FORM 10-Q

                        SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C. 20549


(Mark One)

     |X|          Quarterly Report Pursuant to Section 13 or 15(d) of the
                          Securities Exchange Act of 1934

                        For the period ended June 30, 1997

                                        or

      |_|         Transition Report Pursuant to Section 13 or 15(d) of the
                          Securities Exchange Act of 1934

                   For the transition period from       to

                           Commission File Number 1-8609

                               PACIFIC TELESIS GROUP

                Incorporated under the laws of the State of Nevada
                 I.R.S. Employer Identification Number 94-2919931

                130 Kearny Street, San Francisco, California 94108
                         Telephone Number: (415) 394-3000


THE REGISTRANT,  A WHOLLY-OWNED SUBSIDIARY OF SBC COMMUNICATIONS INC., MEETS THE
CONDITIONS SET FORTH IN GENERAL  INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS
THEREFORE  FILING THIS FORM WITH REDUCED  DISCLOSURE  FORMAT PURSUANT TO GENERAL
INSTRUCTION H(2).

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No


<PAGE>


                                         


PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements
<TABLE>
PACIFIC TELESIS GROUP
---------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions except per share amounts
(Unaudited) 
<CAPTION>
---------------------------------------------------------------------------------------
                                                   ------------------------------------
                                                     Three months        Six months
                                                         ended              ended
                                                       June 30,           June 30,
                                                   ------------------------------------
                                                    1997      1996      1997    1996
---------------------------------------------------------------------------------------
<S>                                                 <C>       <C>       <C>      <C>
Operating Revenues
Local service                                    $   1,107 $  1,016  $  2,144 $  1,995
Network access:
  Interstate                                           355      461       829      919
  Intrastate                                           217      186       405      366
Long-distance service                                  298      322       607      639
Directory advertising                                  264      278       627      585
Other                                                  151      142       315      279
---------------------------------------------------------------------------------------
Total operating revenues                             2,392    2,405     4,927    4,783
---------------------------------------------------------------------------------------

Operating Expenses
Cost of services and products                        1,000      836     1,876    1,722
Selling, general and administrative                  1,903      487     2,370      891
Depreciation and amortization                          984      464     1,475      929
---------------------------------------------------------------------------------------
Total operating expenses                             3,887    1,787     5,721    3,542
---------------------------------------------------------------------------------------
Operating Income (Loss)                             (1,495)     618      (794)   1,241
---------------------------------------------------------------------------------------
Other Income (Expense)
Interest expense                                      (117)     (94)     (209)    (187)
Other income (expense)- net                            (49)     (17)      (62)     (21)
---------------------------------------------------------------------------------------
Total other income (expense)                          (166)    (111)     (271)    (208)
---------------------------------------------------------------------------------------
Income (Loss) Before Income Taxes and Cumulative
  Effect of Accounting Changes                      (1,661)     507    (1,065)   1,033
---------------------------------------------------------------------------------------
Income Taxes                                          (552)     216      (317)     426
---------------------------------------------------------------------------------------
Income (Loss) Before Cumulative Effect of
  Accounting Changes                                (1,109)     291      (748)     607
Cumulative Effect of Accounting Changes, net of tax      -        -       322       85
---------------------------------------------------------------------------------------
Net Income (Loss)                                $  (1,109)$    291  $   (426) $   692
---------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>

<TABLE>
---------------------------------------------------------------------------------
PACIFIC TELESIS GROUP
---------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts
<CAPTION>
---------------------------------------------------------------------------------
                                                         June 30,   December 31,
                                                      ---------------------------
                                                             1997           1996
---------------------------------------------------------------------------------
<S>                                                      <C>            <C>
Assets                                                 (Unaudited)
Current Assets
Cash and cash equivalents                                $    113        $    72
Accounts receivable - net of allowances for
  uncollectibles of $212 and $163                           2,287          2,109
Prepaid expenses                                               62             52
Deferred income taxes                                         624            144
Deferred charges                                               21             45
Other current assets                                           62             52
---------------------------------------------------------------------------------
Total current assets                                        3,169          2,474
---------------------------------------------------------------------------------
Property, Plant and Equipment - at cost                    29,796         29,032
  Less: Accumulated depreciation and amortization          17,720         16,959
---------------------------------------------------------------------------------
Property, Plant and Equipment - Net                        12,076         12,073
---------------------------------------------------------------------------------
Intangible Assets - Net of Accumulated
  Amortization of $266 and $4                                 871          1,108
---------------------------------------------------------------------------------
Other Assets                                                  903            953
---------------------------------------------------------------------------------
Total Assets                                             $ 17,019       $ 16,608
---------------------------------------------------------------------------------

