UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C. 20549

                                    FORM 10-K

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

For the fiscal year ended                    December 31, 1997

                                       OR

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

For the transition period from         to
Commission file number               1-6469

                    CAROLINA TELEPHONE AND TELEGRAPH COMPANY
             (Exact name of registrant as specified in its charter)

North Carolina                                             56-0931189
(State or other jurisdiction of                          (IRS Employer
 incorporation or organization)                        Identification No.)

14111 Capital Blvd, Wake Forest, NC                           27587
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code       (919) 554-7900

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:   None

Securities subject to Section 15(d) of the Act:

                               Title of each class
                                   Debentures
5 3/4% due August 15, 2000                        6 1/8% due May 1, 2003
7 1/4% due December 15, 2004                      6 3/4% due August 15, 2013

This registrant  meets the conditions set forth in General  Instruction  I(1)(a)
and (b) of Form  10-K  and is  therefore  filing  this  form  with  the  reduced
disclosure format.

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

There is no voting stock held by non-affiliates.

There were 3,626,510 common shares  outstanding at December 31, 1997, and at the
date of filing of this report.



<PAGE>



                   CAROLINA TELEPHONE AND TELEGRAPH COMPANY

                       SECURITIES AND EXCHANGE COMMISSION
                           ANNUAL REPORT ON FORM 10-K

Part I

Item 1.  Business

Carolina  Telephone and Telegraph  Company (CT&T), a wholly-owned  subsidiary of
Sprint  Corporation,  was  incorporated  under  the  laws of the  State of North
Carolina in 1968. In 1969, CT&T acquired all of the public utility assets of the
predecessor company of the same name under a plan of merger.

CT&T provides local exchange  services in all or part of 50 counties,  mainly in
the  eastern  portion  of North  Carolina.  These  services  include  access  by
telephone  customers  and other  carriers to CT&T's local  exchange  facilities,
sales  of  telecommunications  equipment,  and  long  distance  services  within
specified geographical areas, or local access transport areas (LATAs).

CT&T is subject to the  jurisdiction  of the Federal  Communications  Commission
(FCC) and the North Carolina Utilities Commission (NCUC).

The following table reflects major revenue  categories as a percentage of CT&T's
total net operating revenues:

<TABLE>
<CAPTION>

                                                                    1997              1996             1995
-------------------------------------------------------------- ---------------- ----------------- ----------------

<S>                                                                 <C>              <C>               <C>
Local service                                                        46.1%            42.4%             39.5%
Network access                                                       27.5             28.5              28.6
Toll service                                                          4.2              7.3              12.4
Other                                                                22.2             21.8              19.5
-------------------------------------------------------------- ---------------- ----------------- ----------------

                                                                    100.0%           100.0%            100.0%
                                                               ---------------- ----------------- ----------------
</TABLE>
















<PAGE>



The following table summarizes access lines in service at the end of each of the
last three years:

<TABLE>
<CAPTION>

                                                                    1997              1996             1995
-------------------------------------------------------------- ---------------- ----------------- ----------------
                                                                                 (in thousands)
Access lines
<S>                                                                 <C>              <C>                 <C>
    Residential                                                       816              792               764
    Business                                                          276              251               228
-------------------------------------------------------------- ---------------- ----------------- ----------------
Total                                                               1,092            1,043               992
                                                               ---------------- ----------------- ----------------
Growth rates                                                         4.6%             5.2%
                                                               ---------------- -----------------
</TABLE>


AT&T is CT&T's largest customer for network access  services.  In 1997 and 1996,
12% of CT&T's net operating  revenues was derived from services  (mainly network
access  services)  provided to AT&T,  compared with 14% in 1995. While AT&T is a
significant  customer,  CT&T does not believe revenues are dependent on AT&T, as
customers'  demand for interLATA long distance  telephone service is not tied to
any one long distance carrier.

CT&T had  approximately  3,700  employees  at year-end  1997,  of which 58% were
represented  by the  Communications  Workers  of  America  or the  International
Brotherhood of Electrical Workers for collective bargaining purposes.

In 1987, CT&T formed Carolina Telephone Long Distance, Inc. (CTLD).  CTLD resold
interexchange long distance services from exchanges within CT&T's service area.
Through early 1997, CT&T phased out these reseller services.

In September 1996, Sprint contributed NOCUTS, Inc. (formerly called Joint
Underground Locating Services, Inc.)(NOCUTS) to CT&T.  NOCUTS was previously
owned by The United Telephone Company of Pennsylvania, an affiliate of CT&T.
NOCUTS operates a non-regulated line of business specializing in locating
underground utility lines.

In July 1995,  legislation  was enacted that allowed  incumbent  local  exchange
telephone  companies to have intrastate rates, terms and conditions for services
determined  based on a price cap form of  regulation.  The NCUC approved a price
regulation  plan for CT&T  effective in June 1996. The price  regulation  allows
CT&T to adjust prices for basic,  interconnection and non-basic services,  using
an inflation-based  formula.  As a consumer  safeguard,  CT&T capped residential
rates at its June 1996 level for the first three years of the plan.

The extent and ultimate  impact of  competition  will  continue to depend,  to a
considerable  degree, on FCC and state regulatory  actions,  court decisions and
possible  federal  and  state  legislation.   Federal  legislation  designed  to
stimulate  competition was passed and signed into law in February 1996. See Part
II, Item 7  "Management's  Discussion  and Analysis of Financial  Condition  and
Results of Operations" for a discussion of this law.

CT&T's environmental  compliance and remediation expenditures are mainly related
to the  operation  of  standby  power  generators.  The  expenditures  arise  in
connection with standards compliance,  permits, or occasional remediation, which
may be related to  generators,  batteries or fuel storage.  CT&T's  expenditures
relating to  environmental  compliance and remediation have not been material to
its  financial  statements  or its  operations  and are not expected to have any
future material effects.


<PAGE>



Item 2.  Properties

CT&T's properties consist mainly of land, structures, facilities and equipment.

The following table summarizes  CT&T's major telephone assets as a percentage of
total property, plant and equipment at year-end 1997:

Property, plant and equipment
    Cable and wire facilities                                        42.8%
    Central office equipment                                         41.8
    General support assets                                           12.8
    Other                                                             2.6
---------------------------------------------------------------- ------------
                                                                    100.0%
                                                                 ------------


Item 3.  Legal Proceedings

No material legal proceedings are pending against CT&T or its subsidiaries.

