<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 1, 1998)
$500,000,000
BELLSOUTH TELECOMMUNICATIONS, INC.
6% RESET PUT SECURITIES (REPS-SM-), DUE JUNE 15, 2012*
-----------------
INTEREST PAYABLE JUNE 15 AND DECEMBER 15
-------------------
BELLSOUTH TELECOMMUNICATIONS, INC. (THE "COMPANY") WILL ISSUE THE 6% RESET PUT
SECURITIES, DUE JUNE 15, 2012 (THE "REPS-SM-"). THE REPS WILL BE SUBJECT TO
MANDATORY REDEMPTION FROM THE EXISTING HOLDERS ON JUNE 15, 2002 THROUGH EITHER
(I) THE EXERCISE OF THE CALL OPTION BY THE CALLHOLDER OR (II) IN THE EVENT
THE CALLHOLDER DOES NOT PURCHASE THE REPS PURSUANT TO THE CALL OPTION, THE
AUTOMATIC EXERCISE OF THE PUT OPTION BY SUNTRUST BANK, ATLANTA, AS
TRUSTEE, ON BEHALF OF THE HOLDERS. THE "CALLHOLDER" WILL BE MORGAN
STANLEY & CO. INTERNATIONAL LIMITED. IF THE CALLHOLDER, OR ANY SUCCESSOR
OR ASSIGN THERETO, PURCHASES THE REPS PURSUANT TO THE CALL OPTION, THE
REPS WILL BE PURCHASED BY THE CALLHOLDER FROM THE HOLDERS THEREOF ON
JUNE 15, 2002 (THE "COUPON RESET DATE") AT 100% OF THE ENTIRE
PRINCIPAL AMOUNT THEREOF AND THE INTEREST RATE ON THE REPS WILL BE
RESET BY THE CALCULATION AGENT EFFECTIVE ON THE COUPON RESET DATE
PURSUANT TO THE COUPON RESET PROCESS. IF THE CALLHOLDER FOR ANY
REASON FAILS TO PURCHASE THE REPS ON THE COUPON RESET DATE, THE
COMPANY WILL BE REQUIRED TO REPURCHASE THE PRINCIPAL AMOUNT OF THE
REPS FROM THE HOLDERS THEREOF ON THE COUPON RESET DATE AT 100% OF
THE PRINCIPAL AMOUNT THEREOF. SEE "DESCRIPTION OF THE REPS--CALL
OPTION; MANDATORY PUT." OWNERSHIP OF THE REPS WILL BE MAINTAINED
IN BOOK-ENTRY FORM BY OR THROUGH THE DEPOSITORY TRUST COMPANY
(THE "DEPOSITARY"). INTERESTS IN THE REPS WILL BE SHOWN ON, AND
TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS
MAINTAINED BY THE DEPOSITARY AND ITS PARTICIPANTS.
------------------------
APPLICATION WILL BE MADE TO LIST THE REPS ON THE NEW YORK STOCK EXCHANGE.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------
PRICE 99.883% AND ACCRUED INTEREST
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO THE DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (1)(3)(4)
------------------ ------------------ ------------------
<S> <C> <C> <C>
PER REPS................................................. 99.883% .450% 102.383%
TOTAL.................................................... $499,415,000 $2,250,000 $511,915,000
</TABLE>
- ---------
(1) PLUS ACCRUED INTEREST FROM JUNE 15, 1998.
(2) THE COMPANY HAS AGREED TO INDEMNIFY THE SEVERAL UNDERWRITERS AGAINST
CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SEE "UNDERWRITING."
(3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $300,000.
(4) REPRESENTS CONSIDERATION FOR THE REPS, WHICH INCLUDES CONSIDERATION FOR
THE CALL OPTION.
------------------------
* REPS IS A SERVICE MARK OF MORGAN STANLEY DEAN WITTER & CO.
------------------------
THE REPS ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ISSUED TO AND
ACCEPTED BY THE UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY
DAVIS POLK & WARDWELL, COUNSEL FOR THE UNDERWRITERS. THE UNDERWRITERS RESERVE
THE RIGHT TO WITHDRAW, CANCEL OR MODIFY SUCH OFFER AND TO REJECT ORDERS IN WHOLE
OR IN PART. IT IS EXPECTED THAT DELIVERY OF THE REPS WILL BE MADE IN BOOK-ENTRY
FORM THROUGH THE FACILITIES OF THE DEPOSITARY ON OR ABOUT JUNE 22, 1998, AGAINST
PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.
-------------------
MORGAN STANLEY DEAN WITTER
LEHMAN BROTHERS
J. P. MORGAN & CO.
MERRILL LYNCH & CO.
<PAGE>
SALOMON SMITH BARNEY
JUNE 17, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE REPS.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING OF
THE REPS, AND MAY BID FOR, AND PURCHASE, THE REPS IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
PROCEEDS OF THE OFFERING
The Company intends to apply the net proceeds toward general corporate
purposes, including the refinancing of commercial paper.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges for
the Company for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED DECEMBER 31,
MARCH 31, -----------------------------------------------------
1998 1997 1996 1995 1994 1993
- ----------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
8.4x 7.18x 6.02x 4.38x 5.68x 3.17x
</TABLE>
For the purpose of this ratio: (i) earnings have been calculated by adding
income before income taxes, gross interest expense and such portion of rental
expense representative of the interest factor on such rentals; and (ii) fixed
charges are comprised of gross interest expense and such portion of rental
expense representative of the interest factor on such rentals.
DESCRIPTION OF THE REPS
GENERAL
The REPS will be issued as a Series of debt Securities under (and as defined
in) an indenture dated June 1, 1998 and a supplemental indenture thereto dated
June 22, 1998 (as supplemented, the "Indenture"). Provisions of the Indenture
are more fully described under "Description of Securities" in the attached
Prospectus to which reference is hereby made.
The principal of and interest on the REPS are to be payable at the office or
agency of the Company in Atlanta, Georgia.