Liabilities and Shareowner's Equity
Current Liabilities
Debt maturing within one year                            $  1,297        $   613
Accounts payable and accrued liabilities                    3,879          2,914
---------------------------------------------------------------------------------
Total current liabilities                                   5,176          3,527
---------------------------------------------------------------------------------
Long-Term Debt                                              5,409          5,424
---------------------------------------------------------------------------------

Deferred Credits and Other Noncurrent Liabilities
Postemployment benefit obligation                           2,370          2,250
Unamortized investment tax credits                            220            243
Other noncurrent liabilities                                  734          1,391
---------------------------------------------------------------------------------
Total deferred credits and other noncurrent liabilities     3,324          3,884
---------------------------------------------------------------------------------

Commitments and contingencies

Corporation-obligated mandatorily redeemable
preferred securities of subsidiary trusts*                  1,000          1,000
---------------------------------------------------------------------------------

Shareowner's Equity
Common stock (par value of $1 and                                            
  $.10 at June 30, 1997 and 1996)                               -             43
Capital in excess of par value                              3,135          3,501
Retained earnings (deficit)                                  (905)          (479)
Deferred compensation - LESOP                                (120)          (161)
Treasury shares (at cost)                                       -           (131)
---------------------------------------------------------------------------------
Total shareowner's equity                                   2,110          2,773
---------------------------------------------------------------------------------
Total Liabilities and Shareowner's Equity                $ 17,019       $ 16,608
---------------------------------------------------------------------------------
<FN>
* The trusts contain assets of $1,030 in principal amount of the Subordinated
Debentures of Pacific Telesis Group
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>

<TABLE>

------------------------------------------------------------------------------
PACIFIC TELESIS GROUP
------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions, increase (decrease) in cash and cash equivalents
(Unaudited)
<CAPTION>
------------------------------------------------------------------------------
                                                          Six months ended
                                                              June 30,
                                                       -----------------------
                                                            1997       1996
------------------------------------------------------------------------------
<S>                                                     <C>           <C>
Operating Activities
Net income (loss)                                      $     (426) $      692
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
  Depreciation and amortization                             1,475         929
  Undistributed earnings from investments in equity                       
  affiliates                                                    9          19
  Provision for uncollectible accounts                        149          87
  Amortization of investment tax credits                      (24)        (24)
  Deferred income taxes                                      (378)         89
  Cumulative effect of accounting changes, net of tax        (322)        (85)
  Other - net                                                 596        (661)
------------------------------------------------------------------------------
Total adjustments                                           1,505         354
------------------------------------------------------------------------------
Net Cash Provided by Operating Activities                   1,079       1,046
------------------------------------------------------------------------------

Investing Activities
Construction and capital expenditures                      (1,273)     (1,092)
Investments in affiliates                                     (14)        (29)
Dispositions                                                    -          18
Acquisitions                                                    -         (35)
------------------------------------------------------------------------------
Net Cash Used in Investing Activities                      (1,287)     (1,138)
------------------------------------------------------------------------------

Financing Activities
Net change in short-term borrowings with original
  maturities of three months or less                          664      (1,019)
Issuance of other short-term borrowings                         -          75
Issuance of long-term debt                                      -         424
Repayment of long-term debt                                    (2)        (18)
Issuance of trust originated preferred securities               -       1,000
Issuance of treasury shares                                     -          43
Equity received from parent                                   137           -
Dividends paid                                               (550)       (456)
Other                                                           -          21
------------------------------------------------------------------------------
Net Cash Provided by Financing Activities                     249          70
------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents           41         (22)
------------------------------------------------------------------------------
Cash and cash equivalents beginning of year                    72          76
------------------------------------------------------------------------------
Cash and Cash Equivalents End of Period                $      113  $       54
------------------------------------------------------------------------------

Cash paid during the six months ended June 30 for:
   Interest                                            $      195  $      179
   Income taxes                                        $       33  $      151
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>


<TABLE>
PACIFIC TELESIS GROUP
----------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF SHAREOWNER'S EQUITY
Dollars in millions
(Unaudited)
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                                                Deferred
                                                                              Compensation
                                                                                Leveraged
                                                                                 Employee                
                                                    Capital in   Retained         Stock
                                           Common   Excess of    Earnings       Ownership        Treasury
                                           Shares   Par Value    (Deficit)        Trust           Shares
----------------------------------------------------------------------------------------------------------
<S>                                        <C>         <C>         <C>            <C>            <C>                
Balance, December 31, 1996               $     43    $  3,501     $   (479)      $     (161)   $    (131)
Net income (loss)                               -           -         (426)               -             -
Dividends to parent                             -        (275)           -                -             -
Dividends to shareowners                        -        (140)           -                -             -
Reduction of debt associated with
  Employee Stock Ownership Plans                -           -            -               41             -
Recapitalization of Common and                (43)        (88)           -                -           131
Treasury Shares
Net equity received from parent                 -         137            -                -
----------------------------------------------------------------------------------------------------------
Balance, June 30, 1997                   $      -    $  3,135     $   (905)      $     (120)   $        -
----------------------------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
 
