FORM 10-Q

                                       United States
                             SECURITIES AND EXCHANGE COMMISSION
                                   Washington, D.C. 20549



(Mark One)

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

                        For the quarterly period ended June 30, 1999

                                             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 1-1414

                                        PACIFIC BELL

                   Incorporated under the laws of the State of California
                      I.R.S. Employer Identification Number 94-0745535

              140 New Montgomery Street, San Francisco, California 94105-3705
                              Telephone Number: (415) 542-9000


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

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


<PAGE>


PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements

<TABLE>
PACIFIC BELL
----------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions
(Unaudited)
<CAPTION>
                                                 Three months ended   Six months ended
                                                     June 30,             June 30,
                                                 ---------------------------------------
                                                     1999      1998     1999      1998
----------------------------------------------------------------------------------------
<S>                                               <C>       <C>      <C>       <C>
Operating Revenues
Local service                                     $ 1,242   $ 1,220  $ 2,461   $ 2,386
Network access:
  Interstate                                          525       484    1,038       963
  Intrastate                                          189       189      375       369
Long distance service                                 275       306      544       612
Other                                                 196       124      372       265
----------------------------------------------------------------------------------------
Total operating revenues                            2,427     2,323    4,790     4,595
----------------------------------------------------------------------------------------

Operating Expenses
Operations and support                              1,318     1,224    2,625     2,524
Depreciation and amortization                         475       463      943       914
----------------------------------------------------------------------------------------
Total operating expenses                            1,793     1,687    3,568     3,438
----------------------------------------------------------------------------------------
Operating Income                                      634       636    1,222     1,157
----------------------------------------------------------------------------------------

Other Income (Expense)
Interest expense                                     (100)     (110)    (203)     (216)
Other income (expense) - net                            3         2       31         -
----------------------------------------------------------------------------------------
Total other income (expense)                          (97)     (108)    (172)     (216)
----------------------------------------------------------------------------------------
Income Before Income Taxes                            537       528    1,050       941
----------------------------------------------------------------------------------------
Income Taxes                                          212       207      415       368
----------------------------------------------------------------------------------------
Net Income                                        $   325   $   321  $   635   $   573
----------------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements.
</TABLE>


<PAGE>

<TABLE>
PACIFIC BELL
------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts
------------------------------------------------------------------------------
<CAPTION>
                                                   June 30,       December 31,
                                                ------------------------------
                                                     1999            1998
------------------------------------------------------------------------------
<S>                                                <C>              <C>
Assets                                            (Unaudited)
Current Assets
Cash and cash equivalents                           $      12       $      15
Accounts receivable - net of allowances for
  uncollectibles of $149 and $161                       1,860           2,015
Prepaid expenses                                          250              90
Deferred income taxes                                     438             280
Other current assets                                       32              31
------------------------------------------------------------------------------
Total current assets                                    2,592           2,431
------------------------------------------------------------------------------
Property, Plant and Equipment - at cost                30,475          29,871
  Less: Accumulated depreciation and amortization      18,803          18,272
------------------------------------------------------------------------------
Property, Plant and Equipment - Net                    11,672          11,599
------------------------------------------------------------------------------
Other Assets                                            1,269           1,063
------------------------------------------------------------------------------
Total Assets                                        $  15,533       $  15,093
------------------------------------------------------------------------------

Liabilities and Shareowner's Equity
Current Liabilities
Intercompany loans                                  $   1,319       $   1,551
Current portion of long-term obligations                  127             103
------------------------------------------------------------------------------
Total debt maturing within one year                     1,446           1,654
------------------------------------------------------------------------------
Accrued taxes                                             532             122
Accounts payable and accrued liabilities                2,393           2,669
------------------------------------------------------------------------------
Total current liabilities                               4,371           4,445
------------------------------------------------------------------------------
Long-Term Debt                                          4,490           4,614
------------------------------------------------------------------------------

