challenges by other carriers of any approved applications or proposed or enacted legislation, it is uncertain when we will be authorized to
commence interLATA service over our wireline network.

QWEST RELATIONSHIP

In
April 1999, we formed a strategic commercial relationship with Qwest Communications International Inc. to facilitate the offering of a full set of integrated digital data, image and
voice communications services to our business customers. Under the agreement, we immediately began the coordinated marketing of our respective services, with Qwest offering its full portfolio of data
networking, Internet and voice services, including the interLATA long distance component, and with us offering a full complement of local networking services. Once we are allowed to provide interLATA
long distance service, we will jointly develop and deliver a comprehensive set of end-to-end high-speed data, image and voice communications services to business
customers, with a heavy emphasis on broadband and Internet-based services. In addition, we bought a 10 percent equity stake in Qwest as a part of this arrangement.

Since
the date of this agreement, Qwest and US West have agreed to merge, with the result that Qwest will be required to divest its interLATA assets and cease providing interLATA
service in US West's 14-state service territory until the combined companies achieve interLATA relief. We and Qwest are exploring arrangements for a third party to assume the obligations
of Qwest with respect to the provision of interLATA service in US West's 14-state service territory to the extent Qwest is prohibited from continuing to provide such service as a result of
the Qwest-US West merger.

COMPETITION

LOCAL SERVICE

The
1996 Act requires the elimination of state legislative and regulatory barriers to competition for local telephone service, subject only to competitively neutral requirements to preserve and
advance universal service, protect the public safety and welfare, maintain the quality of telecommunications services and safeguard the rights of customers. The 1996 Act also includes requirements
that incumbent local exchange carriers (ILECs), such as BST, negotiate with other carriers for interconnection, provide UNEs (unbundled network elements), pay access fees for local calls terminating
on the network of a carrier other than the originating carrier, resell telecommunications services and charge for collocation of equipment in ILEC facilities. If a negotiated agreement cannot be
reached, either party may seek arbitration with the state regulatory authority or the FCC if the state fails to act. If UNE rates are disputed, the arbitrator must set rates based on cost, which may
include a reasonable profit. ILECs are also required to negotiate to provide their retail services at wholesale rates for the purpose of resale by competing carriers. If agreement cannot be reached,
the arbitrator must set the wholesale rates at the ILEC's retail rates, less costs that are avoided. BST has executed numerous interconnection or resale agreements with such carriers. Many of these
agreements expired during 1999 and are being renegotiated. At December 31, 1999, BST has provisioned approximately 665,000 equivalent access

9



lines
to such carriers for resale, an increase of 145,000 since December 31, 1998.

The
state public service commissions to which BST is subject have granted numerous CLEC applications for authority to offer local telephone service. As a result, substantial
competition has developed for BST's business customers, which provide a greater concentration of higher margin revenues than its residential customers. Competitors include major carriers which resell
BST's local services, use UNEs or provide services over their own facilities.

An
increasing number of voice and data communications networks utilizing fiber optic lines have been and are being constructed by telecommunications providers in all major metropolitan
areas throughout BST's wireline service territory. These networks offer certain high-volume users a competitive alternative to BST's public and private line offerings. Furthermore,
wireless services, such as cellular, personal communications service (PCS) and paging services, and Internet services (including all of such services of BellSouth) increasingly compete with wireline
communications services. Such wireless services are provided by a number of well-capitalized entities in most of our markets.

As
technological and regulatory developments make it more feasible for cable television networks to carry data and voice communications, BST will face increased competition within its
region from cable television ventures. AT&T has purchased extensive cable systems and has announced plans to upgrade those systems to offer two-way telephony services. AT&T has also formed
joint ventures and announced plans to expand this initiative with other cable television companies to provide telephony nationwide.

FCC Interconnection Order

In
connection with the requirements of the 1996 Act, in August 1996, the FCC released an order adopting rules governing interconnection and related matters. With regard to setting the price of
interconnection between ILECs and other carriers, the FCC has jurisdiction to set pricing standards to be implemented by the state commissions. The FCC has prescribed a forward-looking economic cost
approach for pricing interconnection and unbundled network elements. That methodology is under review by the US Court of Appeals for the Eighth Circuit.

Access
to proprietary network elements can be required only when necessary or, in the case of a non-proprietary element, when the failure to provide access would impair the
ability of the requesting carrier to provide services. The FCC has issued an order adopting a revised list of network elements that ILECs must make available to competitors.

The
FCC's list, together with its regulations prohibiting ILECs from separating currently combined elements, means that ILECs will be required to provide certain combinations of
network elements that competitors may substitute for certain higher priced ILEC services. This substitution could lead to further increases in competition for certain local exchange access services
and materially reduce ILEC's access charge revenues. The FCC determined that, for an interim period, it would not apply these new rules to allow the substitution of certain network elements for
special access services, and announced that it will conduct a further inquiry into the use of network element combinations to provide certain special access services.

The
FCC's revised list does not, however, require ILECs to make certain network elements used to provide advanced data services available to competitors, except in very limited
circumstances. This outcome reduces a disincentive to ILEC investment in these rapidly expanding services.

The
FCC has adopted an "all elements" rule, which allows competing carriers to provide local telephone service relying solely on the elements in an ILEC's network, and has refused to
impose a requirement of facility ownership on carriers that seek to lease network elements. The FCC has also forbidden ILECs from separating already combined network elements before leasing them to a
CLEC and adopted a "pick and choose" rule which requires that ILECs make available to requesting CLECs contractual provisions, including related rates and terms, contained in any other agreements that
have been previously approved by the state commission for that same state. Exceptions are allowed when the ILEC can prove to the state commission that providing the particular item requested is either
more costly than providing it to the original carrier or is technically infeasible. These rulings may make it easier for a CLEC to compete with BellSouth.

In
complying with the technical requirements of interconnection, BST is incurring, and expects to continue to incur, significant costs associated with the facilitation of
interconnection. BST incurred approximately $416 million of costs associated with these efforts in 1999. Of this amount, approximately $295 million was expensed as incurred, and the
remainder was capitalized. Total costs incurred through December 31, 1999 were approximately $1.1 billion.

In
May 1998, the FCC adopted an order that will allow telecommunications carriers, such as BST, to recover over five years their carrier-specific costs of

10



implementing
long-term number portability, which allows customers to retain their local telephone numbers in the event they change local carriers. The order allows for such cost recovery
in the form of a surcharge from customers to whom number portability is available. The surcharge began during second quarter 1999. It remains unclear to what degree, if any, BST will be compensated
for the noncarrier-specific costs of interconnection.

Federal
and state policies strongly favor further changes to the networks and business operations of ILECs to encourage local service competition, and regulators have stated that such changes must be
made before they will allow the Baby Bells to provide interLATA long distance services within their local service territories. Therefore, we expect that local service competition will steadily
increase. While competition for local service revenues could adversely affect our results of operations, we are working to support the opening of local markets to competition by facilitating
interconnection of our facilities and systems with those of CLECs. These actions, among other things, should allow us to qualify to offer in-region interLATA service as contemplated in the
1996 Act. (See "RegulationInterLATA Long Distance Service".)

NETWORK ACCESS

FCC
rules require BST to offer expanded interconnection for interstate special and switched network access transport. As a result, BST must permit competitive carriers and customers to terminate their
transmission lines on BST's facilities in its central office buildings and other locations through collocation arrangements. The effects of the rules are to increase competition for network access
transport. Furthermore, long distance carriers are increasingly connecting their lines directly to their customers' facilities, bypassing BST's networks and thereby avoiding network access charges
entirely. In addition, commercial applications of Internet telephony are being developed. This medium could attract substantial interLATA traffic because of its lower cost structure, due to the fact
that FCC rules do not currently impose access charges on most Internet communications.

LONG DISTANCE

A
number of companies compete with BST in its nine-state region for intraLATA long distance business by reselling long distance services obtained at bulk rates from BST or providing long
distance services over their own facilities. Effective February 1999, BST has implemented 1+ dialing parity in the last of the nine states in its region. This feature allows customers to choose
a competing interLATA long distance carrier without having to dial a special access code.

The
1996 Act permits Baby Bells to offer interLATA long distance service outside of the states containing their local wireline service territories. These and other carriers have announced plans to
compete for such interLATA long distance service in BST's territory. AT&T, MCI WorldCom, Sprint and a number of other carriers, including other Baby Bells, currently provide long distance service to
our local service customers.

FRANCHISES AND LICENSES

BST's local exchange business is typically provided under certificates of public convenience and necessity granted pursuant to state statutes and public interest findings of
the various public utility commissions of the states in which BST does business. These certificates provide for franchises of indefinite duration, subject to the maintenance of satisfactory service at
reasonable rates. The 1996 Act provides that these franchises be non-exclusive.

11



---

DOMESTIC WIRELESS

---

BUSINESS OPERATIONS

We
are one of the largest wireless communications providers in the United States, with operations primarily in our wireline service territory. We have cellular and personal communications service
(PCS) operations in 12 states, encompassing a total population served (POPs) of approximately 78 million. Our proportionate share of those POPs, based on the percentage of our ownership
interests in such systems, was approximately 59 million. This extensive wireless footprint includes some of the top wireless markets in the country including Los Angeles, Houston,
Miami-Fort Lauderdale, Atlanta and Tampa-St. Petersburg. We ended 1999 with approximately 5.3 million cellular and PCS customers on a proportionate basis. Our
penetration rate at December 31, 1999 was 9.4% of the POPs in our operational licensed markets.

Domestic
wireless revenues comprised approximately 13% of our total operating revenues for 1999, 12% for 1998 and 13% for 1997. In addition, we have non-controlling financial interests in
a number of wireless businesses whose revenues are not reflected in operating revenues because of the method of accounting for such investments. Wireless revenues are derived from monthly access and
airtime charges, sales of phones and equipment, roaming charges, custom calling and convenience features, long distance charges and service activation fees. Prices of wireless services are not
regulated by the FCC or state regulatory commissions.

Proportional
wireless customers grew 11.3% for 1999 and 14.4% for 1998 while proportional net revenues grew 10.4% for 1999 and 6.1% for 1998. Adjusted for the impact of ownership changes, primarily
the sale of Honolulu Cellular, during 1999, proportional customers grew 14.1% and proportional net revenue grew 15.3%. The growth trend in customers and revenues reflects the increasingly challenging
dynamics of adding new customers as penetration rises and competition intensifies because of new entrants into our service markets.

The
1996 Act does not regulate our offering of wireless interLATA services, and we offer interLATA long distance wireless communication in conjunction with our wireless offerings. Approximately 80% of
our customers subscribe to such interLATA service. In areas where we do not have long distance telephone facilities, we connect with the networks of long distance carriers.

The
transformation of our network from analog to digital technology has increased our costs, primarily as a result of higher-cost digital handsets, which typically cost one-third more than analog
handsets. Although total customer acquisition costs have increased, we have broadened our sales distribution channels to reduce other components of customer acquisition costs. Wireless services are
marketed through company-owned stores, authorized agents, national retail outlets and an Internet sales channel. In addition, we are increasingly utilizing cross-selling efforts by BST's customer
service representatives, a less costly alternative to independent agents and a natural entrant to selling bundled services. New methods of addressing the issue of customer retention are also being
implemented, including the use of predictive models to identify customers who are likely to discontinue service.

TECHNOLOGY

We offer both analog and digital cellular services in most of our markets as well as PCS in certain markets. Our networks are outfitted with a combination of digital
transmission technologies: TDMA (Time Division Multiple Access) is used exclusively in our cellular markets and in contiguous PCS markets. GSM (Global System for Mobile Communications) is used in our
PCS markets in the Carolinas, Eastern Tennessee and
coastal Georgia. Digital cellular technology offers many advantages over analog technology, including a three-fold gain in channel capacity, the ability to provide advanced services and
functionality, inherent privacy, higher transmission quality and transmission security and the opportunity to provide improved data transmissions. Digital customers also generate higher average
revenue per customer and have lower churn than analog customers.

We
are addressing the interoperability of our different wireless technologies through participation in industry alliances and investments in businesses that are developing adaptive technologies. In
addition, we are evaluating standards and assessing the potential demand for high speed wireless data access using third generation wireless technologies (3G). We are focusing on maximizing our
ability to deliver 3G capabilities while fully utilizing our existing wireless networks.

12



COMPETITION

Under FCC regulations, up to 10 wireless carriers2 cellular, 6 PCS and 2 Enhanced Specialized Mobile Radio (ESMR)and any number of resellers may
operate in a single market. This structure has resulted in the presence of multiple aggressive competitors in our wireless markets and makes it more difficult to attract new customers and retain
existing ones. While we do not compete primarily on the basis of price, low prices offered by competitors who are attempting to build a subscriber base have pressured us to reduce prices and develop
pricing plans attractive to lower usage customers. We are responding to the competitive conditions by offering a variety of innovative plans and new products and targeting the lower-usage customer
through use of prepaid calling and other service options. We are addressing pressure on margins by aggressively reducing expenses.

The
wireless communications industry continues to experience significant consolidation. AT&T has acquired wireless companies and negotiated roaming arrangements that give it a national presence. The
mergers or joint ventures of Bell Atlantic/GTE/Vodafone AirTouch, MCI WorldCom/Sprint and SBC/Ameritech will create large, well-capitalized competitors with substantial financial,
technical, marketing and other resources to compete with our offerings. These competitors may be able to offer nationwide services and plans more quickly and more economically than we can, and obtain
roaming rates that are more favorable than those which we obtain.

In
response to competition, we have introduced variations of fixed-rate calling plans that appeal to a broad base of customers. The US wireless industry is increasingly shifting towards
the use of one-rate pricing plans, which include roaming and long distance at no extra charge. During 1999, we introduced 3 one-rate plans which include 250, 600 or 1,000
minutes per month. These plans have increased our customer's roaming activity and subsequently, the roaming charges that we pay to other carriers. To keep these costs down, we have signed a
long-term roaming contract with AT&T, which gives us access to AT&T's nationwide network at favorable rates. To reduce costs in areas covered by smaller carriers, we can program customers'
digital handsets over the air to seek out the most cost effective roaming provider.

We
have also introduced prepaid cellular calling plans in many areas to further penetrate the market. Prepaid customers can purchase service in fixed dollar increments, and these plans allow those
consumers to receive service in a cost effective manner with no credit check, service contract or monthly access fee. This customer base has a significantly higher churn rate than the
post-paid customer base, and we are seeking methods to reduce that rate. Prepaid subscribers represent a small but growing portion of our domestic customer base.

We
are also introducing new wireless products to differentiate our service, such as BellSouth One Number Service, text messaging and multiple product offerings, including Internet service. For our
business customers, we have begun offering wireless PBX systems, which allow business customers to use their wireless handsets as office phones while at the workplace and as mobile phones when out of
their buildings.

One
of the key competitive strengths of our wireless service is the BellSouth brand. We believe that our brand identity is a significant factor in our success because of BellSouth's high name
recognition and reputation for providing superior coverage, network reliability and customer service.

LICENSES AND REGULATION

The domestic wireless systems in which we have an interest are operated under licenses granted by the FCC. A carrier holding a license to provide cellular service in a
territory has limited eligibility for a PCS license covering the same territory. Prior approval by the FCC is required for the assignment of a license or
the transfer of control of a license. The licenses are generally issued for up to 10-year periods. At the end of the license period, a renewal application must be filed. We believe renewal
will generally be granted on a routine basis upon showing of compliance with FCC regulations and continuing service to the public. Licenses may be revoked and license renewal applications may be
denied for cause. With regard to cellular licenses, the FCC has established the procedures and standards for conducting comparative renewal proceedings, including the award of a "renewal expectancy"
that effectively eliminates the need to consider competing applicants when the incumbent meets specified criteria.

13



---

INTERNATIONAL OPERATIONS

---

BUSINESS OPERATIONS

We
own interests in consortia that hold licenses for, and are building and/or operating, wireless telephone systems in Argentina, Brazil, Chile, Denmark, Ecuador, Germany, Guatemala, India, Israel,
Nicaragua, Panama, Peru, Uruguay and Venezuela. We are exploring additional opportunities, in Europe and Latin America in particular. At November 30, 1999, these systems covered a population of
approximately 273 million and provided wireless service to a total of approximately 11.9 million international customers. Our proportionate share of these systems was approximately
5.9 million customers and 147 million POPs at November 30, 1999.

The
structure of our international wireless interests typically reflects government preferences or requirements that local owners hold interests in telecommunications licenses. In structuring
international investments, we attempt to obtain operating control and influence through board representation, the right to appoint certain key members of management and consent rights with respect to
significant matters, including budgets, business plans and amounts of capital contributions. In addition, we try to assure our ability to maintain a position of influence in the venture by obtaining
rights of first refusal on future sales by other partners and issuances of equity by the venture. Under the governing documents for some of these ventures, certain key matters such as the approval of
business plans and decisions as to the timing and amount of cash distributions require the consent of our partners. We usually play the lead role in the design and construction of the wireless
networks for the ventures in which we have ownership interests.

We
are developing business relationships and regional synergies among our Latin American joint ventures. To the extent possible, we are using the BellSouth brand on a regional basis throughout Latin
America. We use the BellSouth brand in our local joint ventures or other operations in Chile, Ecuador, Nicaragua, Panama and Peru and recently began co-branding the BellSouth name in
Argentina and Uruguay. We are also creating our own international network as well as regional switching centers, to be used to offer voice and data international long distance services linking our
wireless joint ventures and other operations in Latin America when permitted by local law. In addition, we have created the first roaming clearinghouse in Latin America, permitting our Latin American
and US wireless customers who travel throughout the Americas to roam in designated service areas.

Our
market penetration is 4.7% of the POPs in our international markets compared to 9.4% in our domestic markets. We believe that substantial additional growth is achievable in Latin America,
notwithstanding average per capita incomes being lower than the US average.

We
are offering prepaid wireless service in all of our international markets. Our prepaid wireless service has substantially increased customers by making the service available to a broad customer
base. Prepaid offerings are well suited to the operating environment of our international operations. Customers in these countries, when obtaining services, rely significantly less on credit than US
customers and generally prefer to pay for services on a cash basis. Average revenues generated by prepaid customers are lower than those for post-paid. In markets with
calling-party-pays systems of payment, prepaid wireless is especially attractive
since users are more willing to give out their numbers if someone else pays for the incoming call. Acquisition costs and operating expenses are also generally lower, making the overall value more
comparable to post-paid.

We
have a three-fold strategy to expand our international businesses. First, we plan to grow our existing operations, both by adding new customers and increasing our proportionate share of customers
by increasing our interest in less-than-100%-owned entities. Second, we plan to expand our footprint geographically into countries and territories that we do not serve. Finally, we are expanding the
services we provide by adding long distance, Internet/data and other offerings.

On
February 24, 2000 we closed on a previously announced alliance with KPN Royal Dutch Telecom (KPN) to acquire an additional 77.5% interest in E-Plus, a German mobile operator in
which we currently hold a 22.5% interest. As part of the agreement, KPN provided to us a $9.0 billion loan to fund the purchase of the E-Plus shares, and converted the loan into a
77.5% share of BellSouth GmbH, the holding company that will own and operate E-Plus. We share equal operating control of E-Plus with KPN through our ownership in BellSouth
GmbH. We have the option, exercisable after 18 months, of converting our 22.5% interest in E-Plus into either 100 million shares of KPN or a 33.3% ownership interest in KPN
Mobile. We also received warrants to purchase approximately 46 million

14



additional
shares of KPN. We also have agreed to make up to $3 billion of loans to KPN to be used for further wireless investments in Europe.

TECHNOLOGY

We offer digital cellular service in thirteen of our fourteen international cellular markets (Uruguay will begin digital service this year). Seven of our markets (Brazil,
Denmark, Germany, India, Israel and Panama) have utilized digital technology since inception. We have always selected the type of digital technology for each international market offering the best
cost, quality and capacity available at the time in that part of the world. TDMA technology was chosen for Brazil, Chile, Ecuador, Israel, Nicaragua, Panama and Peru. GSM was specified as the digital
technology for Denmark, Germany and India by the national telecommunications ministries in those countries. More recently, we chose CDMA (Code Division Multiple Access) to upgrade the networks in
Argentina, Uruguay and Venezuela and to launch service in Guatemala, based on improvements in cost quality and capacity as that technology has matured.

We
believe there is potentially significant value in high-speed wireless data in international markets, particularly in Latin America. We are currently evaluating the proposed 3G
technologies and the market potential of services based on these technologies.

COMPETITION

Our international wireless operations are subject to significant competition, generally from at least one other wireless provider and increasingly, from multiple new PCS
providers and any number of resellers. These competing service providers generally have partners who are at least as well capitalized as we are. In some cases, the government-owned telephone companies
operate incumbent wireline and wireless systems or have a substantial investment in the competing wireless provider. In all cases, the competing wireless providers generally have access to substantial
financial resources. Many governments have privatized the government-owned telephone companies, and these privatized companies often become more formidable competitors due to the availability of
additional capital and technical expertise. We anticipate an increasing number of facilities-based competitors in our wireless service markets.

To
remain competitive, our joint ventures offer wireless service that is designed and priced to be directly competitive with traditional wireline service. Our ability to introduce new products and
services, however, depends to a large extent upon whether the new products and services are permitted by the local laws and regulatory authorities. As countries have encouraged foreign investment in
telecommunications and have privatized their government-owned wireless telephone companies, the general trend has been toward increasing deregulation of telecommunications. In most of the Latin
American countries in which we do business, telecommunications regulatory bodies have announced plans to deregulate telecommunications over time, which, if implemented, should permit our joint
ventures to offer additional products and services. In several of our markets, our joint ventures offer or plan to offer international long distance services either to our wireless subscriber bases
or, in some cases, to the entire population. In addition, we offer domestic long distance service in certain markets through our nationwide wireless facilities.

LICENSES AND REGULATION

Our international wireless operations provide services pursuant to the terms of licenses granted by the telecommunications agency or similar supervisory authority in the
various countries. Such agencies typically also promulgate and enforce regulations regarding the construction and operation of network equipment. Our international operations also typically require
permits from local building and planning commissions for the construction and operation of their cell sites. It is our policy that our international operations use their best efforts to comply with
all such rules and regulations, and to obtain all permits necessary for the construction and operation of their cell sites. From time to time, some of our international operations have had
difficulties obtaining all required permits. We cannot be sure that our international operations may not be subject to claims or regulatory actions in respect of such past or future
non-compliance with these permitting requirements, although we do not believe that such non-compliance will have a material effect on our business. Other regulations commonly
encountered in international markets include legal restrictions on the percentage ownership of telecommunications licensees by foreign entities, such as us, and transfer restrictions or government
approval requirements regarding changes in the ownership of such licensees.

The
terms of the licenses granted to our international ventures and conditions of the license renewal vary from country to country. The initial terms of service under these licenses generally range
from 5 to 50 years. Although license renewal is not usually guaranteed, most licenses do address the renewal process and terms, which we believe we will be able to

15



satisfy.
As licenses approach the end of their terms, it is our intention to pursue renewal as provided by these license agreements.

FOREIGN RISKS

Our reporting currency is the US 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 have issued US 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 US Dollar will cause revenues to decrease and dollar-denominated liabilities to increase in local-currency
terms. 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 effect of the devaluation or depreciation 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. 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 volatile, which may impair our operations. This volatility could make it difficult for us to continue development of our business,
generate revenues or achieve or sustain profitability. Historically, volatility has been primarily caused by: mismanagement of monetary, exchange rate and/or fiscal policies; 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; price inflation in local currencies; wage and price controls; and economic instability in countries outside of Latin America.

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 US. Recent projections indicate that some Latin American countries, including Brazil and Argentina, will experience stagnant or negative growth rates in terms of their per
capita gross domestic product. Poor social, political and economic conditions may inhibit use of our services which may adversely impact our business.

---

ADVERTISING AND PUBLISHING

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BUSINESS OPERATIONS

We
own a group of companies that publish, print, sell advertising in, and perform related services concerning alphabetical and classified telephone directories in both paper and electronic formats.
Advertising and publishing revenues are derived primarily from sales of directory advertising, which represented approximately 8% of our total operating revenues in 1999 and 1998, and 9% in 1997.

BellSouth
Advertising & Publishing Corporation (BAPCO) is one of the leading publishers of telephone directories in the United States. In 1999, it published alphabetical white page directories
of business and residential telephone subscribers in all of BST's markets and sold advertising in and published classified directories under The RealYellow Pages® trademark in the same
markets.

