BellSouth Reports 24.4% Growth in Normalized EPS - Company Financial Information

Cambridge Telcom Report, Oct 25, 1999

With continued across-the-board growth highlighted by surpassing 10 million wireless customers worldwide, BellSouth Corporation (NYSE: BLS - news) reported third quarter earnings per share (EPS) of 51 cents before special items, a 24.4 percent increase compared to 41 cents in the third quarter of 1998. Consolidated revenues increased 9.5 percent to a record $6.4 billion, as BellSouth's data, Internet and other digital services continued to boost top line growth.

Reported EPS in the most recent quarter was 53 cents. It included gains of 5 cents related to the recognition of certain foreign investment tax credits generated in prior years and 1 cent on the August 1999 sale of Honolulu Cellular. EPS also reflected a charge of 4 cents related to foreign currency impact on Brazilian debt.

"Our financial performance didn't skip a beat in the third quarter," said Duane Ackerman, BellSouth chairman and chief executive officer. "We're combining the packages of communications services customers want with the award-winning service they expect from BellSouth. In addition, our revenue and earnings gains demonstrate the advantages of operating in high growth markets, both in the U.S. and internationally."

[Note to editors: On August 4, 1999 BellSouth took top honors (tie) for the fourth consecutive year in the J.D. Power and Associates Residential Local Telephone Service Satisfaction Study. On September 23, BellSouth Mobility and BellSouth Mobility DCS placed first in Atlanta and Charlotte, respectively, in the J.D. Power and Associates 1999 U.S. Wireless Customer Satisfaction Study.]

BellSouth's fast-growing domestic and international wireless operations shot past the combined 10 million customer milestone during the third quarter, based on the company's ownership percentages. In the U.S., wireless customers reached 5.1 million on a proportionate basis, an increase of 16.1 percent compared to September 30, 1998. BellSouth's international wireless customer base expanded at the annual rate of 76 percent. On a proportionate basis, the company now serves 5.2 million customers outside the U.S., including 3.7 million in Latin America.

Domestic wireless revenues of $815 million grew 16.1 percent on a consolidated basis compared to $702 million in the third quarter of the previous year. BellSouth's rapidly growing international operations generated proportionate revenues of $749 million in the third quarter, compared to $600 million in the same three months of 1998. This 24.8 percent increase was driven by continued high growth in Latin America, particularly in prepaid customers. During the third quarter BellSouth extended its popular prepaid cellular products to all nine of the countries it serves in Latin America.

Digital and data services revenues grew to $698 million in the third quarter of 1999, a 31 percent increase compared to $534 million in the same three months a year earlier. Demand for BellSouth's family of high-speed digital services and data products continued to fuel revenues. Innovative wireless data offerings such as BellSouth Interactive Paging service and joint marketing of the Palm VII connected organizer by 3Com also contributed to revenue growth. In addition, the number of BellSouth.net Internet service customers more than doubled, reaching 626,000, an annual growth rate of 107 percent.

Revenues from convenience features were $481 million in the third quarter of 1999. Sales of the new BellSouth Solutions product are running ahead of projections. Introduced in August for residential and small business customers, BellSouth Solutions is a package of Internet access, wireless, paging and local phone service with convenience features -- all on one bill, with one number to call for service.

Total operating expenses were $4.7 billion, a 7.0 percent increase compared to the third quarter of 1998. Expenses reflected the growth in volumes and customers as well as spending on BellSouth's data initiatives and marketing, offset by a change in accounting for internal-use software.

Reported net income in the third quarter of 1999 was $1.015 billion, including $95 million from the recognition of certain foreign investment tax credits generated in prior years and $23 million from the gain on Honolulu Cellular. The non-cash foreign currency charge reduced reported net income by $75 million. Net income in the third quarter of 1998 was $814 million.

BellSouth is a $25 billion communications services company. It provides telecommunications, wireless communications, cable and digital TV, advertising and publishing, and Internet and data services to more than 36 million customers in 19 countries worldwide.

FMI: http://www.bellsouth.com/