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

Omitted under the provisions of General Instruction I.


<PAGE>


Part II

Item 5.  Market for Registrant's Common Stock and Related Shareholder Matters

CT&T is a  wholly-owned  subsidiary  of Sprint  Corporation;  consequently,  its
common stock is not traded.

Item 6.  Selected Financial Data

Omitted under the provisions of General Instruction I.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

General

Carolina  Telephone and Telegraph Company,  with its wholly-owned  subsidiaries,
(CT&T)  includes  certain  estimates,   projections  and  other  forward-looking
statements in its reports, in presentations to analysts and others, and in other
publicly  available  material.  Future  performance  cannot be  ensured.  Actual
results  may differ  materially  from those in the  forward-looking  statements.
Factors that could cause actual results to differ  materially  from estimates or
projections contained in the forward-looking statements include:

        - the effects of vigorous competition in the markets in which CT&T
          operates;
        - the impact of any unusual items resulting from ongoing evaluations of
          CT&T's business strategies;
        - requirements imposed on CT&T and latitude allowed its competitors by
          the Federal Communications Commission (FCC) or the North Carolina
          Utilities Commission under the Telecommunications Act of 1996
          (Telecom Act);
        - unexpected results of litigation filed against CT&T; and
        - the  possibility of one or more of the markets in which CT&T competes
          being impacted by changes in political, economic or other factors such
          as legal and regulatory  changes or other external  factors over which
          CT&T has no control.

Regulatory Developments

The Telecom  Act,  which was signed into law in February  1996,  was designed to
promote  competition in all aspects of  telecommunications.  It eliminated legal
and regulatory  barriers to entry into local telephone markets. It also required
incumbent local exchange  carriers  (LECs),  among other things,  to allow local
resale  at  wholesale  rates,  negotiate  interconnection  agreements,   provide
nondiscriminatory  access to unbundled network elements and allow collocation of
interconnection  equipment  by  competitors.  The  Telecom  Act also allows Bell
Operating  Companies to provide in-region long distance service once they obtain
state  certification  of  compliance  with  a  competitive  "checklist,"  have a
facilities-based  competitor,  and obtain an FCC ruling  that the  provision  of
in-region  long distance  service is in the public  interest.  The Telecom Act's
impact on CT&T remains unclear because the rules for competition are still being
decided  by  regulators  and  the  courts.  Local  competition  is  expected  to
eventually result in some loss of CT&T's market share.

In accordance  with the Telecom Act, the FCC adopted  detailed  rules in 1996 to
govern interconnection to incumbent local networks by new market entrants.  Some
LECs and state public utility commissions appealed these rules to the U.S. Court
of  Appeals,  which  prevented  most of the pricing  rules from  taking  effect,
pending a full review by the court.


<PAGE>



In 1997,  the court  struck  down the FCC's  pricing  rules.  It ruled  that the
Telecom Act left jurisdiction over pricing matters to the states. The court also
struck down certain other FCC rules on  jurisdictional  or substantive  grounds.
The U.S. Supreme Court has agreed to review the appeals court decision. In 1997,
the FCC issued important  decisions on the structure and level of access charges
and universal service. These decisions will impact the industry in several ways,
including the following:

        - An  additional  subsidy  was  created to  support  telecommunications
          services for schools,  libraries and rural health care providers.  All
          carriers  providing  telecommunications  services  will be required to
          fund this program,  which is capped at $2.7 billion per year. However,
          LECs can  pass  their  portion  of  these  costs  on to long  distance
          carriers.

        - Per-minute  interstate access rates charged by LECs will decline over
          time to become cost-based, beginning in July 1997.

        - Certain  monthly  flat-rate  charges  paid  by some  local  telephone
          customers will increase beginning in 1998.

        - Certain  per-minute  access  charges paid by long distance  companies
          were converted to flat monthly charges based on pre-subscribed lines.

        - A basis has been established for replacing  implicit access subsidies
          with an explicit interstate universal service fund beginning in 1999.


A number of LECs,  long distance  companies and others have appealed some or all
of the FCC's orders. The effective date of the orders has not been delayed,  but
the appeals are expected to take a year or more to conclude. The impact of these
FCC  decisions  on CT&T is  difficult  to  determine,  but is not expected to be
material.

<TABLE>
<CAPTION>

Results of Operations

------------------------------------------------------------------------------- --- ------------- -- -------------
Years ended December 31,                                                                1997             1996
------------------------------------------------------------------------------- --- ------------- -- -------------
                                                                                         (in thousands)
Net Operating Revenues
<S>                                                                             <C>               <C>
    Local service                                                               $       388,050   $      351,218
    Network access                                                                      231,349          235,642
    Toll service                                                                         35,287           60,192
    Other                                                                               187,464          181,066
------------------------------------------------------------------------------- --- ------------- -- -------------
Net operating revenues                                                                  842,150          828,118
------------------------------------------------------------------------------- --- ------------- -- -------------

Operating Expenses
    Costs of services and products                                                      329,875          345,967
    Selling, general and administrative                                                 164,561          152,067
    Depreciation and amortization                                                       140,338          135,205
------------------------------------------------------------------------------- --- ------------- -- -------------
Total operating expenses                                                                634,774          633,239
------------------------------------------------------------------------------- --- ------------- -- -------------

Operating Income                                                                $       207,376   $      194,879
                                                                                --- ------------- -- -------------
</TABLE>



<PAGE>



Net Operating Revenues

Net operating  revenues  increased 2% in 1997 mainly because of customer  access
line growth of 4.6%.

Local  service  revenues,   derived  from  providing  local  exchange  services,
increased  10% in 1997.  This  increase is mainly due to the access line growth,
which reflects  strong  economic growth in CT&T's service areas and increases in
second-line  service for  existing  business and  residential  customers to meet
their  lifestyle and data access needs.  Local service  revenues also  increased
because of  extended  area  calling  plans and  increased  demand  for  advanced
intelligent  network services,  such as Caller ID and Call Waiting. In addition,
revenues reflect increased wire maintenance agreements.

