<PAGE>   1
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                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


     [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934

               For the quarterly period ended: SEPTEMBER 30, 1999

                                       or

     [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934

               For the transition period from _______ to _______


                         Commission File Number 2-36292


                             GTE SOUTH INCORPORATED
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


             VIRGINIA                                   56-0656680
(STATE OR OTHER JURISDICTION OF             (I.R.S. EMPLOYER IDENTIFICATION NO.)
 INCORPORATION OR ORGANIZATION)

1255 Corporate Drive, SVC04C08, Irving, Texas             75038
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)              (ZIP CODE)

         Registrant's telephone number, including area code 972-507-5000


              (Former name, former address and former fiscal year,
                         if changed since last report)

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 [ ]

The Company had 21,000,000 shares of $25 par value common stock outstanding at
October 31, 1999. The Company's common stock is 100% owned by GTE Corporation.



================================================================================

<PAGE>   2



PART I. FINANCIAL INFORMATION



Item 1.  Financial Statements

                             GTE SOUTH INCORPORATED
                   Condensed Statements of Income (Unaudited)


<TABLE>
<CAPTION>

                                                   Three Months Ended         Nine Months Ended
                                                      September 30,              September 30,
                                                 -----------------------   -----------------------
                                                    1999         1998         1999         1998
                                                 ----------   ----------   ----------   ----------
                                                            (Dollars in Millions)

<S>                                              <C>          <C>          <C>          <C>
REVENUES AND SALES
     Local services                              $    174.0   $    159.0   $    506.3   $    468.2
     Network access services                          171.1        160.9        504.8        483.0
     Other services and sales                          68.8         72.8        216.2        216.8
                                                 ----------   ----------   ----------   ----------

        Total revenues and sales                      413.9        392.7      1,227.3      1,168.0
                                                 ----------   ----------   ----------   ----------

OPERATING COSTS AND EXPENSES
     Cost of services and sales                       127.7        143.5        374.6        406.2
     Selling, general and administrative               50.8         55.4        170.9        159.9
     Depreciation and amortization                     76.0         71.4        228.4        215.4
                                                 ----------   ----------   ----------   ----------

        Total operating costs and expenses            254.5        270.3        773.9        781.5
                                                 ----------   ----------   ----------   ----------

OPERATING INCOME                                      159.4        122.4        453.4        386.5

OTHER EXPENSE
     Interest - net                                    18.0         20.1         51.5         48.9
                                                 ----------   ----------   ----------   ----------

INCOME BEFORE INCOME TAXES                            141.4        102.3        401.9        337.6
     Income taxes                                      55.3         39.7        157.3        131.0
                                                 ----------   ----------   ----------   ----------

INCOME BEFORE EXTRAORDINARY CHARGE                     86.1         62.6        244.6        206.6
     Extraordinary charge                                --           --           --         (0.2)
                                                 ----------   ----------   ----------   ----------

NET INCOME                                       $     86.1   $     62.6   $    244.6   $    206.4
                                                 ==========   ==========   ==========   ==========
</TABLE>













Per share data is omitted since the Company's common stock is 100% owned by GTE
Corporation.

The accompanying notes are an integral part of these statements.

                                       1


<PAGE>   3



                             GTE SOUTH INCORPORATED
                      Condensed Balance Sheets (Unaudited)


<TABLE>
<CAPTION>

                                                          September 30,      December 31,
                                                              1999               1998
                                                         ---------------    ---------------
                                                               (Dollars in Millions)

<S>                                                      <C>                <C>
ASSETS
Current assets
    Cash and cash equivalents                            $           1.3    $          12.8
    Receivables, less allowances of $24.1 million
      and $20.0 million                                            304.3              257.4
    Accounts receivable from affiliates                              1.3               29.0
    Inventories and supplies                                        24.7               18.1
    Net assets held for sale (see Note 4)                            3.7                 --
    Prepayments and other                                            2.9               19.5
                                                         ---------------    ---------------

       Total current assets                                        338.2              336.8
                                                         ---------------    ---------------


Property, plant and equipment, at cost                           4,633.7            4,507.4
Accumulated depreciation                                        (2,901.7)          (2,807.2)
                                                         ---------------    ---------------

       Total property, plant and equipment, net (a)              1,732.0            1,700.2
                                                         ---------------    ---------------


Prepaid pension costs                                              224.9              175.6
Other assets                                                         4.1               10.9
                                                         ---------------    ---------------

Total assets                                             $       2,299.2    $       2,223.5
                                                         ===============    ===============
</TABLE>






(a) Includes $3.3 million at December 31, 1998, that is now held for sale, see
    Note 4.

The accompanying notes are an integral part of these statements.