S-2
<PAGE>
The REPS will bear interest at the rate of 6% from June 15, 1998 to but
excluding June 15, 2002 (the "Coupon Reset Date"). Interest on the REPS is
payable semi-annually on June 15 and December 15 of each year, commencing
December 15, 1998 (each an "Interest Payment Date"). Interest will be calculated
based on a 360-day year consisting of twelve 30-day months. On each Interest
Payment Date, interest shall be payable to the persons in whose name the REPS
are registered on the first day of June or December (as the case may be)
immediately preceding the related Interest Payment Date (each, a "Regular Record
Date"). If Morgan Stanley & Co. International Limited, as Callholder (the
"Callholder"), elects to purchase the REPS pursuant to the Call Option (as
defined below) the Calculation Agent (as defined below) will reset the interest
rate, effective on the Coupon Reset Date, pursuant to the Coupon Reset Process
referred to below. In such circumstance, (i) the REPS will be purchased from the
holders by the Callholder, in whole but not in part, at 100% of the principal
amount thereof on the Coupon Reset Date, on the terms and subject to the
conditions described herein (interest accrued to the Coupon Reset Date will be
paid by the Company on such date to holders on the immediately preceding Regular
Record Date), and (ii) on and after the Coupon Reset Date, the REPS will bear
interest at the rate determined by the Calculation Agent in accordance with the
procedures set forth under "--Coupon Reset Process if the Notes are Called"
below.
FINAL MATURITY DATE
The REPS will mature on June 15, 2012 (the "Final Maturity Date"). On June
15, 2002, however, holders of the REPS will be entitled to receive 100% of the
principal amount thereof (i) from the Callholder if it purchases the REPS
pursuant to the Call Option or (ii) if the Callholder does not exercise the Call
Option or fails for any reason to pay the Call Price (as defined below) to the
Trustee when required, then from the Company following the exercise by the
Trustee for and on behalf of the holders of the REPS of the Mandatory Put (as
defined below). The Trustee will exercise the Mandatory Put without the consent
of or notice to the holders of the REPS.
CALL OPTION; MANDATORY PUT
(I) CALL OPTION. The initial Callholder will be Morgan Stanley & Co.
International Limited. Pursuant to the terms of the REPS, the Callholder has the
right to purchase the REPS, in whole but not in part, on the Coupon Reset Date
(the "Call Option") at a price equal to 100% of the principal amount thereof
(the "Call Price"), by giving irrevocable notice to the Trustee (the "Call
Notice"). If the Callholder exercises the Call Option, the Trustee will send a
copy of the Call Notice to the holders as required by the terms of the REPS. The
Callholder will be required to give the Call Notice to the Trustee in writing
prior to 4:00 p.m., New York City time, no later than 15 calendar days prior to
the Coupon Reset Date. If the Callholder exercises the Call Option, (i) not
later than 2:00 p.m., New York City time on the Business Day prior to the Coupon
Reset Date, the Callholder shall pay the amount of the Call Price in immediately
available funds to the Trustee for payment of the Call Price to the holders of
the REPS on the Coupon Reset Date and (ii) the holders of the REPS will be
required to deliver the REPS against payment therefor on the Coupon Reset Date
through the facilities of the Depositary. The Callholder is not required to
exercise the Call Option, and no holder of the REPS or any interest therein
shall have any right or claim against the Callholder as a result of the
Callholder's decision whether or not to exercise the Call Option or performance
or non-performance of its obligations with respect thereto.
The Call Option provides for certain circumstances under which such Call
Option may be terminated. If the Call Option terminates or if the Callholder
fails to pay the Call Price to the Trustee at or prior to the required time, the
Trustee shall exercise the Mandatory Put described below. The Trustee shall
notify the holders that it is exercising the Mandatory Put as required by the
terms of the Indenture.
(II) MANDATORY PUT. If the Callholder fails for any reason to purchase the
REPS on the Coupon Reset Date, the Trustee will be obligated to exercise on
behalf of the holders the right to require the Company to purchase the REPS, in
whole but not in part (the "Mandatory Put"), on the Coupon Reset Date at a price
S-3
<PAGE>
equal to 100% of the principal amount thereof (the "Put Price"). By its purchase
of the REPS, each holder irrevocably agrees that the Trustee shall exercise the
Mandatory Put for or on behalf of the holder of the REPS as provided herein. If
the Trustee exercises the Mandatory Put then the Company shall deliver the Put
Price in immediately available funds to the Trustee by no later than 12:00 noon,
New York City time, on the Coupon Reset Date and the holders will be required to
deliver the REPS to the Company against payment therefor on the Coupon Reset
Date through the facilities of the Depositary. No holder of the REPS or any
interest therein has the right to consent or object to the exercise of the
Trustee's duties under the Mandatory Put.
COUPON RESET PROCESS IF THE NOTES ARE CALLED
Pursuant to the terms of a calculation agency agreement, Morgan Stanley &
Co. Incorporated has been appointed the calculation agent for the REPS (in its
capacity as calculation agent for the REPS, the "Calculation Agent"). If the
Callholder exercises the Call Option as set forth above, then the Calculation
Agent shall determine the interest rate to be paid on the REPS from and
including such Coupon Reset Date to the Final Maturity Date (the "Coupon Reset
Rate") according to procedures established by the Company (the "Coupon Reset
Process") in the calculation agency agreement (the "Calculation Agreement"). The
Company and the Calculation Agent shall use reasonable efforts to cause the
actions contemplated by the Coupon Reset Process to be completed in as timely a
manner as possible.
(a) The Company shall provide the Calculation Agent with (i) a list (the
"Dealer List"), no later than five Business Days prior to the Coupon Reset
Date, containing the names and addresses of five dealers, one of which shall
be Morgan Stanley & Co. Incorporated, from which it desires the Calculation
Agent to obtain the Bids (as defined below) for the purchase of the REPS and
(ii) a copy of any other material reasonably requested by the Calculation
Agent to facilitate a successful Coupon Reset Process.
(b) Within one Business Day following receipt by the Calculation Agent
of the Dealer List, the Calculation Agent shall provide to each dealer
("Dealer") on the Dealer List (i) a copy of this Prospectus Supplement and
the accompanying Prospectus, (ii) a copy of the form of the REPS and (iii) a
written request that each such Dealer submit a Bid to the Calculation Agent
no later than 3 p.m., New York City time, on the third Business Day prior to
the Coupon Reset Date (a "Bid Date"). "Bid" shall mean an irrevocable
written offer given by a Dealer for the purchase of the REPS, settling on
the Coupon Reset Date, and shall be quoted by such Dealer as a stated yield
to maturity on the REPS ("Yield to Maturity"). Each Dealer shall be provided
with (i) the name of the Company, (ii) an estimate of the Purchase Price
(which shall be stated as a U.S. dollar amount and be calculated by the
Calculation Agent in accordance with clause (c) below), (iii) the principal
amount and maturity of the REPS and (iv) the method by which interest will
be calculated on the REPS.