Network  access  service  revenues,  derived from  interexchange  long  distance
carriers' use of the local network to complete calls, decreased 2% in 1997. This
overall decrease is mainly due to FCC-mandated access rate reductions  effective
in July 1997 -- see "Regulatory  Developments" for more information.  Minutes of
use increased 5%, partly offsetting this decrease.

Toll service  revenues are mainly derived from providing long distance  services
within  specified  geographical  areas, or local access transport areas (LATAs).
These revenues decreased 41% in 1997 mainly because reseller  interexchange long
distance  services were phased out through early 1997,  and because of extended
local area calling plans.  This decline was partly offset by the related
increase in local service revenues.

Other  revenues are mainly  derived  from  telecommunications  equipment  sales,
directory sales and listing services, and billing and collection services. Other
revenues  increased 4% in 1997 mainly  because of  increased  sales of telephone
equipment.  Partly offsetting the increase was a decrease in revenues related to
the  change in  transfer  pricing  for  certain  transactions  between  CT&T and
Sprint's directory publishing division beginning in July 1997 to more accurately
reflect market pricing.

Operating Expenses

Costs of services and products  decreased 5% in 1997 mainly because of the phase
out of the  interexchange  long distance  reseller  services through early 1997.
This  decline was partly  offset by customer  line access  growth and  increased
equipment  sales.  Cost of services  and  products  were 39.2% of net  operating
revenues in 1997 and 41.8% in 1996.

Selling,  general and  administrative  expense  increased  8% in 1997 because of
expanded  operations  of  locating   underground  utility  lines  and  increased
marketing costs to promote products and services.

Depreciation increased 4% in 1997 mainly because of plant additions.

Extraordinary Items

CT&T incurred after-tax extraordinary charges of $4 million related to the early
extinguishment of debt in 1996.


<PAGE>



Year 2000 Issue

The "Year 2000" issue affects  installed  computer  systems,  network  elements,
software  applications,  and other  business  systems  that have  time-sensitive
programs that may not properly reflect or recognize the year 2000.  Because many
computers and computer  applications  define dates by the last two digits of the
year,  "00" may not be properly  identified  as the year 2000.  This error could
result in miscalculations or system failures.

Sprint Corporation, with its subsidiaries, (Sprint) started a program in 1996 to
identify  and  address  the Year 2000 issue.  It is taking an  inventory  of its
network and computer systems and is creating and implementing plans to make them
Year 2000  compliant.  Sprint is using both  internal  and  external  sources to
identify,  correct or reprogram,  and test its systems for Year 2000 compliance.
The total  cost of  modifications  and  conversions  is not known at this  time;
however, it is not expected to be material to CT&T's financial position, results
of operations or cash flows and is being expensed as incurred.

The Year 2000 issue may also  affect the systems  and  applications  of Sprint's
customers,  vendors or resellers.  Sprint is also contacting others with whom it
conducts  business to receive the  appropriate  warranties and  assurances  that
those third parties are, or will be, Year 2000 compliant.

If compliance is not achieved in a timely manner, the Year 2000 issue could have
a  material  effect on  Sprint's  operations.  However,  Sprint is  focusing  on
identifying and addressing all aspects of its operations that may be affected by
the Year 2000 issue and is addressing the most critical applications first. As a
result, Sprint management does not believe its operations,  or the operations of
its subsidiaries, will be materially adversely affected.

Impact of Recently Issued Accounting Pronouncement

See Note 9 of Notes to Consolidated  Financial  Statements for a discussion of a
recently issued accounting pronouncement.

Item 8.  Financial Statements and Supplementary Data Index
<TABLE>
<CAPTION>

                                                                                      Page Reference
                                                                                 ------------------------

<S>                                                                                        <C>
Report of Independent Auditors                                                              8

Consolidated Statements of Income for each of the three years ended December 31,
   1997                                                                                     9

Consolidated Balance Sheets as of December 31, 1997 and 1996                               10

Consolidated Statements of Cash Flows for each of the three years ended December
   31, 1997                                                                                11

Consolidated Statements of Changes in Shareholder's Equity for each of the three
   years ended December 31, 1997                                                           12

Notes to Consolidated Financial Statements                                                 13

Schedule II -  Consolidated  Valuation and  Qualifying  Accounts for each of the
   three years ended December 31, 1997                                                     23

</TABLE>

<PAGE>



REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Carolina Telephone and Telegraph Company

We have  audited  the  accompanying  consolidated  balance  sheets  of  Carolina
Telephone and Telegraph  Company  (CT&T),  a  wholly-owned  subsidiary of Sprint
Corporation,  as of  December  31, 1997 and 1996,  and the related  consolidated
statements of income, cash flows and changes in shareholder's equity for each of
the three years in the period ended  December 31, 1997. Our audits also included
the  financial  statement  schedule  listed  in  the  Financial  Statements  and
Supplementary  Data Index.  These financial  statements and the schedule are the
responsibility  of the CT&T's  management.  Our  responsibility is to express an
opinion on these financial statements and the schedule based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the consolidated financial position of CT&T at
December 31, 1997 and 1996, and the  consolidated  results of its operations and
its cash flows for each of the three  years in the  period  ended  December  31,
1997, in conformity with generally accepted accounting principles.  Also, in our
opinion,  the related financial statement schedule,  when considered in relation
to the  basic  financial  statements  taken as a whole,  presents  fairly in all
material respects the information set forth therein.

As  discussed  in  Note  7  to  the  consolidated  financial  statements,   CT&T
discontinued  accounting  for its  operations  in accordance  with  Statement of
Financial  Accounting  Standards No. 71,  "Accounting for the Effects of Certain
Types of Regulation," in 1995.



