BellSouth Reports Fourth Quarter Earnings

BellSouth Reports Fourth Quarter Earnings

-- 1.8 million Cingular pro forma net customer additions -- 224,000 DSL net customer additions -- 467,000 long distance net customer additions

ATLANTA, Jan. 25 /PRNewswire-FirstCall/ -- BellSouth Corporation (NYSE:BLS) announced fourth quarter 2004 earnings per share (EPS):

-- Reported EPS from continuing operations was 27 cents compared to 45
cents in fourth quarter 2003.
-- Normalized EPS from continuing operations was 35 cents compared to 46
cents in fourth quarter of 2003.
-- Total reported EPS from continuing and discontinued operations was 80
cents compared to 43 cents in fourth quarter 2003.

Reported Results from Continuing Operations


For the fourth quarter of 2004, BellSouth's consolidated reported revenue from continuing operations totaled $5.15 billion, an increase of 0.8 percent compared to the same quarter in 2003. Income from continuing operations was $496 million compared to $836 million in the same quarter of the previous year. Reported EPS from continuing operations for the quarter was 27 cents compared to 45 cents in the fourth quarter of 2003.

BellSouth's fourth quarter 2004 reported income and EPS from continuing operations were negatively impacted by restoration expenses due to hurricanes, severance-related expenses and a previously announced change in the calculation of the retiree medical benefit obligation. In addition, BellSouth's earnings related to Cingular Wireless were affected by merger integration costs from the acquisition of AT&T Wireless, high gross customer additions and upgrades, lower service revenue, accelerated depreciation and acquisition-related financing costs.

For the full year of 2004, BellSouth reported EPS from continuing operations of $1.87 compared to $1.88 in 2003. Consolidated revenue from continuing operations was $20.30 billion in 2004, flat compared to 2003. Income from continuing operations was $3.44 billion in 2004 compared to $3.49 billion the previous year.

Normalized Results from Continuing Operations

Normalized results from continuing operations are adjusted for BellSouth's 40 percent proportionate share of Cingular's revenues and expenses. Cingular completed its acquisition of AT&T Wireless on Oct. 26, 2004. Cingular's results for the quarter combine Cingular stand-alone results for the first 25 days of the quarter and the operations of the combined companies starting on Oct. 26, 2004. Prior period results for 2003 and the first three quarters of 2004 have not been restated.

Normalized revenue was $7.92 billion for the fourth quarter of 2004 compared to $6.63 billion for the fourth quarter in 2003. Normalized net income was $640 million compared to $846 million for the fourth quarter in 2003. Normalized EPS from continuing operations of 35 cents in the fourth quarter excludes the impact of hurricane- and severance-related expenses in the wireline business (5 cents) and merger integration costs from Cingular's acquisition of AT&T Wireless (3 cents).

Fourth quarter normalized EPS from continuing operations declined compared to the third quarter of 2004. Communications Group results were negatively impacted by a previously announced change in the calculation of the retiree medical benefit obligation (3 cents) and an annual FAS 112 adjustment (1 cent). In addition to acquisition-related financing costs (2 cents), BellSouth's earnings related to Cingular Wireless declined by approximately 7 cents due primarily to seasonal decline in roaming revenue, high gross customer additions, costs associated with incrementally higher customer upgrades and increased depreciation expense driven by adjustments to the expected useful life of TDMA equipment.

For the full year, normalized EPS was $1.83 in 2004 compared to $1.95 in 2003. Normalized revenue was $27.91 billion in 2004. Normalized net income was $3.36 billion for 2004.

Cash Flow and Capital

Operating free cash flow from continuing operations (defined as net cash provided by operating activities less capital expenditures) totaled $3.61 billion for 2004. Capital expenditures for continuing operations for 2004 were $3.19 billion, including $60 million in hurricane restoration capital, compared to $2.93 billion in 2003.

Communications Group

In 2004, revenue growth from long distance and DSL high-speed Internet service offset reduced revenue from access line declines, holding Communications Group revenue flat at $18.45 billion, compared to 2003. In the fourth quarter, revenue increased 0.6 percent to $4.65 billion compared to the same quarter the previous year. Operating margin for 2004 was 25.1 percent compared to 26.3 percent in 2003. Operating margin for the fourth quarter was 22.6 percent, impacted primarily by the previously announced change in the calculation of the retiree medical benefit obligation.

During the fourth quarter of 2004, BellSouth added a record 224,000 net DSL customers and ended the year at 2.1 million customers. This momentum reflects the continued success of the tiered service portfolio and was driven in part by the Company's long-term, strategic move to offer additional incentives and new pricing for FastAccess(R) DSL. Driven by DSL, network data revenue for the fourth quarter was $1.16 billion, an increase of 6.5 percent compared to the same quarter of 2003.

BellSouth added 467,000 mass-market long distance customers during the fourth quarter of 2004, and now serves more than 6.1 million mass-market long distance customers. These customers represent a 48 percent penetration of BellSouth's mass-market base and spend an average of approximately $17 per month on long distance with BellSouth.

With DIRECTV(R), BellSouth provides a competitively priced triple-play package of voice, data and entertainment services. Through Dec. 31, more than 200,000 customers have added DIRECTV(R) to their communications services packages.

As of Dec. 31, 2004, total access lines were 21.4 million, down 4.1 percent compared to a year earlier. UNE-P access lines resold by BellSouth competitors were 2.8 million at year-end 2004 compared to 2.4 million at year-end 2003. In the third and fourth quarters of 2004, UNE-P lines began a declining trend and decreased a total of 165,000 over the second half of 2004.

Cingular Wireless

Cingular Wireless, the nation's largest wireless provider, added nearly 1.8 million customers in the fourth quarter of 2004, on a pro forma basis, bringing its nationwide customer base to more than 49 million customers. Cingular's gross customer additions in the fourth quarter totaled 5.5 million on a pro forma basis, the best ever combined total for the two companies. Pro forma churn was 2.6 percent in the fourth quarter.

