EXHIBIT 13
                    PORTIONS OF ANNUAL REPORT TO STOCKHOLDERS
                      FOR THE YEAR ENDED DECEMBER 31, 1997
                  (incorporated by reference into this filing)



                                                                  Form 10-K
                                                                 Page Number

Management's Discussion and Analysis of Financial                   33-44
  Condition and Results of Operations

Report of Independent Public Accountants                             45

Selected Financial Data                                              46

Consolidated Statements of Income                                    47

Consolidated Balance Sheets                                         48-49

Consolidated Statements of Cash Flows                                50

Consolidated Statements of Shareholders' Equity                      51

Business Segments                                                    52

Notes to Consolidated Financial Statements                          53-65

Investor Information                                                 66


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<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations

Financial Condition, Liquidity and Capital Resources

-------------------------------------------------------------------------------
(Dollars in millions, except per share amounts)      1997       1996       1995
-------------------------------------------------------------------------------
Cash provided from operations                    $  798.2   $  806.2   $  689.2
Capital expenditures                             $  545.6   $  463.7   $  523.1
Long-term debt issued                            $  164.2   $  316.0   $  218.2
Total capital structure                          $4,136.3   $3,897.5   $3,741.1
Percent equity to total capital                       54%        54%        52%
Interest coverage ratio                             5.78x      4.54x      4.72x
Book value per share                               $11.97     $11.15     $10.18
-------------------------------------------------------------------------------

Cash provided from operations continues to be ALLTEL's primary source of
liquidity. The increase in cash provided from operations for 1996 primarily
reflects a reduction in working capital requirements and growth in earnings of
the Company, excluding the impact of certain non-cash, non-extraordinary
charges, as further discussed below. The increase in 1995 primarily reflects
the growth in earnings of the Company, partially offset by an increase in
working capital requirements.
    Cash flows from investing activities for 1997 include capital expenditures
of $545.6 million. Capital expenditures increased in 1997 primarily due to the
start-up construction of ALLTEL's Personal Communications Services ("PCS")
network and due to construction of additional network facilities. The Company
expects to begin offering PCS in select markets during 1998. Capital
expenditures decreased in 1996 and 1995 primarily as a result of the sale of
wireline properties and a reduction in capital expenditures by the remaining
wireline subsidiaries. The Company financed the majority of its capital
expenditures through the internal generation of funds in each of the past three
years. During each of the past three years, the Company's capital expenditures
were incurred to continue to modernize and upgrade its telecommunications
network, to invest in equipment to provide new telecommunications services and
to expand into existing information services markets. Capital expenditures
are forecast at approximately $600 million for 1998, which are expected to be
primarily internally financed.
    Cash flows from investing activities for 1997 also include total cash
outlays of $50.6 million for three acquisitions, consisting of a wireline
property in Georgia, two wireless properties in Alabama and an additional
ownership interest in a Georgia wireless property. In addition, cash flows from
investing activities for 1997 include a cash outlay of $146.5 million related
to the acquisition of PCS licensing rights. ALLTEL participated in the Federal
Communications Commission's ("FCC") "D" and "E" band PCS auctions, and in
January 1997, the Company was awarded the PCS licensing rights for 73 markets
in 12 states. The PCS licenses increase the size of ALLTEL's potential wireless
customer base to 34 million.
    Cash flows from investing activities for 1997 also include proceeds of
$185.9 million from the sale of a portion of ALLTEL's investment in
WorldCom, Inc. common stock. Additionally, cash flows from investing
activities for 1997 include net proceeds of $200.6 million received from the
sale of property, principally consisting of three non-strategic operations. In
September 1997, the Company received cash proceeds of $48.7 million in
connection with the sale of an investment in a software company. In May 1997,
ALLTEL completed the sale of its wire and cable subsidiary, HWC Distribution
Corp. ("HWC"), for approximately $45.0 million in cash; and in January 1997,
the Company received cash proceeds of $104.9 million in connection with the
sale of its healthcare operations. The proceeds from the sale of assets were
used primarily to reduce borrowings under the Company's revolving credit
agreement. Cash flows from investing activities for both 1996 and 1995 include
proceeds totaling $38.7 million and $212.9 million, respectively, which were
received principally from the sale of certain wireline properties, as discussed
below. Cash flows from investing activities for 1996 also include proceeds of
$30.4 million related to the withdrawal of ALLTEL's investment in GO
Communications Corporation ("GOCC").
    Cash flows from financing activities include dividend payments and the
repurchase by ALLTEL of its common stock. Common and preferred dividend


                                       33
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payments amounted to $206.3 million in 1997, $198.1 million in 1996 and $182.3
million in 1995. The increases in each year primarily reflect growth in the
annual dividend rates on ALLTEL's common stock. In October 1997, the Board of
Directors approved a 5.5 percent increase in the quarterly dividend from 27.5
cents to 29 cents per share, raising the annualized dividend to $1.16 per
share. Under a share repurchase program initiated by ALLTEL in 1996 and
expanded in 1997, the Company repurchased 5.1 million and 2.4 million of its
shares at a total cost of $175.6 million and $75.6 million in 1997 and 1996,
respectively. The Company believes it has adequate internal and external
capital resources available to finance its ongoing operating requirements
including the construction of its PCS network, other capital expenditures,
business development and the payment of dividends.
    ALLTEL has a $750 million revolving credit agreement. Borrowings
outstanding under this agreement at December 31, 1997, 1996 and 1995 were
$247.9 million, $83.7 million and $151.5 million, respectively. The weighted
average interest rate on borrowings outstanding under this agreement at
December 31, 1997, was 6.5 percent. Borrowings under this agreement in 1997
were incurred primarily to fund the stock repurchase program and to acquire
the PCS licensing rights. As previously noted, proceeds from the sales of the
wire and cable and healthcare operations and from the sale of investments in a
software company and WorldCom, Inc. common stock were used primarily to reduce
borrowings under the revolving credit agreement.
    Long-term debt issued was $164.2 million in 1997, $316.0 million in 1996
and $218.2 million in 1995, while retirements of long-term debt amounted to
$42.6 million in 1997, $310.3 million in 1996 and $277.6 million in 1995.
The net increase in revolving credit agreement borrowings from December 31,
1996, represents all of the long-term debt issued in 1997. In 1996, the
Company issued $300 million of 7.0 percent debentures to refinance $200 million
of 9.5 percent debentures and to reduce borrowings under the Company's
revolving credit agreement. In 1995, the Company issued $200 million of
6.75 percent debentures to refinance two existing high-cost debt issues. The
refinanced debt issues represent the majority of long-term debt retired in
1996 and 1995. In connection with the debt refinancings completed in 1996 and
1995, the Company was required to pay termination fees in the amount of $15.8
million and $14.0 million, respectively. The remaining borrowings for 1996 and
1995 were used for investments, acquisitions and other general corporate
requirements. The loans were obtained through the private placement market,
public issuance and the Rural Utilities Service financing programs for
wireline companies. The Company and its subsidiaries expect these sources to
continue to be available for future borrowings. There were no changes in
ALLTEL's bond ratings during 1997. Moody's Investors Service and Standard &
Poor's Corporation senior debt ratings for ALLTEL are A2 and A+, respectively.
(See Note 3 to the Consolidated Financial Statements for additional information
regarding the Company's long-term debt.)

Results of Operations
Overview
In 1997, ALLTEL continued to focus on its strategic priorities and undertook
several initiatives designed to strengthen its communications business and to
expand its position as an information technology provider to the financial
services and communications industries. ALLTEL also provided new or enhanced
services to its customers and pursued new growth opportunities. During 1997,
the Company converged its wireline and wireless businesses into a single
operation capable of delivering to customers one-stop shopping for a full
range of communications products and services. ALLTEL also constructed network
facilities to provide communications services in select areas within its
geographically focused communications markets that are located outside its
traditional franchised service areas. In addition, information services
invested in new businesses in order to expand its service offerings into
existing markets. Finally, ALLTEL completed the sale of certain non-strategic
operations and investments within its information services and product
distribution segments. Operating results for 1997 reflect the impact of these
                                      
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                                       34
<PAGE>

initiatives. Wireline's operating results remained solid, reflecting steady
access line growth and the expansion of its long-distance operations. Wireless
operating results reflect continued growth in its customer base. Information
services' operating results, adjusted for the impact of the asset disposals,
reflect increased revenues and sales and operating income primarily due to
growth in existing data processing contracts and the addition of new
outsourcing agreements. Product distribution's operating results reflect the
disposal of the wire and cable operations completed in May 1997.
    Revenues and sales increased $71.1 million or 2 percent in 1997,
$82.7 million or 3 percent in 1996 and $182.0 million or 6 percent in 1995.
Operating income increased $155.4 million or 26 percent in 1997, decreased
$92.4 million or 14 percent in 1996 and increased $50.1 million or 8 percent
in 1995. Growth in revenues and sales in 1997 was impacted by the sales of HWC
and information services' healthcare operations, while revenues and sales for
1996 and 1995 were impacted by the sale of certain wireline properties.
Operating income for 1997 and 1996 also includes non-recurring charges to
write down the carrying value of certain assets, as further discussed below.
Adjusted for these asset dispositions and write-downs, revenues and sales
would have increased $299.4 million or 10 percent in 1997, $193.0 million or 7
percent in 1996 and $202.4 million or 8 percent in 1995, and operating income
would have increased $62.2 million or 9 percent in 1997, $69.1 million or 11
percent in 1996 and $38.5 million or 6 percent in 1995.
    Net income increased $216.1 million or 74 percent in 1997, decreased
$62.9 million or 18 percent in 1996 and increased $82.9 million or 30 percent
in 1995. Basic and diluted earnings per share both increased 78 percent in
1997, decreased 18 percent in 1996 and increased 30 percent in 1995. In
addition to the asset write-downs and dispositions, reported net income and
basic and diluted earnings per share were impacted by several
non-extraordinary, non-recurring items discussed below. Excluding the impact
in each year of the asset dispositions, write-downs and non-recurring items,
net income would have increased $39.4 million or 11 percent in 1997, $56.6
million or 19 percent in 1996 and $21.7 million or 8 percent in 1995. Basic
earnings per share would have increased 13 percent in 1997, 18 percent in
1996 and 7 percent in 1995, while diluted earnings per share would have
increased 13 percent in 1997, 19 percent in 1996 and 7 percent in 1995.
    Net income and earnings per share adjusted for the asset dispositions,
write-downs and non-extraordinary, non-recurring items are summarized in the
following tables:

-------------------------------------------------------------------------------
(Dollars in thousands)                              1997       1996       1995
-------------------------------------------------------------------------------
Net income, as reported                         $507,886   $291,737   $354,616
Disposition of healthcare, wire and cable
  and wireline operations                           (838)    (6,429)   (31,881)
Non-recurring items, net of tax:
  Provision to reduce carrying value
    of certain assets                             11,744     72,716          -
  Gain on disposal of assets                    (119,895)    (8,465)   (28,793)
  Termination fees on early retirement
    of long-term debt                                  -      9,946      8,944
                                                --------   --------   --------
Net income, as adjusted                         $398,897   $359,505   $302,886
                                                ========   ========   ========
-------------------------------------------------------------------------------

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<PAGE>

-------------------------------------------------------------------------------
                                              Basic             Diluted
                                        ----------------    ------------------
                                        1997  1996  1995    1997   1996   1995
-------------------------------------------------------------------------------
Earnings per share, as reported        $2.72 $1.53 $1.87   $2.70  $1.52  $1.85
Disposition of healthcare, wire and
  cable and wireline operations            -  (.03) (.17)      -   (.03)  (.17)
Non-recurring items:
  Provision to reduce carrying value
    of certain assets                    .06   .38     -     .06    .38      -
  Gain on disposal of assets            (.64) (.04) (.15)   (.64)  (.04)  (.15)
  Termination fees on early retirement
    of long-term debt                      -   .05   .05       -    .05    .05
                                       ----- ----- -----   -----  -----  -----
 Earnings per share, as adjusted       $2.14 $1.89 $1.60   $2.12  $1.88  $1.58
                                       ===== ===== =====   =====  =====  =====
------------------------------------------------------------------------------

The net income and earnings per share impact of the asset dispositions,
write-downs and the non-extraordinary, non-recurring items has been presented
as supplemental information only. The non-recurring items reflected in the
above tables are discussed below in reference to the caption in the
consolidated statements of income in which they are reported.

Provision to Reduce Carrying Value of Certain Assets
During 1997, ALLTEL recorded a pretax write-down of $16.9 million to reflect
the fair value less cost to sell its wire and cable subsidiary, HWC. The net
income impact of this write-down resulted in a decrease in net income of
$11.7 million or $.06 per share.
    During 1996, the Company incurred non-cash, pretax charges of $120.3
million to write down the carrying value of certain assets. In accordance with
ALLTEL's plan to dispose of its wire and cable subsidiary, the Company
recorded a pretax write-down of goodwill in the amount of $45.3 million. In
addition, information services recorded a pretax write-down of $53.0 million
in the carrying value of certain assets primarily consisting of capitalized
software development costs. The write-down of software resulted from performing
a net realizability evaluation of software-related products that have been
impacted by changes in software and hardware technologies. Information services
also recorded a pretax write-down of $22.0 million to adjust the carrying value
of its community banking operations to their estimated fair value based upon
projections of future cash flows. The net income impact of these write-downs
resulted in a decrease in net income of $72.7 million or $.38 per share.