                                                     ERNST & YOUNG LLP


Kansas City, Missouri
January 21, 1998

                                       8

<PAGE>

<TABLE>
<CAPTION>


CONSOLIDATED STATEMENTS OF INCOME                                         Carolina Telephone and Telegraph Company

---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------
Years Ended December 31,                                        1997               1996                 1995
---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------
                                                                              (in thousands)
<S>                                                  <C>                  <C>                  <C>
Net Operating Revenues                               $        842,150     $       828,118      $       764,619

Operating Expenses
    Costs of services and products                            329,875             345,967              314,072
    Selling, general and administrative                       164,561             152,067              138,069
    Depreciation and amortization                             140,338             135,205              132,146
    Restructuring costs                                         -                    -                   8,079
---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------
    Total operating expenses                                  634,774             633,239              592,366
---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------

Operating Income                                              207,376             194,879              172,253

Interest expense                                              (22,329)            (21,262)             (22,413)
Other income, net                                              14,592              14,668                8,602
---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------

Income before income taxes and extraordinary items
                                                              199,639             188,285              158,442

Income taxes                                                  (73,905)            (70,107)             (58,510)
---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------

Income before extraordinary items                             125,734             118,178               99,932
Extraordinary items, net                                        -                  (4,085)             (42,424)
---------------------------------------------------- -- ----------------- -- ----------------- -- -----------------

Net Income                                           $        125,734     $       114,093      $        57,508
                                                     -- ----------------- -- ----------------- -- -----------------


</TABLE>


































See accompanying Notes to Consolidated Financial Statements.
                                                     9

<PAGE>

<TABLE>
<CAPTION>


CONSOLIDATED BALANCE SHEETS                                            Carolina Telephone and Telegraph Company

----------------------------------------------------------------- --- ------------------- --- ------------------
December 31,                                                                 1997                   1996
----------------------------------------------------------------- --- ------------------- --- ------------------
                                                                    (in thousands, except per share data)
Assets
    Current assets
<S>                                                               <C>                     <C>
      Cash                                                        $             104       $             414
      Receivables
          Customers and other, net of allowance of $4,818 and
            $3,506                                                          123,029                 107,193
          Interexchange carriers                                             22,107                  23,174
          Affiliated companies                                               29,045                   8,847
      Inventories                                                            11,295                   9,118
      Other                                                                   5,531                   5,011
----------------------------------------------------------------- --- ------------------- --- ------------------
      Total current assets                                                  191,111                 153,757

    Property, plant and equipment                                         2,055,464               1,939,608
    Less accumulated depreciation                                         1,158,542               1,062,982
----------------------------------------------------------------- --- ------------------- --- ------------------
        Net property, plant and equipment                                   896,922                 876,626

    Prepaid pension                                                          61,779                  51,991

    Deferred charges and other assets                                        36,953                  35,670
----------------------------------------------------------------- --- ------------------- --- ------------------
    Total                                                         $       1,186,765       $       1,118,044
                                                                  --- ------------------- --- ------------------

Liabilities and Shareholder's Equity
    Current liabilities
      Outstanding checks in excess of cash balances               $          16,694       $           2,956
      Advances from parent                                                  152,393                 137,002
      Current maturities of long-term debt                                        6                     842
      Accounts payable
          Vendors and other                                                  15,682                  17,993
          Interexchange carriers                                             20,366                  18,911
          Affiliated companies                                               26,479                  18,902
      Advance billings and customer deposits                                 17,376                  16,869
      Other                                                                  19,411                  31,006
----------------------------------------------------------------- --- ------------------- --- ------------------
      Total current liabilities                                             268,407                 244,481

    Long-term debt                                                          198,813                 198,631

    Deferred credits and other liabilities
       Deferred income taxes and investment tax credits                      98,064                  89,513
       Postretirement and other benefit obligations                          73,413                  62,740
       Other                                                                  1,702                   7,939
----------------------------------------------------------------- --- ------------------- --- ------------------
         Total deferred credits and other liabilities                       173,179                 160,192

    Shareholder's equity
       Common stock,  par value $20 per share,  5,000 shares
         authorized, 3,627 shares issued and outstanding                     72,530                  72,530
       Capital in excess of par value                                        75,744                  75,744
       Retained earnings                                                    398,092                 366,466
----------------------------------------------------------------- --- ------------------- --- ------------------
         Total shareholder's equity                                         546,366                 514,740
----------------------------------------------------------------- --- ------------------- --- ------------------
    Total                                                         $       1,186,765       $        1,118,044
                                                                  --- ------------------- --- ------------------

</TABLE>








See accompanying Notes to Consolidated Financial Statements.
                                                    10
<PAGE>


<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS                                   Carolina Telephone and Telegraph Company

----------------------------------------------------------------- ----------------- ---------------- -----------------
Years Ended December 31,                                                1997             1996              1995
----------------------------------------------------------------- ----------------- ---------------- -----------------
                                                                                    (in thousands)
Operating Activities
<S>                                                                <C>              <C>               <C>
Net income                                                         $     125,734    $     114,093     $      57,508
Adjustments to reconcile net income to net cash provided by
   operating activities:
     Depreciation and amortization                                       140,338          135,205           132,146
     Deferred income taxes and investment tax credits                      6,767            9,005            (8,738)
     Extraordinary losses, net                                             -                4,085            42,424
     Changes in assets and liabilities
       Receivables, net                                                  (34,967)         (26,629)            1,471
       Inventories and other current assets                               (2,405)          (1,679)            8,101
       Accounts payable, accrued expenses and other current
        liabilities                                                        9,371          (11,056)          (11,608)
       Other assets and liabilities, net                                  (5,143)          (2,184)           16,797
----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash provided by operating activities                                239,695          220,840           238,101
----------------------------------------------------------------- --- ------------- -- ------------- --- -------------

Investing Activities
Capital expenditures                                                    (158,000)        (158,586)         (146,146)
Other, net                                                                (2,634)          (4,143)           (5,527)
----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash used by investing activities                                   (160,634)        (162,729)         (151,673)
----------------------------------------------------------------- --- ------------- -- ------------- --- -------------

Financing Activities
Payments on long-term debt                                                  (654)         (61,508)           (8,569)
Net increase (decrease) in short-term borrowings                           -              (42,800)            9,200
Net increase (decrease) in advances from parent                           15,391          136,930            (2,738)
Dividends paid                                                           (94,108)         (90,373)          (84,283)
----------------------------------------------------------------- --- ------------- -- ------------- --- -------------
Net cash used by financing activities                                    (79,371)         (57,751)          (86,390)
----------------------------------------------------------------- --- ------------- -- ------------- --- -------------

Increase (Decrease) in Cash and Equivalents                                 (310)             360                38
Cash and Equivalents at Beginning of Year                                    414               54                16
----------------------------------------------------------------- --- ------------- -- ------------- --- -------------

Cash and Equivalents at End of Year                                $         104    $         414     $          54
                                                                  --- ------------- -- ------------- --- -------------


