<PAGE>


                                   FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549

         (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
                        SECURITIES EXCHANGE ACT OF 1934

               For the quarterly period ended September 30, 1996

                                      OR

         ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 1-8609

                             PACIFIC TELESIS GROUP


                        I.R.S. Employer No. 94-2919931


                             A Nevada Corporation


              130 Kearny Street, San Francisco, California 94108


                     Telephone - Area Code (415) 394-3000



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    .
                                               ---      ---

       At October 31, 1996, 428,321,498 common shares were outstanding.
























                                    <PAGE>


                    PACIFIC TELESIS GROUP AND SUBSIDIARIES
                               TABLE OF CONTENTS

                                                                       Page   
                                                                      Number  
                                                                      ------  
PART I.  FINANCIAL INFORMATION
------------------------------

Item 1.  Financial Statements

     Review Report of Independent Accountants .......................  1

     Condensed Consolidated Statements of Income ....................  2

     Condensed Consolidated Balance Sheets ..........................  4

     Condensed Consolidated Statements of Cash Flows ................  6

     Notes to Condensed Consolidated Financial Statements ...........  8

Item 2.  Management's Discussion and Analysis of Results of 
         Operations and Financial Condition ......................... 14 


PART II.  OTHER INFORMATION
---------------------------

Item 4.  Submission of Matters to a Vote of Security Holders......... 32

Item 5.  Proposed Merger With SBC Communications Inc................. 32

Item 6.  Exhibits and Reports on Form 8-K............................ 35

SIGNATURE............................................................ 36






























                                    <PAGE>

PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

                   REVIEW REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareowners of Pacific Telesis Group:

We  have reviewed  the accompanying  condensed consolidated  balance  sheet of
Pacific Telesis Group and Subsidiaries (the "Corporation") as of September 30,
1996  and  the related  condensed consolidated  statements  of income  for the
three-  and  nine-month periods  ended September  30, 1996  and 1995,  and the
condensed  consolidated statements  of cash  flows for the  nine-month periods
ended  September  30,  1996 and  1995.   These  financial  statements  are the
responsibility of the Corporation's management.

We  conducted our  review  in accordance  with  standards established  by  the
American  Institute  of Certified  Public Accountants.    A review  of interim
financial information  consists principally of applying  analytical procedures
to  financial data and making  inquiries of persons  responsible for financial
and  accounting matters.   It  is substantially  less in  scope than  an audit
conducted  in  accordance  with  generally accepted  auditing  standards,  the
objective of which  is the expression  of an  opinion regarding the  financial
statements taken as a whole.  Accordingly, we do not express such an opinion.

Based  on our  review, we  are not  aware of  any material  modifications that
should be made to the accompanying condensed consolidated financial statements
for them to be in conformity with generally accepted accounting principles.

The   Corporation's  Pacific  Bell   subsidiary  discontinued  application  of
Statement  of Financial  Accounting Standards  No. 71 effective  third quarter
1995.

We have  previously audited, in  accordance with  generally accepted  auditing
standards, the  consolidated  balance  sheet  of  Pacific  Telesis  Group  and
Subsidiaries  as of December 31, 1995, and the related consolidated statements
of income,  shareowners' equity, and cash  flows for the year  then ended (not
presented herein);  and in our report dated February 22, 1996, we expressed an
unqualified  opinion  on  those  consolidated  financial  statements.  In  our
opinion, the  information set forth in the accompanying condensed consolidated
balance  sheet as  of December  31, 1995,  is fairly  stated, in  all material
respects, in relation to the consolidated balance sheet from which it has been
derived.



/s/Coopers & Lybrand L.L.P.
San Francisco, California

November 13, 1996








                                       1








                                    <PAGE>


                    PACIFIC TELESIS GROUP AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                  (Unaudited)

                             For the 3 Months Ended  For the 9 Months Ended
                                    September 30,          September 30,
(Dollars in millions,        ----------------------   ---------------------
except per share amounts)              1996    1995          1996     1995 
---------------------------------------------------------------------------
OPERATING REVENUES
Local service ...................    $1,026   $ 963        $3,020   $2,858 
Network access:
  Interstate ....................       462     427         1,381    1,297 
  Intrastate ....................       177     180           543      525 
Toll service ....................       330     311           969      926 
Other service revenues ..........       423     394         1,232    1,154 
                                     ------  ------        ------    -----
TOTAL OPERATING REVENUES.........     2,418   2,275         7,145    6,760 
                                     ------  ------        ------    -----
OPERATING EXPENSES
Cost of products and services ...       455     403         1,300    1,329 
Customer operations and
  selling expenses ..............       507     477         1,445    1,352 
General, administrative, and
  other expenses ................       365     348         1,101      990 
Property and other taxes.........        48      46           138      146 
Depreciation and amortization ...       473     471         1,401    1,405 
                                     ------  ------        ------    -----
TOTAL OPERATING EXPENSES.........     1,848   1,745         5,385    5,222 
                                     ------  ------        ------    -----
OPERATING INCOME.................       570     530         1,760    1,538 
Interest expense.................        78     117           265      350 
Other income(expense)-net........       (17)     21           (38)      65 
                                     ------  ------        ------    -----
INCOME BEFORE INCOME TAXES AND
 EXTRAORDINARY ITEM..............       475     434         1,457    1,253 
Income taxes.....................       189     159           592      436 
                                     ------  ------        ------    -----
INCOME BEFORE EXTRAORDINARY ITEM.       286     275           865      817 
Extraordinary item, net of tax...         -  (3,360)            -   (3,360)
                                     ------  ------        ------    -----
NET INCOME (LOSS)................    $  286 $(3,085)       $  865  $(2,543)
                                     ======  ======        ======   ======

                           (Continued on next page)











                                       2








                                    <PAGE>


                    PACIFIC TELESIS GROUP AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                  (Unaudited)
                                  (Continued)

                             For the 3 Months Ended  For the 9 Months Ended
                                    September 30,          September 30,
(Dollars in millions,        ----------------------   ---------------------
except per share amounts)              1996    1995           1996     1995 
---------------------------------------------------------------------------
Earnings (loss) per share:
 Income before
  extraordinary item.............    $ 0.67  $ 0.64        $ 2.02   $ 1.92 
 Extraordinary item..............         -   (7.86)             -   (7.90)
                                     ------  ------        ------    -----
 Net income (loss)...............    $ 0.67  $(7.22)        $ 2.02  $(5.98)
                                     ======  ======         ======   ======
Dividends per share .............    $0.315  $0.545        $1.175   $1.635 
Average shares outstanding
   (thousands) ..................   428,362 427,421       428,411  425,184 
===========================================================================
The accompanying Notes are an integral part of the Condensed Consolidated
Financial Statements.

































                                       3








                                    <PAGE>


                    PACIFIC TELESIS GROUP AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                                September 30,  December 31,
(Dollars in millions)                                 1996           1995
---------------------------------------------------------------------------
ASSETS:                                           (Unaudited) 

Cash and cash equivalents........................    $    81        $   76 
Accounts receivable - (net of allowances for
  uncollectibles of $157 and $132 in 1996                              
  and 1995, respectively)........................      1,598         1,505 
Prepaid expenses and other current assets........      1,004         1,002 
                                                     -------        ------
Total current assets.............................      2,683         2,583 
                                                     -------        ------
Property, plant, and equipment - at cost.........     28,414        27,222 
  Less:  accumulated depreciation................    (16,754)      (15,837)
                                                     -------        ------
Property, plant, and equipment - net.............     11,660        11,385 
                                                     -------        ------
Other noncurrent and intangible assets...........      1,882         1,873 
                                                     -------        ------
TOTAL ASSETS.....................................    $16,225       $15,841 
                                                     =======       =======

LIABILITIES AND SHAREOWNERS' EQUITY:                                         
Accounts payable and accrued liabilities.........    $ 2,053        $2,203 
Debt maturing within one year....................        484         1,530 
Other current liabilities........................        731           908 
                                                     -------        ------
Total current liabilities........................      3,268         4,641 
                                                     -------        ------
Long-term obligations............................      5,424         4,737 
                                                     -------        ------
Other noncurrent liabilities and
  deferred credits...............................      3,910         4,273 
                                                     -------        ------

                           (Continued on next page)
















                                       4








                                    <PAGE>

                    PACIFIC TELESIS GROUP AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (Continued)
                                                September 30,  December 31,
(Dollars in millions)                                 1996          1995
---------------------------------------------------------------------------
                                                (Unaudited)                    
                                             
LIABILITIES AND SHAREOWNERS' EQUITY (Continued):

Commitments and contingencies (Note B)

Corporation-obligated mandatorily redeemable
  preferred securities of subsidiary trusts*
  (Note C).......................................      1,000             - 
                                                     -------         ------
Common stock ($0.10 par value; 432,827,595
  shares issued; 428,324,798 and 428,434,672
  shares outstanding)............................         43            43 
Additional paid-in capital.......................      3,502         3,498
Accumulated deficit..............................       (619)         (982)
Treasury stock (4,502,797 and 4,392,923 shares)..       (131)         (127)
Deferred compensation - LESOP trust..............       (172)         (242)
                                                     -------        ------
Total shareowners' equity........................      2,623         2,190
                                                     -------        ------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY........    $16,225       $15,841
                                                     =======       =======
===========================================================================
*    The trusts contain an asset of $1,030 million in principal amount of the
     Subordinated Debentures of Pacific Telesis Group.