<TABLE>
                                                * * * *
SELECTED  FINANCIAL  AND  OPERATING  DATA At June 30, or for the six months then
ended:
<CAPTION>
                                                                                     1997           1996
                                                                                  ------------------------
  <S>                                                                                <C>           <C>   
  Return on weighted average shareowners' equity * ...........................       -47.54%        48.55%
  Debt ratio .................................................................        68.32%        61.58%
  Network access lines in service (000).......................................        16,709        16,151
  Access minutes of use (000,000).............................................        34,838        31,921
  Cellular customers (000)....................................................           123            -
  Number of employees.........................................................        53,030        48,660
<FN>
*Calculated using Income Before Cumulative Effect of Accounting Changes.
</FN>
</TABLE>

<PAGE>


--------------------------------------------------------------------------------
PACIFIC TELESIS GROUP
--------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Dollars in millions

1. BASIS  OF  PRESENTATION  The  consolidated  financial  statements  have  been
   prepared by Pacific Telesis Group (PAC) pursuant to the rules and regulations
   of the  Securities  and  Exchange  Commission  (SEC) and,  in the  opinion of
   management,  include all  adjustments  (consisting  only of normal  recurring
   accruals)  necessary  to present  fairly the results for the interim  periods
   shown.  Certain  information and footnote  disclosures,  normally included in
   financial   statements   prepared  in  accordance  with  generally   accepted
   accounting  principles,  have been condensed or omitted  pursuant to such SEC
   rules and regulations.  Certain  reclassifications have been made to the 1996
   consolidated financial statements to conform with the 1997 presentation.  The
   results for the interim periods are not necessarily indicative of results for
   the full year. The consolidated  financial statements contained herein should
   be read in conjunction with the consolidated  financial  statements and notes
   thereto  included  in PAC's 1996  Annual  Report on Form 10-K (the Form 10-K)
   filed with the SEC.

2. CONSOLIDATION The consolidated  financial  statements include the accounts of
   PAC and its majority-owned subsidiaries.  PAC's subsidiaries include, but are
   not limited to, Pacific Bell (PacBell,  which also includes its subsidiaries)
   and  Nevada  Bell,  which  are  collectively  referred  to as  the  Telephone
   Companies. PAC is a wholly-owned subsidiary of SBC Communications Inc. (SBC).
   All significant intercompany transactions are eliminated in the consolidation
   process.   Investments  in   partnerships,   joint  ventures  and  less  than
   majority-owned  subsidiaries  are principally  accounted for under the equity
   method.

3. COMPLETION OF MERGER On April 1, 1997, PAC and SBC completed the merger of an
   SBC subsidiary with PAC, in a transaction in which each outstanding  share of
   PAC common  stock was  exchanged  for 0.73145 of a share of SBC common  stock
   (equivalent to approximately 313 million shares). With the merger, PAC became
   a wholly-owned subsidiary of SBC. The transaction was accounted for by SBC as
   a pooling of  interests  and a tax-free  reorganization.  PAC  exchanged  the
   outstanding  common stock at the date of merger with SBC stock,  issued 1,000
   shares of $1 par stock and retired the treasury stock.

   Conforming Accounting Changes
   PAC's results include merger  transaction  costs and the effect of changes to
   conform accounting  methodologies between PAC and SBC for, among other items,
   pensions,   postretirement   benefits  and  merger   transaction  costs.  The
   accounting  changes  resulted in a net benefit  recorded by PAC in the second
   quarter of 1997,  retroactive  to January 1, 1997 as a  cumulative  effect of
   accounting  changes of $322,  net of deferred  taxes of $221,  and  increased
   income  before  cumulative  effect of  accounting  changes  for the first six
   months of 1997 by $20.  Had the merger  occurred  January  1,  1997,  incomre
   before cumulative effect of accounting  changes would have decreased by $165.
   Had these  changes been adopted  January 1, 1996,  they would have  increased
   income before cumulative effect of accounting changes by $31, net of deferred
   taxes  of $21 for the  six  months  ended  June  30,  1996.  The  changes  in
   accounting  for  pension  and  postretirment  benefits  were to  adopt  SBC's
   methodology  of  amortizing  gains and  losses on assets  held  within  those
   benefit plans. The change in accounting for merger  transaction  costs was to
   conform to SBC's policy of  recognizing  these costs as incurred  rather than
   deferring until the pooling of interests is effective.  Also, PAC recorded in
   the second  quarter of 1997 the  present  value of amounts to be  returned to
   California  and Nevada  ratepayers as a condition of the merger of $281 ($176
   net of tax).
<PAGE>


