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 March 31, 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 ended
                                                                 March 31,
                                                  --------------------------------
                                                             1997            1996
----------------------------------------------------------------------------------
<S>                                                        <C>           <C>
Operating Revenues
Local service                                              $1,037         $   979
Network access                                                662             638
Long-distance service                                         309             317
Directory advertising                                         363             307
Other                                                         164             137
----------------------------------------------------------------------------------
Total operating revenues                                    2,535           2,378
----------------------------------------------------------------------------------
Operating Expenses
Cost of services and products                                 886             886
Selling, general and administrative                           473             404
Depreciation and amortization                                 491             465
----------------------------------------------------------------------------------
Total operating expenses                                    1,850           1,755
----------------------------------------------------------------------------------
Operating Income                                              685             623
----------------------------------------------------------------------------------
Other Income (Expense)
Interest expense                                             (92)            (93)
Other income (expense) - net                                 (13)             (4)
----------------------------------------------------------------------------------
Total other income (expense)                                (105)            (97)
----------------------------------------------------------------------------------
Income Before Income Taxes and Cumulative
  Effect of Accounting Change                                 580             526
----------------------------------------------------------------------------------
Income taxes                                                  228             210
----------------------------------------------------------------------------------
Income Before Cumulative Effect of Accounting
  Change                                                      352             316
----------------------------------------------------------------------------------
Cumulative Effect of Accounting Change, net of tax              -              85
                                                                
----------------------------------------------------------------------------------
Net Income                                                $   352         $   401
----------------------------------------------------------------------------------
Earnings Per Common Share:
Income before Cumulative Effect of Accounting
 Change                                                   $  0.82         $  0.74
Cumulative Effect of Accounting Change, net of tax              -            0.20
                                                              
----------------------------------------------------------------------------------
Net Income                                                $  0.82         $  0.94
----------------------------------------------------------------------------------
Weighted Average Number of Common
  Shares Outstanding (in millions)                            428             428
----------------------------------------------------------------------------------
Dividends Declared Per Common Share                        $0.315          $0.545
----------------------------------------------------------------------------------

<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>
---------------------------------------------------------------------------------
                                                           March 31,    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  $176 and $163                            2,155          2,109
Prepaid expenses                                               70             52
Deferred charges                                               31             45
Other current assets                                          139            196
---------------------------------------------------------------------------------
Total current assets                                        2,508          2,474
---------------------------------------------------------------------------------
Property, Plant and Equipment - at cost                    29,531         29,032
 Less: Accumulated depreciation and amortization           17,248         16,959
---------------------------------------------------------------------------------
Property, Plant and Equipment - Net                        12,283         12,073
---------------------------------------------------------------------------------
Intangible Assets - Net of Accumulated Amortization of     1,124           1,108
$4 and  $4
---------------------------------------------------------------------------------
Other Assets                                                  815            953
---------------------------------------------------------------------------------
Total Assets                                           $   16,730  $      16,608                                                    
---------------------------------------------------------------------------------

Liabilities and Shareowners' Equity
Current Liabilities
Debt maturing within one year                          $    1,115  $         613                                                    
Accounts payable and accrued liabilities                    2,455          2,779
Dividends payable                                             140            135
---------------------------------------------------------------------------------
Total current liabilities                                   3,710          3,527
---------------------------------------------------------------------------------
Long-Term Debt                                              5,431          5,424
---------------------------------------------------------------------------------

Deferred Credits and Other Noncurrent Liabilities
Postemployment benefit obligation                           2,455          2,250
Unamortized investment tax credits                            232            243
Other noncurrent liabilities                                  911          1,391
---------------------------------------------------------------------------------
Total deferred credits and other noncurrent liabilities     3,598          3,884
---------------------------------------------------------------------------------
Commitments and contingencies
---------------------------------------------------------------------------------
Corporation-obligated mandatorily redeemable preferred      1,000          1,000
securities of subsidiary trusts*
---------------------------------------------------------------------------------
Shareowners' Equity
Common shares issued ($1 par value)                            43             43
Capital in excess of par value                              3,490          3,501
Retained earnings (deficit)                                 (267)          (479)
Deferred compensation - LESOP                               (145)          (161)
Treasury shares (at cost)                                   (130)          (131)
---------------------------------------------------------------------------------
Total shareowners' equity                                   2,991          2,773
---------------------------------------------------------------------------------
Total Liabilities and Shareowners' Equity              $   16,730  $      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>
-------------------------------------------------------------------------------------
                                                            Three months ended
                                                                 March 31,
                                                       ------------------------------
                                                                   1997         1996
-------------------------------------------------------------------------------------
<S>                                                         <C>              <C> 
Operating Activities
Net income                                                  $       352  $       401
                                                                        
