0000732713-05-000223.txt : 20051025 0000732713-05-000223.hdr.sgml : 20051025 20051025081828 ACCESSION NUMBER: 0000732713-05-000223 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20051025 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Other Events FILED AS OF DATE: 20051025 DATE AS OF CHANGE: 20051025 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELLSOUTH CORP CENTRAL INDEX KEY: 0000732713 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 581533433 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08607 FILM NUMBER: 051153230 BUSINESS ADDRESS: STREET 1: 1155 PEACHTREE ST NE STREET 2: ROOM 15G03 CITY: ATLANTA STATE: GA ZIP: 30309-3610 BUSINESS PHONE: 4042492000 MAIL ADDRESS: STREET 1: 1155 PEACHTREE STREET NE CITY: ATLANTA STATE: GA ZIP: 30309-3610 8-K 1 form8k102505.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): October 25, 2005

BELLSOUTH CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

GEORGIA

(State or Other Jurisdiction of Incorporation)

1-8607	58-1533433
(Commission File Number)	(IRS Employer Identification No.)

Room 15G03, 1155 Peachtree Street, N. E., Atlanta, Georgia	30309-3610
(Address of Principal Executive Offices)	(Zip Code)

(404) 249-2000

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

The information in this report, including the Exhibits described below, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

Attached and incorporated herein by reference are:

(i)

Exhibit 99-a, which is a copy of a press release of BellSouth Corporation dated

October 25, 2005, reporting the company’s financial results for the quarter ended September 30, 2005 and

(ii)

Exhibit 99-b, which is a document entitled “Investor News” that contains more detailed information about the recently completed quarter.

Non-GAAP Financial Information

To provide clarity, internally and externally, about the most tangible and relevant measures of our financial performance, we supplement the reporting of BellSouth's consolidated financial information under GAAP with certain non-GAAP financial measures, including normalized operating results from continuing operations, free cash flow and operating income before depreciation and amortization margin. In connection with Cingular Wireless’ (Cingular) acquisition of AT&T Wireless, which was completed on October 26, 2004, we have also reported pro forma revenue and pro forma Average Revenue Per Unit (ARPU) for our domestic wireless segment. The pro forma adjustments are consistent with those set forth in Cingular’s Form 8-K/A dated October 25, 2004. This information should not be considered in isolation or as a substitute for the consolidated (GAAP) financial information. Further, investors should note that these non-GAAP measures involve judgments by management (in particular, judgments as to what is or is not classified as a special item). We believe the presentation of these measures provides useful information to investors for the specific reasons set forth below.

Normalized Results From Continuing Operations. The presentation of normalized results from continuing operations enables investors to focus on period-over-period operating performance, without the impact of significant non-operational or non-recurring items. Additionally, normalized results include BellSouth's 40 percent share of Cingular Wireless’ revenues and expenses. Cingular’s results are recognized on the equity method for GAAP purposes. Accordingly, Cingular’s results are not included in the revenue, expense, or operating income line items in the GAAP presentation. The financial results of Cingular, a joint venture representing our second largest operating segment, are a critical element of BellSouth’s overall financial performance. The inclusion of Cingular’s revenues and expenses on a proportional basis enables investors to evaluate BellSouth’s overall financial performance, including all business segments.

Normalized results from continuing operations are provided to enhance the user’s overall understanding of the Company’s current financial performance and the Company’s prospects for the future. We believe normalized results from continuing operations are an important measure of our recurring operations because it excludes items that may not be indicative of our core operating results, includes items that are core to our operating results not allowed by GAAP (e.g. Cingular’s results) and provides a better baseline for modeling future earnings expectations. We believe the inclusion of normalized results from continuing operations provides consistency and comparability in our financial reporting and is provided in order to enable investors to more thoroughly evaluate our current performance compared to past performance.

Finally, normalized measures are among the primary indicators management uses in planning and operating the business. By providing this information to investors supplementally, investors will be able to evaluate the results of the business through the eyes of management and assess the fundamental performance of the business.

Normalized results from continuing operations may exclude (a) events, such as changes in accounting method, that are generally non-recurring in nature and (b) material one-time gains or losses, both of which can distort reported operating results. A complete list of normalizing items, as well as a full reconciliation of normalized results to GAAP reporting, are included in the quarterly financial statements that are attached hereto and are available on the company's Web site, www.bellsouth.com/investor.

Free Cash Flow. We believe free cash flow provides investors a meaningful measure of liquidity of the business. It indicates the level of cash the business is generating from normal continuing operations less capital reinvestment that is required to continue the operations. Investors can utilize this measure to make assessments of the viability of the company and as a base line for valuation of the company. Management monitors operating free cash flow and makes operating decisions based on its level. We define operating free cash flow as operating cash flow from continuing operations less capital expenditures, both of which are taken directly from the statement of cash flows.

Operating Income Before Depreciation and Amortization and Related Margin. Facility-based telecommunications companies require significant recurring capital investments that generate large non-cash expense, making operating income a less meaningful measure of current period business performance and profitability. We use operating income from continuing operations before depreciation and amortization, and the related margin, as a measure of underlying operating performance of the business and to make meaningful comparisons of different operating periods.

Domestic Wireless Pro Forma Revenue and ARPU. Pro forma revenues and pro forma ARPU are used to provide more meaningful period to period comparisons of reported revenues and ARPU. These unaudited pro forma measures incorporate AT&T Wireless' results for the three and nine months ended September 30, 2004 and include results from other acquired properties, exclude results from divested operations, and reflect intercompany eliminations and other adjustments for such periods. For further detail regarding other pro forma combined historical financial information, see the information filed by Cingular Wireless on Forms 8-K/A filed on November 29, 2004 and March 11, 2005.

The unaudited pro forma information is not intended to represent or be indicative of the results of Cingular that would have been reported had the merger and the above mentioned items been completed as of the dates presented, and should not be taken as representative of the future results of Cingular.

Hurricane Katrina Revenue Impacts. We provide additional information relating to the impact of billing credits associated with Hurricane Katrina on operating revenues, operating income and operating margin for the third quarter of 2005 for our three operating segments. We believe that this additional information better enables comparisons to prior periods and trends in the business.

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; (iv) unfavorable regulatory actions; and (v) 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.

Item 8.01

Other Events

On October 25, 2005, the Company announced that the Board of Directors authorized the repurchase of up to $2 billion of common stock through the end of 2007.

SIGNATURE

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

BELLSOUTH CORPORATION

By: /s/ Pat Shannon
	Pat Shannon
	Senior Vice President – Finance and Controller
	October 25, 2005

EX-99 2 form8k102505ex99a.htm EXHIBIT 99-A

Exhibit 99-a

For Immediate Release

October 25, 2005

BellSouth Reports Third Quarter Earnings

•

Improving Cingular margins contribute to BellSouth results

•

Strong DSL net customer additions

•

$2 billion share repurchase program

ATLANTA – BellSouth Corporation (NYSE: BLS) announced third quarter 2005 earnings per share (EPS) from continuing operations of 44 cents compared to 43 cents in the second quarter of 2005 and 46 cents in the third quarter of 2004. Normalizing items in the third quarter of 2005 consisted of Hurricane Katrina-related costs, wireless merger integration costs, and a gain from the sale of an investment. Normalized EPS from continuing operations was 46 cents, flat compared to the second quarter of 2005 and a 3 cent decline compared to the third quarter of 2004.

“Results for the quarter remained strong despite extraordinary challenges we faced with Hurricane Katrina,” said Duane Ackerman, Chairman and Chief Executive Officer. “Our employees demonstrated tremendous commitment to serve our customers. At the same time, we maintained focus on the key growth areas of our business, delivering solid revenue performance and continued customer growth from broadband and wireless services.”

Normalized Results from Continuing Operations

Normalized results from continuing operations include BellSouth’s 40 percent proportionate share of Cingular’s revenues and expenses. Cingular completed its acquisition of AT&T Wireless on Oct. 26, 2004. Results prior to the acquisition date have not been restated.

For the third quarter of 2005, normalized revenue was $8.49 billion. Normalized revenue for the quarter was down slightly compared to the second quarter of 2005. Billing credits related to Hurricane Katrina reduced normalized revenues by $63 million. Operating income and net income were essentially flat compared to the second quarter of 2005, reflecting continued improvement in the wireless business that offset pressures in wireline services. Year-over-year, third quarter 2005 normalized revenue was up compared to $6.76 billion in the third quarter of 2004. Third quarter normalized net income was $845 million, a $48 million decrease compared to the same quarter of the previous year due to a decline in earnings from the Communications Group and financing costs associated with the acquisition of AT&T Wireless partially offset by higher earnings from Cingular.

Reported Results from Continuing Operations

For the third quarter of 2005, BellSouth’s consolidated reported revenue from continuing operations totaled $5.07 billion, a slight decrease compared to the same quarter of 2004. Income from continuing operations was $817 million compared to $852 million in the same quarter of the previous year. Reported results for the quarter include the financial impacts of two significant events. During the quarter, the Company recognized a $228 million after-tax gain from the sale of its share in Cellcom, a cellular communications operator in Israel. In addition to the negative impact of hurricane-related billing credits, the Company also incurred $200 million of incremental expense and asset impairments, net of taxes, associated with damage from Hurricane Katrina.

On Sept. 6, 2005, BellSouth made an initial estimate of the future cost for network restoration, including capital and expense, of $400 million to $600 million. The company continues with damage assessments as we gain access to all areas. This estimate is subject to many uncertainties, the most significant of which include completion of physical surveys, the government's specific plans for reconstruction of the City of New Orleans and the resulting impact on our network design.

Operating free cash flow (defined as net cash provided by operating activities less capital expenditures) was $1.2 billion for the third quarter of 2005. Capital expenditures for the third quarter of 2005 were $886 million. During the quarter, the Company received $625 million in proceeds from the sale of Cellcom, $949 million in proceeds from loan repayments from Cingular and paid down approximately $700 million in debt. The dividend for the third quarter was 29 cents per share or $1.16 per share annualized. Reflecting management’s confidence in generating operating free cash flow and increasing distributions from Cingular, the Company will allocate a portion of future cash flow for share repurchase. The board of directors authorized the repurchase of up to $2 billion of common stock through the end of 2007.

Communications Group

In the third quarter of 2005, Communications Group revenue was $4.59 billion, a slight decline compared to the same quarter of 2004. Billing credits to customers in the areas hardest-hit by Hurricane Katrina reduced revenue by $44 million. Revenue growth from long distance, DSL and small business services effectively offset revenue declines from residential access line loss and large business services. Third quarter operating margin was 22.3 percent compared to 25.0 percent for the full year of 2004.

The success of BellSouth’s new simplified pricing for BellSouth® FastAccess® DSL drove strong subscriber growth in the third quarter of 2005. During the quarter, BellSouth added 205,000 net DSL customers and now serves nearly 2.7 million customers with broadband DSL service. The company’s gross adds significantly improved, demonstrating continued growth in market demand for broadband services. Sequentially, DSL average revenue per user (ARPU) remained steady at nearly $40. For the third quarter, network data revenue, which includes revenue from DSL services, was $1.17 billion.

