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BellSouth Corporation
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The following question and answer form will be sent to BellSouth employees. The
document addresses questions on BellSouth's proposed Latin America tracking
stock.
BellSouth Employee Questions and Answers Regarding
Latin America Group Tracking Stock
Q1. Will employees be able to participate in the public offering of Latin
America group tracking stock?
A1. BellSouth is currently in the "quiet period" required by the SEC prior to
issuance of the prospectus for the public offering.
Therefore, we cannot answer this question at this time. However, other
companies involved in public offerings have, in some cases, given their
employees the opportunity to purchase stock. BellSouth is reviewing the
programs sponsored by these companies prior to finalizing an approach for
BellSouth employees. We will share more information when it is permissible
under SEC rules.
Q2. What is going to happen to my BellSouth common stock in the 401(k) Plan?
A2. When the Latin America group stock is first issued in the public offering,
all BellSouth common stock, including the stock in the in the 401(k) Plan,
will automatically convert to BLS group stock. No other changes will occur
to your BellSouth stock in the 401(k) plan at that point. However, as
described in the proxy statement, BellSouth plans to distribute Latin
America group stock to holders of BLS group stock six to 12 months after
the public offering. Therefore, employees who hold shares of BLS group
stock through the company's 401(k) Plan (as well as other company-sponsored
plans) will receive an allocation of Latin America group stock at the time
of the distribution.
Q3. How will the distribution of the Latin America group stock to BLS group
shareholders impact the value of my existing BellSouth investment in the
401(k) Plan?
A3.
o Your current investment in BellSouth through the 401(k) Plan is in
BellSouth common stock. The value of this investment fluctuates based
upon changes in BellSouth's stock price and the reinvestment of
quarterly dividends.
o After the public offering of Latin America group stock, your
investment will fluctuate based upon changes in the BLS group stock
price and the reinvestment of quarterly dividends.
o After the distribution of Latin America group stock (discussed above)
your investment in BellSouth will include both BLS group stock and
Latin America group stock. The value of your investment will then
fluctuate based upon changes in the BLS group stock price, the
reinvestment of BLS group quarterly dividends and changes in the Latin
America group stock price.
Q4. Will I be able to invest in Latin America group stock through the 401(k)
Plan?
A4. Yes, participants in the 401(k) Plans will eventually be able to invest in
Latin America group stock. However, this option may not be available until
after the distribution of Latin America group shares. We will provide more
details when we have a final plan.
Q5. Will I be able to invest in the Latin America group stock through the
existing stock purchase plans for employees?
A5. Yes, employees will be able to invest in the Latin America group stock
through the existing stock purchase plans for employees. We will provide
more details when we have a final plan.
Q6. How will the 401(k) Plan employer match and LESOP awards be handled after
the Latin America tracking stock is distributed?
A6. The 401(k) match and/or LESOP awards will be made in some combination of
BLS group stock and Latin America group stock after the distribution. The
exact ratio has not yet been determined.
Q7. Considering what has happened to the AT&T tracking stock for its domestic
cellular business, why is BellSouth interested in doing a tracking stock?
A7. A tracking stock is just another class or series of a corporation's common
stock. Although a tracking stock is created to reflect the separate
performance of a group of assets/business units/divisions, etc., its value
is not immune from the market's perception of the strength of the company
as a whole, including the strength of management.
We believe that the performance of AT&T's tracking stock reflects the
market's view that AT&T has some fundamental weaknesses in its business and
does not necessarily indicate there is a problem with the tracking stock
concept. We also believe that BellSouth's situation is very different from
AT&T's.
This notice shall not constitute an offer to sell, or the solicitation
of an offer to buy any securities.