Adjustments to reconcile net income to net cash
  provided by operating activities:
   Depreciation and amortization                                    491          465
   Undistributed losses from investments in equity
   affiliates                                                         6            8
   Provision for uncollectible accounts                              58           48
   Amortization of investment tax credits                           (11)         (12)
   Deferred income taxes                                            109           21
   Cumulative effect of accounting change                             -          (85)
   Other - net                                                     (719)        (339)
-------------------------------------------------------------------------------------
Total adjustments
                                                                   (66)          106
-------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities
                                                                    286          507
-------------------------------------------------------------------------------------

Investing Activities

Construction and capital expenditures                              (601)        (486)
Investments in affiliates                                            (8)         (18)
Other                                                                 -            7
-------------------------------------------------------------------------------------
Net Cash Used in Investing
Activities                                                         (609)        (497)
-------------------------------------------------------------------------------------

Financing Activities
Net change in short-term borrowings with original
 maturities of three months or less                                 499        (619)
Issuance of trust originated preferred securities                     -         500
Issuance of long-term debt                                            8         346
Dividends paid                                                     (135)       (233)
Other                                                                (8)        (15)
-------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities                 364         (21)
-------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                 41         (11)
-------------------------------------------------------------------------------------
Cash and cash equivalents beginning of year                          72          76
-------------------------------------------------------------------------------------
Cash and Cash Equivalents End of Period                     $       113  $       65
-------------------------------------------------------------------------------------

Cash paid during the three months ended March 31 for:
    Interest                                                $        167  $      121
                                                                           
    Income taxes                                            $         33  $        -
                                                                   

<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>



<TABLE>
PACIFIC TELESIS GROUP
---------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
Dollars in millions
(Unaudited)
<CAPTION>
---------------------------------------------------------------------------------


                                       Capital   Retained  Deferred
                                          in
                               Common  Excess of Earnings  CompensationTreasury
                               Shares  Par Value (Deficit)  -LESOP      Shares
---------------------------------------------------------------------------------
<S>                          <C>     <C>       <C>       <C>           <C>
Balance, December 31, 1995   $     43 $  3,498  $  (982)  $    (242)    $   (127)

Net income                          -        -      401            -            -
Dividends to shareowners            -        -     (231)           -            -
Reduction of deferral associated
with Employee Stock Ownership
Plans                               -        -         -          20            -

Other                               -        2        1            -            -
---------------------------------------------------------------------------------
                               
 Balance, March 31, 1996      $    43 $  3,500  $  (811)  $     (222)   $   (127)
---------------------------------------------------------------------------------


Balance, December 31, 1996   $    43 $  3,501  $  (479) $      (161) $ $   (131)
                   
Net income                         -        -       352           -            -

Dividends to shareowners           -        -     (140)           -            -

Reduction of deferral associated
with Employee Stock Ownership
Plans                              -        -         -          16            -

Issuance of treasury shares        -        -         -           -            1

Other                              -     (11)         -           -            -
---------------------------------------------------------------------------------
                               
Balance, March 31, 1997      $    43 $  3,490  $  (267)  $    (145)  $ $   (130)                                  
---------------------------------------------------------------------------------

<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>

                                       * * *
                                         *


SELECTED FINANCIAL AND OPERATING DATA


At March 31, or for the three months then                      1997         1996
ended:
                                                          ----------------------

  Return on weighted average shareowners' equity             48.37%       52.11%

  Debt ratio                                                 62.12%       67.53%

  Network access lines in service(000)                       16,588       15,967

  Access minutes of use (000,000)                            17,088       15,826

  Number of employees                                        50,510       48,780




<PAGE>


------------------------------------------------------------------------------

------------------------------------------------------------------------------

PACIFIC TELESIS GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Dollars in millions except per share amounts

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 Securities and Exchange Commission.

    Prior to January 1, 1996,  Pacific Bell  Directory (a  subsidiary of Pacific
Bell 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, or $.20 per share.  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.

