| BellSouth Key Financial Measures |
| (amounts in millions, except per share data) |
| Selected Financial and Operating Data |
| | 4Q06 | 4Q05 | | Growth | 3Q06 | | Growth |
| Consolidated | | | | | | | | | | | |
|
| Total Operating Revenues | | $ 9,058 | | $ 8,656 | | 4 | .6% | $ 8,954 | | 1 | .2% |
|
| Total Operating Expenses (excluding depreciation and amortization) | | $ 5,472 | | $ 5,505 | | -0 | .6% | $ 5,367 | | 2 | .0% |
|
| Operating Income | | $ 2,225 | | $ 1,792 | | 24 | .2% | $ 2,210 | | 0 | .7% |
|
| Operating Margin | | 24.6% | | 20.7% | | 390 | bps | 24.7% | | -10 | bps |
|
| Interest Expense | | $ 374 | | $ 377 | | -0 | .8% | $ 405 | | -7 | .7% |
|
| Other Income (Expense), net | | $ 53 | | $ 48 | | 10 | .4% | $ 57 | | -7 | .0% |
|
| Net Income | | $ 1,248 | | $ 965 | | 29 | .3% | $ 1,180 | | 5 | .8% |
|
| Adjusted Earnings Per Share | | $ 0.68 | | $ 0.53 | | 28 | .3% | $ 0.65 | | 4 | .6% |
|
| Diluted Weighted Average Common Shares Outstanding | | 1,832 | | 1,818 | | 0 | .8% | 1,822 | | 0 | .5% |
|
|
| Capital expenditures excluding Hurricane Katrina | | $ 763 | | $ 803 | | -5 | .0% | $ 730 | | 4 | .5% |
|
|
| Total Employees | | 59,298 | | 63,066 | | -6 | .0% | 59,745 | | -0 | .7% |
|
|
| Operating Free Cash Flow (net cash provided by operating activities | |
| less capital expenditures | | $ 1,202 | | ($ 218 | ) | | * | $ 976 | | 23 | .2% |
|
| Advertising and Publishing Group | |
|
| Total Operating Revenues | | $ 576 | | $ 529 | | 8 | .9% | $ 537 | | 7 | .3% |
|
| Total Operating Expenses (excluding depreciation and amortization) | | $ 290 | | $ 277 | | 4 | .7% | $ 284 | | 2 | .1% |
|
| Segment Operating Income | | $ 278 | | $ 245 | | 13 | .5% | $ 245 | | 13 | .5% |
|
| Segment Operating Margin | | 48.3% | | 46.3% | | 200 | bps | 45.6% | | 270 | bps |
|
| | 4Q06 | 4Q05 | | Growth | 3Q06 | | Growth |
| Communications Group | | | | | | | | | | | |
|
| Total Operating Revenues | | $ 4,682 | | $ 4,681 | | 0 | .0% | $ 4,696 | | -0 | .3% |
|
| Total Operating Expenses (excluding | |
| depreciation and amortization) | | $ 2,600 | | $ 2,755 | | -5 | .6% | $ 2,605 | | -0 | .2% |
|
| Segment Operating Income | | $ 1,201 | | $ 1,027 | | 16 | .9% | $ 1,205 | | -0 | .3% |
|
| Segment Operating Margin | | 25.7% | | 21.9% | | 380 | bps | 25.7% | | 0 | bps |
|
| Communications Group Revenue Detail | |
|
| Voice | | $ 3,038 | | $ 3,131 | | -3 | .0% | $ 3,058 | | -0 | .7% |
|
| Data | | $ 1,324 | | $ 1,252 | | 5 | .8% | $ 1,315 | | 0 | .7% |
|
| Other | | $ 320 | | $ 298 | | 7 | .4% | $ 323 | | -0 | .9% |
|
|
| Consumer ARPU | | $ 62.86 | | $ 60.53 | | 3 | .8% | $ 63.26 | | -0 | .6% |
|
| DSL | |
|
| Revenue | | $ 412 | | $ 353 | | 16 | .7% | $ 405 | | 1 | .7% |
|
| �� Subscribers | | 3,632 | | 2,882 | | 26 | .0% | 3,449 | | 5 | .3% |
|
| Net Adds | | 183 | | 204 | | -10 | .3% | 176 | | 4 | .0% |
|
| BellSouth Long Distance | |
|
| Revenue | | $ 681 | | $ 630 | | 8 | .1% | $ 662 | | 2 | .9% |
|
| Subscribers | | 7,682 | | 7,179 | | 7 | .0% | 7,596 | | 1 | .1% |
|
| Net Adds | | 86 | | 186 | | -53 | .8% | 118 | | -27 | .1% |
|
| Access Minutes of Use (MOUs) | |
|
| Switched Access MOUs | | 15,258 | | 15,310 | | -0 | .3% | 14,810 | | 3 | .0% |
|
| BSLD MOUs | | 6,383 | | 6,539 | | -2 | .4% | 6,703 | | -4 | .8% |
|
| Total Access MOUs | | 21,641 | | 21,849 | | -1 | .0% | 21,513 | | 0 | .6% |
|
| Items Excluded From Adjusted Results - EPS Impacts |
|
| Wireless Merger Integration Costs | | $ 0 | .03 | $ 0 | .04 | $ 0 | .02 |
|
|
| Wireless Merger Intangible Amortization | | $ 0 | .04 | $ 0 | .05 | $ 0 | .04 |
|
|
| AT&T Merger Costs | | $ 0 | .05 | $ | - | $ 0 | .01 |
|
|
| Hurricane Katrina-related Expenses | | $ | - | $ 0 | .08 | $ | - |
|
|
| Severance | | $ | - | $ 0 | .03 | $ | - |
|
|
| Deferred Revenue Adjustment | | $ - | | $ (0 | .02) | $ | - |
|
|
Wireless Merger Integration Costs - Represents BellSouth’s 40% share of Cingular's merger integration costs incurred in connection with the Cingular/AT&T Wireless merger and AT&T/BellSouth 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.
Wireless Merger Intangible Amortization- Represents BellSouth's 40 percent share of the non-cash amortization of intangibles, primarily customer lists, that were created in Cingular's acquisition of AT&T Wireless.
AT&T Merger Costs - Represents specific deal-related costs directly associated with the merger with AT&T. Costs include legal and regulatory fees, costs of filing and printing the joint proxy statement, expense associated with employee retention awards, bankers' fees and directors' and officers' insurance.
Hurricane Katrina-related Expenses- Represents incremental labor and material costs primarily related to service restoration and network repairs in BellSouth's wireline business. The expenses include BellSouth's 40% share of Cingular Wireless' hurricane expenses.
Severance - Represents the net severance-related costs recorded in the 4th quarter of 2005 associated with management workforce reductions.
Deferred Revenue Adjustment - Represents the fourth quarter 2005 recognition of previously deferred revenue in the Communications Group segment. The adjustment relates to a system coding error that resulted in underreporting revenues in prior periods. The amount accumulated over multiple years and did not affect any one year by more than $9.