In the fourth quarter, BellSouth's share of Cingular's reported revenues was $2.83 billion. Reported average revenue per user (ARPU) in the fourth quarter was $49.22. ARPU on a pro forma basis was $49.67, down 4.7 percent versus pro forma results the in the third quarter of 2004. The sequential decline is primarily attributable to seasonal declines in roaming revenues. ARPU on a pro forma basis was down 5.8 percent versus pro forma results for the same period in 2003. Year-over-year ARPU was adversely impacted by the transition of customers to GSM plans, Family Talk, and non-cash deferrals of Rollover minutes. ARPU from data services continued its strong growth, reaching $2.89 on a reported basis. This growth was driven by the popularity of text messaging, mobile e-mail, downloadable ringtones, games and photo messaging.

Cingular's normalized fourth quarter service margin from operating income before depreciation and amortization was 23.2 percent. This segment's normalized operating margin, which excludes integration costs, was 1.0 percent. Fourth-quarter expenses and margins reflect negative impacts from accelerated depreciation, higher operating costs from high levels of gross customer additions, upgrade costs, costs associated with the progress in customer conversions to new Cingular GSM contracts, and a range of customer service initiatives. Synergies from the merger will benefit Cingular's financial results as the integration plans progress in 2005.

Cingular has reached several important milestones in the integration process of AT&T Wireless operations and services. In addition to this quarter's net adds, Cingular integrated essentially all customer-facing operations by launch date and has migrated over 1 million AT&T Wireless subscribers to new Cingular postpaid plans.

Advertising & Publishing

In the fourth quarter of 2004, Advertising & Publishing grew revenue by 1.1 percent year-over-year to $528 million. Operating margin for the fourth quarter of 2004 was 45.3 percent compared to 46.0 percent in the fourth quarter of 2003. Segment net income was $145 million compared to $147 million in the fourth quarter of 2003. Full year 2004 revenue was $2.0 billion, a 1.5 percent decline compared to 2003, and full year operating margins were stable at 47.3 percent compared to 47.5 percent in 2003.

Discontinued Operations: Latin America

In March 2004, BellSouth 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. As of Jan. 11, 2005, BellSouth completed the sale of all 10 operations.

The Company's financial statements, as of Dec. 31, 2004, reflect results for the Latin American segment in the line item titled Discontinued Operations. For the fourth quarter, BellSouth reported income from discontinued operations of 53 cents per share compared to a loss of 3 cents per share in the fourth quarter of 2003. Results for the fourth quarter of 2004 include an after-tax gain of $915 million related to eight of the 10 properties that were closed prior to year-end. BellSouth will report an after-tax gain of approximately $385 million to $405 million in the first quarter of 2005 related to the January closing of the remaining two properties.

Normalizing Items

In the fourth quarter of 2004, the difference between reported (GAAP) EPS from continuing operations and normalized EPS is shown in the following table:

4Q04 4Q03
GAAP Diluted EPS - Income from continuing operations $0.27 $0.45

Hurricane-related expenses $0.04
Wireless merger integration costs $0.03
Severance and lease termination costs $0.01 $0.01

Normalized Diluted EPS - Income from continuing
operations $0.35 $0.46




Hurricane-related expenses -- Represents the incremental labor and material costs incurred during the fourth quarter related to service restoration and network repairs 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 $245 million incurred during the fourth quarter in connection with the Cingular/AWE merger.

Severance and lease termination costs -- Represents the net severance- related costs recorded in the fourth quarter associated with previously announced workforce reductions and a provision related to surplus office space under long-term leases.

About BellSouth Corporation

BellSouth Corporation is a Fortune 100 communications company headquartered in Atlanta, GA and a parent company of Cingular Wireless, the nation's largest wireless voice and data provider.

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(R), 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(R) 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(R) RealPages.com(R) and The Real Yellow Pages(R).

More information about BellSouth can be found at http://www.bellsouth.com/ .

Further information about BellSouth and Cingular's fourth 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). 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 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 Feb. 1, 2005, and can be accessed by dialing:

Domestic: 800-642-1687 -- Reservation number: 2940113
International: 706-645-9291 -- Reservation number: 2940113



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 .

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.

4Q04 4Q03 Growth 3Q04 Growth

Operating Revenues
Communications group $4,607 $4,576 0.7% $4,585 0.5%
Advertising and publishing 524 518 1.2% 495 5.9%
All other 15 13 15.4% 15 0.0%
Total Operating Revenues 5,146 5,107 0.8% 5,095 1.0%
Operating Expenses
Cost of services and products 2,052 1,762 16.5% 1,881 9.1%
Selling, general &
administrative expenses 1,072 980 9.4% 905 18.5%
Depreciation and amortization 916 950 -3.6% 908 0.9%
Provision for restructuring
and asset impairments 18 16 12.5% - N/M
Total Operating Expenses 4,058 3,708 9.4% 3,694 9.9%
Operating Income 1,088 1,399 -22.2% 1,401 -22.3%
Interest Expense 270 222 21.6% 220 22.7%
Other Income (Expense), net (107) 108 -199.1% 136 -178.7%
Income from Continuing
Operations before Income Taxes,
Discontinued
Operations and Cumulative
Effect of Changes in
Accounting Principles 711 1,285 -44.7% 1,317 -46.0%
Provision for Income Taxes 215 449 -52.1% 465 -53.8%
Income from Continuing
Operations before Discontinued
Operations and
Cumulative Effect of Changes
in Accounting Principles 496 836 -40.7% 852 -41.8%
Income (Loss) from Discontinued
Operations, net of tax 975 (49) N/M* (53) N/M
Income Before Cumulative Effect
of Changes in Accounting
Principles 1,471 787 86.9% 799 84.1%
Cumulative Effect of Changes in
Accounting Principle - - N/M* - N/M
Net Income 1,471 787 86.9% 799 84.1%

Diluted:
Weighted Average Common Shares
Outstanding 1,836 1,845 -0.5% 1,835 0.1%
Earnings Per Share:
Income from Continuing
Operations $0.27 $0.45 -40.0% $0.46 -41.3%
Income from Discontinued
Operations $0.53 ($0.03) N/M ($0.03) N/M
Cumulative Effect of
Changes in Accounting
Principles - - N/M - N/M
Net Income $0.80 $0.43 86.0% $0.44 81.8%

* - Not meaningful.