The
Berry Company (Berry) acts as sales agent for advertising in yellow page directories on BAPCO's behalf in certain states and for nonaffiliated telephone companies and receives a portion of the
advertising revenue as a commission. During 1999, Berry contracted with 105 nonaffiliated telephone companies to sell advertising in over 300 classified directories in over 40 states. Berry also acts
as agent for national yellow page ad placements in all 50 states on behalf of over 700 companies.

In
addition to publishing directories in traditional paper form, BellSouth companies publish white and yellow page directories in other media. For example, BAPCO offers white page directories on CD
ROM for BST's major markets, and another subsidiary publishes Internet white and yellow page directories for the southeastern United States and also offers additional Internet advertising services.
These services link to similar on-line directories with information for businesses nationwide. Berry also sells additional advertising to local and national businesses for our
on-line yellow pages.

We
continually seek to expand our advertising and publishing business by increasing advertising sales in our traditional directory products. In addition, BAPCO

16



has
expanded its offerings to include a complementary line of advertising products in other media, including radio, television, newspaper and billboards. Recorded ads delivered by telephone are also
available. We also market to organizations and companies with unique directory needs. Export directories, audio text advertising, a restaurant and entertainment guide and Internet directories are
examples of such directory services and products.

We
own a printing company which prints substantially all white and yellow pages and specialty directories distributed in BST's markets. In 1999, it printed 56 million white page, yellow page
and specialty directories. This company also prints other materials for BellSouth and our affiliates and, to a limited extent, documents for nonaffiliated companies.

We
own interests in companies that publish directories and offer electronic advertising services in Peru and Brazil and we provide directory publishing consulting services internationally. As we seek
further business opportunities overseas, we will likely consider other investments in international directory companies to complement our telecommunications service offerings there.

COMPETITION

Competition for advertising revenues continues to expand. Many different media compete for advertising revenues, and some newspaper organizations and other companies have begun
publishing their own directories. Competition for directory sales agency contracts for the sale of advertising in publications of nonaffiliated companies also continues to be strong. Competitors offer
directory listings in various media such as CD ROM, the Internet and other electronic databases. As such offerings expand and are enhanced through interactivity and other features, we will experience
heightened competition in our directory advertising and publishing businesses. We have responded to the increasing competition and changing market environment with new directory products, product
enhancements, multi-media delivery options, including Internet directory services, pricing changes, competitive advertising, local promotions, directory redeliveries and extended distributions.

---

OTHER

---

WIRELESS DATA

We
offer enterprise and personal wireless data solutions through a nationwide wireless network. Our service area covers a total population of 200 million people that includes 93 percent
of the urban business population. Our strategy is to serve the interactive marketplace by delivering solutions to big business such as monitoring services, field force automation, and mobile
professionals, as well as addressing the needs of the transaction market (point-of-sale, debit cards and ATMs). We are also targeting the consumer market with interactive messaging capabilities and
access to dynamic information on demand through products such as the RIMInter@active Pager 950and Palm VII.

ENTERTAINMENT

We develop, implement and manage video systems in several areas within our region. These systems include wireline and wireless based systems designed to compete with cable
operators market by market. We currently operate 100% digital wireless video systems covering more than one million homes in Atlanta, New Orleans and Orlando. In addition, we operate wired systems in
subdivisions near Atlanta, Birmingham, Charleston, SC and Jacksonville, FL. As of December 31, 1999, we had invested $540 million in licenses and related fixed assets to operate these
systems within our region.

Programming
content for the cable systems is provided by americast®, a joint venture partnership of which we are a part owner.

---

17



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RESEARCH AND DEVELOPMENT

---

We
conduct research and development activities internally and through external vendors, primarily Telcordia Technologies. Telcordia provides research and development and other services to us and the
other Baby Bells. We have contracted with Telcordia for ongoing support of engineering and systems. In addition, we are a member of the National Telecommunications Alliance, an organization which
supports our commitment to national security and emergency preparedness.

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EMPLOYEES

---

At
December 31, 1999, we employed approximately 96,200 individuals. Of those totals, approximately 64,200 were employees engaged in BST's telephone operations. About 55% of our employees at
December 31, 1999 were represented by the Communications Workers of America (the CWA), which is affiliated with the AFL-CIO. In September 1998, members of the CWA ratified
new three-year contracts with us. The contracts include basic wage increases totaling 12.39% over the three years covered by the contracts. In addition, the agreement provides for a
standard award of between 2% and 2.5% of base salary and overtime compensation, which is subject to adjustment based on company performance measures for plan years 1999 and 2000. Other terms of the
agreement include pension band increases and pension plan cash balance improvements for active employees.

---

18



## 

PROPERTIES

---

GENERAL

---

Our
properties do not lend themselves to description by character or location of principal units. Our investment in property, plant and equipment in our consolidated operations consisted of the
following at December 31:

|                              |  | 1998 |  | 1999
|----------------------------- |  | ---- |  | ----
|Outside plant                 |  | 39%  |  | 38% 
|Central office equipment      |  | 35   |  | 35  
|Operating and other equipment |  | 12   |  | 12  
|Land and buildings            |  | 8    |  | 8   
|Furniture and fixtures        |  | 5    |  | 5   
|Plant under construction      |  | 1    |  | 2   
|                              |  |      |  |     
|                              |  | 100% |  | 100%
|                              |  |      |  |     

These
properties are divided among our operating segments as follows: wireline communications, 86%; domestic wireless, 7%; international operations, 5%; advertising and publishing, 1%; and other, 1%.

Outside
plant consists of connecting lines (aerial, underground and buried cable) not on customers' premises, the majority of which is on or under public roads, highways or streets, while the
remainder is on or under private property. We currently self-insure all of our outside plant against casualty losses. Central office equipment substantially consists of digital electronic
switching equipment and circuit equipment. Land and buildings consist principally of central offices. Operating and other equipment consists of wireless network equipment, embedded intrasystem wiring
(substantially all of which is on the premises of customers), motor vehicles and other equipment. Central office equipment, buildings, furniture and fixtures and certain operating and other equipment
are insured under a blanket property insurance program. This program provides substantial limits of coverage against "all risks" of loss including fire, windstorm, flood, earthquake and other perils
not specifically excluded by the terms of the policies.

Substantially
all of the installations of central office equipment for the wireline communications business are located in buildings and on land owned by BST. Many garages, administrative and business
offices and telephone service centers are in leased quarters. Most of the land and buildings associated with our nonwireline businesses and administrative functions are leased.

---

CAPITAL EXPENDITURES

---

Capital
expenditures consist primarily of (a) gross additions to property, plant and equipment having an estimated service life of one year or more, plus the incidental costs of preparing the
asset for its intended use, and (b) gross additions to capitalized software.

The
total investment in property, plant and equipment has increased from $44.2 billion at January 1, 1995 to $61.0 billion at December 31, 1999, not including deductions of
accumulated depreciation. Significant additions to property, plant and equipment will be required to meet the growing demand for telecommunications services and to continually modernize and improve
such services to meet competitive demands. We project continued population and economic expansion in certain growth centers within our nine-state area during the next five to ten years. In
addition, growth in international markets will require investment to expand existing wireless networks.

Our
capital expenditures for 1995 through 1999 were as follows:

|     |  | Millions
|---- |  | --------
|1995 |  | $       
|1996 |  | $       
|1997 |  | $       
|1998 |  | $       
|1999 |  | $       

We
project capital expenditures of approximately $6.0 to $6.5 billion for 2000, consisting primarily of approximately $4.0 to $4.4 billion for wireline communications with the remaining
balance split between the consolidated domestic wireless and international businesses. A majority of the expenditures will be to expand, enhance and modernize current wireline and domestic cellular
operating systems, and to develop international wireless and other businesses.

During
1999, we funded our normal business operations substantially through internal sources and, to the extent necessary, from external financing sources. We expect expenditures for 2000 to be
financed in the same manner.

19



---

ENVIRONMENTAL MATTERS

---

We
are subject to a number of environmental matters as a result of our operations and the shared liability provisions related to the divestiture from AT&T. As a result, we expect that
we will be required to expend funds to remedy certain facilities, including those Superfund sites for which we have been named as a potentially responsible party, for the remediation of sites with
underground fuel storage tanks and other expenses associated with environmental compliance. At December 31, 1999, our recorded liability, related primarily to remediation of these sites, was
approximately $30 million.

We
monitor our operations with respect to potential environmental issues, including changes in legally mandated standards and remediation technologies. Our recorded
liability reflects those specific issues where remediation activities are currently deemed to be probable and where the cost of remediation is estimable. We continue to believe that expenditures in
connection with additional remedial actions under the current environmental protection laws or related matters would not be material to our results of operations, financial position or cash flows.

---

LEGAL PROCEEDINGS

Following
the enactment of the 1996 Act, BST and various CLECs 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 CLECs claim entitlement from BST for compensation associated with
dial-up calls originating on BST's network and connecting with Internet service providers (ISPs) served by the CLECs' networks. BST has maintained that dial-up calls to ISPs
are not local calls for which terminating compensation is due under the interconnection agreements.

In
February 1999, the FCC issued a decision that such ISP traffic does not terminate at the ISP and, therefore, is interstate in nature, rather than local. The FCC
stated, however, that it would not interfere with prior state commissions' decisions regarding this matter. 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. In certain instances, BST has been ordered to pay this compensation pending
appeal. In other cases, the ruling bodies have determined that BST does not owe reciprocal compensation for these calls. BST has appealed the adverse decisions and continues to believe that it has a
good legal basis for its position that such reciprocal compensation is not owed to the CLECs. For those cases where BST believes it is probable that it has incurred a liability, it has recorded an
estimate of the amount owed. At December 31, 1999, the exposure related to unrecorded amounts withheld from CLECs was approximately $300 million, including accrued interest.

In
a related matter, at least one CLEC is claiming terminating compensation of approximately $165 million for service arrangements that we do not believe involve
"traffic" under BST's interconnection agreement. BST has filed a complaint with the state regulatory commission asking that agency to declare that BST does not owe reciprocal compensation for these
arrangements. The CLEC has filed a complaint with the state regulatory commission asking it to order BST to pay the disputed amounts. Hearings on this matter were held in August 1999 and a
decision is pending. We
believe that we have a good legal basis for our position and, accordingly, no provision has been recorded for this claim in our financial statements.

We
are also 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. While complete assurance cannot be given as to the outcome of any legal claims, we believe that any financial impact would not be
material to our results of operations, financial position or cash flows. (See Note O to the consolidated financial statements.)

SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

No
matter was submitted to a vote of shareholders in the fourth quarter of the fiscal year ended December 31, 1999.

---

20



ADDITIONAL INFORMATIONDESCRIPTION OF BELLSOUTH STOCK

GENERAL

Our
Articles of Incorporation authorize the issuance of 4,400,000,000 shares of common stock, par value $1 per share (the common stock), and 100,000,000 shares of cumulative, first preferred stock,
par value $1 per share. Our Board of Directors (the Board) is authorized to provide for the issuance, from time to time, of the first preferred stock in series and, as to each series, to fix the
number of shares in such series and the voting, dividend, redemption, liquidation, retirement and conversion provisions applicable to the shares of such series. No shares of first preferred stock are
outstanding. The Board has created Series B First Preferred Stock consisting of 30 million shares (the Series B Preferred Stock) for possible issuance under the BellSouth
Shareholder Rights Plan. (The Series A First Preferred Stock was created for a previous Shareholder rights plan which has expired.) (See "Preferred Stock Purchase Rights" and "Market for
Registrant's Common Equity and Related Stockholder Matters.")

DIVIDEND
RIGHTS

The
holders of common stock are entitled to receive, from funds legally available for the payment thereof, dividends when and as declared by resolution of the Board. While any series of preferred
stock is outstanding, no dividends (other than dividends payable solely in common stock) may be declared or paid on common stock, and no common stock may be purchased, redeemed or otherwise acquired
for value, (a) unless dividends on all outstanding shares of preferred stock for the current and all past dividend periods have been paid or declared and provision made for payment thereof and
(b) unless all requirements with respect to any purchase, retirement or sinking fund or funds applicable to all outstanding series of preferred stock have been satisfied.

VOTING
RIGHTS

Except
in connection with the "business combinations" and "fair price" provisions discussed below, holders of shares of common stock are entitled to one vote, in person or by proxy, for each share
held on the applicable record date with respect to each matter submitted to a vote at a meeting of shareholders, but such holders do not have cumulative voting rights. The holders of any series of
preferred stock, when issued, may receive the right to vote as a class on certain amendments to the Articles of Incorporation and on certain other matters, including the election of directors in the
event of certain defaults, which may include non-payment of preferred stock dividends.

LIQUIDATION
RIGHTS

In
the event of voluntary or involuntary liquidation of BellSouth, holders of the common stock will be entitled to receive, after creditors have been paid and the holders of the preferred stock, if
any, have received their liquidation preferences and accumulated and unpaid dividends, all the remaining assets of BellSouth.

PRE-EMPTIVE
RIGHTS; CONVERSION RIGHTS; REDEMPTION

No
shareholders of any class shall be entitled to any pre-emptive rights to subscribe for or purchase any shares or other securities issued by BellSouth. The common stock has no conversion
rights and is not subject to redemption.

PREFERRED
STOCK PURCHASE RIGHTS

Each
share of common stock outstanding includes one preferred stock purchase right (Right). Under certain circumstances, each Right will entitle the holder to purchase one one-thousandth
of a share of Series B Preferred Stock, $1 par value (Common Equivalent Preferred Stock), which unit is substantially equivalent in voting and dividend rights to one whole share of the common
stock, at a price of $200 per unit (the Purchase Price). The Rights are not presently exercisable and may be exercised only if a person or group (Acquiring Person) acquires 10% of the outstanding
voting stock of BellSouth without the prior approval of the Board or announces a tender or exchange offer that would result in ownership of 10% or more of the common stock.

If
an Acquiring Person becomes such without prior Board approval, the Rights are adjusted, and each holder, other than the Acquiring Person, then has the right to receive, on payment of the Purchase
Price, the number of shares of common stock, units of the Common Equivalent Preferred Stock or other assets having a market value equal to twice the Purchase Price.

The
Rights currently trade with the common stock and expire in December 2009.

21



BUSINESS
COMBINATIONS

The
Georgia legislature has enacted legislation which generally prohibits a corporation which has adopted a by-law electing to be covered thereby (which BellSouth has done)
from engaging in any "business combination" (i.e., a merger, consolidation or other specified corporate transaction) with an "interested shareholder" (i.e., a 10% shareholder or an affiliate of the
corporation which was a 10% shareholder at any time within the preceding two years) for a period of five years from the date such person becomes an interested shareholder, unless the interested
shareholder (a) prior to becoming an interested shareholder, obtained the approval of the Board of Directors for either the business combination or the transaction which resulted in the
shareholder becoming an interested shareholder, (b) becomes the owner of at least 90% of the outstanding voting stock of the corporation in the same transaction in which the interested
shareholder became an interested shareholder, excluding for purposes of determining the number of shares outstanding those shares owned by officers, directors, subsidiaries and certain employee stock
plans of the corporation or (c) subsequent to the acquisition of 10% or more of the outstanding voting stock of the corporation, acquires additional shares resulting in ownership of at least
90% of the outstanding voting stock of the corporation and obtains approval of the business combination by the holders of a majority of the shares of voting stock of the corporation, other than those
shares held by an interested shareholder, officers, directors, subsidiaries and certain employee stock plans of the corporation. BellSouth's "business combinations" by-law may be repealed
only by an affirmative vote of two-thirds of the continuing directors and a majority of the votes entitled to be cast by the shareholders, other than interested shareholders, and shall not
be effective until 18 months after such shareholder vote. The Georgia statute provides that a domestic corporation which has thus repealed such a by-law may not thereafter readopt
the by-law as provided therein.

FAIR
PRICE PROVISIONS

"Fair
price" provisions contained in the Articles of Incorporation require, generally, in connection with a merger or similar transaction between BellSouth and an "interested
shareholder", the unanimous approval of BellSouth's directors not affiliated with the interested shareholder or the affirmative vote of two-thirds of such directors and a majority of the
outstanding shares held by disinterested shareholders, unless (a) within the past three years the shareholder has been an interested shareholder and has not increased its shareholdings by more
than one percent in any 12-month period or (b) all shareholders receive at least the same consideration for their shares as the interested shareholder previously paid. Additionally,
these provisions may be revised or rescinded only upon the affirmative vote of at least two-thirds of the directors not affiliated with an interested shareholder and a majority of the
outstanding shares held by disinterested shareholders.

BOARD
CLASSIFICATION; REMOVAL OF DIRECTORS

Board
classification provisions adopted by the shareholders and contained in the By-laws prescribe a shareholder vote for approximately one-third of the
directors, instead of all directors, at each annual meeting of shareholders for a three-year term. Additionally, such provisions provide that shareholders may remove directors from office
only for cause, and can amend the By-laws with respect to the number of directors or amend the board classification provisions only by the affirmative vote of the holders of at least 75%
of the outstanding shares entitled to vote for the election of directors.

LIMITATION
ON SHAREHOLDERS' PROCEEDINGS

Our
By-laws require that notice of shareholder nominations for directors and of other matters to be brought before annual shareholders' meetings must be provided in writing
to the Secretary of BellSouth not later than the 75th day nor earlier than the 120th day prior to the date which is the anniversary of the annual meeting of shareholders held in the prior year. Such
By-laws also provide that a special shareholders' meeting may be called by shareholders only upon written request signed by the holders of at least three-quarters of the outstanding shares
entitled to vote at the meeting.

---

The
provisions discussed under the five preceding sub-headings and the ability to issue first preferred stock, such as the Series B Preferred Stock described above,
with characteristics established by the Board and without the consent of the holders of common stock and the ability to issue additional shares of common stock may have the effect of discouraging
takeover attempts and may also have the effect of maintaining the position of incumbent management. In addition, these provisions may have a significant effect on the ability of our shareholders to
benefit from certain kinds of transactions that may be opposed by the incumbent Board.

---

22



EXECUTIVE OFFICERS

The
executive officers of BellSouth Corporation are listed below:

|Name                   |  | Age |  | Office                                                             |  | Officer
Since |  | This
Office
Since
|---------------------- |  | --- |  | ------------------------------------------------------------------ |  | ------------- |  | -----------------
|F. Duane Ackerman      |  | 57  |  | Chairman of the Board, President and Chief Executive Officer       |  | 1983          |  | 1997             
|Richard A. Anderson    |  | 41  |  | PresidentCustomer Markets                                         |  | 1993          |  | 2000             
|Charles B. Coe         |  | 52  |  | PresidentNetwork Services                                         |  | 1988          |  | 2000             
|Keith O. Cowan         |  | 43  |  | Vice PresidentCorporate Development                               |  | 1996          |  | 1996             
|Francis A. Dramis, Jr. |  | 51  |  | Chief Information and Ecommerce Officer                            |  | 1998          |  | 2000             
|Mark E. Droege         |  | 46  |  | Vice PresidentFinancial Management and Treasurer                  |  | 1996          |  | 1996             
|Jere A. Drummond       |  | 60  |  | Vice ChairmanExternal Affairs                                     |  | 1983          |  | 2000             
|Ronald M. Dykes        |  | 52  |  | Chief Financial Officer                                            |  | 1988          |  | 1995             
|Mark L. Feidler        |  | 43  |  | President, Wireless Services                                       |  | 1999          |  | 1999             
|Gary D. Forsee         |  | 56  |  | Chief Staff Officer                                                |  | 1999          |  | 1999             
|David J. Markey        |  | 59  |  | Vice PresidentGovernmental Affairs                                |  | 1986          |  | 1993             
|Charles C. Miller, III |  | 47  |  | PresidentBellSouth International                                  |  | 1990          |  | 1995             
|Charles R. Morgan      |  | 53  |  | General Counsel                                                    |  | 1998          |  | 1998             
|William C. Pate        |  | 39  |  | Vice PresidentAdvertising and Public Relations                    |  | 1997          |  | 1997             
|William F. Reddersen   |  | 52  |  | Executive Vice PresidentStrategic Planning                        |  | 1987          |  | 2000             
|W. Patrick Shannon     |  | 37  |  | Vice President and Controller                                      |  | 1997          |  | 1997             
|Richard D. Sibbernsen  |  | 52  |  | Vice PresidentHuman Resources                                     |  | 1997          |  | 1997             
|Carl E. Swearingen     |  | 53  |  | Senior Vice PresidentCorporate Compliance and Corporate Secretary |  | 1989          |  | 1998             

All
of the executive officers of BellSouth, other than Mr. Cowan, Mr. Dramis, Mr. Forsee, Mr. Morgan, Mr. Pate, Mr. Shannon and Mr. Sibbernsen have for
at least the past five years held high level management or executive positions with BellSouth or its subsidiaries. Mr. Cowan was a partner at the law firm of Alston & Bird before joining
BellSouth in 1996. Mr. Dramis joined BellSouth in December 1998 from CIO Strategy, Inc., a Clifton, Virginia-based information technology consulting firm. Prior to joining
BellSouth in September 1999, Mr. Forsee was President and Chief Executive Officer of Global One, a global telecommunications joint venture, and before that held various positions with Sprint
Corporation. Prior to joining BellSouth in February 1998, Mr. Morgan was a partner with Mayer, Brown & Platt, a Chicago-based international law firm, and prior to that was Vice
President, General Counsel and Secretary of Chiquita Brands International, Inc. Mr. Pate, prior to joining BellSouth in 1996, was employed by MCI where he was responsible for that
company's domestic and international advertising. Prior to joining BellSouth in 1997, Mr. Shannon was employed by US West, Inc. as Chief Financial Officer of MediaOne, a company that
provides cable television services. In 1997,
Mr. Sibbernsen joined BellSouth from TNT Limited, a worldwide transportation company where he was head of corporate human resources and responsible for that company's global human resources
strategies and programs.

All
officers serve until their successors have been elected and qualified.

23



PART II

MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The
principal market for trading in BellSouth common stock is the New York Stock Exchange, Inc. (NYSE). BellSouth common stock is also listed on the Boston, Chicago, Pacific and Philadelphia
exchanges in the United States and the London, Frankfurt, Amsterdam and Swiss exchanges. The ticker symbol for BellSouth common stock is BLS. At February 1, 2000, there were 944,285 holders of
record of BellSouth common stock. The market price and dividend information listed below has been adjusted for the two-for-one stock split effective in December 1998.
Market price data were obtained from the NYSE Composite Tape, which encompasses trading on the principal United States stock exchanges as well as off-board trading. High and low prices
represent the highest and lowest sales prices for the periods indicated.

|               |  | Market Prices |    |      
|-------------- |  | ------------- | -- | -----
|
|
|1997           |  |               |    |      
|First Quarter  |  | $             | 23 | 13/16
|Second Quarter |  |               | 24 | 5/16 
|Third Quarter  |  |               | 24 | 1/2  
|Fourth Quarter |  |               | 29 | 1/16 
|1998           |  |               |    |      
|First Quarter  |  |               | 34 | 7/32 
|Second Quarter |  |               | 34 | 3/4  
|Third Quarter  |  |               | 39 | 1/16 
|Fourth Quarter |  |               | 50 |      
|1999           |  |               |    |      
|First Quarter  |  |               | 49 | 15/16
|Second Quarter |  |               | 48 | 3/4  
|Third Quarter  |  |               | 51 | 5/16 
|Fourth Quarter |  |               | 48 | 9/16 

STOCK TRANSFER AGENT AND REGISTRAR

ChaseMellon Shareholder Services, L.L.C. is our stock transfer agent and registrar.

