SBC COMMUNICATIONS INC, S-4, 1996-04-17

SBC COMMUNICATIONS INC
S-4, 1996-04-17
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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<PAGE> 1

Registration No. 33-____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------
SBC COMMUNICATIONS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 6719 43-1301883
(STATE OR OTHER JURISDICTION OF (Primary Standard Industrial (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) Classification Code Number) IDENTIFICATION NUMBER)
</TABLE>

175 East Houston
San Antonio, Texas 78205-2233
(210) 821-4105

(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------------------------

JUDITH M. SAHM
SBC COMMUNICATIONS INC.
175 EAST HOUSTON
SAN ANTONIO, TEXAS 78205-2233
(210) 821-4105

(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

--------------------------------
Copies to:
<TABLE>
<S> <C> <C> <C>
Joseph B. Frumkin Wayne Wirtz Duane G. Henry James M. Canty
Sullivan & Cromwell SBC Communications Inc. Pacific Telesis Group Pillsbury Madison & Sutro LLP
125 Broad Street 175 East Houston 130 Kearny Street 235 Montgomery Street
New York, New York 10004 San Antonio, Texas 78205-2233 San Francisco, California 94108 San Francisco, California 94104
</TABLE>

--------------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS
SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

--------------------------------

If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /

--------------------------------
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=============================================================================================================================
PROPOSED MAXIMUM
OFFERING PRICE PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PER SHARE OF AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED COMMON STOCK OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1.00 per
share, together with Preferred
Stock Purchase Rights (1) 317,389,000(2) $43.57(3) $13,830,020,000(3) $4,768,972.41(3)
=============================================================================================================================
</TABLE>

(1) Preferred stock purchase rights are attached to and trade with the
common stock, par value $1.00 per share of SBC Communications Inc.
("SBC Common Stock"). The value attributable to such rights, if any,
is reflected in the market price of SBC Common Stock.

(2) Represents the maximum amount of SBC Common Stock estimated to be
issuable upon the consummation of the merger (the "Merger") of SBC
Communications (NV) Inc., a wholly-owned subsidiary of SBC, with and
into Pacific Telesis Group ("PAC").

(3) Pursuant to Rules 457(f)(1) and 457(c), under the Securities Act of
1933, as amended, and solely for the purpose of calculating the
registration fee, the proposed maximum aggregate offering price is
equal to the market value of the common stock, par value $.10 per
share, of PAC ("PAC Common Stock") to be cancelled in the Merger and
is based upon $31.94, the average of the high and low sale prices of
PAC Common Stock on the New York Stock Exchange Composite Tape on
April 11, 1996.
================================================================================
<PAGE> 2
SBC COMMUNICATIONS INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K

<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
-------------------------------- ----------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus . . . . . . . . . . Outside Front Cover Page

2. Inside Front and Outside Back Cover Pages of
Prospectus . . . . . . . . . . . . . . . . . . . . Inside Front and Outside Back Cover Pages

3. Risk Factors, Ratio of Earnings to Fixed Charges,
and Other Information . . . . . . . . . . . . . . . Summary; Unaudited Pro Forma Combined Condensed
Financial Statements of SBC
Communications Inc. and Pacific Telesis
Group; The Special Meetings; The Merger

4. Terms of the Transaction . . . . . . . . . . . . . Summary; The Merger; Comparison of Certain
Rights of Shareowners of SBC and PAC;
Certain Federal Income Tax Consequences
of the Merger

5. Pro Forma Financial Information . . . . . . . . . . Summary; Unaudited Pro Forma Condensed
Combined Financial Statements of SBC
Communications Inc. and Pacific Telesis
Group

6. Material Contacts with the Company Being Acquired . Summary; The Merger

7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be *
Underwriters . . . . . . . . . . . . . . .

8. Interests of Named Experts and Counsel . . . . . . Experts; Validity of Shares

9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities . . *

10. Information with Respect to S-3 Registrants . . . . Incorporation of Certain Information by
Reference; Summary; Unaudited Pro Forma
Combined Condensed Financial Statements
of SBC Communications Inc. and Pacific
Telesis Group

11. Incorporation of Certain Information by Reference . Incorporation of Certain Information by
Reference

12. Information with Respect to S-2 or S-3 Registrants *

13. Incorporation of Certain Information by Reference . *

14. Information with Respect to Registrants Other Than
S-2 or S-3 Registrants . . . . . . . . . . . . . . *

15. Information with Respect to S-3 Companies . . . . . Incorporation of Certain Information by
Reference; Summary; Unaudited Pro Forma
Combined Condensed Financial Statements
of SBC Communications Inc. and Pacific
Telesis Group

16. Information with Respect to S-2 or S-3 Companies . *
</TABLE>

- ----------------------------------

* Indicates that Item is not applicable or answer is in the negative.
<PAGE> 3
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
-------------------------------- ----------------------
<S> <C> <C>
17. Information with Respect to Companies Other Than
S-2 or S-3 Companies . . . . . . . . . . . . . . . *

18. Information if Proxies, Consents or Authorizations
Are to be Solicited: . . . . . . . . . . . . . . . The Special Meetings

1. Date, Time and Place Information . . . . . Outside Front Cover Page; Summary; The Special
Meetings

2. Revocability of Proxy . . . . . . . . . . The Special Meetings

3. Dissenters' Rights of Appraisal . . . . . Summary; The Special Meetings; The Merger;
Comparison of Certain Rights of
Shareowners of SBC Communications Inc.
and Pacific Telesis Group

4. Persons Making the Solicitation . . . . . Outside Front Cover Page; Summary; The Special
Meetings; The Merger
5. Interest of Certain Persons in Matters to
be Acted Upon and Voting Securities and
Principal Holders Thereof . . . . . . . . Incorporation of Certain Information by
Reference; Summary; The Special
Meetings; The Merger

6. Vote Required for Approval . . . . . . . . Summary; The Special Meetings

7. Directors and Executive Officers, Executive
Compensation, and Certain Relationships and
Related Transactions . . . . . . . . . . . Incorporation of Certain Information by
Reference; Summary
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer . . *
</TABLE>

- ----------------------------------

* Indicates that Item is not applicable or answer is in the negative.
<PAGE> 4
SBC COMMUNICATIONS INC.
175 EAST HOUSTON
SAN ANTONIO, TEXAS 78205-2223

_________ __, 1996
Dear Shareowner:

You are cordially invited to attend a special meeting of
shareowners (the "SBC Special Meeting") of SBC Communications Inc. ("SBC") to
be held on __________ __, 1996, at _______ [a.m.] [p.m.], local time, at
______________________.

At the SBC Special Meeting, you will be asked to consider and
vote on a proposal to approve and adopt an Agreement and Plan of Merger (the
"Merger Agreement"), pursuant to which SBC Communications (NV) Inc. ("Merger
Sub"), a wholly-owned subsidiary of SBC, will be merged (the "Merger") with and
into Pacific Telesis Group ("PAC"), and to approve the transactions
contemplated thereby, including the issuance of shares of common stock, par
value $1.00 per share, of SBC ("SBC Common Stock") pursuant to the Merger
Agreement. Upon the Merger becoming effective, each share of common stock, par
value $.10 per share, of PAC will be converted into the right to receive, and
become exchangeable for, 0.733 of a share of SBC Common Stock, subject to
adjustment in certain circumstances as set forth in the Merger Agreement and as
described in the accompanying Joint Proxy Statement/ Prospectus (the "Exchange
Ratio"), together with the appropriate number of preferred stock purchase
rights attached thereto.

The Board of Directors of SBC has carefully reviewed and
considered the terms and conditions of the Merger. In addition, the Board of
Directors of SBC has received a written opinion from its financial advisor,
Lazard Freres & Co. LLC, to the effect that, as of April 1, 1996 and as of the
date hereof, the Exchange Ratio is fair to SBC from a financial point of view.

SBC'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE
BEST INTERESTS OF, ITS SHAREOWNERS. ACCORDINGLY, THE BOARD HAS UNANIMOUSLY
APPROVED (BY VOTE OF ALL DIRECTORS PRESENT) THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT ALL SHAREOWNERS VOTE FOR ITS APPROVAL AND ADOPTION
AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE ISSUANCE
OF THE SHARES OF SBC COMMON STOCK PURSUANT THERETO.

I urge you to review and consider carefully the accompanying
Notice of Special Meeting of Shareowners and Joint Proxy Statement/Prospectus,
which contain information about SBC and PAC and describe the Merger and certain
other matters.

The affirmative vote of a majority of the votes cast at the
SBC Special Meeting is necessary for approval and adoption of the Merger
Agreement and approval of the transactions contemplated thereby, including the
issuance of shares of SBC Common Stock pursuant to the Merger Agreement.

IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE SBC
SPECIAL MEETING, YOU ARE URGED PROMPTLY TO COMPLETE, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND
THE SBC SPECIAL MEETING. Prior to the voting of the Proxy at the SBC Special
Meeting, any person giving a proxy has the power to revoke it at any time, and
shareowners who are present at the SBC Special Meeting may withdraw their
proxies and vote in person.

Sincerely,

-------------------------------
Edward E. Whitacre, Jr.
Chairman of the Board and Chief
Executive Officer
<PAGE> 5
SBC COMMUNICATIONS INC.

175 EAST HOUSTON
SAN ANTONIO, TEXAS 78205-2233

-----------------------------------------------------

NOTICE OF SPECIAL MEETING OF SHAREOWNERS
TO BE HELD ON ___________ ___, 1996

-----------------------------------------------------

To the Shareowners of SBC Communications Inc.:

NOTICE IS HEREBY GIVEN that a special meeting of shareowners
(the "SBC Special Meeting") of SBC Communications Inc., a Delaware corporation
("SBC"), has been called by the Board of Directors of SBC and will be held at
___________________ at _____ [a.m.] [p.m.], local time, on _______________ __,
1996, to consider and vote upon the following matters described in the
accompanying Joint Proxy Statement/Prospectus:

1. To consider and vote upon a proposal to approve
and adopt an Agreement and Plan of Merger (the "Merger
Agreement"), among Pacific Telesis Group, a Nevada corporation
("PAC"), SBC and SBC Communications (NV) Inc., a Nevada
corporation and a wholly-owned subsidiary of SBC ("Merger
Sub"), dated as of April 1, 1996, and to approve the
transactions contemplated by the Merger Agreement, including
the issuance of shares of common stock, par value $1.00 per
share, of SBC ("SBC Common Stock") pursuant to the Merger
Agreement;

2. To transact such other business as may properly
come before the SBC Special Meeting or any adjournments or
postponements thereof.

Notwithstanding shareowner approval of the foregoing proposal,
SBC reserves the right to abandon the merger of Merger Sub with and into PAC
(the "Merger") at any time prior to the consummation of the Merger, subject to
the terms and conditions of the Merger Agreement.

Holders of SBC Common Stock will not be entitled to appraisal
rights in connection with the Merger.

The Board of Directors of SBC has fixed the close of business
on _______ __, 1996, as the record date for the determination of shareowners
entitled to notice of, and to vote at, the SBC Special Meeting, and only
shareowners of record at such time will be entitled to notice of, and to vote
at, the SBC Special Meeting.

Approval and adoption of the Merger Agreement and approval of
the transactions contemplated thereby, including the issuance of shares of SBC
Common Stock pursuant to the Merger Agreement, requires the affirmative vote of
a majority of the votes cast at the SBC Special Meeting.

A form of Proxy and a Joint Proxy Statement/Prospectus
containing more detailed information with respect to the matters to be
considered at the SBC Special Meeting (including the Merger Agreement attached
as Appendix A thereto) accompany and form a part of this notice.

Whether or not you plan to attend the SBC Special Meeting,
please promptly complete, sign, date and return the enclosed proxy in the
enclosed self-addressed, stamped envelope. Prior to the voting of the proxy at
the SBC Special Meeting, any person giving a proxy has the power to revoke it
at any time, and shareowners who are present at the SBC Special Meeting may
withdraw their proxies and vote in person.

---------------------

THE BOARD OF DIRECTORS OF SBC UNANIMOUSLY RECOMMENDS THAT SHAREOWNERS VOTE IN
FAVOR OF THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE ISSUANCE OF SHARES OF SBC
COMMON STOCK PURSUANT TO THE MERGER AGREEMENT.
<PAGE> 6
By Order of the Board of Directors

----------------------------------
Judith M. Sahm
Vice President-Secretary
San Antonio, Texas
_________ __, 1996

The Proxy Solicitor For SBC:

Georgeson & Company, Inc.
Wall Street Plaza
New York, New York 10005

Call Toll Free [ ]

YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE> 7
PACIFIC TELESIS GROUP
130 KEARNY STREET
SAN FRANCISCO, CALIFORNIA 94108

_________ __, 1996
Dear Shareowner:

You are cordially invited to attend a special meeting of
shareowners (the "PAC Special Meeting") of Pacific Telesis Group ("PAC") to be
held on __________ __, 1996, at _______ [a.m.] [p.m.], local time, at
______________________.

At the PAC Special Meeting, you will be asked to consider and
vote on a proposal to approve and adopt an Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which SBC Communications (NV) Inc. ("Merger
Sub"), a wholly-owned subsidiary of SBC Communications Inc. ("SBC"), will be
merged (the "Merger") with and into PAC, and to approve the transactions
contemplated thereby. Upon the Merger becoming effective, each share of Common
Stock, par value $.10 per share, of PAC ("PAC Common Stock") will be converted
into the right to receive, and become exchangeable for, 0.733 of a share of
common stock, par value $1.00 per share, of SBC, subject to adjustment in
certain circumstances as set forth in the Merger Agreement and as described in
the accompanying Joint Proxy Statement/Prospectus(the "Exchange Ratio"),
together with an appropriate number of preferred stock purchase rights attached
thereto.

The Board of Directors of PAC has carefully reviewed and
considered the terms and conditions of the Merger. In addition, the Board of
Directors of PAC has received written opinions from its financial advisor,
Salomon Brothers Inc, to the effect that, as of April 1, 1996 and as of the
date hereof, the Exchange Ratio is fair to the holders of PAC Common Stock from
a financial point of view.

PAC'S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN
THE BEST INTERESTS OF, PAC AND ITS SHAREOWNERS. ACCORDINGLY, THE BOARD HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT ALL
SHAREOWNERS VOTE FOR ITS APPROVAL AND ADOPTION AND APPROVAL OF THE TRANSACTIONS
CONTEMPLATED THEREBY.

I urge you to review and consider carefully the accompanying
Notice of Special Meeting of Shareowners and Joint Proxy Statement/Prospectus,
which contain information about PAC and SBC and describe the Merger and certain
other matters.

The affirmative vote of the holders of at least a majority of
the outstanding shares of PAC Common Stock is necessary for approval and
adoption of the Merger Agreement and approval of the transactions contemplated
thereby.

If the Merger Agreement is approved and the Merger is
consummated, you will be sent a letter of transmittal with instructions for
surrendering your certificates representing shares of PAC Common Stock. Please
do not send your share certificates until you receive these materials.

IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE PAC
SPECIAL MEETING, YOU ARE URGED PROMPTLY TO COMPLETE, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND
THE PAC SPECIAL MEETING. If you attend the PAC Special Meeting and desire to
revoke your Proxy in writing and vote in person, you may do so; in any event, a
Proxy may be revoked in writing at any time before it is exercised. Your prompt
cooperation will be appreciated.

Sincerely,

--------------------------------
Philip J. Quigley
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 8
PACIFIC TELESIS GROUP
130 KEARNY STREET
SAN FRANCISCO, CALIFORNIA 94108

-----------------------------------------------------

NOTICE OF SPECIAL MEETING OF SHAREOWNERS
TO BE HELD ON _________ __, 1996

-----------------------------------------------------

To the Shareowners of Pacific Telesis Group:

NOTICE IS HEREBY GIVEN that a special meeting of shareowners
(the "PAC Special Meeting") of Pacific Telesis Group, a Nevada corporation
("PAC"), has been called by the Board of Directors of PAC and will be held at
_______________________ at [a.m.] [p.m.], local time, on ________ __, 1996, to
consider and vote upon the following matters described in the accompanying
Joint Proxy Statement/Prospectus:

1. To consider and vote upon a proposal to approve
and adopt an Agreement and Plan of Merger (the "Merger
Agreement"), among PAC, SBC Communications Inc., a Delaware
corporation ("SBC"), and SBC Communications (NV) Inc., a
Nevada corporation and a wholly-owned subsidiary of SBC
("Merger Sub"), dated as of April 1, 1996, and to approve the
transactions contemplated thereby; and

2. To transact such other business as may properly
come before the PAC Special Meeting or any adjournments or
postponements thereof.

Notwithstanding shareowner approval of the foregoing proposal,
PAC reserves the right to abandon the merger of Merger Sub with and into PAC
(the "Merger") at any time prior to the consummation of the Merger, subject to
the terms and conditions of the Merger Agreement.

Holders of PAC Common Stock will not be entitled to appraisal
rights in connection with the Merger.

The Board of Directors of PAC has fixed the close of business
on __________ __, 1996, as the record date for the determination of shareowners
entitled to notice of, and to vote at, the PAC Special Meeting, and only
shareowners of record at such time will be entitled to notice of, and to vote
at, the PAC Special Meeting.

Approval and adoption of the Merger Agreement and approval of
the transactions contemplated thereby requires the affirmative vote of at least
a majority of the outstanding shares of PAC common stock.

A form of Proxy and a Joint Proxy Statement/Prospectus
containing more detailed information with respect to the matters to be
considered at the PAC Special Meeting (including the Merger Agreement attached
as Appendix A thereto) accompany and form a part of this notice.

Whether or not you plan to attend the PAC Special Meeting,
please promptly complete, sign, date and return the enclosed Proxy in the
enclosed self-addressed, stamped envelope. If you attend the PAC Special
Meeting and desire to revoke your Proxy in writing and vote in person, you may
do so; in any event, a Proxy may be revoked in writing at any time before it is
voted.

----------------

THE BOARD OF DIRECTORS OF PAC UNANIMOUSLY RECOMMENDS THAT
SHAREOWNERS VOTE IN FAVOR OF THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT
AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED THEREBY.

By Order of the Board of Directors

----------------------------------
Richard W. Odgers
Secretary
San Francisco, California
_________ __, 1996
<PAGE> 9

The Proxy Solicitor For PAC:

Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, New Jersey 07072-2586

Call Toll Free [ ]

YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE> 10
SBC COMMUNICATIONS INC. PACIFIC TELESIS GROUP

JOINT PROXY STATEMENT

--------------------
SBC COMMUNICATIONS INC.
PROSPECTUS
--------------------

This Joint Proxy Statement/Prospectus is being furnished to
the shareowners of SBC Communications Inc., a Delaware corporation ("SBC"), in
connection with the solicitation of proxies by SBC's Board of Directors from
holders of outstanding shares of common stock, par value $1.00 per share, of
SBC ("SBC Common Stock"), for use at a special meeting of shareowners of SBC to
be held on __________ __, 1996 and at any adjournments or postponements thereof
(the "SBC Special Meeting"). This Joint Proxy Statement/Prospectus is also
being furnished to the shareowners of Pacific Telesis Group, a Nevada
corporation ("PAC"), in connection with the solicitation of proxies by PAC's
Board of Directors from holders of outstanding shares of common stock, par
value $.10 per share, of PAC ("PAC Common Stock"), for use at a special meeting
of shareowners of PAC to be held on __________ __, 1996 and at any adjournments
or postponements thereof (the "PAC Special Meeting," and, together with the SBC
Special Meeting, the "Special Meetings").

At the Special Meetings, shareowners of SBC and PAC will be
asked to consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, dated as of April 1, 1996, among SBC, PAC and SBC
Communications (NV) Inc., a Nevada corporation and a wholly-owned subsidiary of
SBC ("Merger Sub") (as it may be amended, supplemented or otherwise modified
from time to time, the "Merger Agreement"), which is attached as Appendix A to
this Joint Proxy Statement/Prospectus and is incorporated herein by reference,
and to approve the transactions contemplated by the Merger Agreement,
including, in the case of SBC, the issuance of shares of SBC Common Stock
pursuant to the Merger Agreement. The Merger Agreement provides for the merger
of Merger Sub with and into PAC (the "Merger"), with PAC being the corporation
surviving the Merger (sometimes hereinafter referred to as the "Surviving
Corporation"). Upon the Merger becoming effective, each share of PAC Common
Stock issued and outstanding immediately prior to such time (other than shares
of PAC Common Stock owned by SBC, Merger Sub or any other subsidiary of SBC, or
shares of PAC Common Stock owned by PAC or any subsidiary of PAC ("Excluded PAC
Common Stock")) will be converted into the right to receive, and become
exchangeable for, 0.733 of a share of SBC Common Stock, subject to adjustment
in certain circumstances as set forth in the Merger Agreement and as described
in this Joint Proxy Statement/Prospectus. See "The Merger -- Terms of the
Merger." Each share of SBC Common Stock issued in the Merger will be
accompanied by an appropriate number of preferred stock purchase rights of SBC.
See "Description of SBC Capital Stock."

SBC has filed a Registration Statement (including exhibits and
amendments thereto, the "Registration Statement") pursuant to the Securities
Act of 1933, as amended (the "Securities Act"), covering the shares of SBC
Common Stock (and accompanying SBC preferred stock purchase rights) issuable in
the Merger. This Joint Proxy Statement/Prospectus constitutes the respective
Proxy Statements of SBC and PAC relating to the solicitation of proxies for use
at their respective Special Meetings and the Prospectus of SBC filed as part of
the Registration Statement. This Joint Proxy Statement/Prospectus and the
proxies are first being provided to shareowners of SBC and PAC on or about
__________ __, 1996.

THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY STATEMENT/PROSPECTUS
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Joint Proxy Statement/Prospectus is __________ __, 1996
<PAGE> 11
AVAILABLE INFORMATION

Each of SBC and PAC is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). The
reports, proxy statements and other information filed by SBC and PAC with the
SEC can be inspected and copied at the SEC's public reference room located at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at the public reference facilities in the SEC's regional offices located at: 7
World Trade Center, 13th Floor, New York, New York 10048, and Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material can be obtained at prescribed rates by writing to the
Securities and Exchange Commission, Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549. The shares of SBC Common Stock and PAC Common
Stock are listed on the New York Stock Exchange (the "NYSE"), the Pacific Stock
Exchange (the "PSE") and the Chicago Stock Exchange (the "CSE"). As such, the
periodic reports, proxy statements and other information filed by SBC and PAC
with the SEC may be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005, the offices of the PSE, 301 Pine Street, San Francisco,
California 94104, and the offices of the CSE, One Financial Place, 444 South
LaSalle Street, Chicago, Illinois 60605.

This Joint Proxy Statement/Prospectus does not contain all of
the information set forth in the Registration Statement covering the securities
offered hereby which SBC has filed with the SEC, certain portions of which have
been omitted pursuant to the rules and regulations of the SEC, and to which
portions reference is hereby made for further information with respect to SBC,
PAC and the securities offered hereby. Statements contained herein concerning
any documents are not necessarily complete and, in each instance, reference is
made to the copies of such documents filed as exhibits to the Registration
Statement. Each such statement is qualified in its entirety by such reference.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS
BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS
RELATING TO SBC, EXCLUDING EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED HEREIN, ARE AVAILABLE WITHOUT CHARGE UPON REQUEST TO
SPECIALIST-EXTERNAL REPORTING, SBC COMMUNICATIONS INC., 175 EAST HOUSTON, SAN
ANTONIO, TEXAS 78205-2233. TELEPHONE REQUESTS MAY BE DIRECTED TO
SPECIALIST-EXTERNAL REPORTING AT (210) 351-3049. DOCUMENTS RELATING TO PAC,
EXCLUDING EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED HEREIN, ARE AVAILABLE WITHOUT CHARGE UPON REQUEST TO INVESTOR
SERVICES, PACIFIC TELESIS GROUP, 130 KEARNY STREET, SUITE 2926, SAN FRANCISCO,
CALIFORNIA 94108. TELEPHONE REQUESTS MAY BE DIRECTED TO GINNY ROGERS AT (415)
394-3079. IN ORDER TO ENSURE TIMELY DELIVERY OF ANY OF SUCH DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY _________ __, 1996.

The following documents filed with the SEC by SBC (File No.
1-8610) are incorporated herein by reference: (a) SBC's Annual Report on Form
10-K for the year ended December 31, 1995 (the "1995 SBC 10-K"); (b) SBC's
Current Report on Form 8-K, dated April 1, 1996; (c) the description of SBC
Common Stock contained in SBC's Registration Statement on Form 10, dated
November 15, 1983; and (d) SBC's Registration Statement on Form 8-A, dated
February 9, 1989, together with amendments thereto.

The following documents filed with the SEC by PAC (File No.
1-8609) are incorporated herein by reference: (a) PAC's Annual Report on Form
10-K for the fiscal year ended December 31, 1995 (the "1995 PAC 10-K"); (b)
PAC's Current Reports on Form 8-K, dated January 4, 1996 and April 1, 1996; (c)
the description of PAC Common Stock contained in PAC's Registration Statement
on Form 10, dated November 15, 1983; and (d) PAC's Registration Statement on
Form 8-A, dated September 25, 1989, together with amendments thereto.

All documents filed by either SBC or PAC pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof
shall be deemed to be incorporated herein by reference and to be a part hereof
from the date of such filing. Any statement contained herein or in a document
incorporated or deemed to be incorporated herein by reference shall be deemed
to be modified or superseded for purposes hereof to the extent that a statement
contained

ii
<PAGE> 12
herein or in any other subsequently filed document which also is, or is deemed
to be, incorporated herein by reference modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed to constitute
a part hereof, except as so modified or superseded.