Year-to-Date
2004 2003 Growth

Operating Revenues
Communications group $18,239 $18,255 -0.1%
Advertising and publishing 2,005 2,033 -1.4%
All other 56 53 5.7%
Total Operating Revenues 20,300 20,341 -0.2%
Operating Expenses
Cost of services and products 7,520 6,991 7.6%
Selling, general & administrative
expenses 3,816 3,777 1.0%
Depreciation and amortization 3,636 3,811 -4.6%
Provision for restructuring and
asset impairments 39 205 -81.0%
Total Operating Expenses 15,011 14,784 1.5%
Operating Income 5,289 5,557 -4.8%
Interest Expense 916 947 -3.3%
Other Income (Expense), net 883 814 8.5%
Income from Continuing Operations
before Income Taxes, Discontinued
Operations and Cumulative Effect
of Changes in Accounting
Principles 5,256 5,424 -3.1%
Provision for Income Taxes 1,819 1,936 -6.0%
Income from Continuing Operations
before Discontinued Operations and
Cumulative Effect of Changes in
Accounting Principles 3,437 3,488 -1.5%
Income (Loss) from Discontinued
Operations, net of tax 1,428 101 N/M
Income Before Cumulative Effect of
Changes in Accounting Principles 4,865 3,589 35.6%
Cumulative Effect of Changes in
Accounting Principle - 315 -100.0%
Net Income 4,865 3,904 24.6%

Diluted:
Weighted Average Common Shares
Outstanding 1,836 1,852 -0.9%
Earnings Per Share:
Income from Continuing
Operations $1.87 $1.88 -0.5%
Income from Discontinued
Operations $0.78 $0.05 N/M
Cumulative Effect of Changes in
Accounting Principles - $0.17 -100.0%
Net Income $2.65 $2.11 25.6%

* - Not meaningful.



Selected Financial and Operating Data

4Q04 4Q03 Growth 3Q04 Growth

Operating income $1,088 $1,399 -22.2% $1,401 -22.3%
Operating margin 21.1% 27.4% -630 bps 27.5% -640 bps
Declared dividends per
share $0.27 $0.25 8.0% $0.27 0.0%
Capital expenditures $1,059 $948 11.7% $768 37.9%

Common shares outstanding 1,831 1,830 0.1% 1,831 0.0%
Book value per share $12.66 $10.77 17.5% $11.94 6.0%

Selected Financial and Operating Data

Year-to-Date
2004 2003 Growth
Operating income $5,289 $5,557 -4.8%
Operating margin 26.1% 27.3% -120 bps

Declared dividends per share $1.06 $0.92 15.2%
Capital expenditures $3,193 $2,926 9.1%



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.

4Q04 4Q03 Growth 3Q04 Growth

Operating Revenues
Communications group $4,543 $4,528 0.3% $4,533 0.2%
Domestic wireless 2,833 1,565 81.0% 1,702 66.5%
Advertising and publishing 524 518 1.2% 495 5.9%
All other 15 14 7.1% 16 -6.3%
Total Operating Revenues 7,915 6,625 19.5% 6,746 17.3%

Operating Expenses
Cost of services and products 3,025 2,327 30.0% 2,445 23.7%
Selling, general, &
administrative expenses 2,148 1,572 36.6% 1,510 42.3%
Depreciation and amortization 1,472 1,179 24.9% 1,137 29.5%
Total Operating Expenses 6,645 5,078 30.9% 5,092 30.5%
Operating Income 1,270 1,547 -17.9% 1,654 -23.2%
Interest Expense 368 281 31.0% 276 33.3%
Other Income (Expense), net 35 39 -10.3% 7 400.0%
Income Before Income Taxes 937 1,305 -28.2% 1,385 -32.3%
Provision for Income Taxes 297 459 -35.3% 492 -39.6%
Net Income $640 $846 -24.3% $893 -28.3%

Diluted:
Weighted Average Common Shares
Outstanding 1,836 1,845 -0.5% 1,835 0.1%
Earnings Per Share $0.35 $0.46 -23.9% $0.49 -28.6%



Year-to-Date
2004 2003 Growth

Operating Revenues
Communications group $18,074 $18,084 -0.1%
Domestic wireless 7,774 6,193 25.5%
Advertising and publishing 2,005 2,033 -1.4%
All other 57 54 5.6%
Total Operating Revenues 27,910 26,364 5.9%

Operating Expenses
Cost of services and products 10,129 9,108 11.2%
Selling, general, &
administrative expenses 6,641 5,928 12.0%
Depreciation and amortization 4,868 4,647 4.8%
Total Operating Expenses 21,638 19,683 9.9%
Operating Income 6,272 6,681 -6.1%
Interest Expense 1,184 1,194 -0.8%
Other Income (Expense), net 54 157 -65.6%
Income Before Income Taxes 5,142 5,644 -8.9%
Provision for Income Taxes 1,783 2,028 -12.1%
Net Income $3,359 $3,616 -7.1%

Diluted:
Weighted Average Common Shares
Outstanding 1,836 1,852 -0.9%
Earnings Per Share $1.83 $1.95 -6.2%



Selected Financial and Operating Data

4Q04 4Q03 Growth 3Q04 Growth

Operating income $1,270 $1,547 -17.9% $1,654 -23.2%
Operating margin 16.0% 23.4% -740 bps 24.5% -850 bps

Declared dividends per share $0.27 $0.25 8.0% $0.27 0.0%
Capital expenditures $1,059 $948 11.7% $768 37.9%

Common shares outstanding 1,831 1,830 0.1% 1,831 0.0%
Book value per share $12.66 $10.77 17.5% $11.94 6.0%
Total employees 62,564 65,842 -5.0% 63,132 -0.9%