(c) The purchase price to be paid by any Dealer for the REPS (the
"Purchase Price") shall be equal to (i) the principal amount of the REPS
plus (ii) a premium (the "Notes Premium") which shall be equal to the
excess, if any, of (A) the discounted present value to the Coupon Reset Date
of a bond with a maturity of June 15, 2012, which has as interest rate of
5.541%, semiannual interest payments on each June 15, and December 15
commencing December 15, 2002, and a principal amount equal to the principal
amount of the REPS, and assuming a discount rate equal to the Treasury Rate
over (B) the principal amount of the REPS. "Treasury Rate" for the REPS
means the per annum rate equal to the offer side yield to maturity of the
current on-the-run 10 year United States Treasury Security per Telerate page
500 (or any successor or substitute page as may replace such page on such
service) no later than 3 p.m., New York City time on the Bid Date.
(d) The Calculation Agent shall immediately notify the Company of (i)
the names of each of the Dealers from whom the Calculation Agent received
Bids on the Bid Date, (ii) the Bid submitted by each such Dealer and (iii)
the Purchase Price as determined pursuant to paragraph (c) hereof. Unless
S-4
<PAGE>
the Call Option has terminated, the Calculation Agent shall thereafter
select from the Bids received the Bid with the lowest Yield to Maturity (the
"Selected Bid") and set the Coupon Reset Rate equal to the interest rate
which would amortize the Notes Premium fully over the term of the REPS at
the Yield to Maturity indicated by the Selected Bid, PROVIDED, HOWEVER, that
if the Calculation Agent has not received a timely Bid from a Dealer, the
Selected Bid shall be the lowest of all Bids received by such time and
PROVIDED, FURTHER that if any two or more of the lowest Bids submitted are
equivalent, the Company shall in its sole discretion select any of such
equivalent Bids (and such selected Bid shall be the Selected Bid). In all
cases, Morgan Stanley & Co. Incorporated, in its capacity as a Dealer, has
the right to match the Bid with the lowest Yield to Maturity, whereby Morgan
Stanley & Co. Incorporated's Bid becomes the Selected Bid.
(e) Immediately after calculating the Coupon Reset Rate, the Calculation
Agent shall provide written notice to the Company and the Trustee, setting
forth the Coupon Reset Rate. At the request of the holders of the REPS, the
Calculation Agent will provide such holders the Coupon Reset Rate. The
Company shall thereafter establish the Coupon Reset Rate as the new interest
rate on the REPS, effective from and including the Coupon Reset Date by
delivery to the Trustee on or before the Coupon Reset Date of an officers'
certificate.
(f) The Callholder shall sell the REPS to the Dealer that made the
Selected Bid at the Purchase Price, such sale to be settled on the Coupon
Reset Date in immediately available funds.
If the Calculation Agent determines that (i) at any time prior to the sale
of the REPS on the Bid Date an Event of Default has occurred and is continuing
under the Indenture, (ii) a Market Disruption Event (as defined below) has
occurred and is continuing following the exercise of the Call Option, and as a
result thereof, the Callholder fails to pay the Call Price by 2:00 p.m., New
York City time on the Business Day immediately preceding the Coupon Reset Date,
(iii) two or more of the Dealers have failed to provide Bids in a timely manner
substantially as provided above, or (iv) the Company has defeased the REPS or
any Indenture covenant applicable thereto, as described in the attached
Prospectus, or notified the Calculation Agent or the Trustee in writing of its
intent to do so, then such Call Option will be automatically revoked, and the
Trustee will exercise the Mandatory Put as of the Coupon Reset Date on behalf of
the holders. "Market Disruption Event" shall mean any of the following if such
events occur and are continuing on any day from and including the date of the
Call Notice to and including the Bid Date in the judgment of the Calculation
Agent: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange, Inc. (the "NYSE") or the establishment
of minimum prices on such exchange; (ii) a general moratorium on commercial
banking activities declared by either federal or New York State authorities;
(iii) any material adverse change in the existing financial, political or
economic conditions in the United States of America; (iv) an outbreak or
escalation of major hostilities involving the United States of America or the
declaration of a national emergency or war by the United States; or (v) any
material disruption of the U.S. government securities market, U.S. corporate
bond market or U.S. federal wire system; provided, in each case, that in the
judgment of the Calculation Agent the effect of the foregoing makes it
impractical to conduct the Coupon Reset Process.
The Calculation Agreement provides that the Calculation Agent may resign at
any time, such resignation to be effective ten business days after the delivery
to the Company and the Trustee of notice of such resignation, or may be removed
by the Company under certain circumstances. In either case, the Company may
appoint a successor Calculation Agent.
The Calculation Agent, in its individual capacity, may buy, sell, hold and
deal in the REPS and may exercise any vote or join in any action which any
holder of the REPS may be entitled to exercise or take as if it were not the
Calculation Agent. The Calculation Agent, in its individual capacity, may also
engage in any transaction with the Company and any of its affiliates as if it
were not the Calculation Agent.
S-5
<PAGE>
DEFEASANCE
The REPS will be subject to defeasance and covenant defeasance as described
in the attached Prospectus.
TRUSTEE
SunTrust Bank, Atlanta (the "Trustee") is the trustee under the Indenture.
The Company and certain of its affiliates maintain banking relationships in the
ordinary course of business with the Trustee. The Trustee is also the trustee
with respect to the Company's Ten Year 6 1/2% Notes, due June 15, 2005, Twelve
Year 7% Notes, due February 1, 2005, Forty Year 7 5/8% Debentures, due May 15,
2035, and Thirty Year 6 3/8% Debentures, due June 1, 2028.
BOOK-ENTRY SYSTEM
The REPS will be represented by one or more global securities (the "Global
Security"). The Global Security will be deposited with, or on behalf of, the
Depositary and registered in the name of a nominee of the Depositary. Except
under circumstances described below, the REPS will not be issuable in definitive
form.
