<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-2222
ILLINOIS BELL TELEPHONE COMPANY
(Incorporated under the laws of the State of Illinois)
225 W. Randolph Street, Chicago, Illinois 60606
I.R.S. Employer Identification Number 36-1253600
Telephone Number - (800) 257-0902
THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF AMERITECH CORPORATION,
MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b)
OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE
FORMAT PURSUANT TO GENERAL INSTRUCTION H(2).
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
---- ----
At October 31, 1996, 81,938,121 common shares were outstanding.
<PAGE>2
Part I - Financial Information
------------------------------
The following condensed financial statements have been prepared by
Illinois Bell Telephone Company (the Company) pursuant to the rules
and regulations of the Securities and Exchange Commission (SEC) and,
in the opinion of the Company, include all adjustments (consisting
only of normal recurring adjustments) necessary for a fair statement
of results for each period shown. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such SEC rules and regulations. The
Company believes that the disclosures made are adequate to make the
information presented not misleading. These financial statements
should be read in conjunction with the financial statements and notes
thereto included in the Company's latest Annual Report on Form 10-K
and the quarterly reports on Form 10-Q previously filed in the current
year.
CONDENSED STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
(Dollars in Millions)
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
--------------- ---------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues........................ $ 908.9 $ 872.7 $ 2,724.8 $ 2,541.6
--------- --------- --------- ---------
Operating expenses
Employee-related expenses..... 211.7 204.2 614.0 603.8
Depreciation and amortization. 144.1 134.7 426.0 393.2
Other operating expenses...... 312.6 258.5 915.4 752.8
Restructuring (credit) charge. -- 5.8 -- (71.1)
Taxes other than income taxes. 20.9 22.0 60.0 61.7
--------- --------- --------- ---------
689.3 625.2 2,015.4 1,740.4
--------- --------- --------- ---------
Operating income................ 219.6 247.5 709.4 801.2
Interest expense................ 28.7 30.1 85.3 88.7
Other income, net .............. 3.2 1.6 9.1 4.0
--------- --------- --------- ---------
Income before income taxes...... 194.1 219.0 633.2 716.5
Income taxes.................... 80.3 78.8 257.0 263.2
--------- --------- --------- ---------
Net income...................... 113.8 140.2 376.2 453.3
Accumulated deficit,
beginning of period........... (478.8) (571.8) (465.8) (608.5)
Less, dividends declared.... 147.2 -- 422.6 276.4
--------- --------- --------- ---------
Accumulated deficit,
end of period................. $ (512.2) $ (431.6) $ (512.2) $ (431.6)
========= ========= ========= =========
See Notes to Condensed Financial Statements.
<PAGE>3
CONDENSED BALANCE SHEETS
(Dollars in Millions)
Sept. 30, 1996 Dec. 31, 1995
------------- -------------
(Unaudited) (Derived from
Audited
Financial
Statements)
ASSETS
- ------
Current assets
Cash and temporary cash investments......... $ -- $ 0.3
Receivables, net
Customers................................. 812.6 745.8
Ameritech and affiliates.................. 48.4 39.5
Other..................................... 37.5 29.9
Material and supplies....................... 21.0 17.8
Prepaid and other........................... 19.2 26.4
--------- ---------
938.7 859.7
--------- ---------
Property, plant and equipment................ 8,752.0 8,444.7
Less, accumulated depreciation............... 4,966.1 4,689.4
--------- ---------
3,785.9 3,755.3
--------- ---------
Investments, primarily in affiliates......... 84.4 85.5
Other assets and deferred charges............ 299.2 279.8
--------- ---------
Total assets................................. $ 5,108.2 $ 4,980.3
========= =========
See Notes to Condensed Financial Statements.