Deferred Credits and Other Noncurrent
Liabilities
Deferred income taxes                                   1,290           1,082
Postemployment benefit obligation                         883             894
Unamortized investment tax credits                        133             149
Other noncurrent liabilities                              646             649
------------------------------------------------------------------------------
Total deferred credits and other noncurrent
  liabilities                                           2,952           2,774
------------------------------------------------------------------------------

Shareowner's Equity
Common shares ($1 par value)                              225             225
Capital in excess of par value                          4,035           4,210
Retained earnings (deficit)                              (540)         (1,175)
------------------------------------------------------------------------------
Total shareowner's equity                               3,720           3,260
------------------------------------------------------------------------------
Total Liabilities and Shareowner's Equity           $  15,533       $  15,093
------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements.
</TABLE>


<PAGE>


<TABLE>
PACIFIC BELL
-----------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions, increase (decrease) in cash and cash equivalents
(Unaudited)
-----------------------------------------------------------------------------
<CAPTION>
                                                         Six months ended
                                                            June 30,
                                                  ---------------------------
                                                        1999           1998
-----------------------------------------------------------------------------
<S>                                                   <C>            <C>
Operating Activities
Net income                                            $  635         $  573
Adjustments to reconcile net income to net cash
  provided by operating activities:
   Depreciation and amortization                         943            914
   Provision for uncollectible accounts                   67             79
   Amortization of investment tax credits                (16)           (20)
   Deferred income tax expense                            98             90
   Other - net                                          (185)          (476)
-----------------------------------------------------------------------------
Total adjustments                                        907            587
-----------------------------------------------------------------------------
Net Cash Provided by Operating Activities              1,542          1,160
-----------------------------------------------------------------------------

Investing Activities
Construction and capital expenditures                 (1,038)          (957)
-----------------------------------------------------------------------------
Net Cash Used in Investing Activities                 (1,038)          (957)
-----------------------------------------------------------------------------

Financing Activities
Net change in short-term borrowings with original
 maturities of three months or less                     (231)            17
Issuance of long-term debt                                 -            198
Repayment of long-term debt                             (101)          (178)
Net equity from parent                                     8            164
Dividends paid                                          (183)          (388)
-----------------------------------------------------------------------------
Net Cash Used in Financing Activities                   (507)          (187)
-----------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents      (3)            16
-----------------------------------------------------------------------------
Cash and cash equivalents beginning of year               15             43
-----------------------------------------------------------------------------
Cash and Cash Equivalents End of Period               $   12         $   59
-----------------------------------------------------------------------------
<FN>
Cash paid during the six months ended June 30 for:
     Interest                                         $  204         $  213
     Income taxes, net of refunds                     $ ( 81)        $   94

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


<PAGE>


<TABLE>
PACIFIC BELL
-----------------------------------------------------------------------------------
STATEMENT OF SHAREOWNER'S EQUITY
Dollars in millions
(Unaudited)
-----------------------------------------------------------------------------------
<CAPTION>
                                                      Capital in       Retained
                                            Common     Excess of       Earnings
                                            Shares     Par Value       (Deficit)
-----------------------------------------------------------------------------------
<S>                                         <C>        <C>             <C>
Balance, December 31, 1998                  $ 225      $  4,210        $ (1,175)
Net income                                      -            -              635
Dividends to shareowner                         -          (183)              -
Net equity from parent                          -             8               -
-----------------------------------------------------------------------------------
Balance, June 30, 1999                      $ 225      $  4,035        $   (540)
-----------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements.
</TABLE>

                                     * * * *


SELECTED FINANCIAL AND OPERATING DATA

At June 30, or for the six months then ended:           1999             1998
                                                     -----------      ----------
  Debt ratio.................................            61.48%          65.44%
  Network access lines in service (000)......            18,312          17,730
  Access minutes of use (000,000)*...........            37,944          36,026
  Resold lines (000).........................               270             251
  Number of employees........................            48,320          45,800

*1998 amounts have been restated.