BellSouth continued penetrating its customer base with incremental services and now serves approximately 7.0 million mass-market long distance customers. The Company added 222,000 net mass-market long distance customers during the third quarter of 2005 to reach 56 percent penetration of its mass-market customer base. During the third quarter, 66,000 customers added DIRECTV® service to their communications packages, reaching a total of more than 460,000. For convenience and simplicity, customers can combine DSL, long distance, DIRECTV® and Cingular Wireless with the BellSouth Answers® bundle. At quarter-end, BellSouth had 4.9 million BellSouth Answers® residential customers, which is a 42 percent penetration of the company’s retail residential access lines.

As of Sept. 30, 2005, total access lines were 20.4 million, down 354,000 compared to June 30, 2005. The Company estimates approximately 40,000 of this decline is attributable to disconnections associated with Hurricane Katrina. The remaining access line loss was driven by wireless substitution and cable telephony providers in residential markets. Residential retail access lines were down 181,000. In contrast, business retail access lines grew 37,000 lines with positive results in both small and large business segments. UNE-P (Unbundled Network Elements–Platform) access lines resold by BellSouth competitors were down 228,000 compared to June 30, 2005.

Cingular Wireless

In the third quarter, Cingular Wireless delivered balanced results driven by improved margins and progress on merger initiatives, positively impacting BellSouth’s earnings. Cingular had gross additions of 4.4 million and net additions of 867,000 bringing its nationwide customer base to 52.3 million customers at quarter-end. Total churn was 2.3 percent, a 10 basis point sequential increase reflecting seasonal patterns and a relatively high number of contract expirations in the quarter.

Cingular’s reported revenue was $8.7 billion, which is a 6.2 percent increase compared to pro forma revenue in the same quarter a year ago. Credits issued to customers in the areas affected by Hurricane Katrina reduced Cingular’s reported revenue by $31 million.

Cingular’s normalized service margin from operating income before depreciation and amortization (OIBDA) was 31.6 percent, 270 basis points higher than the second quarter of 2005. This increase demonstrates the company’s continued progress on merger integration initiatives. Cingular’s proportion of BellSouth’s operating margin before depreciation and amortization expanded from 21 percent in the fourth quarter of 2004 to 31 percent in the third quarter of 2005. With Cingular representing 41 percent of BellSouth’s normalized revenue and a growing percentage of its profit, continued margin growth at Cingular will have a compounding affect on BellSouth’s profitability.

ARPU was $49.65, a decline of 5.2 percent from pro forma ARPU in the same quarter a year ago. Data service ARPU continued its strong growth reaching $4.33 driven by increasing market demand for text messaging, mobile e-mail, downloadable ringtones, games and photo messaging.

Network integration and UMTS deployment are progressing. GSM migration is moving toward completion with 93 percent of MOUs carried on Cingular’s GSM network. Cingular has now converted 6 million former AT&T Wireless subscribers to new Cingular plans. UMTS deployment is on schedule for 15 to 20 markets before the end of 2005. UMTS will provide simultaneous voice and data and is expected to have the fastest average speeds in the industry.

Advertising & Publishing

In the third quarter of 2005, Advertising & Publishing revenue was $509 million, an increase of 2.2 percent compared to the same quarter of the previous year. Adjusted for hurricane-related revenue credits, revenue growth was 3.6 percent. Growth in this business is driven by rapidly increasing online advertising and other new print services. Operating margins remained strong at 45.8 percent. Segment net income was $146 million, up $5 million compared to the third quarter of 2004.

Normalizing Items

In the third quarter of 2005, the difference between reported (GAAP) EPS from continuing operations and normalized EPS is shown in the following table:

		3Q05	3Q04	2Q05
GAAP Diluted EPS – Income from continuing operations		$0.44	$0.46	$0.43

Hurricane-related expenses:		$0.11	$0.01
Asset impairment	$0.06
Uncollectibles	$0.01
Restoration	$0.04

Wireless merger integration costs		$0.03	$0.01	$0.02
Gain on sale of Cellcom		($0.12)
Debt extinguishment costs				$0.01

Normalized Diluted EPS – Income from continuing operations ⁽¹⁾		$0.46	$0.49	$0.46

⁽¹⁾ 3Q04 does not sum due to rounding

Hurricane-related expenses – Represents third quarter 2005 Hurricane Katrina-related charges of $200 million after-tax and consists of asset impairment charges (based on preliminary damage assessments), incremental labor and material costs related to service restoration and network repairs, and incremental uncollectible expense. These expenses are comprised of charges related to BellSouth's wireline business and its 40 percent share of Cingular Wireless. Third quarter 2004 charges represent incremental labor and material costs in the wireline business due to Hurricanes Charley, Frances, Ivan and Jeanne.

Wireless merger integration costs – Represents BellSouth’s 40 percent share of tax-effected wireless merger integration costs of $240 million incurred during the third quarter of 2005 in connection with the Cingular/ AT&T Wireless merger. Integration costs include one-time cash outlays or specified non-cash charges, including accelerated depreciation directly related to rationalization of the wireless network, sales distribution channels, the workforce, information technology systems and real estate.

Gain on sale of Cellcom – Gain related to sale of Cellcom, a cellular communications operator in Israel.

Debt extinguishment costs – Represents one-time expenses associated with the early extinguishment of $300 million of long-term debt in the second quarter of 2005.

About BellSouth Corporation

BellSouth Corporation is a Fortune 100 communications company headquartered in Atlanta, Georgia. BellSouth has joint control and 40 percent ownership of Cingular Wireless, the nation’s largest wireless voice and data provider with 52.3 million customers.

Backed by award winning customer service, BellSouth offers the most comprehensive and innovative package of voice and data services available in the market. Through BellSouth Answers®, residential and small business customers can bundle their local and long distance service with dial-up and high-speed DSL Internet access, satellite television and Cingular® Wireless service. For businesses, BellSouth provides secure, reliable local and long distance voice and data networking solutions. BellSouth also offers online and directory advertising through BellSouth® RealPages.com® and The Real Yellow Pages®.

BellSouth believes that diversity and fostering an inclusive environment are critical in maintaining a competitive advantage in today's global marketplace. More information about BellSouth can be found at http://www.bellsouth.com.

Further information about BellSouth and Cingular’s third quarter earnings can be accessed at www.bellsouth.com/investor. The press release, financial statements and Investor News summarizing highlights of the quarter are available on the BellSouth Investor Relations website starting today at 8 a.m. Eastern Time (ET).

BellSouth will host a conference call with investors today at 10 a.m. (ET).

Dial-in information for the conference call is as follows:

Domestic: 888-370-1863

International: 706-634-1735

The conference call will also be webcast live beginning at 10 a.m. (ET) on our website at www.bellsouth.com/investor. The webcast will be archived on our website beginning at approximately 1 p.m. (ET) today.

A replay of the call will be available beginning at approximately 1 p.m. (ET) today, through November 1, 2005, and can be accessed by dialing:

Domestic: 800-642-1687 - Conference ID: 4107477

International: 706-645-9291 - Conference ID: 4107477

In addition to historical information, this document may contain 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 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; (iv) unfavorable regulatory actions; and (v) 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.

This document may also contain certain non-GAAP financial measures. The most directly comparable GAAP financial measures, and a full reconciliation of non-GAAP to GAAP financial information, are attached hereto and provided on the Company's investor relations website, www.bellsouth.com/investor.

For More Information Contact:

Jeff Battcher, Media Relations at 404-249-2793

BellSouth Investor Relations at 800-241-3419

BellSouth Corporation
Consolidated Statements of Income - Reported Basis (unaudited)
(amounts in millions, except per share data)
Note to Readers: See Normalization Earnings Summary and Reconciliation to GAAP results on pages 3 and 4 for a summary of unusual items included in Reported Basis results.
								Year-to-Date
			3Q05	3Q04	Growth	2Q05	Growth	2005	2004	Growth


Operating Revenues
	Communications group		$4,558	$4,590	-0.7%	$4,598	-0.9%	$13,749	$13,643	0.8%
	Advertising and publishing		506	495	2.2%	527	-4.0%	1,521	1,481	2.7%
	All other		8	10	-20.0%	17	-52.9%	35	30	16.7%
		Total Operating Revenues	5,072	5,095	-0.5%	5,142	-1.4%	15,305	15,154	1.0%
Operating Expenses
	Cost of services and products		2,017	1,881	7.2%	1,925	4.8%	5,862	5,468	7.2%
	Selling, general & administrative expenses		1,162	905	28.4%	951	22.2%	3,014	2,765	9.0%
	Depreciation and amortization		922	908	1.5%	916	0.7%	2,756	2,720	1.3%
		Total Operating Expenses	4,101	3,694	11.0%	3,792	8.1%	11,632	10,953	6.2%
Operating Income			971	1,401	-30.7%	1,350	-28.1%	3,673	4,201	-12.6%
Interest Expense			274	220	24.5%	285	-3.9%	850	646	31.6%
Other Income (Expense), net			512	136	276.5%	124	N/M*	612	990	-38.2%
Income from Continuing Operations before Income
Taxes and Discontinued Operations			1,209	1,317	-8.2%	1,189	1.7%	3,435	4,545	-24.4%
Provision for Income Taxes			392	465	-15.7%	394	-0.5%	1,140	1,604	-28.9%
Income from Continuing Operations			817	852	-4.1%	795	2.8%	2,295	2,941	-22.0%
Income (Loss) from Discontinued Operations, net of tax			-	(53)	N/M*	-	N/M*	381	453	-15.9%
		Net Income	817	799	2.3%	795	2.8%	2,676	3,394	-21.2%
Diluted:
Weighted Average Common Shares Outstanding			1,836	1,835	0.1%	1,835	0.1%	1,835	1,836	-0.1%
	Earnings Per Share:
	Income from Continuing Operations		$0.44	$0.46	-4.3%	$0.43	2.3%	$1.25	$1.60	-21.9%
	Income from Discontinued Operations		$0.00	($0.03)	N/M*	$0.00	N/M*	$0.21	$0.25	-16.0%
	Net Income		$0.44	$0.44	0.0%	$0.43	2.3%	$1.46	$1.85	-21.1%
* - Not meaningful.