Gain on Disposal of Assets, Write-down of Assets and Other
During 1997, the Company recorded a pretax gain of $34.4 million primarily
related to the sale of its investment in a software company. ALLTEL also
recorded a pretax gain of $156.0 million from the sale of a portion of its
investment in WorldCom, Inc. common stock. In addition, the Company recorded a
pretax gain of $16.2 million from the sale of information services' healthcare
operations. The net income impact from these transactions resulted in an
increase in net income of $119.9 million or $.64 per share.
    In 1996, the Company recorded a pretax gain of $15.3 million from the sale
of wireline properties in Nevada to Citizens Utilities Company ("Citizens").
ALLTEL also incurred $15.8 million of termination fees related to the early
retirement of $200 million of long-term debt. Additionally, ALLTEL realized
a pretax loss of $1.8 million related to the withdrawal of its investment in
GOCC. The net income impact from these transactions resulted in a decrease of
$1.5 million in net income or $.01 per share.
    In 1995, the Company recorded pretax gains totaling $49.8 million from the
disposal of certain wireline properties in Arizona, California, New Mexico,
Oregon, Tennessee, Utah and West Virginia to Citizens. The Company also
recorded an additional pretax write-down of $5.0 million to reflect the net
realizable value of information services' check processing operations.
Additionally, ALLTEL incurred $14.0 million of termination fees related to the

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early retirement of $200 million of long-term debt. The net income impact from
these transactions resulted in an increase of $19.8 million in net income or
$.10 per share.

Results of Operations by Business Segment
Communications - Wireline Operations

-------------------------------------------------------------------------------
(Dollars in millions)                        1997           1996           1995
-------------------------------------------------------------------------------
Local service                            $  466.1       $  429.3       $  411.4
Network access and long-distance            647.6          595.6          637.8
Miscellaneous                               155.2          144.2          148.5
                                         --------       --------       --------
   Total revenues and sales                $1,268       $1,169.1       $1,197.7
                                         ========       ========       ========
Operating income                         $  446.5       $  408.4       $  422.5
Access lines in service                 1,789,317      1,681,395      1,623,440
-------------------------------------------------------------------------------

Wireline's revenues and sales increased $99.8 million or 9 percent in 1997,
decreased $28.6 million or 2 percent in 1996 and increased $19.4 million or
2 percent in 1995. Operating income increased $38.1 million or 9 percent in
1997, decreased $14.1 million or 3 percent in 1996 and increased $22.3 million
or 6 percent in 1995. As previously discussed, ALLTEL sold certain wireline
properties in eight states to Citizens during 1996 and 1995. The sale of
properties to Citizens resulted in decreases in revenues and sales and
operating income in 1996 of $88.5 million and $31.7 million, respectively,
while in 1995, the disposition of properties resulted in decreases in revenues
and sales and operating income of $24.0 million and $7.2 million, respectively.
Excluding the impact of the sale of properties to Citizens, wireline's revenues
and sales would have increased $59.9 million or 5 percent in 1996 and
$43.4 million or 4 percent in 1995, and operating income would have increased
$17.6 million or 4 percent in 1996 and $29.5 million or 7 percent in 1995. 
    Local service revenues increased $36.8 million or 9 percent in 1997,
$17.9 million or 4 percent in 1996 and $21.7 million or 6 percent in 1995. The
increases in local service revenues in all periods reflect growth in customer
access lines and growth in enhanced services and other special feature
revenues. Customer access lines increased 6 percent in 1997, primarily
reflecting increased sales of residential and second access lines. Local
service revenues for 1997 also reflect the expansion of local calling areas in
North Carolina and Georgia, which reclassified certain revenues from network
access and long-distance revenues to local service revenues. The increases in
local service revenues in 1996 and 1995 resulting from growth in both customer
access lines and enhanced services and other special feature revenues were
partially offset by the property sales to Citizens. Future access line growth
is expected to result from population growth in the Company's service areas,
from sales of second access lines and through strategic acquisitions.
    Network access and long-distance revenues increased $52.0 million or
9 percent in 1997, compared to decreases of $42.2 million or 7 percent in 1996
and $6.3 million or 1 percent in 1995. The increase in 1997 primarily reflects
growth in ALLTEL's long-distance operations and higher volumes of access
usage, partially offset by the reclassification of certain revenues to local
service revenues, as previously discussed. The long-distance operations, which
began service in 1996 and currently serve more than 281,000 customers,
generated growth in operating revenues of $28.6 million in 1997. The decrease
in network access and long-distance revenues in 1996 primarily reflects the
sale of properties to Citizens, partially offset by higher volumes of access
usage and additional revenues derived from the long-distance operations.
Network access and long-distance revenues decreased in 1995 primarily due to
the impact of certain regulatory commission actions designed to reduce
earnings levels in California and Ohio and due to the sale of wireline
properties to Citizens.
    On July 12, 1996, the Georgia Public Service Commission ("Georgia PSC")
issued an order requiring that ALLTEL's wireline subsidiaries which operate
within its jurisdiction reduce their annual network access charges by
$24 million, prospectively, effective July 1, 1996. The Georgia PSC's action
was in response to the Company's election to move from a rate-of-return method


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<PAGE>

of pricing to an incentive rate structure, as provided by a 1995 Georgia
telecommunications law. The Company appealed the Georgia PSC order. On
November 6, 1996, the Superior Court of Fulton County, Georgia, (the "Superior
Court") rendered its decision and reversed the Georgia PSC order, finding,
among other matters, that the Georgia PSC had exceeded its authority by
conducting a rate proceeding after the Company's election of alternative
regulation. The Superior Court did not rule on a number of other assertions
made by the Company as grounds for reversal of the Georgia PSC order. The
Georgia PSC appealed the Superior Court's decision, and on July 3, 1997, the
Georgia Court of Appeals reversed the Superior Court's decision. On
July 16, 1997, the Georgia Court of Appeals denied the Company's request to
reconsider its decision. On August 5, 1997, the Company filed with the Georgia
Supreme Court a petition for writ of certiorari requesting that the Georgia
Court of Appeals' decision be reversed. The Georgia Supreme Court has not yet
ruled on this petition. The Company has not implemented any revenue reductions
or established any reserves for refunds related to this matter.
    Miscellaneous revenues increased $11.0 million or 8 percent in 1997,
decreased $4.3 million or 3 percent in 1996 and increased $4.0 million or 3
percent in 1995. The increase in 1997 primarily reflects growth in sales of
wireline equipment and wireline equipment protection plans. The decrease in
miscellaneous revenues in 1996 primarily reflects the sale of properties to
Citizens, partially offset by increases in directory advertising revenues and
sales of wireline equipment and wireline equipment maintenance and protection
plans. The increase in miscellaneous revenues in 1995 was primarily due to
increases in direct sales of wireline equipment and protection plans and
directory advertising revenues, partially offset by the sale of properties to
Citizens.
    Total wireline operating expenses increased $61.7 million or 8 percent in
1997, compared to decreases of $14.5 million or 2 percent in 1996 and
$2.9 million or 1 percent for 1995. The long-distance operations accounted
for $23.5 million of the increase in operating expenses for 1997. Operating
expenses for 1997 also reflect increases in depreciation, network-related
expenses, increased data processing charges and additional costs incurred by
ALLTEL in consolidating its customer service operations. Operating expenses
decreased in 1996 and 1995 by approximately $56.8 million and $16.8 million,
respectively, as a result of the sale of properties to Citizens. The decrease
in operating expenses in 1996 attributable to the sale of properties to
Citizens was partially offset by start-up costs associated with the long-
distance operations and by increased expense for maintenance and repair of
cable, digital electronic switching and circuit equipment and an increase
in depreciation expense. Operating expenses decreased in 1995 primarily due to
the sale of properties to Citizens, lower maintenance costs for buildings and
electro-mechanical switching equipment and decreases in call completion and
other general and administrative expenses. These decreases were partially
offset by increases in depreciation, maintenance and repair expenses and
information services and engineering charges.
    ALLTEL's wireline subsidiaries follow the accounting for regulated
enterprises prescribed by Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation" ("SFAS 71"). If
ALLTEL's wireline subsidiaries no longer qualified for the provisions of SFAS
71, the accounting impact to the Company would be an extraordinary non-cash
charge to operations of an amount that could be material. Criteria that would
give rise to the discontinuance of SFAS 71 include (1) increasing competition
that restricts the wireline subsidiaries' ability to establish prices to
recover specific costs and (2) a significant change in the manner in which
rates are set by regulators from cost-based regulation to another form of
regulation. The Company periodically reviews these criteria to ensure the
continuing application of SFAS 71 is appropriate. As a result of the passage of
the Telecommunications Act of 1996 (the "96 Act") and state telecommunications
reform legislation, ALLTEL's wireline subsidiaries could begin to experience
increased competition in their local service areas. To date, competition has
not had a significant adverse effect on the operations of ALLTEL's wireline
subsidiaries.

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                                       38
<PAGE>

    In August 1996, the FCC issued regulations implementing the local
competition provisions of the 96 Act. These regulations established pricing
rules for state regulatory commissions to follow with respect to entry by
competing carriers into the local, intrastate markets of incumbent local
exchange carriers ("ILECs") and addressed interconnection, unbundled network
elements and resale rates. The FCC's authority to adopt such pricing rules,
including permitting new entrants to "pick and choose" among the terms and
conditions of approved interconnection agreements, was challenged in federal
court by various ILECs and state regulatory commissions. On July 18, 1997, the
U.S. Eighth Circuit Court of Appeals (the "Eighth Circuit Court") issued its
decision and vacated the FCC's pricing rules including the "pick and choose"
provisions, finding, among other matters, that the FCC had exceeded its
jurisdiction in establishing pricing rules for intrastate communications
services. In responding to petitions for rehearing of its earlier decision,
the Eighth Circuit Court ruled on October 14, 1997, that ILECs are not
required by the 96 Act to recombine network elements purchased by requesting
carriers on an unbundled basis. The FCC asked the U.S. Supreme Court to review
two interconnection decisions of the Eighth Circuit Court. The U.S. Supreme
Court has agreed to review these decisions.
    On May 7, 1997, the FCC issued regulations relating to access charge reform
and universal service. The access charge reform regulations are applicable
mainly to price cap regulated local exchange companies. Since ALLTEL's wireline
subsidiaries are not price cap regulated companies, the access charge
regulations, with few exceptions, are not applicable to them. The FCC has
indicated that a further notice of proposed rulemaking will be issued during
1998 to address access charge reform for rate-of-return companies. Based upon
ALLTEL's review of the FCC's regulations concerning the universal service
subsidy, it is unlikely that material changes in the universal service funding
for ALLTEL's wireline subsidiaries will occur prior to 2001. In 2001, the
universal service subsidy is scheduled to change from being based on actual
costs to being based on a proxy model. Since the FCC has not yet defined the
structure or content of any such proxy model, the impact, if any, of this
change in the universal service funding for ALLTEL's wireline subsidiaries
cannot be determined at this time. The impact of the FCC's universal service
order on ALLTEL's other telecommunications operations is still being evaluated.
Petitions for reconsideration of certain aspects of both the universal service
and access charge reform orders are pending at the FCC. In addition, petitions
to review parts of these orders have also been filed with various federal
courts of appeal.
    Because resolution of the regulatory matters discussed above that are
currently under FCC and/or judicial review is uncertain and regulations to
implement other provisions of the 96 Act have yet to be issued, the Company
cannot predict at this time the specific effects that the 96 Act and future
competition will have on its wireline subsidiaries. However, ALLTEL is intent
on taking advantage of the various opportunities that competition should
provide.

Communications - Wireless Operations

-------------------------------------------------------------------------------
(Dollars in millions)                        1997           1996           1995
-------------------------------------------------------------------------------
Revenues and sales                         $542.7         $475.1         $398.1
Operating income                           $178.4         $151.7         $121.5
Total customers                           941,226        795,136        624,542
Market penetration rate                     10.6%           9.4%           7.6%
-------------------------------------------------------------------------------

Wireless revenues and sales increased $67.6 million or 14 percent in 1997,
$77.0 million or 19 percent in 1996 and $110.8 million or 39 percent in 1995.
Operating income increased $26.7 million or 18 percent in 1997, $30.2 million
or 25 percent in 1996 and $36.8 million or 44 percent in 1995.
    Customer growth continued, as the number of customers increased 18 percent
over 1996, compared to annual growth rates in customers of 27 percent in 1996
and 33 percent in 1995. While the rate of customer growth has declined, the
overall market penetration rate (number of customers as a percentage of the
total population in ALLTEL's service areas) has increased.