The accompanying Notes are an integral part of the Condensed Consolidated
Financial Statements.























                                       5








                                    <PAGE>


                   PACIFIC TELESIS GROUP AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)                                
                                                     For the 9 Months Ended
                                                           September 30,
                                                     ----------------------
(Dollars in millions)                                      1996       1995
---------------------------------------------------------------------------
CASH FROM (USED FOR) OPERATING ACTIVITIES:                                 
Net income (loss)....................................    $   865   $(2,543)
Adjustments to reconcile net income (loss) to cash
 from operating activities:
  Extraordinary item.................................          -     3,360
  Depreciation and amortization......................      1,401     1,405
  Change in deferred income taxes....................        184        50
  Changes in operating assets and liabilities:
    Accounts receivable..............................        (93)       43
    Prepaid expenses and other current assets........        (51)      (46)
    Other noncurrent and intangible assets...........        (79)      135
    Accounts payable and accrued liabilities.........       (139)        4
    Other current liabilities........................        (80)       23
    Noncurrent liabilities and deferred credits......       (327)     (438)
  Other adjustments, net.............................         93       (11)
                                                         -------     ------
Cash from operating activities.......................      1,774     1,982
                                                         -------     ------
CASH USED FOR INVESTING ACTIVITIES:
Additions to property, plant, and equipment..........     (1,680)   (1,308)
Investment in PCS licenses...........................        (72)     (656)
Other investing activities, net......................        (95)      (13)
                                                         -------     ------
Cash used for investing activities...................     (1,847)   (1,977)
                                                         -------     ------
CASH FROM (USED FOR) FINANCING ACTIVITIES:
Proceeds from issuance of common and treasury shares.        109        67
Proceeds from issuance of long-term debt.............        495         - 
Retirements of long-term debt........................        (15)     (261)
Proceeds from issuance of trust originated
  preferred securities...............................      1,000         - 
Proceeds from sale and leaseback transactions........        211         -
Dividends paid.......................................       (601)     (693)
Increase (decrease) in short-term borrowings, net....     (1,045)      821
Other financing activities, net......................        (76)       (2)
                                                         -------     ------
Cash from (used for) financing activities............         78       (68)
                                                         -------     ------
                                                                             
                           (Continued on next page)








                                       6








                                    <PAGE>

                    
                    PACIFIC TELESIS GROUP AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                  (Continued)
                                                     For the 9 Months Ended
                                                           September 30,
                                                     ----------------------
(Dollars in millions)                                       1996       1995
---------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents.....          5       (63)
Cash and cash equivalents at January 1...............         76       135 
                                                         -------    ------
Cash and cash equivalents at September 30............    $    81    $   72 
                                                         =======    ======
Cash payments for:
  Interest...........................................    $   291    $  382 
  Income taxes.......................................    $   366    $  359    
===========================================================================
The accompanying Notes are an integral part of the Condensed Consolidated
Financial Statements.                                                       




































                                       7








                                    <PAGE>


                    PACIFIC TELESIS GROUP AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


A.   BASIS OF PRESENTATION

     The Condensed  Consolidated Financial Statements include  the accounts of
     Pacific Telesis Group (the "Corporation")  and its wholly- and  majority-
     owned subsidiaries.  The Corporation includes a holding company,  Pacific
     Telesis,  and its telephone subsidiaries:   Nevada Bell  and Pacific Bell
     (which  when   used  herein  includes  its   subsidiaries,  Pacific  Bell
     Directory,  Pacific   Bell  Information  Services,  Pacific  Bell  Mobile
     Services,  Pacific   Bell   Internet  Services,   Pacific  Bell   Network
     Integration  and  others)  hereinafter   referred  to  as  the  Telephone
     Companies.   Other Pacific  Telesis subsidiaries include  Pacific Telesis
     Enterprises, Pacific Bell Communications,  and several other subsidiaries
     that  provide video, communications  and other  services.   The Condensed
     Consolidated  Financial  Statements  reflect  reclassifications  made  to
     conform with  the current year presentation.  These reclassifications did
     not affect net income or shareowners' equity. 

     The  Condensed Consolidated  Financial Statements  have been  prepared in
     accordance  with the rules and regulations of the Securities and Exchange
     Commission ("SEC") applicable to  interim financial information.  Certain
     information  and  footnote disclosures  included in  financial statements
     prepared in accordance with generally accepted accounting principles have
     been  condensed or omitted in  these interim statements  pursuant to such
     SEC rules  and regulations.   Management  recommends  that these  interim
     financial statements be  read in conjunction with  both the Corporation's
     1995  annual report  on  Form  10-K and  its  1996  Proxy Statement  that
     includes the audited 1995 financial statements.  

     Effective third quarter 1995,  for external financial reporting purposes,
     Pacific  Bell  discontinued the  application  of  Statement of  Financial
     Accounting Standards  No.  ("SFAS") 71,  "Accounting for  the Effects  of
     Certain Types of Regulation," an accounting standard for entities subject
     to  traditional regulation.   As a result, during  third quarter 1995 the
     Corporation recorded a non-cash,  extraordinary, after-tax charge of $3.4
     billion,  or $7.86  per share.   Nevada Bell  continues to  apply SFAS 71
     accounting.

     In management's opinion, the  Condensed Consolidated Financial Statements
     include all adjustments (consisting of only normal recurring adjustments)
     necessary  to  present  fairly  the  financial  position and  results  of
     operations  for each  interim period shown.   The  Condensed Consolidated
     Financial Statements  have been  reviewed by  Coopers  & Lybrand  L.L.P.,
     independent accountants.  Their report is on page 1.








                                       8








                                    <PAGE>

                    PACIFIC TELESIS GROUP AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

A.   BASIS OF PRESENTATION (Continued)

     Change In Estimates

     In  March  1996, management  amended  the  salaried pension  plan,  which
     changed from a final pay plan to a cash balance plan.  As a result of the
     approval of this plan  amendment, in second quarter 1996  the Corporation
     updated its actuarial assumptions  to reflect changes in market  interest
     rates  and  recent  experience,  including a  change  in  its  assumption
     concerning future ad hoc increases in pension benefits.  These changes in
     estimates increased  net income by  approximately $75 million,  or $0.175
     per  share for the  first nine months  of 1996 in comparison  to the same
     period in 1995. 

B.   COMMITMENTS AND CONTINGENCIES

     Merger Agreement

     On April 1,  1996, SBC  Communications Inc. ("SBC")  and the  Corporation
     jointly  announced a  definitive agreement  whereby the  Corporation will
     become  a wholly-owned  subsidiary of  SBC.   Under  terms of  the merger
     agreement, each share of  Pacific Telesis common stock will  be exchanged
     for  0.733 shares  of  SBC  common stock,  subject  to  adjustment.   The
     transaction is intended to be accounted for as a pooling of interests and
     to be a tax-free reorganization. On July 31, 1996, the shareowners of the
     Corporation and SBC approved  the transaction, which previously had  been
     approved by the  respective Board of Directors of each company.  Pursuant
     to the merger agreement,  the Corporation's quarterly dividend  per share
     cannot  exceed 0.733 of SBC's quarterly dividend per share.  Accordingly,
     the  Corporation reduced its second  and third quarter  1996 dividends to
     $0.315  per share. On  November 5, 1996,  the U.S. Department  of Justice
     announced it had concluded that the merger does not violate the antitrust
     laws  and  accordingly that  it was  closing  its investigation  into the
     merger.  The merger is subject to certain other conditions and regulatory
     approvals.  The  California  Public  Utilities  Commission  ("CPUC")  has
     established  a schedule for review of the transaction with final comments
     from interested parties due in January  1997.  On September 30, 1996, the
     Office of  Ratepayer Advocates ("ORA"),  the consumer interest  branch of
     the  CPUC, filed testimony in  the merger proceeding  recommending a $2.1
     billion refund to customers payable over five years.  Management does not
     agree  with the  ORA's  recommendation and  believes  no customer  rebate
     should be required in connection  with the merger.  The CPUC  is expected
     to  make a  final decision on  the merger  by the  end of March  1997. In
     Nevada, SBC and the Corporation entered into a stipulation with the staff
     of the Public Service Commission of Nevada ("PSCN") and the Office of the
     Consumer Advocate to refund to customers the greater of $4 million or 2.0
     percent of  the amount, if  any, ordered  by the CPUC  to be  refunded to
     Pacific Bell  customers.  The  refund is conditioned  on approval of  the
     stipulation  by  the PSCN  and  closing  of the  merger.    The PSCN  has
     scheduled hearings for  November 25,  1996, and approval  is expected  in
     December 1996. If all necessary approvals are granted, the transaction is
     expected to close in the first quarter of 1997.