<PAGE>4
CONDENSED BALANCE SHEETS (continued)
(Dollars in Millions)
Sept. 30, 1996 Dec. 31, 1995
------------- -------------
(Unaudited) (Derived from
Audited
Financial
Statements)
LIABILITIES AND SHAREOWNER'S EQUITY
Current liabilities
Debt maturing within one year
Ameritech................................. $ 878.5 $ 544.0
Other..................................... 51.5 1.3
Accounts payable
Ameritech Services, Inc. (ASI)............ 151.1 197.0
Ameritech and affiliates.................. 49.7 11.9
Other..................................... 229.3 225.1
Other current liabilities.................. 234.3 362.0
--------- ---------
1,594.4 1,341.3
--------- ---------
Long-term debt.............................. 1,012.6 1,061.2
--------- ---------
Deferred credits and other long-term liabilities
Accumulated deferred income taxes.......... 225.8 220.8
Unamortized investment tax credits......... 52.3 61.0
Postretirement benefits
other than pensions...................... 914.8 932.5
Long-term payable to ASI................... 25.5 27.3
Other ..................................... 90.2 97.2
--------- ---------
1,308.6 1,338.8
--------- ---------
Shareowner's equity
Common shares - ($20 par value;
100,000,000 shares authorized;
81,938,121 issued and outstanding)....... 1,638.8 1,638.8
Proceeds in excess of par value............ 66.0 66.0
Accumulated deficit........................ (512.2) (465.8)
--------- ---------
1,192.6 1,239.0
--------- ---------
Total liabilities and shareowner's equity... $ 5,108.2 $ 4,980.3
========= =========
See Notes to Condensed Financial Statements.
<PAGE>5
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
Nine Months Ended
September 30
-------------
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................... $ 376.2 $ 453.3
Adjustments to net income
Restructuring credit, net of tax............ -- (42.8)
Depreciation and amortization............... 426.0 393.2
Deferred income taxes, net.................. (3.0) (2.9)
Investment tax credits, net................. (8.7) (11.0)
Capitalized interest........................ (2.8) (1.8)
Provision for uncollectibles................ 70.3 31.4
Change in accounts receivable............... (153.6) (67.0)
Change in material and supplies............. (9.3) (0.4)
Change in certain other current assets...... 7.2 7.3
Change in accounts payable.................. (3.9) (165.6)
Change in certain other current
liabilities................................ 34.4 4.7
Change in certain other noncurrent
assets and liabilities..................... (49.4) 20.4
Other....................................... 0.3 5.7
-------- --------
Net cash from operating activities............ 683.7 624.5
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................... (443.8) (338.3)
Proceeds from disposals of
property, plant and equipment................ 0.6 7.2
Other investing activity...................... 0.2 0.8
-------- --------
Net cash from investing activities............ (443.0) (330.3)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Intercompany financing, net................... 334.4 118.1
Issuance of long-term debt.................... 3.0 --
Retirements of long-term debt................. (1.5) (30.9)
Dividend payments............................. (576.9) (388.4)
-------- --------
Net cash from financing activities............ (241.0) (301.2)
-------- --------
Net decrease in cash and
temporary cash investments................... (0.3) (7.0)
Cash and temporary cash investments,
beginning of period.......................... 0.3 7.1
-------- --------
Cash and temporary cash investments,
end of period................................ $ -- $ 0.1
======== ========
See Notes to Condensed Financial Statements.
<PAGE>6
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Dollars in Millions)
SEPTEMBER 30, 1996
NOTE 1: Work Force Restructuring
As announced in March 1994, the Company's parent, Ameritech
Corporation, restructured its existing nonmanagement work force,
reducing the work force by 11,500 employees during 1994 and 1995,
including 3,503 at the Company. As a result of the restructuring, the
Company recorded a gain of $71.1 million or $42.8 million after-tax in
the first nine months of 1995, resulting primarily from settlement
gains from lump sum pension payments from the Ameritech Pension Plan
to former employees. No restructuring charges or credits were recorded
in the first nine months of 1996.
The Company recorded additional restructuring charges in the fourth
quarter of 1995, primarily for the consolidation of data centers and
additional work force reductions. The remaining accrual related to
work force restructuring charges was not significant as of September
30, 1996. See further discussion in Management's Discussion and
Analysis below.
NOTE 2: Debt Maturing Within One Year
Debt maturing within one year is included as debt in the computation
of debt ratios and consists of amounts payable to Ameritech through
Ameritech's short-term funding pool, as well as long-term debt
maturing within one year. At September 30, 1996, $50.0 million of
long-term debt was reclassified to debt maturing within one year to
reflect First Mortgage bonds, Series G, 47/8%, due July 1, 1997.