                                       2
<PAGE>   4



                             GTE SOUTH INCORPORATED
                Condensed Balance Sheets (Unaudited) - Continued

<TABLE>
<CAPTION>

                                                   September 30,  December 31,
                                                        1999          1998
                                                   ------------   ------------
                                                      (Dollars in Millions)

<S>                                                <C>            <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
    Current maturities of long-term debt           $        4.1   $        4.1
    Notes payable to affiliates                           124.5          106.8
    Accounts payable                                       62.5           54.4
    Affiliate payables and accruals                        31.6           36.9
    Taxes payable                                          30.4           21.0
    Accrued payroll costs                                  19.4           36.2
    Dividends payable                                      88.0           61.3
    Other                                                  92.0           84.5
                                                   ------------   ------------

       Total current liabilities                          452.5          405.2
                                                   ------------   ------------


Long-term debt                                            796.9          796.6
Employee benefit plans                                    166.2          165.6
Deferred income taxes and other                           175.1          168.3
                                                   ------------   ------------

       Total liabilities                                1,590.7        1,535.7
                                                   ------------   ------------


Shareholders' equity
    Preferred stock                                         0.4            0.4
    Common stock (21,000,000 shares issued)               525.0          525.0
    Additional paid-in capital                             62.4           58.4
    Retained earnings                                     120.7          104.0
                                                   ------------   ------------

       Total shareholders' equity                         708.5          687.8
                                                   ------------   ------------

Total liabilities and shareholders' equity         $    2,299.2   $    2,223.5
                                                   ============   ============
</TABLE>






The accompanying notes are an integral part of these statements.



                                       3

<PAGE>   5



                             GTE SOUTH INCORPORATED
                 Condensed Statements of Cash Flows (Unaudited)


<TABLE>
<CAPTION>

                                                                       Nine Months Ended
                                                                          September 30,
                                                                 ----------------------------
                                                                     1999            1998
                                                                 ------------    ------------
                                                                     (Dollars in Millions)

<S>                                                              <C>             <C>
OPERATIONS
    Income before extraordinary charge                           $      244.6    $      206.6
    Adjustments to reconcile income before extraordinary
       charge to net cash from operations:
         Depreciation and amortization                                  228.4           215.4
         Provision for uncollectible accounts                            22.1            19.0
         Changes in current assets and current liabilities              (36.2)          (67.9)
         Deferred income taxes and other - net                          (26.6)           16.6
                                                                 ------------    ------------
       Net cash from operations                                         432.3           389.7
                                                                 ------------    ------------

INVESTING
    Capital expenditures                                               (261.7)         (248.9)
    Other - net                                                           1.4              --
                                                                 ------------    ------------
       Net cash used in investing                                      (260.3)         (248.9)
                                                                 ------------    ------------
FINANCING
    Long-term debt issued                                                  --           221.1
    Long-term debt and preferred stock retired,
       including premiums paid on early retirement                         --           (34.9)
    Dividends paid                                                     (201.2)         (219.4)
    Net change in affiliate notes                                        17.7          (112.9)
                                                                 ------------    ------------
       Net cash used in financing                                      (183.5)         (146.1)
                                                                 ------------    ------------

Decrease in cash and cash equivalents                                   (11.5)           (5.3)

Cash and cash equivalents:
    Beginning of period                                                  12.8            13.1
                                                                 ------------    ------------
    End of period                                                $        1.3    $        7.8
                                                                 ============    ============
</TABLE>







The accompanying notes are an integral part of these statements.



                                       4

<PAGE>   6



                             GTE SOUTH INCORPORATED
                  Statement of Shareholders' Equity (Unaudited)


<TABLE>
<CAPTION>

                                                                           Additional
                                               Preferred       Common       Paid-In      Retained
                                                 Stock         Stock        Capital      Earnings      Total
                                               ----------    ----------    ----------   ----------   ----------
                                                                    (Dollars in Millions)

<S>                                            <C>           <C>           <C>          <C>          <C>
Shareholders' equity, December 31, 1998        $      0.4    $    525.0    $     58.4   $    104.0   $    687.8

Net income                                                                                   244.6        244.6
Tax benefit of employee stock
   options exercised                                                              4.0                       4.0
Dividends declared                                                                          (227.9)      (227.9)
                                               ----------    ----------    ----------   ----------   ----------
Shareholders' equity, September 30, 1999       $      0.4    $    525.0    $     62.4   $    120.7   $    708.5
                                               ==========    ==========    ==========   ==========   ==========
</TABLE>







The accompanying notes are an integral part of these statements.

                                       5


<PAGE>   7



                             GTE SOUTH INCORPORATED
               Notes to Condensed Financial Statements (Unaudited)

NOTE 1. BASIS OF PRESENTATION

GTE South Incorporated (the Company) is incorporated under the laws of the State
of Virginia and is a subsidiary of GTE Corporation (GTE).

The unaudited condensed financial statements included herein have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. However, in the opinion of management of the Company, the condensed
financial statements include all adjustments, which consist only of normal
recurring accruals, necessary to present fairly the financial information for
such periods. These condensed financial statements should be read in conjunction
with the financial statements and the notes thereto included in the Company's
1998 Annual Report on Form 10-K.

Reclassifications of prior year data have been made, where appropriate, to
conform to the 1999 presentation.

NOTE 2. CAPITALIZED SOFTWARE

Effective January 1, 1999, the Company adopted Statement of Position (SOP) 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." As a result of adopting SOP 98-1, in the third quarter and first
nine months of 1999, the Company capitalized $6.0 million and $13.9 million,
respectively, of software expenditures, which would have previously been
expensed.