Upon the issuance of the Global Security, the Depositary will credit on its
book-entry registration and transfer system the accounts of persons designated
by the Underwriters with the respective principal amounts of the REPS
represented by the Global Security. Ownership of beneficial interests in the
Global Security will be limited to persons that have accounts with the
Depositary or its nominee ("participants") or persons that may hold interests
through participants. Ownership of beneficial interests in the Global Security
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the Depositary or its nominee (with respect to
interests of participants) and on the records of participants (with respect to
interests of persons other than participants). The laws of some states require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and such laws may impair the ability to own,
transfer or pledge beneficial interests in the Global Security.
So long as the Depositary or its nominee is the registered owner of the
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the REPS represented by the Global
Security for all purposes under the Indenture. Except as provided below, owners
of beneficial interests in the Global Security will not be entitled to have REPS
represented by the Global Security registered in their names, will not receive
or be entitled to receive physical delivery of REPS in definitive form and will
not be considered the owners or holders thereof under the Indenture.
Principal and interest payments on REPS registered in the name of the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner of the Global Security. None of the
Company, the Trustee, any paying agent or the registrar for the REPS will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in the Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interest.
The Company expects that the Depositary for the REPS or its nominee, upon
receipt of any payment of principal or interest, will credit immediately
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Security
as shown on the records of the Depositary or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in the
Global Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
S-6
<PAGE>
If the Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company within 90
days, the Company will issue REPS in definitive form in exchange for the entire
Global Security. In addition, the Company may at any time and in its sole
discretion determine not to have the REPS represented by the Global Security
and, in such event, will issue REPS in definitive form in exchange for the
entire Global Security. In any such instance, an owner of a beneficial interest
in the Global Security will be entitled to physical delivery in definitive form
of REPS represented by the Global Security equal in principal amount to such
beneficial interest and to have such REPS registered in its name. REPS so issued
in definitive form will be issued as registered REPS in denominations of $1,000
and integral multiples thereof, unless otherwise specified by the Company.
Settlement for the REPS will be made by the Underwriters in immediately
available funds. All payments of principal and interest on Global Securities
will be made by the Company in immediately available funds.
S-7
<PAGE>
UNITED STATES FEDERAL TAXATION
The following is based on the advice of Davis Polk & Wardwell, special tax
counsel to the Company ("Tax Counsel"), and is a general discussion of the
principal potential U.S. federal income tax consequences of ownership and
disposition of the REPS to initial holders purchasing REPS at the "issue price."
The "issue price" of a REPS will equal the first price to the public (not
including bond houses, brokers or similar persons or organizations acting in the
capacity of underwriters, placement agents or wholesalers) at which a
substantial amount of the REPS is sold for money. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), and Treasury
regulations, revenue rulings, administrative interpretations and judicial
decisions, all as currently in effect, any of which are subject to change,
possibly on a retroactive basis. Moreover, it deals only with purchasers who
hold REPS as "capital assets" within the meaning of Section 1221 of the Code,
and does not purport to deal with persons in special tax situations, such as
financial institutions, regulated investment companies, dealers in securities or
currencies, persons holding REPS as a hedge against currency risk or as a
position in a "straddle," "conversion" or another integrated transaction for tax
purposes, or U.S. Holders (as defined below) whose functional currency is not
the U.S. dollar. In addition, because the Company intends to treat the REPS as
maturing on the Coupon Reset Date, as discussed below, this discussion only
addresses the U.S. federal income tax consequences of the REPS until the Coupon
Reset Date.
As used herein, the term "U.S. Holder" means a beneficial owner of REPS that
is, for U.S. federal income tax purposes, (i) a citizen or resident of the
United States, (ii) a corporation created or organized in or under the laws of
the United States or of any political subdivision thereof, or (iii) an estate or
trust whose income is subject to U.S. federal income tax regardless of its
source. As used herein, the term "non-U.S. Holder" means a beneficial owner of a
REPS that is, for U.S. federal income tax purposes, (i) a nonresident alien
individual, (ii) a foreign corporation, (iii) a nonresident alien fiduciary of a
foreign estate or trust or (iv) a foreign partnership one or more of the members
of which is, for U.S. federal income tax purposes, a nonresident alien
individual, a foreign corporation or a nonresident alien fiduciary of a foreign
estate or trust.
Because the REPS are subject to exercise of the Call Option or the Mandatory
Put on the Coupon Reset Date, the Company intends to treat the REPS as maturing
on the Coupon Reset Date for U.S. federal income tax purposes and as being
reissued on the Coupon Reset Date should the Coupon Reset Process be completed.
By purchasing the REPS, a holder agrees (in the absence of an administrative
determination or judicial ruling to the contrary) to follow such treatment for
U.S. federal income tax purposes. Because no debt instrument closely comparable
to the REPS has been the subject of any Treasury regulation, revenue ruling or
judicial decision, the U.S. federal income tax treatment of the REPS is not
certain. No ruling on any of the issues discussed below will be sought from the
Internal Revenue Service ("IRS"). Due to the absence of authorities that
directly address instruments that are similar to the REPS, Tax Counsel has
rendered no opinion as to the proper U.S. federal income tax characterization of
the REPS. Accordingly, significant aspects of the U.S. federal income tax
consequences of an investment in the REPS are uncertain, and no assurance can be
given that the IRS or the courts will agree with the characterization described
above. PROSPECTIVE PURCHASERS ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISERS
REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE REPS
(INCLUDING ALTERNATIVE CHARACTERIZATIONS OF THE REPS). EXCEPT WHERE INDICATED TO
THE CONTRARY, THE FOLLOWING DISCUSSION ASSUMES THAT THE COMPANY'S TREATMENT OF
THE REPS WILL BE RESPECTED FOR U.S. FEDERAL INCOME TAX PURPOSES. PROSPECTIVE
PURCHASERS SHOULD ALSO CONSULT THEIR TAX ADVISERS WITH RESPECT TO ANY TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING
JURISDICTION.
TREATMENT OF U.S. HOLDERS
Assuming the characterization of the REPS as maturing on the Coupon Reset
Date, Tax Counsel is of the opinion that the following U.S. federal income tax
consequences would result with respect to U.S. Holders.