<PAGE>7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
The following is a discussion and analysis of the changes in revenues,
operating expenses and other income and expenses for the first nine
months of 1996 as compared with the first nine months of 1995.
Results of Operations
---------------------
Revenues
--------
Total revenues in the first nine months of 1996 were $2,724.8 million
and were $2,541.6 million for the same period in 1995, an increase of
$183.2 million. The increase was primarily attributable to growth in
access lines and switched minutes of use resulting in higher network
usage volumes, as well as increased sales of equipment and other
nonregulated services. These increases were partially offset by net
rate reductions.
----------------------------------------------------------------------
Local service
-------------
September 30 Increase Percent
------------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Nine Months Ended $1,574.3 $1,473.4 $ 100.9 6.8
Local service revenues include basic monthly service fees and usage
charges, fees for call management services, installation and
connection charges and public phone revenues. The increase in local
service revenues for the nine months ended September 30, 1996 was due
largely to higher network usage volumes, resulting primarily from
growth in the number of access lines, which increased 3.6 percent to
6,405,000 as of September 30, 1996 as compared with 6,185,000 at
September 30, 1995. Greater sales of call management services, such as
Call Forwarding, Call Waiting and Caller ID also contributed to the
increase. This increase was partially offset by net rate decreases.
----------------------------------------------------------------------
Network access
--------------
September 30 Increase Percent
------------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Interstate
----------
Nine Months Ended $ 574.0 $ 571.2 $ 2.8 0.5
Intrastate
----------
Nine Months Ended $ 70.9 $ 67.8 $ 3.1 4.6
Network access revenues are fees charged to interexchange carriers
that use the Company's local landline communications network to
connect customers to their long distance network. In addition, end
users pay flat rate access fees to connect to the long distance
network. These revenues are generated from both interstate and
intrastate services.
<PAGE>8
Management's Discussion and Analysis
of Results of Operations (cont'd.)
Network access (cont'd.)
------------------------
The increase in network access revenues for the nine months ended
September 30, 1996 was due primarily to an increase in network minutes
of use, resulting from overall growth in the volume of calls handled
for interexchange carriers. Interstate and intrastate minutes of use
for the nine months ended September 30, 1996 increased by 8.6 percent
and 22.8 percent, respectively, over the comparable prior year period.
The increase in interstate network access revenues was largely offset
by net rate reductions. The increase in intrastate network access
revenues was offset primarily by a refund to interexchange carriers
related to certain payphone use fees in the second quarter of 1996, as
well as net rate reductions.
----------------------------------------------------------------------
Long distance service
---------------------
September 30 Increase Percent
------------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Nine Months Ended $ 192.2 $ 181.8 $ 10.4 5.7
Long distance service revenues are derived from customer calls to
locations outside of their local calling areas, but within the same
local access and transport area (LATA). The increase in long distance
service revenues for the nine months ended September 30, 1996 was due
primarily to higher network usage, as well as increased revenues
related to surcharges collected for third-party credit card calls.
----------------------------------------------------------------------
Other
-----
September 30 Increase Percent
------------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Nine Months Ended $ 313.4 $ 247.4 $ 66.0 26.7
Other revenues include revenues derived from directory advertising,
billing and collection services, inside wire installation and
maintenance services and other miscellaneous services. The increase
in other revenues for the nine months ended September 30, 1996 was due
to growth in voice messaging, equipment sales and other nonregulated
services, as well as rate increases in inside wire installation and
maintenance services. These increases were partially offset by a
decrease in billing and collection services, as certain long distance
carriers began direct billing of their own customers in 1996.
----------------------------------------------------------------------
Operating expenses
------------------
Total operating expenses for the nine months ended September 30, 1996
increased by $275.0 million or 15.8 percent to $2,015.4 million. The
increase was partially attributable to the work force restructuring,
which resulted in a credit of $71.1 million in the first nine months
of 1995 related to noncash settlement gains from the pension plan.
Total operating expenses also increased in the first nine months of
1996 due to increases in depreciation expense and other operating
expenses, such as cost of sales and affiliated services, as discussed
below.
<PAGE>9
Management's Discussion and Analysis
of Results of Operations (cont'd.)
