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The big telcos are tired of being underappreciated, and they aren't going to take it anymore.



Tuesday became the latest old-guard telco to join the tracking-stock craze. The regional Bell operating company told analysts it expects to reach a decision as early as April to sell a tracking stock for its international operations.

The move, which could give investors a way to play the hot international telecom sector, comes as wireless and Internet-related telecom stocks continue to drive the stock market's rally. The Baby Bells, which have been mostly left behind as investors throw money at highflying


-listed stocks, are feeling mounting pressure to cash in. Thus the urge to issue trackers, even though some detractors say tracking stocks deprive holders of real value.

Long Reach

BellSouth is the smallest of the remaining regional Bell companies, but its international business is formidable. More than half of BellSouth's 10.5 million customers are in nine Latin American countries and four European countries. In part because of the regulatory limitations in the U.S. and the sizable business opportunities beyond these shores, BellSouth has been far more aggressive in lining up partnerships and making strategic investments overseas than its rivals.

For example, BellSouth has seen its initial $150 million investment in German wireless provider


turn into a $5.4 billion value to shareholders through a

partnership with

KPN Royal Dutch Telecom


. That value "is not currently reflected in our stock price," BellSouth Chairman and CEO F. Duane Ackerman said recently.

Indeed, BellSouth Tuesday told analysts that it believes the Street is undervaluing it by about $13 per share, so it is preparing the tracking stock to, as they say in business, "unlock the hidden value." On Tuesday BellSouth shares finished off 15/16, or 2%, at 44 1/4, valuing the company at $83 billion.

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BellSouth may well have value that's due to be unlocked. For 1999, its shares were flaccid, hovering in the mid-40s. Meanwhile, shares of upstart telcos such as

Level 3



Allegiance Telecom


more than doubled as the


put in a remarkable run to finish the year up an eye-popping 86%.

And internationally might not be a bad place to do the unlocking. Latin American cellular companies such as

Celular Sul

(TSU) - Get TIM Participações SA Report


Telecom Argentina STET-France Telecom



Tele Nordeste Celular


have been on a tear -- particularly since

Telefonica de Espana

(TEF) - Get Telefónica SA Report

last month set an all-stock tender offer to acquire all of the shares of its Latin American subsidiaries in Peru, Brazil and Argentina.

Stay With the Flock

BellSouth's decision also comes on the heels of high-profile tracking-stock plans set by some of its old-line peers.


(T) - Get AT&T Inc. Report

, for instance, has filed for a wireless tracking-stock IPO, planned for April.

SBC Communications


last month met with bankers to hammer out a tracker for its wireless operations that it intends to sell to the public in the first half of the year.

BellSouth was

mulling its own wireless tracker last month and threw analysts a bit of a curveball by delivering plans for an international tracker instead.

The Other Side

Of course, not everyone's a fan of the tracking stock. Critics call tracking stocks second-class holdings, featuring dismal performance records and poor shareholder rights. Unlike regular common shares, tracking stocks typically bestow no ownership stake, no voting rights and no dividends.

"If something as ridiculous as this actually gets the stock moving, then so be it," says


analyst Greg Miller, who has an accumulate rating on BellSouth. Jefferies has no banking ties to BellSouth.

"Tracking stocks really add no economic value to the company," says Miller. "It's really the equivalent of beating investors over the head with a club to demonstrate what the value of the underlying asset is that they already own. It's purely financial engineering."

Of the nine tracking stocks created last year, only one-third had positive returns. Yet

Sprint PCS


, which went public in 1998, is seen as the telcom tracking success story of the century, and a prime role model with its 343% gain last year.

So as long as the bull market for telecom stocks continues, don't expect the tracking-stock trend to slow.