24



SELECTED FINANCIAL AND OPERATING DATA (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

|At December 31 or for the year ended                          |  | 1995 |        | 1996 |   | 1997   |  | 1998 |        | 1999
|------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | ---- | ------ | ----
|Operating revenues                                            |  | $    | 17,886 |      | $ | 19,040 |  | $    | 20,561 |     
|Operating expenses                                            |  |      | 14,594 |      |   | 14,261 |  |      | 15,185 |     
|Operating income                                              |  |      | 3,292  |      |   | 4,779  |  |      | 5,376  |     
|Income before extraordinary losses                            |  |      | 1,564  |      |   | 2,863  |  |      | 3,270  |     
|Net income (loss)                                             |  |      | (1,232 | )    |   | 2,863  |  |      | 3,261  |     
|Operating income margin                                       |  |      | 18.4%  |      |   | 25.1%  |  |      | 26.1%  |     
|Diluted earnings (loss) per share:                            |  |      |        |      |   |        |  |      |        |     
|Before extraordinary losses                                   |  | $    | .79    |      | $ | 1.44   |  | $    | 1.64   |     
|After extraordinary losses                                    |  | $    | (0.62  | )    | $ | 1.44   |  | $    | 1.64   |     
|Diluted weighted-average common shares outstanding (millions) |  |      | 1,989  |      |   | 1,992  |  |      | 1,989  |     
|Dividends declared per common share                           |  | $    | .71    |      | $ | .72    |  | $    | .72    |     
|Operating cash flow                                           |  | $    | 5,443  |      | $ | 5,863  |  | $    | 7,039  |     
|Total assets                                                  |  | $    | 31,880 |      | $ | 32,568 |  | $    | 36,301 |     
|Long-term debt                                                |  | $    | 7,924  |      | $ | 8,116  |  | $    | 7,348  |     
|Shareholders' equity                                          |  | $    | 11,825 |      | $ | 13,249 |  | $    | 15,165 |     
|Total employees                                               |  |      | 87,571 |      |   | 81,241 |  |      | 81,000 |     

Significant
events affecting our historical earnings trends include the following:



25





MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

In
the following discussion, BellSouth Corporation and its subsidiaries are referred to as "we" or "BellSouth".

We
are an international telecommunications business headquartered in Atlanta, Georgia. For management purposes, our business is organized into four reportable operating segments: wireline
communications; domestic wireless; international operations; and advertising and publishing. 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.

---

Consolidated Results of Operations

Key selected financial and operating data for 1997, 1998 and 1999 are as follows (all references to earnings per share are on a diluted basis):

|                   |  |   |        |  |   |        |  | Percent Change |       
|------------------ |  | - | ------ |  | - | ------ |  | -------------- | ------
|
|Revenues           |  | $ | 20,561 |  | $ | 23,123 |  | $              | 25,224
|Expenses           |  | $ | 15,185 |  | $ | 17,219 |  | $              | 18,787
|EBITDA(a)          |  | $ | 9,340  |  | $ | 10,261 |  | $              | 11,428
|EBITDA margin      |  |   | 45.4%  |  |   | 44.4%  |  |                | 45.3% 
|As Reported:       |  |   |        |  |   |        |  |                |       
|Net income         |  | $ | 3,261  |  | $ | 3,527  |  | $              | 3,448 
|Earnings per share |  | $ | 1.64   |  | $ | 1.78   |  | $              | 1.80  
|Normalized:        |  |   |        |  |   |        |  |                |       
|Net income         |  | $ | 2,814  |  | $ | 3,259  |  | $              | 3,825 
|Earnings per share |  | $ | 1.41   |  | $ | 1.64   |  | $              | 2.00  
|                   | 

Overview

On a comparative basis, results reflect strong revenue growth in the core wireline business driven by digital and data services revenues and significant increases in our
international and domestic wireless customer bases. Expense growth was driven by increased spending in the core wireline business for customer service and network support functions, volume-driven
increases at our international and domestic wireless businesses and expenses for development and promotion of new business initiatives, including high-speed data and Internet service
offerings.

Normalized
results for 1999 exclude the impacts of:



26





Normalized
results for 1998 exclude the impacts of:



Normalized
results for 1997 exclude the impacts of:



On
January 1, 1999, we adopted a new accounting standard on capitalization of internal-use software. The impact of capitalizing software costs under the new standard was a benefit
of $285 ($0.15 per share) for 1999 compared to 1998.

---

Results by Segment

Our
reportable segments reflect strategic business units that offer similar products and services and/or serve similar customers. We have four reportable operating segments: (1) Wireline
communications; (2) Domestic wireless; (3) International operations; and (4) Advertising and publishing. We have included the operations of all other businesses falling below the
reporting threshold in the "Other" segment. We evaluate the performance
of each business unit based on net income, exclusive of charges for use of intellectual property rights and adjustments for special items that may arise. Special items are transactions or events that
are included in reported consolidated results but are excluded from segment results due to their nonrecurring or nonoperational nature.

The
results of businesses in which we own noncontrolling interests are not included in our reported revenues and expenses but are included in the Net Equity in Earnings (Losses) of Unconsolidated
Businesses line item.

27



---

Wireline Communications

---

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

|                                   |  |   |        |  |   |         |  | Percent Change |        
|---------------------------------- |  | - | ------ |  | - | ------- |  | -------------- | -------
|
|Results of Operations              |  |   |        |  |   |         |  |                |        
|Operating revenues:                |  |   |        |  |   |         |  |                |        
|Local service                      |  | $ | 9,017  |  | $ | 10,033  |  | $              | 10,887 
|Network access                     |  |   | 4,483  |  |   | 4,632   |  |                | 4,761  
|Long distance                      |  |   | 734    |  |   | 713     |  |                | 608    
|Other wireline                     |  |   | 944    |  |   | 1,023   |  |                | 1,198  
|Intersegment revenues              |  |   | 168    |  |   | 221     |  |                | 318    
|Total operating revenues           |  |   | 15,346 |  |   | 16,622  |  |                | 17,772 
|Operating expenses                 |  |   | 11,158 |  |   | 11,751  |  |                | 11,944 
|Operating income                   |  |   | 4,188  |  |   | 4,871   |  |                | 5,828  
|Segment net income                 |  | $ | 2,314  |  | $ | 2,751   |  | $              | 3,315  
|EBITDA                             |  | $ | 7,520  |  | $ | 8,234   |  | $              | 9,221  
|EBITDA margin                      |  |   | 49.0%  |  |   | 49.5%   |  |                | 51.9%  
|Key Indicators                     |  |   |        |  |   |         |  |                |        
|Access line counts (000's):        |  |   |        |  |   |         |  |                |        
|Switched access lines:             |  |   |        |  |   |         |  |                |        
|Residential                        |  |   | 15,841 |  |   | 16,457  |  |                | 16,958 
|Business                           |  |   | 7,088  |  |   | 7,294   |  |                | 7,254  
|Other                              |  |   | 272    |  |   | 274     |  |                | 265    
|Total switched access lines        |  |   | 23,201 |  |   | 24,025  |  |                | 24,477 
|Access line equivalents(a)         |  |   | 10,801 |  |   | 14,744  |  |                | 20,375 
|Total equivalent access lines      |  |   | 34,002 |  |   | 38,769  |  |                | 44,852 
|Access minutes of use (millions)   |  |   | 97,106 |  |   | 104,373 |  |                | 110,088
|Long distance messages (millions)  |  |   | 894    |  |   | 784     |  |                | 644    
|Digital and data services revenues |  | $ | 1,437  |  | $ | 2,041   |  | $              | 2,687  
|Convenience feature revenues       |  | $ | 1,364  |  | $ | 1,636   |  | $              | 1,911  
|                                   | 

Operating Revenues

Local service

Local service revenues increased $854 during 1999 and $1,016 during 1998, attributable to growth in switched access lines and strong demand for digital and data services and convenience features.

Total
equivalent access lines increased 15.7% during 1999 and 14.0% during 1998. Residential access lines rose 3.0% during 1999 and 3.9% during 1998, driven by economic growth in our
nine-state region as well as demand for secondary residence lines. Secondary residence lines are used for home office purposes, Internet access and children's phones, and accounted for
51.1% of the growth in residential access lines during 1999 and 49.8% during 1998. Business access lines, including both switched access lines and data circuits, grew 25.4% during 1999 and 23.2%
during 1998, propelled by expanding demand for our digital and data services. Switched business access lines grew 2.9% during 1998 but decreased 0.5% during 1999 as an increasing number of new and
existing

28



business
customers migrate to our high-capacity data line offerings.

Revenues
from optional convenience features such as custom calling features (e.g., Caller ID, Call Waiting, Call Return) and voice mail service increased $275 (16.8%) during 1999 and $272 (19.9%)
during 1998. These increases were driven by growth in convenience feature usage through our Complete Choice® package, a one-price bundled offering of over 20 features. The 1999
increase also includes the effect of positive rate impacts on revenues from these features.

Increased
penetration of extended local area calling plans also increased local service revenues by approximately $182 during 1999 and $213 during 1998. Also contributing to the increases in revenues
were net rate impacts of $163 in 1999 and $161 in 1998. The 1999 rate impacts were attributable to sharing accruals recorded in 1998 as well as positive rate adjustments in 1999 on convenience
features, directory assistance and inside wire service. The rate impacts during 1998 were primarily attributable to sharing accruals and cellular interconnection rate reductions recorded in 1997.

Network access

Network
access revenues grew $129 in 1999 and $149 in 1998, due largely to higher demand. Access minutes of use rose 5.5% and 7.5% during the same periods. Increases in switched access lines and
promotional activities by long distance carriers continue to be the primary drivers of the increase in minutes of use. The introduction of 1+ dialing parity for intraLATA long distance calls in all
states in our wireline territory is also contributing to growth in minutes.

The
growth rate in total minutes of use continues to be negatively impacted by the trend of business customers migrating from traditional switched circuits to higher capacity data line offerings which
are fixed-charge based rather than per-minute-of-use based. Revenues from these data services grew approximately $155 in 1999 and $148 in 1998 as Internet service
providers and high-capacity users increased their use of our network. The growth rate in switched minutes of use has also been negatively impacted by competition from CLECs whose traffic
completely bypasses our network.

Volume-related
growth was largely offset by net rate impacts that decreased revenues by $158 in 1999 and $122 in 1998. These reductions are primarily related to the FCC's access reforms and
productivity factor adjustment. The reductions were partially offset by recoveries of local number portability costs in 1999.

Long distance

The
decreases during 1999 and 1998 are primarily attributable to decreases in long distance message volumes of 17.9% in 1999 and 12.3% in 1998. Partially offsetting these decreases were increased
revenues from the provision of digital and data services.

Also
included in long distance are revenues which we receive from long distance carriers for interconnection to our public payphones. These revenues increased from 1997 to 1998 following the 1997
deregulation of payphone services but decreased in 1999 as a result of a regulatory ruling on the rates charged to the long distance carriers.

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

Other wireline

The
increase in external revenues in 1999 is attributable to higher revenues from sales of customer premises equipment, resale of paging products and services, sales of unbundled network elements,
collocation of competing carriers' equipment in our facilities, demand for our Internet access offering and interconnection charges to wireless carriers. The increase in external revenues in 1998 was
driven primarily by increases in charges for billing and collection services, demand for our Internet access offering, and sales of unbundled network elements. The increase in intersegment revenues in
both 1999 and 1998 primarily represents increased business activity with our other operating segments.

We
increased subscribers to our BellSouth.net(sm) service 82% during 1999 and ended the year with over 680,000 subscribers. We expect continued strong growth associated with our alliance with
MyWay.com, an Internet portal operated by CMGI.

Operating Expenses

Operational and support expenses

Operational
and support expenses increased $163 or 1.9% during 1999 and $562 or 7.2% during 1998. The 1999 increase was impacted favorably by the adoption of new rules on software capitalization;
excluding the

29



impact
of adoption, 1999 expenses would have increased $576 (6.9%) when compared to 1998.

The
increase in 1999 was attributable to labor costs driven by the addition of employees in customer service and network support functions, increases in salary and wage rates, costs from sales of CPE
and paging equipment and other increased expenses associated with higher business volumes. These increases were offset by reductions in overtime expense in customer service and network functions and
lower pension and benefit costs attributable to favorable pension plan investment returns.

Also
contributing to the 1999 increase were expenses related to new data initiatives, including Asymmetric Digital Subscriber Line (ADSL) and integrated
fiber-in-the-loop (IFITL), and promotional expenses related to expanding our Internet customer base. We made ADSL service available in 30 markets this year, with an
addressable market of approximately 7 million access lines, and we plan to increase the market to 11.5 million access lines by the end of 2000. In January 2000, we began offering
a self-install kit for ADSL in seven cities and announced a partnership with Darwin Networks to expand ADSL offerings to additional areas in the southeastern US. We are deploying IFITL in
nearly all newly built neighborhoods and are also retrofitting some 200,000 existing homes in Atlanta and Miami.

The
1998 increase was driven by several factors, including: labor costs in the telephone operations; growth in expenses at unregulated subsidiaries associated with higher business volumes; and
payments to the Universal Service Fund. The increase in labor costs was primarily attributable to contract service expense associated with the outsourcing of engineering and IT functions in late 1997,
as well as higher overtime expense in customer service and network support functions. These increases were partially offset by lower base salaries and wage expense in the engineering and IT functions
and lower pension and benefit costs.

Depreciation and amortization

Depreciation
and amortization expense increased $30 during 1999 and $31 during 1998. The 1999 increase is primarily attributable to amortization of capitalized internally developed software. While
gross depreciable plant increased 4.6% during 1999 and 5.0% during 1998, the overall composite depreciation rate has declined, resulting in flat depreciation expense.

30



---

Domestic Wireless

---

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

---

|                                                             |  |   |       |  |   |       |  | Percent Change |      
|------------------------------------------------------------ |  | - | ----- |  | - | ----- |  | -------------- | -----
|
|                                                             | 
|Total operating revenues                                     |  | $ | 2,589 |  | $ | 2,730 |  | $              | 3,204
|Operating expenses                                           |  |   | 2,177 |  |   | 2,356 |  |                | 2,876
|Operating income                                             |  |   | 412   |  |   | 374   |  |                | 328  
|Net equity in earnings (losses) of unconsolidated businesses |  |   | 164   |  |   | 165   |  |                | 144  
|Segment net income                                           |  | $ | 333   |  | $ | 283   |  | $              | 234  
|EBITDA                                                       |  | $ | 858   |  | $ | 887   |  | $              | 984  
|EBITDA margin                                                |  |   | 33.1% |  |   | 32.5% |  |                | 30.7%
|Customers(b)                                                 |  |   | 3,680 |  |   | 4,320 |  |                | 4,887
|Average monthly revenue per customer(b)                      |  | $ | 55    |  | $ | 52    |  | $              | 51   
|                                                             | 

Operating Revenues

Total
operating revenues grew $474 or 17.4% during 1999 and $141 or 5.4% during 1998. These increases are attributable to higher airtime, access and equipment sales revenues driven by a 13.1% and
17.4% increase in the customer base during 1999 and 1998. Adjusted for the sale of Honolulu Cellular in August 1999, customer growth would have been 16.4% for 1999 and 17.8% for 1998. Customer
growth in both years has been driven by advertising, enhanced volume pricing strategies (including one-rate plans, bundled minutes at lower rates and prepaid calling plans) and competitive
incentive programs (such as discounted wireless handsets). The revenue growth in both years is also attributable to the initiation of PCS service in 26 new markets in the southeastern US since 1997.
Average monthly usage by customers increased during 1999 and 1998, and, when combined with the increase in total customers, drove increases in total minutes of use in both years. Average monthly
revenue per customer remained relatively flat during 1999 after decreasing during 1998, due primarily to declines in per-minute rates. The declines in average per-minute rates
occurred as we expanded our product offerings and further penetrated lower-usage market segments, and we expect rates to continue decreasing as more customers opt for our one-rate plans
and other bundled-minute packages.

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

Operating Expenses

Operational and support expenses

Operational and support expenses increased $377 or 20.5% during 1999 and $112 or 6.5% during 1998. These increases result from the addition of employees, higher sales and
marketing expenses in response to competition, higher equipment costs attributable to the conversion to digital network platforms and higher network costs associated with network usage. Employee
additions were driven by customer service and network support personnel associated with the initiation of service in 26 PCS markets since 1997. Higher equipment costs were attributable to the cost of
digital handsets, which typically cost one-third more than analog handsets. Although total customer acquisition costs have increased, average acquisition costs per customer have benefited as we
continue to shift to lower cost, direct sales channels. In our continuing effort to migrate our customer base from analog to digital service, we have moved over two-thirds of our subscriber base to
digital and have increased digital minutes of use to over 70% of total network usage. Digital technology offers many advantages over analog technology, including a three-fold gain in
channel capacity, the ability to provide advanced services and functionality, inherent privacy

31



and
transmission security and the opportunity to provide improved data transmissions. Digital customers also generate higher average revenue per customer.

Depreciation and amortization

Depreciation and amortization increased $143 or 27.9% during 1999 and $67 or 15.0% during 1998. The increase was primarily attributable to the additions of property, plant and
equipment totaling $550 in 1999 and $692 in 1998. These additions were primarily attributable to the build-out of PCS markets, expansion of the network related to growth in the customer
base and deployment of digital cellular across all of our consolidated markets. The 1999 increase is also attributable to accelerated depreciation on network equipment that is being replaced over an
18 month period from June 1999 through December 2000.

Net Equity in Earnings (Losses) of Unconsolidated Businesses

Net equity in earnings (losses) of unconsolidated domestic wireless businesses decreased $21 in 1999 and increased $1 in 1998. The 1999 decrease is principally due to lower
earnings at our business in Los Angeles, attributable to higher acquisition costs associated with customer additions and increased amortization expense that resulted from the reorganization of our
ownership interests in fourth quarter 1998.

---

International Operations

---

International
operations is comprised principally of our investments in wireless businesses in ten countries in Latin America as well as in Denmark, Germany, India and Israel. Consolidated operations
include our businesses in Argentina, Chile, Ecuador, Peru and Venezuela (1998 and 1997 results also include New Zealand, which was sold in fourth quarter 1998). All other businesses are accounted for
under the equity method, and accordingly their results are reported as Net equity in earnings (losses) of unconsolidated businesses.

---

|                                                             |  |   |       |   |   |       |   | Percent Change |      
|------------------------------------------------------------ |  | - | ----- | - | - | ----- | - | -------------- | -----
|
|                                                             | 
|Total operating revenues                                     |  | $ | 948   |   | $ | 1,995 |   | $              | 2,291
|Operating expenses                                           |  |   | 884   |   |   | 1,761 |   |                | 2,173
|Operating income                                             |  |   | 64    |   |   | 234   |   |                | 118  
|Net equity in earnings (losses) of unconsolidated businesses |  |   | (220  | ) |   | (69   | ) |                | (2   
|Segment net income (loss)                                    |  | $ | (187  | ) | $ | (62   | ) | $              | (4   
|EBITDA                                                       |  | $ | 190   |   | $ | 591   |   | $              | 560  
|EBITDA margin                                                |  |   | 20.0% |   |   | 29.6% |   |                | 24.4%
|Customers(b)                                                 |  |   | 1,555 |   |   | 2,598 |   |                | 4,230
|Average monthly revenue per customer(b)                      |  | $ | 67    |   | $ | 70    |   | $              | 52   
|                                                             | 

Operating Revenues

Revenue
growth in 1999 was negatively affected by the absence of revenues from BellSouth New Zealand, which was sold in fourth quarter 1998. Revenue growth in 1998 was positively affected by the
first-time consolidation of several Latin American operations which had previously been accounted for under the equity method. If all periods were adjusted to exclude the effects of these
changes, revenues would have increased approximately 21.2% in 1999 and 49.9% in 1998. These increases are primarily due to substantial growth in the customer bases of our current operations, which
grew 62.8% in 1999 and 67.1% in 1998.

Offsetting
the impacts of customer growth in both periods were overall weakening of local currencies. If foreign exchange rates had remained constant, operating revenues would have been 7% to 10%
higher in both 1999 and 1998. We mitigated a portion of this decline through increases in rates. Also contributing were declining monthly revenue per customer that is driven by continued expansion
into lower-usage customer segments through offerings such as prepaid cellular service as well as competitive pressures in certain countries. During 1999, we extended prepaid

32



cellular
products to all of the countries we serve in Latin America.

Operating Expenses

Operational and support expenses

Operational and support expenses increased $327 or 23.3% in 1999 and $646 or 85.2% in 1998. Adjusted for the first-time consolidation of several Latin American
operations and the sale of BellSouth New Zealand, expenses increased $395 or 29.6% in 1999 and $376 or 39.2% in 1998. These increases are primarily the result of operational and customer acquisition
costs associated with growth in customer levels and expanded operations. Since 1997, our existing operations have added 2.3 million customers in Argentina, Chile and Venezuela. We have also
added 500,000 customers through the acquisition and development of businesses in Peru and Ecuador.

Depreciation and amortization

Depreciation expense increased $64 in 1999 and $166 in 1998. Adjusted for first-time consolidation of several Latin American operations and the sale of BellSouth
New Zealand, depreciation and amortization increased $108 or 32.3% in 1999 and $154 or 85.6% in 1998. These increases are due primarily to higher gross depreciable plant resulting from the continued
investment in our wireless network infrastructure. Amortization expense increased $21 during 1999 and $65 during 1998 as a result of growth in intangibles related to our purchase of additional
ownership interests in several Latin American operations in late 1997 and early 1998.

Net Equity in Earnings (Losses) of Unconsolidated Businesses

Net equity in earnings (losses) for the international operations segment exclude $308 in foreign currency losses related to the devaluation of the Brazilian Real in
January 1999. Net equity in earnings (losses) from our unconsolidated businesses improved $67 to ($2) in 1999 and $151 to ($69) in 1998. 1998 earnings, when adjusted to exclude the effect of
first-time consolidations and sale of businesses, improved $92 over 1997. The improvement in equity in earnings (losses) from our unconsolidated international businesses in both years is
due to stronger results from our investment in Germany and, for 1999, Panama and Nicaragua. All of these businesses experienced substantial growth in their customer bases during the
1998-1999 period. Offsetting these improvements were losses related to our operations in Brazil; these losses were attributable to costs associated with the start-up of
operations during 1998 and economic weakness in the region during 1999.

Our
operations in Brazil continue to be affected by weakness in the local economy. Operational revenues have been negatively impacted as the weakened currency has caused average revenue per subscriber
to decline. In addition, we expect that our earnings will continue to be affected by foreign currency gains or losses associated with the US Dollar-denominated debt issued by our Brazilian businesses.

---

Advertising and Publishing

---

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

---

|                         |  |   |       |  |   |       |  | Percent Change
|------------------------ |  | - | ----- |  | - | ----- |  | --------------
|
|                        
|Operating revenues:      |  |   |       |  |   |       |  |               
|External revenues        |  | $ | 1,837 |  | $ | 1,891 |  | $             
|Intersegment revenues    |  |   | 7     |  |   |      |  |               
|Total operating revenues |  |   | 1,844 |  |   | 1,891 |  |               
|Operating expenses       |  |   | 989   |  |   | 1,042 |  |               
|Operating income         |  |   | 855   |  |   | 849   |  |               
|Segment net income       |  | $ | 543   |  | $ | 530   |  | $             
|EBITDA                   |  | $ | 877   |  | $ | 874   |  | $             
|EBITDA margin            |  |   | 47.6% |  |   | 46.2% |  |               
|                        

33





Operating Results

External
revenues increased $119 during 1999 and $54 during 1998. The 1999 increase is principally a result of revenues from our new directory publishing operations in Peru and Brazil. The increases
for 1998 and, to a lesser extent, 1999 were driven by volume growth and price increases in the domestic operations. To a lesser extent, the increased revenues of our electronic media offerings also
contributed.

Operational
and support expenses increased $79 in 1999 and $50 in 1998. The 1999 increase was driven by the addition of the new international operations. The 1998 increase was due primarily to
increases in salaries and wages driven by business volumes, increases in charges from other operating segments, and technology implementation. Depreciation and amortization remained relatively flat in
1999 and 1998.

---

Other

---

This
segment is primarily comprised of new business initiatives such as entertainment (cable and wireless television), Internet access, wireless data and interLATA long distance. The stand-alone
revenues and expenses of our Internet access marketing company which are included in this segment are eliminated in consolidation and reported as part of the wireline communications results.

---

|                                                             |  |   |        |   |   |        |   | Percent Change |       
|------------------------------------------------------------ |  | - | ------ | - | - | ------ | - | -------------- | ------
|
|                                                             | 
|External revenues                                            |  | $ | 17     |   | $ | 113    |   | $              | 280   
|Intersegment revenues                                        |  |   | 185    |   |   | 227    |   |                | 371   
|Total operating revenues                                     |  |   | 202    |   |   | 340    |   |                | 651   
|Operating expenses                                           |  |   | 345    |   |   | 700    |   |                | 971   
|Operating loss                                               |  |   | (143   | ) |   | (360   | ) |                | (320  
|Net equity in earnings (losses) of unconsolidated businesses |  |   | (197   | ) |   |       |   |                | (1    
|Segment net loss                                             |  | $ | (182   | ) | $ | (210   | ) | $              | (215  
|EBITDA                                                       |  | $ | (110   | ) | $ | (266   | ) | $              | (178  
|EBITDA margin                                                |  |   | (54.5% | ) |   | (78.2% | ) |                | (27.3%
|                                                             | 

Operating Results

External
revenues increased $167 in 1999 and $96 in 1998. The increases were driven by growth in revenues from interactive paging services, wireless television offerings and the resale of interLATA
long distance services in markets outside of our wireline region. Since 1998, we have rolled out wireless television service in four new markets and introduced interactive paging service with
nationwide coverage.