Selected Financial and Operating Data

Operating income			$971	$1,401	-30.7%	$1,350	-28.1%	$3,673	$4,201	-12.6%
Operating margin			19.1%	27.5%	-840 bps	26.3%	-720 bps	24.0%	27.7%	-370 bps

Declared dividends per share			$0.29	$0.27	7.4%	$0.29	0.0%	$0.85	$0.79	7.6%
Capital expenditures			$886	$768	15.4%	$829	6.9%	$2,465	$2,134	15.5%

Common shares outstanding			1,831	1,831	0.0%	1,832	-0.1%
Book value per share			$13.28	$11.94	11.2%	$13.10	1.4%

BellSouth Corporation
Consolidated Statements of Income - Normalized Basis (unaudited)
(amounts in millions, except per share data)
Note to Readers: Our reported results, as shown on page 1, are prepared in accordance with generally accepted accounting principles (GAAP). The normalized results presented below exclude the impact of certain non-recurring or non-operating items, the details of which are provided on pages 3 and 4 of this release. In addition, the normalized results reflect our 40% proportionate share of Cingular's results, the presentation of which is not allowed under GAAP. Normalized results exclude discontinued operations from all periods. Certain reclassifications have been made to prior periods to conform to the current presentation.
								Year-to-Date
			3Q05	3Q04	Growth	2Q05	Growth	2005	2004	Growth

Operating Revenues
	Communications group		$4,480	$4,538	-1.3%	$4,537	-1.3%	$13,538	$13,543	0.0%
	Domestic wireless		3,499	1,716	103.9%	3,443	1.6%	10,234	4,978	105.6%
	Advertising and publishing		506	495	2.2%	527	-4.0%	1,521	1,481	2.7%
	All other		9	11	-18.2%	16	-43.8%	35	30	16.7%
		Total Operating Revenues	8,494	6,760	25.7%	8,523	-0.3%	25,328	20,032	26.4%
Operating Expenses
	Cost of services and products		3,250	2,459	32.2%	3,268	-0.6%	9,749	7,141	36.5%
	Selling, general, & administrative expenses		2,084	1,510	38.0%	2,097	-0.6%	6,234	4,493	38.7%
	Depreciation and amortization		1,501	1,137	32.0%	1,524	-1.5%	4,613	3,396	35.8%
		Total Operating Expenses	6,835	5,106	33.9%	6,889	-0.8%	20,596	15,030	37.0%
Operating Income			1,659	1,654	0.3%	1,634	1.5%	4,732	5,002	-5.4%
Interest Expense			374	276	35.5%	392	-4.6%	1,169	816	43.3%
Other Income (Expense), net			38	7	N/M*	58	-34.5%	170	19	N/M*
Income Before Income Taxes			1,323	1,385	-4.5%	1,300	1.8%	3,733	4,205	-11.2%
Provision for Income Taxes			478	492	-2.8%	451	6.0%	1,321	1,486	-11.1%
		Net Income	$845	$893	-5.4%	$849	-0.5%	$2,412	$2,719	-11.3%
Diluted:
	Weighted Average Common Shares Outstanding		1,836	1,835	0.1%	1,835	0.1%	1,835	1,836	-0.1%
	Earnings Per Share		$0.46	$0.49	-6.1%	$0.46	0.0%	$1.31	$1.48	-11.5%
* - Not meaningful.

Selected Financial and Operating Data

Operating income			$1,659	$1,654	0.3%	$1,634	1.5%	$4,732	$5,002	-5.4%
Operating margin			19.5%	24.5%	-500 bps	19.2%	30 bps	18.7%	25.0%	-630 bps

Declared dividends per share			$0.29	$0.27	7.4%	$0.29	0.0%	$0.85	$0.79	7.6%
Capital expenditures			$886	$768	15.4%	$829	6.9%	$2,465	$2,134	15.5%

Common shares outstanding			1,831	1,831	0.0%	1,832	-0.1%
Book value per share			$13.28	$11.94	11.2%	$13.10	1.4%
Total employees			63,049	63,132	-0.1%	62,524	0.8%

BellSouth Corporation
Normalized Earnings Summary and Reconciliation to Reported Results
(amounts in millions, except per share data)


Third Quarter 2005					Normalizing Items
			Discon-	Contin-				Hurri-
			tinued	uing		Merger	Debt	cane	Sale
			Opera-	Opera-		Integration	Exting.	Related	of
			tions	tions	Cingular	Costs	Costs	Expenses	Cellcom
		GAAP	C	(GAAP-C)	A	E	F	G	I	Normalized

Operating Revenues		$5,072	$-	$5,072	$3,422	$-	$-	$-	$-	$8,494
Operating Expenses		4,101	-	4,101	3,158	(96)	-	(328)	-	6,835
Operating Income		971	-	971	264	96	-	328	-	1,659
Interest Expense		274	-	274	100	-	-	-	-	374
Other Income (Expense), net		512	-	512	(123)	-	-	-	(351)	38
Income from Continuing Operations before Income Taxes		1,209	-	1,209	41	96	-	328	(351)	1,323
Provision for Income Taxes		392	-	392	41	40	-	128	(123)	478
Income from Continuing Operations		817	-	817	-	56	-	200	(228)	845
Income (Loss) from Discontinued Operations, net of tax		-	-	-	-	-	-	-	-	-
	Net Income	$817	$0	$817	$0	$56	$0	$200	($228)	$845
Diluted Earnings Per Share		$0.44	$0.00	$0.44	$0.00	$0.03	$0.00	$0.11	($0.12)	$0.46


Year-to-Date 2005					Normalizing Items
			Discon-	Contin-				Hurri-
			tinued	uing		Merger	Debt	cane	Sale
			Opera-	Opera-		Integration	Exting.	Related	of
			tions	tions	Cingular	Costs	Costs	Expenses	Cellcom
		GAAP	C	(GAAP-C)	A	E	F	G	I	Normalized

Operating Revenues		$15,305	$-	$15,305	$10,023	$-	$-	$-	$-	$25,328
Operating Expenses		11,632	-	11,632	9,511	(219)	-	(328)	-	20,596
Operating Income		3,673	-	3,673	512	219	-	328	-	4,732
Interest Expense		850	-	850	319	-	-	-	-	1,169
Other Income (Expense), net		612	-	612	(133)	-	42	-	(351)	170
Income from Continuing Operations before Income Taxes		3,435	-	3,435	60	219	42	328	(351)	3,733
Provision for Income Taxes		1,140	-	1,140	60	100	16	128	(123)	1,321
Income from Continuing Operations		2,295	-	2,295	-	119	26	200	(228)	2,412
Income (Loss) from Discontinued Operations, net of tax		381	(381)	-	-	-	-	-	-	-
	Net Income	$2,676	$(381)	$2,295	$0	$119	$26	$200	($228)	$2,412
Diluted Earnings Per Share		$1.46	$(0.21)	$1.25	$0.00	$0.06	$0.01	$0.11	($0.12)	$1.31

BellSouth Corporation
Normalized Earnings Summary and Reconciliation to Reported Results
(amounts in millions, except per share data)


Third Quarter 2004					Normalizing Items
			Discon-	Contin-		Hurri-	Merger
			tinued	uing		cane	Integra-
			Opera-	Opera-		Related	tion/FV	Round-
			tions	tions	Cingular	Expenses	Adj	ing
		GAAP	C	(GAAP-C)	A	G	H		Normalized

Operating Revenues		$5,095	$-	$5,095	$1,664	$-	$-	$1	$6,760
Operating Expenses		3,694	-	3,694	1,479	(38)	(29)	-	5,106
Operating Income		1,401	-	1,401	185	38	29	1	1,654
Interest Expense		220	-	220	56	-	-	-	276
Other Income (Expense), net		136	-	136	(129)	-	-	-	7
Income from Continuing Operations before Income Taxes		1,317	-	1,317	-	38	29	1	1,385
Provision for Income Taxes		465	-	465	-	15	12	-	492
Income from Continuing Operations		852	-	852	-	23	17	1	893
Income (Loss) from Discontinued Operations, net of tax		(53)	53	-	-	-	-	-	-
	Net Income	$799	$53	$852	$0	$23	$17	$1	$893
Diluted Earnings Per Share*		$0.44	$0.03	$0.46	$0.00	$0.01	$0.01	$0.01	$0.49
* Normalized earnings per share for third quarter 2004 does not sum due to rounding.


Year-to-Date 2004					Normalizing Items
			Discon-	Contin-			Regu-	Hurri-	Merger
			tinued	uing		Sale	latory	cane	Integra-
			Opera-	Opera-		Of	Settle-	Related	tion/FV	Round-
			tions	tions	Cingular	Sonofon	ment	Expenses	Adj	ing	Normalized
		GAAP	C	(GAAP-C)	A	B	D	G	H

Operating Revenues		$15,154	$-	$15,154	$4,827	$-	$50	$-	$-	$1	$20,032
Operating Expenses		10,953	-	10,953	4,146	-	(3)	(38)	(29)	1	15,030
Operating Income		4,201	-	4,201	681	-	53	38	29	-	5,002
Interest Expense		646	-	646	170	-	-	-	-	-	816
Other Income (Expense), net		990	-	990	(509)	(462)	-	-	-	-	19
Income from Continuing Operations before Income Taxes		4,545	-	4,545	2	(462)	53	38	29	-	4,205
Provision for Income Taxes		1,604	-	1,604	2	(167)	20	15	12	-	1,486
Income from Continuing Operations		2,941	-	2,941	-	(295)	33	23	17	-	2,719
Income (Loss) from Discontinued Operations, net of tax		453	(453)	-	-	-	-	-	-		-
	Net Income	$3,394	($453)	$2,941	$0	($295)	$33	$23	$17	$0	$2,719
Diluted Earnings Per Share		$1.85	($0.25)	$1.60	$0.00	($0.16)	$0.02	$0.01	$0.01	($0.00)	$1.48

BellSouth Corporation
Notes to Normalized Financial and Operating Data (pages 3 and 4)
(amounts in millions, except per share data)

Our normalized earnings have been adjusted for the following:

^(a)	The periods presented have been adjusted to include our 40% proportional share of Cingular Wireless' operating results, net of eliminations for amounts charged by other BellSouth companies to Cingular.

^(b)	Gain related to the sale of our operations in Denmark.

^(c)	Discontinued Operations - In March 2004, we announced our intention to sell our Latin American properties. Accordingly, the prior period results have been recast to reflect the Latin American operations as Discontinued Operations and thus excluded from normalized results. The first quarter 2005 results include an after-tax gain of $390 related to the final 2 of the 10 properties that were closed in January.

^(d)	Regulatory Settlement - In April 2004, BellSouth entered into a settlement agreement with respect to previously disclosed litigation (See 2004 10K for further discussion).

^(e)	Wireless merger integration costs – Represents BellSouth’s 40% share of tax-effected wireless merger integration costs of $105 incurred during the 1st quarter 2005, $204 incurred during 2nd quarter 2005 and $240 incurred during 3rd quarter 2005 in connection with the Cingular/AWE merger. Integration costs include one-time cash outlays or specified non-cash charges, including accelerated depreciation, directly related to rationalization of the wireless network, sales distribution channels, the workforce, information technology systems and real estate.

^(f)	Debt extinguishment costs - Represents one-time expenses associated with the early extinguishment of $400 of long-term debt in 1st quarter 2005 and one-time expenses associated with the early extinguishment of $300 of long-term debt in 2nd quarter 2005.