Selected Financial and Operating Data

Year-to-Date
2004 2003 Growth

Operating income $6,272 $6,681 -6.1%
Operating margin 22.5% 25.3% -280 bps

Declared dividends per share $1.06 $0.92 15.2%
Capital expenditures $3,193 $2,926 9.1%



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

Fourth Quarter 2004
Discontinued Continuing
Operations Operations
GAAP F (GAAP - F)

Operating Revenues $5,146 $- $5,146
Operating Expenses 4,058 - 4,058
Operating Income 1,088 - 1,088
Interest Expense 270 - 270
Other Income (Expense), net (107) - (107)
Income from Continuing Operations
before Income
Taxes 711 - 711
Provision for Income Taxes 215 - 215
Income from Continuing Operations 496 - 496
Income (Loss) from Discontinued
Operations, net of tax 975 (975) -
Net Income $1,471 ($975) $496

Diluted Earnings Per Share $0.80 ($0.53) $0.27




Fourth Quarter 2004 Normalizing Items
Severance/ Hurricane-
Lease Term. related
Cingular Payments Expenses
A D H

Operating Revenues $2,769 $- $-
Operating Expenses 2,840 (29) (126)
Operating Income (71) 29 126
Interest Expense 98 - -
Other Income (Expense), net 142 - -
Income from Continuing Operations
before Income Taxes (27) 29 126
Provision for Income Taxes (27) 11 49
Income from Continuing Operations - 18 77
Income (Loss) from Discontinued
Operations, net of tax - - -
Net Income $0 $18 $77

Diluted Earnings Per Share $0.00 $0.01 $0.04




Fourth Quarter 2004 Normalizing Items
Merger Integration
I Normalized

Operating Revenues $- $7,915
Operating Expenses (98) 6,645
Operating Income 98 1,270
Interest Expense - 368
Other Income (Expense), net - 35
Income from Continuing Operations
before Income Taxes 98 937
Provision for Income Taxes 49 297
Income from Continuing Operations 49 640
Income (Loss) from Discontinued
Operations, net of tax - -
Net Income $49 $640

Diluted Earnings Per Share $0.03 $0.35



Year-to-Date 2004
Discontinued Continuing
Operations Operations
GAAP F (GAAP - F)

Operating Revenues $20,300 $- $20,300
Operating Expenses 15,011 - 15,011
Operating Income 5,289 - 5,289
Interest Expense 916 - 916
Other Income (Expense), net 883 - 883
Income from Continuing Operations
before Income Taxes 5,256 - 5,256
Provision for Income Taxes 1,819 - 1,819
Income from Continuing Operations 3,437 - 3,437
Income (Loss) from Discontinued
Operations, net of tax 1,428 (1,428) -
Net Income $4,865 ($1,428) $3,437

Diluted Earnings Per Share $2.65 ($0.78) $1.87



Year-to-Date 2004 Normalizing Items
Severance/
Lease Term. Sale of
Cingular Payments Sonofon
A D E

Operating Revenues $7,560 $- $-
Operating Expenses 6,950 (29) -
Operating Income 610 29 -
Interest Expense 268 - -
Other Income (Expense), net (367) - (462)
Income from Continuing Operations
before Income
Taxes (25) 29 (462)
Provision for Income Taxes (25) 11 (167)
Income from Continuing Operations - 18 (295)
Income (Loss) from Discontinued
Operations, net of tax - - -
Net Income $0 $18 ($295)

Diluted Earnings Per Share $0.00 $0.01 ($0.16)



Year-to-Date 2004 Normalizing Items
Hurricane- Merger
SC related Integration / FV
Settlement Expenses Adj
G H I Normalized

Operating Revenues $50 $- $- $27,910
Operating Expenses (3) (164) (127) 21,638
Operating Income 53 164 127 6,272
Interest Expense - - - 1,184
Other Income (Expense),
net - - - 54
Income from Continuing
Operations before
Income Taxes 53 164 127 5,142
Provision for Income
Taxes 20 64 61 1,783
Income from Continuing
Operations 33 100 66 3,359
Income (Loss) from
Discontinued
Operations, net of tax - - - -
Net Income $33 $100 $66 $3,359

Diluted Earnings Per
Share $0.02 $0.05 $0.04 $1.83



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

Fourth Quarter 2003 Normalizing Items
Discontinued Continuing Pension/
Operations Operations Cingular Severance
GAAP F (GAAP - F) A D Normalized

Operating
Revenues $5,107 $- $5,107 $1,518 $- $6,625
Operating
Expenses 3,708 - 3,708 1,386 (16) 5,078
Operating
Income 1,399 - 1,399 132 16 1,547
Interest
Expense 222 - 222 59 - 281
Other Income
(Expense),
net 108 - 108 (69) - 39
Income from Continuing
Operations before
Income
Taxes 1,285 - 1,285 4 16 1,305
Provision
for Income
Taxes 449 - 449 4 6 459
Income from
Continuing
Operations 836 - 836 - 10 846
Income (Loss)
from
Disconti-
nued
Operations,
net of
tax (49) 49 - - - -
Income
Before
Cumulative
Effect of
Changes in
Accounting
Principles 787 49 836 - 10 846
Cumulative
Effect of
Changes in
Accounting
Principles - - - - - -
Net
Income $787 $49 $836 $0 $10 $846

Diluted Earn-
ings Per
Share * $0.43 $0.03 $0.45 $0.00 $0.01 $0.46

* Normalized earnings per share for fourth quarter 2003 does not sum due
to rounding.



Year-to-Date 2003
Discontinued Continuing
Operations Operations
GAAP F (GAAP - F)
Operating Revenues $20,341 $- $20,341
Operating Expenses 14,784 - 14,784
Operating Income 5,557 - 5,557
Interest Expense 947 - 947
Other Income (Expense), net 814 - 814
Income from Continuing Operations
before Income
Taxes 5,424 - 5,424
Provision for Income Taxes 1,936 - 1,936
Income from Continuing Operations 3,488 - 3,488
Income (Loss) from Discontinued
Operations, net of tax 101 (101) -
Income Before Cumulative Effect of
Changes in Accounting Principles 3,589 (101) 3,488
Cumulative Effect of Changes in
Accounting Principles 315 - 315
Net Income $3,904 ($101) $3,803

Diluted Earnings Per Share * $2.11 ($0.05) $2.05

* Normalized earnings per share for year-to-date 2003 does not sum due
to rounding.