Employee-related expenses
-------------------------
September 30 Increase Percent
------------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Nine Months Ended $ 614.0 $ 603.8 $ 10.2 1.7
The increase in employee-related expenses for the nine months ended
September 30, 1996 was primarily due to increases in wage rates and
overtime expenses, and an increase in payroll taxes. These increases
were partially offset by a decrease in medical benefit expenses.
There were 14,940 employees at September 30, 1996, compared with
14,747 at September 30, 1995.
----------------------------------------------------------------------
Depreciation and
amortization
------------------
September 30 Increase Percent
------------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Nine Months Ended $ 426.0 $ 393.2 $ 32.8 8.3
The increase in depreciation and amortization expense for the nine
months ended September 30, 1996 was due to higher depreciation in the
intrabuilding cable asset category, as well as higher average plant
balances and the use of higher depreciation rates in certain plant
categories due to shorter depreciable lives established in 1994. The
increase was partially offset by a decrease in computer equipment
depreciation.
----------------------------------------------------------------------
Other operating expenses
------------------------
September 30 Increase Percent
------------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Nine Months Ended $ 915.4 $ 752.8 $ 162.6 21.6
The increase in other operating expenses for the nine months ended
September 30, 1996 was due to increases in advertising, uncollectible
and other expenses related to increased sales efforts for equipment
and call management services, such as voice messaging and other
nonregulated services. Higher contract and affiliated services
expenses related primarily to systems programming and reengineering
also contributed to the increase, as did cost of sales increases.
<PAGE>10
Management's Discussion and Analysis
of Results of Operations (cont'd.)
Restructuring credit
--------------------
September 30 Increase Percent
------------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Nine Months Ended $ -- $ (71.1) $ 71.1 n/a
As discussed in Note 1, the Company significantly reduced its
nonmanagement work force during 1994 and 1995 by 3,503 employees. New
employees with different skills were added during this period to
accommodate growth and meet staffing requirements for new business
opportunities. As of September 30, 1995, all 3,503 employees had left
the Company, with 803 leaving in the first nine months of 1995. A
pretax, noncash settlement gain of $71.1 million was recorded in the
first nine months of 1995, associated with lump-sum pension payments
to former employees. No restructuring credits were recorded in the
first nine months of 1996.
----------------------------------------------------------------------
Taxes other than income taxes
-----------------------------
September 30 Increase Percent
------------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Nine Months Ended $ 60.0 $ 61.7 $ (1.7) (2.8)
Taxes other than income taxes consist of property taxes, gross
receipts taxes and other nonincome based taxes. The decrease in taxes
other than income taxes for the nine months ended September 30, 1996
was primarily due to a decrease in property taxes resulting from
favorable legislation involving property tax reforms, partially offset
by higher capital stock taxes due to the effects of a favorable true-
up adjustment recorded in the first nine months of 1995.
----------------------------------------------------------------------
Other Income and Expenses
-------------------------
Interest expense
-----------------
September 30 Increase Percent
------------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Nine Months Ended $ 85.3 $ 88.7 $ (3.4) (3.8)
The decrease in interest expense for the nine months ended September
30, 1996 was due to a decrease in interest on borrowings from the
Ameritech short-term pool, as well as decreased miscellaneous interest
expense and increased capitalized interest.
<PAGE>11
Management's Discussion and Analysis
of Results of Operations (cont'd.)
Other income, net
-----------------
Change
September 30 Income Percent
------------
(dollars in millions) 1996 1995 (Expense) Change
------------------- ---- ---- -------- ------
Nine Months Ended $ 9.1 $ 4.0 $ 5.1 n/m
Other income, net includes equity in earnings of affiliates, interest
income and other nonoperating items. The increase in other income,
net for the nine months ended September 30, 1996 was due primarily to
increased equity earnings from Ameritech Services, Inc. (ASI) and
increased interest income.
----------------------------------------------------------------------
Income taxes
------------
September 30 Increase Percent
------------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Nine Months Ended $ 257.0 $ 263.2 $ (6.2) (2.4)
The decrease in income taxes for the nine months ended September 30,
1996 was due primarily to the tax effect ($28.3 million) associated
with the work force restructuring credit recorded in the first nine
months of 1995. Excluding the effects of this item, income taxes
increased in line with earnings of the business.
