BLS Bellsouth Cp

BellSouth Reports First Quarter Earnings * 636,000 long distance customer net additions ATLANTA, April 22 /PRNewswire-FirstCall/ -- BellSouth Corporation announced first quarter 2004 earnings per share (EPS) from continuing operations of 63 cents, including special items totaling 15 cents (see below). This compared to 46 cents in the first quarter of 2003, including special items totaling 4 cents (see below). For the first quarter, consolidated revenues from continuing operations were $5.0 billion, 0.8 percent lower than the same quarter of the previous year. Income from continuing operations was $1.2 billion compared to $850 million in the same quarter a year ago. Operating free cash flow from continuing operations (defined as cash flow from operations less capital expenditures) totaled $1.1 billion. Capital expenditures for continuing operations in the first quarter of 2004 were $635 million compared to $588 million in 2003. In accordance with Generally Accepted Accounting Principles (GAAP), BellSouth's reported consolidated revenues and consolidated operating expenses from continuing operations do not include the company's 40 percent share of Cingular Wireless. Normalized results from continuing operations include BellSouth's 40 percent proportionate share of Cingular's revenues and expenses. Normalized EPS was 48 cents in the first quarter of 2004 compared to 50 cents in the same quarter a year ago. Normalized revenues were $6.6 billion, an increase of 2.0 percent versus the first quarter of 2003. Normalized net income was $888 million, compared to $924 million in the same quarter a year ago. Communications Group Growth in revenues from long distance and DSL offset access line declines holding Communications Group revenues flat at $4.6 billion compared to 2003. Operating margin for the quarter was 25.6 percent compared 26.3 percent for the full year in 2003. BellSouth added 636,000 long distance customers during the first quarter of 2004, for a total of 4.6 million and almost 35 percent penetration of its mass-market customers by quarter-end. This progress was driven by Unlimited long distance plans and new flat rate calling plans. BellSouth added 156,000 net DSL customers for a total of 1.6 million at quarter-end. Led by DSL, data revenues were $1.1 billion, up slightly compared to the same quarter of 2003. Total access lines of 22.1 million at March 31 declined 3.6 percent compared to a year earlier. Residence and business access lines served by BellSouth competitors under UNE-P (unbundled network elements-platform) increased by 301,000 in the first quarter. Domestic Wireless / Cingular Cingular Wireless continued strong customer growth with 554,000 net cellular/PCS customers in the first quarter. BellSouth's share of Cingular's revenues was $1.6 billion, a gain of 8.4 percent compared to the same quarter a year ago. Segment operating income was $224 million for the quarter compared to $286 million in 2003. First quarter operating margin was 14.2 percent compared to 19.7 percent in the first quarter of 2003 and a 580 basis point improvement over the fourth quarter of 2003. Cingular is moving towards completing the deployment of its nationwide network of next-generation GSM/GPRS technology. By the end of the first quarter of 2004, the company's GSM/GPRS network covered 94 percent of the company's operational POPs, and Cingular expects to achieve 100 percent network coverage by July 2004. At the end of the first quarter, over 53 percent of Cingular's handsets were GSM capable and approximately 66 percent of Cingular's total minutes are now carried on its GSM network. When Cingular's pending acquisition of AT&T Wireless is complete, Cingular will become the nation's leading wireless carrier providing a strong platform for growth to BellSouth. The assets that Cingular and AT&T Wireless will bring together have an outstanding strategic fit and the new Cingular will be capable of delivering a new level of world-class service, products and features to wireless customers with better service quality, broader coverage, more data services, and more choices. Advertising & Publishing Advertising & Publishing revenues were $482 million in the