^(g)	Hurricane-related expenses - Represents 3rd quarter 2005 Hurricane Katrina-related charges of $200 after-tax and consists of asset impairment charges (based on preliminary damage assessments), incremental labor and material costs related to service restoration and network repairs, and incremental uncollectible expense. These expenses are comprised of charges related to BellSouth's wireline business and its 40% share of Cingular Wireless. Third quarter 2004 charges represent incremental labor and material costs in the wireline business due to Hurricanes Charley, Frances, Ivan and Jeanne.

^(h)	Wireless merger integration planning costs and fair value adjustment - Represents BellSouth's 40% share of tax-effected wireless merger integration planning costs of $43 incurred during the 3rd quarter of 2004 in preparation for the Cingular/AWE merger. Also includes a $31 fair value adjustment for the announced sale of Cingular Interactive.

⁽ⁱ⁾	Gain related to the sale of Cellcom, a cellular communications operator in Israel.

BellSouth Corporation
Consolidated Balance Sheets (unaudited)
(amounts in millions, except per share data)

			Sept. 30,	Dec. 31,	Change vs.	June 30,	Change vs.
			2005	2004	Prior Year	2005	Prior Quarter

Assets
Current Assets:
	Cash and cash equivalents		$2,030	$680	$1,350	$485	$1,545
	Short-term investments		0	16	(16)	0	0
	Accounts receivable, net of allowance for uncollectibles of $297, $317 and $287		2,443	2,559	(116)	2,480	(37)
	Material and supplies		336	321	15	335	1
	Other current assets		859	1,055	(196)	951	(92)
	Assets of discontinued operations		0	1,068	(1,068)	0	0
		Total Current Assets	5,668	5,699	(31)	4,251	1,417

Investment in and advances to Cingular Wireless			21,084	22,771	(1,687)	21,952	(868)
Property, plant and equipment, net			21,670	22,039	(369)	21,853	(183)
Other assets			7,611	7,400	211	7,741	(130)
Intangible assets, net			1,517	1,587	(70)	1,529	(12)
Total Assets			$57,550	$59,496	($1,946)	$57,326	$224

Liabilities and Shareholders’ Equity
Current Liabilities:
	Debt maturing within one year		$2,582	$5,475	($2,893)	$3,293	($711)
	Accounts payable		1,030	1,047	(17)	1,027	3
	Other current liabilities		4,081	3,018	1,063	3,444	637
	Liabilities of discontinued operations		0	830	(830)	0	0
		Total Current Liabilities	7,693	10,370	(2,677)	7,764	(71)

Long-Term Debt			14,374	15,108	(734)	14,399	(25)

Noncurrent Liabilities:
	Deferred income taxes		6,465	6,492	(27)	6,594	(129)
	Other noncurrent liabilities		4,704	4,460	244	4,575	129
		Total Noncurrent Liabilities	11,169	10,952	217	11,169	0

Shareholders’ Equity:
	Common stock, $1 par value		2,020	2,020	0	2,020	0
	Paid-in capital		7,861	7,840	21	7,836	25
	Retained earnings		20,326	19,267	1,059	20,053	273
	Accumulated other comprehensive income		(28)	(157)	129	(70)	42
	Shares held in trust and treasury		(5,865)	(5,904)	39	(5,845)	(20)
		Total Shareholders’ Equity	24,314	23,066	1,248	23,994	320
Total Liabilities and Shareholders’ Equity			$57,550	$59,496	($1,946)	$57,326	$224

BellSouth Corporation
Consolidated Statements of Cash Flows (unaudited)
(amounts in millions, except per share data)

					Year-To-Date
		3Q05	3Q04	2Q05	2005	2004

Cash Flows from Operating Activities:
Income from Continuing Operations		$817	$852	$795	$2,295	$2,941
Adjustments to income from continuing operations:
	Depreciation and amortization	922	908	916	2,756	2,720
	Provision for uncollectibles	93	90	80	258	285
	Net losses (earnings) of equity affiliates	(97)	(73)	(68)	(85)	(328)
	Deferred income taxes	(66)	137	162	51	740
	Asset Impairments	166	-	-	166	-
	Pension income	(133)	(121)	(133)	(399)	(363)
	Stock-based compensation expense	22	29	23	70	87
	Loss on extinguishment of debt	-	14	20	42	14
	(Gain) loss on sale/disposal of operations	(351)	-	-	(351)	(462)
Net change in:
	Accounts receivable and other current assets	(11)	(147)	(79)	(174)	(271)
	Accounts payable and other current liabilities	618	(79)	368	1,009	24
	Deferred charges and other assets	(39)	29	(60)	(79)	(33)
	Other liabilities and deferred credits	133	34	101	337	67
Other reconciling items, net		40	18	3	38	67
	Net cash provided by operating activities	2,114	1,691	2,128	5,934	5,488

Cash Flows from Investing Activities:
Capital expenditures		(886)	(768)	(829)	(2,465)	(2,134)
Purchase of short-term investments		(76)	(1,364)	-	(88)	(3,210)
Proceeds from sale of short-term investments		76	3,403	-	104	4,439
Investments in debt and equity securities		(53)	(87)	(71)	(156)	(503)
Net short term (advances to) repayments from Cingular		-	-	266	666	-
Proceeds from sale of securities and operations		656	6	15	1,600	565
Proceeds from repayment of loans and advances		949	20	121	1,072	129
Settlement of derivatives on advances		-	-	-	-	(17)
Other investing activities, net		(25)	(8)	(9)	(39)	(3)
	Net cash provided by (used for) investing activities	641	1,202	(507)	694	(734)

Cash Flows from Financing Activities:
Net borrowing (repayments) of short-term debt		(480)	73	(556)	(2,110)	(266)
Proceeds from long-term debt		-	2,993	-	-	3,689
Repayments of long-term debt		(233)	(524)	(605)	(1,500)	(745)
Dividends paid		(532)	(493)	(494)	(1,520)	(1,407)
Purchase of treasury shares		(54)	-	(6)	(137)	(99)
Other financing activities, net		89	(3)	9	104	48
	Net cash used for financing activities	(1,210)	2,046	(1,652)	(5,163)	1,220

Net Increase/(Decrease) in Cash from Continuing Operations		1,545	4,939	(31)	1,465	5,974
Net Increase/(Decrease) in Cash from Discontinued Operations		-	84	-	(115)	(101)
	Net Increase/(Decrease) in Cash and Cash Equivalents	1,545	5,023	(31)	1,350	5,873
Cash and Cash Equivalents at Beginning of Period		485	3,797	516	680	2,947
Cash and Cash Equivalents at End of Period		$2,030	$8,820	$485	$2,030	$8,820

BellSouth Corporation
Results by Segment (amounts in millions) (unaudited)

Communications Group⁽¹⁾

								Year-To-Date
			3Q05	3Q04	Growth	2Q05	Growth	2005	2004	Growth


Operating Revenues
	Voice		$3,136	$3,121	0.5%	$3,155	-0.6%	$9,445	$9,444	0.0%
	Data		1,166	1,144	1.9%	1,165	0.1%	3,491	3,350	4.2%
	Other		286	353	-19.0%	305	-6.2%	895	980	-8.7%
		Total Operating Revenues	4,588	4,618	-0.6%	4,625	-0.8%	13,831	13,774	0.4%
Operating Expenses
	Cost of services and products		1,860	1,778	4.6%	1,850	0.5%	5,563	5,243	6.1%
	Selling, general, & administrative expenses		793	731	8.5%	775	2.3%	2,306	2,234	3.2%
	Depreciation and amortization		914	901	1.4%	910	0.4%	2,734	2,700	1.3%
		Total Operating Expenses	3,567	3,410	4.6%	3,535	0.9%	10,603	10,177	4.2%
Segment Operating Income			1,021	1,208	-15.5%	1,090	-6.3%	3,228	3,597	-10.3%
Interest Expense			94	95	-1.1%	100	-6.0%	292	278	5.0%
Other Income (Expense), net			14	9	55.6%	20	-30.0%	45	18	150.0%
Income Before Income Taxes			941	1,122	-16.1%	1,010	-6.8%	2,981	3,337	-10.7%
Provision for Income Taxes			330	406	-18.7%	350	-5.7%	1,046	1,209	-13.5%
		Segment Net Income ⁽¹⁾	$611	$716	-14.7%	$660	-7.4%	$1,935	$2,128	-9.1%


Selected Financial and Operating Data

(amounts in millions)
Segment operating income			$1,021	$1,208	-15.5%	$1,090	-6.3%	$3,228	$3,597	-10.3%
Segment operating margin			22.3%	26.2%	-390 bps	23.6%	-130 bps	23.3%	26.1%	-280 bps

Long distance revenues			$608	$524	16.0%	$580	4.8%	$1,766	$1,443	22.4%

Switched Access MOUs			15,511	17,128	-9.4%	15,617	-0.7%	47,279	53,602	-11.8%
BSLD MOUs			6,660	5,673	17.4%	6,301	5.7%	18,972	15,245	24.4%
	Total Access minutes of use		22,171	22,801	-2.8%	21,918	1.2%	66,251	68,847	-3.8%

Capital expenditures			$878	$759	15.7%	$826	6.3%	$2,446	$2,111	15.9%
(amounts in thousands)
Wholesale lines			2,453	3,077	-20.3%	2,665	-8.0%
DSL customers			2,678	1,872	43.1%	2,473	8.3%
LD customers			6,993	5,663	23.5%	6,771	3.3%

Consumer ARPU ⁽³⁾			$58.53	$56.65	3.3%	$58.39	0.2%

BellSouth Corporation
Results by Segment (unaudited)
Supplemental Operating Data (in thousands)

Communications Group – Network Access Lines in Service Reported (a)


				3Q05	3Q04	Growth	2Q05	Growth
Access lines
	Residence
		Retail
			Primary	11,465	11,815	-3.0%	11,595	-1.1%
			Additional	1,206	1,388	-13.1%	1,257	-4.1%
			Total Retail Residence	12,671	13,203	-4.0%	12,852	-1.4%
		Wholesale
			Resale	167	115	45.2%	151	10.6%
			UNE-P	1,507	2,082	-27.6%	1,689	-10.8%
			Total Wholesale Residence	1,674	2,197	-23.8%	1,840	-9.0%
	Total Residence			14,345	15,400	-6.9%	14,692	-2.4%

	Business
		Retail
			Total Retail Business	5,289	5,258	0.6%	5,252	0.7%
		Wholesale
			Resale	59	66	-10.6%	59	0.0%
			UNE-P	658	753	-12.6%	701	-6.1%
			Total Wholesale Business	717	819	-12.5%	760	-5.7%
	Total Business			6,006	6,077	-1.2%	6,012	-0.1%

	Other Retail/Wholesale Lines
			Retail	33	38	-13.2%	31	6.5%
			Wholesale	62	61	1.6%	65	-4.6%
	Total Other Retail/Wholesale Lines			95	99	-4.0%	96	-1.0%

	Total Access Lines in Service			20,446	21,576	-5.2%	20,800	-1.7%

	ISDN line equivalents
			Residence	7	10	-30.0%	7	0.0%
			Business	1,440	1,462	-1.5%	1,421	1.3%
	Total ISDN Adjusted ALIS			21,893	23,048	-5.0%	22,228	-1.5%
Access Line Equivalents (b)
	Selected digital data services:
			Unbundled Loops	308	326	-5.5%	298	3.4%
			DS0 and ADSL	16,300	11,493	41.8%	15,079	8.1%
			DS1	8,163	7,594	7.5%	8,028	1.7%
			DS3 & higher	33,638	32,643	3.0%	32,861	2.4%
	Total digital data lines in service			58,409	52,056	12.2%	56,266	3.8%

Total equivalent access lines in service				80,302	75,104	6.9%	78,494	2.3%

(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 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.