                                       39
<PAGE>

    Wireless revenues and sales increased in all periods primarily due to the
significant growth in ALLTEL's customer base. The acquisition of new wireless
properties and increased ownership interest in existing wireless properties
also contributed to the growth in revenues and sales in all periods. Partially
offsetting the increases in revenues resulting from customer growth and
acquisitions were declines in the average monthly revenue per customer.
Average monthly revenue per customer was $52 for 1997, $59 for 1996 and $63
for 1995. The decline in average monthly revenue per customer in 1997 reflects
the migration of existing customers to lower rate plans, increased penetration
into lower-usage market segments and a reduction in roaming revenue rates. As
a result of increased current and expected future competition in its service
areas, ALLTEL increased its offering of monthly service plans, which have
lower base access rates and include more packaged airtime minutes. Migration
of existing customers to the newly offered rate plans is expected to continue,
and accordingly, this trend could impact future revenue growth. The declines
in average monthly revenue per customer in 1996 and 1995 primarily reflect
increased penetration into lower-usage market segments and reductions in
roaming revenue rates. Growth in revenues and sales in 1997 was favorably
impacted by a reduction in uncollectible revenues, while revenue growth for
1996 was adversely impacted by increased write-offs from bad debts.
    Operating income increased in all periods primarily due to the growth in
revenues and sales. Improved profit margins realized on the sale of wireless
equipment also contributed to the growth in operating income in 1997 and 1996.
The increases in operating income for all periods were partially offset by
higher expenses for selling and advertising, depreciation and other operating
expenses. Growth in operating income in 1997 was favorably impacted by a
reduction in losses incurred from fraud and bad debts, while operating income
for 1996 was adversely impacted by increased losses sustained from fraud and
bad debts. During the third quarter of 1996, the Company implemented new
technologies to control fraud and enhanced its credit and collection
procedures. For each of the past five calendar quarters, the Company has
experienced a decline in losses sustained from both fraud and bad debts.

Information Services Operations

------------------------------------------------------------------------------
(Dollars in millions)                         1997          1996          1995
------------------------------------------------------------------------------
Revenues and sales                          $973.4        $959.1        $926.3
Operating income                            $145.2        $ 67.0        $132.0
------------------------------------------------------------------------------

Information services' revenues and sales reflect increases of $14.3 million or
1 percent in 1997, $32.8 million or 4 percent in 1996 and $64.8 million or
8 percent in 1995. Growth in revenues and sales for 1997 was impacted by the
sale of healthcare operations completed in January 1997. Excluding the sold
healthcare operations, information services' revenues and sales would have
increased $123.9 million or 15 percent in 1997.
    Excluding the impact of the sold healthcare operations, revenues and sales
increased in 1997 primarily due to growth in the financial services and
telecommunications businesses, while revenues and sales increased in 1996 and
1995 primarily due to growth in the telecommunications operations. The
increases in revenues and sales for all periods reflect volume growth in
existing contracts, the addition of new outsourcing agreements and additional
software maintenance and service revenues. Growth in revenues and sales for
1996 was also impacted by a reduction in revenues earned on an outsourcing
agreement accounted for under the percentage-of-completion method, while
revenue growth for 1996 and 1995 was impacted by the sale of the check
processing operations completed in September 1995. Additionally, the increases
in revenues and sales in all periods were partially offset by lost operations
from contract terminations due to the merger and consolidation activity in the
domestic financial services market and by a reduction in revenues collected
for early termination of facilities management contracts.

                                       22
                                       40
<PAGE>

Although the number of mortgage loans serviced increased in all periods,
growth in the related processing revenues has occurred at a slower rate due to
consolidations in the mortgage industry, which have resulted in lower
incremental revenues realized on a per-loan basis. The domestic financial
services industry continues to experience consolidation due to mergers.
    Operating income increased $78.2 million or 117 percent in 1997, decreased
$65.0 million or 49 percent in 1996 and increased $2.2 million or 2 percent in
1995. Operating income for 1996 includes the impact of the $75.0 million
write-down in the carrying value of software and certain other assets, as
previously discussed. Excluding the impact of these write-downs and the sold
healthcare operations, operating income would have increased $4.9 million
or 3 percent in 1997 and $16.3 million or 13 percent in 1996. Operating income
for 1997 reflects the growth in revenues and sales noted above, as well as
improved profit margins realized from the international financial services
business, partially offset by the loss of operations due to the sale of the
healthcare business. Growth in operating income for 1997 was adversely
impacted by start-up and product development costs associated with several new
business initiatives designed to expand the Company's service offerings in
existing markets. Included in these initiatives are the Enterprise Network
Services, Professional Services and Call Center Solutions business units.
Excluding the impact of the asset write-downs and dispositions, the increase
in operating income in 1996 reflects the increase in revenues and sales.
Operating income in 1996 was also impacted by start-up costs associated with
the Enterprise Network Services business unit. The increase in operating
income in 1995 reflects the growth in revenues and sales, partially offset by
lower margins realized on international software sales due to increased costs
to procure and support these sales. Growth in operating income for all periods
was adversely impacted by the loss of higher-margin operations due to contract
terminations, reductions in fees collected on the early termination of
facilities management contracts and an increase in operating costs,
corresponding with the growth in revenues and sales. Depreciation and
amortization expense increased in 1996 and 1995 due to the acquisition of
additional data processing equipment and an increase in the amortization of
internally developed software.

Product Distribution Operations

------------------------------------------------------------------------------
(Dollars in millions)                         1997          1996          1995
------------------------------------------------------------------------------
Revenues and sales                          $359.7        $452.4        $448.1
Operating income                            $ 14.0        $ 23.7        $ 27.3
------------------------------------------------------------------------------

Product distribution's revenues and sales decreased $92.7 million or 20 percent
in 1997, compared to increases of $4.3 million or 1 percent in 1996 and
$11.5 million or 3 percent in 1995. Operating income decreased $9.7 million
or 41 percent in 1997 and $3.6 million or 13 percent in 1996 and increased
$3.4 million or 14 percent in 1995.
    The decrease in revenues and sales for 1997 primarily reflects the sale
of HWC. Sales of telecommunications and data products increased $21.0 million
in 1997, primarily reflecting increased sales to affiliated and non-affiliated
customers and additional retail sales of these products at the Company's
counter showrooms. Revenues and sales increased in 1996 primarily due to
growth in sales of telecommunications and data products to non-affiliated
customers, including increased retail sales of these products at counter
showrooms. Sales of telecommunications and data products to affiliates
decreased $18.1 million in 1996, primarily reflecting the sale of properties
to Citizens and an overall reduction in capital expenditures by the remaining
wireline subsidiaries, as compared to 1995. Sales of electrical wire and cable
products also decreased slightly in 1996. The increase in revenues and sales
in 1995 was primarily due to growth in the sale of telecommunications and data
products.
    Operating income decreased in 1997 primarily due to the decrease in
revenues and sales noted above. Lower gross profit margins realized on the
sale of telecommunications and data products due to increased competition and


                                       41
<PAGE>

a reduction in product cost rebates received from vendors also impacted
operating income growth in 1997. In addition, increased selling expenses also
impacted operating income growth in 1997. The decrease in operating income in
1996 primarily reflects lower profit margins realized on the sale of
electrical wire and cable products. During 1996, gross profit margins for
electrical wire and cable products were adversely impacted by sharp declines
in copper prices, as compared to the prior year. Gross profit margins were
also impacted by increased competition, primarily from direct sales by
manufacturers. Operating income increased in 1995 primarily due to the
increase in revenues and sales previously noted, partially offset by an
increase in selling-related expenses. Increased profit margins on electrical
wire and cable products, primarily resulting from an increase in copper
prices, also contributed to the growth in operating income in 1995.

Other Operations

-------------------------------------------------------------------------------
(Dollars in millions)                          1997          1996          1995
-------------------------------------------------------------------------------
Revenues and sales                           $118.9        $136.8        $139.5
Operating income                             $  8.8        $ 11.3        $  7.0
-------------------------------------------------------------------------------

Other operations' revenues and sales decreased $17.9 million or 13 percent in
1997, $2.7 million or 2 percent in 1996 and $24.4 million or 15 percent in
1995. Operating income decreased $2.5 million or 22 percent in 1997, increased
$4.3 million or 60 percent in 1996 and decreased $8.3 million or 54 percent in
1995.
    Revenues and sales decreased in 1997 due to a reduction in the number of
directories published. Compared to 1996, 43 fewer directories were published
in 1997. Revenues and sales decreased in 1996 due to a reduction in directory
publishing revenues, primarily resulting from the loss of several large
independent directory contracts. The decrease in revenues and sales in 1996 was
partially offset by the receipt of a one-time settlement from GTE Directories
Corporation ("GTE Directories") for reimbursement of certain computer software
conversion costs incurred by the Company subsequent to its purchase of GTE
Directories' independent directory operations. Revenues and sales decreased in
1995 as a result of a reduction in the number of directories published and due
to a prospective change in accounting in late 1993, whereby the Company began
recognizing all revenues and expenses related to a directory in the month of
publication, instead of recognizing the revenues and expenses ratably over a
12-month period. As a result of this change, revenues and sales in 1994
included additional revenues from directories accounted for under the previous
method adding to the decrease in 1995.
    The decrease in operating income in 1997 primarily reflects the decrease
in directory publishing revenues noted above. The increase in operating income
in 1996 reflects the impact of the one-time settlement received from GTE
Directories, elimination of certain amounts paid to GTE Directories and
improved collection experience related to directory advertising revenues. The
Company's publishing subsidiary had previously contracted with GTE Directories
to receive directory advertising sales support, printing and other services.
In 1996, these sales and service functions were performed at a lower cost
internally by the Company's publishing subsidiary. Operating income decreased
in 1995 primarily due to the decrease in revenues and sales previously noted.
Operating income for 1995 also reflects lower margins realized on affiliate
directories due to increased fees for publishing rights paid to affiliates
under terms of a new contract.

Interest Expense
Interest expense decreased $0.7 million or less than 1 percent in 1997,
decreased $14.6 million or 10 percent in 1996 and increased $8.3 million or
6 percent in 1995. The decrease in interest expense in 1996 primarily reflects
the two debt refinancings completed in March 1996 and October 1995, which
resulted in the retirement of three high-cost debt issues and reduced
borrowings under the Company's revolving credit agreement, as previously
discussed. Interest expense in 1996 also reflects lower average borrowing

                                       23
                                       42
<PAGE>

rates for amounts outstanding during the year under the Company's revolving
credit agreement. The increase in interest expense in 1995 reflects the
issuance of $250 million of debentures in April 1994 to reduce borrowings
under the Company's revolving credit agreement, partially offset by the
reduction in interest expense resulting from the refinancing of $200 million
of debentures completed in October 1995.

Income Taxes
Income tax expense increased $151.1 million or 89 percent in 1997, decreased
$47.5 million or 22 percent in 1996 and increased $52.4 million or 32 percent
in 1995. The changes in income tax expense for all periods primarily reflect
the tax-related impact of the various one-time, non-recurring items, as
previously discussed. Excluding the impact on tax expense of these transactions
in each year, income tax expense would have increased $21.2 million or
10 percent in 1997, $11.8 million or 6 percent in 1996 and $19.6 million or
10 percent in 1995, consistent with the overall growth in ALLTEL's earnings
from continuing operations before one-time, non-recurring items.

Average Common Shares Outstanding
The average number of common shares outstanding decreased 2 percent in 1997.
During 1997, 872,000 shares were issued in connection with acquisitions,
common shares issued through stock option plans amounted to 618,000 shares,
and preferred stock and debentures were converted into 67,000 shares. These
increases were offset by ALLTEL's repurchase on the open market of 5,084,000
of its common shares. The average number of common shares outstanding
increased slightly in 1996. During 1996, common shares issued through stock
option plans amounted to 344,000 shares, and preferred stock and debentures
were converted into 28,000 shares. These increases were offset by ALLTEL's
repurchase on the open market of 2,440,000 of its common shares. The average
number of common shares outstanding increased slightly in 1995. During 1995,
common shares issued through stock option plans amounted to 1,227,000 shares,
and preferred stock and debentures were converted into 60,000 shares.

Other Financial Information
Management is currently not aware of any environmental matters which in the
aggregate would have a material adverse effect on the financial condition or
results of operations of the Company.
    The Year 2000 compliance issue concerns the inability of computerized
information systems to properly recognize and process date-sensitive
information as the year 2000 approaches. The Company has taken actions to
understand the nature and extent of the work required to make its systems,
products and infrastructure, in those situations in which ALLTEL is required
to do so, Year 2000 compliant. ALLTEL has established a Year 2000 Program
Office to coordinate and monitor the Company's Year 2000 compliance efforts
and has prepared and is in the process of implementing a company-wide Year
2000 compliance plan. ALLTEL continues to evaluate the estimated costs
associated with these efforts based on actual experience. While these efforts
involve additional costs, the Company believes, based on available
information, that these costs will not have a material adverse effect on its
results of operations.

Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," ("SFAS 130"). This pronouncement, effective for calendar year 1998
financial statements, requires comprehensive income and its components to be
reported either in a separate financial statement, combined and included with
the statement of income or included in a statement of changes in stockholders'
equity. Comprehensive income equals the total of net income and all other
non-owner changes in equity. For ALLTEL, comprehensive income will equal its
reported consolidated net income plus the change from the previously reported
period in the unrealized holding gain on its investment in WorldCom, Inc.