first quarter of 2004, a decrease of 3.2 percent compared to the same quarter a year ago, resulting from the lingering effects of a slow economy in 2003 and continued competition. Operating margins for the first quarter of 2004 improved slightly over the first quarter of 2003 driven by improvements in uncollectibles expense. Segment net income was $147 million compared to $149 million in the first quarter of 2003. Discontinued Operations: Latin America Group On March 8, 2004, BellSouth announced that it had signed a definitive agreement with Telefonica Moviles, the wireless affiliate of Telefonica, S.A., to sell BellSouth's interests in its 10 Latin American operations. The transaction is expected to close in stages as closing conditions are met with the final closing expected to occur in the second half of 2004. Following generally accepted accounting principles (GAAP); the company's financial statements reflect results for the Latin American segment in the line item titled Discontinued Operations. In the first quarter of 2004, BellSouth reported income from discontinued operations of 24 cents per share compared to 3 cents per share in 2003. Income from discontinued operations was $449 million and includes an $11 million gain from foreign currency and a one-time tax benefit of $424 million. The BellSouth Latin American operations added 954,000 customers in the first quarter of 2004 for a total of 10.6 million customers served at the quarter-end. Latin American operations produced $677 million in revenue for the first quarter of 2004. 2003 Accounting Changes In the first quarter of 2003, BellSouth adopted Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement Obligations." The adoption of SFAS 143 resulted in a one-time increase in net income of $816 million (44 cents per share). BellSouth also changed the method for recognizing revenues and expenses in its directory publishing business from the issue basis method to the deferral method. The change resulted in a one-time decrease to net income of $501 million, or 27 cents per share, in the first quarter of 2003. Together, these changes result in a gain of 17 cents to 2003 earnings per share. Special Items In the first quarter of 2004, the difference between reported (GAAP) EPS from continuing operations and normalized EPS is shown in the following table: 1Q04 1Q03 GAAP Diluted EPS - from continuing operations $0.63 $0.46 Pension Settlement / Severance Costs 0.04 Sale of Denmark operations (0.16) SC Regulatory Settlement 0.02 Diluted EPS - Normalized from continuing operations (1) $0.48 $0.50 (1) Diluted EPS- Normalized from continuing operations may not sum due to rounding Pension Settlement / Severance Costs - Costs associated with workforce reductions in 2002 and 2003. Sale of Denmark operations - Gain on sale of Sonofon, Denmark operations SC Regulatory Settlement - In April 2004, BellSouth entered into a settlement agreement with the South Carolina Consumer Advocate with respect to previously disclosed litigation (See 2003 10K). The settlement requires among other things, that BellSouth refund $50 million to its South Carolina customers. The refund was recorded in the first quarter 2004 as a reduction to revenue. About BellSouth Corporation BellSouth Corporation is a Fortune 100 communications services company headquartered in Atlanta, Georgia. BellSouth serves nearly 50 million local, long distance, Internet and wireless customers in the United States and 12 other countries. Consistently recognized for customer satisfaction, BellSouth provides complete communications solutions to the residential and business markets. In the residential market, BellSouth offers DSL high-speed Internet access and long distance, advanced voice features and other services. The company's BellSouth Answers(SM) package combines local and long distance service with an array of calling features; wireless data, voice and e-mail services; and high- speed DSL or dial-up Internet service and Cingular Wireless. In the business market, BellSouth serves small, medium and large businesses providing secure, reliable local and long distance voice and data networking solutions. BellSouth also provides online and directory advertising