Supplemental Cash Flow Information
  Cash paid for interest, net of amounts capitalized               $      22,062    $      22,046     $      22,994
  Cash paid for income taxes                                       $      61,746    $      66,498     $      70,714

Noncash Activities
  Exchange of investment in affiliated partnership for
     investment in affiliated preferred stock                      $       -        $       -         $      29,043

</TABLE>














See accompanying Notes to Consolidated Financial Statements.
                                                11


<PAGE>

<TABLE>
<CAPTION>


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY           Carolina Telephone and Telegraph Company


------------------------------------------------------------------------------------------------------------------
                                                                   Capital in
                                                 Common stock      excess of        Retained
                                                                   par value        earnings            Total
-------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
                                                                        (in thousands)

<S>                                          <C>               <C>              <C>               <C>
Beginning 1995 balance                       $       72,530    $      71,991    $      369,521    $     514,042

Net income                                            -                -                57,508           57,508
Dividends declared                                    -                -               (84,283)         (84,283)
-------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------

Ending 1995 balance                                  72,530           71,991           342,746          487,267

Net income                                            -                -               114,093          114,093
Dividends declared                                    -                -               (90,373)         (90,373)
Contribution of NOCUTS                                -                3,753             -                3,753
-------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------

Ending 1996 balance                                  72,530           75,744           366,466          514,740

Net income                                            -                -               125,734          125,734
Dividends declared                                    -                -               (94,108)         (94,108)
-------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------

Ending 1997 balance                          $       72,530    $      75,744    $      398,092    $     546,366
                                             --- ------------- -- ------------- --- ------------- -- -------------

</TABLE>
































See accompanying Notes to Consolidated Financial Statements.
                                          12

<PAGE>



NOTES TO CONSOLIDATED FINANCIAL        Carolina Telephone and Telegraph Company
STATEMENTS

1.   Summary of Significant Accounting Policies

Basis of Consolidation and Presentation

The consolidated financial statements include the accounts of Carolina Telephone
and  Telegraph  Company  and  its  wholly-owned  subsidiaries  (CT&T),  Carolina
Telephone Long Distance,  Inc., SC One Company, and NOCUTS, Inc. (formerly Joint
Underground  Locating  Services,  Inc.) (NOCUTS).  All significant  intercompany
transactions have been eliminated.  CT&T is a wholly-owned  subsidiary of Sprint
Corporation; accordingly, earnings per share information has been omitted.

The  consolidated  financial  statements  are  prepared  according  to generally
accepted  accounting  principles.  These principles  require  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities,  the  disclosure  of  contingent  assets and  liabilities,  and the
reported  amounts of revenues and  expenses.  Actual  results  could differ from
those estimates.

Certain prior-year amounts have been reclassified to conform to the current-year
presentation. These reclassifications had no effect on the results of operations
or shareholder's equity as previously reported.

At  year-end  1995,  CT&T  adopted  accounting   principles  for  a  competitive
marketplace and  discontinued  accounting fo the economic  effects of regulation
under Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for
the Effects of Certain Types of Regulation" (see Note 7).

Operations

CT&T provides local exchange services,  access by telephone  customers and other
carriers to local exchange facilities, sales of telecommunications equipment and
long distance services within specified geographical areas in North Carolina.

In September  1996,  Sprint  contributed  NOCUTS to CT&T.  NOCUTS was previously
owned by The United  Telephone  Company of  Pennsylvania,  an affiliate of CT&T.
Although the contribution resulted in a change in reporting entity, prior years'
financial  statements  have not been  restated  because  the  impact  on  CT&T's
financial  position  and  operations  was not  significant.  NOCUTS  operates  a
non-regulated  line of business  specializing  in locating  underground  utility
lines.

Revenue Recognition

CT&T recognizes  operating  revenues as services are rendered or as products are
delivered to customers.  Operating  revenues are recorded net of an estimate for
uncollectible accounts.

Cash and Equivalents

CT&T  uses  controlled  disbursement  banking  arrangements  as part of its cash
management program.  Outstanding checks in excess of cash balances are reflected
as a current liability on the consolidated  balance sheets.  CT&T had sufficient
funds  available to fund these  outstanding  checks when they were presented for
payment.


                                     13
<PAGE>


1.   Summary of Significant Accounting Policies (continued)

Inventories

Inventories  consist of  materials  and  supplies  (stated at average  cost) and
equipment held for resale (stated at the lower of average cost or market).

Property, Plant and Equipment

Property,  plant and equipment is recorded at cost.  Generally,  ordinary  asset
retirements and disposals are charged against  accumulated  depreciation with no
gain or loss recognized. Repairs and maintenance costs are expensed as incurred.

Depreciation

The  cost of  property,  plant  and  equipment  is  generally  depreciated  on a
straight-line   basis  over  estimated  economic  useful  lives.  Prior  to  the
discontinued  use of SFAS 71 at year-end 1995,  the cost of property,  plant and
equipment had been generally depreciated on a straight-line basis over the lives
prescribed by regulatory commissions.

Income Taxes

CT&T's operations are included in the consolidated  federal income tax return of
Sprint  Corporation  and  its  subsidiaries  (Sprint).  Federal  income  tax  is
calculated by CT&T on the basis of its filing a separate return.

Investment tax credits (ITC) related to regulated telephone property,  plant and
equipment have been deferred and are being  amortized over the estimated  useful
lives of the related assets.

2.   Employee Benefit Plans

Defined Benefit Pension Plan

Substantially  all CT&T  employees  are  covered  by a  noncontributory  defined
benefit  pension  plan  sponsored  by  Sprint.  Benefits  for plan  participants
represented by collective  bargaining units are based on negotiated schedules of
defined  amounts.   For  participants  not  covered  by  collective   bargaining
agreements,  the plan provides  pension  benefits  based on years of service and
participants' compensation.

CT&T's  policy is to make  annual  plan  contributions  equal to an  actuarially
determined  amount  consistent  with  applicable  federal tax  regulations.  The
funding  objective is to accumulate  funds at a relatively  stable rate over the
participants' working lives so that benefits are fully funded at retirement.  At
year-end  1997, the plan's assets  consisted  mainly of investments in corporate
equity securities and U.S. government and corporate debt securities.