NOTE 3. SPECIAL CHARGE

In 1999, GTE continued the review of its operations and cost structure to ensure
they were consistent with its growth objectives. In connection with this ongoing
review, GTE initiated employee separation programs that resulted in a one-time
charge for GTE during the first quarter of 1999. The charge pertaining to the
Company totaled $11.2 million and is reflected as "Selling, general and
administrative" costs and expenses in the condensed income statements. The
components of the charge include separation programs and related benefits such
as outplacement and benefit continuation costs. These programs were completed
during the first quarter of 1999.

NOTE 4. NET ASSETS HELD FOR SALE

During the first quarter of 1998, the Company committed to a plan that resulted
in a decision to sell approximately 7,000 switched access lines located in
Illinois. The Company plans to enter into agreements to sell these lines during
1999. All sales will be subject to regulatory approval and are expected to close
during 2000. The associated net assets, which approximate $3.7 million, consist
of property, plant and equipment, and are classified as "Net assets held for
sale" in the condensed balance sheet as of September 30, 1999. The Company
intends to continue to operate all of these assets until sold. Based on the
decision to sell, however, the Company stopped recording depreciation expense
for these assets, resulting in depreciation expense reductions of $0.2 million
and $0.6 million for the three and nine months ended September 30, 1999,
respectively. No charges were recorded for the access lines to be sold because
their estimated fair values were in excess of their carrying values. The 7,000
access lines represent less than 1% of the average switched access lines that
the Company had in service during 1998, and contributed less than 1% to 1998
revenues.





                                       6
<PAGE>   8



                             GTE SOUTH INCORPORATED
         Notes to Condensed Financial Statements (Unaudited) - Continued

NOTE 5. RECENT ACCOUNTING PRONOUNCEMENT

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The Company is
currently assessing the impact of adopting SFAS No. 133, as amended, which is
effective January 1, 2001.

NOTE 6. PROPOSED MERGER WITH BELL ATLANTIC CORPORATION

Bell Atlantic and GTE have announced a proposed merger of equals under a
definitive merger agreement dated as of July 27, 1998. Under the terms of the
agreement, GTE shareholders will receive 1.22 shares of Bell Atlantic common
stock for each share of GTE common stock that they own.

The merger is expected to qualify as a pooling of interests, which means that
for accounting and financial reporting purposes the companies will be treated as
if they had always been combined. The completion of the merger is subject to a
number of conditions, including certain regulatory approvals and receipt of
opinions that the merger will be tax-free. At annual meetings held in May 1999,
the shareholders of each company approved the merger.




                                       7
<PAGE>   9



                             GTE SOUTH INCORPORATED

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

RESULTS OF OPERATIONS

Net income increased by $23.5 million or 38% and $38.2 million or 19% for the
three and nine months ended September 30, 1999, respectively, compared to the
same periods in 1998. These increases resulted from higher local services
revenues and network access services revenues and lower cost of services and
sales. In the first quarter of 1998, the Company recorded an after-tax
extraordinary charge of $0.2 million (net of tax benefits of $0.1 million)
reflecting premiums paid on the retirement of high-coupon debt and preferred
stock prior to stated maturity.


<TABLE>
<CAPTION>

REVENUES AND SALES
(Dollars in Millions)                       Three Months Ended
                                                September 30,
                                         -----------------------    Increase       Percent
                                            1999         1998      (Decrease)      Change
                                         ----------   ----------   ----------    ----------

<S>                                      <C>          <C>          <C>           <C>
    Local services                       $    174.0   $    159.0   $     15.0             9%
    Network access services                   171.1        160.9         10.2             6%
    Other services and sales                   68.8         72.8         (4.0)           (5)%
                                         ----------   ----------   ----------
       Total revenues and sales          $    413.9   $    392.7   $     21.2             5%
                                         ==========   ==========   ==========
</TABLE>



<TABLE>
<CAPTION>

                                            Nine Months Ended
                                               September 30,
                                         -----------------------    Increase       Percent
                                            1999         1998      (Decrease)      Change
                                         ----------   ----------   ----------    ----------

<S>                                      <C>          <C>          <C>           <C>
Local services                           $    506.3   $    468.2   $     38.1             8%
Network access services                       504.8        483.0         21.8             5%
Other services and sales                      216.2        216.8         (0.6)           --
                                         ----------   ----------   ----------
   Total revenues and sales              $  1,227.3   $  1,168.0   $     59.3             5%
                                         ==========   ==========   ==========
</TABLE>

Local Services Revenues

Access line growth was 6% for the three and nine months ended September 30,
1999, generating additional revenues of $6.5 million and $21.0 million,
respectively, from basic local services, CentraNet(R) services, Integrated
Services Digital Network and Digital Channel Services. Greater demand for
enhanced custom calling features, such as SmartCall(R) services, increased local
services revenues by $3.9 million and $8.4 million, respectively. Also, growth
in extended area service revenue contributed an additional $2.7 million and $4.2
million for the third quarter and year-to-date, respectively.

Network Access Services Revenues

Minutes of use increased 10% and 7%, generating additional revenues of $7.4
million and $14.0 million, respectively, for the three and nine months ended
September 30, 1999, compared to the same periods in 1998. Special access
revenues grew by $7.2 million and $17.9 million, respectively, as a result of
greater demand for increased bandwidth services by high-capacity users.
Partially offsetting the three and nine month increases are decreases of $5.9
million and $14.0 million, respectively, reflecting the impact of mandated
interstate and intrastate access price changes.