No person is authorized to give any information or to make any
representations not contained in this Joint Proxy Statement/Prospectus or in
the documents incorporated herein by reference in connection with the
solicitation and the offering made hereby and, if given or made, such
information or representation should not be relied upon as having been
authorized by SBC or PAC. This Joint Proxy Statement/Prospectus does not
constitute an offer to sell, or a solicitation of an offer to purchase, the
securities offered by this Joint Proxy Statement/Prospectus, or the
solicitation of a proxy from any person, in any jurisdiction in which it is
unlawful to make such offer, solicitation of an offer or proxy solicitation.
Neither the delivery of this Joint Proxy Statement/Prospectus nor any
distribution of the securities made under this Joint Proxy Statement/Prospectus
hereunder shall, under any circumstances, create an implication that there has
been no change in the affairs of SBC or PAC since the date of this Joint Proxy
Statement/Prospectus other than as set forth in the documents incorporated
herein by reference.

iii
<PAGE> 13
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page Page
---- ----
<S> <C> <C> <C>
Available Information . . . . . . . . . . . . . . . ii Interests of Certain Persons in the Merger 43
Incorporation of Certain Information by Reference . ii Appraisal Rights . . . . . . . . . . . . . 46
Summary . . . . . . . . . . . . . . . . . . . . . . 1 Exchange of Certificates . . . . . . . . . 46
The Companies . . . . . . . . . . . . . . 1 New York Stock Exchange Listing;
Recent Developments . . . . . . . . . . . 1 De-Listing of PAC Common Stock . . 47
The Special Meetings . . . . . . . . . . . 2 Certain Federal Income Tax Consequences
The Merger . . . . . . . . . . . . . . . . 2 of the Merger . . . . . . . . . . . . . . 47
Certain Federal Income Tax Consequences. . 10 General . . . . . . . . . . . . . . . . . 47
Certain Effects of the Merger on the Consequences to PAC Shareowners . . . . . 47
Rights of Holders of PAC Common Fractional Shares . . . . . . . . . . . . 48
Stock . . . . . . . . . . . . . . 10 Consequences to PAC, SBC, Merger Sub and
Comparative Stock Prices . . . . . . . . . 11 Holders of SBC Common Stock . . . 48
Selected Historical and Pro Forma Combined Unaudited Pro Forma Combined Condensed Financial
Statements of SBC Communications Inc.
Financial Data . . . . . . . . . . . . 12 and Pacific Telesis Group . . . . . . . . 49
Notes to Selected Historical and Pro Forma SBC Communications Inc. and Pacific Telesis Group
Combined Financial Data . . . . . . . . 13 Notes to Unaudited Pro Forma Combined
The Special Meetings . . . . . . . . . . . . . . . 14 Condensed Financial Statements . . . . . . 54
General . . . . . . . . . . . . . . . . . 14 Description of SBC Capital Stock . . . . . . . . . 55
Date, Place and Time . . . . . . . . . . . 14 SBC Common Stock . . . . . . . . . . . . . 55
Record Dates . . . . . . . . . . . . . . . 15 SBC Preferred . . . . . . . . . . . . . . 55
Votes Required . . . . . . . . . . . . . . 15 Description of SBC Rights . . . . . . . . 56
Voting and Revocation of Proxies . . . . . 16 Comparison of Certain Rights of
Solicitation of Proxies . . . . . . . . . 16 Shareowners of SBC and PAC . . . . . . . . 57
Appraisal Rights . . . . . . . . . . . . . 17 General . . . . . . . . . . . . . . . . . 57
The Companies . . . . . . . . . . . . . . . . . . . 17 Size and Classification of the Board of
Recent Developments . . . . . . . . . . . . . . . . 17 Directors; Director Designees . . 58
The Merger . . . . . . . . . . . . . . . . . . . . 18 Removal of Directors; Filling Vacancies
General . . . . . . . . . . . . . . . . . 18 on the Board of Directors . . . . 58
Background of the Merger . . . . . . . . . 18 Action by Written Consent . . . . . . . . 59
Reasons for the Merger; Recommendations Meetings of Shareowners . . . . . . . . . 59
of the Boards of Directors . . . . 19 Shareowner Proposals and Shareowner
Opinions of Financial Advisors . . . . . . 23 Nominations of Directors . . . . . 60
Cautionary Statement Concerning Required Vote for Authorization of Certain
Forward-Looking Statements . . . . . . 29 Actions . . . . . . . . . . . . . 60
Terms of the Merger . . . . . . . . . . . 30 Amendment of Corporate Charter and Bylaws 61
Effective Time; Closing . . . . . . . . . 31 Appraisal and Dissenters' Rights . . . . . 62
Representations and Warranties . . . . . . 31 Fair Price and Anti-Greenmail Provisions 62
Conduct of Business Prior to Effective State Antitakeover Statutes . . . . . . 63
Time; Certain Covenants; Rights Plans . . . . . . . . . . . . . . . 64
Acquisition Limitation on Directors' Liability . . . . 65
Proposals . . . . . . . . . . . . 32 Indemnification of Officers and Directors 65
Certain Regulatory Matters . . . . . . . . 34 Cumulative Voting . . . . . . . . . . . . 66
Employee Benefits . . . . . . . . . . . . 36 Conflict-of-Interest Transactions . . . . 66
Indemnification and Insurance . . . . . . 36 Dividends and Other Distributions . . . . 66
Conditions . . . . . . . . . . . . . . . . 37 Duties of Directors . . . . . . . . . . . 66
Modification or Amendment; Waiver of Issuance of Rights or Options to Purchase
Conditions . . . . . . . . . . . . 38 Shares to Directors, Officers and
Termination . . . . . . . . . . . . . . . 38 Employees . . . . . . . . . . . . 67
Certain Termination Fees . . . . . . . . . 40 Loans to Directors . . . . . . . . . . . . 67
Expenses . . . . . . . . . . . . . . . . . 41 Experts . . . . . . . . . . . . . . . . . . . . . . 67
Regulatory Approval Costs . . . . . . . . 41 Validity of Shares . . . . . . . . . . . . . . . . 67
Accounting Treatment . . . . . . . . . . . 42
Resale of SBC Capital Stock . . . . . . . 42
</TABLE>

APPENDIX A: Agreement and Plan of Merger
APPENDIX B: Opinion of Lazard Freres & Co. LLC, dated as of __________,
1996
APPENDIX C: Opinion of Salomon Brothers Inc, dated as of __________, 1996

iv
<PAGE> 14

SUMMARY

The following is a summary of certain information contained
elsewhere in this Joint Proxy Statement/Prospectus, does not purport to be
complete and is qualified in its entirety by reference to the full text of this
Joint Proxy Statement/ Prospectus, including the Appendices attached hereto and
the documents incorporated herein by reference. The information contained in
this Joint Proxy Statement/Prospectus with respect to SBC and Merger Sub has
been supplied by SBC, and the information with respect to PAC has been supplied
by PAC.

THE COMPANIES

SBC

SBC is a communications holding company, which in 1995 had
operating revenues of approximately $12.67 billion and income before
extraordinary loss of approximately $1.89 billion. At December 31, 1995, SBC
had total assets of approximately $22 billion. SBC's subsidiaries are engaged
principally in communications and information services, including the provision
of telecommunications services in Texas, Missouri, Oklahoma, Kansas and
Arkansas. SBC was incorporated under the laws of the State of Delaware in 1983
by AT&T Corp. ("AT&T") as one of seven regional holding companies formed to
hold AT&T's local telephone companies. AT&T divested SBC by means of a
spin-off of stock to AT&T shareowners on January 1, 1984. The divestiture was
made pursuant to a consent decree, settling antitrust litigation, issued by the
United States District Court for the District of Columbia (the "Consent
Decree").

The mailing address of SBC's principal executive offices is
175 East Houston, San Antonio, Texas 78205-2233, and its telephone number is
(210) 821-4105.

PAC

PAC was incorporated under the laws of the State of Nevada in
1983 by AT&T as one of seven regional holding companies formed to hold AT&T's
local telephone companies. AT&T divested PAC by means of a spin-off of stock to
AT&T shareowners on January 1, 1984. The divestiture was made pursuant to the
Consent Decree. PAC includes two wholly-owned operating telephone companies,
Pacific Bell and Nevada Bell, and certain diversified subsidiaries. PAC
provides financial and strategic planning and general administrative functions
on its own behalf and on behalf of its subsidiaries. In 1995, PAC had operating
revenues of approximately $9.04 billion and income before extraordinary item of
approximately $1.05 billion. At December 31, 1995, PAC had total assets of
approximately $16 billion.

The mailing address of PAC's principal executive offices is
130 Kearny Street, San Francisco, California 94108, and its telephone number is
(415) 394-3000.

Merger Sub

Merger Sub, a wholly-owned subsidiary of SBC, was formed by
SBC solely for the purpose of effecting the Merger. The mailing address of
Merger Sub's principal executive offices is 175 East Houston, San Antonio,
Texas 78205-2233, and its telephone number is (210) 821-4105.

RECENT DEVELOPMENTS

On April 17, 1996, SBC released its operating results for the
first quarter of 1996. SBC announced net income of $464.0 million, a 17.4%
increase over the first quarter of 1995; earnings per share of $0.76, a 16.9%
increase over the first quarter of 1995; operating revenue of $3.2 billion, a
9.9% increase over the first quarter of 1995; and operating expenses of $2.4
billion, an 8.8% increase over the first quarter of 1995.
<PAGE> 15

THE SPECIAL MEETINGS

SBC

The SBC Special Meeting to consider and vote on approval and
adoption of the Merger Agreement and approval of the transactions contemplated
thereby, including the issuance of the shares of SBC Common Stock pursuant to
the Merger Agreement, will be held on __________ __, 1996 at ______ [a.m.]
[p.m.], local time, at _______________. Only holders of record of SBC Common
Stock at the close of business on __________ __, 1996 (the "SBC Record Date")
will be entitled to vote at the SBC Special Meeting. At March 31, 1996, there
were 609,247,226 shares of SBC Common Stock outstanding and entitled to vote.
Each share of SBC Common Stock is entitled to one vote.

The affirmative vote of a majority of the votes cast at the
SBC Special Meeting is necessary for the approval and adoption of the Merger
Agreement and approval of the transactions contemplated thereby, including the
issuance of the shares of SBC Common Stock pursuant thereto.

As of March 31, 1996, directors and executive officers of SBC
and their affiliates beneficially owned an aggregate of 1,783,716 shares of SBC
Common Stock (including shares which may be acquired within 60 days upon
exercise of stock options) or less than 1% of the shares of SBC Common Stock
outstanding on such date. The directors and executive officers of SBC have
indicated their intention to vote their shares of SBC Common Stock in favor of
approval and adoption of the Merger Agreement and approval of the transactions
contemplated thereby, including the issuance of the shares of SBC Common Stock
pursuant to the Merger Agreement.

PAC

The PAC Special Meeting to consider and vote on approval and
adoption of the Merger Agreement and approval of the transactions contemplated
thereby will be held on __________ __, 1996 at ______ [a.m.] [p.m.], local
time, at ___________________. Only holders of record of PAC Common Stock at
the close of business on __________ __, 1996 (the "PAC Record Date") will be
entitled to vote at the PAC Meeting. At March 31, 1996, there were 428,434,672
shares of PAC Common Stock outstanding and entitled to vote. Each share of PAC
Common Stock is entitled to one vote.

Approval and adoption of the Merger Agreement and approval of
the transactions contemplated thereby require the affirmative vote of at least
a majority of the outstanding shares of PAC Common Stock.

As of March 31, 1996, directors and executive officers of PAC
and its affiliates owned beneficially an aggregate of 783,219 shares of PAC
Common Stock (including shares which may be acquired within 60 days upon
exercise of stock options) or less than 1% of the shares of PAC Common Stock
outstanding on such date. The directors and executive officers of PAC have
indicated their intention to vote their shares of PAC Common Stock in favor of
approval and adoption of the Merger Agreement and approval of the transactions
contemplated thereby.

For additional information relating to the Special Meetings,
see "The Special Meetings."

THE MERGER

The Merger Agreement provides for a business combination of
SBC and PAC in which, subject to the satisfaction of the conditions therein,
Merger Sub will be merged with and into PAC and the holders of shares of PAC
Common Stock (other than Excluded PAC Common Stock) will be issued SBC Common
Stock in a transaction intended to qualify as a "pooling of interests" for
accounting purposes and as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), for
federal income tax purposes. In the Merger, each issued and outstanding share
of PAC Common Stock will be converted into the right to receive, and become
exchangeable for, 0.733 of a share of SBC Common Stock, subject to adjustment
in certain circumstances as set forth in the Merger Agreement and as described
herein under "The Merger -- Terms of the Merger" (such number, as it may be
adjusted in accordance with the terms of the Merger Agreement, shall be
referred to herein as the "Exchange

2
<PAGE> 16

Ratio"), together with an appropriate number of preferred stock purchase rights
(the "SBC Rights") attached thereto. See "Description of SBC Capital Stock --
Description of SBC Rights." Each outstanding share of SBC Common Stock will
remain outstanding and be unaffected by the Merger. As a result of the Merger,
holders of PAC Common Stock immediately prior to the Merger will own
approximately 34% of SBC Common Stock after the Merger (based on the number of
shares of SBC Common Stock and PAC Common Stock outstanding as of March 31,
1996 and assuming the Exchange Ratio is equal to 0.733).

In the event that the Exchange Ratio is adjusted to less than
0.667 of a share of SBC Common Stock (other than as a result of certain
equitable adjustments necessitated by a distribution, reclassification, stock
split, stock dividend or similar transaction with respect to the SBC Common
Stock) in accordance with the terms of the Merger Agreement, then PAC shall, as
promptly as practicable after the determination of such Exchange Ratio, convene
another meeting of the shareowners of PAC at which the holders of PAC Common
Stock will be requested again to consider and vote upon the transactions
contemplated by the Merger Agreement, taking into account such Exchange Ratio.
See "The Merger -- Terms of the Merger."

No fractional shares of SBC Common Stock will be issued in the
Merger. Instead, the Merger Agreement provides that each holder of PAC Common
Stock who would otherwise be entitled to receive fractional shares of SBC
Common Stock will be entitled to receive, in lieu thereof, cash (without
interest) representing such holder's proportionate interest in a share of SBC
Common Stock based on the closing price of a share of SBC Common Stock, as
reported in The Wall Street Journal, New York City edition, on the trading day
immediately prior to the Effective Time (as defined under "-- The Merger --
Effective Time").

Reasons for the Merger; Recommendations of the Boards of Directors

SBC

The SBC Board of Directors (the "SBC Board") has determined
unanimously (by vote of all directors present) that the Merger Agreement and
the transactions contemplated thereby are fair to, and in the best interests
of, SBC's shareowners. Accordingly, the SBC Board has unanimously approved (by
vote of all directors present) the Merger Agreement and unanimously recommends
that the shareowners of SBC vote FOR approval and adoption of the Merger
Agreement and approval of the transactions contemplated thereby, including the
issuance of the shares of SBC Common Stock pursuant to the Merger Agreement.
The recommendation of the SBC Board is based on a number of strategic,
operating and financial factors as described in "The Merger -- Reasons for the
Merger; Recommendations of the Boards of Directors -- SBC."

PAC

The PAC Board of Directors (the "PAC Board") has unanimously
determined that the terms of the Merger Agreement and the transactions
contemplated thereby are fair to, and in the best interests of, PAC and its
shareowners. Accordingly, the PAC Board has unanimously approved the Merger
Agreement and unanimously recommends that the shareowners of PAC vote FOR
approval and adoption of the Merger Agreement and approval of the transactions
contemplated thereby. The recommendation of the PAC Board is based on a number
of strategic, operating and financial factors as described in "The Merger --
Reasons for the Merger; Recommendations of the Boards of Directors -- PAC."

Opinions of Financial Advisors

SBC

Lazard Freres & Co. LLC ("Lazard Freres") has delivered its
written opinion, dated as of April 1, 1996 which it has confirmed as of the
date of this Joint Proxy Statement/Prospectus, to the SBC Board, to the effect
that, as of such dates, the Exchange Ratio is fair to SBC from a financial
point of view. See "The Merger -- Opinions of Financial

3
<PAGE> 17

Advisors -- SBC." A copy of the opinion of Lazard Freres, dated as of the date
hereof, which sets forth the assumptions made, procedures followed, matters
considered and limitations on the scope of the review by Lazard Freres in
rendering its opinion, is attached as Appendix B to this Joint Proxy
Statement/Prospectus. HOLDERS OF SBC COMMON STOCK ARE URGED TO READ LAZARD
FReRES' OPINION IN ITS ENTIRETY.

PAC

Salomon Brothers Inc ("Salomon") has delivered written
opinions, dated as of April 1, 1996 and as of the date of this Joint Proxy
Statement/Prospectus, to the PAC Board to the effect that, as of such dates,
the Exchange Ratio is fair to the holders of PAC Common Stock from a financial
point of view. See "The Merger -- Opinions of Financial Advisors -- PAC." A
copy of the opinion of Salomon, dated as of the date hereof, which sets forth
the assumptions made, procedures followed, matters considered and limitations
on the scope of review by Salomon in rendering its opinion, is attached as
Appendix C to this Joint Proxy Statement/ Prospectus. HOLDERS OF PAC COMMON
STOCK ARE URGED TO READ SALOMON'S OPINION IN ITS ENTIRETY.

Effective Time

The Merger will become effective at the time when the Articles
of Merger have been duly filed with the Secretary of State of Nevada or such
other time as shall be agreed upon by the parties and set forth in the Articles
of Merger and in accordance with the Nevada Private Corporations Law (the
"NPCL") (the "Effective Time"). See "The Merger -- Effective Time; Closing."

Exchange of Certificates

Promptly after the Effective Time, the exchange agent will
mail transmittal instructions to each shareowner of record of PAC Common Stock
(other than Excluded PAC Common Stock), advising such shareowner of the
procedure for surrendering PAC Common Stock certificates (each, a "PAC
Certificate") in exchange for SBC Common Stock certificates (each, an "SBC
Certificate") and obtaining cash in lieu of any fractional share of SBC Common
Stock. See "The Merger -- Exchange of Certificates" and "The Merger -- Terms of
the Merger."

Covenants

The Merger Agreement provides that, during the period from the
date of the Merger Agreement until the Effective Time, except as otherwise
contemplated by the Merger Agreement, as consented to by the other party or as
required by applicable law, rule or regulation, each of SBC and PAC will, and
each of their respective subsidiaries will, conduct its business only in the
ordinary and usual course and use all reasonable efforts to preserve its
business organization intact and maintain its existing relations and goodwill
with customers, suppliers, regulators, distributors, creditors, lessors,
employees and business associates. See "The Merger -- Conduct of Business
Prior to Effective Time; Certain Covenants; Acquisition Proposals" and "--
Operational Covenants" for a discussion of additional restrictions on SBC, PAC
and their respective subsidiaries with respect to the conduct of their
respective businesses prior to the Effective Time.

The Merger Agreement provides that neither SBC nor PAC or any
of their respective subsidiaries will (i) initiate, solicit, encourage or
otherwise facilitate any inquiries or the making of any proposal or offer with
respect to a merger, reorganization, share exchange, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities of, it or any of its subsidiaries that, in any
such case, could reasonably be expected to lead to a breach of the Merger
Agreement or otherwise interfere with the completion of the Merger (an
"Acquisition Proposal") or (ii) have any discussion with or provide any
confidential information or data to any person relating to an Acquisition
Proposal or engage in any negotiations concerning an Acquisition Proposal. The
Merger Agreement does not prohibit, however, either SBC or PAC from engaging in
any discussions or negotiations with, or providing any information to, any
person in response to an unsolicited bona fide written Acquisition Proposal by
any such person or recommending an unsolicited bona fide written Acquisition
Proposal to the shareowners of SBC or PAC, as the case may be, if certain
prerequisite determinations are made by the SBC

4
<PAGE> 18

Board or the PAC Board, as the case may be, although taking any such actions
will give the other party the right to terminate the Merger Agreement. See "The
Merger -- Termination." The Merger Agreement provides that SBC and PAC each
agrees that it will notify the other immediately if it receives an Acquisition
Proposal indicating, in connection with such notice, the name of the person
making such proposal and the terms and conditions of any proposals or offers,
and thereafter shall keep SBC or PAC, as the case may be, informed, on a
current basis, of the status of any ensuing discussions or negotiations. See
"The Merger -- Conduct of Business Prior to Effective Time; Certain Covenants;
Acquisition Proposals."

Regulatory Matters

Under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the rules promulgated thereunder, certain
transactions, including the Merger, may not be consummated unless certain
waiting period requirements have been satisfied. SBC and PAC each filed a
Premerger Notification and Report Form (a "Notification and Report Form")
pursuant to the HSR Act with the Antitrust Division of the Department of
Justice ("DOJ") and the Federal Trade Commission ("FTC") on April 10, 1996. At
any time before or after the Effective Time, the FTC, the DOJ or others could
take action under the antitrust laws with respect to the Merger, including
seeking to enjoin the consummation of the Merger, to rescind the Merger or to
require divestiture of substantial assets of SBC or PAC. There can be no
assurance that a challenge to the Merger on antitrust grounds will not be made
or, if such a challenge is made, that it would not be successful.

In addition, PAC and SBC are required to file notices with,
and obtain approvals or consents from, the Federal Communications Commission
(the "FCC") pursuant to the Communications Act of 1934, as amended (the
"Communications Act"), and the California Public Utilities Commission ("CPUC").
SBC and PAC also intend to make an informational filing with the Nevada Public
Service Commission ("NPSC").

The transfer of control from PAC to SBC of PAC's subsidiaries
holding certain FCC licenses and authorizations must be approved by the FCC
based on the FCC's evaluation as to whether the public interest, convenience
and necessity will be served by such transfer of control.

PAC's primary operating subsidiaries, Pacific Bell and Nevada
Bell, are public utilities subject to the respective jurisdictions of the CPUC
and NPSC. SBC and PAC will be filing an application with the CPUC requesting its
authorization, to the extent required under Section 854 of the California
Public Utilities Code ("Section 854"), to approve an indirect change in control
of Pacific Bell, which will become an indirect wholly-owned subsidiary of SBC.
Before authorizing a change of control under Section 854(b), the CPUC is
required to find that the Merger provides short- and long-term economic
benefits to customers and to allocate equitably these forecasted economic
benefits, as found by the CPUC, between shareowners and customers, with
customers receiving not less than 50% of any such benefits. The CPUC's
determination of forecasted economic benefits is limited to services within its
jurisdiction and over which it exercises ratemaking authority. The CPUC is not
required to use any particular method for assuring that customers receive any
forecasted economic benefits and, in markets where competition exists, the CPUC
can rely on competition to produce the economic benefits. The CPUC also is
required under Section 854(b) to determine that a change in control does not
adversely affect competition in the provision of telephone service in
California and, in making that determination, it is required to request an
advisory opinion from the Attorney General of the State of California.

Under Section 854(c), the CPUC is required to consider eight
separate criteria, including whether the indirect change in control is fair and
reasonable to public utility employees and to shareowners. Based on its
consideration of those criteria, the CPUC is required to find that, on balance,
the change of control is in the public interest.

The application that SBC and PAC intend to file with the CPUC
will demonstrate compliance with Section 854 provisions.

PAC and SBC believe that the Merger will produce benefits to
the State of California, to its citizens and to PAC's customers. PAC and SBC
also believe that the indirect change of control of Pacific Bell

5
<PAGE> 19

will not have an adverse effect on competition in the provision of telephone
service in California. See "The Merger -- Certain Regulatory Matters."

SBC and PAC have agreed in the Merger Agreement to cooperate
with each other and use all their respective reasonable efforts to take all
actions necessary, proper or advisable to obtain as promptly as practicable all
required consents, registrations, authorizations, permits and approvals from
any governmental or regulatory authority, court, agency, commission, body or
other governmental entity (each, a "Governmental Entity") and/or third party
that is necessary to be obtained to consummate the Merger or any of the other
transactions contemplated by the Merger Agreement. Notwithstanding the
foregoing, except as contemplated in connection with the allocation of
Regulatory Approval Costs (as described under "The Merger -- Regulatory
Approval Costs"), neither SBC nor PAC is required to proffer to, or agree to,
any concession to any Governmental Entity that SBC concludes is reasonably
likely to materially reduce the economic or business benefits SBC expects, as
of the date of the Merger Agreement, to realize from the Merger. See "The
Merger -- Certain Regulatory Matters."

Employee Benefits

Pursuant to the Merger Agreement, each outstanding option
(each, a "PAC Option") to purchase PAC Common Stock under the PAC 1994 Stock
Incentive Plan, the PAC Nonemployee Director Stock Option Plan and the PAC
Stock Option and Stock Appreciation Rights Plan ( collectively, "PAC Stock
Option Plans"), whether vested or unvested, will be deemed to constitute an
option to acquire the same number of shares of SBC Common Stock as the holder
of such PAC Option would have been entitled to receive at the Effective Time
had such holder exercised such PAC Option in full immediately prior to the
Effective Time at an exercise price per share equal to (x) the aggregate
exercise price for the PAC Common Stock otherwise purchasable pursuant to such
PAC Option, divided by (y) the number of full shares of SBC Common Stock deemed
purchasable pursuant to such PAC Option. At the Effective Time, SBC will assume
each PAC Option in accordance with the terms of the PAC Stock Option Plan under
which it was issued and the stock option agreement by which it was evidenced.

Pursuant to the Merger Agreement, SBC will cause the Surviving
Corporation for at least two years after the Effective Time to provide or cause
to be provided to the employees of PAC and its subsidiaries compensation and
benefit plans that are no less favorable, in the aggregate, than the
compensation and benefit plans maintained by PAC and its subsidiaries ("PAC's
Compensation and Benefit Plans"), subject to adjustment in the event SBC
implements widespread increases or decreases in benefits or the cost thereof
with respect to compensation and benefit plans applicable to employees of SBC
and its subsidiaries (other than the Surviving Corporation and its
subsidiaries) and to terms of applicable collective bargaining agreements. At
or prior to the Effective Time, PAC will make all necessary arrangements to
cause any PAC Common Stock units under PAC's Compensation and Benefit Plans to
be converted into share units with respect to SBC Common Stock by multiplying
the number of shares of PAC Common Stock subject to such PAC Common Stock units
by a fraction of a share of SBC Common Stock equal to the Exchange Ratio. SBC
has agreed to honor (and to cause the Surviving Corporation to honor), pursuant
to their terms, all employee benefit obligations to current and former
employees under PAC's Compensation and Benefit Plans.

Pursuant to the Merger Agreement, each outstanding share of
PAC Common Stock that is restricted under the PAC 1994 Stock Incentive Plan or
PAC Restricted Stock Plan shall be converted into the right to receive, and
become exchangeable for, a fraction of a share of SBC Common Stock equal to the
Exchange Ratio, having the same restrictions, terms and conditions as were
applicable to such restricted share of PAC Common Stock.

In addition, pursuant to the Merger Agreement, each
outstanding stock unit under the PAC Outside Directors' Deferred Stock Unit
Plan shall be converted into the right to receive a stock unit representing a
fraction of a share of SBC Common Stock equal to the Exchange Ratio and having
the same terms and conditions as were applicable to such stock unit before the
Effective Time. See "The Merger -- Employee Benefits."