    In 1996,  management amended the salaried pension plan, which changed from a
final pay plan to a cash balance  plan.  Under the  transition  to the new plan,
some retirees elected to receive lump-sum  payments in settlement of the pension
liability.  These  lump-sum  payments in the first  quarter of 1997 exceeded the
projected  service and interest cost. PAC recognized a gain on these settlements
in first quarter 1997 that increased net income by $90, or $.21 per share.

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.  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.

<PAGE>


PACIFIC TELESIS GROUP

NOTES TO CONSOLIDATED  FINANCIAL  STATEMENTS  (UNAUDITED)  continued  
Dollars in Millions except per share amounts


3. MERGER - On April 1, 1997,  SBC  Communications  Inc. (SBC) and PAC completed
the merger of an SBC  subsidiary  with PAC, in a transaction in which each 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  will be  accounted  for as a
pooling of interests and a tax-free reorganization.

       PAC's results will include  merger  transaction  costs and the effects of
changes applied  retroactively to conform accounting  methodologies  between PAC
and SBC for,  among other  items,  pensions and other  postretirement  benefits.
These  changes  will result in a net benefit to be 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 tax.  Also,  PAC will  record in the second
quarter  of 1997 the  present  value of  amounts to be  returned  to  California
ratepayers as a condition of the merger of $274, $165 net of tax. Had the merger
occurred January 1, 1997, income before cumulative effect of accounting  changes
would have decreased by $165.

4.   COMMITMENTS AND CONTINGENCIES

Purchase  Commitments - In December 1994, PacBell contracted for the purchase of
up to  $2,000 of  Advanced  Communications  Network  ("ACN")  facilities,  which
incorporated new technologies. During 1995, the ability to deploy the facilities
outstripped the ACN vendor's ability to deliver necessary products and software.
Accordingly,  management decided to suspend construction at certain sites, which
reduced the  expected  cost to less than $700.  If ACN  facilities  meet certain
quality and  performance  criteria (the Network  Test),  PacBell is committed to
purchase the ACN facilities in 1998. If the ACN facilities are acquired,  due to
competition  and other  factors  affecting  PacBell's  ability  to  recover  its
investment  in these  facilities,  their  value to PacBell  could be  materially
impaired. If ACN facilities fail the Network Test, PacBell will not be committed
to buy the ACN  facilities  but might be liable to reimburse  the  principal ACN
vendor for some  construction  costs up to $300,  which  would also  result in a
material charge.

As of March 31, 1997,  PacBell had purchase  commitments of about $176 remaining
in connection with its previously announced program for deploying an all digital
switching platform with ISDN and SS-7 capabilities.

Purchase  Options - In June 1990,  Prime Cable of Chicago,  Inc.  (Prime  Cable)
acquired certain Chicago cable television  properties from Group W. PAC, through
its PTCB  subsidiary,  holds options to purchase a 75 percent  interest in Prime
Cable.  TC Cable,  Inc.  ("TC Cable") now holds this  interest.  PacTel  Capital
Funding, a wholly owned subsidiary of PAC, has guaranteed bank financing used by
TC Cable and its parent  corporation  to acquire this  interest.  The guarantees
cover  initial  loan  amounts of $60 as well as interest  accruing on the loans,
which will be added to the outstanding loan balances up to an aggregate of $136.
In  management's  opinion,  the  likelihood  that  PAC will be  required  to pay
principal or interest on this debt under these guarantees is remote.



<PAGE>


PACIFIC TELESIS GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) continued 
Dollars in millions except per share amounts

     Property Tax  Investigation  - In 1992, a settlement  agreement was reached
between 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  $75 as of  March  31,  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 except per share amounts

RESULTS OF OPERATIONS

Pacific Telesis Group (PAC) reported net income of $352, or $.82 per share,  for
the first quarter of 1997.  Financial results for the first quarters of 1997 and
1996 are summarized as follows:

--------------------------------------------------------------------------------
                                                          First Quarter
                                                 -------------------------------

                                                                        Percent
                                                    1997      1996       Change
--------------------------------------------------------------------------------
Operating revenues                                 $  2,535  $ 2,378        6.6%

Operating expenses                                 $  1,850  $ 1,755        5.4%

Income before cumulative                           $    352  $   316       11.4%
effect of accounting change

Cumulative                                        $    -    $    85        -
effect of accounting change
--------------------------------------------------------------------------
Net income                                        $    352  $   401      (12.2)%
================================================================================

The primary  factors  contributing  to the increase in income before  cumulative
effect  of  accounting  change  during  the  first  quarter  of 1997  were a $90
after-tax  settlement gain associated with lump-sum  pension payments and growth
in demand for services  and products at Pacific Bell and Nevada Bell  (Telephone
Companies).  Excluding this gain and last year's cumulative effect of accounting
change,  first quarter 1997 results decreased slightly due to increased expenses
for start-up costs associated with new growth  initiatives,  primarily  Personal
Communications  Services (PCS) wireless,  and expenses in the wireline  business
including  preparation  for increased  competition  and unusually  high expenses
associated  with  damage  caused by winter  storms.  1996 net income  included a
one-time, non-cash after-tax gain of $85, or $.20 per share, associated with the
cumulative effect of the change in accounting for directory  publishing revenues
and expenses.