--------------------------------------------------------------------------------
PACIFIC TELESIS GROUP
--------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Dollars in millions

   Post-merger initiatives
   During  the second  quarter  1997,  PAC  recorded  after-tax  charges of $1.4
   billion  related to SBC's June 19,  1997  announcement  of several  strategic
   decisions  resulting from the merger integration  process that began with the
   April 1 closing of its merger with PAC,  which  included $108 ($65 after tax)
   of charges related to recent regulatory rulings and $281 ($176 after tax) for
   the  present  value of  amounts  to be  returned  to  California  and  Nevada
   ratepayers  as a condition  of the merger.  The  decisions  resulted  from an
   extensive  review of  operations  throughout  the merged  company and include
   significant   integration   of   operations   and   consolidation   of   some
   administrative  and support functions.  Following is a discussion of the most
   significant of these charges.

   Reorganization  SBC will  centralize  several key functions that will support
   the  operations  of PacBell,  Nevada  Bell and  Southwestern  Bell  Telephone
   Company  (SWBell),   including  network  planning,  strategic  marketing  and
   procurement.  It is also  consolidating  a number of  corporate-wide  support
   activities,  including  research  and  development,  information  technology,
   financial transaction processing and real estate management.  PacBell, Nevada
   Bell and SWBell will continue as separate legal entities.  These  initiatives
   will result in the creation of some jobs and the  elimination and realignment
   of others, with many of the affected employees changing job  responsibilities
   and in some cases assuming positions in other locations.

   PAC  recognized a charge of  approximately  $238 ($149 net of tax) during the
   second quarter of 1997 in connection with these initiatives.  This charge was
   comprised mainly of post-employment benefits, primarily related to severance,
   and costs  associated  with  closing  down  duplicate  operations,  primarily
   contract  cancellations.  Other charges  arising out of the merger related to
   relocation,  retraining and other effects of consolidating certain operations
   will be recognized in future periods as those charges are incurred.

   Impairments/asset  valuation As a result of SBC's merger  integration  plans,
   strategic  review of domestic  operations and  organizational alignments, PAC
   reviewed  the  carrying  values of related  long-lived  assets.  This  review
   included  estimating  remaining  useful lives and cash flows and  identifying
   assets to be abandoned.  Where this review indicated  impairment , discounted
   cash flows  related to those assets were  analyzed to determine the amount of
   the impairment.  As a result of these reviews,  PAC wrote off some assets and
   recognized impairments to the value of other assets with a combined charge of
   $842  ($591  after  tax)  recorded  in the  second  quarter  of  1997.  These
   impairments  and writeoffs  related to the wireless  digital TV operations in
   southern  California,  certain  analog  switching  equipment  in  California,
   certain  rural and other  telecommunications  equipment  in Nevada,  selected
   wireless equipment,  duplicate or obsolete equipment, cable within commercial
   buildings in California, certain non-operating plant and other assets.

   Video curtailment/purchase  commitments SBC also announced it is scaling back
   its limited direct investment in video services. As part of this curtailment,
   PAC has halted construction on the Advanced  Communications  Network (ACN) in
   California.  As part of an  agreement  with the ACN vendor,  PAC will pay the
   liabilities of the ACN trust that owns and finances ACN  construction,  incur
   costs to shut down all construction  previously conducted under the trust and
   receive certain  consideration  from the vendor.  In the second quarter,  PAC
   recognized its total expense of $553 ($346 after tax)  associated  with these
   activities.



<PAGE>


   Additionally,   PAC  will  curtail  several  other  video-related  activities
   including  substantially  scaling back its  involvement  in the Tele-TV joint
   venture and evaluating its option to invest in cable television operations in
   Chicago. The collective impact of these decisions resulted in a charge of $89
   ($56 after tax) in the second quarter of 1997.

4. CUMULATIVE EFFECT OF CHANGE IN DIRECTORY ACCOUNTING Prior to January 1, 1996,
   Pacific Bell Directory (a subsidiary of PacBell and an indirect subsidiary of
   PAC) recognized  revenues and expenses  related to publishing  directories in
   California using the "amortization" method, under which revenues and expenses
   were recognized over the lives of the directories,  generally one year. Under
   the new "issue basis" method,  revenues and expenses are recognized  when the
   directories are issued. The change to the issue basis method was made because
   it is the method  generally  followed in the  publishing  industry and better
   reflects the operating activity of the business.