6
<PAGE> 20

Conditions

The respective obligations of SBC, Merger Sub and PAC to
consummate the Merger are subject to the satisfaction (or waiver) at or prior
to the Effective Time of a number of conditions, including, among others, the
following: (a) approval by the shareowners of PAC of the matters required to be
approved by such shareowners at the PAC Special Meeting, (b) approval by the
shareowners of SBC of the matters required to be approved by such shareowners
at the SBC Special Meeting, (c) expiration or termination of the waiting period
applicable to the Merger under the HSR Act, (d) the decision and order of the
CPUC authorizing certain matters in connection with the Merger and making such
determinations as may be required under Section 854(a)-(c), including its
determination as to any required allocation of economic benefits, if any, of
the Merger, between shareowners and ratepayers, having become final, and the
receipt of all other material consents, authorizations, orders, and approvals
of (or filings or registrations with) any Governmental Entity (including the
FCC) or any third party, in accordance with the terms set forth in the Merger
Agreement, (e) there being in effect no provision of any applicable law, rule
or regulation and no judgment, injunction, order or decree of a court that
would restrain or otherwise prohibit the consummation of the Merger or that has
or is reasonably likely to have a material adverse effect on SBC or PAC, (f)
the declaration of effectiveness by the SEC under the Securities Act of the
Registration Statement, of which this Joint Proxy Statement/Prospectus is a
part, and no stop order suspending such effectiveness being in effect and no
proceedings for such purpose having been initiated or threatened by the SEC,
(g) approval for listing on the NYSE, subject to official notice of issuance,
of SBC's Common Stock to be issued in the Merger, (h) receipt by SBC and PAC of
opinions from their respective independent public accounting firms to the
effect that the Merger will qualify for "pooling of interests" accounting
treatment, (i) receipt by SBC and PAC of opinions from their respective legal
counsel to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code
and (j) determination and allocation of the Regulatory Approval Costs as
described under "The Merger -- Regulatory Approval Costs". See "The Merger --
Conditions."

Modification or Amendment; Waiver of Conditions

The Merger Agreement provides that, subject to the provisions
of applicable law, at any time prior to the Effective Time, the parties to the
Merger Agreement may modify or amend the Merger Agreement by written agreement.
The Merger Agreement also provides that the conditions to each party's
obligation to consummate the Merger may be waived by such party in whole or in
part to the extent permitted by applicable law. See "The Merger -- Modification
or Amendment; Waiver of Conditions."

Termination

The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, (a) whether before or after
any requisite approval by the shareowners of SBC or PAC, by mutual written
consent of SBC and PAC, or (b) by either SBC or PAC if (i) the Merger is not
consummated by March 31, 1997, whether such date is before or after the date of
approval by the shareowners of SBC or PAC (provided, however, that if SBC or
PAC determines that additional time is necessary in connection with obtaining a
required approval of the CPUC, such date may be extended by SBC or PAC to a
date not later than December 31, 1997); (ii) any of the shareowner approvals
required pursuant to the Merger Agreement have not been obtained; (iii) any
order permanently restraining, enjoining or otherwise prohibiting consummation
of the Merger has become final and non-appealable (whether before or after the
approval by the shareowners of PAC or SBC); (iv) the other party is in material
breach of a representation or warranty made by such party in the Merger
Agreement or materially fails to comply with any of the covenants or agreements
to be performed by such party pursuant to the Merger Agreement and such breach
or failure to perform is not curable or is not cured within 30 days after
notice of such breach is given by the non-breaching party; (v) the board of
directors of the other party withdraws or adversely modifies its recommendation
of the Merger Agreement or (vi) the other party (or any of its directors,
officers, employees or representatives) commences or authorizes negotiations
with (or provides certain information to) third parties in connection with
certain Acquisition Proposals. The Merger Agreement may also be terminated by
PAC (a) if PAC is not in material breach of the Merger Agreement and the PAC
Board approves entering into an agreement that constitutes a Superior Proposal
(as defined under "The Merger -- Conduct of Business Prior to the Effective
Time; Certain Covenants; Acquisition

7
<PAGE> 21

Proposals -- Acquisition Proposals") and SBC does not, within ten business
days, make a counter-proposal at least as favorable to the shareowners of PAC
from a financial point of view as the Superior Proposal, (b) if the persons
comprising the members of the SBC Board as of April 1, 1996 (the "Incumbent
Directors") and any additional members of the SBC Board whose election or
nomination for election as a director is supported by a majority of the
Incumbent Directors (such additional member of the SBC Board thereafter being
an Incumbent Director) shall cease to constitute a majority of the members of
the SBC Board or any person or "group" (as defined in Rule 13d-5 under the
Exchange Act) shall own capital stock of SBC with voting power sufficient to
cast a majority of the votes entitled to be cast for the election of directors
of SBC, or (c) if SBC, in any calendar year, enters into an agreement or
agreements to spend in excess of $5 billion to acquire one or more businesses,
by merger, consolidation or otherwise. In addition, the Merger Agreement will
terminate if the allocation of Regulatory Approval Costs in accordance with the
terms of the Merger Agreement does not occur. See "The Merger -- Termination."

If the Merger Agreement is terminated under certain specified
circumstances, certain termination fees are payable by one party to the other.
See "The Merger -- Certain Termination Fees."

Accounting Treatment

SBC and PAC believe that the Merger will qualify as a "pooling
of interests" for accounting and financial reporting purposes, and have been so
advised by their respective independent public accountants. Under this method
of accounting, SBC will restate its consolidated financial statements at the
Effective Time to include the assets, liabilities, shareowners' equity and
results of operations of PAC.

Consummation of the Merger is conditioned upon the receipt by
each of SBC and PAC of a letter from their respective independent public
accountants stating that the Merger, in their respective opinions, will qualify
as a "pooling of interests" for accounting purposes. See "The Merger --
Accounting Treatment" and "-- Conditions" and "Unaudited Pro Forma Combined
Condensed Financial Information."

Interests of Certain Persons in the Merger

In considering the recommendations of PAC's Board, shareowners
should be aware that certain members of management of PAC and of the PAC Board
have certain interests in the Merger that are in addition to the interests of
shareowners generally. See "The Merger -- Interests of Certain Persons in the
Merger."

Employee Benefits

As described under "The Merger -- Employee Benefits," pursuant
to the Merger Agreement, each PAC Option, whether vested or unvested, will be
deemed to constitute an option to acquire the same number of shares of SBC
Common Stock as the holder of such PAC Option would have been entitled to
receive at the Effective Time had such holder exercised such PAC Option in full
immediately prior to the Effective Time at an exercise price per share equal to
(x) the aggregate exercise price of the shares of PAC Common Stock otherwise
purchasable pursuant to such PAC Option, divided by (y) the number of full
shares of SBC Common Stock deemed purchasable pursuant to such PAC Option.

Pursuant to the Merger Agreement, SBC has agreed to honor (and
to cause the Surviving Corporation to honor), pursuant to their terms, all
employee benefit obligations to current and former employees under PAC's
Compensation and Benefit Plans, including obligations to the officers of PAC
under existing employment and severance agreements. Approval of the Merger
Agreement by PAC's shareowners will constitute a change in control under such
employment and severance agreements, pursuant to which special severance
payments will be payable upon certain involuntary terminations (including a
constructive termination, as defined in the employment and severance
agreements) during the three-year period following a change in control. See
"The Merger -- Interests of Certain Persons in the Merger."

8
<PAGE> 22

exchangeable for, a fraction of a share of SBC Common Stock equal to the
Exchange Ratio, having the same restrictions, terms and conditions as were
applicable to such restricted share of PAC Common Stock.

Pursuant to the Merger Agreement, each outstanding stock unit
under the PAC Outside Directors' Deferred Stock Unit Plan shall be converted
into the right to receive a stock unit representing a fraction of a share of
SBC Common Stock equal to the Exchange Ratio and having the same terms and
conditions as were applicable to such stock unit before the Effective Time. See
"The Merger -- Employee Benefits."

Pursuant to the terms of the PAC 1994 Stock Incentive Plan,
all options granted thereunder to nonemployee directors that are not already
exercisable will become exercisable in the event of a change in control.
Approval by PAC's shareowners of the Merger Agreement will constitute a change
in control and accelerate exercisability of the options granted to nonemployee
directors.

The Compensation and Personnel Committee of PAC's Board (the
"PAC Committee") determined that the options granted on March 22, 1996 under
the PAC 1994 Stock Incentive Plan to certain officers and other key employees
of PAC will become immediately exercisable upon a change in control, which for
such purposes would occur at the Effective Time, subject to confirmation by the
SEC accounting staff that such accelerated exercisability of such options will
not affect accounting for the Merger as a "pooling of interests." If such
confirmation is not received, the options granted on March 22, 1996 will vest
over time without regard to the change in control caused by the Merger.

Director and Officer Indemnification and Insurance

Pursuant to the Merger Agreement, from and after the Effective
Time, SBC will indemnify, defend and hold harmless each present and former
director and officer of PAC against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation whether civil, criminal, administrative or investigative arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, to the fullest extent that PAC would have been permitted under
Nevada law and its articles of incorporation or by-laws in effect on the date
of the Merger Agreement to indemnify such person. The Surviving Corporation is
obligated to maintain a policy of directors' and officers' liability insurance
("D&O Insurance") for acts and omissions occurring prior to the Effective Time
with coverage in amount and scope at least as favorable as PAC's existing D&O
Insurance for a period of six years after the Effective Time so long as the
annual premium therefor is not in excess of the last annual premium paid prior
to the date of the Merger Agreement (the "Current Premium"); provided, however,
if the existing D&O Insurance expires, is terminated or cancelled during such
six-year period, the Surviving Corporation will use its best efforts to obtain
D&O Insurance in an amount and scope as great as can be obtained for the
remainder of such period for a premium not in excess of 175% of the Current
Premium. See "The Merger -- Interests of Certain Persons in the Merger --
Director and Officer Indemnification and Insurance."

Board of Directors; Management

Pursuant to the Merger Agreement, SBC has agreed to increase
the size of the SBC Board at the Effective Time of the Merger in order to
enable approximately one-third of the SBC Board to be comprised of directors
designated by the SBC Board in consultation with the Chief Executive Officer of
PAC and the PAC Board from among the members of the PAC Board (the "Director
Designees") and the SBC Board will appoint each of the Director Designees to
the SBC Board as of the Effective Time, with such Director Designees to be
divided as nearly as evenly as is possible among the classes of directors of
SBC. Further, the Merger Agreement provides that at the Effective Time of the
Merger, SBC will cause Mr. Philip J. Quigley to be appointed President and
Chief Executive Officer of the Surviving Corporation and Vice Chairman of the
SBC Board. Certain other executive officers of PAC are expected to become
executive officers of the Surviving Corporation following the Merger.

9
<PAGE> 23

For more complete information concerning the interests of
executives and directors of PAC in the Merger, shareowners of PAC should review
the information set forth under "The Merger -- Interests of Certain Persons in
the Merger."

Appraisal Rights

The Merger Agreement provides that in accordance with Section
92A.390 of the NPCL, no appraisal rights will be available to holders of PAC
Common Stock in connection with the Merger. Holders of SBC Common Stock will
not be entitled to any dissenters' or appraisal rights under Section 262 of the
General Corporation Law of the State of Delaware (the "DGCL") as a result of
the matters to be voted upon at the SBC Special Meeting.

NYSE Listing

Pursuant to the Merger Agreement, SBC has agreed to use its
best efforts to cause the shares of SBC Common Stock to be issued in the Merger
to be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Effective Time.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The Merger is intended to qualify for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code.
Assuming the Merger so qualifies as a reorganization within the meaning of
Section 368(a) of the Code, in general, no gain or loss will be recognized by
holders of PAC Common Stock with respect thereto on the surrender of their PAC
Common Stock in exchange for SBC Common Stock, except with respect to cash
received in lieu of fractional shares, and no gain or loss will be recognized
by SBC or PAC. Under the Merger Agreement, it is a condition precedent to the
respective obligations of SBC and PAC to consummate the Merger that each of SBC
and PAC will have received an opinion of its respective counsel dated the
Closing Date to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code and that each of PAC, SBC and
Merger Sub will be a party to the reorganization within the meaning of Section
368(b) of the Code. For a further discussion of the federal income tax
consequences of the Merger, see "Certain Federal Income Tax Consequences of the
Merger."

CERTAIN EFFECTS OF THE MERGER ON THE RIGHTS OF HOLDERS OF PAC COMMON STOCK

Upon consummation of the Merger, holders of shares of PAC
Common Stock will become shareowners of SBC. The internal affairs of SBC are
governed by the DGCL, SBC's Restated Certificate of Incorporation (the "SBC
Restated Certificate") and Bylaws (the "SBC Bylaws"). The Merger will result in
certain differences in the rights of holders of PAC Common Stock. See
"Description of SBC Capital Stock" and "Comparison of Certain Rights of
Shareowners of SBC and PAC."

10
<PAGE> 24

COMPARATIVE STOCK PRICES

SBC Common Stock and PAC Common Stock are each listed on the
NYSE as well as on certain other exchanges. SBC is listed under the symbol
"SBC" and PAC is listed under the symbol "PAC." The following table sets forth,
for the periods indicated, the high and low sale prices per share of SBC Common
Stock and PAC Common Stock as reported on the NYSE Composite Transactions Tape.

<TABLE>
<CAPTION>
SBC PAC
Common Stock Common Stock
------------ ------------
Calendar Quarter High Low High Low
---------------- ---- --- ---- ---
<S> <C> <C> <C> <C> <C>
1994
----
First Quarter . . . . . . . . . . . . . . $41 7/8 $36 3/4 $58(a) $51(a)
Second Quarter . . . . . . . . . . . . . . 44 1/4 38 1/2 32 3/8 29 7/8
Third Quarter . . . . . . . . . . . . . . 44 1/4 40 1/4 33 1/2 30 1/8
Fourth Quarter . . . . . . . . . . . . . . 43 1/8 39 1/4 32 1/8 28 1/4
1995
----
First Quarter . . . . . . . . . . . . . . 43 7/8 39 5/8 31 1/4 28
Second Quarter . . . . . . . . . . . . . . 47 7/8 41 3/8 31 1/4 25 5/8
Third Quarter . . . . . . . . . . . . . . 55 1/8 45 5/8 30 7/8 25 5/8
Fourth Quarter . . . . . . . . . . . . . . 58 1/2 53 1/8 34 3/8 29 1/8
1996
----
First Quarter . . . . . . . . . . . . . . 60 1/4 49 3/4 35 1/4 25 7/8
Second Quarter (through April 16, 1996) . 50 3/4 46 1/4 34 5/8 31 1/2
- ------------------------
</TABLE>

(a) Effective April 1, 1994, PAC spun off to its shareowners its domestic
and international cellular, paging, and other wireless operations in a
one-for-one stock distribution of its interest in these operations.

On March 29, 1996, the last trading day before the public
announcement of the Merger Agreement, the closing prices of SBC Common Stock
and PAC Common Stock as reported on the NYSE Composite Transactions Tape were
$52 5/8 per share and $27 3/4 per share, respectively. Assuming an Exchange
Ratio of 0.733, the pro forma equivalent per share value of PAC Common Stock on
March 29, 1996 was $38.57 per share. The pro forma equivalent per share value
of PAC Common Stock on any date, assuming an Exchange Ratio of 0.733, equals
the closing sale price of SBC Common Stock on such date, as reported on the
NYSE Composite Transaction Tape, multiplied by 0.733.

On ____________, the closing sale prices of SBC Common Stock
and PAC Common Stock as reported on the NYSE Composite Transactions Tape were
$____ per share and $____ per share ($____ on a pro forma equivalent per share
basis, assuming an Exchange Ratio of 0.733), respectively.

Shareowners are urged to obtain current quotations for the
market prices of SBC Common Stock and PAC Common Stock.

No assurance can be given as to the market prices of SBC
Common Stock or PAC Common Stock at the Effective Time. Because the Exchange
Ratio is fixed in the Merger Agreement (subject to adjustment under certain
circumstances not related to the market value of the SBC Common Stock) and
neither SBC nor PAC has the right to terminate the Merger Agreement based on
changes in the market price of SBC's Common Stock, the market value of the
shares of SBC Common Stock that holders of PAC Common Stock will receive upon
consummation of the Merger may vary significantly from the market value of the
shares of SBC Common Stock that holders of PAC Common Stock would receive if
the Merger were consummated on the date of this Joint Proxy
Statement/Prospectus.

11
<PAGE> 25

SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA

The following table presents selected historical financial
data of SBC and PAC and selected unaudited pro forma combined financial data
after giving effect to the Merger as a "pooling-of-interests." SBC and PAC
selected historical data as of or for each of the five years in the period
ended December 31, 1995 have been derived from audited financial statements
filed with the SEC. The pro forma combined financial data are presented for
illustrative purposes only and are not necessarily indicative of the financial
position or operating results that would have occurred or that will occur upon
consummation of the Merger. The pro forma combined financial data do not give
effect to any cost savings which may result from the integration of SBC's and
PAC's operations. Additionally, the pro forma combined financial data do not
include any transaction costs relating to the Merger, nor do they consider any
reorganization costs that might occur as a result of the Merger. Differences in
accounting policies do not have a material effect on either the pro forma
financial position or pro forma results of operations and have not been
reflected in the unaudited pro forma combined financial data. The following
selected financial data should be read in conjunction with the related
historical and pro forma combined financial statements and notes thereto
incorporated by reference or included herein. See "Available Information,"
"Incorporation of Certain Information by Reference" and "Unaudited Pro Forma
Combined Condensed Financial Statements."

<TABLE>
<CAPTION>
As of or For the Years Ended December 31,
---------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
SBC - HISTORICAL
Operating revenues $ 12,670 $ 11,772 $ 10,840 $ 10,150 $ 9,460
Income from continuing operations 1,889 1,649 1,435 1,302 1,157
Income from continuing operations
per common share 3.10 2.74 2.39 2.17 1.93
Total assets 22,003 26,005 24,308 23,810 23,179
Long-term debt 5,672 5,848 5,459 5,716 5,675
Dividends per common share 1.65 1.58 1.51 1.46 1.42
Book value per common share 10.27 13.72 12.61 15.47 14.77
Network access lines 14.22 13.61 13.15 12.72 12.33

PAC - HISTORICAL
Operating revenues $ 9,042 $ 9,235 $ 9,244 $ 9,108 $ 9,168
Income from continuing operations 1,048 1,136 191 1,173 931
Income from continuing operations
per common share 2.46 2.68 0.46 2.91 2.37

Total assets 15,841 20,139 20,563 21,104 20,563
Long-term debt 4,737 4,897 5,129 5,207 5,395
Dividends per common share 2.18 2.18 2.18 2.18 2.14
Book value per common share 5.11 12.34 11.61 18.53 17.62
Network access lines 15.78 15.32 14.87 14.55 14.26

PRO FORMA COMBINED
Operating revenues $ 21,712 $ 21,007 $ 20,084 $ 19,258 $ 18,628
Income from continuing operations 2,937 2,785 1,626 2,475 2,088
Income from continuing operations
per common share 3.19 3.05 1.80 2.76 2.34

Total assets 37,176 46,144 44,871 44,914 43,742
Long-term debt 10,409 10,745 10,588 10,923 11,070
Dividends per common share 1.65 1.58 1.51 1.46 1.42
Book value per common share 9.15 14.77 13.71 18.72 17.81
Network access lines 30.01 28.93 28.02 27.28 26.59

PAC - EQUIVALENTS
Income from continuing operations
per common share $ 2.34 2.24 1.32 2.02 1.72
Dividends per common share 1.21 1.16 1.11 1.07 1.04
Book value per common share 6.71 10.83 10.05 13.72 13.05
</TABLE>

12
<PAGE> 26

NOTES TO SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA

All data presented for PAC and the pro forma combined company
exclude net assets and results of operations for domestic and international
cellular, paging, and other wireless operations spun off by PAC on April 1,
1994, in a one-for-one stock distribution of its interest in these operations.

The unaudited pro forma combined cash dividends declared per
common share are assumed to be the same as the cash dividends declared by SBC
on an historical basis. PAC has agreed that effective with the dividend for the
second quarter of 1996 its quarterly dividend per share will not exceed 0.733
multiplied by SBC's quarterly dividend per share. Dividends per share of the
combined company are expected to be equivalent to the dividend per share of SBC
Common Stock.

The PAC-Equivalents per share amounts are calculated by
multiplying the pro forma combined per share amounts by an assumed Exchange
Ratio of 0.733.

13
<PAGE> 27
THE SPECIAL MEETINGS

GENERAL

SBC

This Joint Proxy Statement/Prospectus is being furnished to
holders of SBC Common Stock in connection with the solicitation of proxies by
the SBC Board for use at the SBC Special Meeting, to be held on ______ __,
1996, and any adjournments or postponements thereof to consider and vote upon
the approval and adoption of the Merger Agreement and approval of the
transactions contemplated thereby, including the issuance of SBC Common Stock
pursuant to the Merger Agreement, and to transact such other business as may
properly come before the SBC Special Meeting or any adjournments or
postponements thereof.

THE SBC BOARD HAS UNANIMOUSLY APPROVED (BY VOTE OF ALL
DIRECTORS PRESENT) THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE SBC
SHAREOWNERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
APPROVAL OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE ISSUANCE OF
SHARES OF SBC COMMON STOCK PURSUANT TO THE MERGER AGREEMENT.

PAC

This Joint Proxy Statement/Prospectus is also being furnished
to holders of PAC Common Stock in connection with the solicitation of proxies
by the PAC Board for use at the PAC Special Meeting, to be held on ______ __,
1996, and any adjournments or postponements thereof, to consider and vote upon
the approval and adoption of the Merger Agreement and approval of the
transactions contemplated thereby and to transact such other business as may
properly come before the PAC Special Meeting or any adjournments or
postponements thereof.

THE PAC BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND UNANIMOUSLY RECOMMENDS THAT THE PAC SHAREOWNERS VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED
THEREBY.

Each copy of this Joint Proxy Statement/Prospectus mailed to
holders of PAC Common Stock is accompanied by a form of proxy for use at the
PAC Special Meeting, and each copy of this Joint Proxy Statement/Prospectus
mailed to holders of SBC Common Stock is accompanied by a form of proxy for use
at the SBC Special Meeting.

This Joint Proxy Statement/Prospectus is also furnished to PAC
shareowners as a prospectus in connection with the issuance by SBC of shares of
SBC Common Stock in connection with the Merger.

DATE, PLACE AND TIME

The SBC Special Meeting will be held at ____________________
on ______ __, 1996, at ______ [a.m.][p.m.], local time.

The PAC Special Meeting will be held at ____________________
on ______ __, 1996 at ______ [a.m.][p.m.], local time.

In the event that the Exchange Ratio is adjusted to less than
0.667 (other than as a result of certain equitable adjustments necessitated by
a distribution, reclassification, stock split, stock dividend or similar
transaction with respect to the SBC Common Stock) in accordance with the terms
of the Merger Agreement, then PAC shall, as promptly as practicable after the
determination of such Exchange Ratio, convene another meeting of the
shareowners of PAC at which the holders of PAC Common Stock will be requested
again to consider and vote upon the transactions contemplated by the Merger
Agreement, taking into account such Exchange Ratio. See "The Merger -- Terms of
the Merger".

14
<PAGE> 28
RECORD DATES

SBC

The SBC Board has fixed the close of business on ______ __,
1996 as the SBC Record Date for the determination of the holders of SBC Common
Stock entitled to receive notice of and to vote at the SBC Special Meeting and
at any adjournments or postponements thereof.

PAC

The PAC Board has fixed the close of business on ______ __,
1996 as the PAC Record Date for the determination of the holders of PAC Common
Stock entitled to receive notice of and to vote at the PAC Special Meeting and
at any adjournments or postponements thereof.

VOTES REQUIRED

SBC

As of March 31, 1996, there were 609,247,226 shares of SBC
Common Stock issued and outstanding. Each share of SBC Common Stock outstanding
on the SBC Record Date is entitled to one vote upon each matter properly
submitted at the SBC Special Meeting. The affirmative vote of a majority of the
votes cast at the SBC Special Meeting is necessary for the approval and
adoption of the Merger Agreement and approval of the transactions contemplated
thereby, including the issuance of the shares of SBC Common Stock pursuant to
the Merger Agreement.

Under the rules of the NYSE, in order to approve the issuance
of shares of SBC Common Stock, the total number of votes with respect to such
matter must be in excess of 50% of the outstanding shares of SBC Common Stock.
Any abstention or broker non-vote will have the effect of reducing the
aggregate number of shares of SBC Common Stock voting and the number of shares
of SBC Common Stock required to approve and adopt the Merger Agreement and
approve the transactions contemplated thereby, including the issuance of shares
of SBC Common Stock pursuant to the Merger Agreement. Under the rules of the
NYSE, brokers who hold shares in street name for customers will not have
authority to vote on the Merger and the transactions contemplated thereby,
including the issuance of shares of SBC Common Stock pursuant to the Merger,
unless they receive specific instructions from beneficial owners.

As of March 31, 1996, directors and executive officers of SBC
and their affiliates beneficially owned an aggregate of 1,783,716 shares of SBC
Common Stock (including shares which may be acquired within 60 days upon
exercise of employee stock options) or less than 1% of the shares of SBC Common
Stock outstanding on such date. The directors and executive officers of SBC
have indicated their intention to vote their shares of SBC Common Stock in
favor of approval and adoption of the Merger Agreement and approval of the
transactions contemplated thereby, including the issuance of the shares of SBC
Common Stock pursuant to the Merger Agreement.

As of ________, 1996, the directors and executive officers of
PAC owned ____ shares of SBC Common Stock.

See "The Merger -- Interests of Certain Persons in the Merger."

PAC

As of March 31, 1996, there were 428,434,672 shares of PAC
Common Stock issued and outstanding. Each share of PAC Common Stock outstanding
on the PAC Record Date is entitled to one vote upon each matter properly
submitted at the PAC Special Meeting. The affirmative vote of at least a
majority of the outstanding shares of PAC Common Stock is required to approve
and adopt the Merger Agreement and to approve the transactions contemplated
thereby.

The presence in person or by proxy at the PAC Special Meeting
of the holders entitled to vote a majority of the outstanding shares of PAC
Common Stock is necessary to constitute a quorum for the transaction of
business.

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Abstentions will be counted as present for the purposes of determining whether
a quorum is present. Any abstention or broker non-vote will have the same
effect as a negative vote. Under the rules of the NYSE, brokers who hold shares
in street name for customers will not have the authority to vote on the Merger
unless they receive specific instructions from beneficial owners.

As of March 31, 1996, directors and executive officers of PAC
and their affiliates beneficially owned an aggregate of 783,219 shares of PAC
Common Stock (including shares which may be acquired within 60 days upon
exercise of employee stock options) or less than 1% of the shares of PAC Common
Stock outstanding on such date. The directors and executive officers of PAC
have indicated their intention to vote their shares of PAC Common Stock in
favor of approval and adoption of the Merger Agreement and approval of the
transactions contemplated thereby.

As of March 31, 1996, directors and executive officers of SBC
owned 1,150 shares of PAC Common Stock.

See "The Merger -- Interests of Certain Persons in the Merger."