Year-to-Date 2003 Normalizing Items

A&P
Cingular Acctg.Change FAS143
A B C

Operating Revenues $6,023 $- $-
Operating Expenses 5,108 - -
Operating Income 915 - -
Interest Expense 247 - -
Other Income (Expense), net (657) - -
Income from Continuing Operations
before Income Taxes 11 - -
Provision for Income Taxes 11 - -
Income from Continuing Operations - - -
Income (Loss) from Discontinued
Operations, net of tax - - -
Income Before Cumulative Effect of
Changes in Accounting Principles - - -
Cumulative Effect of Changes in
Accounting Principles - 501 (816)
Net Income $0 $501 ($816)

Diluted Earnings Per Share * $0.00 $0.27 ($0.44)

* Normalized earnings per share for year-to-date 2003 does not sum due
to rounding.



Year-to-Date 2003 Normalizing Items
Pension/ Asset
Severance Impairment
D J Normalized

Operating Revenues $- $- $26,364
Operating Expenses (157) (52) 19,683
Operating Income 157 52 6,681
Interest Expense - - 1,194
Other Income (Expense), net - - 157
Income from Continuing Operations
before Income
Taxes 157 52 5,644
Provision for Income Taxes 61 20 2,028
Income from Continuing Operations 96 32 3,616
Income (Loss) from Discontinued
Operations, net of tax - - -
Income Before Cumulative Effect of
Changes in
Accounting Principles 96 32 3,616
Cumulative Effect of Changes in
Accounting Principles - - -
Net Income $96 $32 $3,616

Diluted Earnings Per Share * $0.05 $0.02 $1.95

* Normalized earnings per share for year-to-date 2003 does not sum due
to rounding.



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) 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/Lease Termination Payments -- 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 $43 after-tax of severance related costs. During 2004,
the amount represents the net severance related costs recorded in the
fourth quarter associated with workforce reductions and a provision
related to surplus office space under long-term leases.

(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 excluded from normalized results. The
year-to-date period in 2004 includes $336 in net income tax benefit
representing the recognition of book over tax basis differential in
connection with the announced sale of these properties. The third
quarter 2004 results include an after-tax charge of $190 related to
the buyout of the other major shareholder in Telcel, our Venezuelan
operation and the settlement of all outstanding claims with this
shareholder. The fourth quarter 2004 results include an after-tax
gain of $915 related to 8 of the 10 properties that were closed prior
to year end.

(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 for further
discussion). The settlement required among other things, that
BellSouth refund $50 to its South Carolina customers. The refund was
recognized in the first quarter 2004 as a reduction to revenue.

(h) Hurricane-related Expenses - Represents the incremental labor and
material costs incurred during the 3rd and 4th quarters related to
service restoration and network repairs in the wireline business due
to Hurricanes Charley, Frances, Ivan and Jeanne.

(i) 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 and
costs of $245 in the 4th quarter in connection with the Cingular/AWE
merger. Also includes a $31 fair value adjustment for the announced
sale of Cingular Interactive during the 3rd quarter.

(j) Asset Impairment -- The third quarter 2003 charge for asset impairment
represents the write-off of capitalized software related to an
abandoned systems project.



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

December December Change September Change
31, 31, vs. 30, vs.
Prior Prior
2004 2003 Year 2004 Quarter

Assets
Current Assets:
Cash and cash equivalents $696 $4,556 ($3,860) $9,200 ($8,504)
Accounts receivable, net of
allowance for
uncollectibles of $317,
$496, and $331 2,559 2,870 (311) 2,546 13
Material and supplies 321 375 (54) 316 5
Other current assets 909 1,048 (139) 842 67
Assets of discontinued
operations 1,068 0 1,068 3,977 (2,909)
Total Current Assets 5,553 8,849 (3,296) 16,881 (11,328)

Investment in and Advances to
Cingular Wireless 22,841 7,679 15,162 7,952 14,889
Property, Plant and
Equipment, net 22,039 23,807 (1,768) 21,971 68
Other Assets 7,400 6,977 423 7,178 222
Goodwill 0 93 (93) 0 0
Intangible Assets, net 1,587 2,297 (710) 1,507 80
Total Assets $59,420 $49,702 $9,718 $55,489 $3,931

Liabilities and Shareholders'
Equity
Current Liabilities:
Debt maturing within one
year $5,475 $3,491 $1,984 $3,048 $2,427
Accounts payable 1,047 1,339 (292) 970 77
Other current liabilities 2,980 3,628 (648) 3,150 (170)
Liabilities of discontinued
operations 830 0 830 2,674 (1,844)
Total Current
Liabilities 10,332 8,458 1,874 9,842 490

Long-Term Debt 15,108 11,489 3,619 13,142 1,966

Noncurrent Liabilities:
Deferred income taxes 6,347 5,349 998 6,314 33
Other noncurrent
liabilities 4,460 4,694 (234) 4,327 133
Total Noncurrent
Liabilities 10,807 10,043 764 10,641 166

Shareholders' Equity:
Common stock, $1 par value 2,020 2,020 0 2,020 0
Paid-in capital 7,840 7,729 111 7,790 50
Retained earnings 19,374 16,540 2,834 18,421 953
Accumulated other
comprehensive income (157) (585) 428 (470) 313
Shares held in trust and
treasury (5,904) (5,992) 88 (5,897) (7)
Total Shareholders'
Equity 23,173 19,712 3,461 21,864 1,309
Total Liabilities and
Shareholders' Equity $59,420 $49,702 $9,718 $55,489 $3,931



BellSouth Corporation
Consolidated Statements of Cash Flows (unaudited)
(amounts in millions, except per share data)
Year-To-Date
4Q04 4Q03 3Q04 2004 2003