S-8
<PAGE>
PAYMENTS OF INTEREST. Interest on the REPS would be taxable as ordinary
income for U.S. federal income tax purposes when received or accrued by a U.S.
Holder in accordance with its method of accounting. The Company does not
anticipate that the REPS will be issued with original issue discount ("OID"),
generally defined as the excess of the stated redemption price at the Coupon
Reset Date of the REPS over its issue price. However, if a REPS is issued with
OID and such OID is greater than the statutory DE MINIMIS amount (generally,
1/4 of one percent of the REPS' stated redemption price at the Coupon Reset Date
multiplied by the number of complete years to the Coupon Reset Date from the
issue date), the holder of a REPS will be required to recognize as ordinary
income the amount of OID on the REPS as such discount accrues, in accordance
with a constant yield method.
SALE, EXCHANGE OR REDEMPTION. When a REPS is sold or redeemed, the U.S.
Holder will recognize gain or loss equal to the difference between the amount
realized on the sale or redemption (excluding any amount attributable to accrued
interest not previously included in income) and the adjusted basis in its REPS.
The adjusted basis of the REPS generally would equal the U.S. Holder's cost,
increased by any OID previously includable in the U.S. Holder's income with
respect to the REPS and reduced by any principal payments received by the U.S.
Holder and, in the case of a REPS with OID, by the amount of any other payments
that do not constitute qualified stated interest. Gain or loss on sale or
redemption of a REPS would generally be capital gain or loss.
Capital gains of individuals derived with respect to capital assets held for
more than one year are eligible for reduced rates of taxation depending upon the
holding period of such capital assets. The deductibility of capital losses is
subject to certain limitations.
ALTERNATIVE CHARACTERIZATION
There can be no assurance that the IRS will agree with, or that a court will
uphold, the Company's treatment of the REPS as maturing on the Coupon Reset Date
and as thereafter being reissued upon completion of the Coupon Reset Process,
and it is possible that the IRS could assert another characterization. In
particular, the IRS could seek to treat the REPS as maturing on the Final
Maturity Date and possibly also to treat the issue price of the REPS as
including the amount the U.S. Holder could be treated as having received for the
Call Option. Because of the possible reset pursuant to the Coupon Reset Process,
if the REPS were treated as maturing on the Final Maturity Date, Treasury
regulations relating to contingent payment debt obligations (the "Contingent
Payment Debt Regulations") would apply. In such case, the timing and character
of income on the REPS would be significantly affected. Among other things, U.S.
Holders, regardless of their usual method of tax accounting, would be required
to accrue income annually as OID, subject to the adjustments described below, at
a "comparable yield" on the adjusted issue price, which could be higher than the
actual cash payments received on the REPS in a taxable year. In this regard, the
Contingent Payment Debt Regulations require that a projected payment schedule be
determined, and that adjustments to income accruals be made to account for
differences between actual payments and projected payments. Furthermore, any
gain realized with respect to the REPS would generally be treated as ordinary
income, and any loss realized would generally be treated as ordinary loss to the
extent of the U.S. Holder's ordinary income inclusions with respect to the REPS.
Any remaining loss generally would be treated as capital loss. In addition, upon
the sale of a REPS (other than through the exercise of the Call Option), the IRS
could take the position that the gain or loss with respect to the Call Option
and the gain or loss with respect to the debt obligation must be separately
determined, in which case any deemed loss with respect to the Call Option would
be treated as capital loss, and a corresponding amount of additional ordinary
income would need to be recognized by the U.S. Holder with respect to the sale
of the debt obligation. The ability to use capital losses to offset ordinary
income in determining taxable income is generally limited.
Prospective purchasers are strongly urged to consult their tax advisers
regarding the U.S. federal income tax consequences of an investment in the REPS.
S-9
<PAGE>
TREATMENT OF NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to U.S. federal income or withholding
tax on payments of principal, premium (if any) or interest (including OID and
accruals under the Contingent Payment Debt Regulations, if any) on a REPS,
unless such non-U.S. Holder owns actually or constructively 10% or more of the
total combined voting power of the Company or is a controlled foreign
corporation related to the Company through stock ownership. Sections 871(h) and
881(c) of the Code, and applicable Treasury regulations, require that, in order
to obtain the exemption from withholding tax described above, either the
beneficial owner of the REPS, or a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "Financial Institution") and that is holding
the REPS on behalf of such beneficial owner, file a statement with the
withholding agent to the effect that the beneficial owner of the REPS is not a
U.S. person. In general, such requirement will be fulfilled if the beneficial
owner of a REPS certifies on IRS Form W-8, under penalties of perjury, that it
is not a U.S. person and provides its name and address, and any Financial
Institution holding the REPS on behalf of the beneficial owner files a statement
with the withholding agent to the effect that it has received such statement
from the Holder (and furnishes the withholding agent with a copy thereof).
Generally, a non-U.S. Holder will not be subject to U.S. federal income tax
on any amount which constitutes gain upon retirement or disposition of a REPS,
provided the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. Holder. Certain other exceptions
may be applicable, and a non-U.S. Holder should consult its tax adviser in this
regard.
If a non-U.S. Holder of a REPS is engaged in a trade or business in the
United States, and if interest (including OID, if any) or gain on the REPS is
effectively connected with the conduct of such trade or business, the non-U.S.
Holder, although exempt from the withholding tax discussed above, will generally
be subject to regular U.S. income tax on interest and on any gain realized on
the sale, exchange or other disposition of a REPS in the same manner as if it
were a U.S. Holder. In lieu of the statement described above, such Holder will
be required to provide to the Company a properly executed Form 4224 (or
successor form) in order to claim an exemption from withholding tax. In
addition, if such non-U.S. Holder is a foreign corporation, it may be subject to
a branch profits tax equal to 30% (or such lower rate provided by an applicable
treaty) of its effectively connected earnings and profits for the taxable year,
subject to certain adjustments. For purposes of the branch profits tax, interest
on and any gain recognized on the sale, exchange or other disposition of a REPS
will be included in the effectively connected earnings and profits of such
non-U.S. Holder if such interest or gain, as the case may be, is effectively
connected with the conduct by the non-U.S. Holder of a trade or business in the
United States.