Pension costs or credits are  determined for each Sprint  subsidiary  based on a
calculation  of  service  costs  and  projected  benefit  obligations,   and  an
appropriate allocation of unrecognized prior service costs, transition asset and
plan assets.  Net periodic  pension credits  recorded by CT&T were $8 million in
1997 and $7 million in 1996 and 1995.

                                     14
<PAGE>


2.   Employee Benefit Plans (continued)

Defined Contribution Plans

Sprint   sponsors   defined   contribution   employee   savings  plans  covering
substantially all CT&T employees.  Participants may contribute portions of their
pay to the plans. For employees represented by collective bargaining units, CT&T
matches   contributions   based  on  negotiated   amounts.   CT&T  also  matches
contributions of employees not covered by collective bargaining agreements.  For
those participants,  their contributions are matched in Sprint common stock. The
matching is equal to 50% of  participants'  contributions up to 6% of their pay.
In addition,  Sprint may, at the  discretion of its Board of Directors,  provide
matching  contributions based on the performance of Sprint common stock compared
to other telecommunications companies' stock. CT&T's matching contributions were
$4 million in 1997, 1996 and 1995.

Postretirement Benefits

Sprint  provides  postretirement  benefits  (principally  medical  benefits)  to
substantially  all  employees.  Employees  retiring  before  certain  dates  are
eligible for benefits at no cost, or at a reduced cost. Employees retiring after
certain dates are eligible for benefits on a shared-cost  basis.  CT&T funds the
accrued costs as benefits are paid.

Net postretirement benefit costs are determined for each Sprint subsidiary based
on a  calculation  of  service  costs  and  accumulated  postretirement  benefit
obligations and an appropriate  allocation of unrecognized  prior service costs,
unrecognized   net  gains  and   transition   obligation.   CT&T   recorded  net
postretirement benefit costs of $15 million in 1997 and 1996, and $17 million in
1995.

3.    Income Taxes

Income  tax  expense  on income  before  extraordinary  items  consisted  of the
following:

<TABLE>
<CAPTION>

                                                                      1997              1996             1995
-------------------------------------------------------------- -- ------------- --- ------------- -- -------------
                                                                                 (in thousands)
Current income tax expense
<S>                                                            <C>              <C>               <C>
    Federal                                                    $      54,849    $     49,780      $    54,744
    State                                                             12,289          11,322           12,504
-------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total current                                                         67,138          61,102           67,248
-------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Deferred income tax expense (benefit)
    Federal                                                            5,686          7,234            (5,777)
    State                                                              1,081          1,771            (1,023)
Amortization of deferred ITC                                              -              -             (1,938)
-------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total deferred                                                         6,767          9,005            (8,738)
-------------------------------------------------------------- -- ------------- --- ------------- -- -------------

Total income tax expense                                       $      73,905    $     70,107      $    58,510
                                                               -- ------------- --- ------------- -- -------------

</TABLE>

                                     15
<PAGE>



3.   Income Taxes (continued)

The  differences  that  caused  the  effective  income tax rate to vary from the
statutory rate of 35% were as follows:

<TABLE>
<CAPTION>

                                                                      1997              1996             1995
-------------------------------------------------------------- -- ------------- --- ------------- -- ------------
                                                                                 (in thousands)
<S>                                                            <C>              <C>               <C>
Income tax expense at the statutory rate                       $      69,874    $       65,900    $      55,455
Less ITC included in income                                            -                 -                1,938
-------------------------------------------------------------- -- ------------- -- -------------- -- ------------
Expected federal income tax provision after ITC                       69,874            65,900           53,517
Effect of
   State income tax, net of federal income tax effect                  8,688             8,510            7,463
   Other, net                                                         (4,657)           (4,303)          (2,470)
-------------------------------------------------------------- -- ------------- -- -------------- -- ------------

Income tax expense, including ITC                              $      73,905    $       70,107    $      58,510
                                                               -- ------------- -- -------------- -- ------------

Effective income tax rate                                             37.0%             37.2%            36.9%
                                                               -- ------------- -- -------------- -- ------------
</TABLE>

In 1996,  CT&T  redeemed  outstanding  debt prior to  maturity,  resulting in an
after-tax  extraordinary  loss of $4 million,  net of income tax  benefits of $3
million. At year-end 1995, CT&T adopted accounting  principles for a competitive
marketplace and discontinued applying SFAS 71 to its financial statements.  This
resulted in an after-tax,  noncash  extraordinary  charge of $42 million, net of
income tax benefits of $52 million (see Note 7).

CT&T recognizes deferred income taxes for the temporary  differences between the
carrying amounts of its assets and liabilities for financial  statement purposes
and  their tax  bases.  The  sources  of the  differences  that give rise to the
deferred income tax assets and liabilities at year-end 1997 and 1996, along with
the income tax effect of each, were as follows:

<TABLE>
<CAPTION>

                                                   1997 Deferred Income Tax           1996 Deferred Income Tax
                                                 ------------- -- ------------- --- ------------- -- -------------
                                                    Assets        Liabilities          Assets        Liabilities
-------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
                                                                        (in thousands)
<S>                                           <C>              <C>               <C>              <C>         
Property, plant and equipment                 $       -        $    105,656      $       -        $     96,081
Postretirement and other benefits                   29,277             -               21,227             -
Prepaid pension costs                                 -              24,637              -              19,998
Other, net                                           7,232             -                9,327             -
-------------------------------------------- --- ------------- -- -------------  -- ------------- -- -------------

Total                                         $     36,509     $    130,293      $     30,554     $    116,079
                                             --- ------------- -- -------------  -- ------------- -- -------------

</TABLE>


                                     16
<PAGE>


4.   Borrowings

Long-term Debt

Long-term debt at year-end was as follows:

<TABLE>
<CAPTION>

                                                           Interest Rates               1997             1996
----------------------------------------------------- ------------------------- --- ------------- -- -------------
                                                                                         (in thousands)
Debentures, maturities
<S>                                                         <C>                  <C>              <C>          
    1997                                                         -               $        -       $         825
    2000                                                        5.8%                    50,000           50,000
    2003 - 2007                                             6.1% - 7.3%                100,000          100,000
    2013                                                        6.8%                    50,000           50,000
Other                                                       7.3% - 8.4%                      6               22
Unamortized debt discount                                                               (1,187)          (1,374)
----------------------------------------------------- -------------------------  -- ------------- -- -------------
                                                                                       198,819          199,473
Less current maturities                                                                      6              842
----------------------------------------------------- -------------------------  -- ------------- -- -------------
Long-term debt                                                                   $     198,813    $     198,631
                                                                                 -- ------------- -- -------------
</TABLE>


Long-term debt  maturities  during the next five years consist of $6,000 in 1998
and $50 million in 2000.