BellSouth Corporation
Results by Segment (amounts in millions) (unaudited)

Domestic Wireless Segment ⁽¹⁾^(a)

								Year-To-Date
			3Q05	3Q04	Growth	2Q05	Growth	2005	2004	Growth


Operating Revenues
	Service revenues ⁽²⁾		$3,089	$1,548	99.5%	$3,087	0.1%	$9,144	$4,515	102.5%
	Equipment and other revenues		410	168	144.0%	356	15.2%	1,090	463	135.4%
		Total Operating Revenues	3,499	1,716	103.9%	3,443	1.6%	10,234	4,978	105.6%
Operating Expenses
	Cost of services and products		1,395	665	109.8%	1,401	-0.4%	4,171	1,851	125.3%
	Selling, general, & administrative expenses		1,128	609	85.2%	1,151	-2.0%	3,438	1,742	97.4%
	Depreciation and amortization		579	229	152.8%	608	-4.8%	1,857	676	174.7%
		Total Operating Expenses	3,102	1,503	106.4%	3,160	-1.8%	9,466	4,269	121.7%
Segment Operating Income			397	213	86.4%	283	40.3%	768	709	8.3%
Interest Expense			122	80	52.5%	130	-6.2%	387	239	61.9%
Other Income (Expense), net			(9)	(46)	80.4%	(4)	-125.0%	(9)	(145)	93.8%
Income Before Income Taxes			266	87	205.7%	149	78.5%	372	325	14.5%
Provision for Income Taxes			117	33	254.5%	72	62.5%	179	123	45.5%
		Segment Net Income ⁽¹⁾	$149	$54	175.9%	$77	93.5%	$193	$202	-4.5%


Selected Financial and Operating Data

(amounts in millions, except customer data in thousands)
Segment operating income			$397	$213	86.4%	$283	40.3%	$768	$709	8.3%
Segment operating margin			11.3%	12.4%	-110 bps	8.2%	310 bps	7.5%	14.2%	-670 bps
Cellular/PCS Operating Metrics (100% Cingular):
	Total Customers		52,292	25,672	103.7%	51,442	1.7%	52,292	25,672	103.7%
	Net Customer Additions		867	657	32.0%	952	-8.9%	3,186	1,639	94.4%
	Partitioned Customers and/or Adjustments		(17)	(29)	41.4%	140	-112.1%	(26)	6	N/M*
	Churn		2.3%	2.8%	-50 bps	2.2%	10 bps	2.2%	2.7%	-50 bps
	Wireless Service ARPU ⁽³⁾		$49.65	$50.25	-1.2%	$50.51	-1.7%	$49.92	$49.78	0.3%
	Minutes of Use Per Subscriber ⁽⁴⁾		727	598	21.6%	705	3.1%	692	565	22.5%
	Licensed POPs ⁽⁵⁾		294	243	21.0%	294	0.0%	294	243	21.0%
	Penetration ⁽⁵⁾		18.3%	11.4%	690 bps	18.0%	30 bps	18.3%	11.4%	690 bps
* - Not meaningful.

PROFORMA			3Q05	3Q04	Growth	2Q05	Growth

	Service Revenue		3,089	2,960	4.4%	3,087	0.1%
	Total Revenue (40%)		3,499	3,295	6.2%	3,443	1.6%
	Net Adds (100%)		867	808	7.3%	952	-8.9%
	ARPU		$49.65	$52.38	-5.2%	$50.51	-1.7%

(a) The domestic wireless segment is comprised of BellSouth’s 40% share of the reported results of Cingular Wireless.

BellSouth Corporation
Results by Segment (amounts in millions) (unaudited)

Advertising & Publishing ⁽¹⁾

								Year-To-Date
			3Q05	3Q04	Growth	2Q05	Growth	2005	2004	Growth


Operating Revenues
	Advertising and publishing revenues		$477	$471	1.3%	$481	-0.8%	$1,433	$1,403	2.1%
	Commission revenues		32	27	18.5%	50	-36.0%	98	88	11.4%
		Total Operating Revenues	509	498	2.2%	531	-4.1%	1,531	1,491	2.7%
Operating Expenses
	Cost of services		94	89	5.6%	99	-5.1%	283	259	9.3%
	Selling, general, & administrative expenses		175	173	1.2%	180	-2.8%	518	496	4.4%
	Depreciation and amortization		7	7	0.0%	7	0.0%	21	21	0.0%
		Total Operating Expenses	276	269	2.6%	286	-3.5%	822	776	5.9%
Segment Operating Income			233	229	1.7%	245	-4.9%	709	715	-0.8%
Interest Expense			3	2	50.0%	2	50.0%	8	6	33.3%
Other Income (Expense), net			-	-	N/M*	1	-100.0%	-	1	-100.0%
Income Before Income Taxes			230	227	1.3%	244	-5.7%	701	710	-1.3%
Provision for Income Taxes			84	86	-2.3%	90	-6.7%	260	272	-4.4%
		Segment Net Income ⁽¹⁾	$146	$141	3.5%	$154	-5.2%	$441	$438	0.7%

Segment operating income			$233	$229	1.7%	$245	-4.9%	$709	$715	-0.8%
Segment operating margin			45.8%	46.0%	-20 bps	46.1%	-30 bps	46.3%	48.0%	-170 bps
* - Not meaningful.

BellSouth Corporation
Notes

⁽¹⁾	Segment net income (loss) is based on normalized results which exclude certain one-time transactions and certain corporate intercompany billings. Certain intersegment revenues are not eliminated for purposes of management reporting.


⁽²⁾	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. Average monthly revenue per customer is calculated by dividing average monthly service revenue by average customers.



⁽³⁾	Management uses average revenue per unit (ARPU) as an indicator of operating performance of the business.
	Consumer ARPU is defined as consumer revenues during the period divided by average primary access lines during the period.
	Wireless Service ARPU - Cellular/PCS is defined as Cellular/PCS service revenues during the period divided by average Cellular/PCS subscribers during the period. This metric is used to compare the recurring revenue amounts being generated on our network to prior periods and internal targets. We believe that each of these metrics provides useful information concerning the performance of our initiatives to attract and retain high value customers and the use of our network.




⁽⁴⁾	Total Minutes of Use per Cellular/PCS Subscriber definition was changed effective with the 2Q05 reporting period. Prior to the change, the numerator was defined as Local Minutes of Use. Effective with this change, the numerator is now defined as including Local Minutes of Use and Outcollect Minutes of Use.

⁽⁵⁾	Licensed POPs refers to the number of people residing in areas where Cingular and its partners have licenses to provide cellular or PCS service including areas where Cingular has not yet commenced service. Penetration calculation for 2Q05 and 3Q05 is based on licensed "operational" POPs of 286 million for each quarter. POPs used for the rate of penetration calculation excludes international.

BellSouth Corporation
Non-GAAP Measures – Reconciliation (amounts in millions) (unaudited)
Segment Net Income Reconciliation to GAAP Net Income					Year-to-Date
		3Q05	3Q04	2Q05	2005	2004
Communications group segment net income		$611	$716	$660	$1,935	$2,128
Domestic wireless group segment net income		149	54	77	193	202
Advertising and publishing group segment net income		146	141	154	441	438
Corporate, eliminations and other		(61)	(18)	(42)	(157)	(49)
Normalized net income		845	893	849	2,412	2,719
	Add back Excluded non-recurring or non-operational items ^(a)	(28)	(94)	(54)	264	675
Consolidated GAAP net income		$817	$799	$795	$2,676	$3,394

Free Cash Flow					Year-to-Date
		3Q05	3Q04	2Q05	2005	2004
Net cash provided by operating activities		$2,114	$1,691	$2,128	$5,934	$5,488
	Less Capital Expenditures	(886)	(768)	(829)	(2,465)	(2,134)
Operating Free Cash Flow		$1,228	$923	$1,299	$3,469	$3,354

Net Debt		Sept. 30,	Dec. 31,	June 30,
		2005	2004	2005
Total Debt		$16,956	$20,583	$17,692
	Less Cash	(2,030)	(680)	(485)
Net Debt		$14,926	$19,903	$17,207

Communications Group Operating Income before Depreciation and Amortization					Year-to-Date
		3Q05	3Q04	2Q05	2005	2004
Operating Revenues		$4,588	$4,618	$4,625	$13,831	$13,774
Operating Income		1,021	1,208	1,090	3,228	3,597
	Add back Depreciation and amortization	914	901	910	2,734	2,700
Operating Income before Depreciation and Amortization		$1,935	$2,109	$2,000	$5,962	$6,297
Margin		42.2%	45.7%	43.2%	43.1%	45.7%

Domestic Wireless Operating Income before Depreciation and Amortization					Year-to-Date
		3Q05	3Q04	2Q05	2005	2004
Service revenues		$3,089	$1,548	$3,087	$9,144	$4,515
Equipment and other revenues		410	168	356	1,090	463
Operating revenues		3,499	1,716	3,443	10,234	4,978
Operating income		397	213	283	768	709
Operating Margin (Operating income divided by operating revenues) ^(b)		11.3%	12.4%	8.2%	7.5%	14.2%
	Add back Depreciation and amortization	579	229	608	1,857	676
Operating income before Depreciation and Amortization		$976	$442	$891	$2,625	$1,385
Margin (Operating income before Depr & Amort divided by service revenues) ^(b)		31.6%	28.6%	28.9%	28.7%	30.7%

Domestic Wireless Proforma Revenue		3Q05	3Q04	2Q05
Operating Revenue		$3,499	$1,716	$3,443
	Add back Proforma Adjustments ^(c)	-	1,579	-
Total Operating Revenue (Proforma)		$3,499	$3,295	$3,443

Domestic Wireless Proforma ARPU		3Q05	3Q04	2Q05
Service revenues		$3,089	$1,548	$3,087
	Less Mobitex data revenues	7	22	8
	Add back Proforma Adjustments ^(c)	-	1,412	-
Service revenue used to calculate Proforma ARPU		$3,082	$2,938	$3,079
ARPU (Proforma)		$49.65	$52.38	$50.51
(a) See pages 3 and 4 for detail of excluded items
(b) Margin calculations for our domestic wireless segment represents 40% of Cingular’s margin calculations adjusted for related normalized items as presented on pages 3-4.
(c) These adjustments are consistent in nature with those set forth in Cingular’s Form 8-K/A dated November 29, 2004.