PAC's  operating  revenues in the first quarter of 1997 increased $157, or 6.6%.
Components  of operating  revenues for the first quarter of 1997 and 1996 are as
follows:

--------------------------------------------------------------------------------
                                                          First Quarter
                                                  ------------------------------

                                                                        Percent
                                                    1997      1996       Change
--------------------------------------------------------------------------------
Local service                                     $  1,037  $   979        5.9%
Network access
   Interstate                                          474      458        3.5
   Intrastate                                          188      180        4.4
Long-distance                                          309      317       (2.5)
service
Directory                                              363      307       18.2
advertising
Other                                                  164      137       19.7
----------------------------------------------------------------------
     Total                                        $  2,535  $ 2,378        6.6%
================================================================================



<PAGE>


PACIFIC TELESIS GROUP

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

Dollars in millions except per share amounts

RESULTS OF OPERATIONS - Continued

             Local service  revenues  increased in the first quarter of 1997 due
      primarily to increases in demand,  including increases in access lines and
      vertical services  revenues.  The number of access lines increased by 3.9%
      since March 31, 1996, with  approximately 13% 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  21%. Local
      service  revenues  also  reflect  the  implementation  of  the  California
      Universal  Service Fund that went into effect  February 1, 1997. This fund
      is  intended to  subsidize  the  provision  of service to high cost areas.
      Amounts received from the fund resulted in a shift of equivalent  revenues
      from intraLATA  long-distance  and intrastate  network access  revenues to
      local service revenues in the first quarter of 1997. This shift is subject
      to final California Public Utilities Commission (CPUC) approval,  expected
      in second quarter 1997. Increases in revenues were slightly offset by rate
      reductions due to CPUC price cap orders.

      Network Access Interstate  network access revenues  increased in the first
      quarter of 1997 due primarily to an increase in demand for access services
      by  interexchange  carriers.  Growth  in  revenues  from end user  charges
      attributable  to an increasing  access line base also  contributed  to the
      increase.  Partially  offsetting  these  increases in  interstate  network
      access revenues were sharing accrual adjustments from prior periods.

      Intrastate  network access revenues increased in the first quarter of 1997
      due  primarily  to  increases in demand,  including  usage by  alternative
      intraLATA toll carriers, partially offset by the effects of the California
      Universal Service Fund described above.

      Long-Distance  Service revenues decreased slightly in the first quarter of
      1997 primarily due to the effects of the California Universal Service Fund
      described  above  primarily  offset by increases in demand  resulting from
      California's growing economy.

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

      Other  operating  revenues  increased  in the  first  quarter  of 1997 due
      primarily to increased demand for Pacific Bell's  (PacBell)  non-regulated
      services and products.







<PAGE>


PACIFIC TELESIS GROUP

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

Dollars in millions except per share amounts

RESULTS OF OPERATIONS - Continued

PAC's  operating  expenses in first quarter 1997  increased  $95, or 5.4%,  over
first quarter 1996.  Components of operating  expenses for the first quarters of
1997 and 1996 are as follows:

-------------------------------------------------------------------------------
                                                         First Quarter
                                                 ------------------------------
                                                                       Percent
                                                   1997      1996       Change
--------------------------------------------------------------------------------
Cost of services and products
                                                 $   886   $   886        - %
                                                                           
Selling, general and administrative
                                                     473       404
                                                                         17.1
Depreciation and amortization
                                                     491       465        5.6
---------------------------------------------------------------------
  Total                                          $ 1,850   $ 1,755        5.4%
================================================================================

Total Operating Expenses Costs of services and products and selling, general and
administrative  costs  increased  on a combined  basis $69, or 5.3% in the first
quarter of 1997 due to increases for employee  compensation,  costs  incurred to
prepare for local competition,  and expenses  associated with damage from winter
storms.   Other  increases   related  to  new  business   initiatives  for  PCS,
long-distance and video. These increases were partially offset by savings due to
a $152  settlement  gain  associated  with  lump-sum  pension  payments and 1996
changes in benefit plans and plan  assumptions.  Depreciation  and  amortization
increased in the first quarter of 1997 due primarily to growth in plant levels.