                                       43
<PAGE>

common stock. Currently, this unrealized holding gain, net of tax, is reported
in the Company's consolidated balance sheets as a separate component of
stockholders' equity. Accordingly, the adoption of SFAS 130 will require the
Company to modify the presentation of information already disclosed in the
consolidated financial statements.
    Also, in June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information," ("SFAS 131"). This pronouncement, also effective for calendar
year 1998 financial statements, requires reporting segment information
consistent with the way executive management of an entity disaggregates its
operations internally to assess performance and make decisions regarding
resource allocations. Among information to be disclosed, SFAS 131 requires an
entity to report a measure of segment profit or loss, certain specific revenue
and expense items and segment assets. SFAS 131 also requires reconciliations
of total segment revenues, total segment profit or loss and total segment
assets to the corresponding amounts shown in the entity's consolidated
financial statements. The Company does not expect that the adoption of SFAS 131
will significantly change the number or designation of the reportable segments
currently disclosed in its consolidated financial statements.

Forward-Looking Statements
This Management's Discussion and Analysis of Financial Condition and Results
of Operations includes, and future filings by the Company on Form 10-K, Form
10-Q and Form 8-K and future oral and written statements by the Company and its
management may include, certain forward-looking statements, including (without
limitation) statements with respect to anticipated future operating and
financial performance, growth opportunities and growth rates, acquisition and
divestitive opportunities, Year 2000 compliance and other similar forecasts
and statements of expectation. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates," and "should," and
variations of these words and similar expressions, are intended to identify
these forward-looking statements. Forward-looking statements by the Company
and its management are based on estimates, projections, beliefs and assumptions
of management and are not guarantees of future performance. The Company
disclaims any obligation to update or revise any forward-looking statement
based on the occurrence of future events, the receipt of new information,
or otherwise.
    Actual future performance, outcomes and results may differ materially
from those expressed in forward-looking statements made by the Company and its
management as a result of a number of important factors. Representative
examples of these factors include (without limitation) rapid technological
developments and changes in the telecommunications and information services
industries; ongoing deregulation (and the resulting likelihood of significantly
increased price and product/service competition) in the telecommunications
industry as a result of the Telecommunications Act of 1996 and other similar
federal and state legislation and the federal and state rules and regulations
enacted pursuant to that legislation; regulatory limitations on the Company's
ability to change its pricing for communications services; the possible future
unavailability of SFAS 71 to the Company's wireline subsidiaries; continuing
consolidation in certain industries, such as banking, served by the Company's
information services business; and the risks associated with relatively large,
multi-year contracts in the Company's information services business. In
addition to these factors, actual future performance, outcomes and results may
differ materially because of other, more general, factors including (without
limitation) general industry and market conditions and growth rates, domestic
and international economic conditions, governmental and public policy changes
and the continued availability of financing in the amounts, at the terms and
on the conditions necessary to support the Company's future business.

                                       24
                                       44
<PAGE>

Report of Independent Public Accountants

To the Shareholders of ALLTEL Corporation:

We have audited the accompanying consolidated balance sheets of ALLTEL
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements 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 financial statements referred to above present fairly,
in all material respects, the financial position of ALLTEL Corporation and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.


/S/Arthur Anderson LLP

Little Rock, Arkansas,
January 29, 1998


                                       25
                                       45
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data


--------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31,
(Dollars in thousands, except per share amounts)      1997          1996          1995          1994          1993          1992
--------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>           <C>           <C>           <C>           <C>           <C>
Revenues and Sales:
  Service revenues                              $2,700,907    $2,524,845    $2,441,826    $2,249,933    $1,811,808    $1,565,544
  Product sales                                    562,656       667,573       667,899       677,743       510,082       501,865
                                                ----------    ----------    ----------    ----------    ----------    ----------
  Total revenues and sales                       3,263,563     3,192,418     3,109,725     2,927,676     2,321,890     2,067,409
                                                ----------    ----------    ----------    ----------    ----------    ----------
Costs and Expenses:
  Operating expenses                             2,137,501     2,032,057     1,976,628     1,871,732     1,469,921     1,280,591
  Cost of products sold                            362,164       448,456       449,119       422,078       332,923       344,076
  Provision to reduce carrying
    value of certain assets                         16,874       120,280             -             -             -             -
                                                ----------    ----------    ----------    ----------    ----------    ----------
  Total costs and expenses                       2,516,539     2,600,793     2,425,747     2,293,810     1,802,844     1,624,667
                                                ----------    ----------    ----------    ----------    ----------    ----------
Operating Income                                   747,024       591,625       683,978       633,866       519,046       442,742

Other income, net                                    5,236         2,925         2,481        (6,064)        2,230        13,364
Interest expense                                  (130,181)     (130,832)     (145,428)     (137,120)      (98,746)      (93,245)
Gain on disposal or exchange of assets,
  write-down of assets and other                   206,622        (2,278)       30,775       (54,157)       27,390        (5,512)
                                                ----------    -----------   ----------    ----------    ----------    ---------- 
Income before income taxes                         828,701       461,440       571,806       436,525       449,920       357,349
Income taxes                                       320,815       169,703       217,190       164,772       187,903       128,713
                                                ----------    ----------    ----------    ----------    ----------    ----------
Net income                                         507,886       291,737       354,616       271,753       262,017       228,636
Preferred dividends                                  1,008         1,071         1,158         1,232         1,578         1,742
                                                ----------    ----------    ----------    ----------    ----------    ----------
Net income applicable
  to common shares                              $  506,878    $  290,666    $  353,458    $  270,521    $  260,439    $  226,894
                                                ==========    ==========    ==========    ==========    ==========    ==========
Earnings per Share:
  Basic                                              $2.72         $1.53         $1.87         $1.44         $1.40         $1.24
  Diluted                                            $2.70         $1.52         $1.85         $1.42         $1.38         $1.22

Dividends per common share                          $1.115        $1.055         $ .98         $ .90         $ .82         $ .77
Common shares:
  weighted average for the year                186,059,000   189,378,000   188,870,000   187,758,000   185,634,000   183,740,000
  at year end                                  183,673,000   187,200,000   189,268,000   187,981,000   187,458,000   184,678,000
Total assets                                    $5,633,445    $5,359,183    $5,073,105    $4,713,878    $4,270,458    $3,125,976
Total shareholders' equity                      $2,208,506    $2,097,107    $1,935,565    $1,625,369    $1,554,708    $1,304,454
Total redeemable preferred stock
  and long-term debt                            $1,879,797    $1,762,597    $1,768,682    $1,853,979    $1,604,659    $1,027,803
--------------------------------------------------------------------------------------------------------------------------------
<FN>
Note:  A.  Net income for 1997 includes pretax gains of $206.6 million from the sale of certain investments and the sale of the
           Company's healthcare operations. These gains increased net income by $119.9 million or $.64 per share. Net income for
           1997 also includes a pretax write-down of $16.9 million to reflect the fair value less cost to sell the Company's wire
           and cable operations. This write-down decreased net income $11.7 million or $.06 per share. (See Notes 8 and 9.)
       B.  Net income for 1996 includes pretax write-downs of $120.3 million to adjust the carrying value of certain software and
           other assets. The write-downs decreased net income $72.7 million or $.38 per share. (See Note 8.)
       C.  Net income for 1995 includes a net pretax gain of $30.8 million primarily from the sale of certain wireline properties.
           The net gain increased net income by $19.8 million or $.10 per share. (See Note 9.)
       D.  Net income for 1994 includes a pretax write-down of $54.2 million to reflect the estimated net realizable value of the
           Company's community banking and check processing operations. The write-down decreased net income by $32.2 million or
           $.17 per share.
       E.  On November 1, 1993, the Company purchased substantially all of the assets of the wireline operations of GTE Corporation
           in the State of Georgia ("GTE Georgia"). This acquisition was accounted for as a purchase, and accordingly, GTE
           Georgia's results have been included in the consolidated financial statements from the date of acquisition.
</FN>
</TABLE>

                                       26
                                       46
<PAGE>

<TABLE>
<CAPTION>
Consolidated Statements of Income

------------------------------------------------------------------------------------------------
For the years ended December 31,
(Dollars in thousands, except per share amounts)                  1997         1996         1995
------------------------------------------------------------------------------------------------
<S>                                                         <C>          <C>          <C>       
Revenues and Sales:
  Service revenues                                          $2,700,907   $2,524,845   $2,441,826
  Product sales                                                562,656      667,573      667,899
                                                            ----------   ----------   ----------
  Total revenues and sales                                   3,263,563    3,192,418    3,109,725
                                                            ----------   ----------   ----------
Costs and Expenses:
  Operations                                                 1,686,739    1,607,942    1,566,829
  Cost of products sold                                        362,164      448,456      449,119
  Depreciation and amortization                                450,762      424,115      409,799
  Provision to reduce carrying value of certain assets          16,874      120,280            -
                                                            ----------   ----------   ----------
  Total costs and expenses                                   2,516,539    2,600,793    2,425,747
                                                            ----------   ----------   ----------
Operating Income                                               747,024      591,625      683,978

Other income, net                                                5,236        2,925        2,481
Interest expense                                              (130,181)    (130,832)    (145,428)
Gain on disposal of assets, write-down of assets and other     206,622       (2,278)      30,775
                                                            ----------   ----------   ----------
Income before income taxes                                     828,701      461,440      571,806
Income taxes                                                   320,815      169,703      217,190
                                                            ----------   ----------   ----------
Net income                                                     507,886      291,737      354,616
Preferred dividends                                              1,008        1,071        1,158
                                                            ----------   ----------   ----------
Net income applicable to common shares                      $  506,878   $  290,666   $  353,458
                                                            ==========   ==========   ==========
Earnings per Share:
  Basic                                                          $2.72        $1.53        $1.87
  Diluted                                                        $2.70        $1.52        $1.85
------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
                                       27
                                       47
<PAGE>

Consolidated Balance Sheets

---------------------------------------------------------------------------
December 31,
(Dollars in thousands)
---------------------------------------------------------------------------
Assets                                                    1997         1996
---------------------------------------------------------------------------
Current Assets:
  Cash and short-term investments                   $   16,212   $   13,874
  Accounts receivable (less allowance for doubtful
    accounts of $18,562 and $21,271, respectively)     560,928      554,316
  Materials and supplies                                14,237       17,152
  Inventories                                           51,277       85,970
  Prepaid expenses                                      23,190       38,156
                                                    ----------   ----------
  Total current assets                                 665,844      709,468
                                                    ----------   ----------

Investments                                            775,647      838,651
Goodwill and other intangibles                         606,484      425,823

Property, Plant and Equipment:
  Wireline                                           4,068,502    3,827,659
  Wireless                                             692,490      582,707
  Information services                                 539,743      506,905
  Other                                                 11,008       27,618
  Under construction                                   218,951      169,439
                                                    ----------   ----------
  Total property, plant and equipment                5,530,694    5,114,328
  Less accumulated depreciation                      2,340,242    2,072,789
                                                    ----------   ----------
  Net property, plant and equipment                  3,190,452    3,041,539
                                                    ----------   ----------
Other assets                                           395,018      343,702
                                                    ----------   ----------
Total Assets                                        $5,633,445   $5,359,183
                                                    ==========   ==========
---------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated balance
sheets.

                                       28
                                       48
<PAGE>

--------------------------------------------------------------------
Liabilities and Shareholders' Equity               1997         1996
--------------------------------------------------------------------
Current Liabilities:
  Current maturities of long-term debt       $   48,028   $   37,798
  Accounts payable                              237,865      240,570
  Advance payments and customer deposits         84,215       78,080
  Accrued taxes                                  74,681       41,932
  Accrued dividends                              55,012       52,440
  Other current liabilities                     137,480      139,876
                                             ----------   ----------
  Total current liabilities                     637,281      590,696
                                             ----------   ----------
Long-term debt                                1,874,172    1,756,142
Deferred income taxes                           665,473      674,887
Other liabilities                               242,388      233,896
Preferred stock, redeemable                       5,625        6,455

Shareholders' Equity:
  Preferred stock                                 9,155        9,198
  Common stock                                  183,673      187,200
  Additional capital                            152,936      285,779
  Unrealized holding gain on investments        300,671      351,867
  Retained earnings                           1,562,071    1,263,063
                                             ----------   ----------
  Total shareholders' equity                  2,208,506    2,097,107
                                             ----------   ----------
Total Liabilities and Shareholders' Equity   $5,633,445   $5,359,183
                                             ==========   ==========
--------------------------------------------------------------------

                                       29
                                       49
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows

---------------------------------------------------------------------------------------------------
For the years ended December 31,
(Dollars in thousands)                                                 1997        1996        1995
---------------------------------------------------------------------------------------------------
<S>                                                                <C>         <C>         <C>
Cash Provided from Operations:
  Net income                                                       $507,886    $291,737    $354,616
  Adjustments to reconcile net income to net cash
    provided from operations:
      Depreciation and amortization                                 450,762     424,115     409,799
      Provision to reduce carrying value of certain assets, gain
        on disposal of assets, write-down of assets, and other     (108,151)     74,197     (19,849)
      Other, net                                                     33,890      42,532      41,366
      Increase in deferred income taxes                                 613      47,156      65,246
  Changes in operating assets and liabilities:
    Accounts receivable                                            (102,896)    (24,141)    (71,541)
    Inventories and materials and supplies                            1,500       7,997       5,101
    Accounts payable                                                 17,596      28,043     (42,096)
    Other current liabilities                                        13,348     (20,781)     (5,051)
    Other, net                                                      (16,323)    (64,673)    (48,405)
                                                                   --------    --------    -------- 
      Net cash provided from operations                             798,225     806,182     689,186
                                                                   --------    --------    --------