BellSouth Corporation
Hurricane Katrina Revenue Impacts
(amounts in millions, except per share data)
Communications Group:
							Year-to-Date
		3Q05	3Q04	Growth	2Q05	Growth	2005	2004	Growth

As reported (with Katrina customer bill credits):
	Operating revenues	$4,588	$4,618	-0.6%	$4,625	-0.8%	$13,831	$13,774	0.4%
	Operating income	$1,021	$1,208	-15.5%	$1,090	-6.3%	$3,228	$3,597	-10.3%
	Operating margin	22.3%	26.2%	-390 bps	23.6%	-130 bps	23.3%	26.1%	-280 bps

Pro forma (without Katrina customer bill credits):
	Operating revenues	$4,632	$4,618	0.3%	$4,625	0.2%	$13,875	$13,774	0.7%
	Operating income	$1,065	$1,208	-11.8%	$1,090	-2.3%	$3,272	$3,597	-9.0%
	Operating margin	23.0%	26.2%	-320 bps	23.6%	-60 bps	23.6%	26.1%	-250 bps

Impact of Hurricane Katrina bill credits on:
	Operating revenues	$(44)	$-	-100 bps	$-	-100 bps	$(44)	$-	-30 bps
	Operating income	$(44)	$-	-360 bps	$-	-400 bps	$(44)	$-	-120 bps
	Operating margin	-0.7%	0.0%	-70 bps	0.0%	-70 bps	-0.3%	0.0%	-30 bps

Domestic Wireless:
							Year-to-Date
		3Q05	3Q04	Growth	2Q05	Growth	2005	2004	Growth

As reported (with Katrina customer bill credits):
	Operating revenues	$3,499	$1,716	103.9%	$3,443	1.6%	$10,234	$4,978	105.6%
	Operating income	$397	$213	86.4%	$283	40.3%	$768	$709	8.3%
	Operating margin	11.3%	12.4%	-110 bps	8.2%	310 bps	7.5%	14.2%	-670 bps

Pro forma (without Katrina customer bill credits):
	Operating revenues	$3,511	$1,716	104.6%	$3,443	2.0%	$10,246	$4,978	105.8%
	Operating income	$409	$213	92.0%	$283	44.5%	$780	$709	10.0%
	Operating margin	11.6%	12.4%	-80 bps	8.2%	340 bps	7.6%	14.2%	-660 bps

Impact of Hurricane Katrina bill credits on:
	Operating revenues	$(12)	$-	-70 bps	$-	-30 bps	$(12)	$-	-20 bps
	Operating income	$(12)	$-	-560 bps	$-	-420 bps	$(12)	$-	-170 bps
	Operating margin	-0.3%	0.0%	-30 bps	0.0%	-30 bps	-0.1%	0.0%	-10 bps

Advertising & Publishing:
							Year-to-Date
		3Q05	3Q04	Growth	2Q05	Growth	2005	2004	Growth

As reported (with Katrina customer bill credits):
	Operating revenues	$509	$498	2.2%	$531	-4.1%	$1,531	$1,491	2.7%
	Operating income	$233	$229	1.7%	$245	-4.9%	$709	$715	-0.8%
	Operating margin	45.8%	46.0%	-20 bps	46.1%	-30 bps	46.3%	48.0%	-170 bps

Pro forma (without Katrina customer bill credits):
	Operating revenues	$516	$498	3.6%	$531	-2.8%	$1,538	$1,491	3.2%
	Operating income	$240	$229	4.8%	$245	-2.0%	$716	$715	0.1%
	Operating margin	46.5%	46.0%	50 bps	46.1%	40 bps	46.6%	48.0%	-140 bps

Impact of Hurricane Katrina bill credits on:
	Operating revenues	$(7)	$-	-140 bps	$-	-130 bps	$(7)	$-	-50 bps
	Operating income	$(7)	$-	-310 bps	$-	-290 bps	$(7)	$-	-100 bps
	Operating margin	-0.7%	0.0%	-70 bps	0.0%	-70 bps	-0.3%	0.0%	-30 bps

EX-99 3 form8k102505ex99b.htm EXHIBIT 99-B

Exhibit 99-b

BellSouth Reports Third Quarter Earnings

•	Improving Cingular margins contribute to BellSouth results
•	Strong DSL net customer additions
•	$2 billion share repurchase program

ATLANTA – BellSouth Corporation (NYSE: BLS) announced third quarter 2005 earnings per share (EPS) from continuing operations of 44 cents compared to 43 cents in the second quarter of 2005 and 46 cents in the third quarter of 2004. Normalizing items in the third quarter of 2005 consisted of Hurricane Katrina-related costs, wireless merger integration costs, and a gain from the sale of an investment. Normalized EPS from continuing operations was 46 cents, flat compared to the second quarter of 2005 and a 3 cent decline compared to the third quarter of 2004.

Normalized Results from Continuing Operations

Reported Results from Continuing Operations

same quarter of the previous year. Reported results for the quarter include the financial impacts of two significant events. During the quarter, the Company recognized a $228 million after-tax gain from the sale of its share in Cellcom, a cellular communications operator in Israel. In addition to the negative impact of hurricane-related billing credits, the Company also incurred $200 million of incremental expense and asset impairments, net of taxes, associated with damage from Hurricane Katrina.

On Sept. 6, 2005, BellSouth made an initial estimate of the future cost for network restoration, including capital and expense, of $400 million to $600 million. The company continues with damage assessments as we gain access to all areas. This estimate is subject to many uncertainties, the most significant of which include completion of physical surveys, the government’s specific plans for reconstruction of the City of New Orleans and the resulting impact on our network design.

Communications Group

to reach 56 percent penetration of its mass-market customer base. During the third quarter, 66,000 customers added DIRECTV® service to their communications packages, reaching a total of more than 460,000. For convenience and simplicity, customers can combine DSL, long distance, DIRECTV® and Cingular Wireless with the BellSouth Answers® bundle. At quarter-end, BellSouth had 4.9 million BellSouth Answers® residential customers, which is a 42 percent penetration of the company’s retail residential access lines.

As of Sept. 30, 2005, total access lines were 20.4 million, down 354,000 compared to June 30, 2005. The Company estimates approximately 40,000 of this decline is attributable to disconnections associated with Hurricane Katrina. The remaining access line loss was driven by wireless substitution and cable telephony providers in residential markets. Residential retail access lines were down 181,000. In contrast, business retail access lines grew 37,000 lines with positive results in both small and large business segments. UNE-P (Unbundled Network Elements-Platform) access lines resold by BellSouth competitors were down 228,000 compared to June 30, 2005.

Cingular Wireless

Network integration and UMTS deployment are progressing. GSM migration is moving toward completion with 93 percent of MOUs carried on Cingular’s GSM network.

Cingular has now converted 6 million former AT&T Wireless subscribers to new Cingular plans. UMTS deployment is on schedule for 15 to 20 markets before the end of 2005. UMTS will provide simultaneous voice and data and is expected to have the fastest average speeds in the industry.

Advertising & Publishing

Normalizing Items

In the third quarter of 2005, the difference between reported (GAAP) EPS from continuing operations and normalized EPS is shown in the following table:

3Q05

3Q04

2Q05

GAAP Diluted EPS –

Income from continuing operations

$0.44

$0.46

$0.43

Hurricane-related expenses:

$0.11

$0.01

Asset impairment

$0.06

Uncollectibles

$0.01

Restoration

$0.04

Wireless merger integration costs

$0.03

$0.01

$0.02

Gain on sale of Cellcom

($0.12)

Debt extinguishment costs

$0.01

Normalized Diluted EPS –
Income from continuing operations (1)

$0.46

$0.49

$0.46

⁽¹⁾3Q04 does not sum due to rounding

Hurricane-related expenses – Represents third quarter 2005 Hurricane Katrina-related charges of $200 million after-tax and consists of asset impairment charges (based on preliminary damage assessments), incremental labor and material costs related to service restoration and network repairs, and incremental uncollectible expense. These expenses are comprised of charges related to BellSouth’s wireline business and its 40 percent share of Cingular Wireless. Third quarter 2004 charges represent incremental labor and material costs in the wireline business due to Hurricanes Charley, Frances, Ivan and Jeanne.

Gain on sale of Cellcom – Gain related to sale of Cellcom, a cellular communications operator in Israel.

Debt extinguishment costs – Represents one-time expenses associated with the early extinguishment of $300 million of long-term debt in the second quarter of 2005.

Communications Group

Communications Group revenues were down slightly in the third quarter of 2005, decreasing 0.6 percent compared to the same period last year and 0.8 percent sequentially. Billing credits for customers in the hardest hit areas of Hurricane Katrina negatively affected revenues by $44 million. The credit applied to approximately 660,000 retail and wholesale lines. Adjusting for these credits, Communications Group revenues grew 0.3 percent versus the same quarter last year and 0.2 percent sequentially. Year-over-year revenue growth in InterLATA long distance, DSL and Small Business services more than offset lower revenues from residential access line loss and Large Business services. Data revenue grew 1.9 percent and voice revenue increased slightly. Other revenue declined $67 million due to lower revenues from wholesale long distance and payphone services.

Consumer revenue grew 0.7 percent year-over-year as growth in long distance and DSL revenue more than compensated for a decline in core voice revenue. Wireless and broadband substitution continued to negatively impact Consumer lines, resulting in a 4.0 percent year-over-year decline in retail residential access lines. Adjusting for Hurricane Katrina billing credits, Consumer revenue increased 1.8 percent compared to the third quarter of last year.

Successful customer reacquisition and retention programs and continued growth in DSL and long distance revenues drove a 6.9 percent increase in Small Business revenue compared to the same quarter in 2004. The business unit added more than 33,000 access lines during the third quarter. This marks the tenth consecutive quarter of year-over-year revenue growth and the fifth consecutive quarter of access line growth for Small Business. Small Business revenue increased 8.4 percent versus the same quarter last year when adjusting for Hurricane Katrina credits.

[Graphic inserted here

Communications Group Revenues

(in billions)

3Q04 - $4.6

4Q04 - $4.6

1Q05 - $4.6

2Q05 - $4.6

3Q05 - $4.6]

Revenue for BellSouth’s Large Business unit fell 3.2 percent in the third quarter compared to the same period last year. Price and volume pressures in core voice and data services continued to overshadow revenue growth in complex long distance services. Large Business gained nearly 2,000 access lines in the third quarter, a marked improvement from average line losses of 25,000 in each of the previous four quarters. Although not necessarily indicative of a change in trend, the improvement provides a new data point for the Large Business segment. Excluding the impact of Hurricane Katrina

billing credits, Large Business revenue declined 2.1 percent compared to third quarter of 2004.