Cash Flows from Operating
Activities:
Income from Continuing
Operations $496 $836 $852 $3,437 $3,488
Adjustments to income from
continuing operations:
Depreciation and amortization 916 950 908 3,636 3,811
Provision for uncollectibles 99 125 90 384 523
Net losses (earnings) of
equity affiliates 190 (25) (73) (138) (452)
Deferred income taxes 196 (12) 137 936 788
Net (gains) losses on sale or
impairment of equity securities (5) - 6 4 7
Pension income (121) (133) (121) (484) (534)
Pension settlement (gains)
losses - (40) - - 47
Stock-based compensation expense 29 32 29 116 124
Asset impairments - - - - 52
(Gain) loss on sale/disposal
of operations - - - (462) -
Net change in:
Accounts receivable and other
current assets (148) (89) (147) (419) (81)
Accounts payable and other
current liabilities (504) (233) (88) (508) 55
Deferred charges and other
assets (21) 46 19 (79) 299
Other liabilities and deferred
credits 111 (143) 28 159 (276)
Other reconciling items, net 75 14 51 219 32
Net cash provided by operating
activities 1,313 1,328 1,691 6,801 7,883

Cash Flows from Investing
Activities:
Capital expenditures (1,059) (948) (768) (3,193) (2,926)
Investments in debt and equity
securities (129) (167) (87) (632) (194)
Investments in and advances to
equity affiliates (14,445) - - (14,445) -
Net short term advances to
Cingular (666) - - (666) -
Proceeds from sale of securities
and operations 3,113 - 6 3,678 27
Proceeds from repayment of loans
and advances - - 20 129 1,899
Settlement of derivatives on
advances - - - (17) (352)
Other investing activities, net (4) (1) (8) (7) (12)
Net cash provided by (used
for) investing activities (13,190) (1,116) (837)(15,153) (1,558)

Cash Flows from Financing
Activities:
Net borrowing (repayments) of
short-term debt 2,004 (8) 73 1,738 (431)
Proceeds from long-term debt 2,389 - 2,993 6,078 -
Repayments of long-term debt (14) (13) (524) (759) (1,849)
Dividends paid (494) (425) (493) (1,901) (1,608)
Purchase of treasury shares (47) (536) - (146) (858)
Other financing activities, net 13 38 (3) 61 67
Net cash used for financing
activities 3,851 (944) 2,046 5,071 (4,679)

Net Increase/(Decrease) in Cash
from Continuing Operations (8,026) (732) 2,900 (3,281) 1,646
Net Increase/(Decrease) in Cash
from Discontinued Operations (478) 263 84 (579) 428
Net Increase (Decrease) in
Cash and Cash Equivalents (8,504) (469) 2,984 (3,860) 2,074
Cash and Cash Equivalents at
Beginning of Period 9,200 5,025 6,216 4,556 2,482
Cash and Cash Equivalents at End
of Period $696 $4,556 $9,200 $696 $4,556



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

Communications Group (1)

4Q04 4Q03 Growth 3Q04 Growth

Operating Revenues
Voice $3,166 $3,164 0.1% $3,121 1.4%
Data 1,165 1,094 6.5% 1,145 1.7%
Other 316 360 -12.2% 361 -12.5%
Total Operating Revenues 4,647 4,618 0.6% 4,627 0.4%
Operating Expenses
Cost of services and products 1,850 1,698 9.0% 1,783 3.8%
Selling, general, &
administrative expenses 844 792 6.6% 729 15.8%
Depreciation and amortization 904 941 -3.9% 898 0.7%
Total Operating Expenses 3,598 3,431 4.9% 3,410 5.5%
Segment Operating Income 1,049 1,187 -11.6% 1,217 -13.8%
Interest Expense 93 90 3.3% 94 -1.1%
Other Income (Expense), net 9 10 -10.0% 7 28.6%
Income Before Income Taxes 965 1,107 -12.8% 1,130 -14.6%
Provision for Income Taxes 341 393 -13.2% 416 -18.0%
Segment Net Income (1) $624 $714 -12.6% $714 -12.6%



Year-To-Date
2004 2003 Growth

Operating Revenues
Voice $12,609 $12,702 -0.7%
Data 4,518 4,353 3.8%
Other 1,325 1,393 -4.9%
Total Operating Revenues 18,452 18,448 0.0%
Operating Expenses
Cost of services and products 7,108 6,755 5.2%
Selling, general, & administrative
expenses 3,123 3,079 1.4%
Depreciation and amortization 3,593 3,771 -4.7%
Total Operating Expenses 13,824 13,605 1.6%
Segment Operating Income 4,628 4,843 -4.4%
Interest Expense 367 407 -9.8%
Other Income (Expense), net 29 38 -23.7%
Income Before Income Taxes 4,290 4,474 -4.1%
Provision for Income Taxes 1,563 1,645 -5.0%
Segment Net Income(1) $2,727 $2,829 -3.6%



Selected Financial and Operating Data

4Q04 4Q03 Growth 3Q04 Growth

(amounts in millions)
Segment operating income $1,049 $1,187 -11.6% $1,217 -13.8%
Segment operating margin 22.6% 25.7% -310 bps 26.3% -370 bps

Long distance revenues $533 $411 29.7% $524 1.7%

Switched Access MOUs 16,459 18,983 -13.3% 17,128 -3.9%
BSLD MOUs 5,864 3,920 49.6% 5,673 3.4%
Total Access minutes
of use 22,323 22,903 -2.5% 22,801 -2.1%

Capital expenditures $969 $901 7.5% $724 33.8%
(amounts in thousands)
Wholesale lines 2,958 2,682 10.3% 3,070 -3.6%
DSL customers 2,096 1,462 43.4% 1,872 12.0%
LD customers 6,130 3,960 54.8% 5,663 8.2%

Consumer ARPU (4) $57.32 $53.20 7.7% $56.80 0.9%



Year-To-Date
2004 2003 Growth

(amounts in millions)
Segment operating income $4,628 $4,843 -4.4%
Segment operating margin 25.1% 26.3% -120 bps