                                       9








                                    <PAGE>

                  PACIFIC TELESIS GROUP AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

B.   COMMITMENTS AND CONTINGENCIES (Continued)

     Purchase Commitments

     In November 1995, the  Corporation announced an agreement to  acquire 100
     percent of the  stock of Wireless Holdings, Inc. and  Videotron Bay Area,
     Inc.,  which hold licenses and rights to provide wireless video services.
     Both are  joint  ventures  between  Transworld  Telecommunications,  Inc.
     ("TTI") and Le Groupe  Videotron Ltee (collectively the  "Sellers").  The
     acquisition agreement  provides for  termination after November  9, 1996,
     one year after  execution of the agreement, by either  the Sellers or the
     Corporation under specified circumstances. Closing of the transaction was
     subject  to a number of conditions, which had not been met by November 9,
     1996. The  Corporation filed an  arbitration complaint in  September 1996
     alleging that Sellers  had breached  the agreement.   Sellers denied  the
     allegations  and counterclaimed  that  the Corporation  had breached  its
     obligations.   On November 12, 1996, management notified Sellers that the
     Corporation  was  exercising  its   right  to  terminate  the  agreement.
     Management  anticipates   that  the   parties'  arbitration   claims  and
     counterclaims  will  be  amended  in  view  of  the  termination  of  the
     agreement.   The Corporation has some related investments in tangible and
     intangible  assets,  and   may  incur  additional  expenses  as  part  of
     terminating this agreement.   The  assets may be  reused, written-off  or
     sold.  Pending further analysis, management does not expect any write-off
     or additional expenses to be material.

     In December  1994, Pacific  Bell contracted  for the  purchase  of up  to
     $2 billion  of Advanced  Communications  Network  facilities, which  will
     incorporate emerging technologies.  Pacific Bell is committed to purchase
     these facilities in  1998 if  they meet certain  quality and  performance
     criteria.  Management now  expects the actual amount of  these facilities
     purchased in 1998 will be less than $700 million.  

     As of September 30, 1996, Pacific  Bell had purchase commitments of about
     $212 million  remaining  in  connection  with  its  previously  announced
     program for  deploying an  all-digital switching  platform with  ISDN and
     SS-7 capabilities.
















                                      10








                                    <PAGE>


                    PACIFIC TELESIS GROUP AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

B.   COMMITMENTS AND CONTINGENCIES (Continued)

     Purchase Options

     In  June  1990, Prime  Cable of  Chicago,  Inc. ("Prime  Cable") acquired
     certain  Chicago   cable  television  properties  from  Group   W.    The
     Corporation,  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 the
     Corporation,  has  guaranteed bank  financing used  by  TC Cable  and its
     parent  corporation  to acquire  this  interest.    The guarantees  cover
     initial loan amounts of $60 million  as well as interest accruing on  the
     loans, which  will be  added to  the outstanding loan  balances up  to an
     aggregate of $136 million.  In management's opinion,  the likelihood that
     the Corporation  will be  required to pay  principal or interest  on this
     debt under these guarantees is remote.

     Revenues Subject to Refund

     In 1992, the  CPUC issued  a decision adopting,  with modification,  SFAS
     106,  "Employers'  Accounting  for  Postretirement  Benefits  Other  than
     Pensions,"  for  regulatory  accounting   purposes.    Annual  price  cap
     decisions  by the CPUC granted Pacific Bell approximately $100 million in
     each of the  years 1993-1996 for  partial recovery of higher  costs under
     SFAS 106.   However, the CPUC in October 1994  reopened the proceeding to
     determine the criteria  for exogenous cost treatment  and whether Pacific
     Bell should continue to recover these costs.  The CPUC's  order held that
     related  revenues collected after October 12, 1994, are subject to refund
     plus interest.  It is  possible that the CPUC could decide  this issue in
     the near term, and that the decision could have a material adverse effect
     on Pacific Bell.  Related  revenues subject to refund totaled  about $197
     million  at  September  30,  1996.   Management  believes  postretirement
     benefits costs are appropriately recoverable in Pacific Bell's price  cap
     filings.


















                                      11








                                    <PAGE>


                    PACIFIC TELESIS GROUP AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

B.   COMMITMENTS AND CONTINGENCIES (Continued)

     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  Pacific Bell,  on  a  specific methodology  for
     valuing utility property for property tax purposes for a period of  eight
     years.   The 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 million  of  annual property  tax savings
     should be treated as an exogenous cost reduction in Pacific Bell's annual
     price  cap filings.    These intervenors  have  also asserted  that  past
     property  tax savings totaling as much as approximately $66 million as of
     September  30, 1996,  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  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 of the criteria for exogenous
     cost  treatment under its regulatory  framework.  The  criteria are being
     considered in a separate proceeding initiated for rehearing of the CPUC's
     postretirement benefits other than pensions decision discussed above.  It
     is possible that the CPUC could  decide this issue in the near  term, and
     that  the  decision  could   have  a  material  adverse  effect   on  the
     Corporation.

C.   CORPORATION-OBLIGATED MANDATORILY  REDEEMABLE PREFERRED SECURITIES OF    
     SUBSIDIARY TRUSTS

     Pacific  Telesis Financing  I and II  (the "Trusts") were  formed for the
     exclusive purpose of issuing preferred and common securities representing
     undivided beneficial  interests in the Trusts and  investing the proceeds
     from  the sale  of  Trust Originated  Preferred  Securities ("TOPrS")  in
     unsecured subordinated debt securities  of the Corporation. Under certain
     circumstances, dividends on TOPrS could be deferred for up to a period of
     five  years.  TOPrS  are   subject  to  a  limited  guarantee   from  the
     Corporation.  The  Corporation sold $1 billion of TOPrS,  $500 million at
     7.56 percent in January 1996 through Pacific Telesis Financing I and $500
     million at 8.5 percent in June 1996 through Pacific Telesis Financing II.
     Both issues of TOPrS were priced  at $25 per share, have an original  30-
     year maturity that  may be extended  up to 49 years  and are callable  in
     five  years  at  par.   The  proceeds  were  used  to  retire  short-term
     indebtedness, primarily commercial paper.

     As of September  30, 1996, Pacific  Telesis Financing I and  II contained
     subordinated debt securities  of the Corporation in principal  amounts of
     $515.5  and $514.5 million, respectively, with interest rates of 7.56 and
     8.5 percent, respectively.



                                      12








                                    <PAGE>

                    PACIFIC TELESIS GROUP AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

D.   DEBT ISSUANCES

     Pacific  Bell issued $500 million of debentures, $250 million in February
     1996  at 5.875 percent due February 15,  2006, and $250 million in August
     1996 at 6.875 percent due August 15, 2006.  Neither issue may be redeemed
     prior  to maturity.   The proceeds from  the sale of  the debentures were
     used  to  reduce  short-term  debt  incurred  to  retire  Pacific  Bell's
     debentures totaling approximately $500 million called in December 1995.

     Pacific Bell has remaining CPUC authority, which will expire December 31,
     1996, to issue up  to $750 million of  long- and intermediate-term  debt.
     Pacific Bell  plans to make an  application to renew this  authority. The
     proceeds may be used only to redeem maturing debt and  to refinance other
     debt issues.  Pacific Bell has  remaining authority from the SEC to issue
     up  to $150 million of  long- and intermediate-term  debt through a shelf
     registration filed in April 1993.





































                                      13








                                    <PAGE>


Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
          FINANCIAL CONDITION

In addition to historical information contained  herein, this quarterly report
on  Form  10-Q  contains   certain  forward-looking  statements  that  involve
potential   risks   and  uncertainties.      Pacific   Telesis  Group's   (the
"Corporation")  future results  could differ  materially from  those discussed
herein.  Factors that could cause  or contribute to such differences  include,
but are  not limited to,  those discussed  herein and those  discussed in  the
"Annual Financial  Review" in the Corporation's 1996  Proxy Statement. Readers
are cautioned not to  place undue reliance on these forward-looking statements
which speak  only  as of  the  date hereof.    The Corporation  undertakes  no
obligation to revise  or update  these forward-looking  statements to  reflect
events or circumstances after the date  hereof or to reflect the occurrence of
unanticipated events.


RESULTS OF OPERATIONS

The following  discussions and data compare  the results of operations  of the
Corporation for the three- and nine-month periods  ended September 30, 1996 to
the  same periods in 1995.   The Corporation's operations include Pacific Bell
and Nevada Bell (the  "Telephone Companies"), along with several  other units.
Results for the first nine months of 1996 may not be indicative of results for
the full year.

A summary of selected operating data is shown below:

                             For the 3 Months Ended    For the 9 Months Ended
                                   September 30,            September 30,
                             ----------------------    ----------------------
                                               %                         %
Operating Statistics            1996    1995 Change      1996    1995  Change
-----------------------------------------------------------------------------
Return on shareowners'
equity (%)...................   45.0  -246.3      -      47.9   -64.5      -
Capital expenditures ($mil)..    684     650    5.2     1,825   2,195  -16.9
Total employees at Sept. 30.. 48,427  49,976   -3.1         -       -      -
Telephone Companies' employees
at September 30*............. 44,309  46,643   -5.0         -       -      -
Telephone Companies' employees 
per ten thousand access lines
at September 30*.............   27.1    29.8   -9.1         -       -      -
-----------------------------------------------------------------------------
* Excludes Pacific Bell Directory and Pacific Bell Mobile Services employees.











                                      14








                                    <PAGE>


Earnings
--------
The  Corporation's quarterly  earnings  continue to  reflect the  year-to-date
revenue growth from  increased customer  demand for  local telephone  products
associated with marketing efforts and California's growing economy,  offset by
expenses  to  prepare  to  enter  new  businesses  and  to  comply with  local
competition mandates.  The Corporation reported net income of $286 million for
the third  quarter 1996, a 4.0  percent increase over the  $275 million before
extraordinary item reported for the same period last year.  Earnings per share
for the third quarter 1996 was $0.67, up 4.7 percent from  the $0.64 per share
before extraordinary item  for the  same period last  year. The  extraordinary
item was  a one-time, non-cash, after-tax charge of $3.4 billion, or $7.86 per
share recorded  in third quarter 1995.  The extraordinary charge resulted from
the discontinued application by  Pacific Bell of special accounting  rules for
entities  subject  to traditional  regulation and  its  change to  the general
accounting  rules used by competitive  enterprises.  (See "Extraordinary Item"
on page 22.) 