----------------------------------------------------------------------
Ratio of earnings to fixed charges
----------------------------------
The ratio of earnings to fixed charges for the nine months ended
September 30 was 7.60 in 1996 and 8.33 in 1995. The ratio in 1995 was
favorably affected by a pretax credit of $71.1 million for work force
restructuring (see prior discussion of this item).
<PAGE>12
Management's Discussion and Analysis
of Results of Operations (cont'd.)
Other Matters
--------------
Telecommunications Act of 1996
------------------------------
The Telecommunications Act of 1996 (the 1996 Act) was enacted on
February 8, 1996. This legislation defines the conditions under which
Ameritech, including the Company, will be permitted to offer interLATA
long distance service and provides certain mechanisms intended to
facilitate local exchange competition. This legislation, in addition
to allowing Ameritech to offer interLATA long distance services,
provides the framework for additional competition in the Company's
traditional local exchange markets.
On August 8, 1996, the Federal Communications Commission (FCC) adopted
rules to implement the local competition provisions of the 1996 Act.
Among other things, the rules require local exchange carriers to
provide interconnection to any requesting telecommunications carrier at
any technically feasible point and equal in quality to that provided
for the local exchange carriers' own operations. The rules also
require each local exchange carrier to provide these other carriers
access to network elements on an unbundled basis, and to offer for
resale any telecommunications services that it provides at retail to
subscribers who are not telecommunications carriers. The FCC's rules
address mechanisms for pricing of interconnection, unbundled network
elements and reselling of telecommunications services and prescribe
that the individual state regulatory authorities develop specific rates
and procedures consistent with general rules and guidelines established
by the FCC.
In September 1996, several local exchange carriers, including
Ameritech, filed appeals of the FCC interconnection order in the U.S.
Court of Appeals for the District of Columbia. In their appeals, the
local exchange carriers argue, among other things, that the FCC
exceeded its authority over state regulatory commissions, that the
rules setting national pricing standards violate the 1996 Act, and that
the order will force local exchange carriers to sell elements of their
networks below cost. Several companies also requested a stay of the
FCC's order pending the outcome of the appeals, while others, including
Ameritech, opposed the stay and requested only an expedited review of
the order.
Following the FCC's denial of the requests for a stay, a motion for a
stay was filed by certain parties in the U.S. Court of Appeals for the
Eighth Circuit (the Court) in St. Louis, which had been selected to
hear the challenges to the FCC's order. On September 27, 1996, the
Court ordered a temporary stay of the new rules pending the hearing of
oral arguments from local exchange carriers and the FCC. On October
15, 1996, after hearing the oral arguments, the Court issued a partial
stay of the FCC's order, saying that the pricing provisions and the
"pick and choose" rule related to unbundled network elements could not
take effect until the Court conducts a full review of the order and
rules on the merits of the case. On November 1, 1996, the Court lifted
the stay on three aspects of the pricing rules that apply primarily to
cellular service providers. The FCC has indicated that it will appeal
the Court's decision to the U.S. Supreme Court.
It will not be possible to determine what effect the 1996 Act and the
FCC rules implementing it will have on the Company's results of
operations until the challenges to the rules have been resolved and the
Illinois Commerce Commission (ICC) has acted on the matter within its
jurisdiction under the 1996 Act.
<PAGE>13
Management's Discussion and Analysis
of Results of Operations (cont'd.)
Dial 1+
-------
The Company implemented intra-MSA presubscription on April 7, 1996
pursuant to the Customers First Order issued by the ICC on April 7,
1995. Presubscription allows customers to select one carrier for
inter-MSA interstate calling and a second carrier for non-local intra-
MSA calls. Non-local intra-MSA calls include all Band C calls (more
than 15 miles) plus intra-MSA toll calls between the Company's
territory and that of an independent company. As a result, the
Company's customers may now select an alternate long distance carrier
for Band C calls by presubscribing their Band C calls and intra-MSA
toll calls to that carrier.
----------------------------------------------------------------------
Illinois rate reductions
------------------------
Effective July 11, 1996, the Company reduced rates by $31.0 million
annually under the adjustment process of a price regulation plan
approved by the ICC in October 1994. These rate reductions primarily
impact local service revenues.