The REPS will not be includable in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of such individual's death, payments in respect of the REPS
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
A holder may be subject to backup withholding at the rate of 31% of the
interest and other "reportable payments" (including, under certain
circumstances, principal payments and sales proceeds) paid with respect to the
REPS if, in general, the holder fails to comply with certain certification
procedures and is not an exempt recipient under applicable provisions of the
Code.
On October 6, 1997, the Treasury Department issued new regulations (the "New
Regulations") which make modifications to the withholding, backup withholding
and information reporting rules described above. The New Regulations will
generally be effective for payments made after December 31, 1999, subject to
certain transition rules. Prospective investors are urged to consult their own
tax advisers regarding the New Regulations.
S-10
<PAGE>
UNDERWRITING
Under the terms of and subject to the conditions contained in an
Underwriting Agreement dated June 17, 1998, the Underwriters named below have
severally agreed to purchase from the Company, and the Company has agreed to
sell to them, the respective principal amounts of the REPS set forth below:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
- ------------------------------------------------------------------------------ --------------
<S> <C>
Morgan Stanley & Co. Incorporated ........................................... $ 160,000,000
Lehman Brothers Inc. ........................................................ 160,000,000
J.P. Morgan Securities Inc. ................................................. 60,000,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated............................ 60,000,000
Salomon Brothers Inc ......................................................... 60,000,000
--------------
Total..................................................................... $ 500,000,000
--------------
--------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
thereunder are subject to approval of certain legal matters by counsel and to
various other conditions. The nature of the Underwriters' obligations is such
that they are committed to take and pay for all of the REPS if any are taken.
The Underwriters propose to offer the REPS in part directly to the public at
the public offering price set forth on the cover page of this Prospectus
Supplement and in part to certain dealers at such price less a concession of
.300% of their principal amount. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of .250% of the principal amount of the
REPS to certain other dealers. After the initial public offering, the offering
price and other selling terms may be changed by the Underwriters.
In order to facilitate the offering of the REPS, the Underwriters may engage
in transactions that stabilize, maintain or otherwise affect the price of the
REPS. Specifically, the Underwriters may overallot in connection with the
offering, creating a short position in the REPS for their own account. In
addition, to cover overallotments or to stabilize the price of the REPS, the
Underwriters may bid for, and purchase, the REPS in the open market. Finally,
the Underwriting syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the REPS in the offering, if the
syndicate repurchases previously distributed REPS in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the REPS above
independent market levels. The Underwriters are not required to engage in these
activities, and may end any of these activities at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
In the ordinary course of their respective businesses, affiliates of the
Underwriters have engaged, and will in the future engage, in investment banking
transactions with the Company and certain of its affiliates.
S-11
<PAGE>
PROSPECTUS
$1,200,000,000
BELLSOUTH TELECOMMUNICATIONS, INC.
DEBT SECURITIES
BellSouth Telecommunications, Inc. (the "Company") may offer, in one or more
issues, up to $1,200,000,000 aggregate principal amount of its debt securities
(the "Securities") on terms to be determined at the time the Securities are
offered for sale. When a particular issue of the Securities is offered, a
prospectus supplement ("Prospectus Supplement"), together with this prospectus,
will be delivered setting forth the terms of the Securities, including, where
applicable, the specific designation, aggregate principal amount, denominations,
maturity, rate of any interest (or manner of calculation thereof) and time of
payment thereof, any redemption provisions, the initial public offering price,
the names of the underwriters, dealers or agents, any compensation to such
underwriters, dealers or agents and any other specific terms in connection with
the offering and sale of the Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is June 1, 1998.
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
-------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and in accordance therewith
files reports and other information with the Securities and Exchange Commission
("SEC"). Such reports and other information filed by the Company can be
inspected and copied at the public reference facilities of the SEC, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at
the following SEC Regional Offices: 13th Floor, 7 World Trade Center, New York,
NY 10048 and Suite 1400, Northwestern Atrium Center, 500 West Madison Street,
Chicago, IL 60661-2511. Such material can also be inspected at the New York
Stock Exchange. Copies can be obtained from the SEC by mail at prescribed rates.
Requests should be directed to the SEC's Public Reference Section, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549.
The Company is not required to deliver annual reports to its security
holders pursuant to the Exchange Act or any stock exchange requirement. Copies
of its annual, quarterly and periodic reports to the SEC on Forms 10-K, 10-Q and
8-K (containing financial information audited by independent accountants in the
case of its annual report on Form 10-K) are required to be furnished to the
trustee under the indenture or indentures pursuant to which the Securities will
be issued.
The Company has registered the Securities with the SEC pursuant to
Registration Statement Nos. 33-63661 and 333-00649 on Form S-3 (together with
all amendments and exhibits thereto, the "Registration Statements") under the
Securities Act of 1933, as amended ("Securities Act"). This Prospectus does not
contain all of the information set forth in the Registration Statements, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC. For further information, reference is made to the Registration Statements.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the SEC and are
hereby incorporated herein by reference:
Annual Report on Form 10-K for the year ended December 31, 1997.
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
COPIES OF THE ABOVE DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS) MAY BE
OBTAINED UPON REQUEST WITHOUT CHARGE FROM THE VICE PRESIDENT AND COMPTROLLER OF
THE COMPANY, 675 WEST PEACHTREE STREET, N.E., ATLANTA, GEORGIA 30375 (TELEPHONE
NUMBER (404) 529-8611).
2
<PAGE>
THE COMPANY
The Company is an operating telephone company, wholly owned by BellSouth
Corporation, which provides predominantly tariffed telecommunications services
to approximately two-thirds of the population and one-half of the territory
within Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North
Carolina, South Carolina and Tennessee.
The Company is a Georgia corporation and has its principal executive offices
at 675 West Peachtree Street, N.E., Atlanta, Georgia 30375 (telephone number
(404) 529-8611).
USE OF PROCEEDS
The Company intends to apply the net proceeds from the sale of the
Securities primarily toward refinancing debt and also for general corporate
purposes. The Company intends to offer Securities from time to time for
refinancing purposes when and as prevailing interest rates and other market
conditions are advantageous.
DESCRIPTION OF SECURITIES
The following description sets forth certain general terms and provisions of
the Securities to which any Prospectus Supplement may relate. The particular
terms and provisions of the Securities offered by a Prospectus Supplement, and
the extent to which such general terms and provisions described below may apply
thereto, will be described in the Prospectus Supplement.