At year-end 1997,  CT&T had lines of credit with banks totaling $31 million.  No
borrowings were outstanding. The bank lines provide for short-term borrowings at
market rates of interest and require annual commitment fees. The lines of credit
will expire in April 1998.

CT&T's 1997 short-term  financing was provided by Sprint.  The weighted  average
interest rates on short-term borrowings were 5.1% in 1997, 5.5% in 1996 and 5.9%
in 1995.

CT&T was in compliance with all restrictive or financial  covenants  relating to
its debt arrangements at year-end 1997.

During 1996, CT&T redeemed prior to maturity,  $50 million of debentures with an
interest  rate  of  9.0%.  These  early  redemptions  resulted  in a $4  million
after-tax extraordinary loss.


                                    17
<PAGE>



5.   Commitments and Contingencies

Gross rental expense totaled $13 million in 1997, $7 million in 1996 and $6
million in 1995.  Minimum rental commitments at year-end 1997 are as follows:

------------------------------------------------- --------------------
                                                      (in thousands)
1998                                                    $  2,060
1999                                                       1,040
2000                                                         649
2001                                                         432
2002                                                         275
Thereafter                                                   198
------------------------------------------------- --------------------


Various  suits  arising in the ordinary  course of business are pending  against
CT&T. Management cannot predict the final outcome of these actions, but believes
they will not result in a material effect on CT&T's financial statements.

6.   Related Party Transactions

CT&T's related party transactions were as follows:

<TABLE>
<CAPTION>

                                                Affiliate
          Transaction Description                Company               1997                1996               1995
-------------------------------------------- ----------------- -- ---------------- -- --------------- -- -------------
CT&T:                                                                                (in thousands)
<S>                                          <C>               <C>                 <C>                <C>           
Purchased telecommunications equipment,      North Supply      $      68,581 (1)(2)$      44,653      $       42,274
construction and maintenance equipment and   Company
materials and supplies.
-------------------------------------------- ----------------- -- ---------------- -- --------------- -- -------------
Reimbursed Sprint for data processing        Sprint                   57,730              50,614              51,606
services, other data-related costs and
certain management costs.
-------------------------------------------- ----------------- -- ---------------- -- --------------- -- -------------
In 1996, filed a common interstate access    Central                 143,287             148,916                -
tariff with the FCC.  Participated in a      Telephone
pooling arrangement where interstate         Company of
access revenues are based on a common rate   North Carolina
of return. Amounts represent total
interstate access revenues recognized
under this arrangement.
-------------------------------------------- ----------------- -- ---------------- -- --------------- -- -------------
</TABLE>

(1)   During 1997,  Sprint  centralized  certain local  division  purchasing and
      warehousing  functions at North Supply Company. This resulted in increased
      sales of telecommunications equipment and distribution services to CT&T.
(2)   Beginning in July 1997,  Sprint  changed its transfer  pricing for certain
      transactions between affiliates to more accurately reflect market pricing.

                                      18
<PAGE>



7.    Adoption of Accounting Principles for a Competitive Marketplace

At year-end 1995, CT&T  determined that it no longer met the criteria  necessary
for the continued use of SFAS 71. As a result, 1995 operating results included a
noncash,  extraordinary charge of $42 million, net of income tax benefits of $52
million.  The decision to discontinue  using SFAS 71 was based on changes in the
regulatory    framework   and   the    convergence   of   competition   in   the
telecommunications industry.

The 1995  extraordinary  charge recognized when CT&T discontinued  using SFAS 71
consisted of the following:

<TABLE>
<CAPTION>

                                                                                       Pretax         After-Tax
------------------------------------------------------------------------------- --- ------------- -- -------------
                                                                                         (in thousands)
<S>                                                                             <C>               <C>          
Increase in accumulated depreciation                                            $      103,277    $      61,926
Recognition of switch software assets                                                  (15,772)          (9,457)
Elimination of other net regulatory assets                                               6,442            3,863
                                                                                -- -------------  -- -------------
    Total                                                                       $       93,947           56,332
                                                                                -- -------------
Tax-related net regulatory liabilities                                                                  (13,225)
Accelerated ITC amortization                                                                               (683)
                                                                                                  -- -------------

Extraordinary charge                                                                              $      42,424
                                                                                                  -- -------------
</TABLE>


8.   Additional Financial Information

Restructuring Costs

In 1995, CT&T recorded an $8 million  restructuring  charge.  The  restructuring
plan included the planned  elimination over several years of  approximately  150
positions at CT&T, mainly in the network and finance functions.  Through 1997, a
majority of the positions have been eliminated  resulting in termination benefit
payments of $7 million.

Major Customer Information

Consolidated operating revenues from AT&T, resulting mainly from network access,
billing and collection services and the lease of network facilities, totaled $98
million in 1997, $101 million in 1996 and $108 million in 1995.

CT&T's  customer and other  accounts  receivable  are not subject to significant
concentrations  of credit risk due to the large  number of  customers  in CT&T's
customer base.

                                  19
<PAGE>



8.     Additional Financial Information (continued)

Financial Instruments

CT&T  estimates  the fair value of its  financial  instruments  using  available
market  information  and  appropriate  valuation  methodologies.  As  a  result,
year-end estimates do not necessarily represent the values CT&T could realize in
a current market exchange.  Although management is not aware of any factors that
would affect the estimated fair value amounts  presented at year-end 1997, those
amounts have not been comprehensively  revalued for financial statement purposes
since that date. Therefore,  fair value estimates after year-end 1997 may differ
significantly from the amounts discussed below.

CT&T's  financial  instruments  mainly consisted of long-term debt with carrying
amounts of $199 million at year-end 1997 and 1996,  and estimated fair values of
$202 million at year-end 1997 and $198 million at year-end  1996.  The estimated
fair  value of  CT&T's  long-term  debt was based on quoted  market  prices  for
publicly traded issues.  The estimated fair value for all other issues was based
on the present value of estimated  future cash flows using a discount rate based
on the risks involved.  The carrying value of CT&T's other financial instruments
(principally short-term borrowings) approximates fair value at year-end 1997 and
1996.