VOTING AND REVOCATION OF PROXIES

Shares of SBC Common Stock and PAC Common Stock represented by
a proxy properly signed and received at or prior to the appropriate Special
Meeting, unless subsequently revoked, will be voted in accordance with the
instructions thereon. IF A PROXY IS SIGNED AND RETURNED WITHOUT INDICATING ANY
VOTING INSTRUCTIONS, SHARES OF SBC COMMON STOCK REPRESENTED BY THE PROXY WILL
BE VOTED FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT AND TO
APPROVE THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE ISSUANCE OF SHARES
OF SBC COMMON STOCK PURSUANT TO THE MERGER AGREEMENT, AND SHARES OF PAC COMMON
STOCK REPRESENTED BY THE PROXY WILL BE VOTED FOR THE PROPOSAL TO APPROVE AND
ADOPT THE MERGER AGREEMENT AND TO APPROVE THE TRANSACTIONS CONTEMPLATED
THEREBY. Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before the proxy is voted by filing a duly
executed revocation or a duly executed proxy bearing a later date with the
Secretary of SBC, for SBC shareowners, or with the Secretary of PAC, for PAC
shareowners, prior to or at the appropriate Special Meeting, or, with respect
to a proxy given by a shareowner of SBC, by voting in person at the SBC
Meeting, although attendance at the SBC Special Meeting will not in and of
itself constitute revocation of a proxy. All written notices of revocation and
other communications with respect to revocation of SBC proxies should be
addressed as follows: SBC Communications Inc., 175 East Houston, San Antonio,
Texas 78205-2233, Attention: Secretary. All written notices of revocation and
other communications with respect to revocation of PAC proxies should be
addressed as follows: Pacific Telesis Group, 130 Kearny Street, San Francisco,
California 94108, Attention: Secretary.

The SBC Board and the PAC Board are not currently aware of any
business to be acted upon at their respective Special Meeting, of their
respective shareowners, other than as described herein. If, however, other
matters are properly brought before either Special Meeting, or any adjournments
or postponements thereof, the persons appointed as proxies will have discretion
to vote or act thereon according to their best judgment.

Shareowners of SBC and PAC will not be entitled to present any
matter for consideration at either of the Special Meetings.

SOLICITATION OF PROXIES

In addition to solicitation by mail, directors, officers and
employees of SBC and PAC, none of whom will be specifically compensated for
such services, may solicit proxies from the shareowners of SBC and PAC,
respectively, personally or by telephone, telecopy or telegram or other forms
of communication. Brokerage houses, nominees, fiduciaries and other custodians
will be requested to forward soliciting materials to beneficial owners and will
be reimbursed for their reasonable expenses incurred in sending proxy materials
to beneficial owners.

In addition, SBC and PAC have retained Georgeson & Company,
Inc. ("Georgeson") and Corporate Investor Communications, Inc. ("CIC"),
respectively, to assist in the solicitation of proxies from their respective
shareowners. The fees to be paid to such firms for such services by each of SBC
and PAC are not expected to exceed $______ and $25,000, respectively, plus in
each case reasonable out-of-pocket costs and expenses. SBC and PAC each will
bear

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its own expenses in connection with the solicitation of proxies for its Special
Meeting, except that each will pay one-half of all printing, filing and mailing
costs and expenses incurred in connection with the Registration Statement and
this Joint Proxy Statement/Prospectus.

PAC SHAREOWNERS SHOULD NOT SEND PAC COMMON STOCK CERTIFICATES WITH
THEIR PROXY CARDS.

APPRAISAL RIGHTS

Holders of SBC Common Stock will not be entitled to any
dissenter's or appraisal rights under Section 262 of the DGCL as a result of
the matters to be voted upon at the SBC Special Meeting. Holders of PAC Common
Stock also will not be entitled to any dissenters' or appraisal rights under
Section 92A.390 of the NPCL in connection with the Merger.

THE COMPANIES

SBC

SBC is a communications holding company, which in 1995 had
operating revenues of approximately $12.67 billion and income before
extraordinary loss of approximately $1.89 billion. At December 31, 1995, SBC
had total assets of approximately $22 billion. SBC's subsidiaries are engaged
principally in communications and information services, including the provision
of telecommunications services in Texas, Missouri, Oklahoma, Kansas and
Arkansas. SBC was incorporated under the laws of the State of Delaware in 1983
by AT&T as one of seven regional holding companies formed to hold AT&T's local
telephone companies. AT&T divested SBC by means of a spin-off of stock to AT&T
shareowners on January 1, 1984. The divestiture was made pursuant to the
Consent Decree.

PAC

PAC was incorporated under the laws of the State of Nevada in
1983 by AT&T as one of seven regional holding companies formed to hold AT&T's
local telephone companies. AT&T divested PAC by means of a spin-off of stock to
AT&T shareowners on January 1, 1984. The divestiture was made pursuant to the
Consent Decree. PAC includes two wholly-owned operating telephone companies,
Pacific Bell and Nevada Bell, and certain diversified subsidiaries. PAC
provides financial and strategic planning and general administrative functions
on its own behalf and on behalf of its subsidiaries. In 1995, PAC had operating
revenues of approximately $9.04 billion and income before extraordinary item
of approximately $1.05 billion. At December 31, 1995, PAC had total assets
of approximately $16 billion.

Merger Sub

Merger Sub, a wholly-owned subsidiary of SBC, was formed by
SBC solely for the purpose of effecting the Merger.

RECENT DEVELOPMENTS

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THE MERGER

This section of the Joint Proxy Statement/Prospectus describes
certain aspects of the Merger. To the extent that it relates to the Merger
Agreement, the following description does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement, which is
attached as Appendix A to this Joint Proxy Statement/Prospectus and is
incorporated herein by reference. All shareowners are urged to read the Merger
Agreement in its entirety.

GENERAL

The Merger Agreement provides for a business combination
between SBC and PAC in which, subject to the satisfaction of the conditions
therein, Merger Sub will be merged with and into PAC and the holders of PAC
Common Stock will be issued SBC Common Stock in a transaction intended to
qualify as a "pooling of interests" for accounting purposes and as a
reorganization within the meaning of Section 368(a) of the Code for federal
income tax purposes. In the Merger, each outstanding share of PAC Common Stock
(other than Excluded PAC Common Stock) will be converted into the right to
receive, and become exchangeable for, a fraction of a share of SBC Common Stock
equal to the Exchange Ratio, together with the appropriate number of SBC
Rights. The Exchange Ratio may be adjusted in certain circumstances as set
forth in the Merger Agreement and as described herein under "The Merger --
Terms of the Merger." Each outstanding share of SBC Common Stock will remain
outstanding and be unaffected by the Merger. As a result of the Merger, holders
of PAC Common Stock immediately prior to the Merger will own approximately 34%
of the SBC Common Stock after the Merger (based on the number of shares of SBC
Common Stock and PAC Common Stock outstanding as of March 31, 1996 and assuming
the Exchange Ratio is equal to 0.733).

BACKGROUND OF THE MERGER

The action of the PAC Board to approve the Merger Agreement
was the ultimate outcome of a process which began in the fall of 1994 in which
management and the PAC Board commenced consideration of the optimum long run
strategic alternatives available to PAC and its shareowners. In late 1994,
management and the PAC Board met to consider the evolving challenges in the
telecommunications industry and the means by which PAC could be best positioned
to meet these challenges. The process continued when PAC's strategic
alternatives were addressed by management and the PAC Board at a meeting in
December of 1994. In February of 1995, PAC engaged Salomon to provide advice in
respect to the strategic alternatives available to PAC. It was determined at
that time to defer actively pursuing alternatives until the legislative process
which eventually led to the Telecommunications Act of 1996 was closer to
completion.

In July and August of 1995, management of PAC and its
financial advisor met on several occasions to consider strategic alternatives.
In late September of 1995, at meetings of the Finance Committee of the PAC
Board and of the PAC Board, a wide-ranging discussion of strategic alternatives
was conducted. Alternatives considered included acquisitions, joint ventures or
other alliances, the sale of a substantial equity stake to a strategic partner
and a business combination with a larger participant in the telecommunications
industry. At meetings of the PAC Board on October 27 and 28, 1995, extensive
consideration of strategic alternatives occurred and the PAC Board authorized
Mr. Philip J. Quigley, PAC's Chairman of the Board and Chief Executive Officer,
to make preliminary inquiries of selected major telecommunications companies to
determine their interests in pursuing a possible business combination.

SBC and PAC from time to time in recent years had discussed
possible limited business arrangements, such as cooperation in the long
distance market. In November 1995, pursuant to the authority granted to him by
the PAC Board, Mr. Quigley contacted Mr. Edward E. Whitacre, Jr., SBC's
Chairman of the Board and Chief Executive Officer, to inquire whether SBC might
be interested in discussing a possible business combination between PAC and
SBC. Mr. Whitacre indicated that SBC might be interested in discussing such a
transaction, but that he believed it would be preferable to defer any
discussions until after federal telecommunications law reforms then under
discussion became law and the companies' regulatory environment was clarified.

At the meeting of the PAC Board on December 15, 1995, a
further presentation was made by management to the PAC Board regarding
available alternatives, including the possibility of a strategic investor. At
such meeting,

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consideration was given to the shared strategic vision of SBC and PAC. The PAC
Board also considered management's report regarding contacts with chief
executive officers of other significant participants in the telecommunications
industry.

On February 8, 1996, the Telecommunications Act of 1996 was
signed into law by President Clinton. Messrs. Whitacre and Quigley subsequently
met in late February to explore the possibility of a business combination
transaction, and concluded after that meeting that there appeared to be
sufficient mutual interest in pursuing such a transaction to justify further
discussions. Messrs. Whitacre and Quigley met again in early March along with
the General Counsels of SBC and PAC. These meetings focused on their views on
business opportunities in their respective regions, including in their core
local exchange and wireless businesses, opportunities for expansion into new
territories and services including long distance, the complementary natures of
the respective company's strengths and management teams, their respective
regulatory environments and plans to position the potential combined company
for growth.

Beginning March 8, 1996, and continuing through March 30, 1996,
SBC and PAC conducted mutual due diligence, including a review of each other's
business plans, budgets and capital requirements. The parties determined to
commence negotiation of a merger agreement on March 22 and continued
negotiation along with their respective counsel until shortly before the Merger
Agreement was signed on April 1, 1996.

On March 31, 1996, the PAC Board met to consider the Merger
Agreement and the transactions contemplated thereby, including the proposed
consideration to be paid to PAC shareowners. Members of PAC's senior management
and representatives of Pillsbury Madison & Sutro LLP, PAC's legal advisor, and
Salomon, PAC's financial advisor, made presentations to the PAC Board and
discussed with the PAC Board their views and analyses of various aspects of the
proposed transaction. The PAC Board reviewed and considered, among other
things, the background of the proposed transaction, PAC's strategic
alternatives, financial and valuation analyses of the transactions, the terms
of the Merger Agreement, and the other matters described below under "--Reasons
for the Merger; Recommendations of the Boards of Directors -- PAC."

On April 1, 1996, the PAC Board reconvened. Salomon delivered
its opinion to the PAC Board to the effect that, as of such date, the Exchange
Ratio was fair to the holders of PAC Common Stock from a financial point of
view. After further deliberation, the PAC Board unanimously approved the
Merger Agreement and authorized the execution of the Merger Agreement.

On March 29, 1996, the SBC Board met to consider the Merger and
the transactions contemplated thereby including the consideration to be paid by
SBC in the Merger. At this meeting management of SBC and representatives of
Lazard Freres made presentations to the SBC Board, and the SBC Board considered
the Merger.

On March 31, 1996, the SBC Board met again to consider the
Merger and the transactions contemplated thereby. At this meeting, after
considering issues raised during the due diligence process, the terms of the
Merger Agreement and the oral opinion of Lazard Freres to the effect that the
Exchange Ratio is fair to SBC from a financial point of view, the SBC
Board unanimously determined (by vote of all directors present) that the Merger
Agreement and the transactions contemplated thereby are fair to and in the best
interests of its shareowners.

REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS

SBC

The SBC Board has unanimously determined that the terms of the
Merger Agreement and the transactions contemplated thereby are fair to, and in
the best interests of, its shareowners. In reaching this determination, the SBC
Board of Directors concluded that the Merger was likely to increase the value
of shareowners' investment in SBC over what that value would have been had SBC
not agreed to the Merger, and that the opportunities created by the Merger to
increase shareowner value more than offset the risks inherent in the Merger. In
reaching this conclusion, the SBC Board considered that the Merger will:

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(a) create the second largest telecommunications company
in the United States, with the size, geographic and product diversity
and complementary competencies to better serve customers and to
position SBC for a continuing leadership role in the
telecommunications industry of the 21st century;

(b) create opportunities to apply SBC's proven skills in
marketing, wireless operations and creating value added services for
the PAC customer base, including its new PCS business, and to apply
PAC's proven skills in expense reduction, process redesign and
internet applications to the SBC customer base;

(d) enable SBC to provide telecommunications services in
the two largest states in the United States, California and Texas;

(e) create a telecommunications enterprise with a strong
focus on Mexico and other parts of Latin America and on Asian
telecommunications markets; and

(f) enable SBC to add 15.8 million telephone access lines
to its existing 14.2 million telephone access lines.

In reaching the determination that the terms of the Merger
were fair to and in the best interests of SBC shareowners, the SBC Board also
considered a number of additional factors, including its knowledge of SBC's
business and discussions with SBC's management concerning the results of SBC's
due diligence investigation of PAC, the economic and regulatory environment in
California, strategic, operational and financial opportunities and risks
associated with the Merger and the terms of the Merger Agreement, the
historical and current market prices of PAC Common Stock and the oral opinion
of SBC's financial advisor, Lazard Freres (which opinion was confirmed in
writing on April 1, 1996, and as of the date hereof), to the effect that, as of
the date of such opinion, the Exchange Ratio is fair to SBC from a financial
point of view. The SBC Board also considered certain risks associated with the
Merger, including the challenges inherent in the combination of two business
enterprises the size of SBC and PAC and the possible resulting diversion of
management attention from other strategic opportunities for an extended period
of time, the possibility of significant adverse developments in the California
regulatory environment, the competitive environment in California (particularly
if the regulatory environment imposes economic disadvantages on Pacific Bell),
and the risks associated with PAC's substantial investments in PCS and wireless
cable.

The foregoing discussion of the information and factors which
were given weight by the SBC Board is not intended to be exhaustive but is
believed to include all material factors considered by the SBC Board. The SBC
Board did not assign specific weights to the foregoing factors and individual
Directors may have given different weights to different factors. The SBC Board,
however, unanimously approved (by vote of all directors present) the Merger
Agreement and unanimously recommends to its shareowners that they approve and
adopt the Merger Agreement and approve the transactions contemplated thereby,
including the issuance of shares of SBC in the Merger. Mr. Knight and Dr.
Mobley were unable to attend the March 31, 1996 meeting of the SBC Board but
have subsequently confirmed that they approve the Merger Agreement and
recommend the approval and adoption of the Merger Agreement and approval of the
transactions contemplated thereby, including the issuance of SBC Common Stock
in the Merger.

THE SBC BOARD UNANIMOUSLY RECOMMENDS THAT SBC SHAREOWNERS VOTE
FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE ISSUANCE OF SHARES OF SBC
COMMON STOCK PURSUANT TO THE MERGER AGREEMENT.

PAC

The PAC Board has unanimously determined that the terms of the
Merger Agreement and the transactions contemplated thereby are fair to, and in
the best interest of, PAC and its shareowners. In reaching this determination,
the PAC Board gave significant consideration to a number of factors, including,
without limitation, the factors referred to below. In view of the wide variety
of factors bearing on its decision, the PAC Board did not consider it

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<PAGE> 34
practical to, nor did it attempt to, quantify or otherwise assign relative
weight to the factors it considered in reaching its decision. The Board of
Directors received the advice of independent counsel throughout its
consideration of the Merger Agreement.

Such factors considered by the PAC Board included the
following:

(i) Management's View. The PAC Board considered management's
view that PAC's best strategic alternative is to combine with another major
telecommunications company to create an enterprise with the scale and scope of
operations necessary to compete effectively against the industry's much larger
worldwide companies. The PAC Board considered management's conclusion that such
a combined company would have an improved cost structure which would allow it
to meet competitive challenges in an industry that is likely to experience
consolidation and substantially increased competition. The PAC Board also
considered management's view that only companies of substantial scale and scope
will be able to offer a broad, integrated package of telecommunications
services that customers will demand, including local, long distance, wireless
and video services, and be able to do so on a national and international
basis. In making its determination, the PAC Board also considered the view
expressed by management that companies with significant scale and scope will be
likely to attract the most desirable investment and partnering opportunities as
the telecommunications business continues to evolve. The PAC Board also
considered the conclusion of management that a significant alignment existed
between the strategic perspective in the core businesses of PAC and SBC,
including the mutual emphasis on a strong branded bundle of telecommunications
products as being critical to future success.

(ii) PAC's Business, Financial Condition and Prospects. In
evaluating the Merger, the PAC Board also considered information with respect
to the business, financial condition and results of operations of PAC, as well
as PAC's prospects for growth in view of industry and market conditions. The
PAC Board considered the constraints on PAC's ability to raise sufficient
capital to take advantage of attractive opportunities. The PAC Board considered
the desirability of its California markets, the efficiency and quality of its
services and the focus of PAC's operations in a single region. It considered
that the desirability of its California markets would attract the highest level
of competition. It also considered that PAC's opportunities to combine with
attractive partners on desirable terms likely would decrease as industry
consolidation accelerates.

(iii) SBC's Business, Financial Condition and Prospects. The
PAC Board considered, among other things, information provided by management
and Salomon with respect to the business, financial condition and results of
operations of SBC. The PAC Board considered, among other things, SBC's
historically strong earnings growth and prospects for continued growth, SBC's
relatively stronger borrowing capacity and lower capital costs, the strength
and experience of its senior management team, its substantial interests in
expanding wireless and international markets, the expertise SBC will bring to
PAC's start-up wireless communications operations and SBC's experience and
position in international markets. The PAC Board also considered PAC's ability
to apply its strengths, particularly in cost management and competitive
response, to create value for the combined company. The PAC Board also
considered the attractiveness of SBC's international diversification and the
opportunities believed to exist for expanded activity in Mexico through SBC's
investment in Telmex and the nexus between the principal markets of both PAC
and SBC to that country. In this regard, the PAC Board considered as favorable
the successes of SBC in operating varied domestic and international assets,
including particularly wireless assets.

The PAC Board also considered risks associated with the
proposed Merger, including, among others, the possibility that the Merger will
not be consummated as a result of unacceptable conditions imposed by regulatory
authorities or otherwise, diversion of management attention from operational
matters as a result of the proposed Merger, the impact of limitations in the
Merger Agreement on PAC's ability to undertake new initiatives prior to the
Effective Time, the effect of rising levels of competition on SBC's local
telephone and wireless businesses, and the possibility that expected operating
benefits from the Merger would be more difficult to achieve than expected.

(iv) Opinion of Salomon; Market Premium. The PAC Board viewed
as favorable to its decision the opinion of Salomon to the effect that as of
April 1, 1996 the Exchange Ratio was fair to holders of PAC Common Stock from
a financial point of view. The PAC Board also considered the oral and written
presentations made to it by Salomon. See "--Opinions of

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Financial Advisors--PAC." A copy of Salomon's written opinion to the PAC Board,
dated as of the date hereof, is attached as Appendix C to this Joint Proxy
Statement/Prospectus.

The PAC Board reviewed the historical market prices and recent
trading activity of PAC Common Stock and SBC Common Stock. The PAC Board
considered as favorable to its decision that the per share value of the
consideration to be received by PAC shareowners in the Merger (which, as of
March 29, 1996, was $38.75 per share based on the closing sale price of SBC
Common Stock on such date and assuming an Exchange Ratio of 0.733) represented
a premium of approximately 38.9% over the closing sale price of PAC Common
Stock on March 29, 1996.

(v) Strategic Alliance. The PAC Board also considered that
the Merger would create a strategic alliance between PAC and SBC for the
benefit of their respective shareowners. The combined company would be
significantly more diversified than PAC, both geographically and in its lines
of business. In this regard, the PAC Board considered that the shareowners of
PAC would have the opportunity to participate in a strengthened combined
company which would be expected to have significant potential for growth and
that there could be expected to be significant values arising from such
participation, including, but not limited to, growth in future stock values and
earnings per share and an enhanced perception of the combined company by the
financial markets and rating agencies.

(vi) Commitment to California, Nevada and other
Constituencies of PAC. The PAC Board also reviewed the willingness of SBC to
commit publicly in connection with the proposed Merger to further the strategic
alliance described above by, among other things, committing to maintain and
improve the quality of service to customers in California and Nevada, to expand
service to ethnic markets, to maintain commitments to diversity in the work
force, to continue support of charitable and other community endeavors, to
further the cause of improving the quality of education in California and Nevada
and to increase California employment levels. The PAC Board considered the
following specific examples of such commitments: an increase of California
employment within two years after the Effective Time by at least 1,000 jobs
above the level that otherwise would have prevailed in the absence of the
Merger; maintenance of the Pacific Bell and Nevada Bell headquarters in their
present locations; continued use of the Pacific Bell and Nevada Bell brand
names; and establishment of a new headquarters in California for integrated
support and administrative services, long distance businesses, international
businesses and a new internet company. The PAC Board also regarded as favorable
the opportunities in the combined company for the employees and officers of PAC
and the beneficial effects on California and Nevada customers and vendors to
PAC and its subsidiaries arising from the above-described commitments. The PAC
Board also regarded as favorable the commitment of SBC in the Merger Agreement
to honor, pursuant to their terms, all employee benefit obligations to current
and former employees under PAC's Compensation and Benefit Plans, including
obligations to officers of PAC under existing employment and severance
agreements. The PAC Board also considered the commitment of SBC under the
Merger Agreement to cause the Surviving Corporation for at least two years
after the Effective Time to provide or cause to be provided to the employees of
PAC and its subsidiaries Compensation and Benefit Plans that are at least as
favorable, in the aggregate, as the Compensation and Benefit Plans maintained
by PAC and its subsidiaries, subject to adjustment in the event SBC implements
widespread increases or decreases in benefits or the cost thereof with respect
to Compensation and Benefit Plans applicable to employees of SBC and its
subsidiaries.

(vii) Alternative Transactions. The PAC Board considered
strategic alternatives other than a combination, including joint ventures and
alliances, acquisitions and the sale of a significant equity stake to a
strategic partner. It concurred with management's view that none of these
alternatives would offer as much value to PAC shareowners as a combination with
another major telecommunications company. It also determined, taking into
account, among other things, preliminary inquiries of other possible merger
candidates by PAC's Chief Executive Officer and applicable regulatory and legal
considerations, that it was unlikely that PAC would be able to negotiate a
combination on terms superior to the proposed Merger with SBC.

(viii) Terms of the Merger Agreement. The PAC Board reviewed
presentations from, and discussed the terms and conditions of the Merger
Agreement with, management and representatives of its financial and legal
advisors. Among other things, the PAC Board considered the fact that the Merger
Agreement does not provide a "collar" limiting the effect of changes in the
price of SBC Common Stock on the value of the consideration to be received by
PAC shareowners, and the fact that the Merger Agreement contains an adjustment
mechanism which could result in a reduction in the Exchange Ratio based on
costs incurred in connection with required approvals from state regulatory

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authorities. The PAC Board also gave consideration to the fact that the
Merger would be a tax-free transaction to the PAC shareowners and the fact that
the Merger Agreement would permit continued payment of dividends to the
shareowners of PAC, at a reduced rate, prior to the Effective Time of the
Merger. The PAC Board also considered the possible effect of interim operating
covenants and restrictions which would apply to the operations of PAC and
certain of its subsidiaries during the period of time from the signing of the
Merger Agreement to the Effective Time. The PAC Board also considered the
operating covenants and restrictions applicable to SBC after the signing of the
Merger Agreement and prior to the Effective Time. The PAC Board also
considered the provisions in the Merger Agreement (a) that permit SBC to
terminate the Merger Agreement and receive a fee of up to $300 million in the
event that PAC enters into discussions or negotiations concerning an
Alternative Proposal and (b) that do not permit PAC to terminate the Merger
Agreement and accept a Superior Proposal without complying with a procedure
that allows SBC to submit a matching bid. The PAC Board found reasonable the
views of its management and advisors that such provisions were not preclusive
of an Alternative Proposal and were necessary to obtain SBC's agreement under
the circumstances. The PAC Board also gave consideration to the terms of the
Merger Agreement relating to the treatment of PAC Options and to the effect of
the Merger on entitlements of certain officers of PAC under employment
agreements and other employment arrangements and benefits plans. See
"-Interests of Certain Persons in the Merger."

(ix) Regulatory Considerations. The PAC Board considered the
likelihood of the Merger being approved by the appropriate regulatory
authorities. It also considered the respective regulatory environments of SBC
and PAC and their respective subsidiaries and considered the possible effect of
the pendency of the Merger on existing regulatory proceedings involving PAC and
its subsidiaries. The PAC Board also considered the expected increase in
competition as a result of the Telecommunications Act of 1996 and the
respective positions of SBC and PAC thereunder.

THE PAC BOARD UNANIMOUSLY RECOMMENDS THAT PAC SHAREOWNERS VOTE
FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE
TRANSACTIONS CONTEMPLATED THEREBY.

OPINIONS OF FINANCIAL ADVISORS

SBC

SBC has retained Lazard Freres to act as its financial advisor
with respect to the Merger. Lazard Freres delivered its written opinion to the
SBC Board to the effect that as of April 1, 1996, the Exchange Ratio is fair to
SBC from a financial point of view. Lazard Freres has confirmed its opinion as
of the date of this Joint Proxy Statement/Prospectus with its written opinion
dated as of the date hereof.

A copy of the full text of the opinion of Lazard Freres, dated
as of the date of this Joint Proxy Statement/Prospectus, which sets forth the
assumptions made, matters considered and limitations on the review undertaken
in connection with the opinion, is attached hereto as Appendix B and is
incorporated herein by reference. This summary discussion of the opinion of
Lazard Freres is qualified in its entirety by reference to the full text of the
opinion. The engagement of Lazard Freres and its opinion are for the benefit of
the SBC Board, and its opinion was rendered to the SBC Board in connection with
its consideration of the Merger. Lazard Freres' opinion is directed only to the
fairness of the Exchange Ratio from a financial point of view to SBC and does
not address any other aspect of the Merger. The opinion is not intended to, and
does not constitute, a recommendation to any holder of SBC Common Stock as to
whether such shareowner should vote for the Merger at the SBC Special Meeting.
SHAREOWNERS OF SBC COMMON STOCK ARE URGED TO READ THE OPINION OF LAZARD FRERES
IN ITS ENTIRETY.