<PAGE>


PACIFIC BELL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Dollars in millions

1. BASIS  OF  PRESENTATION  The  consolidated  financial  statements  have  been
   prepared by Pacific Bell (PacBell, which also includes its subsidiary Pacific
   Bell  Information  Services)  pursuant  to the rules and  regulations  of the
   Securities and Exchange  Commission  (SEC) and, in the opinion of management,
   include  all  adjustments  (consisting  only of  normal  recurring  accruals)
   necessary  to present  fairly the  results  for the  interim  periods  shown.
   PacBell is a  wholly-owned  subsidiary  of Pacific  Telesis  Group  (PAC),  a
   wholly-owned subsidiary of SBC Communications Inc. (SBC).

   Certain information and footnote disclosures,  normally included in financial
   statements   prepared  in  accordance  with  generally  accepted   accounting
   principles,  have  been  condensed  or  omitted  pursuant  to SEC  rules  and
   regulations.   Certain   reclassifications   have   been  made  to  the  1998
   consolidated financial statements to conform with the 1999 presentation.  The
   results for the interim periods are not necessarily indicative of results for
   the full year. The consolidated  financial statements contained herein should
   be read in conjunction with the consolidated  financial  statements and notes
   thereto  included in PacBell's 1998 Annual Report on Form 10-K filed with the
   SEC.  Comprehensive  income  for  PacBell  is the same as net  income for all
   periods  presented.  As  PacBell  operates  in only  one of  SBC's  segments,
   wireline  telecommunications  services,  separate  segment  reporting  is not
   applicable to PacBell.

2. CONSOLIDATION The consolidated  financial  statements include the accounts of
   PacBell.  All  significant  intercompany   transactions  within  PacBell  are
   eliminated in the consolidation process.

3. COMPLETION  OF MERGERS On April 1, 1997,  SBC and PAC completed the merger of
   an SBC subsidiary with PAC, in a transaction in which each outstanding  share
   of PAC  common  stock was  exchanged  for 1.4629  shares of SBC common  stock
   (equivalent to approximately 626 million shares). With the merger, PAC became
   a wholly-owned subsidiary of SBC. The transaction has been accounted for as a
   pooling of interests and a tax-free reorganization.

   On  October  26,  1998,  SBC  and  Southern  New  England  Telecommunications
   Corporation  (SNET) completed the merger of an SBC subsidiary with SNET, in a
   transaction in which each share of SNET common stock was exchanged for 1.7568
   shares of SBC common stock  (equivalent to approximately 120 million shares).
   SNET became a  wholly-owned  subsidiary of SBC effective  with the merger and
   the transaction has been accounted for by SBC as a pooling of interests and a
   tax-free reorganization.

   Post-merger initiatives
   During the  second  quarter  of 1997,  SBC  announced  PacBell  had  incurred
   after-tax  charges of $883 related to several strategic  decisions  resulting
   from the merger integration process that began with the April 1, 1997 closing
   of its  merger  with PAC,  which  included  $107 ($65  after  tax) of charges
   related to several  regulatory  rulings during the second quarter of 1997 and
   $276 ($173 after tax) for merger approval costs. The decisions  resulted from
   an extensive  review of operations  throughout the merged company and include
   significant   integration   of   operations   and   consolidation   of   some
   administrative and support functions.

   One-time  charges  related to the strategic  decisions  reached by the review
   teams  totaled $1  billion  ($645  after tax) in the second  quarter of 1997.
   During the fourth quarter of 1998, SBC again  performed a complete  review of
   all  operations  affected by the merger with SNET to determine  the impact on
   ongoing merger integration processes.  This review resulted in no significant
   additional  financial  effect


<PAGE>


PACIFIC BELL

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

   on PacBell.  At June 30, 1999 and  December 31, 1998,  remaining accruals for
   anticipated cash expenditures  related to these decisions were  approximately
   $34 and $61.

