EX-99 2 q2ex99a.txt EX 99A - EARNINGS RELEASE FOR MORE INFORMATION FOR IMMEDIATE RELEASE Jeff Battcher (404-713-0274) July 23, 2001 Pattie Kushner (404-249-2365) BellSouth Reports Second Quarter Earnings - DSL customers increase to 381,000 - Cingular Wireless exceeds 21.2 million total customers - Latin America customer base surpasses 8 million - Data revenues grow 25 percent ATLANTA - With continued growth in its broadband, data and wireless businesses, BellSouth Corporation (NYSE: BLS) reported normalized earnings per share (EPS) of 52 cents in the second quarter of 2001, including a 5-cent reduction related to previously disclosed foreign currency losses associated with remeasurement of U.S. dollar denominated debt. Without that impact, normalized EPS would have been 57 cents. Normalized EPS in the same quarter a year ago was 56 cents. Adjusted to include BellSouth's 40 percent share of Cingular Wireless, revenues of $7.4 billion increased 8.9 percent compared to the second quarter of 2000. Data, Broadband, Internet BellSouth's second quarter data revenues were $1.1 billion, an increase of 25.3 percent compared to the same quarter of 2000. DSL (digital subscriber line) and other broadband and Internet services represented nearly 15 percent of total revenues. BellSouth added 78,000 high-speed Internet access customers in the second quarter, finishing with 381,000 DSL customers, on track toward its year-end target of 600,000. High-speed, high-capacity services for business customers continued to drive BellSouth's data revenues. These offerings include branded products such as SMARTRing(R) service, which provides a dedicated high-capacity network connecting multiple customer locations and BellSouth central offices. To ensure a continuous flow of data, SMARTRing automatically detects and self-heals failures using fiber optic technology. For wholesale customers, in June BellSouth activated the BellSouth Florida MIXSM, or Multimedia Internet Exchange, the only optically switched major Internet "intersection" in the U.S. Domestic Wireless / Cingular BellSouth's domestic wireless revenues were $1.4 billion in the second quarter of 2001. This was a gain of 37.5 percent compared to revenues from BellSouth's stand-alone domestic wireless operations in the second quarter of 2000. At June 30, Cingular had 21.2 million cellular and PCS customers, an annual growth rate of 16.9 percent. Revenue growth in the second quarter was driven by Cingular's nationwide footprint and demand for the company's array of data and voice services. In June, Cingular added an innovative relocation program for its customers who move from one part of the country to another, and introduced a new product to the suite of mobile commerce services known as Cingular Wireless Wallet. The new feature, called Cingular DirectBill, is the first nationwide wireless billing service in the U.S. Latin America Group Consolidated Latin America revenues -- including advertising and publishing - were $744 million in the second quarter. Cash earnings, or EBITDA, increased 34.1 percent to $244 million. BellSouth had more than 8 million customers in Latin America at the end of the second quarter, an annual growth rate of 43.4 percent. BellSouth and its partners added 1.1 million new customers in Brazil over the past 12 months, driven by strong operating performance. The markets BellSouth serves in 11 Central and South American countries have significant untapped potential, as indicated by the fact that only about five out of every 100 potential customers currently have the company's wireless service. Worldwide Wireless Reach Including Cingular, BellSouth now provides wireless services to 44.7 million total customers in the U.S. and 15 other countries. On a proportionate basis, BellSouth's wireless customers around the world numbered 19.2 million at June 30, an increase of 5.7 million, or 41.9 percent, compared to the second quarter of 2000. Through its international operations and its domestic joint venture, Cingular, BellSouth's wireless licenses reach a total population globally of more than 556 