For  the first  nine months of  1996, the  Corporation reported  net income of
$865 million, or  $2.02 per share,  compared to earnings  before extraordinary
item of $817 million,  or $1.92 per share for a year ago.   For the first nine
months in 1995, pressure  on earnings before extraordinary item  resulted from
incremental labor expense  associated with  the severe storms  in early  1995.
These  earnings decreases in 1995  were partially offset  by the Corporation's
ongoing  cost-reduction efforts and other  items including the  receipt of tax
and related interest refunds.

The California  Public  Utilities Commission  ("CPUC") authorized  facilities-
based  local   services  competition   effective  January  1996,   and  resale
competition  effective March  1996. Certain  issues remain  open in  the local
competition  proceedings.  (See "CPUC Local Services Competition" on page 30.)
As  of September  30, 1996,  such competition  had not  yet had  a significant
effect  on   the  Corporation's   earnings.  In  August   1996,  the   Federal
Communications Commission  ("FCC") released a decision establishing guidelines
to  implement the 1996 Telecommunications Act, which sets additional rules for
opening local  telecommunications  markets to  full  competition.   (See  "FCC
Interconnection Order" on page  29.) Management is concerned that  final terms
set by regulators  could deprive the Corporation of the  opportunity to earn a
fair return on investment.  

















                                      15








                                    <PAGE>

Volumes 
-------
                              For the 3 Months Ended   For the 9 Months Ended
                                    September 30,            September 30,
                              ----------------------   ----------------------
                                                %                        %
Volume Indicators              1996     1995 Change     1996     1995 Change
-----------------------------------------------------------------------------
Switched access lines in
 service at September 30
 (thousands)..............   16,320  15,630*    4.4        -        -      -
   Residence..............   10,172   9,804*    3.8        -        -      -
   Business...............    5,933   5,615*    5.7        -        -      -
   Other..................      215     211*    1.9        -        -      -
   ISDN access lines 
    (included in above access 
    lines)................       92       44  109.1        -        -      -

Interexchange carrier access
 minutes-of-use (millions).  16,353   15,037    8.8   48,274   44,083    9.5
   Interstate..............   9,411    8,252   14.1   26,827   24,505    9.5
   Intrastate..............   6,942    6,785    2.3   21,447   19,578    9.5

Toll messages (millions)...   1,333   1,238*    7.7    3,884   3,609*    7.6
Toll minutes-of-use 
 (millions)................   3,909    3,701    5.6   11,565   10,870    6.4

Voice mailbox equivalents at
 September 30 (thousands)..   1,666    1,374   21.3        -        -      -
Custom calling services at
 September 30 (thousands)..   7,829    7,093   10.4        -        -      -
-----------------------------------------------------------------------------
* Restated

The  total  number of  access  lines in  service  grew to  16.320  million, an
increase of 4.4 percent for  the twelve months ended September 30, 1996.  This
is an improvement over the 2.7 percent increase for the same period last year.
The  residential access  line growth  rate increased  to 3.8  percent for  the
twelve months ended September 30, 1996, from 1.8 percent last year. Changes in
technology, telecommuting,  Internet access  and  the Corporation's  marketing
efforts  continue to fuel increased  demand for additional  telephone lines in
the  home.    Second  access  lines  in  residences  grew  14.2  percent  from
1.742 million  lines  to  1.989 million  lines  for  the  twelve months  ended
September 30, 1996.  The growth rate  in business access lines was 5.7 percent
for the  twelve months ended September 30,  1996, up from 4.5  percent for the
same  period  last  year.    The number  of  ISDN  lines  in  service  for the
Corporation grew to 92 thousand, an  increase of 109.1 percent for  the twelve
months ended  September 30,  1996, as  customers  increased telecommuting  and
demanded faster data transmission and Internet access.  Accelerated demand for
the  Corporation's high-speed  data transmission  continued through  the third
quarter due to the Corporation's intensified marketing efforts.






                                      16








                                    <PAGE>


Access minutes-of-use represent the volume of traffic carried by interexchange
carriers  over the Telephone Companies' local networks.  Total access minutes-
of-use for the nine months  ended September 30, 1996 increased by  9.5 percent
over the same  period last year.   The increase  in access minutes-of-use  was
primarily attributable to the continued economic growth in California.

Toll messages  and minutes-of-use are comprised  of Message Telecommunications
Service  and  Optional  Calling  Plans  ("local toll")  as  well  as  WATS and
terminating 800  services.  For the nine months ended September 30, 1996, toll
minutes-of-use  increased  by 6.4  percent  driven by  the  continued economic
growth in California.

High  demand  for the  Corporation's voice  mail  products continued  in 1996.
Voice mailbox equivalents  in service  increased 21.3 percent  for the  twelve
months  ended September  30, 1996  to 1.666  million.   Similarly, demand  for
custom calling  services,  such as  call waiting,  grew 10.4  percent for  the
twelve months ended September 30, 1996 due to California's growing economy and
the Corporation's focused customer retention efforts.

Operating Revenues
------------------
                            For the 3 Months Ended    For the 9 Months Ended
                                September 30,               September 30,
                            ----------------------   -----------------------
($ millions)                 1996    1995  Change    1996    1995   Change
----------------------------------------------------------------------------
Total operating revenues.  $2,418  $2,275    $143  $7,145  $6,760     $385
                                             6.3%                     5.7%
----------------------------------------------------------------------------

Revenues for the  three- and  nine-months ended September  30, 1996  increased
from the same periods last year primarily due to increased customer demand for
the  Corporation's   telephone  services  driven  by   marketing  efforts  and
California's growing economy.   Revenues for  the nine-months ended  September
30,  1996 were offset  by a $55  million rate  reduction due to  FCC price cap
orders.    Revenues for  the six  months ended  June  30, 1996,  decreased $60
million due to  the FCC price cap filing for the twelve months ending June 30,
1996. For  the  1996 annual  access tariffs  filings effective  July 1,  1996,
revenues increased approximately $5 million  for the three-month period ending
September  30, 1996.   (See  "FCC Annual Access  Tariff Filing  and Regulatory
Framework Review" on page 30.)  The CPUC price  cap order effective January 1,
1996, had  a  minimal effect  on Pacific  Bell  revenues due  to an  order  in
December  1995 suspending use of  the "inflation minus productivity" component
of the price cap formula for 1996 through 1998.  This action freezes the price
caps on  most of  Pacific Bell's regulated  services through  1998 except  for
adjustments  due  to exogenous  costs or  price  changes approved  through the
CPUC's  application process.    (See "CPUC  Regulatory  Framework Review"  and
"Nevada Bell Rate Case" on page 31.)








                                      17








                                    <PAGE>

Factors affecting revenue changes are summarized in the following tables. 

                   Third Quarter 1996 versus Third Quarter 1995
                  ----------------------------------------------
                                                                    Total
                                           Price                   Change
                                             Cap          Customer   From
($ millions)                              Orders   Misc.   Demand    1995
----------------------------------------------------------------------------
Local service........................        $-    $ -2     $ 65     $ 63
Network access:
 Interstate..........................         5      -5       35       35
 Intrastate..........................         -      -7        4       -3
Toll service.........................         -       3       16       19
Other service revenues...............         -       1       28       29
                                          -----   -----    -----     ----
Total operating revenues.............        $5    $-10     $148     $143
============================================================================


                First 9 Months 1996 versus First 9 Months 1995
                ---------------------------------------------- 
                                                                    Total
                                          Price                    Change
                                            Cap          Customer    From
($ millions)                             Orders   Misc.    Demand    1995
----------------------------------------------------------------------------
Local service........................     $  -     $15      $147     $162 
Network access:                                                           
 Interstate..........................      -55      54        85       84 
 Intrastate..........................        -     -18        36       18 
Toll service.........................        -     -24        67       43 
Other service revenues...............        -       5        73       78 
                                         -----   -----     -----     ---- 
Total operating revenues.............     $-55     $32      $408     $385 
============================================================================

The  increases in revenue due to customer  demand for the periods presented in
the above tables for local service revenues  are the result of the 4.4 percent
growth in access lines and the 10.4 percent growth in custom calling services.
These  increases were  generated by  the continuing  growth in  the California
economy  and  the  Corporation's  focused  customer  retention  efforts.    In
addition, Pacific Bell introduced a new feature, "Call Return," on a "pay-per-
use" basis in April 1996 that generated  revenues of approximately $30 million
for 1996.

Increases in interstate network access revenues due to customer demand for the
periods presented  in the above tables reflect increased interexchange carrier
access minutes-of-use, as  well as  increased access lines.   Customer  demand
increases in intrastate network  access revenues also resulted from  growth in
access minutes-of-use.






                                      18








                                    <PAGE>


Increases in  toll service  revenues due to  customer demand  for the  periods
presented in  the above tables were  driven primarily by  increased local toll
usage resulting  from general  economic growth.   The  customer demand-related
increase  in local toll service  revenues was partially  offset by competitive
losses  in WATS and  800 services.  Interexchange  carriers currently have the
competitive advantage  of being able to offer WATS and 800 service both within
and between service areas.