4. SOFTWARE COSTS The American  Institute of Certified Public Accountants issued
   a  Statement  of  Position  (SOP)  that  requires  capitalization  of certain
   computer  software  expenditures  beginning in 1999.  The SOP, which has been
   adopted  prospectively as of January 1, 1999,  requires the capitalization of
   certain costs incurred in connection  with  developing or obtaining  internal
   use  software.  Prior to the  adoption  of the  SOP,  the  costs of  computer
   software  purchased or developed  for internal use were expensed as incurred.
   However,  initial  operating  system software costs were, and continue to be,
   capitalized.

   With  comparable  levels of  software  expenditures,  the SOP  would  tend to
   increase net income in comparison with PacBell's  former method of accounting
   for software  costs.  However,  the increases would be largest in the year of
   adoption  with  diminishing   levels  of  increases   compared  with  current
   accounting throughout the amortization period. Consequently,  given otherwise
   comparable  income  levels  excluding  software,   and  otherwise  comparable
   software  expenditures,  the effect of the SOP would be to increase income in
   the first year and decrease  income in each  subsequent year until the number
   of years affected by the SOP equals the  amortization  period.  The effect of
   adopting  the SOP was to  increase  net income by  approximately  $17 for the
   second quarter and $24 for the first six months of 1999.


<PAGE>


PACIFIC BELL

Item 2.  Management's Discussion and Analysis
Dollars in millions

RESULTS OF OPERATIONS

Overview  Financial  results for  Pacific  Bell  (PacBell,  which  includes  its
subsidiary) for the first six months of 1999 and 1998 are summarized as follows:

---------------------------------------------------------------------------
                                                    Six-Month Period
                                              -----------------------------
                                                                   Percent
                                                  1999      1998   Change
---------------------------------------------------------------------------
Operating revenues                             $  4,790 $  4,595      4.2%
Operating expenses                             $  3,568 $  3,438      3.8%
Net income                                     $    635 $    573     10.8%
===========================================================================

PacBell  reported  net  income of $635 for the first six months of 1999 and $573
for the first six  months  of 1998.  The  primary  factor  contributing  to this
increase  was growth in demand for services and products and a slowing of growth
in operating expenses due to merger related initiatives and benefits.

Operating Revenues PacBell's  operating revenues increased $195, or 4.2%, in the
first six months of 1999.  Components  of  operating  revenues for the first six
months of 1999 and 1998 are as follows:

----------------------------------------------------------------------------
                                                    Six-Month Period
                                              ------------------------------
                                                                     Percent
                                                 1999         1998   Change
----------------------------------------------------------------------------
Local service                                 $  2,461  $ 2,386         3.1%
Network access:
   Interstate                                    1,038      963         7.8
   Intrastate                                      375      369         1.6
Long distance service                              544      612       (11.1)
Other                                              372      265        40.4
----------------------------------------------------------------------------
     Total                                    $  4,790  $ 4,595         4.2%
============================================================================

      Local service revenues  increased for the first six months of 1999 by $75,
      or 3.1%, due primarily to increases in demand totaling approximately $139,
      including  increases in access lines,  data-related and vertical  services
      revenues. The number of access lines increased by approximately 3.3% since
      June 30,  1998,  with  approximately  45% of access line growth due to the
      sales of  additional  access  lines  to  existing  residential  customers.
      Vertical services revenues,  which include custom calling services such as
      Caller ID, Call Waiting, voice mail and other enhanced services, increased
      by  approximately  20% and  totaled  approximately  $410 for the first six
      months of 1999. This increase in demand was partially  offset by a decline
      in the public telephone business totaling nearly $40.