Long distance revenues $1,976 $1,354 45.9%

Switched Access MOUs 70,061 82,102 -14.7%
BSLD MOUs 21,109 10,039 110.3%
Total Access minutes of use 91,170 92,141 -1.1%

Capital expenditures $3,018 $2,824 6.9%



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

Communications Group - Network Access Lines In Service Reported (a)

4Q04 4Q03 Growth 3Q04 Growth
Access lines
Residence
Retail
Primary 11,771 12,466 -5.6% 11,816 -0.4%
Additional 1,346 1,601 -15.9% 1,388 -3.0%
Total Retail Residence 13,117 14,067 -6.8% 13,204 -0.7%
Wholesale
Resale 116 177 -34.5% 114 1.8%
UNE-P 1,972 1,696 16.3% 2,082 -5.3%
Total Wholesale
Residence 2,088 1,873 11.5% 2,196 -4.9%
Total Residence 15,205 15,940 -4.6% 15,400 -1.3%

Business
Retail
Total Retail Business 5,245 5,417 -3.2% 5,264 -0.4%
Wholesale
Resale 58 73 -20.5% 61 -4.9%
UNE-P 750 686 9.3% 752 -0.3%
Total Wholesale Business 808 759 6.5% 813 -0.6%
Total Business 6,053 6,176 -2.0% 6,077 -0.4%

Other Retail/Wholesale Lines
Retail 36 97 -62.9% 38 -5.3%
Wholesale 62 50 24.0% 61 1.6%
Total Other Retail/Wholesale
Lines 98 147 -33.3% 99 -1.0%

Total Access Lines in Service 21,356 22,263 -4.1% 21,576 -1.0%

ISDN line equivalents
Residence 9 13 -30.8% 10 -10.0%
Business 1,459 1,453 0.4% 1,462 -0.2%
Total ISDN Adjusted ALIS 22,824 23,729 -3.8% 23,048 -1.0%
Access Line Equivalents (b)
Selected digital data services:
Unbundled Loops 273 344 -20.6% 326 -16.3%
DS0 & ADSL 12,863 9,051 42.1% 11,493 11.9%
DS1 7,695 7,179 7.2% 7,594 1.3%
DS3 & higher 32,746 31,577 3.7% 32,643 0.3%
Total digital data lines in
service 53,577 48,151 11.3% 52,056 2.9%

Total equivalent access lines in
service 76,401 71,880 6.3% 75,104 1.7%

(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.

(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)

4Q04 4Q03 Growth 3Q04 Growth

Operating Revenues
Service revenues (2) $2,511 $1,414 77.6% $1,534 63.7%
Equipment and other revenues 322 151 113.2% 168 91.7%
Total Operating Revenues 2,833 1,565 81.0% 1,702 66.5%
Operating Expenses
Cost of services and products 1,166 607 92.1% 651 79.1%
Selling, general, &
administrative expenses 1,084 599 81.0% 609 78.0%
Depreciation and amortization 556 228 143.9% 229 142.8%
Total Operating Expenses 2,806 1,434 95.7% 1,489 88.4%
Segment Operating Income 27 131 -79.4% 213 -87.3%
Interest Expense 121 82 47.6% 80 51.3%
Other Income (Expense), net (35) (38) 7.9% (46) 23.9%
Income Before Income Taxes (129) 11 N/M* 87 -248.3%
Provision for Income Taxes (56) (1) N/M 33 -269.7%
Segment Net Income (1) ($73) $12 N/M $54 -235.2%

* - Not meaningful.



Year-To-Date
2004 2003 Growth

Operating Revenues
Service revenues (2) $6,989 $5,689 22.9%
Equipment and other revenues 785 504 55.8%
Total Operating Revenues 7,774 6,193 25.5%
Operating Expenses
Cost of services and products 2,980 2,273 31.1%
Selling, general, & administrative
expenses 2,826 2,170 30.2%
Depreciation and amortization 1,232 835 47.5%
Total Operating Expenses 7,038 5,278 33.3%
Segment Operating Income 736 915 -19.6%
Interest Expense 360 343 5.0%
Other Income (Expense), net (180) (152) -18.4%
Income Before Income Taxes 196 420 -53.3%
Provision for Income Taxes 67 159 -57.9%
Segment Net Income (1) $129 $261 -50.6%

* - Not meaningful.



Selected Financial and Operating Data

4Q04 4Q03 Growth 3Q04 Growth

(amounts in millions, except
customer data in thousands)
Segment operating income $27 $131 -79.4% $213 -87.3%
Segment operating margin 1.0% 8.4% -740 bps 12.5% -1150 bps

Cellular/PCS Operating Metrics
(100% Cingular):
Total Customers 49,109 24,027 104.4% 25,672 91.3%
Net Customer Additions 1,713 642 166.8% 657 160.7%
Partitioned Customers
and/or Adjustments 21,724 0 N/M (29) N/M
Churn 2.6% 2.8% -20 bps 2.8% -20 bps
Wireless Service ARPU (3) $49.22 $49.03 0.4% $49.78 -1.1%
Minutes Of Use Per
Subscriber 526 475 10.7% 537 -2.0%
Licensed POPs (4) 290 236 22.9% 243 19.3%
Penetration (4) 17.2% 10.8% 640 bps 11.4% 580 bps



Year-To-Date
2004 2003 Growth

(amounts in millions, except customer
data in thousands)
Segment operating income $736 $915 -19.6%
Segment operating margin 9.5% 14.8% -530 bps
Cellular/PCS Operating Metrics (100%
Cingular):
Total Customers 49,109 24,027 104.4%
Net Customer Additions 3,352 2,116 58.4%
Partitioned Customers and/or
Adjustments 21,730 (14) N/M
Churn 2.7% 2.7% 0 bps
Wireless Service ARPU (3) $49.30 $51.32 -3.9%
Minutes Of Use Per Subscriber 520 446 16.6%
Licensed POPs (4) 290 236 22.9%
Penetration (4) 17.2% 10.8% 640 bps



PROFORMA 4Q04 4Q03 Growth 3Q04 Growth

Total Revenue (40%) 3,220 3,165 1.7% 3,281 -1.9%
Net Adds (100%) 1,757 736 138.7% 808 117.5%
ARPU $49.67 $52.71 -5.8% $52.13 -4.7%