CT&T has not invested in derivative financial instruments.

9.       Recently Issued Accounting Pronouncement

In February 1998, the Financial  Accounting Standards Board issued SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement  Benefits." SFAS
132  standardizes the disclosure  requirements  for pensions and  postretirement
benefits where practical.  It also eliminates  certain  disclosures and requires
certain  additional  information.  CT&T will adopt SFAS 132 in its 1998 year-end
financial  statements.  SFAS 132 is not expected to have a significant effect on
CT&T's pension and postretirement benefit plan disclosures.

                                   20
<PAGE>




Parts II - IV

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

None

Item 10.  Directors and Executive Officers of the Registrant

Omitted under the provisions of General Instruction I.

Item 11.  Executive Compensation

Omitted under the provisions of General Instruction I.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

Omitted under the provisions of General Instruction I.

Item 13.  Certain Relationships and Related Transactions

Omitted under the provisions of General Instruction I.

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

   (a)  1. The  consolidated  financial  statements of CT&T filed as part of
           this report are listed in the Financial Statements and Supplementary
           Data Index.

        2. The consolidated  financial statement schedule of CT&T filed as part
           of  this  report  is  listed  in  the   Financial   Statements   and
           Supplementary Data Index.

        3. The following exhibits are filed as part of this report:

           EXHIBITS

           (3)   Articles of Incorporation and Bylaws:

                (a) Articles  of  incorporation  (filed  as  Exhibit  3 to 1980
                    Annual  Report  Form  10-K  and   incorporated   herein  by
                    reference - commission file number 1-6469).

                (b)  Bylaws, as amended.
                                  
                                     21
<PAGE>



           (4)  Instruments defining the rights of security holders, including
                indentures

                (a)  The Rights of CT&T's equity security holders are defined in
                     its Articles of Incorporation. See Exhibit 3 (a) above.

                (b)  Indenture  dated  as of  December  1,  1992,  from  CT&T to
                     Bankers Trust Company,  (filed as Exhibit 4 to Registration
                     No. 33-64476 and incorporated herein by reference).

           (12)  Computation of Ratio of Earnings to Fixed Charges

           (23)  Consent of Ernst & Young LLP

           (27)  Financial Data Schedules

                 (a)  December 31, 1997

                 (b)  September 30, 1997 Restated

                 (c)  June 30, 1997 Restated

                 (d)  March 31, 1997 Restated

                 (e)  December 31, 1996 Restated

                 (f)  September 30, 1996 Restated

                 (g)  June 30, 1996 Restated

                 (h)  March 31, 1996 Restated

                 (i)  December 31, 1995 Restated

   (b)     Report on Form 8-K

           No  reports  on Form 8-K were filed  during  the three  months  ended
           December 31, 1997.

   (c)     Exhibits are listed in Item 14(a)

                                     22
<PAGE>

<TABLE>
<CAPTION>


                                      CAROLINA TELEPHONE & TELEGRAPH COMPANY
                           SCHEDULE II -- CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
                                   Years Ended December 31, 1997, 1996 and 1995



                                                                 Additions          Deductions
                                                               --------------     ---------------
                                                                                     Accounts
                                               Balance                             charged off       Balance end
                                              beginning         Charged to            net of           of year
                                               of year            expense          collections
----------------------------------------- -- ------------- --- -------------- --- --------------- -- -------------
                                                                      (in thousands)
1997
<S>                                       <C>              <C>                <C>                 <C>         
    Allowance for doubtful accounts       $      3,506     $      11,706      $       10,394      $      4,818
----------------------------------------- -- ------------- --- -------------- --- --------------- -- -------------

1996
    Allowance for doubtful accounts       $      2,348     $       5,831      $        4,673      $      3,506
----------------------------------------- -- ------------- --- -------------- --- --------------- -- -------------

1995
    Allowance for doubtful accounts       $      1,775     $       3,474      $        2,901      $      2,348
----------------------------------------- -- ------------- --- -------------- --- --------------- -- -------------

</TABLE>

























                                   23
<PAGE>


                                SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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.


                         CAROLINA TELEPHONE & TELEGRAPH COMPANY
                         (Registrant)


                         By/s/Michael B. Fuller
                         Michael B. Fuller
                         President and Chief Executive Officer



Date:  March 25, 1998


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities indicated on the 25th day of March, 1998.

                         s/ Michael B. Fuller
                         Michael B. Fuller
                         President, Chief Executive Officer and Director


                         s/ Richard D. McRae
                         Richard D. McRae
                         Vice President (Chief Financial Officer) and Director


                         s/ John I. Lehman
                         John I. Lehman
                         Controller (Chief Accounting Officer)


                         s/ Don A. Jensen
                         Don A. Jensen
                         Director




<PAGE>


           EXHIBIT INDEX

           (3)   Articles of Incorporation and Bylaws:

                (a) Articles  of  incorporation  (filed  as  Exhibit  3 to 1980
                    Annual  Report  Form  10-K  and   incorporated   herein  by
                    reference - commission file number 1-6469).

                (b)  Bylaws, as amended.

           (4)  Instruments defining the rights of security holders, including
                indentures

                (a)  The Rights of CT&T's equity security holders are defined in
                     its Articles of Incorporation. See Exhibit 3 (a) above.

                (b)  Indenture  dated  as of  December  1,  1992,  from  CT&T to
                     Bankers Trust Company,  (filed as Exhibit 4 to Registration
                     No. 33-64476 and incorporated herein by reference).

           (12)  Computation of Ratio of Earnings to Fixed Charges

           (23)  Consent of Ernst & Young LLP

           (27)  Financial Data Schedules

                 (a)  December 31, 1997

                 (b)  September 30, 1997 Restated

                 (c)  June 30, 1997 Restated

                 (d)  March 31, 1997 Restated

                 (e)  December 31, 1996 Restated

                 (f)  September 30, 1996 Restated

                 (g)  June 30, 1996 Restated

                 (h)  March 31, 1996 Restated

                 (i)  December 31, 1995 Restated