services through BellSouth(R) RealPages.com(SM) and The Real Yellow Pages(R). BellSouth owns 40 percent of Cingular Wireless, the nation's second largest wireless company, which provides innovative wireless voice and data services. Further information about BellSouth and Cingular's first quarter earnings can be accessed at http://www.bellsouth.com/investor. The press release, financial statements and BLS Investor News summarizing highlights of the quarter are available on the BellSouth Investor Relations web site starting today at 8 a.m. Eastern Time (ET). BellSouth will host a conference call with investors today at 10 a.m. (ET). Participating will be BellSouth CFO, Ron Dykes and Investor Relations Vice President, Nancy Davis. Dial-in information for the conference call is as follows: Domestic: 888-370-1863 International: 706-634-1735 The conference call will also be web cast live beginning at 10:00 a.m. (ET) on our website at http://www.bellsouth.com/investor . The web cast 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 April 29, 2004 and can be accessed by dialing: Domestic: 800-642-1687 - Reservation number: 6093719 International: 706-645-9291 - Reservation number: 6093719 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 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; (v) currency devaluations and continued economic weakness in certain international markets in which we operate or have material investments; and (vi) 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, http://www.bellsouth.com/investor . 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 page 3 for a summary of unusual items included in Reported Basis results. 1Q04 1Q03 Growth 4Q03 Growth Operating Revenues Communications group $4,485 $4,508 -0.5% $4,576 -2.0% Advertising and publishing 479 494 -3.0% 518 -7.5% All other 12 12 0.0% 13 -7.7% Total Operating Revenues 4,976 5,014 -0.8% 5,107 -2.6% Operating Expenses Cost of services and products 1,798 1,675 7.3% 1,762 2.0% Selling, general & administrative 909 919 -1.1% 980 -7.2% Depreciation and amortization 898 949 -5.4% 950 -5.5% Provision for restructuring and asset impairments 13 120 -89.2% 16 -18.8% Total Operating Expenses 3,618 3,663 -1.2% 3,708 -2.4% Operating Income 1,358 1,351 0.5% 1,399 -2.9% Interest Expense 215 258 -16.7% 222 -3.2% Other Income (Expense), net 630 247 155.1% 108 N/M* Income from Continuing Operations before Income Taxes, Discontinued Operations and Cumulative Effect of Changes in Accounting Principles 1,773 1,340 32.3% 1,285 38.0% Provision for Income Taxes 623 490 27.1% 449 38.8% Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Changes in Accounting Principles 1,150 850 35.3% 836 37.6% Income (Loss) from Discontinued Operations, net of tax 449 65 590.8% (49) 1016.3% Income Before Cumulative Effect of Changes in Accounting Principles 1,599 915 74.8% 787 103.2% Cumulative Effect of Changes in Accounting Principles, net of tax - 315 -100.0% - N/M Net Income 1,599 1,230 30.0% 787 103.2% Diluted: Weighted Average Common Shares Outstanding 1,838 1,861 -1.2% 1,845 -0.4% Earnings Per Share: Income from Continuing Operations $0.63 $0.46 37.0% $0.45 40.0% Income from Discontinued Operations $0.24 $0.03 N/M ($0.03) N/M Cumulative Effect of Changes in Accounting Principles $0.00 $0.17 -100.0% $0.00 N/M Net Income $0.87 $0.66 31.8% $0.43 102.3% * - Not meaningful. Selected Financial and Operating Data - Continuing Operations Operating income $1,358 $1,351 0.5% $1,399 -2.9% Operating margin 27.3% 26.9% 40 bps 27.4% -10 bps Dividends per share $0.25 $0.21 19.0% $0.25 0.0% Capital expenditures $635 $588 8.0% $948 -33.0% Common shares outstanding 1,834 1,847 -0.7% 1,830 0.2% Book value per share $11.48 $9.96 15.3% $10.77 6.6% See Accompanying Notes at Page 11 BellSouth Corporation Consolidated Statements of Income from Continuing Operations - 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 page 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. 