Operating
expenses for 1999 and 1998 primarily reflect increased spending associated with new product and/or market introductions in all of these businesses. Higher headcount associated with customer
support and installation functions also contributed to the increase in expenses. Depreciation and amortization has increased reflecting our continuing investment of resources associated with the
growth of these businesses.

Net
equity in earnings (losses) for 1997 was primarily comprised of the results of our wireless data operations, which were consolidated beginning in 1998.

---

34



Other Nonoperating Items

---

|                                                             |  |   |       |   |   |       |  | Percentage Change |      
|------------------------------------------------------------ |  | - | ----- | - | - | ----- |  | ----------------- | -----
|
|                                                             | 
|Interest Expense                                             |  | $ | 761   |   | $ | 837   |  | $                 | 1,030
|Gain on Sale of Operations                                   |  |   | 787   |   |   | 335   |  |                   | 55   
|Net equity in earnings (losses) of unconsolidated businesses |  |   | (242  | ) |   | 92    |  |                   | (169 
|Other Income, net                                            |  |   | 261   |   |   | 257   |  |                   | 195  
|Provision for Income Taxes                                   |  |   | 2,151 |   |   | 2,224 |  |                   | 2,040
|Effective Tax Rate                                           |  |   | 39.7% |   |   | 38.7% |  |                   | 37.2%
|                                                             | 

Interest expense

Interest
expense increased $193 in 1999 and $76 in 1998. The 1999 increase is attributable to higher average debt balances resulting from commercial paper borrowings associated with
the financing of our investment in Qwest and a higher proportion of capitalized interest in 1998. The increase in 1998 expense reflects the consolidation of several international operations which had
previously been accounted for under the equity method and a greater proportion of capitalized interest due to our start-up investments in Brazil. Our average debt balances were as follows:

---

|                                |  |   |       |  |   |        |  | Percent Change
|------------------------------- |  | - | ----- |  | - | ------ |  | --------------
|
|                               
|Average short-term debt balance |  | $ | 2,123 |  | $ | 3,239  |  | $             
|Average long-term debt balance  |  | $ | 7,822 |  | $ | 8,220  |  | $             
|Total average debt balance      |  | $ | 9,945 |  | $ | 11,459 |  | $             
|                               

Gain on sale of operations

Gains
for 1999 include $39 from the sale of our 100% ownership interest in Honolulu Cellular and $16 from the sale of a wireless property in Alabama. Gains for 1998 include $180 from
the sale of our 100% interest in BellSouth New Zealand and $155 from the receipt of additional proceeds related to the sale of our investment in ITT World Directories. Gains for 1997 include $578 from
the sale of our investment in Optus Communications and $209 from the sale of our investment in ITT World Directories.

Net equity in earnings (losses) of unconsolidated businesses

Earnings
from our unconsolidated businesses decreased $261 in 1999 and increased $334 during 1998. The decrease in 1999 was driven by foreign exchange losses of $308 related to our
Brazilian properties (see Note C to the consolidated financial statements for further discussion of this matter). Excluding the impact of these foreign exchange losses, earnings increased $47
in 1999. The 1999 and 1998 results are addressed in the discussions for the Domestic wireless, International operations and Other segments.

Other income, net

Other
income, net includes interest income, gains/ losses on disposition of assets, foreign currency gains/ losses and miscellaneous nonoperating income. The decrease of $62 in 1999 is
attributable to higher minority interest expense related to our less-than-100-percent owned subsidiaries and decreased interest income due to lower average cash
balances. These decreases were partially offset by miscellaneous nonoperating items. The decrease of $4 in 1998 reflects decreases in nonoperating items, offset by the additional income from the
settlement of a loan and a gain from the sale of our investment in Bellcore.

Provision for income taxes

The
decrease in the 1999 effective tax rate was driven by the recognition of foreign investment tax credits, and a change in the mix of income among taxing jurisdictions. These
decreases were offset by less favorable results at foreign equity-method subsidiaries which are recorded net of tax benefits or expense. These results were significantly impacted by foreign currency
losses recorded at our unconsolidated Brazilian businesses during 1999.

The
decrease in the 1998 effective tax rate was attributable to improved results in our foreign equity-method subsidiaries and a change in the mix of income among
taxing jurisdictions. The decreases were partially offset by a reduction in the benefit from investment tax credits.

---

35



Financial Condition

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

Net cash provided by (used for):

---

|                     |  |   |        |   |   |        |   | Percent Change |       
|-------------------- |  | - | ------ | - | - | ------ | - | -------------- | ------
|
|                     | 
|Operating activities |  | $ | 7,039  |   | $ | 7,741  |   | $              | 8,199 
|Investing activities |  | $ | (4,949 | ) | $ | (5,627 | ) | $              | (9,966
|Financing activities |  | $ | (698   | ) | $ | (1,681 | ) | $              | (167  
|                     | 

Net cash provided by operating activities

The
increase in cash from operations primarily reflects higher EBITDA, partially offset by an increase in working capital requirements and lower dividends from
our unconsolidated businesses. Operating cash flows for 1999 also include $630 in cash proceeds associated with the closings of our agreements to sublease wireless communications towers to Crown.
Additional closings are scheduled to occur in 2000.

EBITDA
is an indicator used by management to measure performance and ability to generate cash flow. EBITDA does not represent cash flows for the period, nor is it an alternative to operating income 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. Our
computation of EBITDA and EBITDA margin may not be comparable to the computation of similarly titled measures reported by other companies.

EBITDA
and EBITDA margins were favorably impacted by revenue growth in both 1999 and 1998, and by the adoption of SOP 98-1 in 1999. Offsetting these increases were increased spending to support growth
in our core wireline business, substantial increases in the wireless customer base and new initiatives such as Internet, wireless data, long distance and video.

Net cash used in investing activities

During
1999, we invested $6.2 billion for capital expenditures to support our wireline and wireless networks, to promote the introduction of new products and services and increase operating
efficiency and productivity. Significant investments are also being made to support deployment of ADSL and fast packet switching technologies as well as our IFITL initiative. Included in these
expenditures for 1999 are approximately $550 in costs related to the purchase and development of internal-use software.

During
1999, we announced a new business agreement with Qwest that included our purchasing a ten percent stake for $3.5 billion. This transaction closed during May 1999. We initially
funded this purchase by utilizing existing cash reserves and issuing $2.5 billion in commercial paper.

During
1999, our Argentine wireless communications company won its bid to acquire additional PCS licenses. It will pay approximately $260 for the licenses and anticipates investing an additional $600
to build out the areas covered by these licenses.

Also
during 1999, we acquired an additional wireless license in Chile which will expand our service area to the entire country. We will pay approximately $90 for the license, and anticipate investing
an additional $80 to build out the areas covered by the license.

As
part of the reorganization of ownership interests in E-plus (see Note R to the consolidated financial statements) we have agreed to make up to $3 billion of loans to KPN
Royal Dutch Telecom (KPN) to be used for further wireless investments in Europe.

Net cash used in financing activities

During
1999, we purchased 66 million shares as part of a $3 billion repurchase plan announced in December 1998. Combined with 1998 repurchases under a previous plan, we have
reduced our number of outstanding shares by approximately 101 million since December 31, 1997. We completed the December 1998 buyback plan during May 1999.

36



Our
debt to total capitalization ratio was 53.1% at December 31, 1999 compared to 43.0% at December 31, 1998. The increase is a function of increases in short-term debt
attributable to higher net borrowings of commercial paper and the reduction in shareholders' equity, driven primarily by the effect of our stock buyback program.

At
February 28, 2000, we have shelf registration statements on file with the SEC under which $2.7 billion of debt securities could be publicly offered.

Subsequent Refinancing

In
February 2000, we issued $2 billion of long-term debt, consisting of $1 billion of Ten-year, 73/4% Notes and $1 billion of
Thirty-year, 77/8% Debentures. We received total proceeds of $1,974, which will be used to retire commercial paper.

---

Market Risk

We
are exposed to various types of market risk in the normal course of business, including the impact of interest rate changes and foreign currency exchange rate fluctuations. To manage this exposure,
we employ risk management strategies including the use of derivatives such as interest rate swap agreements, foreign currency forwards and currency swap agreements. We do not hold derivatives for
trading purposes.

Interest Rate Risk

Our
objective in managing interest rate risk is to maintain a balance of fixed and variable rate debt that will lower our overall borrowing costs within reasonable risk parameters. Interest rate swaps
are used to convert a portion of our debt portfolio from a variable rate to a fixed rate or from a fixed rate to a variable rate.

Foreign Exchange Risk

Our
objective in managing foreign exchange risk is to protect against cash flow and earnings volatility resulting from changes in foreign exchange rates. Short-term foreign currency
transactions and commitments expose us to changes in foreign exchange rates. We occasionally enter into forward contracts and similar instruments to mitigate the potential impacts of such risks.

Our
equity investments in Brazil hold US Dollar-denominated liabilities and recognize foreign currency gains or losses when converting those liabilities into local currency. Our proportionate share of
these liabilities was $1.0 billion at December 31, 1999. The equity income related to these investments is subject to fluctuations in the US Dollar/Brazilian Real exchange rate. (See
"MD&AOperating EnvironmentInternational Operations.")

We
are subject to risk from changes in foreign exchange rates for our international operations which use a foreign currency as their functional currency and are translated to US Dollars. Such changes
result in cumulative translation adjustments which are included in shareholders' equity. We have translation exposure to various foreign currencies with the most significant being the Brazilian Real
and the German Mark. Operations in countries with hyperinflationary economies consider the US Dollar the functional currency and reflect translation gains and losses in the determination of net
income.

Risk Sensitivity

Our
use of derivative financial instruments is designed to mitigate foreign currency and interest rate risks, although to some extent they expose us to credit risks. The credit risks associated with
these instruments are controlled through the evaluation and continual monitoring of the creditworthiness of the counterparties. In the event that a counterparty fails to meet the terms of a contract
or agreement, our exposure is limited to the current value at that time of the currency rate or interest rate differential and not the full notional or contract amount. Such contracts and agreements
have been executed with creditworthy financial institutions, and as such, we consider the risk of nonperformance to be remote.

37



The
following table provides information, by maturity date, about our interest rate sensitive financial instruments, which consist of fixed and variable rate debt obligations. Fair values for the
majority of our long-term debt obligations are based on quotes from dealers.

---

|                      |  | 2000 |       | 2001 |   | 2002 |   | 2003 |      | 2004 |   | Thereafter |   | Total
Recorded
Amount |      | Fair Value
|--------------------- |  | ---- | ----- | ---- | - | ---- | - | ---- | ---- | ---- | - | ---------- | - | --------------------- | ---- | ----------
|                     
|Debt:                 |  |      |       |      |   |      |   |      |      |      |   |            |   |                       |      |           
|Fixed rate debt       |  | $    | 7,641 |      | $ | 203  |   | $    | 320  |      | $ | 646        |   | $                     | 317  |           
|Average interest rate |  |      | 6.00  | %    |   | 8.49 | % |      | 7.66 | %    |   | 6.51       | % |                       | 6.22 | %         
|Variable rate debt    |  | $    | 4     |      | $ | 236  |   | $    | 68   |      | $ | 115        |   | $                     | 164  |           
|Average interest rate |  |      | 7.26  | %    |   | 7.62 | % |      | 6.44 | %    |   | 6.43       | % |                       | 6.20 | %         
|                     

---

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 being implemented by the Federal Communications Commission (FCC) strongly favor access reform, whereby the historical subsidy for local service that is contained in network access
charges paid by long distance carriers is eliminated. Unless compensatory changes are adopted, such as Universal Service Fund contribution mandates, our revenues from this source, which constituted
approximately 6% of our revenues during 1999, are at risk. In addition, other aspects of access charge regulation and Universal Service Fund contribution requirements that are applicable to local
service carriers such as BST are also under consideration and 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 accelerate the growth of local service competition by aggressively utilizing such power.

We
have petitioned the FCC for permission under the 1996 Act to offer full long distance services in South Carolina and Louisiana. The FCC has denied both petitions. We have been testing our
operations support systems in Georgia and expect to file with the FCC during the second quarter of 2000. We do not know if the FCC will require further changes in our network interconnection elements
and operating systems before it will approve such petitions. These changes could result in significant additional expenses and promote local service competition.

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.
These commissions generally may require price reductions and other concessions from us as a condition to approving these plans.

BST
is involved in numerous legal proceedings associated with state and federal regulatory matters, the disposition of which could materially impact its operating results and prospects. See
Note O to the consolidated financial statements.

Competition

There
are many competitive forces that impact our businesses. The 1996 Act removed the regulatory barriers to local service competition in the wireline market and required incumbent carriers such as
us to open our networks to other carriers. In the wireless market, the auction of PCS licenses has created as many as six new wireless competitors in domestic markets in addition to resellers, and the
deregulation of international communications markets has introduced new global competitors to nearly all of our international businesses.

We
expect local service competition to steadily increase, particularly with respect to business customers. While competition for local service revenues could adversely affect our results of
operations, opening of local markets can favorably impact qualification to offer in-region interLATA long distance wireline services.

The
presence of multiple aggressive competitors in our domestic and international wireless markets makes it more difficult to attract new customers and retain existing ones. Furthermore, while we do
not compete primarily on the basis of price, low prices offered by

38



competitors
attempting to obtain market share have pressured us to reduce prices and develop pricing plans attractive to lower usage customers. These trends are expected to continue and could
adversely affect our results of operations in the future.

We
plan to compete through aggressive marketing, competitive pricing, bundled services and technical innovation. We will offer consumers a full range of serviceslocal, long distance,
Internet access, wireless and morewhile remaining committed to our high level of customer service and value.

Technology

We
are continually upgrading our networks with digital and optical technologies, making them capable of delivering a full complement of voice and data services. This modernization of the network is
critical to our success in providing the data connectivity demanded by customers and to compete with fiber networks being constructed or currently utilized by start-ups and cable
companies. This effort will require investment of significant amounts of capital in the future.

Digital
wireless technology is rapidly evolving and the development of a common roaming platform for digital wireless technologies could result in more intense competition and have an adverse effect
on our results of operations.

International Operations

Our
reporting currency is the US 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 US 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 US Dollar will cause revenues 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. 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 volatile, which may impair our operations. This volatility could make it difficult for us to continue development of our business,
generate revenues or achieve or sustain profitability. Historically, volatility has 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 US. Recent projections indicate that some Latin American countries, including Brazil and Argentina, will experience stagnant or negative growth rates in
terms of their per capita gross domestic product. Poor social, political and economic conditions may inhibit use of our services which may adversely impact our business.

We
are currently considering issuing a separately traded stock that would track our Latin American operations.

Year 2000 Disclosure

In
1997, we initiated a company-wide program to ensure that our date-sensitive information, telephony and business systems, and other certain equipment would properly recognize
the Year 2000 as a result of the century change on January 1, 2000. The program focused on the hardware, software, embedded chips, third-party vendors and suppliers as well as third-party
networks that were associated with the identified systems. We substantially completed the program during third quarter 1999 and our systems did not experience any significant disruptions as a result
of the century change. In total, we have spent approximately $240 in external costs on this program through December 31, 1999 and do not expect to incur any significant additional costs related
to Year 2000 compliance subsequent to 1999.

New Accounting Pronouncements

In
June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". Among other

39



provisions,
it requires that entities recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Gains and losses
resulting from changes in the fair values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The effective date of this
standard was delayed via the issuance of SFAS No. 137. The effective date for SFAS No. 133 is now for fiscal years beginning after June 15, 2000, though earlier adoption is
encouraged and retroactive application is prohibited. This means that the standard must be adopted by us no later than January 1, 2001. We do not expect the adoption of this standard to have a
material impact on results of operations, financial position or cash flows.

40



Cautionary Language Concerning Forward-Looking Statements

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

Factors
that could affect future operating results, financial position and cash flows and could cause actual results to differ materially from those expressed in the forward-looking statements are:



This
list of cautionary statements is not exhaustive. These and other developments could cause our actual results to differ materially from those forecast or implied in the forward-looking statements.
You are cautioned not to place undue reliance on these forward-looking statements, which are current only as of the date of this filing. We have no obligation, and we do not intend, to publicly
release the results of any revisions to these forward-looking statements to reflect events or circumstances after the date of this filing.

41



REPORT OF MANAGEMENT

To
the Shareholders of BellSouth Corporation:

These
financial statements have been prepared in conformity with generally accepted accounting principles and have been audited by PricewaterhouseCoopers LLP, independent accountants,
whose report is contained herein.

The
integrity and objectivity of the data in these financial statements, including estimates and judgments relating to matters not concluded by the end of the year, are
the responsibility of the management of BellSouth. Management has also prepared all other information included therein unless indicated otherwise.

Management
maintains a system of internal accounting controls which is continuously reviewed and evaluated. However, there are inherent limitations that should be
recognized in considering the assurances provided by any system of internal accounting controls. The concept of reasonable assurance recognizes that the cost of a system of internal accounting
controls should not exceed, in management's judgment, the benefits to be derived. Management believes that BellSouth's system does provide reasonable assurance that the transactions are executed in
accordance with management's general or specific authorizations and are recorded properly to maintain accountability for assets and to permit the preparation of financial statements in conformity with
generally accepted accounting principles. Management also believes that this system provides reasonable assurance that access to assets is permitted only in accordance with management's
authorizations, that the recorded accountability for assets is compared with the existing assets at reasonable intervals and that appropriate action is taken with respect to any differences.
Management also seeks to assure the objectivity and integrity of its financial data by the careful selection of its managers, by organizational arrangements that provide an appropriate division of
responsibility and by communications programs aimed at assuring that its policies, standards and managerial authorities are understood throughout the organization. Management is also aware that
changes in operating strategy and organizational structure can give rise to disruptions in internal controls. Special attention is given to controls while the changes are being implemented.

Management
maintains a strong internal auditing program that independently assesses the effectiveness of the internal controls and recommends possible improvements
thereto. In addition, as part of its audit of these financial statements, PricewaterhouseCoopers LLP completed a review of the accounting controls to establish a basis for reliance thereon in
determining the nature, timing and extent of audit tests to be applied. Management has considered the internal auditor's and PricewaterhouseCoopers LLP's recommendations concerning the system of
internal controls and has taken actions that it believes are cost-effective in the circumstances to respond appropriately to these recommendations. Management believes that the system of
internal controls was adequate to accomplish the objectives discussed herein.

Management
also recognizes its responsibility for fostering a strong ethical climate so that BellSouth's affairs are conducted according to the highest standards of
personal and corporate conduct. This responsibility is communicated to all employees through policies and guidelines addressing such issues as conflict of interest, safeguarding of BellSouth's real
and intellectual properties, providing equal employment opportunities and ethical relations with customers, suppliers and governmental representatives. BellSouth maintains a program to assess
compliance with these policies and our ethical standards through its Senior Vice PresidentCorporate Compliance and Corporate Secretary.

|/s/ F. Duane Ackerman
F. Duane Ackerman
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER |  |  | 
|----------------------------------------------------------------------------------------- |  |  | 
|/s/ Ronald M. Dykes
Ronald M. Dykes
CHIEF FINANCIAL OFFICER                               |  |  | 

February
28, 2000

41



AUDIT COMMITTEE CHAIRMAN'S LETTER

The
Audit Committee of the Board of Directors consists of four members who are neither officers nor employees of BellSouth Corporation. Information as to these persons, as well as their duties, is
provided in the Proxy Statement. The Audit Committee met seven times during 1999 and reviewed with the Chief Corporate Auditor, PricewaterhouseCoopers LLP and management current audit activities,
plans and the results of selected internal audits. The Audit Committee also reviewed the objectivity of the financial reporting process and the adequacy of internal controls. The Audit Committee
recommended, subject to shareholder ratification, the appointment of the independent accountants and considered factors relating to their independence. In addition, the Audit Committee provided
guidance in matters regarding ethical considerations and business conduct, reviewed the operations of political action committees and monitored compliance with laws and regulations. The Audit
Committee met privately with the Chief Corporate Auditor and PricewaterhouseCoopers LLP on occasion to encourage confidential discussions as to any auditing matters.

/s/ REUBEN V. ANDERSON

---

Reuben V. Anderson
CHAIRMAN, AUDIT COMMITTEE

February
28, 2000

REPORT OF INDEPENDENT ACCOUNTANTS

To
the Shareholders
BellSouth Corporation

In
our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, cash flows and shareholders' equity and comprehensive income present fairly, in all
material respects, the financial position of BellSouth Corporation and its subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

As
discussed in Note A to the consolidated financial statements, in 1999 BellSouth Corporation adopted AICPA Statement of Position 98-1 and changed its method of accounting for internal-use software
development costs.