GENERAL INDENTURE PROVISIONS
The Securities are to be issued in one or more series (a "Series") under an
indenture or indentures (the "Indenture") entered or to be entered into between
the Company and one or more trustees (the "Trustee"). The following summaries of
certain provisions of the Securities and the Indenture do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the Indenture. Particular sections of the Indenture which
are relevant to the discussion are cited parenthetically. Capitalized terms used
in this Prospectus which are defined in the Indenture shall have the same
meaning herein as in the Indenture. "Principal" when used herein includes, when
appropriate, the premium, if any.
The Indenture does not limit the amount of securities, other than the
Securities, which may be issued or the amount of debt which may be incurred by
the Company. Reference is made to the Prospectus Supplement for the following
terms of the Securities being offered hereby: (i) the title of the Securities;
(ii) the date on which the principal of the Securities will mature; (iii) the
rate, if any, at which the Securities will bear interest, the date or dates from
which any such interest will accrue and on which such interest will be payable;
(iv) any redemption or sinking fund provisions; (v) if other than the principal
amount thereof, the portion of the principal amount of Securities which will be
payable upon declaration of acceleration of the maturity thereof; and (vi) any
additional provisions or other special terms not inconsistent with the
provisions of the Indenture, including any terms which may be required by or
advisable under United States laws or regulations or advisable in connection
with the marketing of the Securities.
The Securities will be issuable initially only as registered Securities
without coupons in denominations of $1,000 and any integral multiple of $1,000.
Principal and interest are to be payable at the office or agency of the Company
designated by the Company from time to time. Securities may be presented for
transfer or exchange at such office or agency. No service charge will be made
for any transfer or exchange.
The Securities will not be secured. The Company will covenant in the
Indenture that if it shall subject to lien any of its property, it will secure
the outstanding Securities, and any other of its obligations which
3
<PAGE>
may then be outstanding and entitled to the benefit of a similar covenant,*
ratably with the indebtedness or obligations secured by such lien, so long as
such obligations are so secured. The foregoing covenant will not apply to
purchase-money liens, or to deposits to secure public or statutory obligations
or with any governmental body for specified purposes. A subsidiary or other
affiliate of the Company may subject to lien any property whether or not
acquired from the Company. (SECTION 4.03)
The Company also will covenant that if in case of certain events--namely,
(a) any consolidation or merger of the Company and any other corporation, or (b)
any sale or conveyance of the property of the Company as an entirety or
substantially as an entirety to any other corporation, or (c) the acquisition by
the Company of the property of any other corporation as an entirety or
substantially as an entirety--any of the property owned by the Company
immediately prior to such event would thereupon become subject to any lien, the
Company prior to such event will secure the outstanding Securities and any other
of its obligations which may then be outstanding and entitled to the benefit of
a similar covenant;* ratably by a direct lien on all such property of the
Company, prior to any lien to which such property would become subject by reason
of such event. In case the Securities have been secured pursuant to the
provisions described in this paragraph by a direct lien on substantially all of
the telephone plant and on all securities of affiliates owned by the Company,
the covenants described in this paragraph and the preceding paragraph will no
longer be of any effect. As used in the covenants referred to in this paragraph
and the following paragraph, the word "securities" will be defined to mean
stocks and all indebtedness except indebtedness (other than that arising from
borrowing) incurred in the ordinary course of business. (SECTION 4.04)
The Indenture will provide that the Company may be discharged from all
obligations under outstanding Securities of any Series upon the irrevocable
deposit with the Trustee as trust funds solely for the benefit of the holders of
such Securities money and/or U.S. Government Obligations (as defined in the
Indenture) sufficient to pay and discharge the principal of (and premium, if
any) and interest on such Securities. In such event, except in the case of
Securities becoming due and payable within one year, the Company shall deliver
to the Trustee a ruling from the Internal Revenue Service or an Opinion of
Counsel (as defined in the Indenture) to the effect that the holders of such
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of the payment and discharge and will be subject to federal
income tax on the same amount and in the same manner and at the same times as
would have been the case if such payment and discharge had not occurred. On
substantially the same terms and conditions, the Company may be relieved from
the obligation to comply with certain covenants in the Indenture, including
those described in the preceding two paragraphs. (SECTION 11.01)
The Indenture will contain provisions permitting the Company and the
Trustee, with the consent of the holders of not less than 66 2/3% in aggregate
principal amount of the Securities at the time outstanding, to modify the
Indenture or any supplemental indenture or the rights of the holders of the
Securities; provided that no such modification shall (i) extend the fixed
maturity of any Securities, or reduce the principal amount thereof, or reduce
the rate or extend the time of payment of interest thereon, or reduce any
premium payable upon the redemption thereof, without the consent of the holder
of each Security so affected, or (ii) reduce the aforesaid percentage of
Securities, the consent of the holders of which is required for any such
modification, without the consent of the holders of all Securities then
outstanding. The Indenture will also contain provisions permitting the Company
and the Trustee, without the consent of the holders of Securities, to modify the
Indenture or any supplemental indenture or the rights of the holders of the
Securities for certain limited purposes. (SECTION 9.02)
Under the Indenture an Event of Default with respect to Securities of any
Series means, with respect to Securities of such Series: default for 90 days in
payment of interest; default in payment of principal or premium; default for 90
days after notice by the Trustee or the holders of at least 25% in aggregate
- ------------------------
* Each outstanding issue of long and intermediate term debt of the Company is
entitled to the benefit of a similar covenant.
4
<PAGE>
principal amount of Securities of such Series then outstanding in performance of
any other covenants in the Indenture; or certain events in bankruptcy,
insolvency or reorganization. (SECTION 6.01)
Subject to the duty of the Trustee during default to act with the specified
standard of care, the Trustee before taking any action under the Indenture is
entitled to reasonable security or indemnity (SECTIONS 7.01 AND 7.02). Subject
to such provisions for the indemnification of the Trustee, the holders of a
majority of the principal amount of outstanding Securities of a Series may
direct the time, method and place for certain actions by the Trustee with
respect to Securities of such Series. (SECTION 6.06)
Except as may be otherwise described in a Prospectus Supplement, the
covenants contained in the Indenture would not afford holders of the Securities
protection in the event of a highly-leveraged transaction involving the Company.