1Q04 1Q03 Growth 4Q03 Growth Operating Revenues Communications group $4,488 $4,469 0.4% $4,528 -0.9% Domestic wireless 1,577 1,455 8.4% 1,565 0.8% Domestic advertising and publishing 479 494 -3.0% 518 -7.5% All other 12 12 0.0% 14 -14.3% Total Operating Revenues 6,556 6,430 2.0% 6,625 -1.0% Operating Expenses Cost of services and products 2,339 2,125 10.1% 2,327 0.5% Selling, general, & administrative expenses 1,464 1,404 4.3% 1,572 -6.9% Depreciation and amortization 1,119 1,144 -2.2% 1,179 -5.1% Total Operating Expenses 4,922 4,673 5.3% 5,078 -3.1% Operating Income 1,634 1,757 -7.0% 1,547 5.6% Interest Expense 272 326 -16.6% 281 -3.2% Other Income (Expense), net 4 30 -86.7% 39 -89.7% Income Before Income Taxes 1,366 1,461 -6.5% 1,305 4.7% Provision for Income Taxes 478 537 -11.0% 459 4.1% Net Income $888 $924 -3.9% $846 5.0% Diluted: Weighted Average Common Shares Outstanding 1,838 1,861 -1.2% 1,845 -0.4% Earnings Per Share $0.48 $0.50 -4.0% $0.46 4.3% Selected Financial and Operating Data - Continuing Operations Operating income $1,634 $1,757 -7.0% $1,547 5.6% Operating margin 24.9% 27.3% -240 bps 23.4% 150 bps Declared dividends per share $0.25 $0.21 19.0% $0.25 0.0% Capital expenditures $635 $588 8.0% $948 -33.0% Common shares outstanding 1,834 1,847 -0.7% 1,830 0.2% Book value per share $11.48 $9.96 15.3% $10.77 6.6% Total employees 64,651 67,342 -4.0% 65,842 -1.8% See Accompanying Notes at Page 11 BellSouth Corporation Normalized Earnings Summary and Reconciliation to Reported Results (amounts in millions, except per share data) First Quarter 2004 Normalizing Items Sale of Cingular Sonofon GAAP A E Operating Revenues $4,976 $1,530 Operating Expenses 3,618 1,307 Operating Income 1,358 223 - Interest Expense 215 57 Other Income (Expense), net 630 (164) (462) Income from Continuing Operations before Income Taxes 1,773 2 (462) Provision for Income Taxes 623 2 (167) Income from Continuing Operations 1,150 - (295) Income (Loss) from Discontinued Operations, net of tax 449 Net Income $1,599 $0 ($295) Diluted Earnings Per Share * $0.87 $0.00 ($0.16) * Normalized earnings per share for first quarter 2004 does not sum due to rounding. First Quarter 2004 Normalizing Items Discontinued SC Operations Settlement F G Normalized Operating Revenues $50 $6,556 Operating Expenses (3) 4,922 Operating Income - 53 1,634 Interest Expense 272 Other Income (Expense), net 4 Income from Continuing Operations before Income Taxes - 53 1,366 Provision for Income Taxes 20 478 Income from Continuing Operations - 33 888 Income (Loss) from Discontinued Operations, net of tax (449) - Net Income ($449) $33 $888 Diluted Earnings Per Share * ($0.24) $0.02 $0.48 * Normalized earnings per share for first quarter 2004 does not sum due to rounding. First Quarter 2003 Normalizing Items A&P Acctg. Cingular Change FAS143 GAAP A B C Operating Revenues $5,014 $1,416 Operating Expenses 3,663 1,130 Operating Income 1,351 286 - - Interest Expense 258 68 Other Income (Expense), net 247 (217) Income from Continuing Operations before Income Taxes 1,340 1 - - Provision for Income Taxes 490 1 Income from Continuing Operations 850 - - - Income (Loss) from Discontinued Operations, net of tax 65 Income Before Cumulative Effect of Changes in Accounting Principles 915 - - - Cumulative Effect of Changes in Accounting Principles 315 501 (816) Net Income $1,230 $0 $501 ($816) Diluted Earnings Per Share $0.66 $0.00 $0.27 ($0.44) First Quarter 2003 Normalizing Items Pension/ Discontinued Severance Operations D F Normalized Operating Revenues $6,430 Operating Expenses (120) 4,673 Operating Income 120 - 1,757 Interest Expense 326 Other Income (Expense), net 30 Income from Continuing Operations before Income Taxes 120 - 1,461 Provision for Income Taxes 46 537 Income from Continuing Operations 74 - 924 Income (Loss) from Discontinued Operations, net of tax (65) - Income Before Cumulative Effect of Changes in Accounting Principles 74 (65) 924 Cumulative Effect of Changes in Accounting Principles - Net Income $74 ($65) $924 Diluted Earnings Per Share $0.04 ($0.03) $0.50 See Accompanying Notes at Page 4 BellSouth Corporation Notes to Normalized Financial and Operating 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) Change in method of accounting related to our directory publishing business from the issue basis method to the deferral method -- The 2003 amount is a one-time charge to net income of $501. (c) Adoption of Financial Accounting Standard No. 143 (FAS 