/s/PRICEWATERHOUSECOOPERSLLP

---

Atlanta,
Georgia
February 3, 2000 (except for Note R, as to which the date is February 24, 2000)

43



BELLSOUTH CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

|                                                               |  | For the years ended
December 31, |       
|-------------------------------------------------------------- |  | -------------------------------- | ------
|
|Operating Revenues:                                            |  |                                  |       
|Wireline communications:                                       |  |                                  |       
|Local service                                                  |  | $                                | 10,887
|Network access                                                 |  |                                  | 4,761 
|Long distance                                                  |  |                                  | 608   
|Other wireline                                                 |  |                                  | 1,198 
|                                                               |  |                                  |       
|Total wireline communications                                  |  |                                  | 17,454
|Domestic wireless                                              |  |                                  | 3,191 
|International operations                                       |  |                                  | 2,289 
|Advertising and publishing                                     |  |                                  | 2,010 
|Other                                                          |  |                                  | 280   
|                                                               |  |                                  |       
|Total Operating Revenues                                       |  |                                  | 25,224
|                                                               |  |                                  |       
|Operating Expenses:                                            |  |                                  |       
|Operational and support expenses                               |  |                                  | 13,796
|Depreciation and amortization                                  |  |                                  | 4,671 
|Provision for asset impairment                                 |  |                                  | 320   
|                                                               |  |                                  |       
|Total Operating Expenses                                       |  |                                  | 18,787
|                                                               |  |                                  |       
|Operating Income                                               |  |                                  | 6,437 
|Interest Expense                                               |  |                                  | 1,030 
|Gain on Sale of Operations                                     |  |                                  | 55    
|Net Equity in Earnings (Losses) of Unconsolidated Businesses   |  |                                  | (169  
|Other Income, net                                              |  |                                  | 195   
|                                                               |  |                                  |       
|Income Before Income Taxes                                     |  |                                  | 5,488 
|Provision for Income Taxes                                     |  |                                  | 2,040 
|                                                               |  |                                  |       
|Income Before Extraordinary losses                             |  |                                  | 3,448 
|Extraordinary loss on Early Extinguishment Of Debt, net of tax |  |                                  |      
|                                                               |  |                                  |       
|Net Income                                                     |  | $                                | 3,448 
|                                                               |  |                                  |       
|Weighted-Average Common Shares Outstanding:                    |  |                                  |       
|Basic                                                          |  |                                  | 1,898 
|Diluted                                                        |  |                                  | 1,916 
|Earnings Per Share:                                            |  |                                  |       
|Basic                                                          |  | $                                | 1.82  
|Diluted                                                        |  | $                                | 1.80  
|Dividends Declared Per Common Share                            |  | $                                | .76   

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

44



BELLSOUTH CORPORATION

CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

|                                                                                         |  | December 31,
1999 |        | December 31,
1998 |  
|---------------------------------------------------------------------------------------- |  | ----------------- | ------ | ----------------- | -
|ASSETS                                                                                   |  |                   |        |                   |  
|Current Assets:                                                                          |  |                   |        |                   |  
|Cash and cash equivalents                                                                |  | $                 | 1,069  |                   | $
|Temporary cash investments                                                               |  |                   | 323    |                   |  
|Accounts receivable, net of allowance for uncollectibles of $312 and $251                |  |                   | 5,177  |                   |  
|Material and supplies                                                                    |  |                   | 451    |                   |  
|Other current assets                                                                     |  |                   | 367    |                   |  
|                                                                                         |  |                   |        |                   |  
|Total Current Assets                                                                     |  |                   | 7,387  |                   |  
|                                                                                         |  |                   |        |                   |  
|Investments and Advances                                                                 |  |                   | 6,097  |                   |  
|Property, Plant and Equipment, net                                                       |  |                   | 24,631 |                   |  
|Deferred Charges and Other Assets                                                        |  |                   | 1,564  |                   |  
|Intangible Assets, net                                                                   |  |                   | 3,774  |                   |  
|                                                                                         |  |                   |        |                   |  
|Total Assets                                                                             |  | $                 | 43,453 |                   | $
|                                                                                         |  |                   |        |                   |  
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                     |  |                   |        |                   |  
|Current Liabilities:                                                                     |  |                   |        |                   |  
|Debt maturing within one year                                                            |  | $                 | 7,653  |                   | $
|Accounts payable                                                                         |  |                   | 1,961  |                   |  
|Other current liabilities                                                                |  |                   | 3,781  |                   |  
|                                                                                         |  |                   |        |                   |  
|Total Current Liabilities                                                                |  |                   | 13,395 |                   |  
|                                                                                         |  |                   |        |                   |  
|Long-Term Debt                                                                           |  |                   | 9,113  |                   |  
|                                                                                         |  |                   |        |                   |  
|Noncurrent Liabilities:                                                                  |  |                   |        |                   |  
|Deferred income taxes                                                                    |  |                   | 2,705  |                   |  
|Unamortized investment tax credits                                                       |  |                   | 126    |                   |  
|Other noncurrent liabilities                                                             |  |                   | 3,299  |                   |  
|                                                                                         |  |                   |        |                   |  
|Total Noncurrent Liabilities                                                             |  |                   | 6,130  |                   |  
|                                                                                         |  |                   |        |                   |  
|Shareholders' Equity:                                                                    |  |                   |        |                   |  
|Common stock, $1 par value (4,400 shares authorized; 1,883 and 1,950 shares outstanding) |  |                   | 2,020  |                   |  
|Paid-in capital                                                                          |  |                   | 6,771  |                   |  
|Retained earnings                                                                        |  |                   | 11,456 |                   |  
|Accumulated other comprehensive income                                                   |  |                   | (358   | )                 |  
|Shares held in trust and treasury                                                        |  |                   | (4,798 | )                 |  
|Guarantee of ESOP debt                                                                   |  |                   | (276   | )                 |  
|                                                                                         |  |                   |        |                   |  
|Total Shareholders' Equity                                                               |  |                   | 14,815 |                   |  
|                                                                                         |  |                   |        |                   |  
|Total Liabilities and Shareholders' Equity                                               |  | $                 | 43,453 |                   | $
|                                                                                         |  |                   |        |                   |  

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

45



BELLSOUTH CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS)

|                                                             |  | For the Years Ended
December 31, |       
|------------------------------------------------------------ |  | -------------------------------- | ------
|
|Cash Flows from Operating Activities:                        |  |                                  |       
|Net income                                                   |  | $                                | 3,448 
|Adjustments to net income:                                   |  |                                  |       
|Depreciation and amortization                                |  |                                  | 4,671 
|Provision for asset impairment                               |  |                                  | 320   
|Provision for uncollectibles                                 |  |                                  | 365   
|Pension income                                               |  |                                  | (421  
|Net equity in losses (earnings) of unconsolidated businesses |  |                                  | 169   
|Dividends received from unconsolidated businesses            |  |                                  | 97    
|Minority interests in income of subsidiaries                 |  |                                  | 57    
|Deferred income taxes and investment tax credits             |  |                                  | (54   
|Gain on sale of operations                                   |  |                                  | (55   
|Additional income from settlement of loans                   |  |                                  |      
|Extraordinary loss on early extinguishment of debt           |  |                                  |      
|Net change in:                                               |  |                                  |       
|Accounts receivable and other current assets                 |  |                                  | (860  
|Accounts payable and other current liabilities               |  |                                  | 49    
|Deferred charges and other assets                            |  |                                  | (86   
|Other liabilities and deferred credits                       |  |                                  | 316   
|Other reconciling items, net                                 |  |                                  | 183   
|                                                             |  |                                  |       
|Net cash provided by operating activities                    |  |                                  | 8,199 
|                                                             |  |                                  |       
|Cash Flows from Investing Activities:                        |  |                                  |       
|Capital expenditures                                         |  |                                  | (6,200
|Investments in and advances to unconsolidated businesses     |  |                                  | (3,799
|Purchases of licenses and other intangible assets            |  |                                  | (240  
|Proceeds from sale of operations                             |  |                                  | 215   
|Purchases of short-term investments                          |  |                                  | (221  
|Proceeds from disposition of short-term investments          |  |                                  | 59    
|Proceeds from repayment of loans and advances                |  |                                  | 83    
|Other investing activities, net                              |  |                                  | 137   
|                                                             |  |                                  |       
|Net cash used for investing activities                       |  |                                  | (9,966
|                                                             |  |                                  |       
|Cash Flows from Financing Activities:                        |  |                                  |       
|Net borrowings (repayments) of short-term debt               |  |                                  | 4,070 
|Proceeds from long-term debt                                 |  |                                  | 522   
|Repayments of long-term debt                                 |  |                                  | (217  
|Dividends paid                                               |  |                                  | (1,449
|Purchase of treasury shares                                  |  |                                  | (3,120
|Other financing activities, net                              |  |                                  | 27    
|                                                             |  |                                  |       
|Net cash used for financing activities                       |  |                                  | (167  
|                                                             |  |                                  |       
|Net (Decrease) Increase in Cash and Cash Equivalents         |  |                                  | (1,934
|Cash and Cash Equivalents at Beginning of Period             |  |                                  | 3,003 
|                                                             |  |                                  |       
|Cash and Cash Equivalents at End of Period                   |  | $                                | 1,069 
|                                                             |  |                                  |       

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

46



BELLSOUTH CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

AND COMPREHENSIVE INCOME (IN MILLIONS)

|                                           |  |       |  |      |   | Amount |      
|------------------------------------------ |  | ----- |  | ---- | - | ------ | -----
|
|
|
|
|Balance at December 31, 1996               |  | 1,009 |  | (18  | ) | $      | 1,009
|Net income                                 |  |       |  |      |   |        |      
|Other comprehensive income, net of tax:    |  |       |  |      |   |        |      
|Foreign currency translation adjustments   |  |       |  |      |   |        |      
|                                           |  |       |  |      |   |        |      
|Total comprehensive income                 |  |       |  |      |   |        |      
|Dividends declared                         |  |       |  |      |   |        |      
|Share issuance for employee benefit plans  |  |       |  | 2    |   |        |      
|Share issuance by grantor trust            |  | 1     |  | (1   | ) |        | 1    
|Acquisitionrelated transactions           |  |       |  | 2    |   |        |      
|Purchase of treasury stock                 |  |       |  | (3   | ) |        |      
|ESOP activities and related tax benefit    |  |       |  |      |   |        |      
|                                           |  |       |  |      |   |        |      
|Balance at December 31, 1997               |  | 1,010 |  | (18  | ) | $      | 1,010
|                                           |  |       |  |      |   |        |      
|Two-for-one stock split (Note H)           |  | 1,010 |  | (19  | ) |        | 1,010
|Net income                                 |  |       |  |      |   |        |      
|Other comprehensive income, net of tax:    |  |       |  |      |   |        |      
|Foreign currency translation adjustment    |  |       |  |      |   |        |      
|                                           |  |       |  |      |   |        |      
|Total comprehensive income                 |  |       |  |      |   |        |      
|Dividends declared                         |  |       |  |      |   |        |      
|Share issuance for employee benefit plans  |  |       |  | 3    |   |        |      
|Acquisitionrelated transactions           |  |       |  | 1    |   |        |      
|Purchase of treasury stock                 |  |       |  | (36  | ) |        |      
|Purchase of stock by grantor trusts        |  |       |  | (1   | ) |        |      
|Tax benefit related to stock options       |  |       |  |      |   |        |      
|ESOP activities and related tax benefit    |  |       |  |      |   |        |      
|                                           |  |       |  |      |   |        |      
|Balance at December 31, 1998               |  | 2,020 |  | (70  | ) | $      | 2,020
|                                           |  |       |  |      |   |        |      
|Net income                                 |  |       |  |      |   |        |      
|Other comprehensive income, net of tax:    |  |       |  |      |   |        |      
|Foreign currency translation adjustment    |  |       |  |      |   |        |      
|Net unrealized losses on securities        |  |       |  |      |   |        |      
|Minimum pension liability adjustment       |  |       |  |      |   |        |      
|                                           |  |       |  |      |   |        |      
|Total comprehensive income                 |  |       |  |      |   |        |      
|Dividends declared                         |  |       |  |      |   |        |      
|Share issuances for employee benefit plans |  |       |  | 2    |   |        |      
|Purchase of treasury stock                 |  |       |  | (70  | ) |        |      
|Purchase of stock by grantor trust         |  |       |  |      |   |        |      
|Tax benefit related to stock options       |  |       |  |      |   |        |      
|ESOP activities and related tax benefit    |  |       |  |      |   |        |      
|                                           |  |       |  |      |   |        |      
|Balance at December 31, 1999               |  | 2,020 |  | (138 | ) | $      | 2,020
|                                           |  |       |  |      |   |        |      

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

47





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

NOTE AACCOUNTING POLICIES

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

ORGANIZATION

We
are an international telecommunications company headquartered in Atlanta, Georgia. For management purposes, our operations are organized into four reportable segments: wireline communications;
domestic wireless; international operations; advertising and publishing; and an "other" segment.

BASIS OF PRESENTATION

The
consolidated financial statements include the accounts of BellSouth and subsidiaries in which we have a controlling financial interest. Investments in businesses which we do not control, but have
the ability to exercise significant influence over operations and financial policies, are accounted for using the equity method. We report our results on a calendar-year basis, except for
our domestic wireless and international operations which we report on a one-month lag basis. All significant intercompany transactions and accounts have been eliminated. Certain amounts in
the prior period consolidated financial statements have been reclassified to conform to the current year's presentation.

USE OF ESTIMATES

Our
consolidated financial statements have been prepared in accordance with generally accepted accounting principles. Such financial statements include estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the amounts of revenues and expenses. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

We
consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. Investments with an original maturity of over three months to one year are not
considered cash equivalents and are included as temporary cash investments in the consolidated balance sheets. Interest income on cash equivalents, temporary cash investments and other
interest-bearing instruments was $144 for 1999, $313 for 1998 and $193 for 1997.

MATERIAL AND SUPPLIES

New
and reusable material is carried in inventory, principally at average original cost, except that specific costs are used in the case of large individual items. Nonreusable material is carried at
estimated salvage value.

PROPERTY, PLANT AND EQUIPMENT

The
investment in property, plant and equipment is stated at original cost. For plant dedicated to providing regulated telecommunications services, depreciation is based on the composite group
remaining life method of depreciation and straight-line composite rates determined on the basis of equal life groups of certain categories of telephone plant acquired in a given year. When
depreciable telephone plant is disposed of, the original cost less net salvage value is charged to accumulated depreciation. The cost of other property, plant and equipment is depreciated using either
straight-line or accelerated methods over the estimated useful lives of the assets. Gains or losses on disposal of other depreciable property, plant and equipment are recognized in the
year of disposition as an element of other income, net.

INTANGIBLE ASSETS

Intangible
assets consist primarily of the excess consideration paid over the fair value of net tangible assets acquired in business combinations, and include amounts allocated to acquired licenses
and customer lists. These assets are being amortized using the straight-line and accelerated methods over periods of benefit that do not exceed 40 years. Intangible assets also
include amounts capitalized for computer software costs, which are amortized over periods of benefit of 3 to 5 years.

The
carrying value of intangible assets is periodically reviewed to determine whether such intangibles are fully recoverable from projected net cash flows of the related business unit. Amortization of
such intangibles was $273 for 1999, $135 for 1998 and $58 for 1997. Accumulated amortization of intangibles was $740 at December 31, 1999 and $462 at December 31, 1998.

FOREIGN CURRENCY

Assets
and liabilities of foreign subsidiaries and equity investees with a functional currency other than US Dollars are translated into US Dollars at exchange rates in effect at the end of the
reporting period. Foreign entity revenues and expenses are translated into US

48



Dollars
at the average rates that prevailed during the period. The resulting net translation gains and losses are reported as foreign currency translation adjustments in shareholders' equity as a
component of other accumulated comprehensive income. Operations in countries with hyperinflationary economies consider the US Dollar the functional currency.

Exchange
gains and losses on transactions and equity investments denominated in a currency other than their functional currency are generally included in results of operations as incurred unless the
transactions are hedged (see "Derivative Financial Instruments" below).

DERIVATIVE FINANCIAL INSTRUMENTS

We
generally enter into derivative financial instruments only for hedging purposes. Deferral accounting is applied when the derivative reduces the risk of the underlying hedged item effectively as a
result of high inverse correlation with the value of the underlying exposure. If a derivative instrument either initially fails or later ceases to meet the criteria for deferral or settlement
accounting, any subsequent gains or losses are recognized currently in income.

REVENUE RECOGNITION

Revenues
are recognized when earned. Certain revenues derived from local telephone and wireless services are billed monthly in advance and are recognized the following month when services are
provided. Print advertising and publishing revenues and related directory costs are recognized upon publication of directories. Revenues derived from other telecommunications services, principally
network access, long distance and wireless airtime usage, are recognized monthly as services are provided. Allowances for uncollectible billed services are adjusted monthly. The provision for such
uncollectible accounts was $365 for 1999, $334 for 1998 and $304 for 1997.

MAINTENANCE AND REPAIRS

The
cost of maintenance and repairs of plant, including the cost of replacing minor items not resulting in substantial betterments, is charged to operating expenses.

ADVERTISING

We
expense advertising costs as they are incurred. Our total advertising expense was $539 for 1999, $509 for 1998 and $395 for 1997.

INCOME TAXES

The
consolidated balance sheets reflect deferred tax balances associated with the anticipated tax impact of future income or deductions implicit in the consolidated balance sheets in the form of
temporary differences. Temporary differences primarily result from the use of accelerated methods and shorter lives in computing depreciation for tax purposes.

For
financial reporting purposes, we are amortizing deferred investment tax credits earned prior to the 1986 repeal of the investment tax credit and also some transitional credits earned after the
repeal. The credits are being amortized as a reduction to the provision for income taxes over the estimated useful lives of the assets to which the credits relate.

EARNINGS PER SHARE

Basic
earnings per share is computed based on the weighted-average number of common shares outstanding during each year. 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:

|                                      |  | 1999  |  | 1998  |  | 1997 
|------------------------------------- |  | ----- |  | ----- |  | -----
|Basic common shares outstanding       |  | 1,898 |  | 1,970 |  | 1,984
|Incremental shares from stock options |  | 18    |  | 14    |  | 5    
|                                      |  |       |  |       |  |      
|Diluted common shares outstanding     |  | 1,916 |  | 1,984 |  | 1,989
|                                      |  |       |  |       |  |      

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

ADOPTION OF NEW ACCOUNTING STANDARD

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

49



on
income before income taxes, net income and earnings per share were as follows:

|                           |  | 1999
|-------------------------- |  | ----
|Income before income taxes |  | $   
|                           |  |     
|Net income                 |  | $   
|                           |  |     
|Earnings per share         |  | $   
|                           |  |     

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

RECENT ACCOUNTING PRONOUNCEMENTS

In
June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". Among other provisions, it requires that
entities recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Gains and losses resulting from changes in the
fair values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The effective date of this standard was delayed via the
issuance of SFAS No. 137. The effective date for SFAS No. 133 is now for fiscal years beginning after June 15, 2000, though earlier adoption is encouraged and retroactive
application is prohibited. This means that the standard must be adopted by us no later than January 1, 2001. We do not expect the adoption of this standard will have a material impact on
results of operations, financial position or cash flows.

NOTE BPARTNERSHIPS, ACQUISITIONS AND DIVESTITURES

We
have completed various transactions to further our strategy of expanding our core operations and divested of interests that no longer meet our strategic objectives. A summary of significant
transactions follows:

DOMESTIC WIRELESS

Our
domestic wireless equity method investments consist primarily of noncontrolling interests in partnerships serving the Los Angeles and Houston/ Galveston Metropolitan Service Areas. In 1998, we
contributed our interests in these partnerships into a new joint venture with AT&T. AT&T contributed its ownership interests and $1,000 into the joint venture. Our ownership shares changed from 60.0%
to 44.4% for Los Angeles, from 43.6% to 44.4% for Houston and from 36.6% to 38.8% for Galveston. As a result of the reorganization, our proportionate share of the net assets of the new venture
exceeded our aggregate book investment balance. The related excess totaled $408 at December 31, 1999 and $422 at December 31, 1998, and is being amortized into income using the
straight-line method over a period of approximately 30 years.

INTERNATIONAL OPERATIONS

1999

We
invested $20 in a venture in Guatemala that won rights to three PCS licenses which cover a substantial portion of the country.

We
also raised our ownership interest in our Peruvian communications company through a series of transactions totalling $238, increasing our ownership from 59% to 97%.

1998

We
purchased additional ownership interests in existing wireless operations in Venezuela, Brazil and Ecuador for approximately $536.

1997

In
early 1997, we acquired a 59% interest in Tele2000, a Peruvian communications company, for approximately $136 in cash. We also acquired a 61% stake in one of two nationwide wireless telephone
companies in Ecuador for $155 in cash. We invested approximately $600 for noncontrolling stakes in two Brazilian ventures that won licenses to provide cellular services in São Paulo and
six northeastern Brazilian states.

In
September 1997, we acquired an additional 7% interest and gained a controlling seat on the Board of Directors of our wireless operation in Venezuela. Accordingly, we began consolidating the
operating results and cash flows after the step acquisition.

In
all transactions, the excess of the respective purchase price over the net book value of the assets acquired was allocated to customer lists, wireless licenses or goodwill. The excess consideration
paid over net assets acquired, along with other intangible assets, is being amortized using either straight-line or accelerated methods over periods of benefit, which do not exceed
40 years.

50



ADVERTISING AND PUBLISHING

During
1999, we acquired a non-controlling 40% interest in OESP Midia, a directory publishing business in Brazil for approximately $23. This investment is accounted for using the equity
method. In addition, we acquired 100% of Listel, a directory publishing business in Brazil, for total consideration of approximately $115. This business is accounted for using the consolidation
method.

For
both transactions, the excess of the respective purchase price over the net book value of the assets acquired was assigned to goodwill, and is being amortized over 15 years using the
straight-line method.

WIRELESS DATA

Prior
to 1998, we were partners with RAM Broadcasting Corporation (RAM) in an entity that owned and operated wireless data communications networks in the US, the UK and various other countries. During
1998, we purchased the issued and outstanding stock of RAM. As a result of the transaction, we hold a 90% interest in the US operations and a 100% interest in the UK operations. Accordingly, these
operations were consolidated at December 31, 1998.

DIVESTITURES

1999

We
sold our 100% interest in Honolulu Cellular to AT&T for total proceeds of $194. The pretax gain on the sale was $39 ($23 after tax).

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

1998

We
sold our 65% ownership interest in BellSouth New Zealand to Vodafone Group Plc for total proceeds of $254. The pretax gain on the sale was $180 ($110 after tax).

1997

We
sold a 24.5% interest in Optus Communications to Cable and Wireless, a UK telecommunications company. The pretax gain on the sale was $578 ($352 after tax).

We
sold a 20% interest in ITT World Directories (ITTWD) to ITT Corporation (ITT) for total proceeds of $265. The pretax gain on such sale was $209 ($128 after tax). The sale agreement contained
certain provisions that called for additional sales proceeds to be paid to us in the event that ITT subsequently resold ITTWD above a certain price. As a result of ITT's subsequent sale of ITTWD, we
received additional
proceeds that resulted in a pretax gain of $155 ($96 after tax) in the first quarter of 1998.

We
sold our 14.3% interest in Bell Communications Research, Inc. (Bellcore) for total proceeds of $65. The pretax gain on the sale, included as a component of other income, net, was $38 ($23
after tax).

NOTE CINVESTMENTS AND ADVANCES

We
hold investments in various domestic and international partnerships and ventures which are accounted for under the equity method. We also hold investments in equity securities which are accounted
for under the cost method. Investments and advances at December 31 consists of the following:

|                                                  |  | 1999 |       | 1998
|------------------------------------------------- |  | ---- | ----- | ----
|Investments accounted for under
the equity method |  | $    | 1,938 |     
|Investments accounted for under
the cost method   |  |      | 3,469 |     
|Advances to and notes receivable
from affiliates  |  |      | 690   |     
|                                                  |  |      |       |     
|Investments and Advances                          |  | $    | 6,097 |     
|                                                  |  |      |       |     

EQUITY METHOD INVESTMENTS

Ownership
in equity investments at December 31 is as follows:

|                       |  | 1999  |  | 1998 
|---------------------- |  | ----- |  | -----
|AB Cellular (US)(1)    |  | 44.4% |  | 44.4%
|Abiatar (Uruguay)      |  | 46.0% |  | 46.0%
|BellSouth Guatemala(2) |  | 60.0% |  |     
|BellSouth Nicaragua(3) |  | 49.0% |  | 49.0%
|BellSouth Panama       |  | 43.7% |  | 42.0%
|BCPSão Paulo (Brazil) |  | 44.5% |  | 44.5%
|BSENortheast (Brazil) |  | 46.8% |  | 46.8%
|Cellcom (Israel)       |  | 34.8% |  | 34.8%
|E-Plus (Germany)       |  | 22.5% |  | 22.5%
|OESP Midia             |  | 40.0% |  |     
|Sonofon (Denmark)      |  | 46.5% |  | 46.5%
|Skycell (India)        |  | 24.5% |  | 24.5%
|                       |  |       |  |      

---

51





SUMMARY
FINANCIAL INFORMATION OF EQUITY INVESTEES

A
summary of combined financial information as reported by our equity investees is set forth below:

|                           |  | 1999 |       | 1998
|-------------------------- |  | ---- | ----- | ----
|Balance Sheet Information: |  |      |       |     
|Current assets             |  | $    | 2,619 |     
|Noncurrent assets          |  |      | 8,595 |     
|Current liabilities        |  |      | 1,505 |     
|Noncurrent liabilities     |  |      | 6,130 |     

|                              |  | 1999 |       | 1998 |   | 1997  |  
|----------------------------- |  | ---- | ----- | ---- | - | ----- | -
|Income Statement Information: |  |      |       |      |   |       |  
|Revenues                      |  | $    | 5,398 |      | $ | 3,786 |  
|Operating Income              |  |      | 450   |      |   | 165   |  
|Net Loss                      |  |      | (767  | )    |   | (116  | )

Brazil Devaluation

In
mid January 1999, the Brazilian Government changed its foreign exchange policy, extinguishing the exchange band through which it had managed the range of the fluctuation of the Real in
relation to the US Dollar, allowing the market to freely determine the exchange rate. As a consequence of this change, the Real devalued significantly in relation to the US Dollar in early 1999. The
devaluation and subsequent fluctuations in the exchange rate resulted in our Brazilian wireless properties recording net currency losses related to their net US Dollar-denominated liabilities. Our
share of the foreign currency losses was $308 for 1999.

COST METHOD INVESTMENTS

We
have investments in marketable securities, primarily common stocks, which are accounted for under the cost method. These investments are comprised primarily of a 10% equity interest in Qwest
Communications International Inc. and are classified as available-for-sale under SFAS 115. Under SFAS 115, available-for-sale
securities are required to be carried at their fair value, with unrealized gains and losses (net of income taxes) recorded in accumulated other comprehensive income (loss) in our statement of changes
in shareholders' equity and comprehensive income. The fair values of our investments in marketable securities are determined based on market quotations. The table below shows certain summarized
information related to these investments at December 31, 1999:

|                    |  | Cost |       | Gross
Unrealized
Gains |   | Gross
Unrealized
Losses |  | Fair
Value
|------------------- |  | ---- | ----- | ---------------------- | - | ----------------------- |  | ----------
|Investment in Qwest |  | $    | 3,500 |                        | $ |                        |  | $         
|Other investments   |  |      | 157   |                        |   | 130                     |  |           
|                    |  |      |       |                        |   |                         |  |           
|Total               |  | $    | 3,657 |                        | $ | 130                     |  | $         
|                    |  |      |       |                        |   |                         |  |           

We
held no significant investments in marketable securities at December 31, 1998.