The increases in other service revenues due to customer demand for the periods
presented in the above tables reflect the  continuing success of the Telephone
Companies'  voice mail  products  and  directory  operations.    In  addition,
customer  demand-related  revenues  increased  in  the  Corporation's  network
integration and wireless cable services. 

Operating Expenses
------------------
                            For the 3 Months Ended   For the 9 Months Ended
                                  September 30,            September 30,
                            ----------------------   ----------------------
($ millions)                  1996    1995  Change     1996    1995  Change
---------------------------------------------------------------------------
Total operating expenses.   $1,848  $1,745    $103   $5,385  $5,222    $163
                                              5.9%                     3.1% 
---------------------------------------------------------------------------

Total operating expenses for the three- and nine-month periods ended September
30,  1996 increased  when compared  with 1995  reflecting costs  for increased
demand  for products and services, new business initiatives and costs incurred
to  prepare for local competition. Increased expenses were partially offset by
cost reductions from the Corporation's  ongoing efficiency efforts and savings
due  to  changes  in employee  benefit  plans  and  benefit plan  assumptions.
Primary factors affecting expense changes are summarized below.
























                                      19








                                    <PAGE>


                     Third Quarter 1996 versus Third Quarter 1995
                     --------------------------------------------

                            Pacific   Pacific                          Total
                              Bell*     Bell*   Pacific     Other     Change
                           Salaries  Employee     Bell*     PTG**       From
                            & Wages  Benefits     Misc.  Entities       1995
----------------------------------------------------------------------------
Cost of products and services.  $24      $-28       $54       $ 2        $52
Customer operations and
 selling expenses.............    3       -14         3        38         30
General, administrative,
 and other expenses...........    5       -18        55       -25         17
Property and other taxes......    -         -         1         1          2
Depreciation and amortization.    -         -        -1         3          2
                                ---      ----      ----       ---       ----
Total operating expenses......  $32      $-60      $112       $19       $103
============================================================================
*  Excludes Pacific Bell subsidiaries.
** Includes Pacific Telesis Group and Pacific Bell subsidiaries.


                First 9 Months 1996 versus First 9 Months 1995
                ----------------------------------------------

                            Pacific   Pacific                          Total
                              Bell*     Bell*   Pacific     Other     Change
                           Salaries  Employee     Bell*     PTG**       From
                            & Wages  Benefits     Misc.  Entities       1995
----------------------------------------------------------------------------
Cost of products and services.   $6      $-94       $55        $4       $-29
Customer operations and
 selling expenses.............    6       -49        29       107         93
General, administrative,
 and other expenses...........    5       -12       112         6        111
Property and other taxes......    -         -        -9         1         -8
Depreciation and amortization.    -         -       -15        11         -4
                                ---     -----      ----      ----       ----
Total operating expenses......  $17     $-155      $172      $129       $163
============================================================================
*  Excludes Pacific Bell subsidiaries.
** Includes Pacific Telesis Group and Pacific Bell subsidiaries.

At Pacific Bell, excluding subsidiaries, salary and wage expense for the three
and nine-month periods ended September 30, 1996 increased compared to the same
periods  in 1995,  primarily due to  wage increases associated  with new labor
agreements effective August 1995 and overtime in the second and third quarters
of 1996 due to increased business volumes.  These increases were mostly offset
by force reduction programs.  Decreased overtime in first quarter  1996 due to
milder weather when compared to 1995 also partially offset the increases.






                                      20








                                    <PAGE>


At  Pacific Bell,  excluding subsidiaries, employee  benefits expense  for the
three-  and nine-month periods ended September 30, 1996, decreased compared to
the same  periods in 1995 primarily  due to changes in  employee benefit plans
and a related remeasurement of benefit plan expense.  The  changes in employee
benefit  plans and benefit plan  assumptions will continue  to produce savings
through year end  and are expected to produce savings in future periods.  (See
"Change In Estimates" under Note A on page 9.)

At  Pacific Bell, excluding  subsidiaries, miscellaneous cost  of products and
services, and general,  administrative, and other  expenses increased for  the
three-  and nine-month  periods  ended September  30,  1996 compared  to  1995
primarily due to costs incurred to prepare for local competition and  contract
services associated with increased demand for products and services.

At  Pacific Bell,  excluding  subsidiaries, miscellaneous  property and  other
taxes expense decreased  for the  nine-month period ended  September 30,  1996
compared  to 1995 primarily due  to nonrecurring audit  adjustments accrued in
1995.

At Pacific  Bell, excluding  subsidiaries, depreciation expense  decreased for
the three- and  nine-month periods ended September  30, 1996 compared to  1995
primarily due to  the elimination  of the amortization  of certain  regulatory
assets associated with the discontinued application of Statement  of Financial
Accounting Standards No. ("SFAS")  71, "Accounting for the Effects  of Certain
Types of Regulation."   (See "Extraordinary Item" on page 22.)   The effect of
this  decrease  was  partially   offset  by  higher  telecommunications  plant
balances.

The  Corporation's other  entities' customer  operations and  selling expenses
increased  for  the three-  and nine-month  periods  ended September  30, 1996
compared  to  1995  due   to  new  business  initiatives,  such   as  Personal
Communications Services ("PCS"), Internet access and network integration. 

The Corporation's other entities'  general, administrative, and other expenses
decreased for the three-month period ended September 30, 1996 compared to 1995
primarily due to reduced software expenses.

Interest Expense
----------------
                             For the 3 Months Ended   For the 9 Months Ended
                                        
                                   September 30,           September 30,    
                                        
                            -----------------------  -----------------------
($ millions)                  1996   1995   Change    1996    1995   Change
----------------------------------------------------------------------------
Interest expense.............  $78   $117     $-39    $265    $350     $-85
                                            -33.3%                   -24.3%
----------------------------------------------------------------------------

Interest  expense  decreased  for  the  three- and  nine-month  periods  ended
September 30, 1996 compared to 1995.  This decrease was due to a change in the
Corporation's   debt  structure,  lower   interest  rates  and   a  change  in
classification of  interest capitalized  during construction  from an item  of
other  income to  a  reduction in  interest expense  due  to the  discontinued
application of SFAS 71 at Pacific Bell.  An adjustment to capitalized interest
in third quarter 1996 also contributed to the overall decrease.

                                      21








                                    <PAGE>


Other Income (Expense) - Net
----------------------------

                                        
                             For the 3 Months Ended   For the 9 Months Ended
                                        
                                   September 30,           September 30,    
                                        
                            -----------------------   ----------------------
($ millions)                  1996   1995   Change    1996    1995  Change
----------------------------------------------------------------------------
Other income (expense)-net    $-17    $21     $-38    $-38     $65   $-103
                                           -181.0%                 -158.5%
----------------------------------------------------------------------------

Other income (expense)-net  decreased for  the three-  and nine-month  periods
ended September 30, 1996 compared to 1995 due to a change in classification of
interest capitalized  during construction from  an item  of other income  to a
reduction of interest expense and dividends paid on Trust Originated Preferred
Securities  ("TOPrS").    (See  Note C  -  "Corporation-Obligated  Mandatorily
Redeemable Preferred Securities of  Subsidiary Trusts" on page 12.)   Interest
income  received on  a tax  refund in  first quarter  1995 contributed  to the
comparative decrease for the nine-month period ended September 30, 1996.  

Income Taxes
------------
                            For the 3 Months Ended    For the 9 Months Ended
                                  September 30,            September 30,    
                            ----------------------    ----------------------
($ millions)                  1996   1995   Change    1996    1995  Change
----------------------------------------------------------------------------
Income taxes .............    $189    $159     $30    $592    $436    $156
                                             18.9%                   35.8%
----------------------------------------------------------------------------

Income  tax  expense increased  for the  three-  and nine-month  periods ended
September 30, 1996 compared  to 1995 primarily  due to higher pre-tax  income,
tax adjustments and tax refunds received in first quarter 1995.


Extraordinary Item
------------------

Effective  third  quarter 1995,  for  external  financial reporting  purposes,
Pacific Bell discontinued the  application of SFAS 71, an  accounting standard
for entities subject  to traditional regulation.   As  a result, during  third
quarter  1995 the  Corporation recorded  a non-cash,  extraordinary, after-tax
charge of $3.4 billion, or $7.86 per share.    











                                      22








                                    <PAGE>


Status of Reserves
------------------

As previously reported, the Corporation established a restructuring reserve at
the end  of 1993 to provide for  the incremental cost of  force reductions and
other related  costs to  restructure its internal  business processes  through
1997.   After new hires, net  force reduction for Pacific  Bell, excluding its
subsidiaries, was approximately 1,225  employees for the first nine  months of
1996.  A total of $144 million in  cash outlays was charged to the reserve  in
the first nine months of 1996. In  1995, Pacific Bell charged $219 million  to
the restructuring reserve  for the  cost through 1997  of enhanced  retirement
benefits  negotiated in the  1995 union contracts.   Based on  its experience,
Pacific  Bell  this  year revised  its  estimate  of  these retirement  costs.
Consequently,  $64  million of  these 1995  noncash  charges were  reversed in
second quarter 1996. There was  no effect on net  income from either the  1995
charge or the 1996 change in estimate.  As of September 30, 1996, $148 million
remained in the restructuring reserve.

Other  reserves were recorded in 1993, 1992  and 1990 primarily related to the
Corporation's withdrawal  from, or restructuring  of, its real  estate, cable,
and  customer premises  equipment businesses.  As of  September 30,  1996, $94
million remained in these reserves.


