143) -- Represents a one-time charge related to the adoption of new accounting rules associated with obligations related to the retirement of long-lived assets. The adjustment resulted in a one-time increase to net income of $816. (d) Pension/Severance Costs -- During 2003, the number of employees who voluntarily separated and elected to receive lump-sum retirement benefits exceeded thresholds that require current recognition of deferred losses related to these employees. These costs include $33 after-tax of severance related costs. (e) Gain related to the sale of our operations in Denmark. (f) 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. These amounts are reported net of a $405 tax benefit in the first quarter of 2004 and of a $16 tax benefit in the first quarter of 2003. (g) SC Regulatory Settlement -- In April 2004, BellSouth entered into a settlement agreement with the South Carolina Consumer Advocate with respect to previously disclosed litigation (See 2003 10k). The settlement requires among other things, that BellSouth refund $50 million to its South Carolina customers. The refund was recorded in the first quarter 2004 as a reduction to revenue. BellSouth Corporation Consolidated Balance Sheets (unaudited) (amounts in millions, except per share data) Change vs. March 31, December 31, Prior Year- 2004 2003 End Assets Current Assets: Cash and cash equivalents $5,368 $4,556 $812 Accounts receivable, net of allowance for uncollectibles of $396 and $496 2,385 2,870 (485) Material and supplies 293 375 (82) Other current assets 887 1,048 (161) Assets of discontinued operations 3,796 0 3,796 Total Current Assets 12,729 8,849 3,880 Investments and Advances 8,206 8,552 (346) Property, Plant and Equipment, net 22,282 23,807 (1,525) Deferred Charges and Other Assets 5,938 5,855 83 Goodwill 249 342 (93) Intangible Assets, net 1,525 2,297 (772) Total Assets $50,929 $49,702 $1,227 Liabilities and Shareholders' Equity Current Liabilities: Debt maturing within one year $2,508 $3,491 ($983) Accounts payable 1,047 1,339 (292) Other current liabilities 3,059 3,628 (569) Liabilities of discontinued operations 2,582 0 2,582 Total Current Liabilities 9,196 8,458 738 Long-Term Debt 10,616 11,489 (873) Noncurrent Liabilities: Deferred income taxes 5,694 5,349 345 Other noncurrent liabilities 4,367 4,694 (327) Total Noncurrent Liabilities 10,061 10,043 18 Shareholders' Equity: Common stock, $1 par value 2,020 2,020 0 Paid-in capital 7,708 7,729 (21) Retained earnings 17,626 16,540 1,086 Accumulated other comprehensive income (471) (585) 114 Shares held in trust and treasury (5,827) (5,992) 165 Total Shareholders' Equity 21,056 19,712 1,344 Total Liabilities and Shareholders' Equity $50,929 $49,702 $1,227 BellSouth Corporation Consolidated Statements of Cash Flows (unaudited) (amounts in millions) 1Q04 1Q03 4Q03 Cash Flows from Operating Activities: Income from Continuing Operations $1,150 $850 $836 Adjustments to income from continuing operations: Depreciation and amortization 898 949 950 Provision for uncollectibles 115 159 125 Net losses (earnings) of equity affiliates (104) (171) (25) Deferred income taxes 169 270 (12) Pension income (121) (134) (133) Pension settlement losses - 67 (40) Stock-based compensation expense 28 27 32 (Gain) loss on sale/disposal of operations (462) - - Net change in: Accounts receivable and other current assets (14) (106) (89) Account payable and other current liabilities 41 (33) (233) Deferred charges and other assets (25) 86 46 Other liabilities and deferred credits 3 (56) (143) Other reconciling items, net 50 2 14 Net cash provided by operating activities 1,728 1,910 1,328 Cash Flows from Investing Activities: Capital expenditures (635) (588) (948) Investments in debt and equity securities (140) (14) (167) Proceeds from sale of securities and operations 559 - - Proceeds from repayment of loans and advances 109 - - Settlement of derivatives on advances (17) - - Other investing activities, net (5) (3) (1) Net cash provided by (used for) investing activities (129) (605) (1,116) Cash Flows from Financing Activities: Net borrowing (repayments) of short- term debt (362) (212) (8) Repayments of long-term debt (7) (512) (13) Dividends paid (457) (371) (425) Purchase of treasury shares - (255) (536) Other financing activities, net 48 13 38 Net cash used for financing activities (778) (1,337) (944) Net Increase/(Decrease) in Cash from Continuing Operations 821 (32) (732) Net Increase/(Decrease) in Cash from Discontinued Operations (9) (8) 263 Net Increase in Cash and Cash Equivalents 812 (40) (469) Cash and Cash Equivalents at Beginning of Period 4,556 2,482 5,025 Cash and Cash Equivalents at End of Period $5,368 $2,442 $4,556 BellSouth Corporation Results by Segment (amounts in millions) (unaudited) Communications Group (1) 1Q04 1Q03 Growth 4Q03 Growth Operating Revenues Voice $3,169 $3,163 0.2% $3,164 0.2% Data 1,092 1,090 0.2% 1,094 -0.2% Other 314 323 -2.8% 360 -12.8% Total Operating Revenues 4,575 4,576 0.0% 4,618 -0.9% Operating Expenses Cost of services and products 1,745 1,625 7.4% 1,698 2.8% Selling, general, & administrative expenses 772 764 1.0% 792 -2.5% Depreciation and amortization 888 937 -5.2% 941 -5.6% Total Operating Expenses 3,405 3,326 2.4% 3,431 -0.8% Segment Operating Income 1,170 1,250 -6.4% 1,187 -1.4% Interest Expense 91 118 -22.9% 90 1.1% Other Income (Expense), net 6 3 100.0% 10 -40.0% Income Before Income Taxes 1,085 1,135 -4.4% 1,107 -2.0% Provision for Income Taxes 398 426 -6.6% 393 1.3% Segment Net Income(1) $687 $709 -3.1% $714 -3.8% * - Not meaningful. Selected Financial and Operating Data (amounts in millions) Segment operating income $1,170 $1,250 -6.4% $1,187 -1.4% Segment operating margin 25.6% 27.3% -170bps 25.7% -10bps Long distance revenues $440 $257 71.2% $411 7.1% Access minutes of use 23,293 22,795 2.2% 22,903 1.7% Capital expenditures $612 $566 8.1% $901 -32.1% (amounts in thousands) Wholesale Lines 2,960 2,171 36.3% 2,682 10.4% DSL customers 1,618 1,122 44.2% 1,462 10.7% LD customers 4,596 1,930 138.1% 3,960 16.1% Consumer ARPU (4) $53.68 $49.93 7.5% $53.20 0.9% See Accompanying Notes at Page 11 BellSouth Corporation Results by Segment (unaudited) Supplemental Operating Data (in thousands) Communications Group - Network Access Lines In Service Reported (a) 1Q04 1Q03 Growth 4Q03 Growth Access lines Residence Retail Primary 12,200 13,115 -7.0% 12,466 -2.1% Additional 1,525 1,849 -17.5% 1,601 -4.7% Total Retail Residence 13,725 14,964 -8.3% 14,067 -2.4% Wholesale Resale 160 296 -45.9% 177 -9.6% UNE-P 1,963 1,156 69.8% 1,696 15.7% Total Wholesale Residence 2,123 1,452 46.2% 1,873 13.3% Total Residence 15,848 16,416 -3.5% 15,940 -0.6% Business Retail Total Retail Business 5,354 5,621 -4.8% 5,417 -1.2% Wholesale Resale 67 77 -13.0% 73 -8.2% UNE-P 714 614 16.3% 686 4.1% Total Wholesale Business 781 691 13.0% 759 2.9% Total Business 6,135 6,312 -2.8% 6,176 -0.7% Other Retail/Wholesale Lines Retail 48 146 -67.1% 97 -50.5% Wholesale 56 28 100.0% 50 12.0% Total Other Retail/Wholesale Lines 104 174 -40.2% 147 -29.3% Total Access Lines in Service 22,087 22,902 -3.6% 22,263 -0.8% ISDN line equivalents Residence 12 17 -29.4% 13 -7.7% Business 1,457 1,592 -8.5% 1,453 0.3% Total ISDN Adjusted ALIS 23,556 24,511 -3.9% 23,729 -0.7% (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. See Accompanying Notes at Page 11 BellSouth Corporation Results by Segment (amounts in millions) (unaudited) Domestic Wireless Segment (1)(a) 1Q04 1Q03 Growth 4Q03 Growth Operating Revenues Service revenues (2) $1,423 $1,357 4.9% $1,414 0.6% Equipment and other revenues 154 98 57.1% 151 2.0% Total Operating Revenues 1,577 1,455 8.4% 1,565 0.8% Operating Expenses Cost of services and products 584 487 19.9% 607 -3.8% Selling, general, & administrative expenses 548 487 12.5% 599 -8.5% Depreciation and amortization 221 195 13.3% 228 -3.1% Total Operating Expenses 1,353 1,169 15.7% 1,434 -5.6% Segment Operating Income 224 286 -21.7% 131 71.0% Interest Expense 79 90 -12.2% 82 -3.7% Other Income (Expense), net (47) (31) -51.6% (38) -23.7% Income Before Income Taxes 98 165 -40.6% 11 N/M* Provision for Income Taxes 39 64 -39.1% (1) N/M Segment Net Income(1) $59 $101 -41.6% $12 391.7% * - Not meaningful. Selected Financial and Operating Data (amounts in millions, except customer data in thousands) Segment operating income $224 $286 -21.7% $131 71.0% Segment operating margin 14.2% 19.7% -550 bps 