----------------------------------------------------------------------
Wholesale/Resale Order
-----------------------
On June 26, 1996, the ICC approved an Order establishing wholesale
prices to be made available to resellers. Based on the discount from
retail levels required, the Company will experience lower operating
margins on those services purchased at wholesale. The potential
impact cannot be quantified because the demand shift to resellers is
unknown.
<PAGE>14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
--------
12 Computation of Ratio of Earnings to Fixed Charges for the
Nine Months ended September 30, 1996 and September 30,
1995.
27 Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
No Form 8-K was filed by the registrant during the quarter for
which this report is filed.
<PAGE>15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ILLINOIS BELL TELEPHONE COMPANY
-------------------------------
(Registrant)
Date: November 7, 1996 /s/ Laurie L. Streling
----------------------
Laurie L. Streling
Comptroller
State Finance Organization
(Principal Accounting Officer)
EXHIBIT 12
ILLINOIS BELL TELEPHONE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
Nine Months Ended
September 30
-------------
1996 1995
---- ----
1. EARNINGS
a) Income before interest expense,
income taxes and undistributed
equity earnings (2)................. $ 719.3 $ 810.6
b) Portion of rental expense
representative of the
interest factor (1)................. 7.6 7.8
-------- --------
Total 1(a) through 1(b)................. $ 726.9 $ 818.4
-------- --------
2. FIXED CHARGES
a) Total interest expense including
capital lease obligations........... $ 85.3 $ 88.7
b) Capitalized interest................. 2.8 1.8
c) Portion of rental expense
representative of the
interest factor (1)................. 7.6 7.8
-------- --------
Total 2(a) through 2(c)................. $ 95.7 $ 98.3
-------- --------
3. RATIO OF EARNINGS TO FIXED CHARGES....... 7.60 8.33
===== =====
(1) One-third of rental expense is considered to be the amount
representing return on capital.
(2) The results for the first nine months of 1995 reflect a $71.1 million
pretax credit primarily from settlement gains resulting from lump-sum
pension payments from the pension plan to former employees who left
the business in the nonmanagement work force restructuring.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ILLINOIS BELL TELEPHONE COMPANY'S SEPT.30, 1996 FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0<F1>
<RECEIVABLES> 898,500
<ALLOWANCES> 0
<INVENTORY> 21,000
<CURRENT-ASSETS> 938,700
<PP&E> 8,752,000
<DEPRECIATION> 4,966,100
<TOTAL-ASSETS> 5,108,200
<CURRENT-LIABILITIES> 1,594,400
<BONDS> 1,012,600
0
0
<COMMON> 1,638,800
<OTHER-SE> (446,200)
<TOTAL-LIABILITY-AND-EQUITY> 5,108,200
<SALES> 0<F2>
<TOTAL-REVENUES> 2,724,800
<CGS> 0<F3>
<TOTAL-COSTS> 2,015,400
<OTHER-EXPENSES> (9,100)
<LOSS-PROVISION> 60,700
<INTEREST-EXPENSE> 85,300
<INCOME-PRETAX> 633,200
<INCOME-TAX> 257,000
<INCOME-CONTINUING> 376,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 376,200
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>SECURITIES ARE NOT MATERIAL AND THEREFORE HAVE NOT BEEN STATED SEPARATELY
IN THE FINANCIAL STATEMENTS. THIS AMOUNT IS INCLUDED IN THE CASH TAG.
<F2>NET SALES OF TANGIBLE PRODUCTS IS NOT MORE THAN 10% OF TOTAL OPERATING
REVENUES AND THEREFORE HAS NOT BEEN STATED SEPARATELY IN THE FINANCIAL
STATEMENTS PURSUANT TO REGULATION S-X, RULE 5-03(B). THIS AMOUNT IS
INCLUDED IN THE "TOTAL REVENUES" TAG.
<F3>COST OF TANGIBLE GOODS SOLD IS INCLUDED IN COST OF SERVICE AND PRODUCTS IN
THE FINANCIAL STATEMENTS AND THE "TOTAL COST" TAG, PURSUANT TO REGULATION
S-X, RULE 5-03(B).
</FN>
</TABLE>