                                      23








                                    <PAGE>


LIQUIDITY AND FINANCIAL CONDITION

The  Corporation defines  liquidity as  its ability  to generate  resources to
finance  business  expansion,  construct   capital  assets,  pay  its  current
obligations, and pay dividends.   The Corporation expects to continue to  meet
the majority  of its liquidity needs from  internally generated funds, but can
also  obtain  external financing  through the  issuance  of common  stock, and
short- and long-term debt, if needed.

Short-term  borrowings  are available  under  a commercial  paper  program and
through uncommitted unused lines of credit.  These lines of credit are subject
to continued review by  the lending banks.  At September  30, 1996, the unused
lines of credit available totaled approximately $2.9 billion.

For longer-term borrowings,  Pacific Bell has remaining CPUC  authority, which
will  expire December  31, 1996,  to issue  up  to $750  million of  long- and
intermediate-term debt.   Pacific Bell plans  to make an application  to renew
this authority.  The proceeds may be used only to redeem  maturing debt and to
refinance other debt  issues.  Pacific Bell  has remaining authority  from the
Securities and  Exchange Commission  ("SEC") to  issue up  to $150  million of
long- and intermediate-term debt  through a shelf registration filed  in April
1993.    The Corporation's  PacTel Capital  Resources ("PTCR")  subsidiary may
issue up to $192 million of  medium-term notes through a shelf registration on
file with the SEC. 

In March 1996, Moody's Investors Services, Inc. ("Moody's"), placed the senior
long-term  debt ratings  of Pacific  Bell and  PTCR as  well as  the preferred
securities rating  of Pacific  Telesis  Financing I  and II  under review  for
possible  downgrade.   In  August  1996,  Moody's  downgraded  Pacific  Bell's
debentures and notes to  A1 from Aa3, PTCR's medium-term notes  to A2 from A1,
Pacific Telesis Group's counterparty rating to  A2 from A1 and Pacific Telesis
Financing I and  II Trust Originated Preferred  Securities to a2 from a1.   In
addition,  Moody's  downgraded  Pacific  Bell's  shelf  registration  of  debt
securities  to (P)A1  from  (P)Aa3  and  PTCR's  shelf  registration  of  debt
securities  to (P)A2  from (P)A1.   The  downgrades  were prompted  by Moody's
concerns about  the ability of Pacific  Bell to continue to  generate the same
level  of   highly  predictable  cash  flows  in   an  increasingly  uncertain
competitive and regulatory environment. 

In  April 1996, reflecting the  announcement of the  merger agreement with SBC
Communications Inc. ("SBC"), Standard & Poor's Corporation revised the outlook
on Pacific Telesis Group's corporate credit ratings, including PTCR, to stable
from negative.  (See "Merger Agreement" under Note B on page 9.)   The outlook
for  Pacific  Bell remains  negative.   Also  reflecting the  merger agreement
announcement, Duff  and Phelps,  Inc. reaffirmed its  ratings of  Duff 1+  and
Double-A-Minus  ("AA-") on  Pacific  Bell's commercial  paper and  debentures,
respectively.









                                      24








                                    <PAGE>


The   following  are  commercial  paper,  bond,  and  TOPrS  ratings  for  the
Corporation and its subsidiaries as of September 30, 1996:

                           Moody's Investors    Standard &      Duff and
                             Services, Inc.    Poor's Corp.   Phelps, Inc.
                          -----------------------------------------------
Commercial Paper:
------------------------
Pacific Telesis Group...         Prime-1            A-1          -
Pacific Bell............         Prime-1            A-1+       Duff 1+
PacTel Capital Resources         Prime-1            A-1          -

Long- and Intermediate-
 Term Debt:
------------------------
Pacific Bell............            A1              AA-          AA-
PacTel Capital Resources            A2              A+           -

TOPrS:
-------------------------
Pacific Telesis Financing 
 I and II................           a2              A            -

The above  ratings reflect the views of the rating agencies and are subject to
change.    The  ratings   should  be  evaluated  independently  and   are  not
recommendations to buy, sell, or hold the securities of the Corporation.  

The  Corporation has entered into  sale and leaseback  arrangements to finance
equipment associated with the buildout of its PCS network.  In accordance with
generally accepted accounting principles, these leases are being classified as
capital  leases in property, plant, and equipment.   As of September 30, 1996,
the financing obtained under the leases was  $211 million.  Management expects
the  total financing to reach about  $350 million, of which approximately one-
third will be  repaid in Japanese yen.  To hedge  exposure to foreign currency
exchange  fluctuations,  the Corporation  has  entered  into foreign  currency
forward contracts  to purchase yen in  amounts equal to the  current yen lease
obligations when they  become due.   Gains or losses  due to foreign  currency
rate fluctuations on these contracts  and on the yen lease obligations  offset
each  other  in results  of  operations. The  Corporation  does not  expect to
realize any loss from counterparty nonperformance under these contracts.
















                                      25








                                    <PAGE>


In  November 1995,  the  Corporation announced  an  agreement to  acquire  100
percent of the stock of Wireless  Holdings, Inc. and Videotron Bay Area, Inc.,
which hold licenses and rights  to provide wireless video services.   Both are
joint  ventures between  Transworld  Telecommunications, Inc.  ("TTI") and  Le
Groupe Videotron Ltee (collectively the "Sellers").  The acquisition agreement
provides for  termination after November 9, 1996,  one year after execution of
the  agreement, by  either  the Sellers  or  the Corporation  under  specified
circumstances.  Closing  of  the  transaction  was  subject  to  a  number  of
conditions, which had not been met by November 9, 1996.  The Corporation filed
an  arbitration complaint in September 1996 alleging that Sellers had breached
the agreement.  Sellers denied  the allegations  and  counterclaimed that  the
Corporation  had breached its obligations.   On November  12, 1996, management
notified  Sellers that the Corporation  was exercising its  right to terminate
the agreement.   Management anticipates  that the parties'  arbitration claims
and counterclaims will be amended in view of the termination of the agreement.
The Corporation  has  some  related investments  in  tangible  and  intangible
assets,  and may  incur  additional  expenses  as  part  of  terminating  this
agreement.   The assets may be  reused, written-off or sold.   Pending further
analysis, management does not  expect any write-off or additional  expenses to
be material.

Cash  from operating  activities decreased  $208 million  for the  nine months
ended  September 30, 1996 compared to  the same period in  1995.  The decrease
was  primarily due  to timing  differences in  the  payment and  collection of
accounts payable and accounts receivable, respectively.  A tax refund received
in 1996  of approximately $133 million was $19 million  less than a tax refund
received in 1995.

Cash  used for investing activities decreased $130 million for the nine months
ended September 30,  1996 compared to the  same period in 1995.   The decrease
was  primarily due  to  payments  of $656  million  on  the Corporation's  PCS
licenses  in 1995, offset by  1996 investments in  the core telecommunications
network  and  the  Pacific Bell  Mobile  Services'  PCS  network.   Management
anticipates capital expenditures for 1996 to reach about the same  level as in
1995.





















                                      26








                                    <PAGE>


Cash from  financing activities  increased  $146 million for  the nine  months
ended September  30,  1996 compared  to the  same  period in  1995.   The  net
increase  reflects  the proceeds  from  TOPrS  financing, long-term  debt  and
leasing arrangements substantially offset by the  use of these funds to reduce
the  level of short-term borrowings.  Lower dividend payments also contributed
to the net increase. The Corporation sold $1 billion of TOPrS, $500 million at
7.56  percent in  January 1996  through Pacific Telesis  Financing I  and $500
million  at 8.5  percent in  June 1996  through Pacific Telesis  Financing II.
Under certain  circumstances, dividends on TOPrS could be deferred for up to a
period  of five  years.   (See  Note  C -  "Corporation-Obligated  Mandatorily
Redeemable  Preferred Securities  of  Subsidiary Trusts"  on  page 12.)    The
proceeds were  used to  retire outstanding short-term  indebtedness, primarily
commercial paper.  In February 1996, Pacific Bell issued $250 million of 5.875
percent debentures due February  15, 2006. In August 1996, Pacific Bell issued
$250 million of 6.875 percent  debentures due August 15, 2006.   Neither issue
may be  redeemed  prior to  maturity.   The  proceeds from  the sale  of  both
issuances of debentures were used to reduce short-term debt incurred to retire
Pacific Bell debentures totaling approximately $500 million called in December
1995. In addition during  1996, the Corporation financed $211  million through
its leasing  arrangements for equipment  purchases for  the PCS network.   The
Corporation reduced its second quarter 1996 dividend to $0.315 per share which
contributed to the overall increase in cash flow in third quarter 1996.

The Corporation's  debt ratio improved to  62.0 percent at  September 30, 1996
from 74.1 percent at December 31, 1995.  This improvement was primarily due to
the use of the  TOPrS proceeds to retire outstanding  short-term indebtedness.
Pre-tax  interest coverage was  6.6 times for  the first nine  months in 1996.
Pre-tax interest coverage for the same period in 1995  was negative due to the
Corporation's reported loss in third quarter 1995.   

Pursuant to  the terms of the  merger agreement, the   Corporation reduced its
second  and  third quarter  dividends  to $0.315  per share.    These dividend
reductions will improve cash flow by approximately $195 million in 1996.  (See
"Merger Agreement" under Note B on page 9.)      






