      Additionally,  local  service  revenues  increased  as  a  result  of  the
      California  High Cost Fund (CHCFB) which also had the effect of decreasing
      two other types of  operating  revenues.  In the first six months of 1999,
      the CHCFB  increased  local  service  revenues  by  approximately  $51 and
      decreased  long  distance  revenues by  approximately  $43 and  intrastate
      network  access  revenues by  approximately  $25.  The net effect on total
      operating  revenues  for the CHCFB was a decrease of $17.  The  California
      Public Utilities  Commission  (CPUC) has stated that the CHCFB is


<PAGE>


PACIFIC BELL

Item 2.  Management's Discussion and Analysis
Dollars in millions

RESULTS OF OPERATIONS - Continued

      intended to  directly  subsidize  the  provision  of service to  high cost
      areas and allow PacBell to set  competitive rates for other services. The
      increase in local service  revenues  was partially offset  by decreases of
      approximately $59  resulting  from rate  reductions  under  CPUC price cap
      orders  and approximately $23 related to the  deregulation of 911 revenues
      that were shifted to other revenues.

      Network access Interstate  network access revenues increased $75, or 7.8%,
      in the first six  months of 1999 due  primarily  to  increased  demand for
      access services by interexchange  carriers,  special access, and growth in
      end-user  charges  attributable to an increasing  access line base,  which
      collectively  resulted in an increase of  approximately  $99. In addition,
      customer number portability cost recovery, net of a Federal Communications
      Commission  (FCC)  retroactive  rate  decrease  implemented  in the second
      quarter of 1999, effective February 1999, contributed approximately $28 to
      the increase.  Partially  offsetting  these  increases were the effects of
      PacBell's  rate  reduction  of  approximately  $55  related  to the  FCC's
      productivity factor adjustment.

      Intrastate network access revenues increased $6, or 1.6%, in the first six
      months of 1999  attributable to increased demand of $48, offset in part by
      the effect of the CHCFB described above in local service of  approximately
      $25, by CPUC rate  reductions  of  approximately  $8 and by a reduction in
      contract settlements in comparison to the prior year of approximately $4.

      Long distance service  decreased $68, or 11.1%, in the first six months of
      1999  due  to  the  effect  of  the  CHCFB  noted  in  local   service  of
      approximately $43 and by CPUC rate reductions of approximately $15.

      Other operating revenues increased $107, or 40.4%, in the first six months
      of 1999 due primarily to increased  sales from  nonregulated  products and
      services totaling  approximately $33, increased equipment sales, primarily
      consumer  equipment,  of  approximately  $51 and the  deregulation  of 911
      revenues  shifted  to  other  revenues  noted in  local  service  above of
      approximately $23.

Operating Expenses PacBell's  operating expenses increased $130, or 3.8%, in the
first six months of 1999.  Components of total operating  expenses for the first
six months of 1999 and 1998 are as follows:

---------------------------------------------------------------------------
                                                    Six-Month Period
                                              -----------------------------
                                                                    Percent
                                                1999      1998      Change
---------------------------------------------------------------------------
Operations and support                        $  2,625  $ 2,524        4.0%
Depreciation and amortization                      943      914        3.2
------------------------------------------------------------------
   Total operating expenses                   $  3,568  $ 3,438        3.8%
===========================================================================

      Operations and support increased $101, or 4.0%, in the first six months of
      1999.  The  increase  includes  costs of  approximately  $120  related  to
      progression in the merger  implementation  process  including charges from
      centralized support functions throughout SBC Communications Inc. (SBC) and
      other  merger   initiatives   and   increased   expenditures   related  to
      implementation of