Wholesale revenue decreased 1.6 percent, or 1.1 percent adjusted for Katrina credits, compared to the prior year third quarter. Lower UNE-P revenue and a decrease in revenue from transport services sold to inter-exchange carriers more than offset growth in wireless transport. Also contributing was a decrease in revenue from continued declines in the wholesale aggregation of dial-up ISP traffic. UNE-P lines dropped 228,000 during the third quarter versus a decline of 236,000 in the second quarter of 2005.

Voice Revenue and Access Lines Details

Communications Group voice revenue grew 0.5 percent year-over-year as InterLATA long distance revenue growth offset lower revenue from retail core voice services. InterLATA long distance voice revenue increased approximately 25 percent compared to the prior year third quarter and totaled more than $386 million.

At the end of the third quarter, total access lines were 20.4 million, down 5.2 percent compared to the third quarter of 2004. Access lines continued to be negatively impacted by wireless and broadband substitution and losses to cable providers. BellSouth lost 142,000 retail access lines and 228,000 UNE-P lines in the third quarter. The Company estimates that approximately 40,000 lines disconnected as a result of Hurricane Katrina. In addition, there are approximately 100,000 to 140,000 lines in New Orleans and along the Gulf Coast that may be subject to customer “extended displacement” due to damage in the area (e.g., flooded areas in New Orleans). As of the end of the third quarter, these customers had not yet reported a disconnect of service and are still included in our access line base. Revenue credits issued during the third quarter as well as credits the Company will issue during the fourth quarter include this group of access lines. On a positive note, there are some signs of inward movement activity for customers relocating within our markets and businesses migrating to New Orleans to participate in reconstruction.

Total retail lines declined 2.7 percent compared to the third quarter of 2004 resulting from a 4.0 percent decline in retail residential lines. Retail business lines were positive year-over-year, increasing 0.6 percent from the third quarter of 2004. Small Business has added more than 103,000 access lines this year, which more than compensated for the year-to-date declines in Large Business lines from continued demand pressures and migration to data services. As expected, UNE-P lines have been impacted by the regulatory sunset, decreasing 669,000 compared to the third quarter of last year. BellSouth’s Consumer unit continues to reacquire approximately 50 percent of all UNE-P disconnects.

[Graphic inserted here

Small Business Net Access Line

Change (in thousands)

YTD 2003 – (26)

YTD 2004 – 3

YTD 2005 – 103]

Broadband and Data Services

While ARPU remained stable, new simplified pricing and attractive promotions drove strong DSL net subscriber additions of 205,000 in the third quarter, up 65.3 percent sequentially and 53.0 percent from the same quarter last year. Net subscriber additions to BellSouth’s two highest-speed DSL products made up 60 percent of total DSL net customers additions in the third quarter. The DSL customer base has grown to more than 2.6 million subscribers, an increase of 43.1 percent from the previous year’s third quarter. Robust customer growth raised DSL penetration to 17.1 percent of qualified lines and 13.8 percent of retail (ISDN-adjusted) switched access lines.

In late July, BellSouth announced more straightforward consumer broadband pricing which reduced the number of BellSouth® FastAccess® DSL price points from 21 to 3. New residential customers can order FastAccess® DSL Lite for $24.95 per month, FastAccess® DSL Ultra for $32.95 per month or FastAccess® DSL Xtreme for $42.95 per month. These changes resulted in significant improvement in third quarter gross additions, reflecting continued growth in market demand for broadband services.

In addition to pricing changes in the third quarter, new promotions contributed to robust BellSouth® FastAccess® DSL subscriber growth and a more balanced mix of customers. New residential customers of any BellSouth® FastAccess® DSL speed product could receive a free MP3 player plus three months of membership to Napster’s digital music service. New customers who purchased one of the two highest-speed FastAccess DSL services could choose between an MP3 player with three months of Napster or a digital camera. Customers who placed their order online were eligible to receive a free modem or router after rebate. This promotion drove a marked increase in the number of customers ordering DSL service through BellSouth’s lower-cost online distribution channel.

In late July, the Company launched a value-added service – BellSouth® Internet® Security – to its broadband portfolio. The suite of products features a host of security applications designed to help keep residential and small business customers safe while online and to keep their PCs free of spyware, viruses and tracking cookies. For as little as $2.99 per month, BellSouth® FastAccess® DSL customers can add top-ranked security applications combined into one easy-to-use program fully supported by BellSouth that includes necessary updates like virus file definitions and product enhancements.

BellSouth continues to look for ways to enhance our broadband customer experience. The Company plans a limited launch of a new high-speed broadband service in the fourth

quarter of 2005, which will deliver downstream connection speeds of up to 6 megabits. In mid-October, BellSouth and Yahoo! Inc. announced a strategic alliance to provide co-branded broadband service to BellSouth® FastAccess® DSL subscribers throughout BellSouth’s nine-state operating region. Beginning in late 2006, this new co-branded service will be provided, at no additional charge, to all new BellSouth residential broadband subscribers on all tiers of service. Existing customers can opt-in to the service. Consumers can enjoy a full range of Yahoo!’s leading tools and services through the co-branded offering including a powerful customized browsing environment, personalized broadband homepage, premium e-mail, a suite of digital photo features, compelling broadband content and more.

[Graphic inserted here

DSL Net Subscriber Additions

(in thousands)

3Q04 – 134

4Q04 – 224

1Q05 – 253

2Q05 – 124

3Q05 – 205]

Network data revenue totaled more than $1.1 billion in the third quarter, an increase of 1.9 percent compared to the same period in 2004. Katrina-related billing credits had some impact on the growth. Retail data revenue grew 7.5 percent compared to the third quarter of 2004 due to growth in BellSouth® FastAccess® DSL and complex long distance services. DSL revenue increased more than 16 percent year-over-year to total almost $305 million. Complex long distance data revenue growth of $15 million from the prior year third quarter also contributed to the increase in retail data revenues. Year-over-year, network data revenue growth was pressured by a wholesale data revenue decline of 5.0 percent in the third quarter. Increased revenue from wireless carriers was offset by lower revenues from data transport services sold to inter-exchange carriers and continued declines in the wholesale aggregation of dial-up ISP traffic. Third quarter network data revenues represented 13.7 percent of total BellSouth normalized revenues and 25.4 percent of Communications Group revenues.

Packages

BellSouth Answers® gives customers the opportunity to tailor their communications and entertainment packages by combining local calling plans with long distance, Internet, Cingular Wireless services and digital satellite television service from DIRECTV®. The Company had nearly 4.9 million Answers customers at the end of the third quarter, reflecting an increase of 20.2 percent compared to the same period in 2004. Retail primary line penetration of BellSouth Answers® packages increased to 42 percent at the end of the third quarter compared to 34 percent in the same quarter of the previous year. BellSouth Answers® ARPU for the quarter was more than $65. Nearly 40 percent of BellSouth Answers® customers have two or more affiliate services – such as long distance, Cingular Wireless, DSL or dial-up Internet – compared to 30 percent in the third

quarter of 2004. The Company also continued to increase penetration of DIRECTV® service. During the third quarter, an additional 66,000 customers added DIRECTV® service to their communications packages including both new sales and “opt-ins.” More than 460,000 customers now have DIRECTV® in their package.

Long Distance

At the end of the third quarter, BellSouth’s mass-market long distance subscriber base totaled nearly 7.0 million, a year-over-year increase of more than 23 percent. The Company added 222,000 subscribers to its long distance plans during the quarter. Long distance penetration of mass market customers increased to 55.6 percent, representing 55.1 percent of primary residential access lines and 59.9 percent of BellSouth’s mass-market small business accounts. In the third quarter, BellSouth achieved 50 percent mass-market penetration in all nine states in our region. Year-to-date churn improved 60 basis points from the same period in 2004. Mass-market long distance revenues totaled $350 million for the third quarter and $1.0 billion year-to-date. Mass market long distance ARPU has remained stable in the $17 range for the past eight quarters.

[Graphic inserted here

Long Distance Customers

(in thousands)

3Q04 – 5,663

4Q04 – 6,015*

1Q05 – 6,470*

2Q05 – 6,771*

3Q05 – 6,993*

*Does not include toll block customers]

Complex long distance revenue totaled more than $79 million for the third quarter, an increase of 38.6 percent year-over-year and 5.3 percent from the second quarter. For the first nine months of 2005, revenue from complex long distance services has increased more than 50 percent over the same period last year.

Technology Update

As BellSouth transforms from a narrowband voice company to a broadband services company, the Company continues to extend fiber deeper into its network. Almost 50 percent of BellSouth households are served by a combination of fiber and short copper loops (less than 5,000 feet), and approximately half of our 44,000 remote terminals are fed with fiber. At the end of the third quarter, BellSouth had more than 5.6 million miles of fiber, a more than 12 percent increase from one year ago, and had deployed fiber-to-the-curb (FTTC) facilities to more than 1.1 million homes. BellSouth is continuing to advance network capacity by adding new fiber-fed remote terminals, upgrading existing RTs to fiber-fed and laying additional fiber miles. Through September, the Company upgraded or added DSLAM capacity to more than 3,100 sites and was in the process of

updating more than 1,300 copper fed sites with fiber. Nearly 300 copper fed sites have already been upgraded to fiber this year.

In October, BellSouth announced it signed an internetworking agreement with Sprint Nextel to enable seamless connectivity for BellSouth’s next generation data customers across both providers’ networks. The service is expected to launch in the first quarter of 2006 and will initially utilize BellSouth’s private IP backbone in the southeastern United States and Sprint’s network in other regions to link businesses with multiple locations. BellSouth’s nationwide data solution will utilize the security and flexibility of MPLS (Multi-Protocol Label Switching) to allow internetworking of multiple access methods. Many businesses have the challenge of linking multiple office locations that are broadly distributed throughout the country to corporate resources. Each location often has specific network access requirements and, in the past, companies have had to self-integrate and manage these disparate networks across the organization. BellSouth’s nationwide service will provide a managed network-based solution regardless of customer network access method.

[Graphic inserted here

Network Fiber Miles

(in thousands)

3Q04 – 5,025

4Q04 – 5,163

1Q05 – 5,269

2Q05 – 5,426

3Q05 – 5,642]

Expenses and Margins

Communications Group operating margin was 22.3 percent compared to 26.2 percent in the third quarter of 2004. About 100 basis points of the year-over-year decline is due to the previously disclosed changes to accounting for other post-retirement benefits. The Katrina revenue credits impacted operating margin by 70 basis points. The remaining year-over-year decline was due to a shift in product mix, pricing pressures in our Large Business segment and costs for our broadband initiative. On a sequential basis, Communications Group operating margin declined 130 basis points due primarily to the billing credit for the hardest-hit Hurricane Katrina customers and higher levels of overtime related to non-Katrina weather events.

Capital expenditures for the Communications Group were approximately $878 million in the third quarter – $22 million of which was related to Hurricane Katrina. Depreciation and amortization expense increased 1.4 percent year-over-year.