ADVANCES AND NOTES RECEIVABLE

In
addition to our equity investments, we have made advances to our partnerships in Brazil and Israel. These advances bear interest varying at rates based on LIBOR, mature between 2004 and 2006, and
totaled $433 at December 31, 1999 and $437 at December 31, 1998.

We
have noncontrolling financial interests ranging from 70% to 80% in the CSL Ventures and 1155 Peachtree Associates real estate partnerships. We have notes receivable from and advances to these
partnerships totaling $161 at December 31, 1999 and 1998. The notes bear interest at rates ranging from 6.31% to 7.88% while the advances bear interest at the federal funds rate plus .30%.
Principal amounts outstanding at December 31, 1999 are due and payable to us between November 14, 2001 and January 15, 2038. The instruments require periodic payments of interest
and are collateralized by various real estate holdings.

From
1993 to 1998, we had a credit agreement with Prime South Diversified, Inc. (Prime) to provide up to $250 in financing. During 1998, Prime sold certain investments which collateralized the
loan. As specified in the loan agreement, we were repaid the full principal balance as well as amounts for contingent interest, prepayment penalties and regular interest. As a result, in 1998, we
recorded additional income of $102 ($62 after tax) for the amount related to the proceeds from contingent interest and prepayment penalties.

52



NOTE DPROPERTY, PLANT AND EQUIPMENT

Property,
plant and equipment is summarized as follows at December 31:

|                                   |  | Estimated
Depreciable
Lives
(In Years) |  | 1999 |        | 1998
|---------------------------------- |  | -------------------------------------- |  | ---- | ------ | ----
|Outside plant                      |  | 1220                                  |  | $    | 23,325 |     
|Central office equipment           |  | 810                                   |  |      | 21,302 |     
|Operating and other equipment      |  | 515                                   |  |      | 6,676  |     
|Building and building improvements |  | 2545                                  |  |      | 4,866  |     
|Furniture and fixtures             |  | 1015                                  |  |      | 2,995  |     
|Station equipment                  |  | 6                                      |  |      | 606    |     
|Land                               |  |                                       |  |      | 226    |     
|Plant under construction           |  |                                       |  |      | 1,013  |     
|                                   |  |                                        |  |      |        |     
|                                   |  |                                        |  |      | 61,009 |     
|Less: Accumulated depreciation     |  |                                        |  |      | 36,378 |     
|                                   |  |                                        |  |      |        |     
|Property, Plant and Equipment, net |  |                                        |  | $    | 24,631 |     
|                                   |  |                                        |  |      |        |     

ASSET IMPAIRMENT LOSS

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

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

NOTE EOTHER CURRENT LIABILITIES

Other
current liabilities are summarized as follows at December 31:

|                                       |  | 1999 |       | 1998
|-------------------------------------- |  | ---- | ----- | ----
|Advanced billing and customer deposits |  | $    | 944   |     
|Taxes accrued                          |  |      | 772   |     
|Salaries and wages payable             |  |      | 383   |     
|Interest and rents accrued             |  |      | 379   |     
|Dividends payable                      |  |      | 364   |     
|Compensated absences                   |  |      | 263   |     
|Deferred taxes                         |  |      | 193   |     
|Other                                  |  |      | 483   |     
|                                       |  |      |       |     
|Other Current Liabilities              |  | $    | 3,781 |     
|                                       |  |      |       |     

NOTE FDEBT

DEBT MATURING WITHIN ONE YEAR

Debt
maturing within one year is summarized as follows at December 31:

|                                                 |  | 1999 |       | 1998 |  
|------------------------------------------------ |  | ---- | ----- | ---- | -
|Short-term notes payable:                        |  |      |       |      |  
|Bank loans                                       |  | $    | 258   |      | $
|Commercial paper                                 |  |      | 6,896 |      |  
|Current maturities of long-term debt             |  |      | 499   |      |  
|                                                 |  |      |       |      |  
|Debt maturing within one year                    |  | $    | 7,653 |      | $
|                                                 |  |      |       |      |  
|Weighted-average interest rate at end of period: |  |      |       |      |  
|Bank loans                                       |  |      | 7.41  | %    |  
|Commercial Paper                                 |  |      | 5.90  | %    |  

We have committed credit lines aggregating $3,141 with various banks. Borrowings under the committed credit lines totaled $587 at December 31, 1999 and
$634 at December 31, 1998. We also maintain uncommitted lines of credit aggregating $580. Borrowings under the uncommitted lines of credit totaled $149 at December 31, 1999 and $45 at
December 31, 1998. There are no significant commitment fees or requirements for compensating balances associated with any lines of credit.

LONG-TERM DEBT

Long-term
debt, summarized below, consists primarily of debentures and notes issued by BellSouth Telecommunications (BST). Debt issued by BellSouth Capital Funding Corporation (Capital
Funding) is used to finance the businesses of BellSouth Enterprises and the unregulated subsidiaries of BST. We have guaranteed Capital Funding's debt securities. Interest

53



rates
and maturities in the table below are for the amounts outstanding at December 31:

|                                      |  |           |       | 1999 |       | 1998  |  
|------------------------------------- |  | --------- | ----- | ---- | ----- | ----- | -
|BellSouth Telecommunications, Inc.    |  |           |       |      |       |       |  
|4.38%6%                              |  | 20002045 |       | $    | 1,495 |       | $
|6.13%7%                              |  | 20002033 |       |      | 3,207 |       |  
|7.5%8.25%                            |  | 20322035 |       |      | 1,150 |       |  
|6.65%7%                              |  | 2095      |       |      | 665   |       |  
|                                      |  |           |       |      |       |       |  
|                                      |  |           |       |      | 6,517 |       |  
|BellSouth Capital Funding Corporation |  |           |       |     
|5.38%7.38%                           |  | 20022039 |       |      | 1,317 |       |  
|7.12%                                 |  | 2097      |       |      | 500   |       |  
|Guarantee of ESOP debt                |  |           |       |      |       |       |  
|9.13%9.19%                           |  |           | 391   |      |       | 467   |  
|Other                                 |  |           | 933   |      |       | 602   |  
|Unamortized discount, net of premium  |  |           | (46   | )    |       | (30   | )
|                                      |  |           |       |      |       |       |  
|                                      |  |           |       |      | 9,612 |       |  
|Current maturities                    |  |           | (499  | )    |       | (311  | )
|                                      |  |           |       |      |       |       |  
|Long-term debt                        |  | $         | 9,113 |      | $     | 8,715 |  
|                                      |  |           |       |      |       |       |  

Maturities
of long-term debt outstanding (principal amounts) at December 31, 1999 are summarized below. Maturities after the year 2004 include $500 principal amount of 6.65%
Debentures due in 2095. At December 31, 1999, such debentures had an accreted book value of $165.

|Maturities |  |   |      
|---------- |  | - | -----
|2000       |  | $ | 499  
|2001       |  |   | 439  
|2002       |  |   | 388  
|2003       |  |   | 761  
|2004       |  |   | 481  
|Thereafter |  |   | 7,425
|           |  |  
|Total      |  | $ | 9,993
|           |  |  

In
1998, BST issued $500 of 6% Reset Put Securities (REPS) due June 15, 2012. REPS are a debt instrument with embedded put and call option features. The REPS are subject to mandatory redemption
from the existing holders on June 15, 2002 through either (i) the exercise by the callholder of its right to purchase the REPS or (ii) the repurchase of the REPS by BST. If the
call option is exercised, the callholder will, based on BST's then current credit spreads, determine the interest to be paid on the REPS.

At
December 31, 1999, we had shelf registration statements on file with the Securities and Exchange Commission under which $4.7 billion of debt securities could be publicly offered.

NOTE GOTHER NONCURRENT LIABILITIES

Other
noncurrent liabilities are summarized as follows at December 31:

|                                                     |  | 1999 |       | 1998
|---------------------------------------------------- |  | ---- | ----- | ----
|Deferred credits                                     |  | $    | 798   |     
|Postretirement benefits other than pensions (Note I) |  |      | 697   |     
|Compensation related                                 |  |      | 625   |     
|Minority interests                                   |  |      | 391   |     
|Accrued pension cost (Note I)                        |  |      | 296   |     
|Postemployment benefits                              |  |      | 286   |     
|Other                                                |  |      | 206   |     
|                                                     |  |      |       |     
|Other noncurrent liabilities                         |  | $    | 3,299 |     
|                                                     |  |      |       |     

Deferred
credits are primarily comprised of deferred rental revenue generated by the sublease of our wireless communications towers. For more information, see Note P.

NOTE HSHAREHOLDERS' EQUITY

STOCK SPLIT

In
November 1998, our Board of Directors approved a two-for-one stock split effected in the form of a stock dividend. Each shareholder of record as of December 3,
1998 received on December 24, 1998 one additional share of common stock for each share owned as of the record date. As a result of the split, 1,010,156,851 shares were issued and $1,010 was
transferred from paid-in capital to common stock. Also in November 1998, our Board of Directors approved an increase in the number of authorized shares of common stock to
4,400,000,000 from 2,200,000,000. Amounts related to common shares for all periods presented have been restated to reflect the stock split.

PREFERRED STOCK AUTHORIZED

Our
articles of incorporation authorize 100 million shares of cumulative first preferred stock having a par value of $1 per share, of which 30 million shares have been reserved and
designated series B for possible issuance under a shareholder rights plan. As of December 31, 1999, no preferred shares had been issued. The series A first preferred stock was
created

54



for
a previous shareholder rights plan which has expired.

SHAREHOLDER RIGHTS PLAN

In
1999, we adopted a shareholder rights plan by declaring a dividend of one right for each share of common stock then outstanding and to be issued thereafter. Each right entitles shareholders to buy
one one-thousandth of a share of series B first preferred stock for $200.00 per share. The rights may be exercised only if a person or group acquires 10% of the common stock of
BellSouth without the prior approval of the Board of Directors or announces a tender or exchange offer that would result in ownership of 10% or more of the common stock. If a person or group acquires
10% of BellSouth's stock without prior Board approval, other shareholders are then allowed to purchase BellSouth common stock (or units of preferred stock with the same voting and economic
characteristics) at half price. The rights currently trade with BellSouth common stock and may be redeemed by the Board of Directors for one cent per right until they become exercisable, and
thereafter under certain circumstances. The rights expire in December 2009.

SHARES HELD IN TRUST AND TREASURY

During
1996 and 1997, we issued shares to grantor trusts to provide partial funding for the benefits payable under certain nonqualified benefit plans. The trusts are irrevocable, and assets
contributed to the trusts can only be used to pay such benefits with certain exceptions. At December 31, 1999 and 1998, the assets held in the trusts consist of cash and 35.7 million and
35.6 million shares of BellSouth common stock. Of the total shares of BellSouth common stock held by the trusts, 31.9 million were issued directly from us to the trusts out of previously
unissued shares and 3.8 million shares were acquired in open market transactions through use of the trusts' funds.

The
total cost of the shares issued by us as of the date of funding the trusts is included in common stock and
paid-in capital; however, because these shares are not considered outstanding for financial reporting purposes, the shares are included within shares held in trust and treasury, a
reduction to shareholders' equity. In addition, there is no earnings per share impact of these shares. The cost of shares acquired in open market purchases by the trusts are also included in shares
held in trust and treasury.

In
addition to shares held by the grantor trusts, shares held in trust and treasury includes treasury shares purchased in connection with our announced plan to repurchase shares of our common stock.
In 1999 and 1998, we purchased 69.7 million and 36.2 million shares for an aggregate of $3,120 and $1,261. A total of 1.9 million and 4.3 million shares were reissued under
various employee benefit plans and for other purposes. We completed the share repurchase program during May 1999.

Shares
held in trust and treasury, at cost, as of December 31, 1999 and 1998 are comprised of the following:

|                                  |  | 1999       
|--------------------------------- |  | -----------
|
|Shares held by grantor trusts     |  | 35,653,926 
|Shares held in treasury           |  | 102,113,220
|                                  |  |            
|Shares held in trust and treasury |  | 137,767,146
|                                  |  |            

|                                  |  | 1998      
|--------------------------------- |  | ----------
|
|Shares held by grantor trusts     |  | 35,578,926
|Shares held in treasury           |  | 34,316,794
|                                  |  |           
|Shares held in trust and treasury |  | 69,895,720
|                                  |  |           

GUARANTEE OF ESOP DEBT

The
amount equivalent to the guarantee of the amortizing notes issued by our ESOP trusts is presented as a reduction to shareholders' equity. The amount recorded as a decrease in shareholders' equity
represents the cost of unallocated BellSouth common stock purchased with the proceeds of the amortizing notes and the timing difference resulting from the shares allocated accounting method. (See
Note I.)

55



NOTE IEMPLOYEE BENEFIT PLANS

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

Substantially
all of our nonrepresented and represented employees are covered by noncontributory defined benefit pension plans, as well as postretirement health and life insurance welfare plans.
Principal plans are discussed below; other plans are not significant individually or in the aggregate.

The
pension plan covering nonrepresented employees is a cash balance plan, which provides pension benefits determined by a combination of compensation-based service and additional credits and
individual account-based interest credits. The cash balance plan is subject to a minimum benefit determined under a plan in existence for nonrepresented employees prior to July 1, 1993 which
provided benefits based upon credited service and employees' average compensation for a specified period. The minimum benefit under the prior plan is generally applicable to employees who are eligible
to retire before January 1, 2006. The 1999 and 1998 projected benefit obligations assume interest and additional credits greater than the minimum levels specified in the written plan. Pension
benefits provided for represented employees are based on specified benefit amounts and years of service through 1998. During 1998, we established a cash balance plan for represented employees based
upon an initial cash balance amount, negotiated pension band increases and interest credits effective January 1, 1999. The cash balance plan is subject to a minimum benefit determined under a
plan in existence for represented employees who were participants prior to January 1, 1999 and who are eligible to retire. The 1999 and 1998 represented pension obligations include the
projected effect of future bargained-for improvements. The accounting for the represented health care plan does not anticipate future adjustments to the cost-sharing
arrangements provided for in the written plan for employees who retire after December 31, 1991. The accounting for the nonrepresented health care plan anticipates certain
cost-sharing adjustments for employees who retire after December 31, 1991. The adjustments consider past practice but are not provided for in the written plan.

The
following tables summarize benefit costs, as well as the assumptions, the benefit obligations, changes in plan assets and funded status at or for the year ended December 31:

Pension Benefits

|                                                |  | 1999 |        | 1998 |   | 1997   |  
|----------------------------------------------- |  | ---- | ------ | ---- | - | ------ | -
|Components of net pension income:               |  |      |        |      |   |        |  
|Service cost                                    |  | $    | 185    |      | $ | 273    |  
|Interest cost                                   |  |      | 911    |      |   | 841    |  
|Expected return on plan assets                  |  |      | (1,449 | )    |   | (1,209 | )
|Amortization of prior service cost              |  |      | 40     |      |   | (40    | )
|Amortization of actuarial gain                  |  |      | (87    | )    |   | (103   | )
|Amortization of transition asset                |  |      | (21    | )    |   | (21    | )
|                                                |  |      |        |      |   |        |  
|Net pension income                              |  | $    | (421   | )    | $ | (259   | )
|                                                |  |      |        |      |   |        |  
|Weighted-average assumptions as of December 31: |  |      |        |      |   |        |  
|Discount rate                                   |  |      | 7.75%  |      |   | 6.75%  |  
|Expected return on plan assets                  |  |      | 9.00%  |      |   | 8.25%  |  
|Rate of compensation increase                   |  |      | 4.80%  |      |   | 5.10%  |  

|                                                |  | 1999 |        | 1998 |  
|----------------------------------------------- |  | ---- | ------ | ---- | -
|Change in benefit obligation:                   |  |      |        |      |  
|Benefit obligation at the beginning of the year |  | $    | 13,504 |      | $
|Service cost                                    |  |      | 185    |      |  
|Interest cost                                   |  |      | 911    |      |  
|Amendments                                      |  |      | (13    | )    |  
|Actuarial (gain) or loss                        |  |      | (735   | )    |  
|Benefits and lump sums paid                     |  |      | (892   | )    |  
|Curtailments                                    |  |      |       |      |  
|Special termination benefits                    |  |      |       |      |  
|                                                |  |      |        |      |  
|Benefit obligation at the end of the year       |  | $    | 12,960 |      | $
|                                                |  |      |        |      |  

|Change in plan assets:                         |  |   |        |   |   |        |  
|---------------------------------------------- |  | - | ------ | - | - | ------ | -
|Fair value of plan assets at beginning of year |  | $ | 17,983 |   | $ | 17,313 |  
|Actual return on plan assets                   |  |   | 3,472  |   |   | 1,602  |  
|Benefits and lump sums paid                    |  |   | (892   | ) |   | (932   | )
|                                               |  |   |        |   |  
|Fair value of plan assets at end of year       |  | $ | 20,563 |   | $ | 17,983 |  
|                                               |  |   |        |   |  
|Funded status:                                 |  |   |        |   |   |        |  
|As of end of year                              |  | $ | 7,603  |   | $ | 4,479  |  
|Unrecognized prior service cost                |  |   | 326    |   |   | 380    |  
|Unrecognized net (gain) or loss                |  |   | (7,383 | ) |   | (4,714 | )
|Unrecognized net (asset) or obligation         |  |   | (68    | ) |   | (89    | )
|                                               |  |   |        |   |  
|Prepaid or (accrued) benefit cost              |  | $ | 478    |   | $ | 56     |  
|                                               |  |   |        |   |  

56



Retiree Health and Life

|                                                |  | 1999 |       | 1998 |   | 1997  |  
|----------------------------------------------- |  | ---- | ----- | ---- | - | ----- | -
|Components of net postretirement
benefit cost:  |  |      |       |      |   |       |  
|Service cost                                    |  | $    | 45    |      | $ | 34    |  
|Interest cost                                   |  |      | 273   |      |   | 263   |  
|Expected return on plan assets                  |  |      | (207  | )    |   | (167  | )
|Amortization of prior service cost              |  |      | 52    |      |   | 35    |  
|Amortization of actuarial (gain)/loss           |  |      | 2     |      |   | (4    | )
|Amortization of transition obligation           |  |      | 82    |      |   | 82    |  
|                                                |  |      |       |      |   |       |  
|Net postretirement benefit cost                 |  | $    | 247   |      | $ | 243   |  
|                                                |  |      |       |      |   |       |  
|Weighted-average assumptions as of December 31: |  |      |       |      |   |       |  
|Discount rate                                   |  |      | 7.75% |      |   | 6.75% |  
|Expected return on plan assets                  |  |      | 8.00% |      |   | 7.75% |  
|Rate of compensation increase                   |  |      | 4.80% |      |   | 5.10% |  
|Health care cost trend rate                     |  |      | 8.00% |      |   | 8.50% |  

|                                                |  | 1999 |        | 1998 |  
|----------------------------------------------- |  | ---- | ------ | ---- | -
|Change in benefit obligation:                   |  |      |        |      |  
|Benefit obligation at the beginning of the year |  | $    | 4,690  |      | $
|Service cost                                    |  |      | 45     |      |  
|Interest cost                                   |  |      | 273    |      |  
|Amendments                                      |  |      | 195    |      |  
|Actuarial (gain) or loss                        |  |      | 1      |      |  
|Benefits and lump sums paid                     |  |      | (271   | )    |  
|                                                |  |      |        |      |  
|Benefit obligation at the end of the year       |  | $    | 4,933  |      | $
|                                                |  |      |        |      |  
|Change in plan assets:                          |  |      |        |      |  
|Fair value of plan assets at beginning of year  |  | $    | 2,845  |      | $
|Actual return on plan assets                    |  |      | 478    |      |  
|Employer contribution                           |  |      | 357    |      |  
|Plan participants' contributions                |  |      | 11     |      |  
|Benefits and lump sums paid                     |  |      | (270   | )    |  
|                                                |  |      |        |      |  
|Fair value of plan assets at end of year        |  | $    | 3,421  |      | $
|                                                |  |      |        |      |  
|Funded status:                                  |  |      |        |      |  
|As of end of year                               |  | $    | (1,512 | )    | $
|Unrecognized prior service cost                 |  |      | 305    |      |  
|Unrecognized net (gain) or loss                 |  |      | (44    | )    |  
|Unrecognized net (asset) or obligation          |  |      | 658    |      |  
|                                                |  |      |        |      |  
|Prepaid or (accrued) benefit cost               |  | $    | (593   | )    | $
|                                                |  |      |        |      |  

The health care cost trend rate used to value the accumulated postretirement obligation in 1999 and 1998 is assumed to decrease to 6% by 2003. Assumed health
care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the
following effects as of December 31, 1999:

|                                                        |  | 1-Percentage
Point Increase |     | 1-Percentage
Point Decrease |  
|------------------------------------------------------- |  | --------------------------- | --- | --------------------------- | -
|Effect on total of service and interest cost components |  | $                           | 25  |                             | $
|Effect on postretirement benefit obligation             |  | $                           | 369 |                             | $

Amounts recognized in the consolidated balance sheets consist of:

|                          |  | Pension Benefits |      | Retiree Health and Life |  
|------------------------- |  | ---------------- | ---- | ----------------------- | -
|
|Prepaid benefit cost      |  | $                | 774  |                         | $
|Accrued benefit liability |  |                  | (296 | )                       |  

Effective December 31, 1997, the nonrepresented cash balance plans were recombined from six into one cash balance plan. Although only one nonrepresented
cash balance plan exists, separate demographic pools are maintained to generate pension income based upon specific company information. The change in net pension income and net postretirement benefit
cost is affected by several variables, including changes in actuarial assumptions such as discount rate, return on plan assets and plan amendments. The consolidated net pension income and
postretirement benefit cost
amounts above are exclusive of curtailment effects reflected in the work force reduction activity and do not reflect pension curtailment gains in the amount of $9 and $36 in 1998 and 1997.

We
also maintain a nonqualified supplemental retirement plan for certain employees. The unfunded accumulated benefit obligations were $279 and $278 at December 31, 1999 and 1998. An intangible
asset of $27 and $46 was recognized pursuant to paragraph 37 of SFAS 87, as was accumulated other comprehensive income, net of deferred taxes, of $45 and $0 at December 31, 1999 and
1998. The net cost associated with this plan was $38 in 1999, $39 in 1998 and $24 in 1997.

DEFINED CONTRIBUTION PLANS

We
maintain several contributory savings plans which cover substantially all employees. The BellSouth Retirement Savings Plan and the BellSouth Savings and Security Plan (collectively, the Savings
Plans) are tax-qualified defined contribution plans. Assets of the plans are held by two trusts (the Trusts) which, in turn, are part of the BellSouth Master Savings Trust.

57



In
1990, a leveraged Employee Stock Ownership Plan (ESOP) was incorporated into the Savings Plans. The Trusts borrowed $850 by issuing amortizing notes which are guaranteed by BellSouth. The Trusts
used the loan proceeds to purchase shares of BellSouth common stock in the open market. These shares are held in suspense accounts in the Trusts; a scheduled number of shares is released for
allocation to participants as each semiannual loan payment is made. The Trusts service the debt with contributions from us and with dividends paid on the shares held by the Trusts. None of the shares
held by the Trusts is subject to repurchase.

A
portion of employees' eligible contributions to the Savings Plans is matched by us at rates determined annually by the Board of Directors. Our matching obligation is fulfilled with shares released
from the suspense accounts semi-annually for allocation to participants. The number of shares allocated to each participant's account is based on the market price of the shares at the time
of allocation. If shares released for allocation do not fulfill our matching obligation, we make further contributions to the Trusts to fund the purchase of additional shares in the open market to
fulfill the remaining obligation.