million. Impact of Growth Initiatives As previously disclosed, the second quarter reflected the impact of BellSouth's accelerated growth initiatives in domestic broadband and Latin America wireless. The company's 2001 ramp-up of DSL high-speed Internet access service reduced EPS an incremental 2 cents compared to the second quarter of 2000. BellSouth's wireless operations in Colombia, which were acquired in July 2000 and not included in the second quarter a year ago, reduced EPS 2 cents. Special Items Reported EPS in the second quarter of 2001 was 47 cents, reflecting the impact of special items totaling 5 cents. These items were: a previously disclosed accrual adjustment for prior claims from competitive local exchange carriers (CLECs) regarding reciprocal compensation; and transition costs associated with the previously announced restructuring of BellSouth's consumer wireless video entertainment business. 2001 Guidance BellSouth is reissuing its EPS guidance for the full-year due to the impact of deteriorating economic growth and previously disclosed foreign exchange losses associated with U.S. dollar denominated debt. The company expects normalized EPS, adjusted for year-over-year incremental foreign exchange losses, to be in the $2.30 to $2.35 range (5% to 7% growth). Including the effects of foreign exchange losses, normalized EPS is expected to be in the $2.25 to $2.30 range. Guidance for certain key financial and business metrics in 2001 remains as follows: Total operating revenue, including Cingular 9-11% growth Data revenue 30% growth (approx.) Capital expenditures $5.5-6.0 billion DSL high-speed Internet customers 600,000 at 12/31/01 About BellSouth Corporation BellSouth Corporation is a Fortune 100 communications services company headquartered in Atlanta, GA, serving nearly 46 million customers in the United States and 16 other countries. Consistently recognized for customer satisfaction, BellSouth provides a full array of broadband data and e-commerce solutions to business customers, including Web hosting and other Internet services. In the residential market, BellSouth offers DSL high-speed Internet access, advanced voice features and other services. BellSouth also provides online and directory advertising services, including BellSouth(R) Real PagesSM.com. BellSouth owns 40 percent of Cingular Wireless, the nation's second largest wireless company, which provides innovative wireless data and voice services. Further information about BellSouth's second quarter earnings can be accessed at www.bellsouth.com/investor. The press release, financial statements and earnings commentary summarizing highlights of the quarter are available on the BellSouth Investor Relations Web site starting today at 8 a.m. Eastern Time. BellSouth will host a conference call with investors today at 10 a.m. Eastern Time. Participating on the call will be BellSouth CFO Ron Dykes and Investor Relations Vice President Nancy Humphries. Dial-in information for the conference call is: Domestic: 888-370-1863 International: 706-634-1735 A replay of the call will be available beginning at noon today, through 5 p.m. July 30. The replay can be accessed by dialing: Domestic: 800-642-1687 - Reservation number: 1325558 International: 706-645-9291 - Reservation number: 1325558 The second quarter earnings release, BLS Investor News summarizing highlights of the quarter, and downloadable Microsoft Excel and computer viewable financial statements are available at 8 a.m. today on our Web site, www.bellsouth.com/investor. Today's conference call will be audiocast live on our Web site beginning at 10 a.m., with a replay available through July 30. In addition to historical information, this document contains forward-looking statements regarding events and financial trends. Factors that could affect future results and could cause actual results to differ materially from those expressed or implied in the forward-looking statements include: (i) a change in economic conditions in domestic or international markets where we operate or have material investments which would affect demand for