                                       8
<PAGE>   10


                             GTE SOUTH INCORPORATED

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued

Other Services and Sales Revenues

The decrease in other services and sales revenues for the three months ended
September 30, 1999 is primarily due to a $4.1 million decline in toll revenues,
primarily related to intraLATA (local access transport area) toll competition.

<TABLE>
<CAPTION>

OPERATING COSTS AND EXPENSES
(Dollars in Millions)                       Three Months Ended
                                                September 30,
                                         -----------------------    Increase       Percent
                                             1999        1998      (Decrease)      Change
                                         ----------   ----------   ----------    ----------

<S>                                      <C>          <C>          <C>           <C>
Cost of services and sales               $    127.7   $    143.5   $    (15.8)          (11)%
Selling, general and administrative            50.8         55.4         (4.6)           (8)%
Depreciation and amortization                  76.0         71.4          4.6             6%
                                         ----------   ----------   ----------
   Total operating costs and expenses    $    254.5   $    270.3   $    (15.8)           (6)%
                                         ==========   ==========   ==========
</TABLE>



<TABLE>
<CAPTION>

                                            Nine Months Ended
                                               September 30,
                                         -----------------------    Increase       Percent
                                            1999         1998      (Decrease)      Change
                                         ----------   ----------   ----------    ----------

<S>                                      <C>          <C>          <C>           <C>
Cost of services and sales               $    374.6   $    406.2   $    (31.6)           (8)%
Selling, general and administrative           170.9        159.9         11.0             7%
Depreciation and amortization                 228.4        215.4         13.0             6%
                                         ----------   ----------   ----------
   Total operating costs and expenses    $    773.9   $    781.5   $     (7.6)           (1)%
                                         ==========   ==========   ==========
</TABLE>

Total operating costs and expenses declined for the three and nine months ended
September 30, 1999, compared with the same periods in 1998. These decreases were
partially due to the employee-reduction program initiated earlier this year and
the resulting settlement of pension obligations, which allowed the Company to
immediately recognize pension plan gains that have accumulated in excess of the
employee obligations. These favorable pension settlement gains were $13.8
million and $31.4 million in the third quarter and first nine months of 1999,
respectively. Further contributing to the decreases in operating costs and
expenses were data processing costs of $4.9 million for the three and nine
months ended September 30, 1999. Partially offsetting the cost reductions for
the first nine months of 1999, is a one-time special charge of $11.2 million
associated with employee separation programs completed in the first quarter of
1999 and favorable adjustments of certain employee benefits and other
liabilities recorded in the second quarter of 1998, which reduced 1998 expenses
by $10.7 million. Higher depreciation charges associated with the investment in
additional network facilities resulting from increased demand for switched
access lines contributed $4.8 million and $13.8 million to the increases in
depreciation expense for both the three and nine months ended September 30,
1999, respectively. The third quarter and year-to-date increases in depreciation
are partially offset by $0.2 million and $0.6 million, respectively, resulting
from the discontinuation of depreciation on approximately 7,000 switched access
lines held for sale (for further information see "OTHER DEVELOPMENTS - Planned
Asset Sales").

OTHER INCOME STATEMENT ITEMS

Interest-net decreased $2.1 million or 10% for the quarter ended September 30,
1999, compared to the same period in 1998, primarily due to a decrease in
interest expense resulting from lower average long-term debt balances.
Interest-net increased $2.6 million or 5% for the nine months ended September
30, 1999, compared to the same period in 1998, primarily as a result of an
increase in interest expense due to higher average debt balances.





                                       9
<PAGE>   11

                             GTE SOUTH INCORPORATED

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



Income taxes increased $15.6 million or 39% and $26.3 million or 20% for the
three and nine months ended September 30, 1999, respectively, compared to the
same periods in 1998. The increases are primarily due to corresponding increases
in pretax income.

During the first quarter of 1998, the Company recorded an after-tax
extraordinary charge of $0.2 million (net of tax benefits of $0.1 million)
reflecting premiums paid on the retirement of high-coupon debt and preferred
stock prior to stated maturity.

CAPITAL RESOURCES AND LIQUIDITY

Management believes that the Company has adequate internal and external
resources available to meet ongoing operating requirements for construction of
new plant, modernization of facilities and payment of dividends. The Company
generally funds its construction program from operations, although external
financing is available. Short-term financing can be obtained through borrowings
from GTE, or GTE Funding Incorporated, an affiliate of the Company. The Company
participates with other affiliates in a $1.5 billion, 364-day syndicated
revolving line of credit and has access to an additional $2.0 billion in
short-term liquidity through GTE and GTE Funding Incorporated's committed
bi-lateral revolving lines of credit.

During the first nine months of 1999 net cash from operations was $432.3 million
compared to $389.7 million for the same period in 1998. The increase in net cash
from operations is due primarily to an increase in results from operations.

The Company's capital expenditures during the first nine months of 1999 were
$261.7 million compared to $248.9 million for the same period in 1998. The
majority of new investment is being made to meet the demands of growth,
modernize facilities and develop and install new software, all of which are
required to support new products and enhanced services. The Company anticipates
overall capital expenditures for 1999 to be approximately the same as the 1998
level.