                                      27








                                    <PAGE>


MERGER AGREEMENT

On  April 1,  1996, SBC  and the  Corporation jointly  announced  a definitive
agreement whereby the  Corporation will  become a  wholly-owned subsidiary  of
SBC.   Under  terms of  the merger  agreement, each  share of  Pacific Telesis
common stock will be exchanged  for 0.733 shares of SBC common  stock, subject
to adjustment.  The transaction  is intended to be accounted for  as a pooling
of  interests and  to be  a tax-free reorganization.   On  July 31,  1996, the
shareowners  of  the  Corporation  and  SBC  approved the  transaction,  which
previously had been  approved by  the respective  Board of  Directors of  each
company. On November 5, 1996, the  U.S. Department of Justice announced it had
concluded that the merger does not violate the antitrust laws and  accordingly
that it was closing its investigation into the merger.  The merger  is subject
to certain other conditions  and regulatory approvals.  The  California Public
Utilities Commission ("CPUC")  has established  a schedule for  review of  the
transaction with final comments from interested parties due  in January  1997.
On September 30, 1996, the Office of Ratepayer Advocates ("ORA"), the consumer
interest  branch of  the  CPUC,  filed  testimony  in  the  merger  proceeding
recommending  a  $2.1 billion  refund to  customers  payable over  five years.
Management  does not  agree  with the  ORA's  recommendation and  believes  no
customer rebate should be required in connection with the merger.  The CPUC is
expected to make a final  decision on the merger by the end of  March 1997. In
Nevada, SBC and  the Corporation entered into a stipulation  with the staff of
the  Public Service  Commission  of  Nevada ("PSCN")  and  the Office  of  the
Consumer  Advocate to  refund to customers  the greater  of $4  million or 2.0
percent of the amount, if  any, ordered by the CPUC to be  refunded to Pacific
Bell customers.  The refund  is conditioned on approval of the  stipulation by
the  PSCN and closing  of the  merger.   The PSCN  has scheduled  hearings for
November  25,  1996, and  approval  is  expected in  December  1996.   If  all
necessary approvals are granted, the transaction  is expected to close in  the
first quarter of 1997.

PENDING REGULATORY ISSUES

Long Distance Service
---------------------

In  February 1996,  the  1996  Telecommunications  Act  was  signed  into  law
establishing new procedures  under which  the Corporation can  apply to  offer
within its region long  distance telephone service between service  areas.  To
compete effectively  in  this  market,  the Corporation  formed  Pacific  Bell
Communications  ("PBCOM").    In   March  and  April  of  1996,   PBCOM  filed
applications in  California and  Nevada to  provide competitive long  distance
telephone service between and within service areas and local exchange services
as  a non-dominant carrier.   The Corporation  must comply with  a competitive
checklist required by the 1996 Telecommunications Act before PBCOM can receive
FCC  approval to offer in California and  Nevada long distance service between
service areas.  Both federal and state approvals are required before PBCOM may
enter these markets.  Management expects to be able to  provide these services
in the second half of 1997.






                                      28








                                    <PAGE>


FCC Recommendation on Universal Service
---------------------------------------
 
On November 7,  1996, the Joint Federal-State Board on  Universal Service (the
"Board")  issued a recommendation  on how  to implement  sections of  the 1996
Telecommunications  Act  regarding  universal  service.   Generally  the  plan
creates  a system that identifies cost subsidies in rural and high-cost areas.
However, the Board deferred a recommendation  on how large the subsidy  should
be.  The Board also recommended creation of a $2.25 billion fund for providing
discounted services to schools and libraries.   The FCC has until May 8,  1997
to issue a final decision on this matter.   

FCC Interconnection Order
-------------------------

In  August 1996,  the FCC  released a  decision (the  "Interconnection Order")
establishing guidelines  to implement  the 1996 Telecommunications  Act, which
sets rules for opening local  telecommunications markets to full  competition.
The Interconnection Order lays  out how long-distance companies and  other new
competitors may connect  to local networks and sets guidelines  and prices for
network  components.    Management  believes that  the  Interconnection  Order
undermines  the  intent of  the 1996  Telecommunications  Act by,  among other
things,  denying  states  a role  in  managing and  setting  prices  for local
markets.  Management is also concerned that the order requires local telephone
companies to offer wholesale network services at unrealistically low prices. 

The Corporation,  along  with other  local telephone  companies, the  National
Association of  Regulatory Utility Commissioners and state  PUCs including the
CPUC, appealed the  Interconnection Order to a federal court.   On October 15,
1996,  the  U.S. Court  of  Appeals  for the  Eighth  Circuit  (the "Court  of
Appeals") issued  a partial stay of  the Interconnection Order that  stays the
operation and effect of the pricing provisions and the "pick and choose" rule,
but allows the non-pricing elements  of the order to go into  effect. The U.S.
Supreme Court issued a  memorandum decision on  November 12, 1996 refusing  to
overturn the stay imposed by the Court of Appeals.

The   Interconnection   Order   also   addressed   the   issue   of   wireless
interconnection,  or  the arrangements  under  which  local exchange  carriers
("LECs") are compensated for interconnecting  with and terminating traffic for
commercial mobile  radio service  ("CMRS") providers (including  cellular, PCS
and paging).  The Interconnection Order ruled that CMRS providers are entitled
to reciprocal compensation arrangements for transport and termination of local
telecommunications traffic. On November 1, 1996 the  Court of Appeals lifted a
part of the stay described above with respect to the non-price  aspects of the
FCC's reciprocal compensation rules for  CMRS providers.  As a result  of this
order, Pacific Bell is currently renegotiating its CMRS contracts.










                                      29








                                    <PAGE>


FCC Annual Access Tariff Filing and Regulatory Framework Review
---------------------------------------------------------------

The Telephone Companies  filed their 1996 annual access tariffs  with the FCC,
which  will increase  annual revenues  by approximately  $27 million,  for the
twelve months  beginning July 1, 1996.  The revenue increases are under review
by the FCC.

The FCC adopted  new interim price cap  rules in 1995  that govern the  prices
that the larger LECs, including the Telephone Companies, charge  interexchange
carriers for  access to local  telephone networks.  The  interim rules require
the LECs to adjust their maximum prices for changes in inflation, productivity
and certain costs beyond the control of the LEC.  Under the interim plan, LECs
may choose  from  three  productivity  factors:   4.0,  4.7  or  5.3  percent.
Election of  the 5.3 percent productivity factor permits the LEC to retain all
of  its earnings whereas the other lower productivity factors require earnings
to be shared with customers.  As  in 1995, the Telephone Companies again chose
the 5.3 percent  productivity factor that  will enable them  to retain all  of
their   earnings effective July 1,  1996.  The higher  productivity factor was
chosen  because management  believes  that  it will  be  more  than offset  by
elimination of  the sharing mechanism.   An FCC ruling on  permanent price cap
rules has  been delayed  until  1997 due  to the  implementation  of the  1996
Telecommunications Act.  

Management  continues to  believe that  the FCC  should adopt  pure  price cap
regulation and eliminate the productivity factor, sharing and earnings cap.

CPUC Local Services Competition
-------------------------------

The  CPUC authorized  facilities-based  local  services competition  effective
January  1996 and  resale competition  effective March  1996.   Several issues
still need  to be resolved in order to implement competition in all California
telecommunications  markets.  Issues to  be finalized include  final rates for
resale  and number  portability,  LEC provisioning  and  pricing of  essential
network functions  to  competitors and  presubscription. The  CPUC expects  to
issue  final rules on presubscription in early  1997 and final rates and rules
for all other issues in late 1997.

Management believes that all  markets should be open to  all competitors under
the same rules at the  same time, and that a truly open competitive market, in
which  the  Corporation can  compete  without  restrictions, offers  long-term
opportunity to build the business.

CPUC Decision on Universal Service
----------------------------------

The CPUC issued its final  decision on universal service on October  25, 1996,
establishing an annual California universal service fund of approximately $352
million.  Customers of all telecommunications providers will contribute to the
preservation of affordable telephone  service via a 2.87 percent  surcharge on
all bills for  telecommunications services  provided in California.   The  new
program will go into effect February  1, 1997.  Applications for rehearing are
due on December 4, 1996.  Management is evaluating whether to seek rehearing. 


                                      30








                                    <PAGE>


Management  is concerned  that the  decision underestimates  the true  cost of
providing universal telephone service.   While $305 million of the  total $352
million is  expected to be  paid to  Pacific Bell, this  is far short  of what
Pacific Bell  estimates the true  cost of  providing universal service  to be.
Pacific Bell developed a Cost Proxy Model to calculate the cost  of service in
California.   That model estimated the average cost of providing service to be
$27 per line per month.  The CPUC uses the model for the new program, but  has
determined that the average cost is only $20.30 per line per month.

In order to  ensure revenue  neutrality, Pacific  Bell must  offset its  rates
dollar for dollar  for any funds it receives from  the newly created universal
service  fund.   This offset  will initially  be accomplished  by means  of an
across-the-board  surcredit  on all  of Pacific  Bell's products  and services
except for residential basic exchange services.

The final decision also establishes a discount program for schools, libraries,
certain   community-based  organizations   and  municipal-   and  county-owned
hospitals and clinics.  Carriers providing services at a discounted price will
be  reimbursed from a newly created California Teleconnect Fund. This discount
program will be funded by a separate surcharge of 0.41 percent on the bills of
customers of all telecommunications carriers in California.    