our services; (ii) the intensity of competitive activity and its resulting impact on pricing strategies and new product offerings; (iii) higher than anticipated cash requirements for investments, new business initiatives and acquisitions and (iv) those factors contained in the Company's periodic reports filed with the SEC. The forward-looking information in this document is given as of this date only, and BellSouth assumes no duty to update this information. BellSouth Corporation Consolidated Statements of Income - Normalized Basis (unaudited) (amounts in millions, except per share data) Note to Readers: Our reported results have been significantly impacted by several events, including the formation of Cingular Wireless and other one-time items. To assist in your understanding of our results, we have prepared the following normalized information, including the notes on page 3 which discuss the impacts of these events. See the following page for our reported results. 2Q01 2Q00(10) Growth Operating Revenues Communications group $4,736 $ 4,571 3.6% Domestic wireless 1,414 1,028 37.5% Latin America 744 689 8.0% Domestic advertising and publishing 436 441 -1.1% All other 35 34 2.9% Total Operating Revenues 7,365 6,763 8.9% Operating Expenses Operational and support expenses 3,969 3,576 11.0% Depreciation and amortization 1,392 1,240 12.3% Total Operating Expenses 5,361 4,816 11.3% Operating Income 2,004 1,947 2.9% Interest Expense 394 332 18.7% Other Income (Expense), net (53) 68 N/M* Income Before Income Taxes 1,557 1,683 -7.5% Provision for Income Taxes 584 619 -5.7% Net Income $973 $1,064 -8.6% Diluted: Weighted Average Common Shares Outstanding 1,886 1,900 -0.7% Earnings Per Share $0.52 $0.56 -7.1% Year-to-Date 2001 2000(10) Growth Operating Revenues Communications group $9,363 $ 9,062 3.3% Domestic wireless 2,724 1,972 38.1% Latin America 1,517 1,367 11.0% Domestic advertising and publishing 870 790 10.1% All other 69 67 3.0% Total Operating Revenues 14,543 13,258 9.7% Operating Expenses Operational and support expenses 7,924 7,152 10.8% Depreciation and amortization 2,729 2,458 11.0% Total Operating Expenses 10,653 9,610 10.9% Operating Income 3,890 3,648 6.6% Interest Expense 814 638 27.6% Other Income (Expense), net 18 214 N/M Income Before Income Taxes 3,094 3,224 -4.0% Provision for Income Taxes 1,146 1,179 -2.8% Net Income $1,948 $2,045 -4.7% Diluted: Weighted Average Common Shares Outstanding 1,886 1,899 -0.7% Earnings Per Share $1.03 $1.08 -4.6% * - Not meaningful. Selected Financial and Operating Data 2Q01 2Q00(10) Growth EBITDA (5) $3,396 $3,187 6.6% EBITDA margin (6) 46.1% 47.1% -100 bps Return on average equity (annualized) 22.0% 26.2% -420 bps Return on average total capital (annualized) 13.5% 16.5% -300 bps Digital and data revenues $1,089 $869 25.3% Dividends per share $0.19 $0.19 -- Capital expenditures $1,667 $1,705 -2.2% Year-to-Date 2001 2000(10) Growth EBITDA (5) $6,619 $6,106 8.4% EBITDA margin (6) 45.5% 46.1% -60 bps Return on average equity (annualized) 22.3% 26.0% -370 bps Return on average total capital (annualized) 13.9% 16.0% -210 bps Digital and data revenues $2,123 $1,680 26.4% Dividends per share $0.38 $0.38 -- Capital expenditures $3,357 $3,268 2.7% Common shares outstanding 1,874 1,881 -0.4% Book value per share $9.54 $8.78 8.7% Debt ratio 51.6% 50.6% 100 bps Total employees 107,954 99,027 9.0% See Accompanying Notes at Page 3 BellSouth Corporation Normalized Earnings Summary (unaudited) (amounts in millions, except per share data) 2Q01 2Q00 Growth Reported Net Income $880 $1,064 -17.3% Adjustment to ISP Accrual (a) $88 - Postretirement benefit expense (b) - - Loss on sale of Qwest common stock (c) - - Losses from wireless video business (d) 5 - Gain on E-Plus restructuring (e) - - Severance accrual (f) - - Normalized Net Income $973 $1,064 -8.6% Reported Diluted Earnings Per Share $0.47 $0.56 -16.1% Adjustment to ISP Accrual (a) $0.05 - Postretirement benefit expense (b) - - Loss on sale of Qwest common stock (c) - - Losses from wireless video business (d) - - Gain on E-Plus restructuring (e) - - Severance accrual (f) - - Normalized Diluted Earnings Per Share * $0.52 $0.56 -7.1% Year-to-Date 2001 2000 Growth Reported Net Income $1,771 $2,065 -14.2% Adjustment to ISP Accrual (a) $88 - Postretirement benefit expense (b) 47 - Loss on sale of Qwest common stock (c) 32 - Losses from wireless video business (d) 10 - Gain on E-Plus restructuring (e) - (68) Severance accrual (f) - 48 Normalized Net Income $1,948 $2,045 -4.7% Reported Diluted Earnings Per Share $0.94 $1.09 -13.8% Adjustment to ISP Accrual (a) $0.05 - Postretirement benefit expense (b) 0.02 - Loss on sale of Qwest common stock (c) 0.02 - Losses from wireless video business (d) 0.01 - Gain on E-Plus restructuring (e) - (0.04) Severance accrual (f) - 0.03 Normalized Diluted Earnings Per Share * $1.03 $1.08 -4.6% * Normalized earnings per share for year-to-date 2001 does not sum due to rounding. See Accompanying Notes at Page 3 BellSouth Corporation Notes to Normalized Financial and Operating Data Our normalized earnings have been adjusted for the following: (a) Adjustment to ISP Accrual - Represents the loss incurred for prior claims from competitive local exchange carriers regarding reciprocal compensation for ISP traffic. (b) Postretirement benefit expense - The amount shown represents expense for changes in postretirement medical benefit obligations. This expense is being recognized in accordance with generally accepted accounting principles. (c) Loss on sale of Qwest common stock - Represents the loss incurred from the sale of a portion of our investment in Qwest common stock. (d) Losses from Wireless Video Business - Represents the current period losses being incurred as we exit the wireless video entertainment business. (e) Gain on E-Plus Restructuring - Represents income related to the restructuring of our ownership interest in German wireless operator E-Plus. (f) Severance Accrual - Represents expense recorded as a result of our plan to reduce our domestic general and administrative staff. In addition to the items discussed above, our consolidated normalized statements of income have been adjusted for the following: (g) Communications group revenues have been adjusted to present all revenues from sales of customer premises equipment on an agency-fee basis (net of associated direct costs). This adjustment is made to present these revenues on a basis comparable to amounts earned under a new vendor contract entered into during first quarter 2001. (h) The 2001 periods have been adjusted to include our proportional share of Cingular Wireless' operating results for second quarter 2001 and year-to-date 2001, net of eliminations for amounts charged between Cingular and other BellSouth companies. (i) Cingular presents its revenues and expenses from roamer activity on a gross basis. We have conformed our domestic wireless revenues and operational and support expenses for the 2000 periods to present roamer revenues and roamer costs on a consistent basis. BellSouth Corporation Consolidated Statements of Income - Reported Basis (unaudited) (amounts in millions, except per share data) 2Q01 2Q00(10) Growth Operating Revenues Communications group $4,764 $ 4,601 3.5% Domestic wireless - 936 -100.0% Latin America 744 689 8.0% Domestic advertising and publishing 436 441 -1.1% All other 41 34 20.6% Total Operating Revenues 5,985 6,701 -10.7% Operating Expenses Operational and support expenses 3,232 3,514 -8.0% Depreciation and amortization 1,203 1,240 -3.0% Severance accrual - - N/M* Total Operating Expenses 4,435 4,754 -6.7% Operating Income 1,550 1,947 -20.4% Interest Expense 334 332 0.6% Other Income, net 188 68 N/M Income Before Income Taxes 1,404 1,683 -16.6% Provision for Income Taxes 524 619 -15.3% Net Income $880 $1,064 -17.3% Diluted: Weighted Average Common Shares Outstanding 1,886 1,900 -0.7% Earnings Per Share $0.47 $0.56 -16.1% Year-to-Date 2001 2000(10) Growth Operating Revenues Communications group $9,429 $ 9,114 3.5% Domestic wireless - 1,803 -100.0% Latin America 1,517 1,367 11.0% Domestic advertising and publishing 870 790 10.1% All other 88 67 31.3% Total Operating Revenues 11,904 13,141 -9.4% Operating Expenses Operational and support expenses 6,393 7,035 -9.1% Depreciation and amortization 2,360 2,458 -4.0% Severance accrual - 78 N/M Total Operating Expenses 8,753 9,571 -8.5% Operating Income 3,151 3,570 -11.7% Interest Expense 694 638 8.8% Other Income, net 354 282 25.5% Income Before Income Taxes 2,811 3,214 -12.5% Provision for Income Taxes 1,040 1,149 -9.5% Net Income $1,771 $2,065 -14.2% Diluted: Weighted Average Common Shares Outstanding 1,886 1,899 -0.7% Earnings Per Share $0.94 $1.09 -13.8% * - Not meaningful. Selected Financial and Operating Data 2Q01 2Q00(10) Growth EBITDA (5) $2,753 $3,187 -13.6% EBITDA margin (6) 46.0% 47.6% -160 bps Return on average equity (annualized) 19.9% 26.2% -630 bps Return on average total capital (annualized) 12.5% 16.5% -400 bps Year-to-Date 2001 2000(10) Growth EBITDA (5) $5,511 $6,106 -9.7% EBITDA margin (6) 46.3% 46.5% -20 bps Return on average equity (annualized) 20.3% 26.3% -600 bps Return on average total capital (annualized) 12.9% 16.2% -330 bps See Accompanying Notes at Page 13 BellSouth Corporation Consolidated Balance Sheets (unaudited) (amounts in millions, except per share data) June 30, December 31, 2001 2000 Assets Current Assets: Cash and cash equivalents $658 $1,061 Accounts receivable, net of allowance for uncollectibles of $411 and $377 4,962 5,157 Material and supplies 434 379 Other current assets 1,046 809 Total Current Assets 7,100 7,406 Investments and Advances 9,845 11,010 Property, Plant and Equipment, net 25,057 24,157 Deferred Charges and Other Assets 4,668 4,180 Intangible Assets, net 4,295 4,172 Total Assets $50,965 $50,925 Liabilities and Shareholders' Equity Current Liabilities: Debt maturing within one year $6,057 $7,569 Accounts payable 1,734 2,233 Other current liabilities 3,695 3,468 Total Current Liabilities 11,486 13,270 Long-Term Debt 13,043 12,463 Noncurrent Liabilities: Deferred income taxes 3,537 3,580 Other noncurrent liabilities 5,019 4,700 Total Noncurrent Liabilities 8,556 8,280 Shareholders' Equity: Common stock, $1 par value 2,020 2,020 Paid-in capital 6,763 6,740 Retained earnings 15,102 14,074 Accumulated other comprehensive income (747) (488) Shares held in trust and treasury (5,126) (5,222) Guarantee of ESOP debt (132) (212) Total Shareholders' Equity 17,880 16,912 Total Liabilities and Shareholders' Equity $50,965 $50,925 See Accompanying Notes at Page 13 BellSouth Corporation Results by Segment (amounts in millions) (unaudited) Communications Group (1) 2Q01 2Q00 Growth Operating Revenues Local service $2,964 $2,891 2.5% Network access 1,226 1,210 1.3% Long distance 176 169 4.1% Other 433 395 9.6% Total Operating Revenues 4,799 4,665 2.9% Operating Expenses Operational and support expenses 2,356 2,184 7.9% Depreciation and amortization 1,013 940 7.8% Total Operating Expenses 3,369 3,124 7.8% Operating Income 1,430 1,541 -7.2% Interest Expense 165 177 -6.8% Other Income, net 5 3 N/M* Income Before Income Taxes 1,270 1,367 -7.1% Provision for Income Taxes 451 496 -9.1% Segment Net Income(1) $819 $871 -6.0% Year-to-Date 2001 2000 Growth Operating Revenues Local service $5,874 $5,719 2.7% Network access 2,463 2,442 0.9% Long distance 347 339 2.4% Other 801 743 7.8% Total Operating Revenues 9,485 9,243 2.6% Operating Expenses Operational and support expenses 4,556 4,348 4.8% Depreciation and amortization 1,989 1,851 7.5% Total Operating Expenses 6,545 6,199 5.6% Operating Income 2,940 3,044 -3.4% Interest Expense 333 339 -1.8% Other Income, net 17 7 N/M Income Before Income Taxes 2,624 2,712 -3.2% Provision for Income Taxes 950 1,009 -5.8% Segment Net Income(1) $1,674 $1,703 -1.7% * - Not meaningful. Selected Financial and Operating Data (amounts in millions) 2Q01 2Q00(10) Growth EBITDA (5) $2,443 $2,481 -1.5% EBITDA margin (6) 50.9% 53.2% -230 bps Calling feature revenues $577 $532 8.5% Access minutes of use 27,413 28,798 -4.8% Toll messages 111 129 -14.0% Capital expenditures $1,417 $1,284 10.4% Year-to-Date 2001 2000(10) Growth EBITDA (5) $4,929 $4,895 0.7% EBITDA margin (6) 52.0% 53.0% -100 bps Calling feature revenues $1,144 $1,047 9.3% Access