Cash Flows from Investing Activities:
  Additions to property, plant and equipment                       (545,573)   (463,701)   (523,064)
  Purchase of property, net of cash acquired                        (50,633)          -           -
  Additions to capitalized software development costs               (74,225)    (78,319)    (52,308)
  Additions to other intangible assets                             (146,526)          -           -
  Additions to investments                                          (43,367)    (29,241)    (49,321)
  Proceeds from the sale of/return on investments                   199,749      47,025      15,592
  Proceeds from the sale of assets                                  200,598      38,687     212,911
  Other, net                                                        (86,707)    (63,044)    (72,019)
                                                                   --------    --------    -------- 
      Net cash used in investing activities                        (546,684)   (548,593)   (468,209)
                                                                   --------    --------    -------- 

Cash Flows from Financing Activities:
  Dividends on preferred and common stock                          (206,312)   (198,095)   (182,270)
  Reductions in long-term debt                                      (42,647)   (310,258)   (277,636)
  Purchase of common stock                                         (175,611)    (75,604)          -
  Preferred stock redemptions and purchases                            (873)       (704)     (1,137)
  Long-term debt issued                                             164,220     316,001     218,164
  Common stock issued                                                12,020       3,524      17,225
                                                                   --------    --------    --------
      Net cash used in financing activities                        (249,203)   (265,136)   (225,654)
                                                                   --------    --------    -------- 

Increase (decrease) in cash and short-term investments                2,338      (7,547)     (4,677)
Cash and Short-term Investments:
  Beginning of the year                                              13,874      21,421      26,098
                                                                   --------    --------    --------
  End of the year                                                  $ 16,212    $ 13,874    $ 21,421
                                                                   ========    ========    ========

Supplemental Cash Flow Disclosures:
  Interest paid                                                    $125,562    $124,354    $141,751
  Income taxes paid                                                $243,243    $180,575    $112,690
---------------------------------------------------------------------------------------------------

<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
                                       30
                                       50
<PAGE>
<TABLE>
<CAPTION>

Consolidated Statements of Shareholders' Equity

-----------------------------------------------------------------------------------------
For the years ended December 31,
(Dollars in thousands, except per share amounts)           1997         1996         1995
-----------------------------------------------------------------------------------------
<S>                                                  <C>          <C>          <C>
Preferred Stock:
  Balance at beginning of the year                   $    9,198   $    9,241   $    9,320
  Conversion of preferred stock                             (43)         (43)         (79)
                                                     ----------   ----------   ---------- 
  Balance at end of the year                              9,155        9,198        9,241
                                                     ----------   ----------   ----------
 
Common Stock:
  Balance at beginning of the year                      187,200      189,268      187,981
  Acquisition of subsidiaries                               872            -            -
  Employee plans, net                                       618          344        1,227
  Conversion of preferred stock and debentures               67           28           60
  Repurchase of stock                                    (5,084)      (2,440)           -
                                                     ----------   ----------   ----------
  Balance at end of the year                            183,673      187,200      189,268
                                                     ----------   ----------   ----------

Additional Capital:
  Balance at beginning of the year                      285,779      355,663      339,436
  Acquisition of subsidiaries                            26,348            -            -
  Employee plans, net                                    11,070        3,180       15,998
  Conversion of preferred stock and debentures              266          100          229
  Repurchase of stock                                  (170,527)     (73,164)           -
                                                     ----------   ----------   ----------
  Balance at end of the year                            152,936      285,779      355,663
                                                     ----------   ----------   ----------

Unrealized Holding Gain on Investments:
  Balance at beginning of the year                      351,867      208,681       84,275
  Change in unrealized holding gain on investments      (51,196)     143,186      124,406
                                                     ----------   ----------   ----------
  Balance at end of the year                            300,671      351,867      208,681
                                                     ----------   ----------   ----------

Retained Earnings:
  Balance at beginning of the year                    1,263,063    1,172,712    1,004,357
  Net income for the year                               507,886      291,737      354,616
  Dividends:
    Common per share, $1.115 in 1997,
      $1.055 in 1996 and $.98 in 1995                  (207,870)    (200,315)    (185,103)
    Preferred                                            (1,008)      (1,071)      (1,158)
                                                     ----------   ----------   ---------- 
  Balance at end of the year                          1,562,071    1,263,063    1,172,712
                                                     ----------   ----------   ----------
  Total shareholders' equity                         $2,208,506   $2,097,107   $1,935,565
                                                     ==========   ==========   ==========
-----------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
                                       31
                                       51
<PAGE>

Business Segments

-----------------------------------------------------------------------------
For the years ended December 31,
(Dollars in thousands)                         1997         1996         1995
-----------------------------------------------------------------------------
Revenues and Sales:
  Wireline                               $1,268,882   $1,169,076   $1,197,673
  Wireless                                  542,726      475,109      398,122
                                         ----------   ----------   ----------
    Total communications                  1,811,608    1,644,185    1,595,795
  Information services                      973,373      959,071      926,345
  Product distribution                      359,702      452,380      448,119
  Other operations                          118,880      136,782      139,466
                                         ----------   ----------   ----------
    Total                                $3,263,563   $3,192,418   $3,109,725
                                         ==========   ==========   ==========

Operating Income:
  Wireline                               $  446,450   $  408,382   $  422,542
  Wireless                                  178,401      151,720      121,507
                                         ----------   ----------   ----------
    Total communications                    624,851      560,102      544,049
  Information services                      145,222       67,035      132,043
  Product distribution                       13,957       23,660       27,338
  Other operations                            8,788       11,281        7,040
  Corporate expenses                        (45,794)     (70,453)     (26,492)
                                         ----------   ----------   ---------- 
    Total                                $  747,024   $  591,625   $  683,978
                                         ==========   ==========   ==========

Identifiable Assets:
  Wireline                               $2,872,029   $2,759,683   $2,782,471
  Wireless                                1,080,088      793,133      694,890
                                         ----------   ----------   ----------
    Total communications                  3,952,117    3,552,816    3,477,361
  Information services                      806,015      783,738      745,451
  Product distribution                       66,900      127,830      168,578
  Other operations                           46,979       56,091       58,243
  Corporate                                 761,434      838,708      623,472
                                         ----------   ----------   ----------
    Total                                $5,633,445   $5,359,183   $5,073,105
                                         ==========   ==========   ==========

Capital Expenditures:
  Wireline                               $  302,491   $  279,622   $  308,468
  Wireless                                  127,391       94,932      121,274
                                         ----------   ----------   ----------
    Total communications                    429,882      374,554      429,742
  Information services                       87,937       83,530       77,871
  Product distribution                        1,465          974        2,034
  Other operations and corporate             26,289        4,643       13,417
                                         ----------    ---------   ----------
    Total                                $  545,573   $  463,701   $  523,064
                                         ==========   ==========   ==========

Depreciation and Amortization Expense:
  Wireline                               $  251,243   $  235,543   $  243,975
  Wireless                                   82,421       68,603       54,856
                                         ----------   ----------   ----------
    Total communications                    333,664      304,146      298,831
  Information services                      112,316      112,911      102,033
  Product distribution                          800        1,409        1,277
  Other operations and corporate              3,982        5,649        7,658
                                         ----------   ----------   ----------
    Total                                $  450,762   $  424,115   $  409,799
                                         ==========   ==========   ==========
-----------------------------------------------------------------------------

Note:  A.  Corporate expenses for 1997 and 1996 include pretax write-downs to
           reduce the carrying value of the Company's wire and cable subsidiary
           of $16.9 million and $45.3 million, respectively. (See Note 8.)
       B.  Information services' operating income for 1996 includes pretax
           write-downs of $75.0 million to reduce the carrying value of certain
           assets. (See Note 8.)
       C.  Refer to page 33 for additional information concerning business
           segments.
                                       32
                                       52
<PAGE>

Notes to Consolidated Financial Statements


1. Accounting Policies:

Consolidation - The consolidated financial statements include the accounts of
ALLTEL Corporation, its subsidiary companies and majority-owned partnerships
("ALLTEL" or the "Company"). Investments in 20% to 50% owned entities and all
unconsolidated partnerships are accounted for using the equity method. Other
investments are recorded in accordance with Statement of Financial Accounting
Standards No. 115. (See Note 2.) All intercompany transactions, except those
with certain affiliates described below, have been eliminated in the
consolidated financial statements.
    Business Segments - The Company's wireline operating subsidiaries provide
local service, network access and long-distance communications services in 14
states. Wireless communications services are provided in a number of major
domestic markets - primarily located in the southeast portion of the United
States. Information services provides information processing management,
outsourcing services and application software, primarily to financial and
telecommunications clients. The principal markets for information services'
products and services are commercial banks and financial institutions and
telecommunications companies in the United States and major international
markets. Product distribution sells communications and data products to
affiliated and non-affiliated telephone companies and related industries in the
United States. Prior to May 1997, product distribution also included the
wire and cable operations which were sold in 1997. (See Note 8.) Other
operations primarily consist of directory publishing operations. Corporate
identifiable assets consist principally of cash, investments and headquarters
facilities and equipment. Corporate items represent general corporate expenses
and assets not allocated to segments. (Refer to Page 32 for a schedule of
business segment information.)
    Financial Statement Presentation - The preparation of the consolidated
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses and
disclosure of contingent assets and liabilities. The estimates and assumptions
used in the accompanying consolidated financial statements are based upon
management's evaluation of the relevant facts and circumstances as of the date
of the financial statements. Actual results may differ from the estimates and
assumptions used in preparing the accompanying consolidated financial
statements.
    Service revenues consist of local service, network access and miscellaneous
wireline operating revenues, wireless access and network usage revenues,
information services' data processing, software licensing and maintenance
revenues. Product sales revenues consist of the product distribution and
directory publishing operations and wireline and information services' 
equipment sales. Certain prior-year amounts have been reclassified to conform
with the 1997 financial statement presentation.
    Transactions with Certain Affiliates - ALLTEL Supply, Inc. sells equipment
and materials to wireline subsidiaries of the Company ($123.3 million in 1997,
$119.9 million in 1996 and $138.0 million in 1995) as well as to other
non-affiliated telephone companies and related industries. The cost of
equipment and materials sold to such subsidiaries is included, principally,
in wireline plant in the consolidated financial statements. ALLTEL Information
Services, Inc. provides the data processing services for the Company's wireline
operations ($81.2 million in 1997, $77.2 million in 1996 and $85.1 million in
1995) in addition to other non-affiliated companies. Intercompany profit, to
the extent not offset by depreciation on the capitalized cost of equipment
and materials, has not been eliminated because prices charged by the supply
and information services subsidiaries are recovered through the regulatory
process.


                                       53
<PAGE>

    Regulatory Accounting - The Company's wireline subsidiaries follow the
accounting for regulated enterprises prescribed by Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" ("SFAS 71"). This accounting recognizes the economic effects of
rate regulation by recording costs and a return on investment as such amounts
are recovered through rates authorized by regulatory authorities. Accordingly,
SFAS 71 requires the Company's wireline subsidiaries to depreciate wireline
plant over useful lives as approved by regulators, which could be longer than
the useful lives that would otherwise be determined by management. SFAS 71
also requires deferral of certain costs and obligations based upon approvals
received from regulators to permit recovery of such amounts in future years.
The Company's wireline subsidiaries periodically review the applicability of
SFAS 71 based on the developments in their current regulatory and competitive
environments.
    Cash and Short-term Investments - Cash and short-term investments consist
of highly liquid investments with original maturities of less than three
months.
    Inventories - Inventories are stated at the lower of cost or market value.
Cost is determined using the first-in, first-out method of valuation.
    Goodwill and Other Intangibles - Goodwill represents the excess of cost
over the fair value of net assets acquired and is amortized on a straight-line
basis for periods up to 40 years. At December 31, 1997 and 1996, goodwill, net
of amortization, was $452.5 million and $425.8 million, respectively.
Amortization expense amounted to $15.1 million in 1997, $16.8 million in 1996
and $17.9 million in 1995. Other intangibles consist of the cost of Personal
Communications Services ("PCS") licenses acquired in 1997. The PCS licenses
will be amortized upon commencement of operations on a straight-line basis
over 40 years. The carrying value of goodwill and other intangibles is
periodically evaluated by the Company for the existence of impairment on the
basis of whether the intangible assets are fully recoverable from projected,
undiscounted net cash flows of the related business unit.
    Property, Plant and Equipment - Property, plant and equipment are stated at
original cost. The Company capitalizes interest during periods of construction.
Depreciation is computed using the straight-line method for financial reporting
purposes. Depreciation expense amounted to $410.5 million in 1997, $379.2
million in 1996 and $362.4 million in 1995. The composite depreciation rates
by class of property as a percent of average depreciable plant and equipment
were:

------------------------------------------------------------------------------
                                                  1997        1996        1995
------------------------------------------------------------------------------
Wireline                                          6.3%        6.2%        6.4%
Wireless                                         12.0        12.1        12.7
Information services                             17.0        16.8        15.7
Other                                             8.8        10.3         9.6
------------------------------------------------------------------------------