GLOBAL SECURITIES
The Securities of a Series may be issued in the form of one or more fully
registered global Securities (a "Global Security") that will be deposited with
The Depository Trust Company (the "Depositary") or with a nominee for the
Depositary. In such case, one or more Global Securities will be registered in
the name of Cede & Co., as nominee for the Depositary and issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Securities of the Series to be represented by
such Global Security or Securities. Unless and until it is exchanged in whole or
in part for Securities in definitive registered form, a Global Security may not
be transferred except as a whole by the Depositary for such Global Security to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor depositary or a nominee of such successor. The laws of some
States require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and such laws may impair the
ability to own, transfer or pledge beneficial interests in the Global Security.
The Depositary has informed the Company that it is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. The Depositary holds securities that its
participants deposit with it. The Depositary also facilitates the settlement
among participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. The Depositary is owned by a number of its direct participants
and by The New York Stock Exchange, Inc., the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to its system is
also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
direct participant, either directly or indirectly. The rules applicable to the
Depositary and its participants are on file with the Commission.
The specific terms of the depositary arrangement with respect to any portion
of a Series of Securities to be represented by a Global Security will be
described in the Prospectus Supplement relating to such Series. The Company
anticipates that the following provisions will apply to all depositary
arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Securities represented by such Global
Security to the accounts of persons that have accounts with such Depositary
("participants"). The accounts to be credited shall be designated by any
underwriters or agents participating in the distribution of such Securities.
Ownership of beneficial interests in a Global Security will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in such Global Security will be shown on, and the
transfer of that ownership will be effected only through,
5
<PAGE>
records maintained by the Depositary for such Global Security (with respect to
interests of participants) and on the records of participants (with respect to
interests of persons other than participants) in accordance with the procedures
of the Depositary.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Securities
represented by such Global Security for all purposes under the Indenture. Except
as set forth below, owners of beneficial interests in a Global Security will not
be entitled to have the Securities represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of such Securities in definitive form and will not be considered the
owners or holders thereof under the Indenture. Accordingly, each person owning a
beneficial interest in a Global Security must rely on the procedures of the
Depositary for such Global Security and, if such person is not a participant, on
the procedures of the participant through which such person owns its interest,
to exercise any rights of a holder under the Indenture. The Company understands
that under existing industry practices, if the Company requests any action of
holders or if an owner of a beneficial interest in a Global Security desires to
give or take any action which a holder is entitled to give or take under the
Indenture, the Depositary for such Global Security would authorize the
participants holding the relevant beneficial interests to give or take such
action, and such participants would authorize beneficial owners owning through
such participants to give or take such action or would otherwise act upon the
instructions of beneficial owners holding through them.
Principal and interest payments on Securities represented by a Global
Security registered in the name of a Depositary or its nominee will be made to
such Depositary or its nominee, as the case may be, as the registered owner of
such Global Security. None of the Company, the Trustee or any paying agent for
such Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in such Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The Company expects that the Depositary for any Securities represented by a
Global Security, upon receipt of any payment of principal or interest, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of such Global
Security as shown on the records of such Depositary. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with the securities
held for the accounts of customers registered in "street names" and will be the
responsibility of such participants.
If the Depositary for any Securities represented by a Global Security is at
any time unwilling or unable to continue as Depositary and a successor
Depositary is not appointed by the Company within 90 days, the Company will
issue such Securities in definitive form in exchange for such Global Security.
In addition, the Company may at any time and in its sole discretion determine
not to have any of the Securities of a Series represented by one or more Global
Securities and, in such event, will issue Securities of such Series in
definitive form in exchange for all of the Global Security or Securities
representing such Securities. In such instance, a beneficial owner of a Global
Security will be entitled to physical delivery in definitive form of Securities
of such Series represented by the Global Security equal in principal amount to
such beneficial interest and to have such Securities registered in its name.
Securities so issued in definitive form will be issued as registered Securities
in authorized denominations. Any Securities issued in definitive form in
exchange for a Global Security will be registered in such name or names as the
Depositary shall instruct the Trustee. It is expected that such instructions
will be based upon directions received from the Depositary from participants
with respect to ownership of beneficial interests in such Global Security.
6
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell the Securities being offered hereby in four ways: (i)
directly to purchasers, (ii) through agents, (iii) through underwriters (the
"Underwriters") and (iv) through dealers.
The distribution of the Securities may be effected from time to time in one
or more transactions either (i) at a fixed price or prices, which may be
changed, (ii) at market prices prevailing at the time of sale, (iii) at prices
related to such prevailing market prices or (iv) at negotiated prices.
In connection with the sale of Securities, Underwriters or agents may
receive compensation from the Company or from purchasers of Securities for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the Underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution of
Securities may be deemed to be Underwriters, and any discounts or commissions
received by them from the Company and any profit on the resale of Securities by
them may be deemed to be underwriting discounts and commissions, under the
Securities Act. Any such Underwriter or agent will be identified, and any such
compensation received from the Company will be described, in the Prospects
Supplement.
The Underwriters and other persons may be entitled, under agreements which
may be entered into with the Company, to indemnification against certain civil
liabilities, including liabilities under the Securities Act.
LEGAL OPINIONS
Ms. Margaret H. Greene, Vice President and General Counsel of the Company,
is passing upon the legality of the Securities for the Company, relying on the
opinions of other counsel as to certain matters. Ms. Greene may be deemed to own
beneficially approximately 140,200 shares of BellSouth Corporation Common Stock,
including interests through various BellSouth benefit plans.
On behalf of dealers, underwriters or agents, Davis Polk & Wardwell is
passing upon certain legal matters in connection with the offering of the
Securities.
INDEPENDENT ACCOUNTANTS
The financial statements of the Company included in its Annual Report on
Form 10-K for the year ended December 31, 1997 and incorporated by reference
herein, have been audited by Coopers & Lybrand L.L.P., independent accountants,
to the extent and for the periods indicated in their report relating to such
financial statements, which is also incorporated by reference herein, and have
been so included in reliance upon the report of Coopers & Lybrand L.L.P. given
upon their authority as experts in auditing and accounting.
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