minutes of use 55,355 57,514 -3.8% Toll messages 219 265 -17.4% Capital expenditures $2,894 $2,485 16.5% Equivalent access lines in service (thousands): Access lines 25,666 25,864 -0.8% Access line equivalents 33,877 21,821 55.2% Total equivalent access lines in service 59,543 47,685 24.9% Wholesale Lines 1,478 1,036 42.7% Internet customers (thousands) 1,097 788 39.2% DSL customers (thousands) 381 74 414.9% See Accompanying Notes at Page 13 BellSouth Corporation Results by Segment (unaudited) Supplemental Operating Data (in thousands) Communications Group - Network Access Lines In Service(a) 2Q01 2Q00 Growth Access lines (b) Residence 17,011 17,203 -1.1% Business 8,426 8,401 0.3% Other 229 260 -11.9% Total access lines in service 25,666 25,864 -0.8% Access line equivalents(c) Selected digital data services: DS0 & ADSL 2,998 1,030 191.1% DS1 6,246 5,071 23.2% DS3 & higher 24,633 15,720 56.7% Total digital data lines in service 33,877 21,821 55.2% Total equivalent access lines in service 59,543 47,685 24.9% (a) Prior period operating data are often revised at later dates to reflect updated information. The above information reflects the latest data available for the periods indicated. (b) Access line counts include amounts for switched access lines, Basic Rate ISDN, Primary Rate ISDN and UNE Combos. (c) Access line equivalents represent a conversion of non-switched data circuits to a switched access line basis and is presented for comparability purposes. Equivalents are calculated by converting high-speed/high-capacity circuits to the equivalent of a switched access line based on transport capacity. While the revenues generated by access line equivalents have a directional relationship with these counts, revenue growth rates cannot be compared to line growth rates on an equivalent basis. See Accompanying Notes at Page 13 BellSouth Corporation Results by Segment (amounts in millions) (unaudited) Domestic Wireless Segment (1)(a) 2Q01 2Q00 Growth Operating Revenues Service revenues (4) $1,312 $964 36.1% Equipment and other revenues 102 72 41.7% Total Operating Revenues 1,414 1,036 36.5% Operating Expenses Operational and support expenses 921 724 27.2% Depreciation and amortization 190 154 23.4% Total Operating Expenses 1,111 878 26.5% Operating Income 303 158 91.8% Interest Expense 82 27 N/M* Other Income (Expense), net (10) 39 N/M Income Before Income Taxes 211 170 24.1% Provision for Income Taxes 82 64 28.1% Segment Net Income(1) $129 $106 21.7% Year-to-Date 2001 2000 Growth Operating Revenues Service revenues (4) $2,517 $1,837 37.0% Equipment and other revenues 207 149 38.9% Total Operating Revenues 2,724 1,986 37.2% Operating Expenses Operational and support expenses 1,846 1,450 27.3% Depreciation and amortization 370 321 15.3% Total Operating Expenses 2,216 1,771 25.1% Operating Income 508 215 136.3% Interest Expense 164 54 N/M Other Income (Expense), net 10 73 N/M Income Before Income Taxes 354 234 51.3% Provision for Income Taxes 137 87 57.5% Segment Net Income(1) $217 $147 47.6% * - Not meaningful. Selected Financial and Operating Data (b) (amounts in millions, except customer data in thousands) 2Q01 2Q00 Growth EBITDA (5) $493 $312 58.0% EBITDA margin (6)(c) 37.6% 32.4% 520 bps Average monthly revenue per customer (7)(d) $52 $61 -14.8% Customer net adds in period: Cellular and PCS 273 286 -4.5% Data (Cingular Interactive) 13 79 -83.5% Year-to-Date 2001 2000 Growth EBITDA (5) $878 $536 63.8% EBITDA margin (6)(c) 34.9% 29.2% 570 bps Average monthly revenue per customer (7)(d) $51 $60 -15.0% Customer net adds in period: Cellular and PCS 615 595 3.4% Data (Cingular Interactive) 47 158 -70.3% Customers: Cellular and PCS 8,487 5,482 54.8% Data (Cingular Interactive) 276 382 -27.7% POPs 84,400 57,034 48.0% Penetration rate (9) 11.1% 9.9% 120 bps (a) The 2000 periods are comprised of BellSouth's wireless voice and wireless data operations. The 2001 periods are comprised of BellSouth's 40% share of the reported results of Cingular Wireless. (b) Customer data for the 2001 periods, including POPs, penetration rate and average monthly revenue per