Net cash used in financing activities was $183.5 million during the first nine
months of 1999 compared to $146.1 million for the same period in 1998. This
included dividend payments of $201.2 million during the first nine months of
1999 compared to $219.4 million for the same period in 1998. Short-term
financing, represented by the net change in affiliate notes, increased $17.7
million for the first nine months of 1999, compared to a decrease of $112.9
million for the same period in 1998. During the first nine months of 1999, the
Company did not retire any long-term debt and preferred stock compared to a
total of $34.9 million retired in 1998. Retirements for 1998 included a pretax
charge of $0.3 million ($0.2 million after-tax) in premiums paid on the
retirement of long-term debt and preferred stock prior to stated maturity. In
June 1998, the Company issued $225.0 million of debentures. The net proceeds
were applied toward the repayment of the Company's short-term borrowings used to
finance a portion of the Company's construction program and for general
corporate purposes.

INTERSTATE REGULATORY DEVELOPMENTS

During the third quarter of 1999, regulatory and legislative activity at both
the state and federal levels continued to be a direct result of the
Telecommunications Act of 1996 (Telecommunications Act). Along with promoting
competition in all segments of the telecommunications industry, the
Telecommunications Act was intended to preserve and advance universal service.





                                       10
<PAGE>   12
                             GTE SOUTH INCORPORATED

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued


GTE continued in the third quarter of 1999, to meet the wholesale requirements
of new competitors. To date, GTE has signed interconnection agreements with
other carriers, providing them the capability to purchase individual unbundled
network elements (UNEs), resell retail services and interconnect
facilities-based networks. Several of these interconnection agreements were the
result of the arbitration process established by the Telecommunications Act, and
incorporated prices or terms and conditions based upon the Federal
Communications Commission (FCC) rules that were subsequently overturned by the
Eighth Circuit Court (Eighth Circuit) in July 1997. GTE challenged a number of
such agreements in federal district courts during 1997.

GTE's position in these challenges was supported by the Eighth Circuit's July
1997 decision stating that the FCC had overstepped its authority in several
areas concerning implementation of the interconnection provisions of the
Telecommunications Act. In January 1999, the U.S. Supreme Court (Supreme Court)
reversed in part and affirmed in part the Eighth Circuit's decisions. The
Supreme Court reversed the Eighth Circuit's determination that the FCC had no
jurisdiction over pricing. As a result, the pricing rules established by the FCC
are now subject to review on their merits by the Eighth Circuit. On the other
hand, the Supreme Court vacated the FCC rule setting forth the UNEs that
incumbent local exchange carriers (ILECs) are required to provide to competitive
local exchange carriers (CLECs). This latter ruling has led to a proceeding
before the FCC concerning what elements had to be offered and under what
conditions.

In September 1999, the FCC voted on the matter and the order was issued on
November 5, 1999. The FCC reaffirmed that incumbents must provide unbundled
access to five of the original seven network elements. ILECs are no longer
required to provide unbundled operator services, including directory assistance.
In addition, in certain circumstances, local and tandem switching need not be
unbundled. The FCC also found that state commissions can require ILECs to
unbundle additional elements as long as they are consistent with the
requirements of the Telecommunications Act and the national policy framework
instituted in the FCC's order. Furthermore, the order precludes states from
removing network elements from the FCC's list of unbundling obligations.

In June 1999, the Eighth Circuit established a schedule for addressing the
issues it did not decide in 1998. The major issues are: (1) the FCC's cost
methodology used to set prices, (2) its methodology for setting wholesale
discounts, (3) the "proxy rates" it set for interconnection, UNEs, and wholesale
discounts, (4) whether ILECs should be required to combine UNEs that are not
already combined, and (5) whether the FCC can require ILECs to provide "superior
quality" to competitors than what the ILEC provides to itself. Parties to this
action have filed briefs and participated in oral arguments on September 17,
1999. A court decision is expected during the first quarter of 2000.

Universal Service

GTE is active before both state and federal regulators advocating development
and implementation of measures that will meet the requirements of the universal
service provisions of the Telecommunications Act. Specifically, GTE urges
regulators to identify and remove all hidden subsidies and to provide an
explicit replacement mechanism.

In October 1998, the FCC issued an order selecting a cost model for universal
service. On October 22, 1999, the FCC adopted an order selecting the cost inputs
for the federal universal service cost model. Due to unforeseen delays, the FCC
has now moved the implementation date of the new universal service mechanism for
non-rural carriers to January 2000. As a result, many state regulators are
awaiting FCC action so they can design their universal service programs to be
complementary with the FCC program.

In July 1999, the United States Court of Appeals for the Fifth Circuit (Fifth
Circuit) affirmed in part, reversed in part, and remanded in part the FCC's
universal service regime. The FCC filed a Motion For Stay of the Fifth Circuit's
mandate so that additional time could be granted to address the implementation
issues associated with changing its existing methods of assessment and carrier
recovery of universal service contributions. GTE and







                                       11
<PAGE>   13
                             GTE SOUTH INCORPORATED

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued



several other parties also asked the Fifth Circuit for rehearing on several
issues. However, in September 1999 the Fifth Circuit denied all motions for stay
and/or rehearing, and established November 1, 1999 as the effective date for the
original decision.