<PAGE>


PACIFIC BELL

Item 2.  Management's Discussion and Analysis
Dollars in millions

RESULTS OF OPERATIONS - Continued

      PacBell's  Asymmetrical   Digital   Subscriber   Line (ADSL)   product of
      approximately $61.    Operations  and support   also    increased  due to
      increased  costs for materials,  wages and salaries,  and  other costs of
      approximately  $117.   In addition, costs  associated   with   reciprocal
      compensation   for   the   termination   of Internet   traffic  increased
      approximately $22 and costs  associated with  intraLATA  presubscription,
      (where a customer is able to subscribe to an intraLATA  toll carrier just
      as they do for long    distance  service), were approximately  $8.  These
      increases  were   partially  offset by  reductions  in  contract   labor,
      benefits,    contract  fees and  employee  training  and   development of
      approximately $52 and   a reduction    in   other   non-labor    costs of
      approximately $68 due in  part to merger  initiative  benefits and higher
      first  quarter   1998  storm   related  costs. In addition,  expenditures
      for    interconnection,    customer     number   portability   and  local
      competition initiatives    decreased   approximately $66. Also offsetting
      the   increase   in operations   and support  expense  was the  change in
      accounting   for software costs  (see  Note 4 of Notes  to   Consolidated
      Financial  Statements),  which   resulted in  approximately $41  of  such
      costs being  capitalized rather than expensed at June 30, 1999.

      Depreciation and amortization expense increased $29, or 3.2%, in the first
      six months of 1999. The increase was due primarily to overall higher plant
      levels of approximately $32.

Interest expense  decreased $13, or 6.0%, in the first six months of 1999 due to
lower average debt levels.

Other  income  (expense) - net was income of $31 in the first six months of 1999
due  primarily  to a gain  recognized  from the sale of  PacBell's  interest  in
Advanced  Communications  Network (ACN) of $24. In 1997, ACN was written down as
an impairment in conjunction with the merger with Pacific Telesis Group.

Income Taxes  increased $47, or 12.8%, in the first six months of 1999 primarily
due to higher income before income taxes.

COMPETITIVE AND REGULATORY ENVIRONMENT

Reciprocal  Compensation  is billed to PacBell  by  Competitive  Local  Exchange
Carriers  (CLECs) for the termination of certain local exchange  traffic to CLEC
customers.  SBC believes that under the  Telecommunications Act of 1996 (Telecom
Act) the state commissions have authority to order reciprocal  compensation only
for intrastate or local traffic, while the FCC has authority over interstate and
interexchange  traffic.  SBC believes most Internet traffic is interexchange and
interstate.  In February  1999,  the FCC declared that  Internet  traffic is not
intrastate  or local  traffic but instead is  primarily  interstate,  subject to
interstate  jurisdiction.   However,  the  FCC  added  that  state  commissions,
interpreting   existing   contracts  and  consistent  with  federal  law,  might
nevertheless  order payment of reciprocal  compensation  for Internet traffic in
certain  circumstances.  In March 1999,  MCI WorldCom filed an appeal of the FCC
ruling and certain local exchange  carriers also appealed;  the outcome of these
appeals is pending.


<PAGE>


PACIFIC BELL

Item 2.  Management's Discussion and Analysis
Dollars in millions

COMPETITIVE AND REGULATORY ENVIRONMENT - Continued

In June 1999, the CPUC in arbitration  between PacBell and a CLEC customer voted
to treat Internet  traffic as local pending a further CPUC proceeding to examine
the issue.  The CPUC also  approved a reduction in the  reciprocal  compensation
rate between  PacBell and the CLEC  customer  beginning  June 29, 1999.  In July
1999, the CPUC issued a draft decision in another  arbitration  between  PacBell
and a CLEC customer upholding  reciprocal  compensation fees. The final decision
is expected to result in a reduction of the reciprocal compensation rate paid by
PacBell to the CLEC  customer  beginning in the fourth  quarter of 1999. In July
1999, the CPUC also affirmed an order that had concluded  that Internet  traffic
is local. PacBell is currently evaluating the impact of this order.

PacBell has been  recording  expense for amounts sought by certain CLECs for the
termination of Internet traffic to Internet Service Providers.

Customer Local Number  Portability  Long-term  customer local number portability
(LNP) allows customers to change local exchange carriers while maintaining their
existing  telephone  numbers.  In  December  1998,  the FCC  issued  an order on
recovery  of costs  incurred  for LNP by local  exchange  carriers.  This  order
provides for the levying of federally  tariffed LNP monthly end-user charges for
a five-year  period,  beginning in February 1999.  PacBell began  recovering LNP
costs at the rate of 50 cents per access line per month.  In July 1999,  the FCC
issued an order on PacBell's rate,  revising the rate to 34 cents, with a refund
obligation for the period of February through July 1999. PacBell recorded $13 in
the second quarter of 1999 related to the rate reduction.