                                       33
                                       54
<PAGE>

    Revenue Recognition - Communications revenues are recognized when earned
and are primarily derived from usage of the Company's networks and facilities
or under revenue-sharing arrangements with other telecommunications carriers.
Information services revenues consist of data processing revenue recognized as
services are performed, software licensing revenue recognized when delivery of
the software occurs, and software maintenance revenue recognized ratably over
the maintenance period. Certain long-term contracts are accounted for using the
percentage-of-completion method. Under this method, revenue and profit are
recognized throughout the term of the contract, based upon estimates of the
total costs to be incurred and revenues to be generated throughout the term of
the contract. Changes in estimates for revenues, costs and profits are
recognized in the period in which they are determinable. Due to the uncertainty
of these estimates, it is reasonably possible that these estimates could change
in the near term and the change could be material to the accompanying
consolidated financial statements. For all other operations, revenue is
recognized when products are delivered or services are rendered to customers.
    Included in accounts receivable and other assets are unbilled receivables
related to the information services segment totaling $150.3 million and $141.2
million at December 31, 1997 and 1996, respectively. Included in these unbilled
receivables are amounts totaling $94.5 million and $82.1 million at
December 31, 1997 and 1996, respectively, which represent costs and estimated
earnings in excess of billings related to long-term contracts accounted for
under the percentage-of-completion method.
    Computer Software Development Costs - For the Company's information
services operations, research and development expenditures related to
internally developed computer software are charged to expense as incurred. The
development costs of software to be marketed are charged to expense until
technological feasibility is established. After that time, the remaining
software development costs are capitalized and recorded in other assets in the
accompanying consolidated balance sheets. As of December 31, 1997 and 1996,
capitalized software development costs, net of amortization, were $206.6
million and $197.9 million, respectively. Amortization of the capitalized
amounts is computed on a product-by-product basis using the straight-line
method over the remaining estimated economic life of the product, not exceeding
six years. Amortization expense amounted to $25.1 million in 1997, $28.1
million in 1996 and $29.5 million in 1995.
    The net realizable value of capitalized software development costs is
periodically evaluated by the Company. This evaluation requires considerable
judgment by management with respect to certain external factors, including,
but not limited to, anticipated future revenues generated by the software,
estimated economic life of the software and changes in software and hardware
technologies. Accordingly, it is reasonably possible that estimates of
anticipated future revenues generated by the software, the remaining economic
life of the software, or both, could be reduced in the near term, materially
impacting the carrying value of capitalized software development costs. As a
result of this periodic evaluation, the Company recorded a write-down of
software in 1996. (See Note 8.)
    Earnings Per Share - In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS 128"), which established new standards for computing and
presenting earnings per share information. As required, the Company adopted
the provisions of SFAS 128 in its year-end 1997 financial statements and has
restated all prior-year earnings per share information. Basic earnings per
share of common stock was determined by dividing net income applicable to
common shares by the weighted average number of common shares outstanding
during each year. Diluted earnings per share reflects the potential dilution
that could occur assuming conversion or exercise of all outstanding preferred


                                       55
<PAGE>

stocks and issued and unexercised stock options. A reconciliation of the net
income and numbers of shares used in computing basic and diluted earnings per
share was as follows:


-----------------------------------------------------------------------------
                                        (Thousands, except per share amounts)
                                        -------------------------------------
                                                   1997       1996       1995
-----------------------------------------------------------------------------
Basic earnings per share:
Net income applicable to common shares         $506,878   $290,666   $353,458

Weighted average common shares
  outstanding for the year                      186,059    189,378    188,870
-----------------------------------------------------------------------------
Basic earnings per share of common stock          $2.72      $1.53      $1.87
-----------------------------------------------------------------------------
Diluted earnings per share:
Net income applicable to common shares         $506,878   $290,666   $353,458
Adjustments for convertible securities:
  Preferred stocks                                  206        220        236
                                               --------   --------   --------
 Net income applicable to common shares
  assuming conversion of above securities      $507,084   $290,886   $353,694
                                               ========   ========   ========

Weighted average common shares
  outstanding for the year                      186,059    189,378    188,870
Increase in shares which would result from:
  Exercise of stock options                       1,107      1,089      1,202
  Conversion of convertible preferred stocks        523        559        603
                                               --------   --------   --------
 Weighted average common shares, assuming
  conversion of the above securities            187,689    191,026    190,675
                                               ========   ========   ========

-----------------------------------------------------------------------------
Diluted earnings per share of common stock        $2.70      $1.52      $1.85
-----------------------------------------------------------------------------

2. Financial Instruments and Investment Securities:

The carrying amount of cash and short-term investments approximates fair value
due to the short maturity of the instruments. The fair value of investments is
$775.6 million in 1997 and $838.7 million in 1996 based on quoted market prices
and the carrying value of investments for which there is no quoted market
price. The fair value of the Company's long-term debt, after deducting current
maturities, is estimated to be $1.930 billion in 1997 and $1.772 billion in
1996 compared to a carrying value of $1.874 billion in 1997 and $1.756 billion
in 1996. The fair value estimates are based on the overall weighted rates and
maturity compared to rates and terms currently available in the long-term
financing markets. The fair value of the Company's redeemable preferred stock
is estimated to be $17.5 million in 1997 and $16.6 million in 1996 compared to
a carrying amount of $5.6 million in 1997 and $6.5 million in 1996. The fair
value estimates are based on the conversion of the Series D convertible
redeemable preferred stock to common stock of the Company and the carrying
value of the Series A redeemable preferred stock for which there is no quoted
market price. The fair value of all other financial instruments is estimated by
management to approximate the carrying value.
    Equity securities owned by the Company have been classified as available-
for-sale and are reported at fair value, with unrealized gains and losses
reported, net of tax, in a separate component of shareholders' equity. The
Company had unrealized gains, net of tax, on its investment in WorldCom, Inc.
of $300.7 million, $351.9 million and $208.7 million at December 31, 1997, 1996
and 1995, respectively. The unrealized gains, including the related tax impact,
are non-cash items and accordingly have been excluded from the accompanying
consolidated statements of cash flows. All other unrealized gains and losses on
investments in equity securities are not material to the Company's financial
position or results of operations. During 1997, the Company sold a portion of
its investment in WorldCom, Inc. (See Note 9.)

                                       34
                                       56
<PAGE>

3. Debt:

Long-term debt, after deducting current maturities, was as follows at
December 31:

--------------------------------------- ---------------------------------------
                                                                (Thousands)
                                                         ----------------------
                                                               1997        1996
-------------------------------------------------------------------------------
Debentures and notes, without collateral,
  Weighted rate 7.1% in 1997 and 1996
  Weighted maturity 13 years in 1997 and 1996            $1,286,965  $1,320,141
Rural Telephone Bank and Federal Financing Bank notes,
  Weighted rate 7.7% in 1997 and 1996
  Weighted maturity 16 years in 1997 and 17 years in 1996   255,006     262,547
Revolving credit agreement,
  Weighted rate 6.5% in 1997 and 7.1% in 1996
  Weighted maturity 5 years in 1997 and 1996                247,920      83,700
Rural Utilities Service notes,
  Weighted rate 4.5% in 1997 and 4.4% in 1996
  Weighted maturity 16 years in 1997 and 1996                61,917      66,911
First mortgage bonds and collateralized notes,
  Weighted rate 8.4% in 1997 and 8.7% in 1996
  Weighted maturity 4 years in 1997 and 5 years in 1996      15,864      14,485
Industrial revenue bonds and collateralized notes,
  Weighted rate 5.4% in 1997 and 6.0% in 1996
  Weighted maturity 10 years in 1997 and 1996                 6,500       8,358
                                                         ----------  ----------
    Total long-term debt                                 $1,874,172  $1,756,142
                                                         ==========  ==========
    Weighted rate                                              7.0%        7.1%
    Weighted maturity                                      12 years    13 years
-------------------------------------------------------------------------------

    The Company has a $750 million revolving credit agreement which has a
termination date of October 1, 2002, with provision for annual extensions. It
is the Company's intention to continue to renew the agreement. The revolving
credit agreement provides for a variety of pricing options.
    The indentures and agreements, as amended, provide, among other things, for
various restrictions on the payment of dividends by the Company. Retained
earnings unrestricted as to payment of dividends by the Company amounted to
$1,323.4 million at December 31, 1997. Certain properties have been pledged
as collateral on $339.3 million of obligations.
    Interest expense on long-term debt amounted to $129.0 million in 1997,
$129.4 million in 1996 and $144.4 million in 1995.
    Maturities and sinking fund requirements for the four years after 1998 for
long-term debt outstanding, excluding the revolving credit agreement, as of
December 31, 1997, were $54.3 million, $44.9 million, $48.1 million and
$48.8 million for the years 1999 through 2002, respectively.

4. Common Stock:

There are 500,000,000 shares of $1 par value common stock authorized of which
183,672,880 and 187,199,811 shares were outstanding at December 31, 1997 and
1996, respectively. At December 31, 1997, the Company had 16,660,454 common
shares reserved for issuance in connection with convertible preferred stock
(851,495) and stock options (15,808,959).
    The Company has stock-based compensation plans. Under stock option plans
implemented prior to 1994 (the "Pre-1994 Plans") and the 1994 Stock Option Plan
for Employees (the "1994 Plan"), the Company may grant fixed and performance-
based incentive and non-qualified stock options to officers and other key
employees. The maximum number of shares of the Company's common stock that may
be issued under the Pre-1994 Plans and the 1994 Plan are 5,698,980 and
10,000,000, respectively. Fixed options granted under the Pre-1994 Plans and


                                       57
<PAGE>

the 1994 Plan generally become exercisable in equal increments over a five-year
period beginning one year from the date of grant. Certain fixed options granted
in 1997 become exercisable in equal increments over a six-year period beginning
three years from the date of grant. Performance-based options were granted for
the first time in 1997 under the 1994 Plan, and such options become exercisable
one year from the date in which certain performance goals related to operating
income growth and return on invested capital are achieved for the four most
recent consecutive calendar quarters. Four separate levels of performance goal
targets have been established, each specifying different minimum growth and
return rates. Depending upon which of the four performance goal target levels
is attained, 25%, 50%, 75% or 100% of the option award will vest and become
exercisable.
    Under the 1994 Stock Option Plan for Non-employee Directors (the
"Directors' Plan"), the Company grants fixed, non-qualified stock options to
directors for up to 1,000,000 shares of common stock. Under the Directors'
Plan, directors receive a one-time grant to purchase 10,000 shares of common
stock. Directors are also granted each year, on the date of the annual meeting
of stockholders, an option to purchase a specified number of shares of common
stock (currently 3,500 shares). Options granted under the Directors' Plan
become exercisable the day immediately preceding the date of the first
annual meeting of stockholders following the date of grant.
    For all plans, the exercise price of the option equals the market value of
the Company's common stock on the date of grant. For fixed stock options, the
maximum term for each option granted is 10 years. Any performance-based option
that remains unvested as of January 29, 2003, will expire.
    For stock options granted subsequent to January 1, 1995, the fair value of
each option was estimated on the grant date using the Black-Scholes option-
pricing model and the following assumptions: dividend yield of 3.3% in 1997 and
1996 and 3.7% in 1995, expected volatility of 20.2% in 1997, 19.6% in 1996 and
21% in 1995, and expected option life of 5.7 years in 1997 and 5 years in 1996
and 1995. For options granted under the Directors' Plan, the risk-free interest
rates were 6.5% in 1997, 6% in 1996 and 6.7% in 1995. For options granted under
the 1994 Plan, the risk-free interest rates were 6.2% in 1997, 5.4% in 1996 and
6.4% in 1995. There were no options granted under the Pre-1994 Plans during
the three-year period ended December 31, 1997.
    The following is a summary of stock options outstanding, granted,
exercised, forfeited and expired under the Company's stock-based compensation
plans:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
                                                                           Weighted
                                                                         Average Price
                                              Shares                       Per Share
                               ---------------------------------   ------------------------
                                    1997        1996        1995     1997     1996     1995
-------------------------------------------------------------------------------------------
<S>                            <C>         <C>        <C>          <C>      <C>      <C> 
Outstanding at beginning
  of period                    5,516,168   5,206,509   6,811,202   $24.30   $22.45   $20.32
Granted                        3,886,701     855,000     126,000    33.55    31.37    26.15
Exercised                       (889,193)   (419,729) (1,472,983)   20.30    14.74    12.45
Forfeited                       (314,700)   (125,612)   (257,710)   28.64    27.68    25.05
Expired                          (27,308)          -           -    22.54        -        -
                               ---------   ---------   ---------   ------   ------   ------
Outstanding at end
  of period                    8,171,668   5,516,168   5,206,509   $28.97   $24.30   $22.45
                               =========   =========   =========   ======   ======   ======
Exercisable at end
  of period                    3,271,168   3,385,268   3,001,109   $23.39   $21.82   $19.84
Non-vested at end of period:
  Fixed                        4,614,000   2,130,900   2,205,400
  Performance-based              286,500           -           -
Weighted average fair
  value of stock options
  granted during the year          $7.21       $5.95       $5.49
-------------------------------------------------------------------------------------------
</TABLE>