Other Income  (Expense)- Net decreased $9 in the first quarter of 1997 primarily
as a result of distributions paid due to the sale of an additional $500 of Trust
Originated Preferred Securities of $500 in June 1996.

Income taxes  increased $18 in the first quarter of 1997 primarily due to higher
income before income taxes.

Cumulative  Effect of Accounting  Change As discussed in Note 1 to the financial
statements,  Pacific Bell Directory changed its method of recognizing  directory
publishing  revenues  and  related  expenses  effective  January  1,  1996.  The
cumulative  after-tax  effect of  applying  the new  method  to prior  years was
recognized  as of January 1, 1996 as a one-time,  non-cash  gain  applicable  to
continuing  operations  of $85,  or $.20 per share.  The gain is net of deferred
taxes of $58.  Management  believes  this  change to the issue  basis  method is
preferable  because  it is the  method  generally  followed  in  the  publishing
industry  and better  reflects  the  operating  activity of the  business.  This
accounting  change is not expected to have a  significant  net income  effect on
future periods.



<PAGE>


PACIFIC TELESIS GROUP

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

Dollars in millions except per share amounts


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 $22 in cash outlays
was charged to the reserve in the first  quarter of 1997.  As of March 31, 1997,
$75 remained in the restructuring reserve.

Merger - On April 1, 1997, SBC  Communications  Inc. (SBC) and PAC completed the
merger of an SBC  subsidiary  with PAC, in a transaction  in which each 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  will be  accounted  for as a
pooling of interests and a tax-free  reorganization (see Note 3 to the financial
statements).

OPERATING ENVIRONMENT AND TRENDS OF THE BUSINESS

COMPETITIVE ENVIRONMENT

Access  reform - On May 7, 1997,  the Federal  Communications  Commission  (FCC)
adopted  orders on access  charge reform and local  exchange  carrier price caps
which will reduce access charges by, in part,  adjusting the productivity factor
to be used in interstate price cap calculations.  In presenting the orders,  the
FCC  estimated  there  would  be  a  $1.7 billion   reduction  in  industry-wide
interstate  access  charges  which  are  estimated  to  aggregate  $23  billion.
Management is evaluating the effect of and its response to the orders.

Interconnection  Agreements  -  Companies  seeking to  connect to the  Telephone
Companies'  networks and provide local  service must enter into  interconnection
agreements  with the Telephone  Companies  which are then subject to approval by
the  appropriate  state  commission.  The Telephone  Companies have entered into
agreements  in both  California  and Nevada,  whose  commissions  have  approved
various agreements.

The  Telephone  Companies  expect  that  they  will  experience  local  exchange
competition  both from current  providers  and other new  entrants in 1997.  PAC
intends to use interconnection  agreements to support its application to the FCC
to provide interLATA long-distance service 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 except per share amounts

OPERATING ENVIRONMENT AND TRENDS OF THE BUSINESS - Continued

FCC  Apportionment  of Sharing  Obligations  - The FCC's price cap rules require
Local Exchange  Carriers  (LECs) to apportion  sharing  obligations  among their
price cap baskets based on  "cost-causative"  methods.  The FCC  concluded  that
proportionate  revenues  in each price cap  basket  could be used as a proxy for
cost. For years when PacBell had a sharing  obligation,  it excluded  interstate
end user revenues from the sharing apportionment methodology. On April 17, 1997,
the FCC  ruled  that end user  revenues  must be  included  in the base by which
sharing is  apportioned  to the baskets.  The Order  requires  PacBell to submit
recalculated price cap indices  reflecting its apportionment  methodology and to
revise its tariff rates as of July 1, 1997. Management estimates that the effect
of this order could be up to approximately $30 plus interest.

       Revision of FCC 800 Data Base Access  Tariffs - In October 1996,  the FCC
issued a Report & Order on the 800 Database Access  Tariffs.  The Order required
tariff  revisions  and  largely  disallowed   PacBell's  request  for  exogenous
treatment of 800 database costs. Rates were revised effective December 21, 1996.
The  original  rates took effect May 1, 1993  pursuant to potential  refund.  On
April 14, 1997, the FCC issued an Order that required  refunds be made.  PacBell
must file a refund plan on May 14, 1997.  Currently,  management  assesses  this
refund to be approximately $22 plus interest.

