SOUTHWESTERN BELL &lt;SBC> SEES EARNINGS DILUTION

  Southwestern Bell Corp said that
  its planned acquisitions of cellular telephone and paging
  systems, including those of &lt;Metromedia Inc>, will result in
  some initial earnings dilution and an increase in debt ratio.
      In a letter to shareholders in its 1986 annual report, the
  regional Bell company did not indicate the degree of earnings
  dilution it expects from the acquisitions, which total some
  1.38 billion dlrs. However, the company said the rise in its
  debt ratio will be temporary and will leave its debt level
  within an acceptable range.
      In its 1986 yearend financial statement, Southwestern Bell
  listed a debt-to-equity ratio of 43.4 pct, down slightly from
  43.7 pct in 1985.
      In 1986, the company earned 1.02 billion dlrs, or 10.26
  dlrs a share, compared with 996.2 mln dlrs, or 10 dlrs a share
  in 1985. Revenues dipped to 7.90 billion dlrs from 7.93 billion
  dlrs.
      Southwestern Bell said it expects the new tax law to have a
  negative impact on its cash flow, due mainly to the loss of
  investment tax credits.
      By mid-year, however, the company said a reduced corporate
  tax rate should have a positive impact on its net income and
  cash flow.
      In addition, the company said it is projecting a 1.7 pct
  gain in customer telephone lines and a three to four pct
  increase in long distance calling volumes.
      Southwestern Bell said 1987 capital expenditures will be
  lower that the 1.97 billion dlrs spent in 1986, a year in which
  expenditures were held below budget.
  