On October 8, 1999, the FCC released two orders in response to the Fifth Circuit
decision. One order permits ILECs to continue to recover their universal service
contributions from access charges or to establish end-user charges. The second
order changed the contribution basis for school/library funding to eliminate
calculations based upon intrastate revenues.

On November 4, 1999, the FCC released an order dealing with implementation of
the new FCC federal high cost support mechanism for non-rural ILECs. The
effective date for the new federal universal service plan is January 1, 2000.
This plan will take contributions to the federal fund and distribute them to
states with higher than average costs. The role of state commissions is to
ensure reasonable comparability within the borders of a state. Federal high cost
support will be calculated by comparing the nationwide average cost with each
state's average cost per line, and providing federal support for only states
that exceed 135% of the nationwide average. To guard against rate shock, the FCC
also adopted a "hold harmless" approach so that the amount of support provided
to each non-rural carrier under the new plan will not be less than the amount
provided today.

Price Cap

In May 1999, the U.S. Court of Appeals for the District of Columbia (Court)
released a decision regarding the FCC's choice of a 6.5% price cap productivity
factor in a 1997 order. The Court found the FCC's choice of a 6.0% base factor
and a 0.5% Consumer Productivity Dividend to be inadequately supported. The
Court remanded the matter back to the FCC for further action and established an
April 2000 date by which the FCC must complete its deliberations. The Court also
stayed application of its order, allowing the status quo use of the 6.5%
productivity factor pending conclusion of the FCC's further review.

Interstate Access Revision

Effective July 1999, access charges were further reduced using a 6.5%
productivity factor in compliance with FCC requirements to reflect the impacts
of access charge reform and in making the Company's 1999 Annual Filing. The
total annual financial impact of the reduction was $113 million. Similar filings
during 1997 and 1998 had already resulted in price reductions.

In July 1999, GTE, along with a coalition of local exchange and long-distance
companies, submitted a proposal for interstate access charge and universal
service reform to the FCC. The proposal would accelerate the shift in access
revenue recovery from per-minute to flat-rated charges, set a schedule for
elimination of the price cap productivity factor, and provide more explicit
support for universal service. In September 1999, the FCC put the coalition's
proposal out for public comment.

In August 1999, the FCC released an order pertaining to access reform and
pricing flexibility. The order grants price cap LECs immediate flexibility under
certain circumstances to deaverage certain access services and permits the
introduction of new services on a streamlined basis, without prior FCC approval.

Advanced Telecommunications Services

The Telecommunications Act required the FCC to "encourage the deployment on a
reasonable and timely basis of advanced telecommunications capability to all
Americans." Further, the FCC was required to conduct a proceeding








                                       12
<PAGE>   14

                             GTE SOUTH INCORPORATED

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued


aimed at determining the availability of advanced telecommunications, and to
take action to remove barriers to infrastructure investment and to promote
competition.

In March 1999, the FCC released an order adopting a number of new collocation
rules designed to make competitive entry easier and less costly. These rules
specify how ILECs will manage such items as alternate collocation arrangements,
security, space preparation cost allocation, provisioning intervals, and space
exhaustion. GTE has appealed this order to federal court. The FCC also released
a Further Notice of Proposed Rulemaking (FNPRM) seeking comment on spectrum
compatibility issues and line sharing. Line sharing is a concept wherein two or
more service providers are allowed to use the same local loop (e.g., voice and
xDSL). An order from the FCC on line sharing is expected in the fourth quarter
of 1999.

Number Portability

In December 1998, the FCC released an order establishing cost recovery rules for
local number portability (LNP) that permitted the recovery of carrier-specific
costs directly related to the provision of long-term LNP via a federally
tariffed end-user monthly charge. GTE subsequently filed an LNP tariff with the
FCC, and in March 1999 instituted an end-user number portability fee. This
charge is levied on all business and residence customers because all customers
benefit from the competitive environment created by LNP capability. In June
1999, GTE's tariffed LNP charge was reviewed and accepted by the FCC at $0.36
per access line.

Internet Service Traffic

ILECs are required to provide open access to all Internet service providers
(ISPs), while cable television operators are not. Several major cable television
operators providing Internet access through cable modem facilities are only
offering their affiliated ISPs to consumers. Cable television operators that do
allow customers to select non-affiliated ISPs often require the customer to also
pay for their affiliated ISP's service (i.e., to pay twice for the same
service). GTE has been active in encouraging municipalities engaged in reviewing
cable television mergers or franchise renewals to require cable modem open
access as a condition for approval. The City of Portland, Oregon was first to
adopt such a requirement and AT&T has appealed that decision. Arguments took
place November 1, 1999 before the Ninth Circuit Court.

In October 1999, GTE's Internetworking unit filed an antitrust lawsuit
contending that cable TV providers' refusal to provide ISPs with "open access"
to cable modem platforms is a violation of federal antitrust law. The lawsuit
filed in the U.S. District Court in Pittsburgh, names Tele-Communications, Inc.,
(now a unit of AT&T Corp.), Comcast Corp., and Excite@Home and seeks an
injunction to require open access and damages.