    The change was adopted during fourth quarter 1996. The cumulative  after-tax
   effect of applying the change in method to prior years was  recognized  as of
   January  1,  1996 as a  one-time,  non-cash  gain  applicable  to  continuing
   operations of $85. The gain is net of deferred  taxes of $58. The first three
   quarters of 1996 were restated in the Form 10-K to reflect the new method.

5.  COMMITMENTS AND CONTINGENCIES

   Purchase Commitments As of June 30, 1997, PacBell had purchase commitments of
   about $220 remaining in connection with its previously  announced program for
   deploying an all digital switching platform with ISDN and SS-7 capabilities.

   Property Tax Investigation In 1992, a settlement  agreement was reached among
   the State Board of Equalization,  all California counties, the State Attorney
   General,  and 28 utilities,  including PacBell, on a specific methodology for
   valuing  utility  property  for  property  tax purposes for a period of eight
   years.  The  California   Public  Utilities   Commission   (CPUC)  opened  an
   investigation  to determine if any resulting  property tax savings  should be
   returned  to  customers.  Intervenors  have  asserted  that as much as $20 of
   annual  property tax savings should be treated as an exogenous cost reduction
   in PacBell's annual price cap filings.  These  intervenors have also asserted
   that past property tax savings  totaling as much as  approximately  $80 as of
   June 30, 1997,  plus  interest,  should be returned to customers.  Management
   believes  that,  under the CPUC's  regulatory  framework,  any  property  tax
   savings should be treated only as a component of the calculation of shareable
   earnings and not as an exogenous  cost. In an Interim  Opinion issued in June
   1995,  the CPUC  decided to defer a final  decision  on this  matter  pending
   resolution  in a separate  proceeding  of the  criteria  for  exogenous  cost
   treatment under its regulatory framework.



<PAGE>


--------------------------------------------------------------------------------
PACIFIC TELESIS GROUP
--------------------------------------------------------------------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Dollars in millions

RESULTS OF OPERATIONS

Overview  Financial  results for Pacific  Telesis  Group (PAC) for the first six
months of 1997 and 1996 are summarized as follows:

------------------------------------------------------------------------
                                               Six-Month Period
------------------------------------------------------------------------
                                                                Percent
                                          1997       1996       Change
------------------------------------------------------------------------
Operating revenues                    $   4,927   $  4,783          3.0%
Operating expenses                        5,721      3,542         61.5
Income (loss) before cumulative                   
effect of accounting changes               (748)       607          -
Cumulative effect of accounting             322         85          -
changes
Net income (loss)                     $    (426)  $    692          -
========================================================================

Net loss for the six  months  ended June 30,  1997  includes  a  cumulative  net
benefit  of  $322  resulting  from  accounting  changes  related  to  conforming
accounting between PAC and SBC Communications Inc. (SBC) for, among other items,
pensions and  postretirement  benefits.  The first six months of 1996 included a
cumulative  effect of a change in accounting for directory  publishing  revenues
and expenses.

PAC's  six-month  loss before  cumulative  effect of accounting  changes of $748
includes  after-tax  charges of $1.4 billion  reflecting  strategic  initiatives
resulting  from SBC's  comprehensive  review of operations of the merged company
and the impact of several recent regulatory rulings.  Excluding these items, PAC
reported income before cumulative  effect of accounting  changes of $641 or 5.6%
higher  than the first six months of 1996  income  before  cumulative  effect of
accounting  changes of $607.  PAC  currently  anticipates  incurring  additional
after-tax  charges for ongoing merger  integration  costs,  primarily related to
movement of employees,  and customer  number  portability of $125 to $200 during
the remainder of 1997.

Excluding these second quarter charges,  the primary factors contributing to the
increase in income before  cumulative  effect of accounting  changes  during the
first six months of 1997 were  growth in demand for  services  and  products  at
Pacific Bell  (PacBell) and a first quarter 1997 $90 after-tax  settlement  gain
associated with lump-sum  pension  payments that exceeded the projected  service
and interest costs for 1996  retirements.  These increases were partially offset
by increased  expenses at PacBell  including  expenses for the  introduction  of
Personal Communications Services (PCS) operations in California and Nevada.



<PAGE>


================================================================================
PACIFIC TELESIS GROUP
================================================================================

Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations
Dollars in millions

RESULTS OF OPERATIONS - Continued

Revenues  PAC's  operating  revenues  for the first six  months of 1997  reflect
reductions of $121 related  primarily to the impact of several recent regulatory
rulings.  Excluding  these items,  PAC's operating  revenues  increased $258, or
5.4%. Components of operating revenues for the first six months of 1997 and 1996
are as follows:

------------------------------------------------------------------------
                                               Six-Month Period
------------------------------------------------------------------------
                                                                Percent
                                          1997         1996      Change
------------------------------------------------------------------------
Local service                         $   2,144    $   1,995        7.5%
Network access
  Interstate                                829          919       -9.8
  Intrastate                                405          366       10.7
Long-distance service                       607          639       -5.0
Directory advertising                       627          585        7.2
Other                                       315          279       12.9
---------------------------------------------------------------
       Total                          $   4,927    $   4,783        3.0%
========================================================================

      Local  service  revenues  increased  for the first six  months of 1997 due
      primarily to increases in demand,  including increases in access lines and
      vertical services  revenues.  The number of access lines increased by 3.5%
      since June 30, 1996, with approximately 42.5% of access line growth due to
      the sales of additional  access lines to existing  residential  customers.
      Vertical services revenues,  which include custom calling options,  Caller
      ID and other enhanced  services,  increased by approximately  16.1%. Local
      service  revenues also reflect the  implementation  of the California High
      Cost Fund (CHCFB) that went into effect  February 1, 1997.  The California
      Public  Utilities  Commission  (CPUC) has stated the CHCFB is  intended to
      directly  subsidize  the provision of service to high cost areas and allow
      PacBell to set competitive rates for other services. Amounts received from
      the  CHCFB  resulted  in a shift of  equivalent  revenues  from  intraLATA
      long-distance  and  intrastate  network  access  revenues to local service
      revenues  in the first six months of 1997.  This shift is subject to final
      CPUC approval,  expected in third quarter 1997. For further information on
      the  operations  of the  CHCFB,  see  the  discussion  under  the  heading
      "Regulatory  Environment-California" on page 10 of SBC's Current Report on
      Form 8-K dated May 8, 1997.  Rate  reductions due to CPUC price cap orders
      and revenue sharing  accruals  partially offset increases in local service
      revenues.  Wireless  revenues  also  contributed  to the increase in local
      service  revenues due to product  introduction  in the first six months of
      1997.

      Network Access  Interstate  network access revenues  decreased $134 in the
      first six months of 1997 due to one-time  charges.  These one-time charges
      include  billing claim  settlements  related to the Percentage  Interstate
      Usage (PIU) factor in California  and several  Federal  regulatory  issues
      including  end user charges,  800 data base  charges,  recovery of certain
      employee-related  expenses and the retroactive  effect of the productivity
      factor adjustment in the Federal price cap filing. While the change in PIU
      factor in California,  which is used to allocate  network access  revenues
      between  interstate and intrastate  jurisdictions,  also had the effect of
      increasing  intrastate  network access  revenues,  it resulted in a slight
      decline  in  total  network  access   revenues.   Without  these  impacts,
      interstate  access revenues  increased in the first six months of 1997 due
      to demand for access  services  by  interexchange  carriers  and growth in
      revenues from end user charges  attributable to an increasing  access line
      base.  Partially  offsetting these increases in interstate  network access
      revenues were the effects of revenue sharing  adjustments  made in 1996 at
      PacBell.

      Intrastate  network access  revenues  increased in the first six months of
      1997 due primarily to the PIU settlements described above.  Excluding this
      impact,  intrastate  network access revenues were relatively  unchanged in
      the first six months of 1997 as  increases in demand,  including  usage by
      alternative  intraLATA  toll  carriers,  were offset by the effects of the
      CHCFB discussed above.

      Long-Distance  Service revenues decreased for the first six months of 1997
      primarily  due to the  effects of the CHCFB  discussed  above  under Local
      Service,  and were primarily  offset by increases in demand resulting from
      California's growing economy.

      Directory  advertising revenues increased for the first six months of 1997
      due mainly to the  publication  of books not  published  in 1996 and, to a
      lesser extent, increased demand.

      Other  operating  revenues  increased for the first six months of 1997 due
      primarily to increased  demand for  PacBell's  non-regulated  services and
      products.

Expenses  PAC's  operating  expenses  for the first six  months of 1997  reflect
$1,941 of charges related to strategic  initiatives from a comprehensive  review
of operations of the merged company and the impact of several recent  regulatory
rulings  (see Note 3 to the  financial  statements).  Excluding  these  charges,
operating  expenses  increased  $238 or 6.7% over the first six  months of 1996.
Components  of operating  expenses for the first six months of 1997 and 1996 are
as follows:

------------------------------------------------------------------------
                                                Six-Month Period
                                          ------------------------------
                                                               Percent
                                             1997       1996   Change
-----------------------------------------------------------------------
Cost of services and products             $  1,876  $  1,722       8.9%
Selling, general and administrative          2,370       891     166.0
Depreciation and amortization                1,475       929      58.8
----------------------------------------------- -----------------------
  Total                                   $  5,721  $  3,542      61.5%
=======================================================================

      Costs of services  and  products  for the first six months of 1997 reflect
      charges of $43 relating to SBC's  strategic  initiatives  and  operational
      reviews.  Excluding these charges, cost of services and products increased
      $111,  or 6.4%, in the first six months of 1997 due primarily to increases
      in employee  compensation  including increases related to force additions,
      increases in contract labor and the introduction of PCS operations.  These
      increases  were somewhat  offset by a first  quarter 1997 $105  settlement
      gain associated with lump-sum pension payments that exceeded the projected
      service and interest costs for 1996 retirements.