Other Billing and Collecting  Allocation  Methodology  Changes - The FCC adopted
new  separations  rules effective May 1, 1997 that shift recovery of substantial
other  billing  and  collecting  costs  from the  intrastate  to the  interstate
jurisdiction.  This rule change could reduce PacBell's  revenues by about $30 in
1997 and about $45 in each subsequent year.  Management is evaluating options to
mitigate this effect on net income.

Revenues Subject to Refund - In 1992, the CPUC issued a decision adopting,  with
modification,  Statement of Financial  Accounting Standards No. 106, "Employers'
Accounting  for  Postretirement  Benefits  Other than  Pensions"  (FAS 106), for
regulatory  accounting purposes.  Annual price cap decisions by the CPUC granted
PacBell  approximately  $100 in each of the years 1993-1996 for partial recovery
of higher costs under FAS 106. In October 1994, the CPUC reopened the proceeding
to review the criteria for exogenous cost  treatment and whether  PacBell should
continue  to  recover  these  costs.  The CPUC's  order  also held that  related
revenues  collected after October 12, 1994, were subject to refund plus interest
pending future  proceedings.  These  proceedings were concluded on April 9, 1997
when the CPUC reaffirmed that  postretirement  benefits costs are  appropriately
recoverable in PacBell's price cap filings.











PACIFIC TELESIS GROUP

PART II - OTHER INFORMATION

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

      Exhibit 2 Agreement and Plan of Merger among Pacific  Telesis  Group,  SBC
            Communications, Inc. and SBC Communications (NVI, Inc.), dated as of
            April 1, 1996 (Exhibit 2 to Form 8-K filed April 1, 1996).
 
      Exhibit 3a Articles of  Incorporation of Pacific Telesis Group, as amended
            April 1, 1997.

      Exhibit 4a Rights  Agreement,  dated as of  September  22,  1989,  between
            Pacific  Telesis  Group and The First  National  Bank of Boston,  as
            successor Rights Agent, which includes as Exhibit B thereto the form
            of Rights  Certificate  (Exhibits 1 and 2 to Form SE filed September
            25, 1989 as part of Form 8-A, File No. 1-8609).

            4a(i)  Amendment  to Rights  Agreement,  dated as of April 1,  1996.

      Exhibit 4b No instrument  which defines the rights of holders of long- and
            intermediate-term  debt of Pacific Telesis Group or its subsidiaries
            is   filed    herewith    pursuant   to    Regulation    S-K,   Item
            601(b)(4)(iii)(A).  Pursuant  to this  regulation,  Pacific  Telesis
            Group hereby agrees to furnish a copy of any such  instrument to the
            SEC upon request.

      Exhibit 10bb(i)  Resolutions  terminating the Pacific Telesis Group Senior
            Management Long Term Incentive Plan.

      Exhibit 11  Computation of Earnings per Common Share.

      Exhibit 12  Computation of Ratios of Earnings to Fixed Charges.

      Exhibit 27  Financial Data Schedule.

(b)   Reports on Form 8-K

      On February 11, 1997,  Pacific  Telesis Group (PAC) filed a Current Report
      on Form 8-K,  reporting on Item 7, Financial  Statements and Exhibits.  In
      the Report,  PAC filed a  supplement  that amends the  Prospectus  for the
      Pacific Telesis Group Shareowners Dividend Reinvestment and Stock Purchase
      Plan. The agreement provides that upon consummation of the merger with SBC
      Communications  Inc. (SBC), shares of Telesis stock will be converted into
      the right to receive shares of SBC stock.

      On March 13,  1997,  PAC filed a Current  Report on Form 8-K  reporting on
      Item 7, Exhibits. In the Report, PAC filed its 1996 Unaudited Management's
      Discussion and Analysis of Financial  Condition and Results of Operations;
      and Audited  Consolidated Balance Sheets as of December 31, 1996 and 1995,
      and the related  Consolidated  Statements of Income,  Shareowners' Equity,
      and Cash Flows for each of the three  years in the period  ended  December
      31, 1996.


                                  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




May 9, 1997                               /s/ William E. Downing
                                          ----------------------
                                           William E. Downing
                                           Executive Vice President,
                                           Chief Financial Officer and
Treasurer