CPUC Regulatory Framework Review
--------------------------------

As previously reported,  in December  1995, the  CPUC issued an  order in  its
review of the  regulatory framework in California.  The order suspended use of
the "inflation minus productivity" component of the price cap formula for 1996
through  1998.  This action  freezes the price caps on  most of Pacific Bell's
regulated services for the years 1996  through 1998 except for adjustments due
to exogenous  costs or price  changes approved through the  CPUC's application
process.  In  October 1996, Pacific Bell filed an application with the CPUC to
adjust its rates due  to exogenous cost  changes, proposing an annual  revenue
reduction of approximately $65 million effective January 1, 1997.  The CPUC is
expected to issue a decision before the end of 1996.

Nevada Bell Rate Case
---------------------

The  Public  Service  Commission  of  Nevada  ("PSCN")  approved  a  "Plan  of
Alternative   Regulation"   ("the   Plan")    in   April   1995    redesigning
telecommunications regulation  in the state of  Nevada.  The Plan  will remove
barriers to  toll and local competition  in Nevada but will  also allow Nevada
Bell  to keep  any  productivity gains  by  eliminating the  current  customer
sharing provision.  The Plan is optional and required a rate case to determine
initial pricing.   In March 1996, Nevada  Bell filed a rate  case to enter the
Plan.  The PSCN approved the rate case in August 1996 that redesigned rates by
increasing the  monthly residential  flat rate  service while  reducing intra-
service area toll call services and business  basic prices.  The Plan will  be
effective January  1, 1997  and  is estimated  to decrease  annual revenue  by
approximately  $13 million.  The  PSCN also increased  depreciation rates that
are  estimated to  increase annual  depreciation expense  by about  $5 million
beginning in January 1997.



                                      31








                                    <PAGE>


PART II.  OTHER INFORMATION

Item 4.      Submission of Matters to a Vote of Security Holders.


On  July 31, 1996,  the Corporation held  a Special Meeting  of Shareowners to
vote on a proposal to approve and adopt the Agreement and Plan of Merger among
the Corporation,  SBC Communications  Inc. and  SBC Communications  (NV) Inc.,
dated April 1, 1996.  The proposal received the following number of votes:


Approve and Adopt the Agreement and Plan of Merger:
---------------------------------------------------
                                                  Broker
For                 Against        Abstentions    Nonvotes
-----------         ---------      -----------    --------
313,514,848         6,918,094      3,442,772      0



Item 5.  Proposed Merger With SBC Communications Inc.

SBC  Communications Inc.  ("SBC") and  Pacific Telesis  have entered  into the
Merger Agreement, pursuant  to which  Pacific Telesis would  become a  wholly-
owned subsidiary of SBC.   Under terms of the Merger  Agreement, each share of
Pacific Telesis  Common Stock will  be converted  into 0.733 shares  of common
stock, par value $1.00  per share, of SBC (the "SBC Common Stock"), subject to
adjustment, as described in the Merger Agreement.  Under the Merger Agreement,
Pacific Telesis may not  pay a dividend in excess of 73.3%  of SBC's dividend.
The  transaction,  which has  been  approved  by the  Board  of Directors  and
shareholders of each company, will be accounted for as a  pooling of interests
and be a tax-free reorganization.  On November 5, 1996, the U.S. Department of
Justice  announced it  had  concluded that  the  merger does  not violate  the
antitrust laws and accordingly that it was closing its investigation into  the
merger.   The  Merger Agreement  is subject  to  certain other  conditions and
regulatory  approvals.    The   California  Public  Utilities  Commission  has
established a schedule for review of  the transaction with final comments from
interested parties due  in January 1997.   There can be no  assurance that the
Merger will be consummated. Details of the proposed merger with SBC, including
certain  financial information,  appear  in Pacific  Telesis' Proxy  Statement
dated June 3, 1996.

SBC  is  a   holding  company  whose   subsidiaries  and  affiliates   operate
predominantly in the communications services industry.  SBC's subsidiaries and
affiliates  provide  landline  and wireless  telecommunications  services  and
equipment,  directory advertising,  publishing and cable  television services.
Southwestern  Bell Telephone  Company is  SBC's largest  subsidiary, providing
telecommunications services in Texas, Missouri, Oklahoma, Kansas and Arkansas.








                                      32








                                    <PAGE>


Item 5.  Proposed Merger With SBC Communications Inc. (Continued)

SBC is subject to  the informational reporting requirements of  the Securities
Exchange Act of  1934, as amended, and in accordance  therewith files reports,
including reports  on  Form  8-K  which present  proforma  combined  condensed
financial statements  of SBC  Communications Inc. and  Pacific Telesis  Group,
proxy statements  and  other  information with  the  Securities  and  Exchange
Commission  ("SEC").  Such reports, proxy statements and other information may
be inspected and  copied at the public reference facilities  maintained by the
SEC at Room  1024, Judiciary Plaza, 450  Fifth Street, N.W., Washington,  D.C.
20549, and at the SEC's regional offices located at 7 World Trade Center, 13th
Floor,  New York,  New York  10019  and Northwestern  Atrium Center,  500 West
Madison Street,  Suite 1400, Chicago, Illinois 60661.  Copies of such material
may be  obtained by  mail from  the Public  Reference Section  of  the SEC  at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.  The  SEC maintains a  World Wide Web  site at http://www.sec.gov  that
contains  reports,  proxy and  information  statements  and other  information
regarding entities that file  electronically with the SEC, including  SBC.  In
addition, reports,  proxy statements and other information  concerning SBC may
be inspected  at the  offices of  the following stock  exchanges on  which the
common stock of SBC is traded:  the New  York Stock Exchange, 20 Broad Street,
New York, New York 10005; the Chicago Stock Exchange, One Financial Place, 440
South  La Salle  Street,  Chicago,  Illinois  50504;  and  the  Pacific  Stock
Exchange, 301 Pine Street,  San Francisco, California 94104.   Pacific Telesis
does not assume  any responsibility  for the accuracy  or completeness of  the
information  concerning SBC contained in  such documents and  does not warrant
that there  have not occurred events  not yet publicly disclosed  by SBC which
would  affect the accuracy or  completeness of the  information concerning SBC
included therein.



























                                      33








                                    <PAGE>

Item 5.  Proposed Merger With SBC Communications Inc. (Continued)

The following table  sets forth for the fiscal periods  indicated the high and
low  reported  sale prices  for  SBC's  common stock  on  the  New York  Stock
Exchange.

                                                              REPORTED
                                                             SALE PRICE
                                                          ----------------
                                                            HIGH     LOW
                                                          -------- -------
1994
----
First Quarter.............................................$42.000  $36.750
Second Quarter............................................$44.375  $38.500
Third Quarter.............................................$44.250  $40.250
Fourth Quarter............................................$43.125  $39.250

1995
----
First Quarter.............................................$43.875  $39.625
Second Quarter............................................$47.875  $41.625
Third Quarter.............................................$55.125  $45.500
Fourth Quarter............................................$58.500  $53.125

1996
----
First Quarter.............................................$60.250  $49.750
Second Quarter............................................$50.750  $46.250
Third Quarter.............................................$51.000  $45.625



























                                      34








                                    <PAGE>


Item 6.   Exhibits and Reports on Form 8-K.

   (a)    Exhibits.

          Exhibits  identified as on file with the SEC are incorporated herein
          by reference as exhibits hereto.

Exhibit
Number                            Description
-------                           -----------

   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).

   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.

   10a    Agreement and  Plan  of  Merger among  Pacific  Telesis  Group,  SBC
          Communications Inc.  and SBC Communications  (NV) Inc., dated  as of
          April 1, 1996.   (Exhibit (2) to Form  8-K, Date of Report April  1,
          1996, File No. 1-8609.)

   10qq   Pacific Telesis Group 1996  Executive Deferred Compensation Plan, as
          adopted effective December 1, 1995. 

   11     Computation of Earnings per common share.

   15     Letter re unaudited interim financial information.

   27     Article 5 FDS for 3rd Quarter 1996 Form 10-Q.


The  Corporation will furnish to a security  holder upon request a copy of any
exhibit at cost.

   (b)    Reports on Form 8-K.
          --------------------

          None.










                                      35








                                    <PAGE>


FORM 10-Q





                                  SIGNATURE
                                  ---------

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




                                      
                           BY:  /s/W. E. Downing
                                -----------------------------------
                                W. E. Downing
                                Executive Vice President,
                                Chief Financial Officer & Treasurer


Date:  November 13, 1996

























                                      36








                                    <PAGE>


                                EXHIBIT INDEX

Exhibits  identified  as  on file  with  the  SEC are  incorporated  herein by
reference as exhibits hereto.  All other  exhibits are provided as part of the
electronic transmission.

Exhibit
Number                            Description
-------                           -----------

   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).

   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.

   10a    Agreement  and  Plan of  Merger  among  Pacific  Telesis Group,  SBC
          Communications Inc. and  SBC Communications (NV)  Inc., dated as  of
          April 1, 1996.   (Exhibit (2) to Form  8-K, Date of Report  April 1,
          1996, File No. 1-8609.)

   10qq   Pacific Telesis Group 1996  Executive Deferred Compensation Plan, as
          adopted effective December 1, 1995. 

   11     Computation of Earnings per common share.

   15     Letter re unaudited interim financial information.

   27     Article 5 FDS for 3rd Quarter 1996 Form 10-Q.




















                                      37