      Selling,  general and administrative  expenses for the first six months of
      1997 reflects $1,382 of charges  relating to SBC's  strategic  initiatives
      and  operational  reviews.  As  discussed  in  Note  3  to  the  financial
      statements, the most significant of these charges included shutdown of the
      Advanced Communications Network,  regulatory costs related to the approval
      of the merger with SBC by California and Nevada regulators  reorganization
      initiatives and write-offs related to wireless digital TV. Excluding these
      one-time charges, selling, general and administrative costs increased $97,
      or 10.9%,  in the first six  months of 1997 due to  increases  related  to
      expenses  associated with the  introduction  of PCS  operations,  employee
      compensation,   contract  labor  and  advertising.  These  increases  were
      partially  offset by a first quarter 1997 $47 settlement  gain  associated
      with lump-sum  pension  payments  that exceeded the projected  service and
      interest costs for 1996 retirements.

      Depreciation  and  amortization  for the first six months of 1997 reflects
      charges totaling $516 to record  impairment of plant and  intangibles.  As
      discussed in Note 3 to the financial  statements,  the most significant of
      these  impairments  related  to the  wireless  digital  TV  operations  in
      Southern  California,  certain analog  switching  equipment in California,
      certain rural and other  telecommunications  equipment in Nevada and cable
      within  commercial  buildings  in  California.  Excluding  these  charges,
      depreciation  and  amortization  increased  $30,  or 3.2% in the first six
      months of 1997. These increases were primarily due to overall higher plant
      levels partially offset by reduced  deprecation  during the second quarter
      on analog switching equipment in California.

Interest Expense  increased $22 or 11.8% for the first six months of 1997 due to
interest of $27  associated  with  one-time  charges,  increased  long term debt
compared  to the first six  months of 1996 and  increased  interest  on  capital
leases.  These increases were somewhat offset by increased  capitalized interest
related to PCS construction.

Other Income  (Expense) - net was net expense of $62 for the first six months of
1997. The increased  expenses include $30 in expenses related to SBC's strategic
initiatives, primarily writeoff of nonoperating plant. Other increases from 1996
relate primarily to distributions paid due to the sale of an additional  $500 of
Trust Originated Preferred Securities in June 1996.

Income  taxes for the first six months of 1997 reflect the tax effect of charges
for  strategic   initiatives   resulting  from  SBC's  comprehensive  review  of
operations  of the merged  company and the impact of several  recent  regulatory
rulings.  The  effective  tax  rate on these  items  was  lower  as a result  of
non-deductible  items  included  in the  charges and  valuation  adjustments  to
certain deferred tax assets. 

Cumulative Effect of Accounting Changes, as discussed in Note 3 to the financial
statements,  include merger  transaction costs and the effect of changes applied
retroactively to conform accounting  methodologies between PAC and SBC effective
January 1, 1997. The cumulative  after-tax  effect of these one-time  changes is
$322.


<PAGE>


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PACIFIC TELESIS GROUP
================================================================================

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Dollars in millions

OPERATING ENVIRONMENT AND TRENDS OF THE BUSINESS

COMPETITIVE AND REGULATORY ENVIRONMENT

Access   Reform/Price  Caps  On  June  3,  1997,  SBC  filed  with  the  Federal
Communications  Commission  (FCC) a Petition  for  Partial  Stay  (Petition)  of
aspects  of the orders  adopted  on May 7, 1997 by the FCC on access  reform and
local  exchange  carrier  price  caps.  The  Petition  asked the FCC to stay the
application  of the 6.5%  productivity  offset to all  price cap Local  Exchange
Carriers (LECs), its retroactive  application to the 1996 annual tariff filings,
and  exogenous  reductions  associated  with  the  completion  of  equal  access
amortization.  The FCC  denied  the stay on June 18,  1997.  The  impact  of the
retroactive  portion  of the FCC orders was  recorded  in the second  quarter of
1997.

On June 16, 1997,  SBC and several other  parties filed court appeals  regarding
several aspects of the Access Reform and Price Cap Orders. The appeal related to
access reform was assigned to the U.S.  Court of Appeals for the Eighth  Circuit
in  St.  Louis  (8th  Circuit).  The  appeal  related  to  price  caps  and  the
productivity  offset decision has been assigned to the U.S. Court of Appeals for
the 10th Circuit in Denver but on July 28, 1997 it was  transferred  to the U.S.
Court of Appeals for the D.C Circuit.