Federal  Access  Rates In May 1999,  the United  States Court of Appeals for the
District of  Columbia  Circuit  (Court of Appeals)  ruled that the FCC failed to
adequately  explain certain changes to part of the formula used to calculate the
access rates local  carriers,  such as PacBell,  charge long distance  carriers.
Specifically, the Court of Appeals disagreed with the FCC's rationale for making
certain changes to the "X factor" adjustment,  the purpose of which is to ensure
that access rates decrease as local phone company  productivity  increases,  and
ordered the FCC to  reevaluate  the formula.  The Court of Appeals did not state
whether the FCC should have made specific  adjustments  that would have resulted
in either  higher or lower access  rates.  In a subsequent  order,  the Court of
Appeals  stayed the mandate of this decision  until April 1, 2000. The effect of
the Court of Appeal's  decision on PacBell's results of operations and financial
position cannot be determined at this time.

Shared  Transport In June 1999, the United States Supreme Court (Supreme  Court)
set aside an August 1998 United  States Court of Appeals for the Eighth  Circuit
(8th Circuit)  ruling that major carriers,  such as PacBell,  could be forced to
lease, at a discount,  shared  transport  service for carrying phone calls among
telephone company central switching offices.  The 8th Circuit had held that such
shared  transport  was subject to mandatory  leasing  under the Telecom Act. The
Supreme Court  previously  ruled that the FCC ignored some limits in the Telecom
Act when it drew up  rules  for  mandatory  leasing  and in light of that  prior
ruling,  ordered the 8th Circuit to reconsider the shared transport ruling.  The
effect of this ruling on PacBell cannot be determined at this time.


<PAGE>


PACIFIC BELL

Item 2.  Management's Discussion and Analysis
Dollars in millions

COMPETITIVE AND REGULATORY ENVIRONMENT - Continued

California  Rate Ruling In June 1999,  the CPUC  issued a ruling  recategorizing
certain of PacBell's  services,  including  the  maintenance  of inside  wiring,
collect,  calling  card and  person to  person  calls  and the  provisioning  of
directory assistance to interexchange  carriers, as competitive products. In its
ruling,  the CPUC approved an increase in the ceiling price for both inside wire
repair services and interexchange  directory assistance.  Although the effect of
this ruling on PacBell's results of operations and financial  position cannot be
determined at this time, it is expected to be favorable.

OTHER BUSINESS MATTERS

New Accounting  Standards In June 1998, the Financial Accounting Standards Board
(FASB) issued  Statement No. 133,  "Accounting  for Derivative  Instruments  and
Hedging Activities" (FAS 133), which will require all derivatives to be recorded
on the  balance  sheet  at fair  value  and  changes  in the  fair  value of the
derivatives to be recorded in net income or comprehensive  income. In June 1999,
the FASB issued  Statement No. 137,  "Accounting for Derivative  Instruments and
Hedging Activities-Deferral of the Effective Date of the FASB Statement No. 133"
(FAS 137), that among other items,  defers the date that FAS 133 must be adopted
to years beginning after June 15, 2000.  Earlier  adoption is permitted.  SBC is
currently  evaluating the impact of the change in accounting required by FAS 133
and FAS 137, but is not able to quantify the effect at this time.

See Note 4 of Notes to Consolidated Financial Statements for a discussion of the
new accounting standard on software costs.

SBC's  Year  2000  Project  SBC  operates   numerous   date-sensitive   computer
applications  and systems  throughout its  businesses.  Since 1996, SBC has been
working to upgrade its networks and computer  systems to properly  recognize the
Year  2000  and  continue  to  process   critical   operational   and  financial
information.  Company-wide  teams are in place to address and resolve  Year 2000
issues and  processes  are under way to evaluate  and manage the risks and costs
associated with preparing SBC's  date-impacted  systems and networks for the new
century.