(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)

4Q04 4Q03 Growth 3Q04 Growth

Operating Revenues
Advertising and publishing
revenues 475 470 1.1% 471 0.8%
Commission revenues 53 52 1.9% 27 96.3%
Total Operating Revenues 528 522 1.1% 498 6.0%
Operating Expenses
Cost of services 94 91 3.3% 89 5.6%
Selling, general, & administrative
expenses 188 184 2.2% 173 8.7%
Depreciation and amortization 7 7 0.0% 7 0.0%
Total Operating Expenses 289 282 2.5% 269 7.4%
Segment Operating Income 239 240 -0.4% 229 4.4%
Interest Expense 2 2 0.0% 2 0.0%
Other Income (Expense), net (1) 1 -200.0% - N/M*
Income Before Income Taxes 236 239 -1.3% 227 4.0%
Provision for Income Taxes 91 92 -1.1% 86 5.8%
Segment Net Income(1) $145 $147 -1.4% $141 2.8%

Segment operating income $239 $240 -0.4% $229 4.4%
Segment operating margin 45.3% 46.0% -70 bps 46.0% -70 bps

* - Not meaningful.



Year-To-Date
2004 2003 Growth

Operating Revenues
Advertising and publishing
revenues 1,878 1,906 -1.5%
Commission revenues 141 144 -2.1%
Total Operating Revenues 2,019 2,050 -1.5%
Operating Expenses
Cost of services 353 345 2.3%
Selling, general, & administrative
expenses 684 706 -3.1%
Depreciation and amortization 28 26 7.7%
Total Operating Expenses 1,065 1,077 -1.1%
Segment Operating Income 954 973 -2.0%
Interest Expense 8 7 14.3%
Other Income (Expense), net - 2 -100.0%
Income Before Income Taxes 946 968 -2.3%
Provision for Income Taxes 363 368 -1.4%
Segment Net Income(1) $583 $600 -2.8%

Segment operating income $954 $973 -2.0%
Segment operating margin 47.3% 47.5% -20 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. 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 have licenses to provide cellular or PCS
service including areas where Cingular has not yet commenced service.
Penetration calculation for 4Q04 is based on licensed "operational"
POP's of 286 million.



BellSouth Corporation
Non-GAAP Measures -- Reconciliation
(amounts in millions) (unaudited)

Segment Net Income Reconciliation
to GAAP Net Income
Year-to-Date
4Q04 4Q03 3Q04 2004 2003
Communications group segment net
income $624 $714 $714 $2,727 $2,829
Domestic wireless group segment net
income (73) 12 54 129 261
Advertising and publishing group
segment net income 145 147 141 583 600
Corporate, eliminations and other (56) (27) (16) (80) (74)
Normalized net income 640 846 893 3,359 3,616
Add back Excluded non-recurring or
non-operational items (a) 831 (59) (94) 1,506 288
Consolidated GAAP net income $1,471 $787 $799 $4,865 $3,904



Free Cash Flow
Year-to-Date
4Q04 4Q03 3Q04 2004 2003
Net cash provided by operating
activities $1,313 $1,328 $1,691 $6,801 $7,883
Less Capital Expenditures (1,059) (948) (768) (3,193) (2,926)
Operating Free Cash Flow $254 $380 $923 $3,608 $4,957



Net Debt

December 31, December 31, September 30,
2004 2003 2004
Total Debt $20,583 $14,980 $16,190
Less Cash (696) (4,556) (9,200)
Net Debt $19,887 $10,424 $6,990



Communications Group Operating
Income before Depreciation and
Amortization
Year-to-Date
4Q04 4Q03 3Q04 2004 2003
Operating Revenues $4,647 $4,618 $4,627 $18,452 $18,448
Operating Income 1,049 1,187 1,217 4,628 4,843
Add back Depreciation and
amortization 904 941 898 3,593 3,771
Operating Income before
Depreciation and Amortization $1,953 $2,128 $2,115 $8,221 $8,614
Margin 42.0% 46.1% 45.7% 44.6% 46.7%



Domestic Wireless Operating
Income before Depreciation and
Amortization
Year-to-Date
4Q04 4Q03 3Q04 2004 2003
Service revenues $2,511 $1,414 $1,534 $6,989 $5,689
Equipment and other revenues 322 151 168 785 504
Operating revenues 2,833 1,565 1,702 7,774 6,193
Operating Income 27 131 213 736 915
Operating Margin (Operating
income divided by operating
revenues) (c) 1.0% 8.4% 12.5% 9.5% 14.8%
Add back Depreciation and
amortization 556 228 229 1,232 835
Operating Income before
Depreciation and Amortization $583 $359 $442 $1,968 $1,750
Margin (Operating Income before
Depr & Amort divided by
service revenues) (c) 23.2% 25.4% 28.8% 28.2% 30.8%



Domestic Wireless Proforma Revenue
4Q04 4Q03 3Q04
Operating Revenue $2,833 $1,565 $1,702
Add back Proforma Adjustments (b) 387 1,600 1,579
Total Operating Revenue (Proforma) $3,220 $3,165 $3,281



Domestic Wireless Proforma ARPU
4Q04 4Q03 3Q04
Service revenues $2,511 $1,414 $1,534
Less Mobitex data revenues 14 23 22
Add back Proforma Adjustments (b) 352 1,469 1,412
Service revenue used to calculate
Proforma ARPU $2,849 $2,860 $2,924
ARPU (Proforma) $49.67 $52.71 $52.13

(a) See pages 3 and 4 for detail of excluded items.

(b) These adjustments are consistent in nature with those set forth in
Cingular's Form 8-K/A dated November 29, 2004.

(c) Margin calculations for our domestic wireless segment represents 40%
of Cingular's margin calculations adjusted for the related normalized
items as presented on pages 3-4.


Company News On-Call: http://www.prnewswire.com/comp/095650.html


Source: 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/
http://www.bellsouth.com/investor


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