In connection with rendering its opinion to the SBC Board,
Lazard Freres reviewed and analyzed, among other things, this Joint Proxy
Statement/Prospectus, the financial terms and conditions of the Merger
Agreement; certain historical business and financial information relating to
SBC and PAC; various financial forecasts and other data provided to Lazard
Freres by SBC and PAC relating to their respective businesses and the benefits
projected by SBC to be realized in connection with the Merger; public
information with respect to certain other companies in lines of business
believed by it to be generally comparable to the businesses of SBC and PAC; the
financial terms of certain

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business combinations involving companies in lines of business believed by
Lazard Freres to be generally comparable to those of SBC and PAC, and in other
industries generally; and historical stock prices and trading volumes of the
SBC Common Stock and PAC Common Stock. Lazard Freres also held discussions with
members of the senior management of each of SBC and PAC with respect to the
businesses and prospects of SBC and PAC, respectively, the strategic objectives
of each, and possible benefits which might be realized following the Merger. In
addition, Lazard Freres conducted such financial studies, analyses and
investigations as it deemed appropriate. The opinion of Lazard Freres is based
on economic, monetary and market conditions existing as of the date of the
opinion.

Lazard Freres did not assume any responsibility for
independent verification of the accuracy or completeness of all of the
financial and other information reviewed by it for purposes of its opinion.
Lazard Freres assumed that the financial forecasts provided to it, including
the potential benefits projected to be realized following the Merger, were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the management of SBC and PAC as to the future financial
performance of SBC and PAC, respectively. Lazard Freres expressed no view as to
such forecasts or the assumptions on which they are based and there cannot be
any assurance that actual results of SBC or PAC will not differ materially from
those reflected in the forecasts. In rendering its opinion, Lazard Freres
assumed that the Merger would be consummated on the terms described in the
Merger Agreement without any waiver of material terms or conditions by SBC and
that obtaining the necessary regulatory approvals for the Merger would not have
a material adverse effect on SBC or on PAC, and that the projected benefits to
be realized in connection with the Merger would be realized substantially in
accordance with such projections.

The following is a summary of certain of the financial and
comparative analyses performed by Lazard Freres in connection with providing
its oral opinion to the SBC Board and reviewed with the SBC Board at its
meeting on March 29, 1996. Such analyses were prepared based upon the then
proposed exchange ratio of 0.73, and not on the Exchange Ratio. Such analyses
were also prepared based upon the stock prices of SBC and PAC as of March 27,
1996 and upon the estimated outstanding numbers of shares of SBC Common Stock
and PAC Common Stock as of that date. Lazard Freres did not consider the
revision in the exchange ratio to be material to its analyses, and its written
opinion dated as of April 1, 1996 and as of the date of this Joint Proxy
Statement/Prospectus was not affected by the revision.

Comparable Publicly Traded Companies Analysis. Lazard Freres
reviewed and compared certain actual and estimated financial, operating and
stock market information of companies in lines of businesses believed to be
comparable to those of SBC and PAC. Lazard Freres noted that, although there
were no public companies with precisely the same mix of businesses and
financial condition as SBC or PAC or, on a pro forma basis, SBC and PAC, Lazard
Freres believed the most relevant comparable companies to SBC and PAC to be the
other Regional Bell Operating Companies ("RBOCs") (Ameritech, Bell Atlantic,
BellSouth, NYNEX, and U S WEST Communications), and GTE (collectively, the
"Communications Companies"). The analysis indicated that the enterprise value
(determined as equity market value plus net debt) of the Communications
Companies as a multiple of 1995 revenue ranged from 2.3x to 3.0x, as a multiple
of 1995 earnings before interest, taxes, depreciation and amortization
("EBITDA") ranged from 5.2x to 7.0x, and as a multiple of 1995 earnings before
interest and taxes ("EBIT") ranged from 10.1x to 11.8x. The analysis also
indicated that the public trading market price per share of the Communications
Companies as a multiple of 1995 earnings per share ranged from 14.0x to 16.9x,
and as a multiple of 1996 estimated earnings (based on a compilation of
industry analysts' estimates) per share ranged from 13.1x to 15.6x. For the
local telephone company segment of the Communications Companies' businesses
taken separately, based upon estimates of industry analysts, the implied local
telephone company segment enterprise value as a multiple of 1995 revenue ranged
from 1.9x to 2.7x, as a multiple of 1995 EBITDA ranged from 4.2x to 6.0x, as a
multiple of 1995 EBIT ranged from 7.6x to 10.1x, and as a value for each access
line ranged from $1,160 to $1,692.

Based upon the assumptions described above, the implied value
of the Merger to shareowners of PAC as a multiple of PAC's 1995 revenue was
2.6x, as a multiple of PAC's 1995 EBITDA was 6.1x, as a multiple of PAC's 1995
EBIT was 11.8x, as a multiple of PAC's 1995 earnings was 16.2x, and as a
multiple of PAC's 1996 earnings, as estimated by SBC's management, was 16.0x.
Based on the same assumptions, the implied enterprise value of the Merger to
the shareowners of PAC with respect to the local telephone business alone of
PAC, excluding the estimated value of non-telephone business segments, was
approximately 2.5x PAC's 1995 revenue, 5.8x PAC's 1995 EBITDA, 11.3x PAC's 1995
EBIT, and $1,213 for each access line of PAC.

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<PAGE> 38
Selected Precedent Transactions Analysis. Lazard Freres
reviewed and analyzed selected financial, operating and stock market
information relating to selected acquisition transactions in the
telecommunications industry involving local telephone businesses since July
1990, including the following: PacifiCorp/Pacific Telecom Inc., Citizens
Utilities Company/ALLTEL Communications properties, Citizens Utilities
Company/GTE Corporation properties, ALLTEL Communications/GTE Corporation
properties, Sprint Corporation/Centel Corporation, Century Telephone
Enterprises/Central Telephone Company of Ohio, Rochester Telephone Corp./Centel
Corporation and GTE Corporation/Contel Corporation (the "Telecommunications
Transactions"). Lazard Freres noted that the reasons for, and circumstances
surrounding, each of the transactions analyzed were diverse and the
characteristics of such transactions and the companies involved were not
directly comparable to the Merger and to SBC and PAC. The aggregate
consideration paid in the Telecommunications Transactions ranged from $1,299 to
$2,563 for each access line of the telephone businesses, excluding the
estimated value of non-telephone business segments (in transactions involving
non-telephone business segments), 2.4x to 3.6x revenues of the acquired
businesses, 5.7x to 11.1x EBITDA of the acquired businesses, 9.4x to 23.8x EBIT
of the acquired businesses, and implied an equity value ranging from 18.4x to
34.5x of the net income of the acquired businesses. Based on an analysis of
financial, operating and stock market information relating to the local
telephone businesses involved in the Telecommunications Transactions alone, the
implied aggregate consideration paid in the Telecommunications Transactions for
the local telephone businesses ranged from 2.3x to 3.5x revenues of the
acquired businesses, 5.6x to 10.3x EBITDA of the acquired businesses, 9.0x to
16.7x EBIT, and implied an equity value of 23.1x to 23.5x net income of the
acquired businesses.

Based upon the assumptions described above, the implied value
of the Merger to shareowners of PAC as a multiple of PAC's 1995 revenue was
2.6x, as a multiple of PAC's 1995 EBITDA was 6.1x, as a multiple of PAC's 1995
EBIT was 11.8x and as a multiple of PAC's 1995 earnings was 16.2x. Based on the
same assumptions, the implied enterprise value of the Merger to the shareowners
of PAC with respect to the local telephone business alone of PAC, excluding the
estimated value of non-telephone business segments, was approximately 2.5x
PAC's 1995 revenue. 5.8x PAC's 1995 EBITDA, 11.3x PAC's 1995 EBIT, and $1,213
for each access line of PAC.

Discounted Cash Flow Analysis. Based upon forecasts provided
by the management of SBC, Lazard Freres estimated the net present value of the
future cash flows of PAC. For its forecasts Lazard Freres assumed discount
rates ranging from 9.5% to 10.5% and perpetual growth rates of 2.5% to 3.5% for
PAC's business on a consolidated basis. This analysis indicated a net present
value per share of PAC Common Stock ranging from $35 to $40. Lazard Freres also
estimated the net present value of the aggregated future cash flows of PAC's
individual business segments, assuming discount rates ranging from 9.0% to
13.5% and perpetual growth rates from 2.5% to 6.5%. This analysis indicated a
value per share of PAC Common Stock ranging from $35 to $42. In its analyses,
Lazard Freres assumed that the Merger would be consummated in 1997 and that
benefits would take place starting in 1997. In forecasting SBC's and PAC's
performance, Lazard Freres used forecasts prepared by SBC's management.

Contribution Analysis. Lazard Freres also considered the
contribution of each of SBC and PAC to revenue, EBITDA, EBIT, net income, total
debt and capital expenditures of the pro forma combined company using SBC
management's estimates for 1996. PAC's contribution was estimated to be 41% of
revenue, 41% of EBITDA, 38% of EBlT, 35% of net income, 48% of total debt, and
45% of capital expenditures. Based upon the assumptions described above,
shareowners of PAC Common Stock would own approximately 34% of the combined
company upon consummation of the Merger. The exchange ratios implied by PAC's
estimated contributions to revenue, EBITDA, EBIT, and net income were .98, .97,
.86 and .74, respectively.

Pro Forma Merger Analysis. Lazard Freres considered the
effect the Merger could have on the earnings per share ("EPS") of the combined
company, compared with the EPS of SBC on a stand-alone basis. Based on
estimates of SBC's management and after giving effect to the assumptions
described above and certain other assumptions, including a constant number of
shares outstanding in each respective period, the analysis indicated that the
Merger would be dilutive to the EPS of SBC in 1997 and 1998 and accretive to
the EPS of SBC starting in 1999. In this analysis, Lazard Freres assumed that
both SBC and PAC would perform substantially in accordance with earnings
forecasts provided to Lazard Freres by SBC's management. The actual results
achieved by SBC following the Merger may vary from projected results and the
variations may be material.

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<PAGE> 39
Special Considerations. The preparation of a fairness opinion
is a complex process and is not necessarily susceptible to partial analysis or
summary description. Selecting portions of the analyses or the summary set
forth above without considering the analyses as a whole, could create an
incomplete or misleading view of the process underlying the opinion of Lazard
Freres. No company or transaction used in the above analyses as a comparison is
identical to SBC or PAC or the transaction contemplated by the Merger
Agreement. The analyses were prepared solely for purposes of Lazard Freres
providing its opinion to the SBC Board in connection with its consideration of
the Merger and do not purport to be appraisals or necessarily reflect the
prices at which businesses or securities actually may be sold, which may be
significantly more or less favorable than as set forth in these analyses.
Similarly, any estimate of values or forecast of future results contained in
the analyses is not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than suggested by
such analyses.

In connection with its review, Lazard Freres did not assume
any responsibility for independent verification of any of the information
supplied to it by SBC or PAC and assumed and relied on the completeness and
accuracy of such information in all material respects. Lazard Freres did not
assume any responsibility for an independent evaluation or appraisal of SBC or
PAC or their respective assets or liabilities (contingent or otherwise), nor
was Lazard Freres furnished with any such evaluations or appraisals. In
addition, in performing its analyses, Lazard Freres made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties
or their respective advisors, none of SBC, Lazard Freres, or any other person
assumes responsibility if future results or actual values are materially
different from those forecasts or estimates contained in the analyses. As
described above, Lazard Freres' opinion to the SBC Board was one of many
factors taken into consideration by the SBC Board in making its determination
to approve the Merger Agreement. The foregoing summary does not purport to be a
complete description of the analyses performed by Lazard Freres and is
qualified by reference to the written opinion of Lazard Freres set forth in
Appendix B hereto.

Lazard Freres is an internationally recognized investment
banking firm and is continually engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, secondly distributions of listed and unlisted securities,
private placements, leveraged buyouts, and valuations for estate, corporate and
other purposes. Lazard Freres was selected to act as financial advisor to the
SBC Board because of its expertise and its reputation in investment banking and
mergers and acquisitions.

In connection with Lazard Freres' services as financial
advisor to SBC, including its rendering of the opinions summarized above, SBC
has paid Lazard Freres a fee of $3 million and has agreed to pay Lazard Freres
additional fees of $4 million upon the approval of the Merger by the
shareowners of SBC and PAC and $8 million upon, and subject to, the
consummation of the Merger. SBC also has agreed to reimburse Lazard Freres for
its reasonable out-of-pocket expenses (including fees and expenses of its legal
counsel) and will indemnify Lazard Freres and certain related parties against
certain liabilities, including certain liabilities arising under the federal
securities laws.

Lazard Freres has from time to time in the past provided
investment banking and financial advisory services to SBC for which Lazard
Freres has received fees. In the ordinary course of its business, Lazard Freres
and its affiliates may actively trade in the securities of SBC for their own
account and for the account of their customers and, accordingly, may at any
time hold a long or short position in such securities. In addition, from
January 1, 1994 through the date of this Joint Proxy Statement/Prospectus,
Lazard Freres and its affiliates have invoiced financial advisory and
investment banking fees of approximately $492,948 to date, in connection with
various projects on which it has or is providing advice to SBC.

PAC

At the meeting of the PAC Board on April 1, 1996, at which
meeting the PAC Board approved the Merger Agreement, Salomon delivered its
opinion to the effect that, as of such date, the Exchange Ratio was fair to the
holders of PAC Common Stock from a financial point of view. No limitations
were imposed by the PAC Board upon Salomon with respect to the investigations
made or the procedures followed by Salomon in rendering its opinion. Salomon
has confirmed its opinion as of the date of this Joint Proxy
Statement/Prospectus with its written opinion dated as of such date.

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<PAGE> 40
The full text of the written opinion of Salomon, dated as of
the date hereof, is set forth as Annex C to this Joint Proxy
Statement/Prospectus and sets forth the assumptions made, procedures followed,
matters considered and limitations on the scope of the review undertaken. PAC
shareowners are urged to read the opinion in its entirety. Salomon's opinion
is directed only to the fairness, from a financial point of view, of the
Exchange Ratio and does not constitute a recommendation concerning how such
shareowners should vote with respect to the Merger. The summary of the opinion
of Salomon set forth in this Joint Proxy Statement/Prospectus is qualified in
its entirety by reference to the full text of such opinion.

In connection with rendering its opinion, Salomon reviewed and
analyzed, among other things, the following: (i) this Joint Proxy
Statement/Prospectus; (ii) the Merger Agreement; (iii) certain publicly
available information concerning PAC and SBC, including the Annual Reports on
Form 10-K of PAC and SBC for each of the years in the three year period ended
December 31, 1995; (iv) certain other financial information, including
financial forecasts, concerning the business and operations of PAC and SBC that
were provided to Salomon by PAC and SBC, respectively; and (iv) certain
publicly available information with respect to certain other companies that
Salomon believed to be comparable in certain respects to PAC and SBC and the
trading markets for such other companies' securities. Salomon also met with
certain officers and employees of PAC and SBC to discuss the foregoing,
including the past and current business operations, financial condition and
prospects of PAC and SBC, as well as other matters Salomon believed relevant to
its inquiry, including matters relating to the obtaining of regulatory
approvals for the Merger. Salomon also considered such other information,
financial studies analyses, investigations and financial, economic and market
analyses, investigations and financial, economic and market criteria that
Salomon deemed relevant.

In Salomon's review and analysis and in arriving at its
opinion, Salomon assumed and relied upon the accuracy and completeness of all
of the financial and other information (including information relating to the
obtaining of regulatory approvals for the Merger) provided to Salomon or
publicly available and Salomon did not assume any responsibility for verifying
any of such information. With respect to the financial forecasts of PAC and
SBC, Salomon assumed that they had been reasonably prepared on bases reflecting
the best currently available estimates and judgments of PAC's or SBC's, as the
case may be, management as to the future financial performance of PAC or SBC,
as the case may be, and Salomon expressed no opinion with respect to such
forecasts or the assumptions on which they are based. Salomon did not make or
obtain or assume any responsibility for making or obtaining any independent
evaluations or appraisals of any of the assets (including properties and
facilities) or liabilities of PAC or SBC.

In conducting its analysis and arriving at its opinion,
Salomon considered such financial and other factors as Salomon deemed
appropriate under the circumstances, including, among others, the following:
(i) the historical and current financial position and results of operations of
PAC and SBC; (ii) the historical and current market for the equity securities
of PAC, SBC and certain other companies that Salomon believed to be comparable
in certain respects to PAC or SBC; (iii) the nature and terms of certain other
acquisition transactions that Salomon believed to be relevant; and (iv) the
current and historical relationships between the trading levels of the PAC
Common Stock and SBC Common Stock. Salomon also took into account its
assessment of general economic, market and financial conditions and its
knowledge of the telecommunications industry and related industries, as well as
its experience in connection with similar transactions and securities valuation
generally. Salomon's opinion necessarily was based upon conditions as they
existed and could be evaluated on the date of its opinion, and Salomon assumed
no responsibility to update or revise its opinion based upon circumstances or
events occurring after the date hereof. Salomon's opinion did not imply any
conclusion as to the likely trading range for the SBC Common Stock following
the consummation of the Merger, which may vary depending upon, among other
factors, changes in interest rates, dividends rates, market conditions, general
economic conditions and other factors that generally influence the price of
securities. Salomon's opinion did not address PAC's underlying business
decision to effect the Merger.

In rendering Salomon's opinion, Salomon assumed that in the
course of obtaining the necessary regulatory approvals for the Merger no
restrictions would be imposed that would have a material adverse effect on the
contemplated benefits of the Merger to SBC following the Merger.

The following is a summary of the report (the "Salomon
Report") presented by Salomon to the PAC Board of Directors in connection with
the rendering of Salomon's opinion:

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<PAGE> 41
(i) Historical Trading Analysis. Salomon examined the history
of trading prices for PAC Common Stock, SBC Common Stock, a composite index of
selected telecommunications companies and the Standard & Poors Industrial
Average of 400 Stocks in relation to each other and the relationship between
price movements thereof over the period from January 1, 1994 through March 21,
1996. The composite index of similar companies consisted of the common stock
of the Communications Companies.

(ii) Public Market Valuation. Salomon reviewed certain
financial and operating data relating to PAC and SBC, each on an independent
basis, and the financial and operating performance of PAC and SBC relative to
the Communications Companies. The data reviewed by Salomon for the
Communications Companies included multiples of stock trading prices to
estimated 1996 earnings per share (median multiple of 15.4x, with the
corresponding multiples for PAC and SBC representing a 28.6% discount and 2.6%
premium, respectively, to the median multiple) and multiples of firm values to
each of EBITDA and EBIT (median multiples of 6.4x and 11.9x, respectively, with
the corresponding multiples for PAC and SBC representing discounts of 26.6% and
24.4% and premiums of 15.6% and 5.0%, respectively, to the median multiples).
Salomon also compared the principal business units of each of PAC and SBC to
the Communications Companies with a view to determining the valuation that the
public securities markets would give to those units on a stand-alone basis.
Based on this segment analysis, Salomon calculated equity value reference
ranges of $25 to $34 for each share of PAC Common Stock and $46 to $56 for each
share of SBC Common Stock. No company used in the public market valuation
analysis summarized above is identical to PAC or SBC. Accordingly, any
analysis of the value of the Merger based upon the Communications Companies
involves complex considerations and judgments concerning differences in the
potential financial and operating characteristics of the Communications
Companies and other factors in relation to the trading and acquisition values
of the Communications Companies.

(iii) Discounted Cash Flow Analysis. Using a discounted cash
flow ("DCF") methodology, Salomon valued each of PAC and SBC estimating the
present value of future free cash flows available to their respective debt and
equity holders if each of PAC and SBC were to perform on a stand-alone basis
(without giving effect to the Merger) in accordance with the management
forecasts. This analysis was performed for each major business unit of SBC and
PAC on a stand-alone basis. Free cash flow represents the amount of cash
generated and available for principal, interest and dividend payments after
providing for ongoing business operations. For each major business unit,
Salomon aggregated (x) the present value of the free cash flows over the
applicable forecast period with (y) the present value of the range of terminal
values described below. The range of terminal values was generally calculated
by applying a range of multiples to each business unit's EBITDA. This range of
terminal values represented, for each of PAC and SBC, their respective value
beyond the applicable forecast period. As part of the DCF analysis, Salomon
used discount rates reflecting each business unit's specific financial
characteristics. This DCF analysis resulted in equity value reference ranges
of $34 to $43 for each share of PAC Common Stock and $54 to $66 for each share
of SBC Common Stock.

(iv) Private Market Valuation. Salomon reviewed and analyzed
selected acquisition transactions involving other companies in the
telecommunications industry that it deemed relevant. Among other factors,
Salomon indicated that the merger and acquisition transaction environment
varies over time because of macroeconomic factors such as interest rate and
equity market fluctuations and microeconomic factors such as industry results
and growth expectations. Salomon noted that no transaction reviewed was
identical to the Merger and that, accordingly, an assessment of the results of
the following analysis necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
SBC and PAC and other factors that would affect the acquisition value of the
companies to which it is being compared. The transactions reviewed by Salomon
included the Telecommunications Transactions. Salomon reviewed the
multiples implied by the prices paid in such transactions to each acquiree's
ratio of firm value to access lines (median multiple of $2,238), to target
revenues (median multiple of 2.7x), to target EBITDA (median multiple of 6.6x)
and to target EBIT (median multiple of 12.7x). Based on these multiples and
corresponding 1995 data for PAC, Salomon calculated an implied equity value
reference range of $35 to $43 for each share of PAC Common Stock.

(v) Pro Forma Combination Analysis. Salomon reviewed certain
pro forma financial effects resulting from the Merger for the projected
12-month periods for 1997 and 1998. This analysis was based upon certain
assumptions, including that the projections provided to Salomon by PAC and SBC
management were accurate. Salomon

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estimated that, on a pro forma basis, the Merger would be dilutive to the EPS
of SBC in 1997 and 1998, respectively.

The preparation of a fairness opinion is not susceptible to
partial analysis or summary descriptions. Salomon believes that its analysis
and the summary set forth above must be considered as a whole and that
selecting portions of its analyses and the factors considered by it, without
considering all analyses and factors, could create an incomplete view of the
processes underlying the analysis set forth in its opinion and the Salomon
Report. Salomon has not indicated that any of the analyses which it performed
had a greater significance than any other. The ranges of valuations resulting
from any particular analysis described above should not be taken to be the view
of Salomon of the actual value of PAC and SBC.

In performing its analyses, Salomon made numerous assumptions
with respect to industry performance, general business, financial, market and
economic conditions and other matters, many of which are beyond the control of
PAC or SBC. The analyses which Salomon performed are not necessarily
indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Salomon's analysis of the fairness,
from a financial point of view, of the consideration which the holders of PAC
Common Stock would receive in the Merger. The analyses do not purport to be
appraisals or to reflect the prices at which a company might actually be sold
or the prices at which any securities may trade at the present time or at any
time in the future.

Salomon is not affiliated with PAC or SBC. Salomon has
previously rendered certain financial advisory and investment banking services
to PAC, for which Salomon received customary compensation. Salomon is also
currently engaged by SBC with respect to various other matters for which it
will receive customary compensation. In the ordinary course of its business,
Salomon actively trades the debt and equity securities of PAC and SBC for its
own account and the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities. Pursuant to an engagement
letter dated March 7, 1996, PAC agreed to pay Salomon for its services in
connection with the Merger a cash fee of $26,000,000 subject to certain
adjustments, of which $8,666,667 was paid to Salomon upon execution of the
Merger Agreement and the balance of which will be payable upon consummation of
the Merger. PAC also agreed to reimburse Salomon for certain out-of-pocket
expenses incurred by Salomon in connection with the Merger. PAC also agreed to
indemnify Salomon and certain related persons against certain liabilities,
including liabilities under the Federal securities law, relating to or arising
out of its engagement.

Salomon is an internationally recognized investment banking
firm that provides financial services in connection with a wide range of
business transactions. As part of its business, Salomon regularly engages in
the valuation of companies and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and for
other purposes. The Board of Directors of PAC retained Salomon based on
Salomon's expertise in the valuation of companies as well as its familiarity
with PAC and other telecommunications companies.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Certain matters discussed herein are forward-looking
statements that involve risks and uncertainties. Forward-looking statements
include the information concerning possible or assumed future results of
operations of SBC and PAC set forth under "--Opinions of Financial Advisors."
To that extent, SBC and PAC claim the protection of the disclosure liability
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. Readers are cautioned that the following
important factors in addition to those discussed elsewhere herein and the
documents incorporated by reference herein, could affect the future results of
SBC and PAC and cause those results to differ materially from those expressed
in such forward-looking statements: future regulatory conditions in both
companies' operating areas, competition from others in the local service
market, the success of PAC's PCS roll-out and other new businesses ventures
including internet access and video, growth of SBC's cellular business, the
timing, extent, and profitability of SBC's and PAC's entry into the
long-distance market, growth in local access lines and general economic
conditions.

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TERMS OF THE MERGER

At the Effective Time, SBC, Merger Sub and PAC will consummate
the Merger in which Merger Sub will be merged with and into PAC and the
separate corporate existence of Merger Sub will thereupon cease. PAC will be
the Surviving Corporation in the Merger, will be a wholly-owned subsidiary of
SBC and will continue to be governed by the laws of the State of Nevada. The
Merger Agreement provides that the Articles of Incorporation of PAC as in
effect immediately prior to the Effective Time will be amended as contemplated
by the Merger Agreement, and such Articles of Incorporation, as so amended,
will be the Articles of Incorporation of the Surviving Corporation. The Merger
Agreement provides that the by-laws of PAC in effect at the Effective Time will
continue as the by-laws of the Surviving Corporation following the Merger.

Pursuant to the Merger Agreement, at the Effective time, each
share of PAC Common Stock issued and outstanding immediately prior to the
Effective Time (other than Excluded PAC Common Stock) will be converted into
the right to receive, and become exchangeable for, a fraction of a share of SBC
Common Stock equal to the Exchange Ratio, together with an appropriate number
of SBC Rights attached thereto. In the event there are any Regulatory Approval
Costs (as defined below, under "--Regulatory Approval Costs"), the Exchange
Ratio will be adjusted at the Effective Time to reflect the allocation of such
Regulatory Approval Costs between SBC and PAC. Such adjustment will be based on
the respective market capitalizations of SBC and PAC, based on assumed values
of $53.875 for SBC Common Stock and $39.49 for PAC Common Stock, each reduced
by the respective allocated portions of the Regulatory Approval Costs. The
mechanism for determining the allocation of the Regulatory Approval Costs is
described under "--Regulatory Approval Costs." The formulas to accomplish the
adjustment to the Exchange Ratio are set forth below.

If there are no Regulatory Approval Costs (as defined under "--Regulatory
Approval Costs"), the Exchange Ratio will be 0.733. In the event there are any
Regulatory Approval Costs, the Exchange Ratio will be adjusted to equal:

(i)(A) the Revised Ratio divided by (B) 1,000 minus the Revised Ratio
multiplied by:

(ii) the number of outstanding shares of SBC Common Stock as of the
Estimate Date (as defined under "-Regulatory Approval Costs") (the
"SBC Share Number") divided by the number of outstanding shares of PAC
Common Stock (other than the Excluded PAC Common Stock) as of the
Estimate Date (the "PAC Share Number").