Interconnection   Agreements   PAC  continues  to  enter  into   interconnection
agreements  with  companies  desiring to provide  local service in its operating
territory.  Agreements  have  been  reached  and  approved  by both of the state
commissions where PAC operates.  On July 18, 1997, the 8th Circuit set aside key
parts of the FCC  interconnection  order that  attempted to set prices for local
exchange  services,  holding  that  the  right to set such  prices  is  reserved
exclusively to the states.  PAC is in agreement with the 8th Circuit's ruling on
the order and believes the intent of the Telecommunications Act of 1996 (Telecom
Act) retained state regulators'  jurisdiction over pricing of intrastate service
and  local  interconnection.  The  FCC has  indicated  it  will  appeal  the 8th
Circuit's decision to the Supreme Court.

Other Billing and Collecting  Allocation  Methodology  Changes On June 13, 1997,
PacBell filed a waiver request with the FCC that if approved,  would allow it to
reverse an other billing and  collection  adjustment  resulting  from a recently
adopted FCC separations ruling that shifts recovery of substantial other billing
and collecting costs from the intrastate to the interstate jurisdiction. The FCC
has released  this waiver  request for Public Notice but no comments were filed.
If PacBell's request for a waiver is denied, the separations change could reduce
PacBell's revenues by about $30 in 1997 and about $45 in each subsequent year.

Portions of Telecom Act  Challenged On July 2, 1997,  SBC sued in U.S.  District
Court for the Northern District of Texas to declare a portion of the Telecom Act
unconstitutional on the grounds the Telecom Act improperly discriminates against
SBC  by  imposing   restrictions  that  prohibit  SBC  from  offering  interLATA
long-distance and other services that other local exchange companies are free to
provide. The suit challenges only that portion of the Telecom Act which excludes
SBC from competing in certain lines of business.




<PAGE>


================================================================================
PACIFIC TELESIS GROUP
================================================================================

Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations
Dollars in millions

OTHER BUSINESS MATTERS

Restructuring Reserve PAC established a restructuring reserve at the end of 1993
to  provide  for  the  incremental  cost of  force  reductions  associated  with
restructuring  business  processes  through 1997. A total of $43 in cash outlays
was charged to the reserve in the first six months of 1997. As of June 30, 1997,
$53 remained in the restructuring reserve.

Local  Number  Portability/Interconnection  Over  the  next  few  years,  PAC is
expecting to incur  significant  capital and software  expenditures for customer
number portability and  interconnection.  PAC expects capital costs and expenses
associated with customer number portability, which allows customers to switch to
local  competitors  and  keep  the same  phone  number  to total up to $750 on a
pre-tax  basis  over the next four  years.  Full  recovery  of  customer  number
portability  costs is required under the Telecom Act;  however,  the FCC has not
yet determined when or how those  significant  costs will be recovered.  PacBell
has  filed a  tariff  with the FCC for  recovery  of the  costs of  implementing
customer  number  portability.  The FCC has suspended the tariff until September
1997, pending the issuance of its order on customer number portability recovery.
PacBell is unable to predict the  likelihood of the FCC permitting the tariff to
become  effective.  Capital costs and expenses  associated with  interconnection
will  vary  based on the  number  of  competitors  seeking  interconnection  and
customers served and markets entered by those competitors.  Accordingly,  PAC is
currently unable to reasonably estimate these costs.

<PAGE>


================================================================================
PACIFIC TELESIS GROUP
================================================================================


PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K
(a)   Exhibits

      Exhibit 12    Computation of Ratios of Earnings to Fixed Charges.

      Exhibit 18    Preferability Letter on Change in Accounting

      Exhibit 27    Financial Data Schedule.

(b)   Reports on Form 8-K

      On April 4, 1997,  Pacific  Telesis Group (PAC) filed a Current  Report on
      Form  8-K,   reporting  on  Item  4  Change  in  Registrant's   Certifying
      Accountant.  In the  Report,  PAC  indicated  that Ernst & Young LLP would
      replace Coopers & Lybrand L.L.P. as the certifying accountants.

      On April 9, 1997,  PAC filed a Current  Report on Form 8-K,  reporting  on
      Item 1 Change in Control of Registrant.  In the Report, PAC indicated that
      PAC became a wholly-owned  subsidiary of SBC Communications Inc. effective
      April 1, 1997.

 .

<PAGE>


================================================================================

================================================================================
                                                 SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                          Pacific Telesis Group




August 13, 1997                           /s/ Donald E. Kiernan
                                          ---------------------
                                          Donald E. Kiernan
                                          Executive Vice President,
                                          Chief Financial Officer and Treasurer