8.4% 580 bps Cellular/PCS Operating Metrics: Total Customers 9,847 8,846 11.3% 9,611 2.5% Net Customer Additions 222 76 192.1% 257 -13.6% Partitioned Customers and/or Adjustments 15 - N/M - N/M Churn 2.7% 2.6% 10 bps 2.8% -10 bps Wireless Service ARPU (3) $47.95 $50.76 -5.5% $49.03 -2.2% Minutes Of Use Per Subscriber 488 405 20.5% 475 2.7% Licensed POPs (4) 96 94 2.1% 94 2.1% Penetration (4) 10.9% 10.0% 90 bps 10.8% 10 bps Cingular Interactive Operating Metrics: Total Customers 307 334 -8.1% 316 -2.8% Net Customer Additions (8) 7 -214.3% - N/M (a)The domestic wireless segment is comprised of BellSouth's 40% share of the reported results of Cingular Wireless. See Accompanying Notes at Page 11 BellSouth Corporation Results by Segment (amounts in millions) (unaudited) Advertising & Publishing (1) 1Q04 1Q03 Growth 4Q03 Growth Operating Revenues Advertising and publishing revenues 466 $481 -3.1% 470 -0.9% Commission revenues 16 17 -5.9% 52 -69.2% Total Operating Revenues 482 $498 -3.2% 522 -7.7% Operating Expenses Cost of services 80 78 2.6% 91 -12.1% Selling, general, & administrative expenses 156 170 -8.2% 184 -15.2% Depreciation and amortization 7 7 0.0% 7 0.0% Total Operating Expenses 243 255 -4.7% 282 -13.8% Segment Operating Income 239 243 -1.6% 240 -0.4% Interest Expense 2 2 0.0% 2 0.0% Other Income (Expense), net - (1) 100.0% 1 -100.0% Income Before Income Taxes 237 240 -1.3% 239 -0.8% Provision for Income Taxes 90 91 -1.1% 92 -2.2% Segment Net Income(1) $147 $149 -1.3% $147 0.0% Segment operating income $239 $243 -1.6% $240 -0.4% Segment operating margin 49.6% 48.8% 80 bps 46.0% 360 bps See Accompanying Notes at Page 11 BellSouth Corporation Notes (1) Segment net income (loss) is based on normalized results which exclude certain one-time transactions and certain corporate intercompany billings. Intersegment revenues are not eliminated for purposes of management reporting. (2) 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) Licensed POPs refers to the number of people residing in areas where Cingular and its partners, Salmon and T-Mobile USA, Inc., have licenses to provide cellular or PCS service, including the New York City metropolitan area, and in areas where Cingular has not yet commenced service, such as the Salt Lake City area. As a result of the consolidation of Salmon, effective January 1, 2003, Salmon's licensed POPs of 4 million (BellSouth's 40% share) are included in the 2003 total licensed POPs. Penetration calculation is based upon licensed operational POPs of 89 million (BellSouth's 40% share). The New York City metropolitan area is also included in the penetration calculation. Notes to Segment Results BellSouth Corporation Non-GAAP Measures - Reconciliation (amounts in millions) (unaudited) Segment Net Income Reconciliation to GAAP Net Income 1Q04 1Q03 4Q03 Communications group segment net income $687 $709 $714 Domestic wireless group segment net income 59 101 12 Advertising and publishing group segment net income 147 149 147 Corporate, eliminations and other (5) (35) (27) Normalized net income 888 924 846 Add back Excluded non-recurring or non-operational items (a) 711 306 (59) Consolidated GAAP net income $1,599 $1,230 $787 Free Cash Flow 1Q04 1Q03 4Q03 Net cash provided by operating activities $1,728 $1,910 $1,328 Less Capital Expenditures (635) (588) (948) Operating Free Cash Flow $1,093 $1,322 $380 Net Debt March 31, December 31, 2004 2003 Total Debt $13,124 $14,980 Less Cash (5,368) (4,556) Net Debt $7,756 $10,424 Communications Group Operating Income before Depreciation and Amortization 1Q04 1Q03 4Q03 Operating Revenues $4,575 $4,576 $4,618 Operating Income 1,170 1,250 1,187 Add back Depreciation and amortization 888 937 941 Operating Income before Depreciation and Amortization $2,058 $2,187 $2,128 Margin 45.0% 47.8% 46.1% (a) See pages 3 and 4 for detail of excluded items. See Accompanying Notes at Page 11 DATASOURCE: BellSouth Corporation CONTACT: Jeff Battcher, Media Relations of BellSouth Corporation, +1-404-249-2793; or BellSouth Investor Relations, +1-800-241-3419 Web site: http://www.bellsouth.com/ Company News On-Call: http://www.prnewswire.com/comp/095650.html

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