GTE's interconnection contracts with CLECs specify that parties compensate each
other for the exchange of local traffic, defined as traffic that is originated
by an end user of one party and terminating to the end user of the other party
within GTE's current local serving area. It is GTE's position that ISP traffic
does not satisfy the definition of local traffic, and that no compensation
should be paid to CLECs that switch this traffic to their ISP customers. In a
recent ruling, the FCC has clarified that ISP traffic is largely interstate,
does not "terminate" in GTE's local serving area, and based on an end-to-end
analysis of the call, is not local traffic. Consistent with this recent ruling,
GTE has been disputing and litigating bills from CLECs on these calls.





                                       13
<PAGE>   15


                             GTE SOUTH INCORPORATED

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued


INTRASTATE REGULATORY DEVELOPMENTS

Kentucky

In December 1996, the Kentucky Public Service Commission (KPSC) issued its
decision in the Company's arbitration with MCI to determine interconnection,
resale, and unbundling terms and conditions. The interim wholesale discount rate
was set at 18.81%. The KPSC issued a permanent wholesale discount rate of
15.95%.

South Carolina

The South Carolina Public Service Commission (SCPSC) held hearings in August
1997 to determine guidelines for an intrastate universal service fund (USF). An
order adopting the guidelines was issued in September 1997. During the first
quarter of 1998, hearings were held to finalize other issues, including the size
of the USF and the cost model to be used and recommended to the FCC. In its
order in May 1998, the SCPSC adopted its cost model for calculating universal
service support and filed this model with the FCC. The Company has not filed any
opposition to the SCPSC's order. The SCPSC has decided to postpone adoption of
final USF rules until after the FCC completes its USF proceeding, which is
expected to be completed in January 2000.

Virginia

In August 1997, the Virginia State Corporation Commission (VSCC) issued an order
in the Company's revenue-neutral rate rebalancing case which contained an annual
rate reduction of $27.4 million effective as of October 7, 1997. The Company
appealed to the Virginia Supreme Court, but the matter was dismissed as
premature because the VSCC had not ruled on all the issues in the case. A final
order was issued by the VSCC in April 1999, and the Company refiled a Notice of
Appeal with the Virginia Supreme Court in May 1999. In September 1999, the
Supreme Court of Virginia granted the Company's appeal and will hear the case.
GTE filed its opening brief on October 25, 1999.

The Company is currently operating under an Annual Information Filing plan in
Virginia, which may produce refunds under certain circumstances. The VSCC is
currently reviewing the Company's books from 1993 to the present under various
dockets. An unfavorable ruling in these dockets could result in refunds to the
Company's customers in Virginia.

OTHER DEVELOPMENTS

Proposed Merger with Bell Atlantic Corporation

On July 27, 1998, GTE and Bell Atlantic entered into a merger agreement
providing for the combination of the two companies. Under the terms of the
agreement, which was unanimously approved by the boards of directors of both
companies, GTE shareholders will receive 1.22 shares of Bell Atlantic stock for
each GTE share they own.

The merger is expected to qualify as a pooling of interests, which means that
for accounting and financial reporting purposes the companies will be treated as
if they had always been combined. The completion of the merger is subject to a
number of conditions, including certain regulatory approvals and receipt of
opinions that the merger will be tax-free. At annual meetings held in May 1999,
the shareholders of each company approved the merger.

Both companies are working diligently to complete the merger and are targeting
completion of the merger around the end of the first quarter of 2000. However,
Bell Atlantic and GTE must obtain the approval of a variety of state







                                       14
<PAGE>   16

                             GTE SOUTH INCORPORATED

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued


and federal regulatory agencies and, given the inherent uncertainties of the
regulatory process, the closing of the merger may be delayed.

Planned Asset Sales

During the first quarter of 1998, the Company committed to a plan that resulted
in a decision to sell approximately 7,000 switched access lines located in
Illinois. The Company plans to enter into agreements to sell these lines during
1999. All sales will be subject to regulatory approval and are expected to close
during 2000. The associated net assets, which approximate $3.7 million, consist
of property, plant and equipment, and are classified as "Net assets held for
sale" in the condensed balance sheet as of September 30, 1999. The Company
intends to continue to operate all of these assets until sold. Based on the
decision to sell, however, the Company stopped recording depreciation expense
for these assets, resulting in depreciation expense reductions of $0.2 million
and $0.6 million for the three and nine months ended September 30, 1999,
respectively. No charges were recorded for the access lines to be sold because
their estimated fair values were in excess of their carrying values. The 7,000
access lines represent less than 1% of the average switched access lines that
the Company had in service during 1998, and contributed less than 1% to 1998
revenues.

YEAR 2000 CONVERSION

State of Readiness

GTE has completed Year 2000 remediation, conducted system testing and returned
to production the essential systems that support its domestic telecommunications
businesses. GTE's portion of the public switched telephone network (PSTN) in the
United States has been upgraded for Year 2000, and all of GTE's access lines are
now operating using Year 2000 compliant central office switches and network
elements. All other GTE business units are substantially complete in Year 2000
conversion and testing and are expected to be 100% complete by the end of
November 1999.

GTE's remaining efforts continue through March 2000 and consist of quality
assurance and validation of Year 2000 efforts across businesses; assuring
forward compliance of systems and services; planning for reasonably foreseeable
contingencies associated with the millennium rollover; and operation of our
corporate Year 2000 communications watch center.