Hurricane Katrina

Hurricane Katrina’s devastation presented many extraordinary challenges to our employees, our customers, our communities and our network. Throughout this effort,

BellSouth’s commitment to service remains strong as we help our customers through this difficult time.

BellSouth is making significant progress on its network restoration activities from Hurricane Katrina with out-of-state workers assisting those located in Louisiana and Mississippi. The devastation related to this storm is unprecedented in our history, requiring an equally unprecedented dedication of resources to return service to our customers. The Company has incurred over 300,000 incremental man-hours over the comparable period last year when we were restoring service after 4 storms. All working lines in the New Orleans area and Mississippi have access to 911 services and the majority of connections to wireless service providers have been restored. BellSouth launched a website located off of the company’s www.bellsouth.com homepage providing current restoration status information including residential repair intervals. For more details about Hurricane Katrina’s impact on access lines, see section titled “Voice Revenue and Access Line Details” on page 5 of Investor News.

Of the roughly 13,000 BellSouth employees in Louisiana, Mississippi and Alabama, approximately 6,500 of these were in the hardest hit areas of the storm. BellSouth provided affected employees and their families with necessities such as food, shelter, clothing, financial support and employee assistance programs. The Company and its employees raised relief funds that totaled more than $3.0 million. In addition, BellSouth issued more than 1,600 employee emergency loans totaling more than $3.6 million. BellSouth employees and retirees assembled and distributed disaster relief kits, and many employees staffed phone lines at the Emergency Response Center.

Regulatory

On August 5, 2005, the FCC reduced regulation of high-speed wireline broadband Internet access service by classifying it as an information service with a “transmission component.” Since the underlying broadband service is not a “telecommunications service,” it is not subject to normal telecommunications services regulations. The FCC also relieved the RBOCs of Computer Inquiry requirements for broadband Internet access service. This reduction in regulation is intended to give wireline broadband Internet access service parity with cable modem service and frees the RBOCs to compete head-to-head with cable’s Internet access services. The order was effective Oct. 17, 2005.

BellSouth continues to support telecom reform at the Federal level. A bill introduced by Senator John Ensign, R-Nev., would remove U.S. government regulation of all but basic services and move towards market-driven rules, including eliminating the need for video providers to obtain local franchises. It would prevent regulation of rates, terms or quality of any voluntary resale of broadband service, which is defined as anything above 64 kb/s. It would also prevent states from imposing requirements for interconnection or intercarrier compensation.

Cingular Wireless

Almost one year following the close of the purchase of AT&T Wireless, Cingular has made considerable progress with its operational and financial metrics. Compared to pro forma results in the third quarter of 2004, Cingular has:

•	Grown its customer base by 5 million;
•	Increased OIBDA margin by 300 bps;

• Made significant progress integrating the operations and assets of AT&T Wireless.

At the end of the third quarter, Cingular Wireless, the nation’s largest wireless company, served 52.3 million customers or almost 18 percent of Cingular’s 294 million licensed POPs. Cingular’s brand presence and unmatched distribution network drove gross additions of 4.4 million in the third quarter. Net additions for the quarter totaled 867,000 – an increase of 7.3 percent compared to pro forma figures in the same period last year.

Cingular migrated 1.5 million former AT&T Wireless subscribers to new Cingular plans and customer support systems in the third quarter. Since the merger closed, Cingular has transferred almost 6 million subscribers to new Cingular plans and systems. Virtually all of these migrations were to plans that use Cingular’s more efficient GSM network. At the end of the quarter, 93 percent of the company’s total minutes were carried on its GSM network and 82 percent of its subscribers were equipped with a GSM handset. Through roaming alliances with other GSM-based providers around the world, Cingular provides coverage in nearly 180 countries, more than any other U.S. carrier.

[Graphic inserted here

Cingular Subscribers by Technology

(in millions)

GSM Subscribers; TDMA Subscribers; Total Subscribers

3Q04 – 26.9; 20.3; 47.2

4Q04 – 31.9; 17.2; 49.1

1Q05 – 36.3; 14.0; 50.3

2Q05 – 40.1; 11.3; 51.4

3Q05 – 42.9; 9.4; 52.3]

Cingular’s total churn for the quarter was 2.3 percent, 10 basis points higher than last quarter. Postpaid churn in the third quarter was 2.0 percent, an increase of 20 basis points sequentially. Increased contract expirations due to the approach of the anniversary of local number portability and normal seasonal pressures contributed to the rise in postpaid churn.

Service Revenue was flat sequentially in the third quarter to $7.7 billion. Year-over-year, Service Revenue was up 4.3 percent when measuring results on a pro forma basis. Compared with the same quarter last year, service revenue benefited from an increase in Cingular’s subscriber base and was partially offset by declining Average Revenue per

User (ARPU). Total revenue increased 1.6 percent sequentially and 6.2 percent compared to pro forma results in the year-ago quarter to $8.7 billion. Credits issued to customers in the areas affected by Hurricane Katrina reduced Cingular’s reported revenue by $31 million.

Cingular’s ARPU declined 5.2 percent year-over-year on a pro forma basis and 1.7 percent compared to the second quarter of 2005. Most of the ARPU decline sequentially and year-over-year was due to an increasing number of Cingular customers purchasing popular FamilyTalk and Rollover packages and national rate plans. Seasonal roaming revenue in the second quarter also accounted for some of the sequential decrease in ARPU. Total service ARPU was $0.20 higher when adjusting for Hurricane Katrina credits issued to Cingular customers during the second quarter of 2005.

Data ARPU rose 4.1 percent sequentially to $4.33. Since the end of 2004, Data ARPU has increased approximately 50 percent as Cingular’s customers increasingly purchased monthly and a la carte data services. At the end of the quarter, Cingular had 22 million active users of its many data services, up 29 percent compared to the fourth quarter of 2004.

[Graphic inserted here

Cingular Normalized OIBDA

Service Margin

4Q04 – 23.4%

1Q05 – 25.5%

2Q05 – 28.9%

3Q05 – 31.6%]

Cingular Wireless’ OIBDA (Operating Income before Depreciation and Amortization) service revenue margins, normalized for integration costs and expenses directly attributable to Hurricane Katrina, increased 270 basis points sequentially to 31.6 percent. Year-over-year, normalized OIBDA service margin increased 300 basis points on a pro forma basis. Lower per-customer acquisition cost was the primary driver of the third quarter cash margin improvement. Customer service and back-office synergies through reduced employee costs and best practice adoption also contributed to Cingular’s margin expansion. Normalized results for Cingular exclude $149 million in total direct merger integration costs during the period.

With the planning and design phase complete, Cingular’s integration of the network assets of the former AT&T Wireless reached full execution mode in the third quarter of 2005. Cingular will integrate 30 of 63 overlapping GSM markets by year-end. Cingular has already completed 30 of the 47 redundant TDMA market turndowns with the remaining sites rationalized by the end of 2005 – giving the company a single TDMA network across its territory.

Cingular has also made considerable progress on its channel consolidation customer support strategies. Cingular is on track to close 470 retail locations net of new builds by

year-end 2005 representing an 18 percent decline compared to the number of locations at the end of 2004. Customer service efficiency is also improving as complexity is reduced and self-service tools are adopted by Cingular’s customers. Since the beginning of the year, the number of customers per full-time equivalent employee is down 28 percent and customer call-in rates are down 20 percent over the same period.

Cingular announced several initiatives in the third quarter to make its wireless service more entertaining and more accessible. On Sept. 7, Cingular announced it would offer another exclusive handset to its customers – the Motorola ROKR. The ROKR is the first wireless phone with Apple’s iTunes®, enabling music lovers to transfer their favorite songs to their mobile phone.

Cingular also broadened its sales reach with the announcement of two distribution agreements. In August, the company announced a 10-year agreement with RadioShack Corp. that will give Cingular more than 5,000 new sales outlets across the United States. An agreement with Musicland Group added 400 new retail locations nationwide and allows Cingular to sell its GoPhone® prepaid product in Sam Goody and Media Play stores beginning this month.

Cingular is still on track to launch UMTS/HSDPA in 15 to 20 markets by the end of 2005. UMTS with HSDPA provides superior speeds for data and video services, and it delivers outstanding operating efficiencies, using the same spectrum and infrastructure for voice and data. Dallas, Phoenix, and Seattle recently became Cingular’s first markets upgraded to HSDPA.

Advertising & Publishing

BellSouth’s Advertising & Publishing segment continued its steady growth in the third quarter. Total revenue was up 2.2 percent to $509 million compared to the same period in 2004. Excluding the effects of Hurricane Katrina, total revenue growth would have been 3.6 percent relative to the third quarter of 2004. Advertising & Publishing’s year-over-year revenue growth was driven primarily by fast-growing online directory and search engine marketing offerings. Traditional print also contributed to higher revenues, as companion directories drove year-over-year growth in the core publishing business. BellSouth rolled out its first companion directory in July 2003. BellSouth’s RealSearchSM online product has performed particularly well, growing product revenue over 135 percent compared to the same period last year. RealSearchSM gives businesses an easy way to buy and track their search engine marketing. Seasonal fluctuations for commission revenue accounted for the sequential decline in revenues.

[Graphic inserted here

Advertising & Publishing Revenue

(year-over-year change)

3Q04 – (1.4)%

4Q04 – 1.1%

1Q05 – 1.9%

2Q05 – 3.9%

3Q05 – 2.2%*

*Growth of 3.6% adjusted for Hurricane Katrina billing credits]

Operating income increased 1.7 percent to $233 million compared to the same period last year as growth in revenue more than offset higher manufacturing, distribution and healthcare costs. Sequentially, operating income declined 4.9 percent due to seasonally lower commission revenue partially offset by lower production costs.

BellSouth’s network of affiliated search engines covers more than 60 percent of the local search market and includes Google, Yahoo, InfoSpace, and most recently, AOL. As of September, the RealPages.com® network of partners exceeded 21 million searches per month for southeast advertisers and businesses. From 2004 to 2005, the RealPages.com® network has seen an 18 percent growth in searches for local advertisers.

Later this fall, YellowPages.com^SM, the online joint venture between BellSouth and SBC Communications, will merge its website with BellSouth® RealPages.com® and SBC SmartPages.com® to form a single, easy to find site for advertisers and customers.

BellSouth will release fourth-quarter earnings on Wednesday, Jan. 25, 2006, at 8 a.m. (ET).

About BellSouth Corporation

BellSouth believes that diversity and fostering an inclusive environment are critical in maintaining a competitive advantage in today’s global marketplace. More information about BellSouth can be found at http://www.bellsouth.com.

In addition to historical information, this document may contain 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 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; (iv) unfavorable regulatory actions; and (v) 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.

This document may also contain certain non-GAAP financial measures. The most directly comparable GAAP financial measures, and a full reconciliation of non-GAAP to GAAP financial information, are attached hereto and provided on the Company’s investor relations web site, www.bellsouth.com/investor.

For More Information Contact:

Jeff Battcher, Media Relations at 404-249-2793

BellSouth Investor Relations at 800-241-3419