We
recognize expense using the shares allocated accounting method, which combines the cost of the shares allocated for the period plus interest incurred, reduced by the dividends used to service the
ESOP debt. Dividends on all ESOP shares are recorded as a reduction to retained earnings, and all ESOP shares are included in the computation of earnings per share.

|                                                           |  | 1999 |      | 1998 |   | 1997
|---------------------------------------------------------- |  | ---- | ---- | ---- | - | ----
|Compensation cost                                          |  | $    | 31   |      | $ | 46  
|Interest expense                                           |  | $    | 24   |      | $ | 28  
|Actual interest on ESOP Notes                              |  | $    | 37   |      | $ | 44  
|Cash contributions, excluding dividends
paid to the trusts |  | $    | 73   |      | $ | 80  
|Dividends paid to the trusts, used for
debt service        |  | $    | 43   |      | $ | 42  
|Shares allocated to participants (millions)                |  |      | 43.3 |      |   | 38.3
|Shares unallocated (millions)                              |  |      | 20.3 |      |   | 25.2

NOTE JSTOCK COMPENSATION PLANS

At
December 31, 1999, we have stock options outstanding under several stock-based compensation plans. The BellSouth Corporation Stock Plan (the Stock Plan) provides for grants to key employees
of stock options and various other stock-based awards. One share of BellSouth common stock is the underlying security for any award. The aggregate number of shares of BellSouth common stock which may
be granted under the Stock Plan in any calendar year cannot exceed one percent of the shares outstanding at the time of grant. Prior to adoption of the Stock Plan, stock options were granted under the
BellSouth Corporation Stock Option Plan. Stock options granted under both plans entitle an optionee to purchase shares of BellSouth common stock within prescribed periods at a price either equal to,
or in excess of, the fair market value on the date of grant. Options granted under these plans generally become exercisable at the end of three to five years and have a term of 10 years.

We
apply APB Opinion 25 and related Interpretations in accounting for our stock plans. Accordingly, no compensation cost has been recognized for grants of stock options. Had compensation cost for our
stock-based compensation plans been determined in accordance with the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," our net income and earnings per share would have
been changed to the pro forma amounts indicated below:

|                                       |  | 1999 |       | 1998 |   | 1997 
|-------------------------------------- |  | ---- | ----- | ---- | - | -----
|Net incomeas reported                 |  | $    | 3,448 |      | $ | 3,527
|Net incomepro forma                   |  | $    | 3,379 |      | $ | 3,488
|Basic earnings per shareas reported   |  | $    | 1.82  |      | $ | 1.79 
|Basic earnings per sharepro forma     |  | $    | 1.78  |      | $ | 1.77 
|Diluted earnings per shareas reported |  | $    | 1.80  |      | $ | 1.78 
|Diluted earnings per sharepro forma   |  | $    | 1.76  |      | $ | 1.76 

The pro forma amounts reflected above are not representative of the effects on reported net income in future years because, in general, the options granted in
1999, 1998 and 1997 do not vest for several years and additional awards are made each year.

58



The
following table summarizes the activity for stock options outstanding:

|                                                                                    |  | 1999 |            | 1998 |   | 1997       |  
|----------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|Options outstanding at January 1                                                    |  |      | 59,202,910 |      |   | 45,122,812 |  
|Options granted                                                                     |  |      | 15,385,731 |      |   | 17,963,592 |  
|Options exercised                                                                   |  |      | (1,839,933 | )    |   | (2,784,312 | )
|Options forfeited                                                                   |  |      | (1,049,627 | )    |   | (1,099,182 | )
|                                                                                    |  |      |            |      |   |            |  
|Options outstanding at December 31                                                  |  |      | 71,699,081 |      |   | 59,202,910 |  
|                                                                                    |  |      |            |      |   |            |  
|Weightedaverage option prices per common share:                                    |  |      |            |      |   |            |  
|Outstanding at January 1                                                            |  | $    | 22.77      |      | $ | 18.67      |  
|Granted at fair market value                                                        |  | $    | 45.51      |      | $ | 31.95      |  
|Exercised                                                                           |  | $    | 15.74      |      | $ | 15.35      |  
|Forfeited                                                                           |  | $    | 30.22      |      | $ | 23.47      |  
|Outstanding at December 31                                                          |  | $    | 27.73      |      | $ | 22.77      |  
|Weightedaverage fair value of options granted at fair market value during the year |  | $    | 11.19      |      | $ | 7.22       |  
|Options exercisable at December 31                                                  |  |      | 19,114,773 |      |   | 14,733,210 |  
|Shares available for grant at December 31                                           |  |      | 18,825,466 |      |   | 19,504,179 |  

The fair value of each option grant is estimated on the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions:

|                        |  | 1999  |  | 1998  |  | 1997 
|----------------------- |  | ----- |  | ----- |  | -----
|Expected life (years)   |  | 5     |  | 5     |  | 5    
|Dividend yield          |  | 1.67% |  | 2.40% |  | 3.24%
|Expected volatility     |  | 23.0% |  | 21.0% |  | 19.0%
|Risk-free interest rate |  | 4.82% |  | 5.42% |  | 6.22%

The following table summarizes information about stock options outstanding at December 31, 1999:

|   |             | Outstanding |      | Exercisable
|-- | ----------- | ----------- | ---- | -----------
|
|   |             |             |      |            
|$$ | 12.10
15.08 | -           | 12.5 |            
|$$ | 15.13
21.28 | -           | 14.4 |            
|$$ | 21.38
29.22 | -           | 12.6 |            
|$$ | 30.91
37.92 | -           | 15.5 |            
|$$ | 39.41
49.41 | -           | 16.7 |            
|   |            
|$$ | 12.10
49.41 | -           | 71.7 |            
|   |            

NOTE KINCOME TAXES

The
consolidated balance sheets reflect the anticipated tax impact of future taxable income or deductions implicit in the consolidated balance sheets in the form of temporary differences. These
temporary differences reflect the difference between the basis in assets and liabilities as measured in the consolidated financial statements and as measured by tax laws using enacted tax rates.

The
provision for income taxes is summarized as follows:

|                                 |  | 1999 |       | 1998 |   | 1997  |  
|-------------------------------- |  | ---- | ----- | ---- | - | ----- | -
|Current                          |  |      |       |      |   |       |  
|Federal                          |  | $    | 1,875 |      | $ | 1,652 |  
|State                            |  |      | 208   |      |   | 234   |  
|Foreign                          |  |      | 11    |      |   | 34    |  
|                                 |  |      |       |      |   |       |  
|                                 |  |      | 2,094 |      |   | 1,920 |  
|                                 |  |      |       |      |   |       |  
|Deferred, net                    |  |      |       |      |   |       |  
|Federal                          |  |      | 78    |      |   | 221   |  
|State                            |  |      | 5     |      |   | 34    |  
|Foreign                          |  |      | 71    |      |   | 94    |  
|                                 |  |      |       |      |   |       |  
|                                 |  |      | 154   |      |   | 349   |  
|                                 |  |      |       |      |   |       |  
|Investment tax credits, net      |  |      |       |      |   |       |  
|Federal                          |  |      | (41   | )    |   | (45   | )
|Foreign                          |  |      | (167  | )    |   |      |  
|                                 |  |      |       |      |   |       |  
|                                 |  |      | (208  | )    |   | (45   | )
|                                 |  |      |       |      |   |       |  
|Total provision for income taxes |  | $    | 2,040 |      | $ | 2,224 |  
|                                 |  |      |       |      |   |       |  

59



Temporary
differences which gave rise to deferred tax assets and (liabilities) at December 31 were as follows:

|                             |  | 1999 |        | 1998 |  
|---------------------------- |  | ---- | ------ | ---- | -
|Compensation related         |  | $    | 568    |      | $
|Loss carryforwards           |  |      | 173    |      |  
|Allowance for uncollectibles |  |      | 83     |      |  
|Marketable securities        |  |      | 60     |      |  
|Regulatory sharing accruals  |  |      | 68     |      |  
|Other                        |  |      | 116    |      |  
|                             |  |      |        |      |  
|                             |  |      | 1,068  |      |  
|                             |  |      |        |      |  
|Valuation allowance          |  |      | (153   | )    |  
|                             |  |      |        |      |  
|Deferred tax assets          |  | $    | 915    |      | $
|                             |  |      |        |      |  
|Depreciation                 |  | $    | (2,386 | )    | $
|Equity investments           |  |      | (577   | )    |  
|Issue basis accounting       |  |      | (249   | )    |  
|Licenses                     |  |      | (343   | )    |  
|Other                        |  |      | (124   | )    |  
|                             |  |      |        |      |  
|Deferred tax liabilities     |  |      | (3,679 | )    |  
|                             |  |      |        |      |  
|Net deferred tax liability   |  | $    | (2,764 | )    | $
|                             |  |      |        |      |  

The
valuation allowance, which increased by $58 in 1999 and $9 in 1998, primarily relates to state and foreign net operating losses that may not be utilized during the carryforward period. Of the net
deferred tax liability at December 31, 1999 and 1998, $(59) and $(207) were current and $(2,705) and $(2,512) were noncurrent.

A
reconciliation of the federal statutory income tax rate to our effective tax rate follows:

|                                                             |  | 1999 |   | 1998 |   | 1997 |  
|------------------------------------------------------------ |  | ---- | - | ---- | - | ---- | -
|Federal statutory tax rate                                   |  | 35.0 | % | 35.0 | % | 35.0 | %
|State income taxes, net of federal income tax benefit        |  | 2.5  |   | 3.0  |   | 3.9  |  
|Investment tax credits                                       |  | (3.5 | ) | (0.5 | ) | (1.2 | )
|Net equity in earnings (losses) of unconsolidated businesses |  | 2.0  |   | 0.6  |   | 1.6  |  
|Miscellaneous items, net                                     |  | 1.2  |   | 0.6  |   | 0.4  |  
|                                                             |  |      |   |      |   |      |  
|Effective tax rate                                           |  | 37.2 | % | 38.7 | % | 39.7 | %
|                                                             |  |      |   |      |   |      |  

The
reduction in our effective tax rate during 1999 was primarily driven by the recognition of investment tax credits by one of our foreign subsidiaries. The credits were claimed by the subsidiary in
previous years but were denied by taxing authorities. A reserve was established while the matter was under appeal. During 1999, we received a favorable ruling on our appeal leading to the recognition
of the benefit.

NOTE LSUPPLEMENTAL CASH FLOW INFORMATION

|               |  | 1999 |       | 1998 |   | 1997 
|-------------- |  | ---- | ----- | ---- | - | -----
|Cash paid for: |  |      |       |      |   |      
|Income taxes   |  | $    | 1,906 |      | $ | 2,021
|               |  |      |       |      |   |      
|Interest       |  | $    | 1,013 |      | $ | 838  
|               |  |      |       |      |   |      

During
1999, we entered an agreement with Crown Castle International Corporation to sublease portions of our cellular towers (see Note P). As consideration for the transaction, we received
approximately $150 in Crown stock.

In
1998, we contributed our ownership interests in certain domestic wireless operations to a new joint venture (See Note B). As a result of the transaction, net assets were increased by
approximately $300 with a corresponding increase to liabilities.

In
1998 as well as in 1997, we began consolidating certain operations which had previously been accounted for under the equity method. These consolidations resulted in an increase in assets of $519
and $375 (net of decreases of $228 and $225 in investments and advances), and corresponding increases in liabilities.

60



NOTE MSEGMENT INFORMATION

We have four reportable operating segments: (1) Wireline communications; (2) Domestic wireless; (3) International operations; and (4) Advertising and publishing. We have
included the operations of all other businesses falling below the reporting threshold in the "Other" segment. The "Reconciling items" shown below include Corporate Headquarters and capital funding
activities, intercompany eliminations and other nonoperating items. The following table provides information for each operating segment:

|                                                         |  | 1999 |        | 1998 |   | 1997   |  
|-------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ | -
|Wireline communications                                  |  |      |        |      |   |        |  
|External revenues                                        |  | $    | 17,454 |      | $ | 16,401 |  
|Intersegment revenues                                    |  |      | 318    |      |   | 221    |  
|Depreciation and amortization                            |  |      | 3,393  |      |   | 3,363  |  
|Operating income                                         |  |      | 5,828  |      |   | 4,871  |  
|Interest expense                                         |  |      | 560    |      |   | 551    |  
|Income taxes                                             |  |      | 1,971  |      |   | 1,573  |  
|Segment net income                                       |  | $    | 3,315  |      | $ | 2,751  |  
|                                                         |  |      |        |      |   |        |  
|Segment assets                                           |  | $    | 25,536 |      | $ | 23,916 |  
|Capital expenditures                                     |  | $    | 4,638  |      | $ | 3,512  |  
|                                                         | 
|Domestic wireless                                        |  |      |        |      |   |        |  
|External revenues                                        |  | $    | 3,191  |      | $ | 2,723  |  
|Intersegment revenues                                    |  |      | 13     |      |   | 7      |  
|Depreciation and amortization                            |  |      | 656    |      |   | 513    |  
|Operating income                                         |  |      | 328    |      |   | 374    |  
|Interest expense                                         |  |      | 91     |      |   | 84     |  
|Equity in earnings (losses) of unconsolidated businesses |  |      | 144    |      |   | 165    |  
|Income taxes                                             |  |      | 143    |      |   | 184    |  
|Segment net income                                       |  | $    | 234    |      | $ | 283    |  
|                                                         |  |      |        |      |   |        |  
|Segment assets                                           |  | $    | 6,103  |      | $ | 6,540  |  
|Equity method investments                                |  | $    | 1,741  |      | $ | 1,610  |  
|Capital expenditures                                     |  | $    | 550    |      | $ | 692    |  
|                                                         | 
|International operations                                 |  |      |        |      |   |        |  
|External revenues                                        |  | $    | 2,289  |      | $ | 1,995  |  
|Intersegment revenues                                    |  |      | 2      |      |   |       |  
|Depreciation and amortization                            |  |      | 442    |      |   | 357    |  
|Operating income                                         |  |      | 118    |      |   | 234    |  
|Interest expense                                         |  |      | 77     |      |   | 85     |  
|Interest income                                          |  |      | 57     |      |   | 27     |  
|Equity in earnings (losses) of unconsolidated businesses |  |      | (2     | )    |   | (69    | )
|Income taxes                                             |  |      | 31     |      |   | 119    |  
|Segment net income (loss)                                |  | $    | (4     | )    | $ | (62    | )
|Segment assets                                           |  | $    | 4,869  |      | $ | 4,449  |  
|Equity method investments                                |  | $    | 159    |      | $ | 521    |  
|Capital expenditures                                     |  | $    | 603    |      | $ | 710    |  
|                                                         | 
|Advertising and publishing                               |  |      |        |      |   |        |  
|External revenues                                        |  | $    | 2,010  |      | $ | 1,891  |  
|Intersegment revenues                                    |  |      | 18     |      |   |       |  
|Depreciation and amortization                            |  |      | 31     |      |   | 25     |  
|Operating income                                         |  |      | 901    |      |   | 849    |  
|Interest expense                                         |  |      | 8      |      |   | 7      |  
|Equity in earnings (losses) of unconsolidated businesses |  |      | (5     | )    |   | (4     | )
|Income taxes                                             |  |      | 339    |      |   | 317    |  
|Segment net income                                       |  | $    | 556    |      | $ | 530    |  
|                                                         |  |      |        |      |   |        |  
|Segment assets                                           |  | $    | 1,662  |      | $ | 1,288  |  
|Equity method investments                                |  | $    | 25     |      | $ |       |  
|Capital expenditures                                     |  | $    | 35     |      | $ | 36     |  
|                                                         | 
|Other                                                    |  |      |        |      |   |        |  
|External revenues                                        |  | $    | 280    |      | $ | 113    |  
|Intersegment revenues                                    |  |      | 371    |      |   | 227    |  
|Depreciation and amortization                            |  |      | 142    |      |   | 94     |  
|Operating income (loss)                                  |  |      | (320   | )    |   | (360   | )
|Interest expense                                         |  |      | 19     |      |   | 26     |  
|Interest income                                          |  |      | 6      |      |   | 19     |  
|Equity in earnings (losses) of unconsolidated businesses |  |      | (1     | )    |   |       |  
|Income taxes (benefit)                                   |  |      | (143   | )    |   | (112   | )
|Segment net income (loss)                                |  | $    | (215   | )    | $ | (210   | )
|Segment assets                                           |  | $    | 1,409  |      | $ | 1,273  |  
|Equity method investments                                |  | $    | 4      |      | $ | 61     |  
|Capital expenditures                                     |  | $    | 318    |      | $ | 253    |  
|                                                         | 
|Reconciling items                                        |  |      |        |      |   |        |  
|External revenues                                        |  | $    |       |      | $ |       |  
|Intersegment revenues                                    |  |      | (722   | )    |   | (455   | )
|Depreciation and amortization                            |  |      | 7      |      |   | 5      |  
|Provision for asset impairment                           |  |      | 320    |      |   |       |  
|Operating income (loss)                                  |  |      | (418   | )    |   | (64    | )
|Interest expense                                         |  |      | 275    |      |   | 84     |  
|Interest income                                          |  |      | 66     |      |   | 247    |  
|Equity in earnings (losses) of unconsolidated businesses |  |      | (298   | )    |   |       |  
|Gain on sale of operations                               |  |      | 55     |      |   | 335    |  
|Income taxes (benefit)                                   |  |      | (301   | )    |   | 143    |  
|Segment net income (loss)                                |  | $    | (438   | )    | $ | 235    |  
|Segment assets                                           |  | $    | 3,874  |      | $ | 1,944  |  
|Equity method investments                                |  | $    |       |      | $ | (44    | )
|Capital expenditures                                     |  | $    | 29     |      | $ | 9      |  
|                                                         | 

61



RECONCILIATION TO CONSOLIDATED FINANCIAL INFORMATION

|                           |  | 1999 |        | 1998 |   | 1997   |  
|-------------------------- |  | ---- | ------ | ---- | - | ------ | -
|Operating revenues         |  |      |        |      |   |        |  
|Wireline communications    |  | $    | 17,772 |      | $ | 16,622 |  
|Domestic wireless          |  |      | 3,204  |      |   | 2,730  |  
|International operations   |  |      | 2,291  |      |   | 1,995  |  
|Advertising and publishing |  |      | 2,028  |      |   | 1,891  |  
|Other                      |  |      | 651    |      |   | 340    |  
|                           |  |      |        |      |   |        |  
|Total Segments             |  |      | 25,946 |      |   | 23,578 |  
|Reconciling items          |  |      | (722   | )    |   | (455   | )
|                           |  |      |        |      |   |        |  
|Total consolidated         |  | $    | 25,224 |      | $ | 23,123 |  
|                           |  |      |        |      |   |        |  
|Net income                 |  |      |        |      |   |        |  
|Wireline communications    |  | $    | 3,315  |      | $ | 2,751  |  
|Domestic wireless          |  |      | 234    |      |   | 283    |  
|International operations   |  |      | (4     | )    |   | (62    | )
|Advertising and publishing |  |      | 556    |      |   | 530    |  
|Other                      |  |      | (215   | )    |   | (210   | )
|                           |  |      |        |      |   |        |  
|Total Segments             |  |      | 3,886  |      |   | 3,292  |  
|Reconciling items          |  |      | (438   | )    |   | 235    |  
|                           |  |      |        |      |   |        |  
|Total consolidated         |  | $    | 3,448  |      | $ | 3,527  |  
|                           |  |      |        |      |   |        |  
|Segment assets             |  |      |        |      |   |        |  
|Wireline communications    |  | $    | 25,536 |      | $ | 23,916 |  
|Domestic wireless          |  |      | 6,103  |      |   | 6,540  |  
|International operations   |  |      | 4,869  |      |   | 4,449  |  
|Advertising and publishing |  |      | 1,662  |      |   | 1,288  |  
|Other                      |  |      | 1,409  |      |   | 1,273  |  
|                           |  |      |        |      |   |        |  
|Total Segments             |  |      | 39,579 |      |   | 37,466 |  
|Reconciling items          |  |      | 3,874  |      |   | 1,944  |  
|                           |  |      |        |      |   |        |  
|Total consolidated         |  | $    | 43,453 |      | $ | 39,410 |  
|                           |  |      |        |      |   |        |  

Reconciling items include undistributed corporate expenses, corporate assets, intersegment eliminations and special items. For 1999, corporate assets are
comprised primarily of our investment in Qwest. For 1998 and 1997, corporate assets are comprised primarily of cash and cash equivalents.

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. These items
include provisions for asset impairments, foreign currency losses associated with devaluations, gains on sales of operations, gains on swaps of wireless properties and charges for intellectual
property use.

Net
revenues to external customers are based on the location of the customer. Geographic information as of December 31, 1999, 1998 and 1997 is as follows:

|                              |  | United
States |        | International |   | Total
|----------------------------- |  | ------------- | ------ | ------------- | - | -----
|Year ended December 31, 1999: |  |               |        |               |   |      
|Revenues                      |  | $             | 22,935 |               | $ | 2,289
|Long-lived assets             |  |               | 32,263 |               |   | 3,803
|Year ended December 31, 1998: |  |               |        |               |   |      
|Revenues                      |  | $             | 21,128 |               | $ | 1,995
|Long-lived assets             |  |               | 27,082 |               |   | 3,622
|Year ended December 31, 1997: |  |               |        |               |   |      
|Revenues                      |  | $             | 19,613 |               | $ | 948  
|Long-lived assets             |  |               | 25,948 |               |   | 2,236

62



NOTE NFINANCIAL INSTRUMENTS

The recorded amounts of cash and cash equivalents, temporary cash investments, bank loans and commercial paper approximate fair value due to the short-term nature of these instruments. The
fair value for BST's long-term debt is estimated based on the closing market prices for each issue at December 31, 1999 and 1998. Fair value estimates for the Guarantee of ESOP
Debt, Capital Funding long-term debt, foreign exchange contracts, foreign currency swaps and interest rate swaps are based on quotes from dealers. Since judgment is required to develop the
estimates, the estimated amounts presented herein may not be indicative of the amounts that we could realize in a current market exchange.

Following
is a summary of financial instruments where the fair values differ from the recorded amounts as of December 31, 1999 and 1998:

|                                         |  | 1999 |      
|---------------------------------------- |  | ---- | -----
|
|Balance sheet financial instruments:     |  |      |      
|Long-term debt:                          |  |      |      
|BST                                      |  | $    | 6,517
|Capital Funding                          |  |      | 1,817
|Guarantee of ESOP debt                   |  |      | 391  
|Off-balance sheet financial instruments: |  |      |      
|Interest rate swaps                      |  |      |     
|
|
|Balance sheet financial instruments:     |  |      |      
|Long-term debt:                          |  |      |      
|BST                                      |  | $    | 6,518
|Capital Funding                          |  |      | 1,469
|Guarantee of ESOP debt                   |  |      | 467  
|Off-balance sheet financial instruments: |  |      |      
|Interest rate swaps                      |  |      |     

DERIVATIVE FINANCIAL INSTRUMENTS

We
are, from time to time, party to currency swap agreements, interest rate swap agreements and foreign exchange forward contracts in our normal course of business for purposes other than trading.
These financial instruments are used to mitigate foreign currency and interest rate risks, although to some extent they expose us to market risks and credit risks. The credit risks associated with
these instruments are controlled through the evaluation and continual monitoring of the creditworthiness of the counterparties. In the event that a counterparty fails to meet the terms of a contract
or agreement, our exposure is limited to the current value at that time of the currency rate or interest rate differential, not the full notional or contract amount. We believe that such contracts and
agreements have been executed with creditworthy financial institutions. As such, we consider the risk of nonperformance to be remote.

INTEREST RATE SWAPS

We
enter into interest rate swap agreements to exchange fixed and variable rate interest payment obligations without the exchange of the underlying principal amounts. At both December 31, 1999
and 1998, we were a party to various interest rate swaps with an aggregate notional amount of $920. Under swap agreements, we paid fixed rates averaging 6.10% and 6.11% at December 31, 1999 and
1998 and received variable rates averaging 5.41% and 5.54% at December 31, 1999 and 1998. We also paid variable rates averaging 5.35% and received fixed rates averaging 6.00% at
December 31, 1999. The swaps mature at dates ranging from 2001 to 2002.

OTHER

We
have also issued letters of credit and financial guarantees which approximate $617 at December 31, 1999. Of this total, $356 represents the US Dollar equivalent of the outstanding debt of
E-Plus guaranteed by us. We have agreed to guarantee E-Plus borrowings up to a US Dollar equivalent of $361 (705 million German Marks) at December 31, 1999. Since
there is no market for the instruments, it is not practicable to estimate their fair value.

CONCENTRATIONS OF CREDIT RISK

Financial
instruments that potentially subject us to credit risk consist principally of trade accounts receivable. Concentrations of credit risk with respect to these receivables, other than those
from long distance carriers, are limited due to the composition of the customer base, which includes a large number of

63



individuals
and businesses. At December 31, 1999 and 1998, approximately $490 and $472, of trade accounts receivable were from long distance carriers.

NOTE OCOMMITMENTS AND CONTINGENCIES

LEASES

We
have entered into operating leases for facilities and equipment used in operations. Rental expense under operating leases was $297 for 1999, $242 for 1998 and $273 for 1997. Capital leases
currently in effect are not significant.