The Revised Ratio will equal:

(i) the Revised PAC Value, divided by

(ii) the sum of the Revised PAC Value and the Revised SBC Value.

The Revised PAC Value will equal:

(i) the PAC Share Number multiplied by $39.49 (0.733 multiplied by
$53.875 (equitably adjusted as a result of a distribution,
reclassification, stock split, stock dividend or similar
transaction with respect to SBC Common Stock or PAC Common
Stock)), less

(ii) the PAC Costs.

The Revised SBC Value will equal:

(i) the SBC Share Number multiplied by $53.875 (equitably adjusted
as a result of a distribution, reclassification, stock split,
stock dividend or similar transaction with respect to SBC
Common Stock or PAC Common Stock), less

(ii) the SBC Costs.

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The PAC and the SBC Costs are the allocable shares of the Regulatory Approval
Costs determined in accordance with the procedures described under
"--Regulatory Approval Costs."

In the event that the Exchange Ratio is adjusted to less than
0.667 (other than as a result of certain equitable adjustments necessitated by
a distribution, reclassification, stock split, stock dividend or similar
transaction with respect to SBC Common Stock) in accordance with the terms of
the Merger Agreement, then PAC shall, as promptly as practicable after the
determination of such Exchange Ratio, convene another meeting of the
shareowners of PAC at which the holders of PAC Common Stock will be requested
again to consider and vote upon the transactions contemplated by the Merger
Agreement, taking into account such Exchange Ratio.

At the Effective Time, all shares of PAC Common Stock shall no
longer be outstanding, shall be cancelled and retired and shall cease to exist,
and each PAC Certificate formerly representing any of such PAC Common Stock
(other than Excluded PAC Common Stock) shall thereafter represent only the
right to receive the number of shares of SBC Common Stock determined in
accordance with the Exchange Ratio, together with the appropriate number of SBC
Rights attached thereto, and the right, if any, to receive cash in lieu of
fractional shares into which such shares of PAC Common Stock have been
converted (as described below) and any distribution or dividend with a record
date after Effective Time, in each case without interest.

If at any time during the period between the date of the
Merger Agreement and the Effective Time there is a change in the number of
shares of PAC Common Stock or shares of SBC Common Stock or securities
convertible or exchangeable into or exercisable for shares of PAC Common Stock
or shares of SBC Common Stock issued and outstanding as a result of a
distribution, reclassification, stock split, stock dividend or distribution, or
other similar transaction, the Exchange Ratio will be equitably adjusted to
eliminate the effect of such an event.

No fractional shares of SBC Common Stock will be issued in the
Merger. Instead, the Merger Agreement provides that each holder of PAC Common
Stock who would otherwise have been entitled to receive fractional shares of
SBC Common Stock will be entitled to receive, in lieu thereof, cash (without
interest) in an amount equal to the fraction of a share to which such holder
would otherwise have been entitled multiplied by the closing price of a share
of SBC Common Stock, as reported in The Wall Street Journal, New York City
edition, on the trading day immediately prior to the Effective Time.

EFFECTIVE TIME; CLOSING

The Merger will become effective at the Effective Time. The
Merger Agreement provides that the closing of the Merger (the "Closing") will
take place on the third business day after which the last to be fulfilled or
waived of the conditions set forth in the Merger Agreement are satisfied or
waived in accordance with the Merger Agreement, or on such other date as SBC
and PAC may agree. The date upon which the Closing will occur is herein called
the "Closing Date."

REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains various representations and
warranties of PAC, SBC and Merger Sub, certain of which are qualified as to
materiality. PAC represents and warrants to SBC and Merger Sub, and SBC (on
behalf of itself and Merger Sub) represents and warrants to PAC regarding the
following matters, among others: (i) corporate existence and the
capitalization of it and its respective Significant Subsidiaries (as defined in
Rule 1.02(w) of Regulation S-X promulgated pursuant to the Exchange Act); (ii)
corporate power and authority to execute, deliver and perform its obligations
under the Merger Agreement and to consummate the Merger; (iii) that the Merger
Agreement and the consummation of the Merger will not result in a violation of
any contract or agreement to which it is a party, or violate any law, rule,
regulation, any governmental or non-governmental permit or license or the
organizational documents of it or of its Significant Subsidiaries; (iv)
consents, registrations, approvals, permits or authorizations required by any
Governmental Entity, including filings with applicable PUCs and the FCC; (v)
its financial statements; (vi) the conduct of its and its subsidiaries'
businesses since December 31, 1995; (vii) pending or threatened civil, criminal
or administrative suits, actions or proceedings and undisclosed liabilities;
(viii) its Compensation and Benefit Plans; (ix) compliance with laws; (x)
environmental matters; (xi) tax matters; (xii) compliance with laws relating to
the employment of labor and the absence of labor controversies; (xiii) with

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respect to PAC, it having taken all necessary action with respect to all of the
outstanding PAC Rights (as defined below under "Comparison of Certain Rights of
Shareowners of SBC and PAC -- Rights Plans; PAC") so that neither SBC nor PAC
will have any obligations relating to the PAC Rights as a result of the Merger;
(xiv) the absence of any of action that would prevent SBC from accounting for
the Merger as a "pooling of interests" or prevent the Merger from qualifying as
a "reorganization" within the meaning of Section 368(a) of the Code; and (xv)
the absence of any liability to any undisclosed person for any brokerage fees,
commissions or finders' fees.

CONDUCT OF BUSINESS PRIOR TO EFFECTIVE TIME;
CERTAIN COVENANTS; ACQUISITION PROPOSALS

Operational Covenants

The Merger Agreement provides that, during the period from the
date of the Merger Agreement until the Effective Time, except as otherwise
contemplated by the Merger Agreement, as required by applicable law, rule or
regulation, or unless the other party shall otherwise approve, which approval
shall not be unreasonably withheld: (i) each of SBC and PAC will, and each of
their respective subsidiaries will, conduct its business only in the ordinary
and usual course and, to the extent consistent therewith, it and its
subsidiaries shall use all reasonable efforts to preserve its business
organization intact and maintain its existing relations and goodwill with
customers, suppliers, regulators, distributors, creditors, lessors, employees
and business associates; (ii) each of SBC and PAC shall not (A) amend the SBC
Restated Certificate, in the case of SBC, or the Articles of Incorporation of
PAC (the "PAC Articles") in the case of PAC, or their respective by-laws, or
amend, modify or terminate the SBC Rights Agreement (as defined under
"Description of SBC Capital Stock -- Description of SBC Rights") or the PAC
Rights Agreement (as defined under "Comparison of Certain Rights of Shareowners
of SBC and PAC -- Rights Plans -- PAC"), as the case may be, other than, in the
case of SBC, an amendment to the SBC Restated Certificate for the purpose of
increasing the authorized number of shares of SBC Common Stock as contemplated
by SBC's March 12, 1996 Proxy Statement; (B) split, combine, subdivide or
reclassify its outstanding shares of capital stock; (C) declare, set aside or
pay any dividend payable in cash, stock or property in respect of any capital
stock, other than (I) in the case of PAC, the quarterly dividend declared on
March 22, 1996, payable on May 1, 1996 to shareowners of record on April 9,
1996, and per share regular quarterly cash dividends not in excess of the
Exchange Ratio multiplied by the dividend per share of SBC Common Stock in such
quarter and (II) in the case of SBC, regular quarterly cash dividends not in
excess of $0.43 per share of SBC Common Stock; or (D) repurchase, redeem or
otherwise acquire, except (I) in the case of PAC, in connection with the PAC
Stock Plans and (II) in the case of SBC, in connection with the SBC Stock
Plans, or permit any of its subsidiaries to purchase or otherwise acquire, any
shares of its capital stock or any securities convertible into or exchangeable
or exercisable for any shares of its capital stock; (iii) neither SBC nor PAC
nor any of their respective subsidiaries shall knowingly take any action that
would prevent the Merger from qualifying for "pooling of interests" accounting
treatment or as a "reorganization" within the meaning of Section 368(a) of the
Code or that would cause any of its representations and warranties set forth in
the Merger Agreement to become untrue in any material respect; (iv) neither SBC
nor PAC, nor any of their respective subsidiaries, shall terminate, establish,
adopt, enter into or make any new grants or awards of stock-based compensation
or other benefits under, amend or otherwise modify, any PAC or SBC
Compensation and Benefit Plans or increase the salary, wage, bonus or other
compensation of any directors, officers or employees except (A) for grants or
awards to directors, officers and employees of it or its subsidiaries under
existing PAC or SBC Compensation and Benefit Plans in such amounts and on such
terms as are consistent with past practice, (B) in the normal and usual course
of business or (C) for actions necessary to satisfy existing contractual
obligations under PAC or SBC Compensation and Benefit Plans existing as of the
date of the Merger Agreement; and (v) neither SBC nor PAC, nor any of their
respective subsidiaries will authorize, or enter into an agreement to do any of
the foregoing. PAC has consented to a waiver of the limitation contained in
the Merger Agreement on the amount of quarterly cash dividends payable by SBC.

Further, from the date of the Merger Agreement until the
Effective Time, neither SBC nor its subsidiaries will, except as approved by
PAC (which approval shall not be unreasonably withheld), as contemplated in the
Merger Agreement or as required by applicable law, rule or regulation: (i)
issue any preferred stock or incur any indebtedness for borrowed money or
guarantee any such indebtedness if SBC should reasonably anticipate that after
such incurrence any of SBC's or any of its subsidiaries' outstanding senior
indebtedness would be rated BBB or lower by Standard & Poor's; (ii) make any
capital expenditures in any calendar year in an aggregate amount in excess of
150% of the aggregate amount of capital expenditures reflected in SBC's capital
expenditure budget for such year; (iii) issue,

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deliver, sell or encumber shares of any class of its common stock or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, except (A) in public offerings for cash where the aggregate
proceeds to SBC are less than $1 billion in any calendar year, (B) shares
issuable pursuant to stock options and other awards outstanding on the date of
the Merger Agreement under SBC's stock plans, awards of options and other
awards granted after the date of the Merger Agreement under the SBC's stock
plans in accordance with the Merger Agreement and shares issuable pursuant to
such awards, and (C) to fund the cost of any acquisition of a
telecommunications business, whether by merger, consolidation, purchase of
assets or otherwise; (iv) other than in transactions between or among
themselves, sell or otherwise transfer any of its indirect investment in AA
shares of Telefonos de Mexico, S.A. de C.V.; (v) enter any business other than
the telecommunications business and those businesses traditionally associated
with the telecommunications business; or (vi) agree prior to the Effective Time
to do any of the foregoing after the Effective Time.

In addition, from the date of the Merger Agreement until the
Effective Time, neither PAC nor its subsidiaries will, except as SBC shall
otherwise approve (which approval shall not be unreasonably withheld), as
otherwise expressly contemplated by the Merger Agreement or as required by
applicable law, rule or regulation: (i) issue any preferred stock or incur any
indebtedness for borrowed money or guarantee any such indebtedness if PAC
should reasonably anticipate that after such incurrence any of PAC's or any of
its subsidiaries' outstanding senior indebtedness would be rated BBB or lower
by Standard & Poor's; (ii) make any capital expenditures in any calendar year
in an aggregate amount in excess of the aggregate amount reflected in PAC's
capital expenditure budget for such year plus $250 million (provided, however,
that the foregoing restriction will not limit the ability of Pacific Bell or
Nevada Bell (each a subsidiary of PAC) to make or commit to capital
expenditures with respect to any aspect of their respective existing
businesses); (iii) issue, deliver, sell, or encumber shares of any class of its
common stock or any securities convertible into, or any rights, warrants or
options to acquire, any such shares except (A) shares issued pursuant to
options and other awards outstanding on the date of the Merger Agreement under
the PAC Stock Plans, awards of options and other awards granted after the date
of the Merger Agreement under the PAC Stock Plans in accordance with the Merger
Agreement and shares issuable pursuant to such awards, and (B) up to an
aggregate amount of $300 million of such stock in any calendar year to fund, in
whole or in part, any acquisition or acquisitions permitted under clause (iv)
below; (iv) spend in excess of $600 million in any calendar year to acquire any
business, whether by merger, consolidation, purchase of property or assets or
otherwise (except for acquisitions by Pacific Bell and Nevada Bell of
businesses which would be subject to regulation in California or Nevada),
unless such business is acquired directly by PAC and is within PAC's existing
lines of business (provided, however, neither PAC nor any of its subsidiaries
may acquire (A) any cellular, personal communications services or wireless
cable business servicing any territory outside of the states of California and
Nevada, or (B) any business servicing any territory outside the United States
unless such business primarily consists of the long distance telephone
business, the internet services business, or the internet hubbing business);
(v) enter any business other than the telecommunications business and those
businesses traditionally associated with the telecommunications business; or
(vi) agree prior to the Effective Time to do any of the foregoing after the
Effective Time.

Acquisition Proposals

The Merger Agreement provides that neither SBC nor PAC nor any
of their respective subsidiaries nor any of their respective officers and
directors will, and they will use their respective best efforts to cause their
and their subsidiaries' employees, agents and representatives not to, (i)
initiate, solicit, encourage or otherwise facilitate any inquiries or the
making of any Acquisition Proposal or (ii) have any discussion with or provide
any confidential information or data to any person relating to an Acquisition
Proposal or engage in any negotiations concerning an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal. The Merger Agreement does not prohibit, however, either of SBC or PAC
(A) from complying with Rule 14e-2 under the Exchange Act with regard to an
Acquisition Proposal, (B) engaging in any discussions or negotiations with or
providing any information to, any person in response to an unsolicited bona
fide written Acquisition Proposal by any such person or (C) recommending such
an unsolicited bona fide written Acquisition Proposal to the shareowners of SBC
or PAC, as the case may be, if and only to the extent that, in such case
referred to in clause (B) or (C), (i) the SBC Board or PAC Board, as the case
may be, concludes in good faith (after consultation with its financial advisor)
that such Acquisition Proposal is reasonably capable of being completed, taking
into account all legal, financial, regulatory and other aspects of the proposal
and the person making the proposal, and would, if consummated, result in a
transaction more favorable to SBC's or PAC's shareowners from a financial point
of view than the transaction

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contemplated by the Merger Agreement (any such more favorable Acquisition
Proposal being referred to as a "Superior Proposal"), (ii) the SBC Board or the
PAC Board, as the case may be, determines in good faith after consultation with
outside legal counsel that such action is necessary for its board of directors
to comply with their respective fiduciary duties under applicable law and (iii)
prior to providing any information or data to any person in connection with an
Acquisition Proposal by any such person, such board of directors receives from
such person an executed confidentiality agreement on terms substantially
similar to those contained in the confidentiality agreement previously entered
into between SBC and PAC in connection with their consideration of the Merger.
The Merger Agreement provides that SBC and PAC will notify the other
immediately if any such inquiries, proposals or offers are received by, any
such information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, any of its representatives
indicating, in connection with such notice, the name of such person and the
terms and conditions of any proposals or offers, and thereafter will keep SBC
or PAC, as the case may be, informed, on a current basis, of the status and
terms of any such proposals or offers and the status of any such discussions or
negotiations.

CERTAIN REGULATORY MATTERS

HSR

Under the HSR Act and the rules promulgated thereunder,
certain transactions, including the Merger, may not be consummated unless
certain waiting period requirements have been satisfied. SBC and PAC each filed
a Notification and Report Form pursuant to the HSR Act with the DOJ and the FTC
on April 10, 1996. At any time before or after the Effective Time, the FTC, the
DOJ or others could take action under the antitrust laws with respect to the
Merger, including seeking to enjoin the consummation of the Merger, to rescind
the Merger or to require divestiture of substantial assets of SBC or PAC. There
can be no assurance that a challenge to the Merger on antitrust grounds will
not be made or, if such a challenge is made, that it would not be successful.

FCC

Before the Merger can be effected, SBC and PAC must obtain the
approval of the FCC pursuant to the Communications Act for transfer of control
from PAC to SBC of PAC's subsidiaries holding certain FCC licenses and
authorizations. The FCC is expected to evaluate whether the public interest,
convenience and necessity will be served by the transfer of control. The
filings made with the FCC by SBC and PAC under the Communications Act will
include, among others, transfer of control of Radio Stations applications;
applications to acquire lines; and applications to have common officers and
directors. There can be no assurance that the requisite FCC approvals will be
obtained or that they will be obtained in a timely manner. In addition, there
can be no assurance that such approvals will not result in the abandonment of
the Merger.

State PUCs

PAC's primary operating subsidiaries, Pacific Bell and Nevada
Bell, are public utilities subject to the respective jurisdictions of the CPUC
and the NPSC. SBC and PAC will be filing an application with the CPUC
requesting its authorization, to the extent required under Section 854, to
approve an indirect change in control of Pacific Bell, which will become an
indirect wholly-owned subsidiary of SBC. Before authorizing a change of control
under Section 854(b), the CPUC is required to find that the Merger provides
short- and long-term economic benefits to customers and to allocate equitably
these forecasted economic benefits, as found by the CPUC, between shareowners
and customers, with customers receiving not less than 50% of any such benefits.
The CPUC's determination of forecasted economic benefits is limited to services
within its jurisdiction and over which it exercises ratemaking authority. The
CPUC is not required to use any particular method for assuring that customers
receive any forecasted economic benefits and, in markets where competition
exists, the CPUC can rely on competition to produce the economic benefits. The
CPUC also is required under Section 854(b) to determine that a change in
control does not adversely affect competition in the provision of telephone
service in California and, in making that determination, it is required to
request an advisory opinion from the California Attorney General.

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Under Section 854(c), the CPUC is required to consider eight
separate criteria, including whether the indirect change in control is fair and
reasonable to public utility employees and to shareowners. Based on its
consideration of those criteria, the CPUC is required to find that, on balance,
the change of control is in the public interest.

The application that SBC and PAC intend to file with the CPUC
will demonstrate compliance with Section 854 provisions are applicable to the
indirect change of control, although it is not certain whether Section 854(b)
applies to the Merger. SBC and PAC intend to file their joint application
requesting CPUC approval of the indirect change in control in April 1996. Other
parties will have 30 days to file protests to the application. Protests to the
application may be filed by the CPUC Division of Ratepayer Advocates, consumer
groups, competitors or other parties. PAC and SBC are involved in ongoing
meetings with interested parties, including the CPUC staff, in an effort to
satisfy concerns about the transaction and to narrow potential areas of
controversy. After the filing of the application and any protests, if the CPUC
determines that hearings on the application are required, SBC and PAC will file
written testimony regarding the Section 854 requirements, the parties will
conduct discovery and hearings will be held on the application. PAC and SBC
believe that any hearings would be held on the application during the summer of
1996 and that the CPUC should complete its review by the end of 1996.

SBC has committed in connection with the Merger to maintain
and improve the quality of service to customers in California and Nevada, to
expand service to ethnic markets, to maintain commitments to diversity in the
work force, to continue support of charitable and other community endeavors, to
further the cause of improving the quality of education in California and Nevada
and to increase California employment levels. Specific examples of such
commitments include: an increase of California employment within two years
after the Effective Time by at least 1,000 jobs above the level that otherwise
would have prevailed in the absence of the Merger; maintenance of the Pacific
Bell and Nevada Bell headquarters in their present locations; continued use of
the Pacific Bell and Nevada Bell brand names; and establishment of a new
headquarters in California for integrated support and administrative services
and long distance, international and internet businesses.

SBC and PAC believe that the Merger will produce benefits to
the State of California, to its citizens and to PAC's customers. SBC and PAC
also believe that the indirect change of control of Pacific Bell will not have
an adverse effect on competition in the provision of telephone service in
California. For these reasons, among others, SBC and PAC believe that the CPUC
will approve the indirect change of control of Pacific Bell. No assurance can
be given that the CPUC will authorize the indirect change of control of Pacific
Bell, that the CPUC proceedings will not delay the consummation of the Merger
or that challenges to the Merger may not cause SBC and PAC to abandon the
Merger.

SBC and PAC do not believe that NPSC has the statutory
authority to require its approval of the Merger or any aspect of it. In order
to avoid any potential disputes with the NPSC regarding its jurisdiction and to
assist the NPSC in evaluating the Merger, SBC and PAC intend to make an
informational filing with the NPSC.

The Merger Agreement provides that SBC and PAC will cooperate
with each other and use all their respective reasonable efforts to take all
actions necessary, proper or advisable on their part under the Merger Agreement
and applicable laws, rules and regulations to consummate the Merger as soon as
practicable, including preparing and filing as promptly as practicable all
necessary applications, notices, petitions, filings and other documents and to
obtain as promptly as practicable all consents, registrations, approvals,
permits and authorizations necessary to be obtained from any third party and/or
any Governmental Entity in order to consummate the Merger. Notwithstanding the
foregoing, except as contemplated in connection with the allocation of
Regulatory Approval Costs (as described under "--Regulatory Approval Costs"),
neither SBC nor PAC is required to proffer to, or agree to, any concession to
any Governmental Entity that SBC concludes is reasonably likely to materially
reduce the economic or business benefits SBC expects, as of the date of the
Merger Agreement, to realize from the Merger. Subject to applicable laws
relating to the exchange of information, the Merger Agreement provides that SBC
and PAC shall have the right to review in advance, and to the extent
practicable each will consult the other on, all the information relating to SBC
or PAC, as the case may be, that appears in any filing made with, or written
materials submitted to, any third party and/or any Governmental Entity in
connection with the Merger. The Merger Agreement provides that SBC and PAC each
will, upon request by the other, furnish the other with all information
concerning itself, its subsidiaries, directors, officers and shareowners and
such other matters as may be reasonably necessary in connection with any
statement, filing,

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notice or application made by or on behalf of SBC, PAC or any of their
respective subsidiaries to any third party and/or any Governmental Entity in
connection with the Merger.

In addition, the Merger Agreement requires that PAC and SBC
each keep the other apprised of the status of matters relating to completion of
the transactions contemplated by the Merger Agreement, including promptly
furnishing the other with copies of notice or other communications received by
SBC or PAC, as the case may be, from any third party and/or any Governmental
Entity with respect to the Merger. Pursuant to the terms of the Merger
Agreement, each of PAC and SBC shall give prompt notice to the other of any
change that is reasonably likely to result in a material adverse effect on it.

EMPLOYEE BENEFITS

Pursuant to the Merger Agreement, each outstanding PAC Option,
whether vested or unvested, will be deemed to constitute an option to acquire
the same number of shares of SBC Common Stock as the holder of such PAC Option
would have been entitled to receive had such holder exercised such PAC Option
in full immediately prior to the Effective Time at an exercise price per share
equal to (x) the aggregate exercise price for the PAC Common Stock otherwise
purchasable pursuant to such PAC Option, divided by (y) the number of full
shares of SBC Common Stock deemed purchasable pursuant to such PAC Option.
Effective at the Effective Time, SBC shall assume each PAC Option in accordance
with the terms of the PAC Stock Option Plan under which it was issued and the
stock option agreement by which it was evidenced.

Pursuant to the Merger Agreement, SBC will cause the Surviving
Corporation for at least two years after the Effective Time to provide or cause
to be provided to the employees of PAC and its subsidiaries compensation and
benefit plans that are no less favorable, in the aggregate, than PAC's
Compensation and Benefit Plans; provided, however, that if during this period
SBC implements any widespread increase or decrease in benefits under
compensation and benefit plans or in the cost thereof to participants under
compensation and benefit plans applicable to employees of SBC and its
subsidiaries (other than the Surviving Corporation and its subsidiaries), the
Surviving Corporation shall proportionately adjust the benefits under PAC's
compensation and benefit plans or the cost thereof to participants, and
provided, further with respect to employees who are subject to collective
bargaining, all benefits shall be provided in accordance with the applicable
collective bargaining agreement. At or prior to the Effective Time, PAC shall
make all necessary arrangements to cause any shares of PAC Common Stock units
under PAC's Compensation and Benefit Plans to be converted into share units
with respect to SBC Common Stock by multiplying the number of shares of PAC
Common Stock subject to such PAC share units by the fraction of a share of SBC
Common Stock equal to the Exchange Ratio. SBC has agreed to honor (and to cause
the Surviving Corporation to honor), pursuant to their terms, all employee
benefit obligations to current and former employees under PAC's Compensation
and Benefit Plans.

Pursuant to the Merger Agreement, each outstanding share of
PAC Common Stock that is restricted under the PAC 1994 Stock Incentive Plan or
PAC Restricted Stock Plan shall be converted into the right to receive, and
become exchangeable for a fraction of a share of SBC Common Stock equal to the
Exchange Ratio, having the same restrictions, terms and conditions as were
applicable to such restricted share of PAC Common Stock.

In addition, pursuant to the Merger Agreement each outstanding
stock unit under the PAC Outside Directors' Deferred Stock Unit Plan shall be
converted into the right to receive a stock unit representing a fraction of a
share of SBC Common Stock equal to the Exchange Ratio and having the same terms
and conditions as were applicable to such stock unit before the Effective Time.

INDEMNIFICATION AND INSURANCE

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to indemnify such person. The Surviving Corporation is obligated to maintain
D&O Insurance for acts and omissions occurring prior to the Effective Time with
coverage in amount and scope at least as favorable as PAC's existing D&O
Insurance for a period of six years after the Effective Time so long as the
annual premium therefor is not in excess of the Current Premium; provided,
however, if the existing D&O Insurance expires, is terminated or cancelled
during such six year period, the Surviving Corporation will use its best
efforts to obtain D&O Insurance in an amount and scope as great as can be
obtained for the remainder of such period for a premium not in excess of 175%
of the Current Premium.