customer, is comprised of BellSouth's 40% share of the managed results of Cingular Wireless. (c) EBITDA margin denominator includes service revenues only. (d) Average monthly revenue per customer excludes Cingular Interactive (formerly BellSouth Wireless Data). See Accompanying Notes at Page 13 BellSouth Corporation Results by Segment (amounts in millions) (unaudited) Latin America Group (1)(2) 2Q01 2Q00 Growth Operating Revenues Service revenues (4) $629 $574 9.6% Equipment and other revenues 97 99 -2.0% Advertising and publishing revenues 23 31 -25.8% Total Operating Revenues 749 704 6.4% Operating Expenses Operational and support expenses 505 522 -3.3% Depreciation and amortization 155 130 19.2% Total Operating Expenses 660 652 1.2% Operating Income 89 52 71.2% Interest Expense 55 26 111.5% Other Income (Expense), net (128) (58) N/M* Income Before Income Taxes (94) (32) N/M Provision for Income Taxes 25 2 N/M Segment Net Income(1) ($119) ($34) N/M Year-to-Date 2001 2000 Growth Operating Revenues Service revenues (4) $1,271 $1,149 10.6% Equipment and other revenues 236 205 15.1% Advertising and publishing revenues 24 45 -46.7% Total Operating Revenues 1,531 1,399 9.4% Operating Expenses Operational and support expenses 1,135 1,103 2.9% Depreciation and amortization 309 256 20.7% Total Operating Expenses 1,444 1,359 6.3% Operating Income 87 40 117.5% Interest Expense 115 59 94.9% Other Income (Expense), net (169) (46) N/M Income Before Income Taxes (197) (65) N/M Provision for Income Taxes 28 (11) N/M Segment Net Income(1) ($225) ($54) N/M * - Not meaningful. Selected Financial and Operating Data (amounts in millions, except customer data in thousands) 2Q01 2Q00 Growth EBITDA (5) $244 $182 34.1% EBITDA margin (6) 32.6% 25.9% 670 bps Average monthly revenue per customer (8) $26 $35 -25.7% Customer net adds in period (excluding ownership changes) 224 488 -54.1% Year-to-Date 2001 2000 Growth EBITDA (5) $396 $296 33.8% EBITDA margin (6) 25.9% 21.2% 470 bps Average monthly revenue per customer (8) $27 $37 -27.0% Customer net adds in period (excluding ownership changes) 939 1,315 -28.6% Customers (voice) 8,008 5,584 43.4% POPs 156,200 114,600 36.3% Penetration rate (9) 5.1% 4.9% 20 bps See Accompanying Notes at Page 13 BellSouth Corporation Proportionate Basis(3) - Selected Financial and Operating Data (Amounts in millions, except customer data in thousands) Latin America Group (1)(2) 2Q01 2Q00 Growth Operating revenues $701 $692 1.3% EBITDA(5) $222 $179 24.0% EBITDA margin(6) 31.7% 25.9% 580 bps Average monthly revenue per customer (8) $26 $35 -25.7% Customer net adds in period (excluding ownership changes) 304 493 -38.3% Year-to-Date 2001 2000 Growth Operating revenues $1,413 $1,359 4.0% EBITDA(5) $376 $288 30.6% EBITDA margin(6) 26.6% 21.2% 540 bps Average monthly revenue per customer (8) $27 $36 -25.0% Customer net adds in period (excluding ownership changes) 972 1,273 -23.6% Customers (voice) 7,894 5,667 39.3% POPs 156,790 129,135 21.4% Penetration rate (9) 5.0% 4.7% 30 bps See Accompanying Notes at Page 13 BellSouth Corporation Worldwide Wireless (unaudited) Customers and POPs by Country (Proportionate Basis(3) in thousands) Customers As of Country Brand 2Q01 2Q00 Growth United States Cingular Wireless / 8,487 5,913 43.5% BellSouth Mobility Argentina Movicom BellSouth 1,126 920 22.4% Brazil Various* 1,511 1,157 30.6% Chile BellSouth 800 482 66.0% Colombia BellSouth 777 - N/M** Ecuador BellSouth 241 179 34.6% Guatemala BellSouth 29 - N/M Nicaragua BellSouth 127 53 139.6% Panama BellSouth 112 69 62.3% Peru BellSouth 373 337 10.7% Uruguay Movicom BellSouth 63 64 -1.6% Venezuela Telcel BellSouth 2,735 2,406 13.7% Total Latin America 7,894 5,667 39.3% Denmark Sonofon 412 320 28.8% Germany e-plus 1,704 1,080 57.8% India SkyCell 16 7 128.6% Israel Cellcom 712 560 27.1% 2,844 1,967 44.6% Total Worldwide Wireless 19,225 13,547 41.9% POPs As of Country Brand 2Q01 2Q00 Growth United States Cingular Wireless / 84,400 59,394 42.1% BellSouth Mobility Argentina Movicom BellSouth 23,270 23,270 -- Brazil Various* 25,438 25,234 0.8% Chile BellSouth 15,100 15,100 -- Colombia BellSouth 27,451 - N/M Ecuador BellSouth 11,086 11,086 -- Guatemala BellSouth 7,140 7,140 -- Nicaragua BellSouth 2,581 2,581 -- Panama BellSouth 1,223 1,223 -- Peru BellSouth 24,403 24,403 -- Uruguay Movicom BellSouth 966 966 -- Venezuela Telcel BellSouth 18,132 18,132 -- Total Latin America 156,790 129,135 21.4% Denmark Sonofon 2,465 2,465 -- Germany e-plus 18,568 18,568 -- India SkyCell 1,348 1,348 -- Israel Cellcom 2,119 2,119 -- 24,500 24,500 -- Total Worldwide Wireless 265,690 213,029 24.7% * - BCP in Sao Paulo and Northeast regions; TCO. ** - Not meaningful. See Accompanying Notes at Page 13 BellSouth Corporation Results by Segment (amounts in millions) (unaudited) Domestic Advertising & Publishing (1) 2Q01 2Q00 Growth Total Operating Revenues $ 443 $ 448 -1.1% Operating Expenses Operational and support expenses 241 237 1.7% Depreciation and amortization 6 7 -14.3% Total Operating Expenses 247 244 1.2% Operating Income 196 204 -3.9% Interest Expense 3 4 -25.0% Other Income, net - - N/M* Income Before Income Taxes 193 200 -3.5% Provision for Income Taxes 74 76 -2.6% Segment Net Income(1) $119 $124 -4.0% EBITDA (5) $202 $211 -4.3% EBITDA margin (6) 45.6% 47.1% -150 bps Year-to-Date 2001 2000 Growth Total Operating Revenues $ 880 $ 801 9.9% Operating Expenses Operational and support expenses 445 428 4.0% Depreciation and amortization 13 14 -7.1% Total Operating Expenses 458 442 3.6% Operating Income 422 359 17.5% Interest Expense 11 9 22.2% Other Income, net 4 - N/M* Income Before Income Taxes 415 350 18.6% Provision for Income Taxes 159 132 20.5% Segment Net Income(1) $256 $218 17.4% EBITDA (5) $435 $373 16.6% EBITDA margin (6) 49.4% 46.6% 280 bps * - Not meaningful. See Accompanying Notes at Page 13 BellSouth Corporation Notes (1) Segment net income (loss) is based on normalized results which exclude certain one-time transactions and certain corporate intercompany billings. Intersegment revenues are not eliminated for purposes of management reporting. (2) Results for the Latin America segment are reported one month in arrears. (3) Proportionate basis financial and operating data reflect our ownership interest in the total operating results for each of our wireless properties, both domestic and international, whether or not consolidated for financial statement presentation purposes. (4) Wireless service revenues includes activation fees, access, airtime, roaming, long distance and value added services. Roaming revenues are included on a gross basis for the Domestic Wireless segment and on a net basis for the Latin America segment. (5) EBITDA is defined as operating revenues less operational and support expenses. (6) EBITDA margin is calculated by dividing EBITDA by operating revenues. (7) For the Domestic Wireless segment, Average monthly revenue per customer is calculated by dividing average monthly revenue by average customers. Average monthly revenue includes activation fees, access, airtime, roaming (gross), long distance and value added services. (8) For the Latin America segment, Average monthly revenue per customer is calculated by dividing average monthly revenue by average customers. Average monthly revenue includes activation fees, access, airtime, roaming (net), long distance and value added services. (9) Penetration rate is calculated by dividing customers by POPs (excludes POPs in markets where service has not been initiated). (10) During fourth quarter 2000, we adopted a new method of recognizing revenues and expenses derived from installation and activation activities. We did this to comply with new accounting guidance contained in SAB101, which requires that revenues from such activities be deferred and recognized over the estimated life of the relationship with the customer. As required by SAB101, we retroactively adopted the new method effective January 1, 2000. The retroactive adoption decreased our previously reported revenues and expenses equally by $51 for second quarter 2000 and $98 for the year-to-date period. The adoption did not affect our reported earnings for any 2000 period. Notes to Segment Results