The
following table summarizes the approximate future minimum rentals under noncancelable operating leases in effect at December 31, 1999:

|           |  | Minimum
Rentals
|---------- |  | ---------------
|2000       |  | $              
|2001       |  |                
|2002       |  |                
|2003       |  |                
|2004       |  |                
|Thereafter |  |                
|           |  |                
|Total      |  | $              
|           |  |                

OUTSIDE PLANT

We
currently self-insure all of our outside plant against casualty losses. Such outside plant, located in the nine southeastern states served by BST, is susceptible to damage from severe
weather conditions and other perils. The net book value of outside plant was $7,099 at December 31, 1999 and $7,234 at December 31, 1998.

OUTSOURCING CONTRACTS

Beginning
in 1997, we contracted with various entities to outsource the performance of certain engineering functions, as well as our information technology operations and application development.
These contracts expire at various dates through 2007, are generally renewable, and are cancelable upon the payment of additional fees or for nonperformance. Future minimum payments for these contracts
range from $400 to $625 annually over the contract periods.

PURCHASE COMMITMENT

During
1999, our BellSouth Long Distance operating subsidiary entered into an agreement with a long distance carrier to purchase wholesale and retail, voice and private line services. As of
December 31, 1999 our remaining commitment is approximately $100.

RECIPROCAL COMPENSATION

Following
the enactment of the 1996 Act, BST and various CLECs 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 CLECs claim entitlement from BST for compensation associated with dial-up calls
originating on BST's network and connecting with Internet service providers (ISPs) served by the CLECs' networks. BST has maintained that dial-up calls to ISPs are not local calls for
which terminating compensation is due under the interconnection agreements.

In
February 1999, the FCC issued a decision that such ISP traffic does not terminate at the ISP and, therefore, is interstate in nature, rather than local. The FCC stated, however, that it would not
interfere with prior state commissions' decisions regarding this matter. 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. In certain instances, BST has been ordered to pay this compensation pending appeal. In other cases, the ruling bodies
have determined that BST does not owe reciprocal compensation for these calls. BST has appealed the adverse decisions and continues to believe that it has a good legal basis for its position that such
reciprocal compensation is not owed to the CLECs. For those cases where BST believes it is probable that it has incurred a liability, it has recorded an estimate of the amount owed. At
December 31, 1999, the exposure related to unrecorded amounts withheld from CLECs was approximately $300, including accrued interest.

In
a related matter, at least one CLEC is claiming terminating compensation of approximately $165 for service arrangements that we do not believe involve "traffic" under BST's interconnection
agreement. BST has filed a complaint with the state regulatory commission asking that agency to declare that BST

64



does
not owe reciprocal compensation for these arrangements. The CLEC has filed a complaint with the state regulatory commission asking it to order BST to pay the disputed amounts. Hearings on this
matter were held in August 1999 and a decision is pending. We believe that we have a good legal basis for our position and, accordingly, no provision has been recorded for this claim in our
financial statements.

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 any legal claims, we believe that any financial impact would not be material to our results of operations, financial position or cash
flows.

NOTE PSUBLEASE OF COMMUNICATIONS TOWERS

In
June 1999, we signed a definitive agreement with Crown Castle International Corporation (Crown) for the sublease of all unused space on approximately 1,850 of our wireless communications towers in
exchange for $610 to be paid in a combination of cash and Crown common stock. As of December 31, 1999 we have closed on 1,574 towers for proceeds of $519. Remaining towers covered by the
agreement are expected to be subleased in 2000. We also entered into a five-year, build-to-suit agreement with Crown covering up to 500 towers.

Under
a similar agreement, Crown will sublease all unused space on 773 of our PCS towers in exchange for $317 in cash. As of December 31, 1999 we have closed on 648 towers and received $266.
Remaining towers covered by the agreement are expected to be subleased in 2000. In connection with this agreement, we entered into an exclusive three year, build-to-suit agreement.

With
these transactions, Crown will manage, maintain and remarket the remaining space on the towers. We have retained, outside of the leases, a portion of the towers for use in operating our wireless
network and will continue to fully own the communications components including switching equipment, shelters and cell site facilities. We will pay $1,200 (whole dollars) per tower, per month to Crown
for its monitoring and maintenance services. The subleases are classified as operating leases and the up-front
payments from Crown have been treated as prepaid rent. Rental income will be recognized over the life of the respective leases, generally 20 years.

NOTE QQUARTERLY FINANCIAL INFORMATION (UNAUDITED)

In
the following summary of quarterly financial information, all adjustments necessary for a fair presentation of each period were included.

|                                        |  | First
Quarter |       | Second
Quarter |   | Third
Quarter |  | Fourth
Quarter
|--------------------------------------- |  | ------------- | ----- | -------------- | - | ------------- |  | --------------
|1999                                    |  |               |       |                |   |               |  |               
|Operating Revenues                      |  | $             | 5,973 |                | $ | 6,148         |  | $             
|Operating Income                        |  | $             | 1,607 |                | $ | 1,314         |  | $             
|Net Income                              |  | $             | 615   |                | $ | 786           |  | $             
|Earnings per share(a):                  |  |               |       |                |   |               |  |               
|Basic                                   |  | $             | .32   |                | $ | .42           |  | $             
|Diluted                                 |  | $             | .32   |                | $ | .41           |  | $             
|1998                                    |  |               |       |                |   |               |  |               
|Operating Revenues                      |  | $             | 5,426 |                | $ | 5,664         |  | $             
|Operating Income                        |  | $             | 1,454 |                | $ | 1,434         |  | $             
|Net Income                              |  | $             | 892   |                | $ | 818           |  | $             
|Earnings per sharebasic and diluted(a) |  | $             | .45   |                | $ | .41           |  | $             

---

The quarters shown were affected by the following:



65





NOTE RSUBSEQUENT EVENTS

On
February 4, 2000 we announced that we would reduce our domestic workforce by approximately 2,100 positions. These reductions are the result of the streamlining of work processes in
conjunction with our shift from a multiple company structure to a single organization. As a result of these reductions, we will record a one-time, after-tax charge of between
$60 and $80 in the first quarter of 2000 (unaudited).

On
February 16, 2000 we issued $2 billion of long-term debt, consisting of $1 billion of Ten-year, 73/4% Notes and $1 billion of
Thirty-year, 77/8% Debentures. We received total proceeds of $1,974, which will be used to retire commercial paper.

On
February 24, 2000 we closed on a previously announced alliance with KPN Royal Dutch Telecom (KPN) to acquire an additional 77.5% interest in E-Plus, a German mobile operator in
which we currently hold a 22.5% interest. As part of the agreement, KPN provided to us a $9.0 billion loan to fund the purchase of the E-Plus shares, and converted the loan into a
77.5 percent share of BellSouth GmbH, the holding company that will own and operate E-Plus. We share equal operating control of E-Plus with KPN through our ownership in
BellSouth GmbH. We have the option, exercisable after 18 months, of converting our 22.5% interest in E-Plus into either 100 million shares of KPN or a 33.3% ownership
interest in KPN Mobile. We also received warrants to purchase approximately 46 million additional shares of KPN.

We
also have agreed to make up to $3 billion of loans to KPN to be used for further wireless investments in Europe.

66



CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

No
change in accountants or disagreements on the adoption of appropriate accounting standards or financial disclosure has occurred during the periods included in this report.

PART III

ITEMS 10 THROUGH 13.

Information
regarding executive officers required by Item 401 of Regulation S-K is furnished in a separate disclosure on page 23 in Part I of this report since the registrant
did not furnish such information in its definitive proxy statement prepared in accordance with Schedule 14A.

The
additional information required by these items will be included in the registrant's definitive proxy statement dated March 13, 2000 as follows, and is herein incorporated by reference
pursuant to General Instruction G(3):

|Item |  | Description                                                    |  | Page(s) in
Definitive Proxy
Statement
|---- |  | -------------------------------------------------------------- |  | -------------------------------------
|10.  |  | Directors and Executive Officers of the Registrant             |  | 6-9                                  
|11.  |  | Executive Compensation                                         |  | 11;14*;
18-23                        
|12.  |  | Security Ownership of Certain Beneficial Owners and Management |  | 2; 12                                
|13.  |  | Certain Relationships and Related Transactions                 |  | 9                                    

---

PART IV

EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

|                                                                                                                                                                                                                                                                                                                                         |  | Page(s) in This
Form 10-K
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------
|a. Documents filed as a part of the report:                                                                                                                                                                                                                                                                                              |  |                          
|(1) Financial Statements:                                                                                                                                                                                                                                                                                                                |  |                          
|Report of Independent Accountants                                                                                                                                                                                                                                                                                                        |  | 43                       
|Consolidated Statements of Income                                                                                                                                                                                                                                                                                                        |  | 44                       
|Consolidated Balance Sheets                                                                                                                                                                                                                                                                                                              |  | 45                       
|Consolidated Statements of Cash Flows                                                                                                                                                                                                                                                                                                    |  | 46                       
|Consolidated Statements of Shareholders' Equity and Comprehensive Income                                                                                                                                                                                                                                                                 |  | 47                       
|Notes to Consolidated Financial Statements                                                                                                                                                                                                                                                                                               |  | 48-66                    
|(2) Financial statement schedules have been omitted because the required information is contained in the financial statements and notes thereto or because such schedules are not required or applicable.                                                                                                                                |  |                          
|(3) Exhibits: Exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto. All management contracts or compensatory plans or arrangements required to be filed as
exhibits to this Form 10-K Report pursuant to Item 14(c) are filed as Exhibits 10a through 10ff inclusive. |  |                          

67



|Exhibit
Number |  |                                                                                                                                                                                                                                                                                                                       
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3a             |  | Amended Articles of Incorporation of BellSouth Corporation effective December 11, 1999.                                                                                                                                                                                                                               
|3b             |  | Bylaws of BellSouth Corporation as Amended on November 23, 1998.                                                                                                                                                                                                                                                      
|4              |  | BellSouth Corporation Shareholder Rights Agreement. (Exhibit 1 to Report on Form 8-A dated November 23, 1999, File No. 1-8607.)                                                                                                                                                                                       
|4a             |  | No instrument which defines the rights of holders of long and intermediate term debt of BellSouth Corporation is filed herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this regulation, BellSouth
Corporation hereby agrees to furnish a copy of any such instrument to the SEC upon request.
|10a            |  | BellSouth Corporation Officer Short Term Incentive Award Plan. (Exhibit 10y to Form 10-Q for the quarter ended September 30, 1996, File No. 1-8607.)                                                                                                                                                                  
|10b            |  | BellSouth Corporation Executive Long Term Incentive Plan. (Exhibit 10e to Form 10-K for the year ended December 31, 1991, File No. 1-8607.)                                                                                                                                                                           
|10c            |  | BellSouth Corporation Executive Long Term Disability and Survivor Protection Plan as amended and restated effective January 1, 1994. (Exhibit 10c-1 to Form 10-K for the year ended December 31, 1993, File No.
1-8607.)                                                                                              
|10d            |  | BellSouth Corporation Executive Transfer Plan. (Exhibit 10ee to Registration Statement No. 2-87846.)                                                                                                                                                                                                                  
|10e            |  | BellSouth Corporation Death Benefit Program. (Exhibit 10ff to Form 10-K for the year ended December 31, 1989, File No. 1-8607.)                                                                                                                                                                                       
|10f            |  | BellSouth Corporation Plan For Non-Employee Directors' Travel Accident Insurance. (Exhibit 10ii to Registration Statement No. 2-87846.)                                                                                                                                                                               
|10g            |  | BellSouth Corporation Executive Incentive Award Deferral Plan as amended and restated effective September 23, 1996. (Exhibit 10g to Form 10-K for the year ended December 31, 1996, File No. 1-8607.)                                                                                                                 
|10h            |  | BellSouth Corporation Nonqualified Deferred Compensation Plan as amended and restated effective November 25, 1996. (Exhibit 10h to Form 10-K for the year ended December 31, 1996, File No. 1-8607.)                                                                                                                  
|10i            |  | BellSouth Corporation Supplemental Executive Retirement Plan as amended on March 23, 1998. (Exhibit 10i to Form 10-Q for the quarter ended March 31, 1998, File No. 1-8607.)                                                                                                                                          
|10j            |  | BellSouth Corporation Directors Retirement Plan. (Exhibit 10qq to Form 10-K for the year ended December 31, 1986, File No. 1-8607.)                                                                                                                                                                                   
|10k            |  | BellSouth Corporation Financial Counseling Plan. (Exhibit 10r to Form 10-K for the year ended December 31, 1992, File No. 1-8607.)                                                                                                                                                                                    
|10k-1          |  | Amendment dated November 3, 1995 to the BellSouth Corporation Financial Counseling Plan for Executives. (Exhibit 10l-1 to Form 10-K for the year ended December 31, 1995, File No. 1-8607.)                                                                                                                           
|10l            |  | BellSouth Corporation Deferred Compensation Plan for Non-Employee Directors. (Exhibit 10gg to Registration Statement No. 2-87846.)                                                                                                                                                                                    
|10m            |  | BellSouth Corporation Executive Life Insurance Plan as amended and restated as the BellSouth Split-Dollar Life Insurance Plan, effective August 31, 1998. (Exhibit 10m to Form 10-K for the year ended December 31, 1998,
 File No. 1-8607)                                                                           
|10n            |  | BellSouth Corporation Non-Employee Director Stock Plan. (Exhibit 10z to Form 10-Q for the quarter ended March 31, 1997, File No. 1-8607.)                                                                                                                                                                             
|10p            |  | BellSouth Non-Employee Directors Charitable Contribution Program. (Exhibit 10z to Form 10-K for the year ended December 31, 1992, File No. 1-8607.)                                                                                                                                                                   
|10q            |  | BellSouth Personal Retirement Account Pension Plan, as amended and restated effective January 1, 1998. (Exhibit 10q to Form 10-K for the year ended December 31, 1998, File No. 1-8607)                                                                                                                               
|10q-1          |  | Amendment dated December 22, 1998 to the BellSouth Personal Retirement Account Pension Plan. (Exhibit 10q-1 to Form 10-K for the year ended December 31, 1998, File No. 1-8607)                                                                                                                                       
|10q-2          |  | Amendment dated March 22, 1999 to the BellSouth Personal Retirement Account Pension Plan. (Exhibit 10q-2 to Form 10-Q for the quarter ended March 31, 1999, File No. 1-8607.)                                                                                                                                         
|10q-3          |  | Amendment dated April 7, 1999 to the BellSouth Personal Retirement Account Pension Plan. (Exhibit 10q-3 to Form 10-Q for the quarter ended March 31, 1999, File No. 1-8607.)                                                                                                                                          
|10q-4          |  | Amendment dated May 6, 1999 to the BellSouth Personal Retirement Account Pension Plan. (Exhibit 10q-4 to Form 10-Q for the quarter ended June 30, 1999, File No. 1-8607.)                                                                                                                                             

68



|10q-5  |  | Amendment dated May 6, 1999 to the BellSouth Personal Retirement Account Pension Plan. (Exhibit 10q-5 to Form 10-Q for the quarter ended June 30, 1999, File No. 1-8607.)                                
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10q-6  |  | Amendment dated May 7, 1999 to the BellSouth Personal Retirement Account Pension Plan. (Exhibit 10q-6 to Form 10-Q for the quarter ended June 30, 1999, File No. 1-8607.)                                
|10q-7  |  | Amendment dated September 13, 1999 to the BellSouth Personal Retirement Account Pension Plan. (Exhibit 10q-7 to Form 10-Q for the quarter ended September 30, 1999, File No. 1-8607.)                    
|10q-8  |  | Amendment dated December 22, 1999 to the BellSouth Personal Retirement Account Pension Plan.                                                                                                             
|10r    |  | BellSouth Corporation Trust Under Executive Benefit Plan(s) as amended April 28, 1995. (Exhibit 10u-1 to Form 10-Q for the quarter ended June 30, 1995, File No. 1-8607.)                                
|10r-1  |  | Amendment dated May 23, 1996 to the BellSouth Corporation Trust Under Executive Benefit Plan(s). (Exhibit 10s-1 to Form 10-Q for the quarter ended June 30, 1996, File No. 1-8607.)                      
|10s    |  | BellSouth Telecommunications, Inc. Trust Under Executive Benefit Plan(s) as amended April 28, 1995. (Exhibit 10v-1 to Form 10-Q for the quarter ended June 30, 1995, File No. 1-8607.)                   
|10s-1  |  | Amendment dated May 23, 1996 to the BellSouth Telecommunications, Inc. Trust Under Executive Benefit Plan(s). (Exhibit 10t-1 to Form 10-Q for the quarter ended June 30, 1996, File No. 1-8607.)         
|10t    |  | BellSouth Corporation Trust Under Board of Directors Benefit Plan(s) as amended April 28, 1995. (Exhibit 10w-1 to Form 10-Q for the quarter ended June 30, 1995, File No. 1-8607.)                       
|10t-1  |  | Amendment dated May 23, 1996 to the BellSouth Corporation Trust Under Board Directors Benefit Plan(s). (Exhibit 10u-1 to Form 10-Q for the quarter ended June 30, 1996, File No. 1-8607.)                
|10u    |  | BellSouth Telecommunications, Inc. Trust Under Board of Directors Benefit Plan(s) as amended April 28, 1995. (Exhibit 10x-1 to Form 10-Q for the quarter ended June 30, 1995, File No. 1-8607.)          
|10u-1  |  | Amendment dated May 23, 1996 to the BellSouth Telecommunications, Inc. Trust Under Board of Directors Benefit Plan(s). (Exhibit 10v-1 to Form 10-Q for the quarter ended June 30, 1996, File No. 1-8607.)
|10v    |  | BellSouth Corporation Stock Plan as amended on September 23, 1996 and November 24, 1996. (Exhibit 10v to Form 10-K for the year ended December 31, 1996, File No. 1-8607.)                               
|10w    |  | BellSouth Retirement Savings Plan as amended and restated effective July 1, 1996. (Exhibit 10x to Form 10-Q for the quarter ended September 30, 1996, File No. 1-8607.)                                  
|10w-1  |  | Amendment dated February 18, 1997 to the BellSouth Retirement Savings Plan. (Exhibit 10w-1 to Form 10-Q for the quarter ended March 31, 1997, File No. 1-8607.)                                          
|10w-2  |  | Amendment dated June 24, 1997 to the BellSouth Retirement Savings Plan. (Exhibit 10w-2 to Form 10-Q/A for the quarter ended June 30, 1997, File No. 1-8607.)                                             
|10w-3  |  | Amendment dated May 5, 1998 to the BellSouth Retirement Savings Plan. (Exhibit 10w-3 to Form 10-Q for the quarter ended March 31, 1998, File No. 1-8607.)                                                
|10w-4  |  | Amendment dated December 23, 1998 to the BellSouth Retirement Savings Plan. (Exhibit 10w-4 to Form 10-K for the year ended December 31, 1998, File No. 1-8607)                                           
|10w-5  |  | Amendment dated December 22, 1999 to the BellSouth Retirement Savings Plan.                                                                                                                              
|10x    |  | BellSouth Corporation Officer Estate Enhancement Plan and Agreement. (Exhibit 10x to Form 10-K for the year ended December 31, 1996, File No. 1-8607.)                                                   
|10y    |  | BellSouth Change in Control Executive Severance Agreements. (Exhibit 10y to Form 10-K for the year ended December 31, 1996, File No. 1-8607.)                                                            
|10z    |  | BellSouth Compensation Deferral Plan as amended and restated effective September 28, 1998. (Exhibit 10z to Form 10-Q for the quarter ended March 31, 1999, File No. 1-8607.)                             
|10aa   |  | BellSouth Employee Stock Investment Plan. (Exhibit 10aa to Form 10-Q for the quarter ended March 31, 1998, File No. 1-8607.)                                                                             
|10aa-1 |  | Amendment dated November 27, 1996 to the BellSouth Employee Stock Investment Plan. (Exhibit 10aa-1 to Form 10-Q for the quarter ended March 31, 1998, File No. 1-8607.)                                  
|10aa-2 |  | Amendment dated March 21, 1997 to the BellSouth Employee Stock Investment Plan. (Exhibit 10aa-2 to Form 10-Q for the quarter ended March 31, 1998, File No. 1-8607.)                                     
|10aa-3 |  | Amendment dated May 5, 1998 to the BellSouth Employee Stock Investment Plan. (Exhibit 10aa-3 to Form 10-Q for the quarter ended March 31, 1998, File No. 1-8607.)                                        
|10bb   |  | BellSouth Officer Motor Vehicle Policy. (Exhibit 10bb to Form 10-Q for the quarter ended March 31, 1998, File No. 1-8607.)                                                                               

69



|10cc |  | BellSouth Supplemental Life Insurance Plan, as amended and restated effective August 31, 1998. (Exhibit 10cc to Form 10-K for the year ended December 31, 1998, File No. 1-8607)                                           
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10dd |  | Agreement with Chief Executive Officer. (Exhibit 10dd to Form 10-K for the year ended December 31, 1998, File No. 1-8607)                                                                                                  
|10ee |  | Retirement Agreement dated October 27, 1999 for Jere A. Drummond. (Exhibit 10ee to Form 10-Q for the quarter ended September 30, 1999, File No. 1-8607.)                                                                   
|10ff |  | Retirement Agreement dated December 14, 1999 for Earle Mauldin.                                                                                                                                                            
|11   |  | Computation of Earnings Per Share.                                                                                                                                                                                         
|12   |  | Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                         
|21   |  | Subsidiaries of BellSouth.                                                                                                                                                                                                 
|24   |  | Powers of Attorney.                                                                                                                                                                                                        
|27   |  | Financial Data Schedule.                                                                                                                                                                                                   
|99a  |  | Annual report on Form 11-K for BellSouth Retirement Savings Plan for the fiscal year ended December 31, 1999 (to be filed as an amendment hereto within 180 days of the end of the period covered by this report)
 .       
|99b  |  | Annual report on Form 11-K for BellSouth Savings and Security ESOP Plan for the fiscal year ended December 31, 1999 (to be filed as an amendment hereto within 180 days of the end of the period covered by this report)
 .

b.
Reports on Form 8-K:

|Date of Event    |  | Subject                                                                   
|---------------- |  | --------------------------------------------------------------------------
|October 20, 1999 |  | Third Quarter 1999 Earnings                                               
|December 3, 1999 |  | Restatement of Second and Third Quarter
1999 Results and Earnings Guidance
|December 9, 1999 |  | Acquisition of E-Plus                                                     

70



## 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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                                               
| |  | --------------------------------------------------------------------
| |  | /s/W. PATRICK SHANNONW. Patrick Shannon
CONTROLLER
February 28, 2000

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date
indicated.

PRINCIPAL
EXECUTIVE OFFICER:
F. Duane Ackerman*
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER

PRINCIPAL
FINANCIAL OFFICER:
Ronald M. Dykes*
CHIEF FINANCIAL OFFICER

PRINCIPAL
ACCOUNTING OFFICER:
W. Patrick Shannon*
CONTROLLER

DIRECTORS:

|F. Duane Ackerman*     |  | John G. Medlin, Jr.*    
|---------------------- |  | ------------------------
|Reuben V. Anderson*    |  | Leo F. Mullin*          
|James H. Blanchard*    |  | Eugene F. Murphy*       
|J. Hyatt Brown*        |  | Robin B. Smith*         
|Armando M. Codina*     |  | C. Dixon Spangler, Jr.* 
|Phyllis Burke Davis*   |  | William S. Stavropoulos*
|Kathleen F. Feldstein* |  | J. Tylee Wilson*        

*By:
/s/W. PATRICK SHANNON

---

W. Patrick Shannon
(INDIVIDUALLY AND AS ATTORNEY-IN-FACT)
February 28, 2000

70



## 

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference of our report, dated February 3, 2000 (except for Note R, as to which the date is February 24, 2000), relating
to the financial statements, which appears in this Form 10-K, in the following Registration Statements:

Form S-3
(File No. 333-21233),

Form S-3
(File No. 333-31301),

Form S-3
(File No. 333-77053),

Form S-8
(File No. 33-38264),

Form S-8
(File No. 33-38265),

Form S-8
(File No. 33-49459),

Form S-8
(File No. 333-13783),

Form S-8
(File No. 333-49045),

Form S-8
(File No. 333-49047),

Form S-8
(File No. 333-49169).



Atlanta,
Georgia
March 1, 2000

72



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