CONDITIONS

The respective obligation of SBC, Merger Sub and PAC to effect
the Merger is subject to the satisfaction or waiver at or prior to the
Effective Time of each of the following conditions: (a) the Merger Agreement
(including the adjusted Exchange Ratio if required to be approved at an
additional PAC Special Meeting) has been duly approved by holders of PAC Common
Stock and has been duly approved by the sole shareowner of Merger Sub, and the
issuance of SBC Common Stock pursuant to the Merger has been duly approved by
the holders of shares of SBC Common Stock; (b) the shares of SBC Common Stock
issuable to PAC shareowners pursuant to the Merger Agreement have been
authorized for listing on the NYSE upon official notice of issuance; (c) the
waiting period applicable to the consummation of the Merger under the HSR Act
has expired or been terminated, the decision and order of the CPUC authorizing
the Merger and making any required determinations under Section 854(a)-(c) of
the California Public Utilities Code, including its determination as to any
required allocation of economic benefits, if any, of the Merger, between
shareowners and ratepayers, shall have become final, and other than the filing
of the Articles of Merger, all notices, reports and other filings required to
be made prior to the Effective Time by PAC or SBC with, and all consents,
registrations, approvals, permits and authorizations required to be obtained
prior to the Effective Time by PAC or SBC from, any Governmental Entity
(collectively, "Governmental Consents") in connection with the execution and
delivery of the Merger Agreement and the consummation of the Merger shall have
been made or obtained upon terms and conditions that are not reasonably likely
to have a material adverse effect on SBC or PAC (the parties to the Merger
Agreement having agreed that in the event the CPUC were to require by final
decision and order that an allocation of economic benefits to ratepayers is
required under subsection (b) of Section 854, the effect of any such final
decision and order will not be considered to have a material adverse effect on
SBC or PAC, although such allocation may, in certain circumstances result in a
"Failure to Agree Event" (as defined under "--Regulatory Approval Costs") which
would result in the termination of the Merger Agreement); (d) no court or
Governmental Entity of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, rule or regulation that is in effect
and restrains, enjoins or otherwise prohibits consummation of the Merger or
that is, individually or in the aggregate with all other such laws, rules or
regulations reasonably likely to have a material adverse effect on SBC or PAC
(collectively, an "Order"), and no Governmental Entity has instituted any
proceeding or threatened to institute any proceeding seeking any such Order;
(e) the Registration Statement, of which this Proxy Statement/Prospectus is a
part, shall have become effective under the Securities Act, and no stop order
suspending such effectiveness shall have been issued, and no proceedings for
that purpose shall have been initiated or be threatened by the SEC; (f) SBC and
PAC shall each have received a letter from the independent auditors to the
other, dated both the date that the Registration Statement became effective and
the Closing Date, in form and substance customary for "comfort" letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement, and SBC and PAC shall have
received letters from their respective independent public accounting firms to
the effect that the Merger will qualify for "pooling of interests" accounting
treatment; (g) SBC shall have received all state securities and "blue sky"
permits and approvals necessary to consummate the transactions contemplated by
the Merger Agreement; and (h) the determination of SBC Costs and PAC Costs (as
such terms are defined under "--Regulatory Approval Costs") shall have been
completed.

In addition, the obligations of SBC and Merger Sub to effect
the Merger are also subject to the satisfaction or waiver by SBC at or prior to
the Effective Time of the following conditions: (a) the representations and
warranties of PAC set forth in the Merger Agreement are true and correct as of
the date of the Merger Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date, and SBC has
received a certificate signed on behalf of PAC by an executive officer of PAC
to such effect; (b) PAC has performed in all material respects all obligations
required to be performed by it under the Merger Agreement at or prior to the
Closing Date, and SBC has received a certificate signed on behalf of PAC by an
executive officer of PAC to such effect; (c) PAC has obtained the consent or
approval of each person whose consent or approval shall be required in

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order to consummate the transactions contemplated by the Merger Agreement under
any contract to which PAC or any of its subsidiaries is a party, except those
for which the failure to obtain such consent or approval, individually or in
the aggregate, is not reasonably likely to have, a material adverse effect on
PAC or is not reasonably likely to materially adversely affect the ability of
PAC to consummate the transactions contemplated by the Merger Agreement; and
(d) SBC has received the opinion of Sullivan & Cromwell, special counsel to
SBC, dated the Closing Date, to the effect that the Merger will be treated for
Federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and that each of SBC, Merger Sub and PAC will be a party to
that reorganization within the meaning of Section 368(b) of the Code.

Further, the obligation of PAC to effect the Merger is also
subject to the satisfaction or waiver by PAC at or prior to the Effective Time
of the following conditions: (a) the representations and warranties of SBC and
Merger Sub set forth in the Merger Agreement shall be true and correct as of
the date of the Merger Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date, and PAC has
received a certificate signed on behalf of SBC and Merger Sub by an executive
officer of SBC to such effect; (b) each of SBC and Merger Sub has performed in
all material respects all obligations required to be performed by it under the
Merger Agreement at or prior to the Closing Date, and PAC has received a
certificate signed on behalf of SBC and Merger Sub by an executive officer of
SBC to such effect; (c) SBC has obtained the consent or approval of each person
whose consent or approval shall be required in order to consummate the
transactions contemplated by the Merger Agreement under any contract to which
SBC or any of its subsidiaries is a party, except those for which failure to
obtain such consents and approvals, individually or in the aggregate, is not
reasonably likely to have a material adverse effect on SBC or is not reasonably
likely to materially adversely affect the ability of SBC to consummate the
transactions contemplated by the Merger Agreement; and (d) PAC has received the
opinion of Pillsbury Madison & Sutro LLP, counsel to PAC, dated the Closing
Date, to the effect that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
and that each of SBC, Merger Sub and PAC will be a party to that reorganization
within the meaning of Section 368(b) of the Code.

MODIFICATION OR AMENDMENT; WAIVER OF CONDITIONS

The Merger Agreement provides that, subject to the provisions
of applicable law, at any time prior to the Effective Time, the parties to the
Merger Agreement may modify or amend the Merger Agreement by written agreement
executed and delivered by duly authorized officers of the respective parties.
The Merger Agreement also provides that the conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of each such
party and may be waived by such party in whole or in part to the extent
permitted by applicable law.

TERMINATION

The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (a) whether before or after
any requisite approval by the shareowners of SBC or PAC, by mutual written
consent of SBC and PAC, by action of SBC Board or the PAC Board, as the case
may be, or (b) by action of either the SBC Board or the PAC Board if (i) the
Merger has not been consummated by March 31, 1997, whether such date is before
or after the date of approval by the shareowners of SBC or PAC (provided,
however, that if SBC or PAC determines that additional time is necessary in
connection with obtaining a required approval of the CPUC, such date may be
extended by SBC or PAC from time to time by written notice to the other party
to a date not later than December 31, 1997); (ii) the shareowners of PAC fail
to approve the matters required to be approved by such shareowners at the PAC
Special Meeting, (iii) the shareowners of SBC fail to approve the matters
required to be approved by such shareowners at the SBC Special Meeting, or (iv)
any Order permanently restraining, enjoining or otherwise prohibiting
consummation of the Merger shall become final and non-appealable (whether
before or after the approval by the shareowners of PAC or SBC). In addition,
the Merger Agreement shall be automatically terminated upon the occurrence of a
Failure to Agree Event (as defined under "--Regulatory Approval Costs").

Further, the Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after the approval by shareowners of PAC, by action of the PAC Board (a) if (i)
PAC is not in material breach of any of the terms of the Merger Agreement, (ii)
the PAC Board approves entering into a binding written agreement concerning a
transaction that constitutes a Superior Proposal and PAC notifies SBC in
writing that PAC wishes to enter into such agreement, (iii) SBC does not make,
within ten business days of receipt

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of PAC's written notification of its desire to enter into a binding agreement
for a Superior Proposal, an offer that the PAC Board believes, in good faith
after consultation with its financial advisors, is at least as favorable, from
a financial point of view, to the shareowners of PAC as the Superior Proposal
and (iv) PAC, prior to such termination pays to SBC any required termination
fees (as described under "--Certain Termination Fees"); or (b) if (i) the SBC
Board has withdrawn or adversely modified its approval or recommendation of the
Merger Agreement, (ii) the restrictions set forth in the Merger Agreement with
respect to Acquisition Proposals have been breached by SBC in any material
respect and SBC shall have failed to promptly terminate the activity giving
rise to such breach and use best efforts to cure such breach upon notice
thereof from PAC or SBC has breached the notice requirements in connection with
Acquisition Proposals, (iii) there has been a material breach by SBC or Merger
Sub of any representation, warranty, covenant or agreement (other than the
restrictions with respect to Acquisition Proposals) contained in the Merger
Agreement that is not curable or, if curable, is not cured within 30 days after
notice of such breach is given by the non-breaching party, (iv) if SBC (or its
representative) has taken any action in respect of an Acquisition Proposal that
would be proscribed by the Merger Agreement but for the exception allowing
certain actions to be taken by SBC in response to a bona fide unsolicited
Superior Proposal (provided, that PAC shall not have any right to terminate the
Merger Agreement pursuant to this clause (iv) as a result of the taking of any
such action during the first 45 days after the date of the Merger Agreement
(the "45 Day Period") unless PAC exercises its right of termination prior to
the later of (x) the end of the 45 Day Period and (y) 15 business days after
the date PAC receives written notice from SBC of the action giving rise to a
right of termination), (v) the Incumbent Directors and any additional members
of the SBC Board whose election or nomination for election as a director is
supported by a majority of the Incumbent Directors (such additional member of
the SBC Board thereafter being an Incumbent Director) ceasing to constitute a
majority of the members of the SBC Board or any person or "group" (as defined
in Rule 13d-5 under the Exchange Act) owning capital stock of SBC with voting
power sufficient to cast a majority of the votes entitled to be cast for the
election of directors of SBC, (vi) SBC, in any calendar year, enters into an
agreement or agreements to spend in excess of $5 billion to acquire one or more
businesses, whether by merger, consolidation, purchase of property or assets or
otherwise, or (vii) PAC is the Higher Party (as defined below under "--
Regulatory Approval Costs") and, in addition to other factors set forth in the
Merger Agreement, SBC does not make a timely Lower Party Election (as defined
below under "-- Regulatory Approval Costs").

In addition, the Merger Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time, before or after the
approval by the shareowners of SBC, by action of the SBC Board if (i) the PAC
Board has withdrawn or adversely modified its approval or recommendation of the
Merger Agreement, (ii) the restrictions set forth in the Merger Agreement with
respect to Acquisition Proposals have been breached by PAC in any material
respect and PAC has failed to promptly terminate the activity giving rise to
such breach and use best efforts to cure such breach upon notice thereof from
SBC or PAC has breached the notice requirements in connection with Acquisition
Proposals, (iii) there has been a material breach by PAC of any representation,
warranty, covenant or agreement (other than the restrictions with respect to
Acquisition Proposals) contained in the Merger Agreement that is not curable
or, if curable, is not cured within 30 days after notice of such breach is
given by the non-breaching party, (iv) if PAC (or its representative) has taken
any action in respect of an Acquisition Proposal that would be proscribed by
the Merger Agreement but for the exception allowing certain actions to be taken
by PAC in response to a bona fide unsolicited Superior Proposal (provided, that
SBC shall not have any right to terminate the Merger Agreement pursuant to this
clause (iv) as a result of the taking of any action during the 45 Day Period
unless SBC exercises its right of termination prior to the later of (x) the end
of the 45 Day Period and (y) 15 business days after the date SBC received
written notice from PAC of the action giving rise to a right of termination) or
(v) SBC is the Higher Party (as defined below under "-- Regulatory Approval
Costs") and, in addition to other factors set forth in the Merger Agreement,
PAC does not make a timely Lower Party Election (as defined below under "--
Regulatory Approval Costs").

In the event of termination of the Merger Agreement, the
Merger Agreement (other than certain provisions of the Merger Agreement
relating to expenses and confidentiality and other than as described below
under "--Certain Termination Fees") shall become void and of no effect with no
liability on the part of any party thereto (or of any of their respective
directors, officers, employees, agents, legal or financial advisors or other
representatives); provided, however, no such termination shall relieve any
party thereto from any liability for any breach of the Merger Agreement.

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CERTAIN TERMINATION FEES

The Merger Agreement provides that in the event that (i) a
bona fide Acquisition Proposal shall have been made with respect to PAC or any
of its subsidiaries and made known to PAC shareowners generally or has been
made directly to PAC shareowners generally, or any person shall have publicly
announced an intention to make a bona fide Acquisition Proposal with respect to
PAC or any subsidiary of PAC and such Acquisition Proposal or announced
intention shall not be withdrawn prior to the PAC Special Meeting and
thereafter the Merger Agreement is terminated by either SBC or PAC as a result
of the failure of the shareholders of PAC to approve the matters required to be
approved by such shareholders at the PAC Special Meeting, or (ii) the Merger
Agreement is terminated (x) by PAC as a result of the PAC Board's approval of
PAC entering into a binding written agreement concerning a transaction that
constitutes a Superior Proposal in accordance with the terms set forth in the
Merger Agreement or (y) by SBC as a result of (I) the PAC Board's withdrawal or
adverse modification of its approval or recommendation of the Merger Agreement,
(II) a material breach by PAC of certain restrictions set forth in the Merger
Agreement with respect to Acquisition Proposals and PAC's failure to promptly
terminate the activity giving rise to such breach and use best efforts to cure
such breach upon notice thereof from SBC, (III) PAC's breach of the notice
requirements in connection with Acquisition Proposals, (IV) PAC (or its
representative) taking any action in respect of an Acquisition Proposal that
would be proscribed by the Merger Agreement but for the exception allowing
certain actions to be taken by PAC in response to a bona fide unsolicited
Superior Proposal or (V) PAC's failure to make a timely Lower Party Election
(as defined below under "-- Regulatory Approval Costs") in the event that SBC
is the Higher Party (as defined below under "-- Regulatory Approval Costs"),
then PAC shall pay SBC a fee equal to $300 million (the "Termination Fee"),
which amount shall be exclusive of any expenses to be paid pursuant to the
Merger Agreement; provided, however, that no fee shall be payable to SBC
pursuant to preceding clause (i) or pursuant to a termination by SBC as a
result of PAC's taking of any action during the 45 Day Period unless and until,
within 9 months of such termination, PAC or any subsidiary of PAC enters into
any agreement (I) pursuant to which any person (other than SBC) (an "Acquiring
Party") proposes to acquire, by purchase, merger, consolidation, sale,
assignment, lease, transfer or otherwise, thirty percent or more of the voting
power of the outstanding securities of PAC or any Significant Subsidiary of PAC
or a majority of the assets of PAC or any Significant Subsidiary of PAC, (II)
pursuant to which there is proposed to be consummated a merger, consolidation
or similar transaction between PAC or any of its subsidiaries and an Acquiring
Party in which shareholders of PAC immediately prior to such merger,
consolidation or similar transaction would not own securities representing at
least seventy percent of the outstanding voting power of the surviving entity
of such merger, consolidation or similar transaction immediately following the
consummation thereof or (III) pursuant to which any of the transactions
described in (I) or (II) is proposed, assuming that the references to thirty
percent and seventy percent were both to fifty percent; provided, further that,
no fee shall be payable in the case of (I) and (II) above where the persons
comprising the PAC Board prior to entering into such agreement are intended to
constitute after consummation a majority of the members of the PAC Board, in
the case of (I) or the surviving entity in the case of (II). In the event of a
termination by SBC as a result of PAC or its representatives having taken any
action in respect of an Acquisition Proposal that would be proscribed but for
the exception allowing certain actions to be taken in response to a bona fide
unsolicited Superior Proposal during the 45 Day Period, PAC shall pay all
charges and expenses incurred by SBC and Merger Sub in connection with the
Merger Agreement, which payments will be credited against any Termination Fee
that may subsequently become payable.

The Merger Agreement similarly provides that in the event that
(i) a bona fide Acquisition Proposal shall have been made with respect to SBC
or any of its subsidiaries and made known to SBC shareowners generally or has
been made directly to shareowners generally, or any person shall have publicly
announced an intention to make a bona fide Acquisition Proposal with respect to
SBC or any subsidiary of SBC and thereafter the Merger Agreement is terminated
by either PAC or SBC as a result of the failure of the shareholders of SBC to
approve the matters required to be approved by such shareholders at the SBC
Special Meeting, or (ii) the Merger Agreement is terminated by PAC as a result
of (a) the withdrawal or adverse modification by the SBC Board of its approval
or recommendation of the Merger Agreement, the breach by SBC of certain
restrictions set forth in the Merger Agreement with respect to Acquisition
Proposals and SBC's failure to promptly terminate the activity giving rise to
such breach and use best efforts to cure such breach upon notice thereof from
PAC or SBC's breach of the notice requirements in connection with Acquisition
Proposals, (b) SBC (or its representative) taking any action in respect of an
Acquisition Proposal that would be proscribed by the Merger Agreement but for
the exception allowing certain actions to be taken by SBC in response to a bona
fide unsolicited Superior Proposal, (c) the Incumbent Directors and any
additional members of the SBC Board whose election or nomination as a director
is supported by a majority of the Incumbent Directors (such

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additional member of the SBC Board thereafter being an Incumbent Director)
ceasing to constitute a majority of the members of the SBC Board or any person
or "group" (as defined under Rule 13d-5 under the Exchange Act) shall own
capital stock of SBC with voting power sufficient to cast a majority of the
votes entitled to be cast for the election of directors of SBC, (d) an
agreement or agreements by SBC to spend in excess of $5 billion in any calendar
year to acquire one or more businesses, whether by merger or otherwise, or (e)
SBC's failure to make a timely Lower Party Election (as defined below) in the
event that PAC is the Higher Party (as defined below), then SBC shall pay PAC a
fee equal to the Termination Fee, which amount shall be exclusive of any
expenses to be paid pursuant to the Merger Agreement; provided, however, that
no fee shall be payable to PAC pursuant to preceding clause (i) or pursuant to
a termination by PAC as a result of SBC's taking of any action during the 45
Day Period unless and until, within 9 months of such termination, SBC or any
Subsidiary of SBC enters into any agreement (I) pursuant to which any person
(other than PAC) (an "SBC Acquiring Party") proposes to acquire, by purchase,
merger, consolidation, sale, assignment, lease, transfer or otherwise, thirty
percent or more of the voting power of the outstanding securities of SBC or any
Significant Subsidiary of SBC or a majority of the assets of SBC or any
Significant Subsidiary of SBC, (II) pursuant to which there is proposed to be
consummated a merger, consolidation or similar transaction between SBC or any
of its subsidiaries and a SBC Acquiring Party in which shareholders of SBC
immediately prior to such merger, consolidation or similar transaction would
not own securities representing at least seventy percent of the outstanding
voting power of the surviving entity of such consolidation, merger or similar
transaction immediately following the consummation thereof or (III) pursuant to
which any of the transactions described in (I) or (II) is proposed, assuming
that the references to thirty percent and seventy percent were both to fifty
percent; provided, however, that, no fee shall be payable in the case of (I)
and (II) above where the persons comprising the SBC Board prior to entering
into such agreement are intended to constitute after consummation a majority of
the members of the SBC Board, in the case of (I) or the surviving entity in the
case of (II). In the event of a termination by PAC as a result of a breach by
SBC of certain restrictions set forth in the Merger Agreement with respect to
Acquisition Proposals as a result of the taking of any action during the 45 Day
Period, SBC shall pay all charges and expenses incurred by PAC in connection
with the Merger Agreement, which payments will be credited against any
Termination Fee that may subsequently become payable.

EXPENSES

Except as provided above under "-- Certain Termination Fees"
and below under "-- Regulatory Approval Costs," pursuant to the Merger
Agreement, whether or not the Merger is consummated, all costs and expenses
incurred in connection with the Merger Agreement will be paid by the party
incurring such cost or expense, except that expenses incurred in connection
with the filing fee for the Registration Statement and printing and mailing
this Joint Proxy Statement/Prospectus and the Registration Statement and the
filing fee under the HSR Act will be shared equally by SBC and PAC.

REGULATORY APPROVAL COSTS

The Merger Agreement provides that within five days after the
date on which the last of the required Governmental Consents have been obtained
in accordance with the terms of the Merger Agreement or such condition has been
waived, or such earlier date as SBC and PAC may agree (the "Estimate Date"),
SBC and PAC shall determine the present value as of the Estimate Date of the
net costs, fees and expenses and other financial effects that have been or are
to be incurred or sustained by PAC, the Surviving Corporation or any subsidiary
thereof in connection with or as a result of state Governmental Consents (the
"Regulatory Approval Costs"). The Merger Agreement states that such present
value shall be calculated on an after-tax basis using an assumed combined tax
rate of forty-one percent (41%), a discount rate of ten percent (10%) and a
term equal to the period over which such amounts are likely to be incurred or
sustained (but such term, for purposes of such calculation, may not exceed 5.6
years after the Estimate Date unless the use of such term would materially
distort the economic impact to the parties). If SBC and PAC do not agree on the
present value of the Regulatory Approval Costs within ten days of the Estimate
Date, then each of SBC and PAC shall select a nationally recognized public
accounting firm, other than a firm then employed as an auditor of either SBC or
PAC, within ten days after the Estimate Date and such accounting firms shall
jointly select within five additional days a third similarly qualified public
accounting firm, and such accounting firms shall collectively determine within
ten days after the selection of the third firm (or such later date as the
parties may mutually agree) (the "Determination Date"), in accordance with the
procedures set forth in the Merger Agreement, the present value of the
Regulatory Approval Costs.

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The Merger Agreement further provides that within five days
after the Determination Date, each of SBC and PAC shall simultaneously exchange
with the other written notice of the dollar amount of the Regulatory Approval
Costs that it believes, in good faith, to be the appropriate amount of the
Regulatory Approval Costs for it to bear, which amount shall not exceed fifty
percent (50%) of the Regulatory Approval Costs (a "Tentative Share"). In the
event that SBC's Tentative Share and PAC's Tentative Share both equal fifty
percent (50%) of the Regulatory Approval Costs, then the SBC Costs shall equal
fifty percent (50%) of the Regulatory Approval Costs and the PAC Costs shall
equal fifty percent (50%) of the Regulatory Approval Costs. The Merger
Agreement states that in the event the Tentative Share of one party (the
"Higher Party") exceeds the Tentative Share of the other party (the "Lower
Party"), then the Higher Party shall elect to either: (i) accept as its share
of the Regulatory Approval Costs an amount equal to the difference between the
Regulatory Approval Costs and the greater of (A) Tentative Share of the Lower
Party and (B) the lesser of (x) 50% of the Regulatory Approval Costs and (y)
the Termination Fee (the greater of (A) and (B) being the Lower Party's share),
and such amount shall constitute the SBC Costs (if the Higher Party is SBC) or
the PAC Costs (if the Higher Party is PAC), and the Lower Party's share shall
constitute the SBC Costs (if the Lower Party is SBC) or the PAC Costs (if the
Lower Party is PAC); or (ii) subject to any Lower Party Election (as defined
below), terminate the Merger Agreement after providing the Lower Party with ten
(10) days' prior written notice of its intent to so terminate the Agreement
(the "Notice of Proposed Termination"); provided, however, that in the event
the Higher Party elects to terminate this Agreement as provided for in clause
(ii), above, then the Lower Party may, within five (5) days of receipt of
notice of the Notice of Proposed Termination, provide written notice to the
Higher Party of the election of the Lower Party (the "Lower Party Election") to
bear as its share of the Regulatory Approval Costs an amount equal to the
difference between the Regulatory Approval Costs and the Lower Party's share,
and such amount shall constitute the SBC Costs (if the Lower Party is SBC) or
the PAC Costs (if the Lower Party is PAC), and the Lower Party's share shall
constitute the SBC Costs (if the Higher Party is SBC) or the PAC Costs (if the
Higher Party is PAC); provided, further, that the Lower Party Election will
only be available if the Lower Party's Tentative Share is at least 80% of the
Higher Party's Tentative Share. The Merger Agreement provides that, at the
Effective Time, the Exchange Ratio will be adjusted to reflect the SBC Costs
and the PAC Costs according to the formula described under "--Terms of the
Merger."

The Merger Agreement additionally provides that in the event the
Tentative Share of each of SBC and PAC is smaller than fifty percent (50%) of
the Regulatory Approval Costs (a "Failure to Agree Event"), then the Merger
Agreement shall automatically terminate.

ACCOUNTING TREATMENT

SBC and PAC believe that the Merger will qualify as a "pooling
of interests" for accounting and financial reporting purposes, and have been so
advised by Ernst & Young LLP and Coopers & Lybrand L.L.P., their respective
independent public accountants. Under this method of accounting, SBC will
restate at the Effective Date its consolidated financial statements to include
the assets, liabilities, shareholders' equity and results of operations of PAC.
It is anticipated that upon consummation of the Merger, the fiscal year of the
combined company will be the calendar year.

Consummation of the Merger is conditioned upon the receipt by
each of SBC and PAC of a letter from their respective independent public
accountants stating that the Merger, in their respective opinions, will qualify
as a "pooling of interests" for accounting purposes. See "-- Conditions" and
"Unaudited Pro Forma Combined Condensed Financial Statements."

RESALE OF SBC CAPITAL STOCK

The shares of SBC Common Stock issuable to shareowners of PAC
in connection with the Merger have been registered under the Securities Act.
Such shares may be traded freely and without restriction by those shareowners
not deemed to be "affiliates" of SBC or PAC as that term is defined in the
rules under the Securities Act. "Affiliates" are generally defined as persons
who control, are controlled by or are under common control with PAC at the time
of the PAC Special Meeting. Shares of SBC Common Stock received by those
shareowners of PAC who are deemed to be "affiliates" of PAC may be resold
without registration as provided for by Rules 144 or 145, or as otherwise
permitted, under the Securities Act. This Joint Proxy Statement/Prospectus does
not cover any resales of SBC Common Stock received by affiliates of PAC, or by
certain of their family members or related interests.

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Pursuant to the Merger Agreement, each of PAC and SBC shall
deliver to the other a letter identifying all persons whom such party believes
to be, as of the date of their respective Special Meetings, "affiliates" of
such party for purposes of Rule 145 under the Securities Act. Each of PAC and
SBC has agreed to use all reasonable efforts to cause each person who is
identified as an "affiliate" in the letter referred to above to deliver to SBC
prior to the date of the their respective Special Meetings a written agreement
providing that each such person will agree not to sell, pledge, transfer or
otherwise dispose of the shares of SBC Common Stock to be received by such
person in the Merger except in compliance with the applicable provisions of the
Securities Act and, if the Merger qualifies for "pooling of interests"
accounting treatment, until such time as financial results covering at least 30
days of combined operations of SBC and PAC shall have been published.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

In considering the recommendations of PAC's Board, shareowners
should be aware that certain members of management and of the PAC Board have
certain interests in the Merger that are in addition to the interests of
shareowners generally and which may create potential conflicts of interest.

Employee Benefits

As described under "--Employee Benefits," pursuant to the
Merger Agreement, each PAC Option, whether vested or unvested, will be deemed
to constitute an option to acquire the same number of shares of SBC Common
Stock as the holder of such PAC Option would have been entitled to receive had
such holder exercised such PAC Option in full immediately prior to the
Effective Time at an exercise price per share equal to (x) the aggregate
exercise price of the shares of PAC Common Stock otherwise purchasable pursuant
to such PAC Option, divided by (y) the number of full shares of SBC Common
Stock deemed purchasable pursuant to such PAC Option.