Cost to Address Year 2000 Issues

The estimated total multi-year cost of GTE's Year 2000 Program remains unchanged
and is not expected to exceed $400 million. Through September 30, 1999,
expenditures totaled $358 million. The current estimate for the cost of
remediation for the Company is approximately $18.5 million. Through September
30, 1999, expenditures totaled $14.0 million. Year 2000 remediation costs are
expensed in the year incurred. Approximately 68% of GTE's program effort
involves U.S. domestic operations. GTE's majority-owned subsidiaries have not
elected to replace or accelerate the planned replacement of any systems due to
the Year 2000 issue. GTE has begun to reduce the staff assigned to the Year 2000
program. From a program peak of over 1,200 full-time equivalent workers, we are
currently staffed with an estimated 500 full-time equivalent workers (both
company employees and contractors) worldwide.




                                       15
<PAGE>   17

                             GTE SOUTH INCORPORATED

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued

Risks of Year 2000 Issues

With the completion of conversion and system testing, GTE believes that the risk
of multiple, simultaneous Year 2000 disruptions affecting GTE's ability to
provide basic services has been substantially eliminated. While isolated system
issues may arise, the "most reasonably likely worse case scenario" would be any
disruptions resulting from interoperability issues with other international
carriers that have not completed their Year 2000 efforts or other circumstances
outside of GTE's control.

Contingency Planning

GTE continues to enhance its normal business continuity planning to address
potential Year 2000 interruptions. GTE's disaster preparedness recovery plans
include procedures and activities for a "multi-regional" Year 2000 contingency,
if it occurs. GTE has established a corporate Year 2000 communications watch
center that is now operational. Located in Dallas, Texas, the watch center will
remain operational (as required) through March 1, 2000. The initial versions of
our contingency plans were completed during the second quarter of 1999. These
contingency plans will be kept current through the millennium rollover, and are
being tested (as appropriate). As of September 30, 1999, 79% of the contingency
plans have completed testing, and the remaining plans are expected to complete
testing by the end of November 1999. GTE's Year 2000 contingency plans include
business continuity planning; disaster recovery/emergency preparedness;
millennium rollover planning; post millennium degradation tracking; a network
and information technology freeze period; employee availability and logistics
backup planning; "follow-the-sun" time-zone impact analysis; and coordination
with other (non-PSTN) telecommunications providers.

RECENT ACCOUNTING PRONOUNCEMENT

Derivative Instruments and Hedging Activities

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The statement requires
entities that use derivative instruments to measure these instruments at fair
value and record them as assets or liabilities on the balance sheet. It also
requires entities to reflect the gains or losses associated with changes in the
fair value of these derivatives, either in earnings or as a separate component
of comprehensive income, depending on the nature of the underlying contract or
transaction. The Company is currently assessing the impact of adopting SFAS No.
133, as amended, which is effective January 1, 2001.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

In this Management's Discussion and Analysis, the Company has made
forward-looking statements. These statements are based on the Company's
estimates and assumptions and are subject to certain risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations of the Company, as well as those statements
preceded or followed by the words "anticipates," "believes," "estimates,"
"expects," "hopes," "targets" or similar expressions. For each of these
statements, the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.





                                       16
<PAGE>   18

                             GTE SOUTH INCORPORATED

           Management's Discussion and Analysis of Financial Condition
                      And Results of Operations - Continued


The future results of the Company could be affected by subsequent events and
could differ materially from those expressed in the forward-looking statements.
If future events and actual performance differ from the Company's assumptions,
the actual results could vary significantly from the performance projected in
the forward-looking statements.

The following important factors could affect the future results of the Company
and could cause those results to differ materially from those expressed in the
forward-looking statements: (1) materially adverse changes in economic
conditions in the markets served by the Company; (2) material changes in
available technology; (3) the final resolution of federal, state and local
regulatory initiatives and proceedings, including arbitration proceedings, and
judicial review of those initiatives and proceedings, pertaining to, among other
matters, the terms of interconnection, access charges, universal service,
unbundled network elements and resale rates; (4) the extent, timing, success and
overall effects of competition from others in the local telephone and intraLATA
toll service markets; and (5) the success and expense of our remediation efforts
and those of our suppliers, customers and all interconnecting carriers in
achieving Year 2000 compliance.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in the Company's market risks since December
31, 1998.




                                       17
<PAGE>   19







PART II. OTHER INFORMATION

                             GTE SOUTH INCORPORATED


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

         (a) Exhibits required by Item 601 of Regulation S-K.

               12    Statement re: Calculation of the Ratio of Earnings to Fixed
                     Charges

               27    Financial Data Schedule

         (b) The Company filed no reports on Form 8-K during the third
             quarter of 1999.











                                       18
<PAGE>   20



                                    SIGNATURE

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


                                               GTE South Incorporated
                                       -----------------------------------------
                                                    (Registrant)


Date:   November 10, 1999                      /s/ Stephen L. Shore
      --------------------             -----------------------------------------
                                                   Stephen L. Shore
                                                      Controller
                                             (Principal Accounting Officer)







                                       19
<PAGE>   21








                                EXHIBIT INDEX

<TABLE>
<CAPTION>

     EXHIBIT
      NUMBER         DESCRIPTION
     --------        -----------

<S>                 <C>
        12           Statement re: Calculation of the Ratio of Earnings to Fixed
                     Charges

        27           Financial Data Schedule

</TABLE>