SBC is using a  four-step  methodology  to address  the issue.  The  methodology
consists of inventory and assessment,  hardware and software fixes,  testing and
deployment.  SBC  measures  its  progress  by tracking  the number of  completed
hardware and software applications,  network components,  personal computers and
building facilities that can correctly process Year 2000 dates.

The inventory and  assessment  phase was estimated to require 20% of the overall
effort and included the identification and prioritization of items that could be
impacted by the Year 2000 and the  determination  of the work effort required to
ensure  compliance.  The inventory and  assessment  phase was completed in 1998.
This process  involved  reviewing over 340 million lines of software code, 1,200
central office switches,  7,000 company  buildings,  conducting an inventory and
assessment of 124,000 personal  computers and coordinating with 1,500 suppliers.
SBC must obtain adequate assurance that the 15,000 products they provide will be
Year 2000 compliant or determine and address any appropriate  contingency  plans
or backup systems.

Making the hardware  and software  fixes was the second phase of the process and
was  estimated  to require 25% of the overall  effort.  This  activity  involved
modifying program code,  upgrading  computer


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PACIFIC BELL

Item 2.  Management's Discussion and Analysis
Dollars in millions

OTHER BUSINESS MATTERS - Continued

software and upgrading or replacing  hardware.  The hardware and  software fixes
were completed as of June 30, 1999.

Testing involves ensuring that hardware and software fixes will work properly in
1999 and  beyond  and  occurs  both  before  and after  deployment.  Testing  is
estimated to comprise 45% of the overall effort. Testing began early in 1998 and
is  substantially  complete.  Contingency  plans have been  written  and will be
finalized by August 31, 1999.

Deployment  involves  placing the "fixed"  systems  into a live  environment  to
ensure they are working properly. Additional testing is done after deployment as
well. Deployment is estimated to require 10% of the overall effort. Ninety-eight
percent of the deployment phase was completed as of June 30, 1999.

SBC has  budgeted  $265 on the entire  project,  with  approximately  $197 spent
through June 30, 1999.

The  activities  involved  in SBC's  Year 2000  project  require  estimates  and
projections,  as described  above,  of  activities  and  resources  that will be
required in the future.  These  estimates and  projections  could change as work
progresses on the project.


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PACIFIC BELL

Item 3. Quantitative and Qualitative Disclosures About Market Risk
Dollars in millions

There has been no material  change in PacBell's  market risks since December 31,
1998.

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

Information set forth in this form contains forward-looking  statements that are
subject to risks and  uncertainties.  PacBell  claims the protection of the safe
harbor  for  forward-looking  statements  provided  by  the  Private  Securities
Litigation Reform Act of 1995.

The following  factors could cause PacBell's future results to differ materially
from those expressed in the  forward-looking  statements:  (1) adverse  economic
changes in the markets served by PacBell or changes in available technology; (2)
the final outcome of various FCC  rulemakings  and judicial  review,  if any, of
such  rulemakings;  (3) the final  outcome  of  various  CPUC  proceedings,  and
judicial review,  if any, of such  proceedings;  and (4) the timing of entry and
the extent of competition in the local and intraLATA toll markets in California.
Readers are cautioned  that other factors  discussed in this form,  although not
enumerated here, also could materially impact PacBell's future earnings.


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PACIFIC BELL

PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)   Exhibits

      Exhibit 12  Computation of Ratios of Earnings to Fixed Charges.

      Exhibit 27  Financial Data Schedule.

(b)   Reports on Form 8-K

      There were no reports on Form 8-K filed during the quarter  ended June 30,
      1999.


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                                   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 BELL




August 6, 1999                        /s/ Robert B. Pickering
                                      Robert B. Pickering
                                      Vice President and Chief Financial Officer