                                       35
                                       58
<PAGE>
  
  The following is a summary of stock options outstanding as of
December 31, 1997:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
                     Options Outstanding                          Options Exercisable
---------------------------------------------------------------  ----------------------
                                   Weighted        Weighted                    Weighted
                                    Average         Average                     Average
   Range of         Number of      Remaining     Exercise Price  Number of   Exercise Price
Exercise Prices      Options    Contractual Life   Per Share      Options      Per Share
---------------------------------------------------------------------------------------
<S>                 <C>             <C>             <C>          <C>             <C>   
$11.20-$16.12         528,332       2.4 years       $13.32         528,332       $13.32
$20.00-$25.38       1,023,439       4.2 years        20.16       1,023,439        20.16
$26.12-$32.50       4,199,696       7.4 years        29.89       1,699,196        28.35
$33.88-$36.44       2,420,201       9.7 years        34.53          20,201        33.88
                    ---------       ---------       ------       ---------       ------
                    8,171,668       7.4 years       $28.97       3,271,168       $23.39
                    =========       =========       ======       =========       ======
---------------------------------------------------------------------------------------
</TABLE>

    The Company applies the provisions of Accounting Principles Board Opinion
No. 25 and related Interpretations in accounting for its stock-based
compensation plans. Accordingly, no compensation cost has been recognized by
the Company in the accompanying consolidated statements of income for any of
the fixed stock options granted. Compensation cost for performance-based
options is recognized as expense over the expected vesting period and is
adjusted for changes in the market value of the Company's common stock.
Compensation cost for the performance-based options amounted to $547,000 in
1997. Had compensation cost for options granted been determined on the basis
of the fair value of the awards at the date of grant, consistent with the
methodology prescribed by Statement of Financial Accounting Standards No. 123,
the Company's net income would have been reduced to the following pro forma
amounts for the years ended December 31:

------------------------------------------------------------------------------
Dollars in thousands)                           1997         1996         1995
------------------------------------------------------------------------------
Net income:
  As reported                               $507,886     $291,737     $354,616
  Pro forma                                 $505,601     $291,012     $354,502
------------------------------------------------------------------------------

    Pro forma basic and diluted earnings per share amounts would have been
equal to the reported earnings per share amounts for both 1996 and 1995. For
1997, the pro forma basic and diluted earnings per share amounts would have
been $2.71 and $2.69, respectively. The pro forma net income and earnings per
share amounts reflect only the effect of stock options granted subsequent to
January 1, 1995. Accordingly, the pro forma amounts may not be representative
of the future effects on reported net income and earnings per share that will
result from the future granting of stock options, since the pro forma
compensation expense is allocated over the periods in which options become
exercisable and new option awards are granted each year.

5. Preferred Stock:

Cumulative preferred stock is issuable in series, and the Board of Directors is
authorized to designate the number of shares and fix the terms. There are 
50,000,000 $25 par value voting shares and 50,000,000 no par value non-voting
shares authorized.


                                       59
<PAGE>

    The outstanding cumulative preferred stock, which is not redeemable at the
option of the holder, was as follows at December 31:

-------------------------------------------------------------------------------
                                           Quarterly      Amount Outstanding
                                           Dividend           (Thousands)
                                           Per Share     1997     1996     1995
-------------------------------------------------------------------------------
$25 par value:
  Series A, 5%
    Shares - 39,853 in 1997, 1996 and 1995  $.31 1/4   $  996   $  996   $  996
  Series C, 5%
    Shares - 5,000 in 1997, 1996 and 1995    .31 1/4      125      125      125
  Series E, 6%
    Shares - 32,000 in 1997, 1996 and 1995   .37 1/2      800      800      800
  Series F, 5 1/2%
    Shares - 245,955 in 1997, 1996 and 1995  .34 3/8    6,149    6,149    6,149
  Series H, 6%
    Shares - 12,184 in 1997, 1996 and 1995   .37 1/2      305      305      305
  Series I, 5 1/2%
    Shares - 4,000 in 1997, 1996 and 1995    .34 3/8      100      100      100
  Series J, 6%
    Shares - 1,800 in 1997, 1996 and 1995    .37 1/2       45       45       45
No par value:
  Series C, $2.06 Convertible
    Shares - 25,392 in 1997, 27,137 in 1996
    and 28,855 in 1995                       .51 1/2      635      678      721
                                                       ------   ------   ------
                                                       $9,155   $9,198   $9,241
                                                       ======   ======   ======
-------------------------------------------------------------------------------

    The $25 par value preferred stock may be redeemed at the option of the
Company at par value. The no par value Series C preferred shares are
convertible at any time prior to redemption into 5.963 shares of the Company's
common stock. The rate of conversion is subject to adjustment under certain
conditions.
    The outstanding cumulative preferred stock, which is redeemable at the
option of the holder, was as follows at December 31:

-------------------------------------------------------------------------------
                                           Quarterly      Amount Outstanding
                                           Dividend           (Thousands)
                                           Per Share     1997     1996     1995
-------------------------------------------------------------------------------
No par value:
  Series A, 7 3/4%
    Shares - 39,400 in 1997, 44,800
      in 1996 and 50,200 in 1995           $1.93 3/4   $3,940   $4,480   $5,020
  Series D, $2.25 Convertible
    Shares - 60,188 in 1997, 70,535
      in 1996 and 73,500 in 1995             .56 1/4    1,685    1,975    2,058
                                                       ------   ------   ------
                                                       $5,625   $6,455   $7,078
                                                       ======   ======   ======
-------------------------------------------------------------------------------

    The Company's Series A preferred stock is redeemed through required annual
sinking fund payments. The sinking fund requirements in each of the five years
ending December 31, 1998 through 2002 amount to $540,000.
    In addition to redemption at the option of the holder and through required
sinking fund payments at the stated value per share, the Company may at its
option, under certain conditions, redeem outstanding cumulative preferred stock
at varying premiums above par or stated value.
    The Company's Series D stock is convertible at any time prior to
redemption into 5.486 shares of the Company's common stock. The rate of
conversion is subject to adjustment under certain conditions. During 1997,
$290,000 of Series D stock was converted. The stock may be redeemed at the
option of the Company or the holder at the $28 per share stated value.

                                       36
                                       60
<PAGE>

6. Employee Benefit Plans:

The Company has a trusteed, non-contributory, defined benefit pension plan
which provides retirement benefits for eligible employees of the Company.
Pension benefits are based on an employee's years of service and compensation.
The Company's funding policy for the defined benefit contributions is to
satisfy the funding requirements of the Employees' Retirement Income Security
Act of 1974 ("ERISA"). Certain key officers have unfunded executive
compensation agreements that provide retirement benefits in lieu of payments
under the Company's pension plan.
    Pension expense (credit), including provision for executive compensation
agreements, totaled $(5,327,000) in 1997, $577,000 in 1996 and $5,662,000 in
1995.
    Pension expense (credit) includes the following components:

------------------------------------------------------------------------------
                                                         (Thousands)
                                                ------------------------------
                                                    1997       1996       1995
------------------------------------------------------------------------------
Benefits earned during the year                  $10,415    $12,589    $14,966
Interest cost on projected
  benefit obligation                              24,401     23,597     22,301
Actual return on plan assets                     (65,702)   (40,660)   (61,720)
Net amortization and deferral                     25,559      5,051     30,115
                                                 -------    -------    -------
Pension expense (credit)                         $(5,327)   $   577    $ 5,662
                                                 =======    =======    =======
------------------------------------------------------------------------------

    The following table presents the funded status of the plan at December 31:

-------------------------------------------------------------------------------
                                                     (Thousands)
                                                -------------------
                                                    1997       1996
-------------------------------------------------------------------------------
Actuarial present value of accumulated benefit
  obligation, including vested benefits
  of $288,973 in 1997 and $257,236 in 1996      $299,075   $266,348
                                                --------   --------
Actuarial present value of projected
  benefit obligation                             352,405    313,878
Plan assets at fair value                        444,326    394,533
                                                --------   --------
Plan assets in excess of projected benefit
  obligation                                      91,921     80,655
Unrecognized net gain                            (50,665)   (44,689)
Remaining unrecognized prior service cost         (3,198)    (4,315)
Unrecognized transition asset being
  amortized over 16 years                         (7,100)    (8,283)
                                                --------   -------- 
Prepaid pension expense                         $ 30,958   $ 23,368
                                                ========   ========
-------------------------------------------------------------------------------

    Actuarial assumptions used to calculate the projected benefit obligations
were 7.25% for the settlement rate in 1997 and 7.75% in 1996, and 5% for future
compensation level increases in 1997 and 1996. The investment earnings rate was
9% in 1997 and 1996. The changes in the actuarial present value of the
accumulated benefit obligation and the projected benefit obligation for 1997
primarily resulted from the decrease in the settlement rate assumption. Assets
of the plan consist primarily of listed stocks, including common stock of the
Company amounting to $25.3 million and $19.2 million at December 31, 1997 and
1996, respectively, and corporate and government debt.
    The Company has a non-contributory defined contribution plan in the form of
profit-sharing arrangements for eligible employees, except bargaining unit
employees. The amount of profit-sharing contributions to the plan is determined


                                       61
<PAGE>

annually by the Company's Board of Directors. Profit-sharing expense amounted
to $22.8 million in 1997, $20.4 million in 1996 and $28.7 million in 1995.
    The Company also sponsors an employee savings plan under section 401(k) of
the Internal Revenue Code. The plan covers substantially all full-time
employees, except bargaining unit employees. Employees may elect to contribute
to the plan a portion of their eligible pretax compensation up to certain
limits as specified by the plan. The Company also makes annual contributions
to the plan. Amounts contributed by the Company to the plan amounted to
$9.1 million in 1997, $9.4 million in 1996 and $3.4 million in 1995.

7. Postretirement Benefits Other Than Pensions:

The Company provides postretirement healthcare and life insurance benefits for
eligible employees. The healthcare benefit is based on comprehensive hospital,
medical and surgical benefit provisions, while the life insurance is based on
annual earnings at the time of retirement. The employees share in the cost of
these benefits. The Company is not currently funding these plans.
    The postretirement expense includes the following components:

----------------------------------------------------------------------
                                                    (Thousands)
                                              ------------------------
                                                1997     1996     1995
----------------------------------------------------------------------
Benefits earned                               $   59   $  102   $  112
Amortization of transition obligation            976      976      976
Other amortization and deferral                 (115)      40     (918)
Interest cost on accumulated
  postretirement benefit obligation            2,650    2,719    2,454
                                              ------   ------   ------
Postretirement expense                        $3,570   $3,837   $2,624
                                              ======   ======   ======
----------------------------------------------------------------------

     The following table presents the plan status at December 31:

----------------------------------------------------------------------
                                                          (Thousands)
                                                      ----------------
                                                         1997     1996
----------------------------------------------------------------------
Accumulated postretirement benefit obligation:
  Retirees                                            $41,522  $34,337
  Fully eligible active plan participants                 790      709
  Other active plan participants                        1,372    1,119
                                                      -------  -------
Total accumulated postretirement benefit obligation    43,684   36,165
Unrecognized net gain (loss)                           (5,477)   5,162
Unrecognized prior service cost                          (673)    (712)
Unrecognized transition obligation being amortized
  over 20 years                                       (14,638) (15,614)
                                                     -------- -------- 
Accrued postretirement benefit obligation             $22,896  $25,001
                                                      =======  =======
----------------------------------------------------------------------

    Actuarial assumptions used to calculate the accumulated postretirement
benefit obligation were 7.25% for the weighted average discount rate in 1997
and 7.75% for 1996, and 9% for the healthcare cost trend rate in 1997 and 10%
for 1996, decreasing on a graduated basis to an ultimate rate of 6% in the
year 2000. A one percentage point change in the assumed healthcare cost trend
rate for each future year would change the postretirement benefit cost by
approximately $147,000 for the year ended December 31, 1997, and the
accumulated postretirement benefit obligation as of December 31, 1997, by
approximately $2.6 million.

                                       37
                                       62
<PAGE>

8. Provision to Reduce Carrying Value of Certain Assets:

During the second quarter of 1997, the Company recorded a pretax write-down of
$16.9 million to reflect the fair value less cost to sell its product
distribution segment's wire and cable subsidiary, HWC Distribution Corp.
("HWC"). The sale of HWC was completed in May 1997. The net income impact of
this write-down resulted in a decrease in net income of $11.7 million or $.06
per share for the year ended December 31, 1997.
    During the third quarter of 1996, the Company incurred non-cash, pretax
charges of $120.3 million to write down the carrying value of certain assets.
In accordance with the Company's plan to dispose of its wire and cable
subsidiary, the Company recorded a pretax write-down of $45.3 million in the
carrying value of goodwill related to HWC. In addition, the information
services segment recorded a pretax write-down of $53.0 million, primarily
consisting of an adjustment to the carrying value of certain capitalized
software development costs. The write-down of software resulted from performing
a net realizability evaluation of software-related products that have been
impacted by changes in software and hardware technologies. Finally, due to
current and projected future operating losses sustained by its community
banking operations, information services also recorded a pretax write-down of
$22.0 million to adjust the carrying value of these operations to their
estimated fair value based upon projections of future cash flows. The net
income impact of these write-downs resulted in a decrease in net income of
$72.7 million or $.38 per share for the year ended December 31, 1996.
    Operating results of the wire and cable subsidiary included in the
Company's consolidated results of operations were as follows:

-------------------------------------------------------------------------------
                                                        (Thousands)
                                              ---------------------------------
                                                 1997         1996         1995
-------------------------------------------------------------------------------
Revenues and sales                            $42,847     $156,536     $158,605
Operating income                              $ 1,473     $  7,919     $ 11,039
-------------------------------------------------------------------------------

9. Gain on Disposal of Assets, Write-down of Assets and Other:

During the third quarter of 1997, the Company recorded a pretax gain of
$34.4 million primarily related to the sale of its investment in a software
company. During the second quarter of 1997, the Company recorded a pretax gain
of $156.0 million from the sale of a portion of its investment in WorldCom,
Inc. common stock. Proceeds from the sale of this stock amounted to
$185.9 million. During the first quarter of 1997, the Company recorded a
pretax gain of $16.2 million from the sale of information services' healthcare
operations. The net income impact from these transactions resulted in an
increase of $119.9 million in net income or $.64 per share for the year ended
December 31, 1997.
    During the first quarter of 1996, the Company recorded a pretax gain of
$15.3 million from the sale of wireline properties in Nevada to Citizens
Utilities Company ("Citizens"). The Company also incurred $15.8 million of
termination fees related to the early retirement of $200 million of long-term
debt, and the Company realized a pretax loss of $1.8 million related to the
withdrawal of its investment in GO Communications Corporation. The net income
impact from these transactions resulted in a decrease of $.01 per share for
the year ended December 31, 1996.
    During 1995, the Company recorded pretax gains of $49.8 million on the
sale of its wireline properties in Arizona, California, New Mexico, Oregon,
Tennessee, Utah and West Virginia to Citizens. In addition, the Company
incurred $14.0 million of termination fees related to the early retirement of
$200 million of long-term debt. Finally, the Company recorded an additional
pretax write-down of $5.0 million to reflect the net realizable value of its


                                       63
<PAGE>

information services segment's check processing operations. The net income
impact from these transactions resulted in an increase of $19.8 million in net
income or $.10 per share for the year ended December 31, 1995.

10. Income Taxes:

Income tax expense was as follows:
                                                         (Thousands)
                                            ----------------------------------
                                                1997         1996         1995
------------------------------------------------------------------------------
Federal                                     $276,171     $141,320     $181,947
State and other                               44,644       28,383       35,243
                                            --------     --------     --------
                                            $320,815     $169,703     $217,190
                                            ========     ========     ========
------------------------------------------------------------------------------

    The federal income tax expense consists of the following:

                                                         (Thousands)
                                            ----------------------------------
                                                1997         1996         1995
------------------------------------------------------------------------------
Currently payable                           $214,204     $141,035     $128,589
Deferred                                      66,890        9,218       62,614
Investment tax credit amortized               (4,923)      (8,933)      (9,256)
                                            --------     --------     -------- 
                                            $276,171     $141,320     $181,947
                                            ========     ========     ========
------------------------------------------------------------------------------

    Deferred income tax expense results principally from temporary differences
between depreciation expense for income tax purposes and depreciation expense
recorded in the financial statements. Deferred tax balances are adjusted to
reflect tax rates, based on currently enacted tax laws, that will be in effect
in the years in which the temporary differences are expected to reverse. For
the Company's regulated operations, the adjustment in deferred tax balances for
the change in tax rates is reflected as a regulatory asset or liability. These
regulatory assets and liabilities are amortized over the lives of the related
depreciable asset or liability concurrent with recovery in rates.
    Differences between the federal income tax statutory rates and effective
income tax rates, which include both federal and state income taxes, were as
follows:
                                                1997         1996         1995
------------------------------------------------------------------------------
Statutory income tax rates                     35.0%        35.0%        35.0%
Increase (decrease):
  Investment tax credit                        (0.6)        (1.9)        (1.6)
  State income taxes, net of
    federal benefit                             3.5          4.0          4.0
    Other items                                 0.8         (0.3)         0.6
                                               -----        -----        -----
Effective income tax rates                     38.7%        36.8%        38.0%
                                               =====        =====        ===== 
------------------------------------------------------------------------------

    The significant components of the Company's net deferred income tax
liability were as follows at December 31:

                                                  (Thousands)
                                            ---------------------
                                                1997         1996
------------------------------------------------------------------------------
Property, plant and equipment               $426,705     $413,640
Capitalized computer software                 80,466       71,609
Unrealized holding gain on investments       196,634      231,982
Other, net                                   (38,332)     (42,344)
                                            --------     -------- 
   Total                                    $665,473     $674,887
                                            ========     ========
------------------------------------------------------------------------------

    At December 31, 1997 and 1996, total deferred tax assets were
$176.0 million and $201.1 million, respectively, and total deferred tax
liabilities were $841.5 million and $876.0 million, respectively.

                                       38
                                       64
<PAGE>

11. Other Income, Net:

The components of other income, net were as follows:

-----------------------------------------------------------------------------
                                                           (Thousands)
                                                  ---------------------------
                                                     1997      1996      1995
-----------------------------------------------------------------------------
Equity earnings in unconsolidated partnerships    $35,557   $31,353   $20,282
Minority interest in consolidated partnerships    (41,237)  (37,538)  (28,997)
Capitalized interest during construction           11,539     5,160     6,221
Interest and dividend income                          524       500     1,052
Other non-operating income (expense)               (1,147)    3,450     3,923
                                                  -------   -------   -------
                                                  $ 5,236   $ 2,925   $ 2,481
                                                  =======   =======   =======
-----------------------------------------------------------------------------

12.  QUARTERLY FINANCIAL INFORMATION - (Unaudited)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands,
 except per share amounts)                        1997                                                1996
---------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>         <C>       <C>       <C>       <C>       <C>         <C>       <C>        <C>      <C>
                                Total       4th       3rd       2nd       1st       Total       4th       3rd       2nd       1st
                           ----------  --------  --------  --------  --------  ----------  --------  --------  --------  --------
Revenues and sales         $3,263,563  $848,632  $813,746  $816,880  $784,305  $3,192,418  $806,301  $807,398  $804,453  $774,266
Operating income           $  747,024  $202,919  $190,721  $172,159  $181,225  $  591,625  $183,735  $ 55,835  $180,890  $171,165
Net income                 $  507,886  $110,224  $122,064  $173,890  $101,708  $  291,737  $ 96,932  $ 18,824  $ 91,908  $ 84,073
Preferred dividends             1,008       243       251       256       258       1,071       258       265       274       274
                           ----------  --------  --------  --------  --------  ----------  --------  --------  --------  --------
Net income applicable to
  common shares            $  506,878  $109,981  $121,813  $173,634  $101,450  $  290,666  $ 96,674  $ 18,559  $ 91,634  $ 83,799
                           ==========  ========  ========  ========  ========  ==========  ========  ========  ========  ========

Earnings per share:
  Basic                         $2.72      $.60      $.65      $.93      $.54       $1.53      $.51      $.10      $.48      $.44
  Diluted                       $2.70      $.59      $.65      $.92      $.54       $1.52      $.51      $.10      $.47      $.44

From current businesses1:
  Revenues and sales       $3,220,716  $848,632  $813,746  $805,563  $752,775  $2,921,363  $739,755  $739,731  $735,897  $705,980
  Operating income         $  762,425  $202,919  $190,721  $188,699  $180,086  $  700,241  $176,548  $173,072  $181,824  $168,797
  Net income               $  398,897  $110,224  $ 99,495  $ 97,348  $ 91,830  $  359,505  $ 93,044  $ 89,842  $ 92,584  $ 84,035
  Basic earnings per share      $2.14      $.60      $.53      $.52      $.49       $1.89      $.49      $.47      $.49      $.44
  Diluted earnings per share    $2.12      $.59      $.53      $.51      $.49       $1.88      $.49      $.47      $.48      $.44

Dividends per common share     $1.115      $.29     $.275     $.275     $.275      $1.055     $.275      $.26      $.26      $.26
---------------------------------------------------------------------------------------------------------------------------------
<FN>
1 Excludes the sold wireline, healthcare, wire and cable operations and the provision to reduce carrying value of certain assets,
  gain on disposal of assets and other.

Note:  A.  Third quarter 1997 net income includes a pretax gain of $34.4 million primarily related to the sale of the Company's
           investment in a software company. This gain increased net income by $22.6 million or $.12 per share. (See Note 9.)
       B.  Second quarter 1997 operating income includes a pretax write-down of $16.9 million to reflect the fair value less cost
           to sell the Company's wire and cable operations. In addition, the Company recorded a pretax gain of $156.0 million from
           the sale of a portion of its investment in WorldCom, Inc. common stock. These transactions increased net income by
           $76.4 million or $.41 per share. (See Notes 8 and 9.)
       C.  First quarter 1997 net income includes a pretax gain of $16.2 million from the sale of information services' healthcare
           operations. This transaction increased net income by $9.2 million or $.05 per share. (See Note 9.) 
       D.  Third quarter 1996 operating income includes pretax write-downs of $45.3 million and $22.0 million in the carrying value
           of the Company's wire and cable operations and the information services segment's community banking operations,
           respectively. In addition, the information services segment recorded a pretax write-down of $53.0 million to reflect the
           net realizable value of certain capitalized software development costs. These transactions decreased net income by
           $72.7 million or $.38 per share. (See Note 8.)
       E.  First quarter 1996 net income includes a pretax gain of $15.3 million from the sale of certain wireline properties,
           $15.8 million of termination fees related to the early retirement of long-term debt and a pretax loss of $1.8 million
           from the withdrawal of an investment. These transactions decreased net income by $1.5 million or $.01 per share.
           (See Note 9.)
       F.  All adjustments necessary for a fair presentation of results for each period have been included.

</FN>
</TABLE>
                                       39
                                       65


Investor Information

Corporate Headquarters                Shareholder Services 
ALLTEL Corporation                    General questions about accounts,
One Allied Drive                      stock certificates or dividends
Little Rock, Arkansas 72202           should be directed to the
501.905.8000                          Shareholder Services Department
www.alltel.com                        50 Executive Parkway, Hudson, Ohio 44236.
                                      (toll-free) 888.838.4188


Annual Meeting                        Annual Report and Form 10-K Requests
The Annual Meeting of ALLTEL          The 1997 Annual Report is available
Corporation stockholders will         electronically from the Company's web
be held at 11 a.m. (CDT) on           site at www.alltel.com. The report and 
Thursday, April 23, 1998, a           the Form 10-K Annual Report filed with
Arkansas' Excelsior Hotel             the Securities and Exchange Commission
Ballroom Level, Three Statehouse      are available without charge to
Plaza, Little Rock, Arkansas          stockholders upon request to the
                                      Shareholder Services Department,
                                      50 Executive Parkway, Hudson, Ohio 44236.
Transfer Agent, Registrar and         (toll-free) 888.838.4188
Dividend Disbursing Agent
First Union National Bank of
North Carolina                        Dividend Reinvestment and Stock 
Customer Service                      Purchase Plan
1525 West W.T. Harris Blvd. 3C3       ALLTEL offers a Dividend Reinvestment and
Charlotte, North Carolina             Stock Purchase Plan for registered common
28288-1153                            stockholders. In addition to reinvesting 
                                      dividends, the plan allows participants
                                      to invest cash toward the purchase of 
Investor Relations                    ALLTEL common stock. Additional       
Information requests from             information about dividend reinvestment
investors, security analysts and      may be obtained from the Shareholder
other members of the investment       Services Department.
community should be addressed to
Shawne Leach, Vice President-
Investor Relations, One Allied        Electronic Dividend Deposit
Drive, Little Rock, Arkansas          ALLTEL offers Electronic Dividend Deposit 
72202.                                to registered common stockholders.
501.905.8999  fax 501.905.5444        Electronic deposit allows dividend 
                                      payments to be automatically deposited 
                                      into a checking or savings account and 
Common Stock Price and                eliminates the inconvenience of delayed 
Dividend Information                  or lost dividend checks. More information
Ticker Symbol       AT                about Electronic Dividend Deposit may
Newspaper Listings  ALLTEL, ALTEL     be obtained from the Shareholder Services
                                      Department.


Market Price
---------------------------------------------------
                                           Dividend
Year   Qtr.   High     Low       Close     Declared
---------------------------------------------------
1997   4th    41 5/8   33 3/16   41 1/16   .29
       3rd    35 1/2   30 15/16  34 1/2    .275
       2nd    34 3/8   29 3/4    33 7/16   .275
       1st    36 3/4   30 5/8    32 1/2    .275

1996   4th    32 3/4   27 1/2    31 3/8    .275
       3rd    30 7/8   26 5/8    27 7/8    .26
       2nd    33 1/8   29 1/4    30 3/4    .26
       1st    35 5/8   28 1/4    30 7/8    .26
---------------------------------------------------

The common stock is listed and traded on the New York
and Pacific Stock exchanges. The above table reflects
the range of high, low and closing prices as reported
by Dow Jones & Company, Inc. 

                                       41
                                       66