Pursuant to the Merger Agreement, SBC will cause the Surviving
Corporation for at least two years after the Effective Time to provide or cause
to be provided to the employees of PAC and its subsidiaries compensation and
benefit plans that are no less favorable, in the aggregate, than PAC's
Compensation and Benefit Plans; provided, however, that if during this period
SBC implements any widespread increase or decrease in benefits under
compensation and benefit plans or in the cost thereof to participants under
compensation and benefit plans applicable to employees of SBC and its
Subsidiaries (other than the Surviving Corporation and its subsidiaries), the
Surviving Corporation shall proportionately adjust the benefits under PAC's
Compensation and Benefit plans or the cost thereof to participants, and
provided, further with respect to employees who are subject to collective
bargaining, all benefits shall be provided in accordance with the applicable
collective bargaining agreement. At or prior to the Effective Time, PAC shall
make all necessary arrangements to cause any shares of PAC Common Stock units
under PAC's Compensation and Benefit Plans to be converted to share units with
respect to SBC Common Stock by multiplying the number of shares of PAC Common
Stock subject to such PAC share units by the fraction of a share of SBC Common
Stock equal to the Exchange Ratio.

Pursuant to the Merger Agreement, each outstanding share of
PAC Common Stock that is restricted under the PAC 1994 Stock Incentive Plan or
PAC Restricted Stock Plan shall be converted into the right to receive,and
become exchangeable for a fraction of a share of SBC Common Stock equal to the
Exchange Ratio, having the same restrictions, terms and conditions as were
applicable to such restricted share of PAC Common Stock.

In addition, each outstanding stock unit under the PAC Outside
Directors' Deferred Stock Unit Plan shall be converted into the right to
receive a stock unit representing a fraction of a share of SBC Common Stock
equal to the Exchange Ratio and having the same terms and conditions as were
applicable to such stock unit before the Effective Time.

In addition, as described under "--Employee Benefits," SBC has
agreed to honor (and to cause the Surviving Corporation to honor), pursuant to
their terms, all employee benefit obligations to current and former employees
under PAC's Compensation and Benefit Plans including obligations to certain
officers of PAC under existing employment and severance agreements.

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The options held by the nonemployee directors of PAC that are
not already exercisable will become exercisable in full upon approval of the
Merger Agreement by PAC's shareowners. In addition, the options granted on
March 22, 1996, to certain officers and employees of PAC will become
exercisable in full at the Effective Time, subject to confirmation from the SEC
accounting staff that accelerated vesting of such options will not affect
accounting for the Merger as a "pooling of interests." If such confirmation is
not received, options granted March 22, 1996 will vest over time without regard
to the change in control resulting from the Merger.

If any payment made under the PAC 1994 Stock Incentive Plan
will be nondeductible by operation of Section 280G of the Code, the aggregate
present value of all such payments will be reduced to an amount which maximizes
such value without causing any such payment to be nondeductible.

The following table sets forth, with respect to Messrs.
Quigley, Dorman, Fitzpatrick, Odgers and Moberg, the named executive officers
set forth in PAC's 1996 proxy statement for the annual meeting of its
shareowners (the "Named Executive Officers"), and all other executive officers
of PAC as a group based on a closing price per share of PAC Common Stock of
$33.75 on April 1, 1996, (i) the number of shares of PAC Common Stock subject
to options held by such persons that will become exercisable at the Effective
Time (subject to SEC confirmation, as described above), (ii) the weighted
average exercise price for such exercisable options held by such persons, (iii)
the aggregate value of such exercisable options based upon the per share price
of PAC Common Stock as of April 1, 1996 and (iv) the approximate amounts of
severance payments payable as of the date hereof, subject to reductions
necessary to prevent any payment from being non-deductible because of Section
280G of the Code, if their employment was terminated after a change in control
under circumstances entitling them to severance benefits under their respective
employment agreements.

<TABLE>
<CAPTION>
Options/SARs Maximum
Which Become Weighted Potential
Exercisable Average Change in
At The Exercise Aggregate Control
Effective Price Value of Severance
Time Per Share Options/SARs Payments
------------ --------- ------------ ----------
<S> <C> <C> <C> <C>
P.J. Quigley . . . . . . . . . . . . 180,000 $27.375 $1,147,500 $7,874,200
D.W. Dorman . . . . . . . . . . . . . 108,000 27.375 688,500 4,774,800
M.J. Fitzpatrick . . . . . . . . . . 69,000 27.375 439,875 3,397,500
R.W. Odgers . . . . . . . . . . . . . 54,000 27.375 344,250 2,678,700
J.R. Moberg . . . . . . . . . . . . . 54,000 27.375 344,250 2,678,700
All executive officers as a group
(7 persons in total) . . . . . . . 543,000 27.375 3,461,625 25,207,100
</TABLE>

PAC has entered into individual employment agreements with 8
officers of PAC and its subsidiaries, including the Named Executive Officers
and other Executive Vice Presidents ("Tier I Agreements"), which provide for
special severance payments in the event of an involuntary termination
(including a "constructive termination", which is defined as (i) a material
reduction in salary or benefits, (ii) a material change in responsibilities, or
(iii) certain relocation requirements) within three years following a change in
control (as defined in the agreements). In addition, PAC has also entered into
employment agreements with 27 officers below the level of Executive Vice
President ("Tier II Agreements"). Shareowner approval of the Merger will
constitute a change in control under the Tier I and Tier II Agreements.

The special severance payment in the Tier I Agreements is
equal to the sum of (x) an amount equal to 200% of the Standard Award (within
the meaning of the PAC Short Term Incentive Plan) for the employee's position
rate as of the date of termination, plus (y) an amount equal to (i) the fair
market value of a share of PAC Common Stock on the date of termination,
multiplied by (ii) the number of Units (within the meaning of the PAC Senior
Management Long Term Incentive Plan) ("LTIP Units") granted to the employee for
the two performance periods ending with the two calendar years following the
year of termination. In addition, the employee is entitled to three years of

44
<PAGE> 58
continuation coverage (or, if earlier, until normal retirement date (as defined
in the Tier I Agreements) in the basic and supplemental group term life
insurance plan and the health care plan for management employees (as if the
employee was still an active employee).

The Tier II Agreements provide that (i) the amount of the
special severance payment is equal to an amount equal to 100% of the employee's
base compensation in effect on the date of termination, plus an amount equal to
100% of the Standard Award for the employee's position rate as of the date of
termination, plus an amount equal to (x) the fair market value of a Share of
PAC Common Stock on the date of termination, multiplied by (y) the number of
LTIP Units granted to the employee for the two performance periods ending with
the two calendar years following the year in which the employment termination
occurs, and (ii) continuation of life insurance and health benefits coverage is
provided for two years following the date of termination (or, if earlier, until
normal retirement date (as defined in the Tier II Agreement)).

These special severance payments described above are in
addition to any other payments under the agreements to the employee upon an
involuntary termination other than for "cause" or "disability" (each as defined
under the Tier I and Tier II Agreements). Such payments in the Tier I
Agreements include (i) a lump sum cash payment equal to (x) 1/12 of base
compensation in effect on the date of termination, multiplied by (y) the lesser
of 36 or the number of months remaining until normal retirement date, (ii)
continuation of life insurance and health benefits until the earlier of (a) the
first anniversary of the date of termination, (b) death, or (c) normal
retirement date, (iii) payment of 100% of the Standard Award applicable for the
calendar year of termination (if all LTIP Units are forfeited upon termination,
PAC will also pay an amount equal to the fair market value of a PAC Share of
Common Stock on date of termination multiplied by the number of LTIP Units
granted to the employee for the performance period ending with the calendar
year of termination), and (iv) compensation for any nonstatutory stock options
or SARs which terminate upon termination of employment in an amount equal to
the difference between the fair market value of PAC Common Stock at the date of
termination and the option price (in the case of SARs, the difference between
such fair market value and the option price at which the stock option related
to the SAR was granted).

The Tier II Agreements also provide similar benefits to those
described in the immediately preceding paragraph, except that for purposes of
determining the lump sum cash payment in clause (i) above, "36" is replaced by
"12" in subclause (y).

Any payments made under either Tier I or Tier II Agreements
will be limited to the amount which maximizes the aggregate present value of
the payments without causing any payment to be nondeductible because of Section
280G of the Code.

Director and Officer Indemnification and Insurance

Pursuant to the Merger Agreement, from and after the Effective
Time, SBC will indemnify, defend and hold harmless each present and former
director and officer of PAC against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to matters existing or occurring at or prior to
the Effective Time, to the fullest extent that PAC would have been permitted
under Nevada law and the PAC Articles or by-laws in effect on the date of the
Merger Agreement to indemnify such person. The Surviving Corporation is
obligated to maintain D&O Insurance with coverage in amount and scope at least
as favorable as PAC's existing D&O Insurance for a period of six years after
the Effective Time so long as the annual premium therefor is not in excess of
the Current Premium; provided, however, if the existing D&O Insurance expires,
is terminated or cancelled during such six-year period, the Surviving
Corporation will use its best efforts to obtain D&O Insurance in an amount and
scope as great as can be obtained for the remainder of such period for a
premium not in excess of 175% of the Current Premium.

Board of Directors; Management

Pursuant to the Merger Agreement, SBC has agreed to increase
the size of the SBC Board at the Effective Time of the Merger in order to
enable approximately one-third of the SBC Board to be comprised of Director
Designees and the SBC Board will appoint each of the Director Designees to the
SBC Board as of the Effective Time, with such

45
<PAGE> 59
Director Designees to be divided as nearly as evenly as is possible among the
classes of directors of SBC. Further, the Merger Agreement provides that at the
Effective Time of the Merger, SBC will cause Mr. Philip J. Quigley to be
appointed President and Chief Executive Officer of the Surviving Corporation
and Vice Chairman of the SBC Board. Certain other executive officers of PAC are
expected to become executive officers of the Surviving Corporation following
the Merger.

APPRAISAL RIGHTS

The Merger Agreement provides that in accordance with Section
92A.390 of the NPCL, no appraisal rights will be available to holders of PAC
Common Stock in connection with the Merger. Holders of SBC Common Stock will
not be entitled to any dissenters' or appraisal rights under Section 262 of the
DGCL as a result of the matters to be voted upon at the SBC Meeting.

EXCHANGE OF CERTIFICATES

The Merger Agreement provides that promptly after the
Effective Time, the Surviving Corporation will cause an exchange agent selected
by SBC with PAC's prior approval (the "Exchange Agent") to mail to each holder
of record of PAC Common Stock (other than holders of Excluded PAC Common Stock)
(i) a letter of transmittal specifying that delivery shall be effected only
upon delivery of the PAC Certificates to the Exchange Agent, and (ii)
instructions for exchanging the PAC Certificates for (A) certificates
representing shares of SBC Common Stock and (B) any unpaid dividends and other
distributions and cash in lieu of fractional shares. Upon surrender of a PAC
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, the holder of such PAC Certificate shall be entitled to receive in
exchange therefor (x) a certificate representing that number of whole shares of
SBC Common Stock that such holder is entitled to receive pursuant to the terms
of the Merger Agreement, (y) a check in the amount (after giving effect to any
required tax withholdings) of (A) any cash in lieu of fractional shares plus
(B) any unpaid non-stock dividends and any other dividends or other
distributions that such holder has the right to receive pursuant to the terms
of the Merger Agreement, and the PAC Certificate so surrendered shall forthwith
be cancelled. No interest will be paid or accrued on any amount payable upon
due surrender of the PAC Certificates.

The Merger Agreement further provides that whenever a dividend
or other distribution is declared by SBC in respect of SBC Common Stock, the
record date for which is at or after the Effective Time, that declaration shall
include dividends or other distributions in respect of all shares issuable
pursuant to the Merger Agreement. No dividends or other distributions in
respect of the SBC Common Stock shall be paid to any holder of any
unsurrendered PAC Certificate until such PAC Certificate is surrendered for
exchange in accordance with the Merger Agreement. Subject to the effect of
applicable laws, following surrender of any such PAC Certificate, there shall
be issued and/or paid to the holder of the certificates representing whole
shares of SBC Common Stock issued in exchange therefor, without interest, (A)
at the time of such surrender, the dividends or other distributions with a
record date after the Effective Time and a payment date on or prior to the date
of issuance of such whole shares of SBC Common Stock and not previously paid
and (B) at the appropriate payment date, the dividends or other distributions
payable with respect to such whole shares of SBC Common Stock with a record
date after the Effective Time but with a payment date subsequent to surrender.
For purposes of dividends or other distributions in respect of shares of SBC
Common Stock, all shares of SBC Common Stock to be issued pursuant to the
Merger shall be deemed issued and outstanding as of the Effective Time.

In addition, pursuant to the Merger Agreement, holders of
unsurrendered PAC Certificates shall be entitled to vote after the Effective
Time at any meeting of SBC shareowners with a record date at or after the
Effective Time the number of whole shares of SBC Common Stock represented by
such PAC Certificates, regardless of whether such holders have exchanged their
PAC Certificates.

After the Effective Time, there shall be no transfers on the
stock transfer books of PAC of shares of PAC Common Stock that were outstanding
immediately prior to the Effective Time.

Pursuant to the Merger Agreement, in the event any PAC
Certificate is lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such PAC Certificate to be lost, stolen or
destroyed and the posting by such person of a bond in the form customarily
required by SBC as indemnity against any claim that may

46
<PAGE> 60
be made against it with respect to such PAC Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed PAC Certificate the
shares of SBC Common Stock, any unpaid dividends or other distributions and any
cash payment in lieu of a fractional share in respect thereof issuable and/or
payable upon due surrender of and deliverable in respect of PAC Common Stock
represented by such PAC Certificate pursuant to the Merger Agreement, in each
case, without interest.

NEW YORK STOCK EXCHANGE LISTING; DE-LISTING OF PAC COMMON STOCK

Pursuant to the Merger Agreement, SBC will use its best
efforts to cause the shares of SBC Common Stock to be issued in the Merger to
be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date. The Surviving Corporation shall use its best efforts
to cause PAC Common Stock to be delisted from the NYSE and deregistered under
the Exchange Act as soon as practicable following the Effective Time.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

The following summary discusses the material federal income
tax consequences of the Merger. The summary is based upon the Code, applicable
Treasury Regulations thereunder and administrative rulings and judicial
authority as of the date hereof. All of the foregoing are subject to change,
possibly with retroactive effect, and any such change could affect the
continuing validity of the discussion. The discussion assumes that holders of
shares of PAC Common Stock hold such shares as a capital asset. Further, the
discussion does not address the tax consequences that may be relevant to a
particular shareowner subject to special treatment under certain federal income
tax laws, such as dealers in securities, banks, insurance companies, tax-exempt
organizations, non-United States persons, shareowners who acquired shares of
PAC Common Stock through the exercise of options or otherwise as compensation
or through a tax-qualified retirement plan, and holders of options and
performance share units granted under PAC's benefit plans. This discussion does
not address any consequences arising under the laws of any state, locality or
foreign jurisdiction.

Neither PAC nor SBC has requested a ruling from the Internal
Revenue Service ("IRS") with regard to any of the federal income tax
consequences of the Merger and the opinions of counsel as to such federal
income tax consequences set forth below will not be binding on the IRS.

GENERAL

As of the date hereof, it is intended that the Merger will
constitute a reorganization pursuant to Section 368(a) of the Code and that for
federal income tax purposes no gain or loss will be recognized by SBC, PAC or
Merger Sub. The respective obligations of the parties to consummate the Merger
are conditioned on (i) the receipt by SBC of an opinion of Sullivan & Cromwell
dated the Closing Date confirming that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code and that each
of SBC, PAC and Merger Sub will be a party to the reorganization within the
meaning of Section 368(b) of the Code, and (ii) the receipt by PAC of an
opinion of Pillsbury Madison & Sutro LLP dated the Closing Date confirming that
the Merger will qualify as a reorganization within the meaning of Section
368(a) of the Code and that each of SBC, PAC and Merger Sub will be a party to
the reorganization within the meaning of Section 368(b) of the Code. Such
opinions will be based upon, among other things, (i) representations of PAC,
SBC, and certain shareowners of PAC customarily given in transactions of this
type and (ii) the assumption that the Merger will be consummated in accordance
with the terms of the Merger Agreement.

The discussion below summarizes the material federal income
tax consequences of the Merger, assuming that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code.

CONSEQUENCES TO PAC SHAREOWNERS

Under the reorganization provisions of the Code, no gain or
loss will be recognized by holders of PAC Common Stock with respect thereto as
a result of the surrender of their shares of PAC Common Stock in exchange for
shares of SBC Common Stock (including the receipt of SBC Rights) pursuant to
the Merger (except as discussed below with respect to cash received in lieu of
fractional shares). The aggregate tax basis of the shares of SBC Common Stock

47
<PAGE> 61
received in the Merger (including any fractional shares of SBC Common Stock
deemed received) will be the same as the aggregate tax basis of the shares of
PAC Common Stock surrendered in exchange therefor in the Merger. The holding
period of the shares of SBC Common Stock received (including the holding period
of fractional shares of SBC Common Stock deemed received) will include the
holding period of shares of PAC Common Stock surrendered in exchange therefor.

FRACTIONAL SHARES

If a holder of shares of PAC Common Stock receives cash in
lieu of a fractional share interest in SBC Common Stock in the Merger, such
fractional share interest will be treated as having been distributed to the
holder, and such cash amount will be treated as received in redemption of the
fractional share interest. Under Section 302 of the Code, if such redemption is
"not essentially equivalent to a dividend" after giving effect to the
constructive ownership rules of the Code, the holder will generally recognize
capital gain or loss equal to the cash amount received for the fractional share
of SBC Common Stock reduced by the portion of the holder's tax basis in shares
of PAC Common Stock surrendered that is allocable to the fractional share
interest in SBC Common Stock. Under these rules, a minority shareowner of PAC
should recognize capital gain or loss on the receipt of cash in lieu of a
fractional share interest in SBC Common Stock. The capital gain or loss will be
long term capital gain or loss if the holder's holding period in the fractional
share interest is more than one year.

CONSEQUENCES TO PAC, SBC, MERGER SUB AND HOLDERS OF SBC COMMON STOCK

None of PAC, SBC or Merger Sub or the holders of SBC Common
Stock will recognize gain or loss as a result of the Merger.

THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO THE MERGER.
THUS, PAC SHAREOWNERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, AND OTHER
APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.

48
<PAGE> 62
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
OF SBC COMMUNICATIONS INC. AND PACIFIC TELESIS GROUP

The following unaudited pro forma combined condensed financial
statements and notes thereto are presented assuming the Merger will be
accounted for as a "pooling of interests." For a description of pooling of
interests accounting with respect to the Merger, see "The Merger -- Accounting
Treatment."

The following unaudited pro forma combined condensed financial
statements have been prepared using an assumed Exchange Ratio of 0.733. See
"The Merger -- Terms of the Merger."

The unaudited pro forma combined condensed income statements
reflect the combination of the historical operating results of SBC and PAC for
the years ended December 31, 1995, 1994 and 1993. The unaudited pro forma
combined condensed balance sheet reflects the combination of the historical
balance sheets of SBC and PAC at December 31, 1995. The information set forth
in the financial statements below should be read in conjunction with the
financial statements which are incorporated herein by reference.

The unaudited pro forma combined condensed financial
statements are not necessarily indicative of the results of operations or
financial position that actually would have occurred had the Merger been
consummated on the dates indicated or that may be obtained in the future. These
unaudited pro forma combined condensed financial statements should be read in
conjunction with the related historical financial statements and notes thereto
of SBC and PAC incorporated by reference in this Joint Proxy
Statement/Prospectus.

49
<PAGE> 63
SBC COMMUNICATIONS INC. AND PACIFIC TELESIS GROUP
Unaudited Pro Forma Combined Condensed Balance Sheet
As of December 31, 1995

Historical Pro Forma
------------------------ ----------------------------
SBC PAC Adjustments Combined
------- ------------ ----------- -----------
(in millions)
<S> <C> <C> <C> <C>
ASSETS

Current Assets

Cash and cash equivalents $ 490 $ 76 $ $ 566

Accounts receivable - net 2,389 1,505 3,894

Other current assets 800 1,002 (24)(2a) 1,778
---------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 3,679 2,583 (24) 6,238

Property, Plant and Equipment - Net 12,988 11,385 24,373

Intangible Assets - Net 2,679 954 3,633

Other Assets 2,657 919 (644)(2a) 2,932
---------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 22,003 $ 15,841 $ (668) $ 37,176
---------------------------------------------------------------------------------------------------------------

LIABILITIES AND SHAREOWNERS' EQUITY

CURRENT LIABILITIES

Debt maturing within one year $ 1,679 $ 1,530 $ $ 3,209

Other current liabilities 3,377 3,111 (24)(2a) 6,464
---------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 5,056 4,641 (24) 9,673

Long-term debt 5,672 4,737 10,409

Postemployment benefit obligation 2,736 2,549 5,285

Other noncurrent liabilities 2,283 1,724 (644) 3,363

SHAREOWNERS' EQUITY

Common shares 621 43 271 (2b) 935

Capital in excess of par value 6,298 3,498 (398)(2b) 9,398

Retained earnings (deficit) 672 (982) (310)

Guaranteed obligations of ESOPs (273) (242) (515)

Foreign currency translation adjustment (581) - (581)

Treasury shares (481) (127) 127(2b) (481)

---------------------------------------------------------------------------------------------------------------
TOTAL SHAREOWNERS' EQUITY 6,256 2,190 - 8,446
---------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 22,003 $ 15,841 $ (668) $ 37,176
---------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these pro forma combined
condensed financial statements.

50
<PAGE> 64
SBC COMMUNICATIONS INC. AND PACIFIC TELESIS GROUP
Unaudited Pro Forma Combined Condensed Statement of Income
For the Year Ended December 31, 1995

Historical Pro Forma
------------------------ ----------------------------
SBC PAC Adjustments Combined
------- ------------ ----------- -----------
(in millions, except per share amounts)
<S> <C> <C> <C> <C>
Total operating revenues $ 12,670 $ 9,042 $ 21,712

Total operating expenses 9,633 7,031 16,664
---------------------------------------------------------------------------------------------------------------
OPERATING INCOME 3,037 2,011 5,048

Interest expense (515) (442) (957)

Other income - net 270 42 312
---------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY LOSS 2,792 1,611 4,403

Income Taxes 903 563 1,466
---------------------------------------------------------------------------------------------------------------

INCOME BEFORE EXTRAORDINARY LOSS 1,889 1,048 2,937

Extraordinary Loss (2,819) (3,360) (6,179)
---------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (930) $ (2,312) $ (3,242)
---------------------------------------------------------------------------------------------------------------

EARNINGS PER COMMON SHARE:
INCOME BEFORE EXTRAORDINARY LOSS $ 3.10 $ 2.46 (2c) $ 3.19

Extraordinary Loss (4.63) (7.89) (2c) (6.71)

---------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (1.53) $ (5.43) (2c) $ (3.52)
---------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 608.8 426.0 (113.7)(2c) 921.1
---------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these pro forma combined
condensed financial statements.

51
<PAGE> 65
SBC COMMUNICATIONS INC. AND PACIFIC TELESIS GROUP
Unaudited Pro Forma Combined Condensed Statement of Income
For the Year Ended December 31, 1994

Total operating expenses 9,010 7,041 16,051
---------------------------------------------------------------------------------------------------------------
OPERATING INCOME 2,762 2,194 4,956

Interest expense (480) (455) (935)

Other income - net 152 55 207
---------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 2,434 1,794 4,228

Income Taxes 785 658 1,443

---------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 1,649 1,136 2,785

Income from spun-off operations - 23 23
---------------------------------------------------------------------------------------------------------------
NET INCOME $ 1,649 $ 1,159 $ 2,808
---------------------------------------------------------------------------------------------------------------

EARNINGS PER COMMON SHARE:
INCOME FROM CONTINUING OPERATIONS $ 2.74 $ 2.68 (2c) $ 3.05

Income from spun-off operations - 0.05 (2c) 0.03
---------------------------------------------------------------------------------------------------------------
NET INCOME $ 2.74 $ 2.73 (2c) $ 3.08
---------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 601.4 424.0 (113.2)(2c) 912.2
---------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these pro forma combined
condensed financial statements.

52
<PAGE> 66
SBC COMMUNICATIONS INC. AND PACIFIC TELESIS GROUP
Unaudited Pro Forma Combined Condensed Statement of Income
For the Year Ended December 31, 1993

Total operating expenses 8,480 8,582 17,062
---------------------------------------------------------------------------------------------------------------
OPERATING INCOME 2,360 662 3,022

Interest expense (496) (509) (1,005)

Other income - net 196 48 244
---------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES, EXTRAORDINARY
LOSS AND ACCOUNTING CHANGES 2,060 201 2,261

Income Taxes 625 10 635
---------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 1,435 191 1,626

Income from spun-off operations - 29 29
---------------------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY LOSS
AND ACCOUNTING CHANGES 1,435 220 1,655

Extraordinary Loss (153) - (153)

Accounting Changes (2,127) (1,724) (3,851)
---------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (845) $(1,504) $ (2,349)
---------------------------------------------------------------------------------------------------------------

EARNINGS PER COMMON SHARE:
INCOME FROM CONTINUING OPERATIONS $ 2.39 $ 0.46 (2c) $ 1.80

Income from spun-off operations - 0.07 (2c) 0.03
---------------------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY LOSS
AND ACCOUNTING CHANGES 2.39 0.53 (2c) 1.83

Extraordinary Loss (0.25) (2c) (0.17)

Accounting Changes (3.55) (4.16) (2c) (4.26)
---------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (1.41) $ (3.63) (2c) $ (2.60)
---------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 599.8 414.2 (110.6)(2c) 903.4
---------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these pro forma combined
condensed financial statements.

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<PAGE> 67
SBC COMMUNICATIONS INC. AND PACIFIC TELESIS GROUP
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS

NOTE 1 -- BASIS OF PRESENTATION

The accompanying unaudited pro forma combined condensed
financial statements are presented for illustrative purposes only and do not
give effect to any cost savings which may result from the integration of SBC's
and PAC's operations. Additionally, the unaudited pro forma combined condensed
financial statements do not include any transaction costs relating to the
Merger, nor do they consider any reorganization costs that might occur as a
result of the Merger. Differences in accounting policies do not have a material
effect on either the pro forma financial position or pro forma results of
operations and have not been reflected in the unaudited pro forma combined
condensed financial statements. The unaudited pro forma combined condensed
balance sheet reflects the Merger as if it had occurred on December 31, 1995.
The unaudited pro forma combined condensed statements of income reflect the
Merger as if it had been in effect on January 1, 1995, 1994 and 1993,
respectively.

NOTE 2 -- PRO FORMA ADJUSTMENTS

a. Deferred income taxes--Deferred income taxes were reclassified
to present a net asset or liability for both current and
non-current amounts.

b. Shareowners' Equity--The shareowners' equity accounts of PAC
have been adjusted to reflect the assumed issuance of
approximately 314 million shares of SBC Common Stock in
exchange for all of the issued and outstanding PAC Common
Stock (assuming an Exchange Ratio of 0.733 of a share of SBC
Common Stock for each share of PAC Common Stock). The actual
number of shares of SBC Common Stock to be issued in
connection with the Merger will be based upon the number of
shares of PAC Common Stock issued and outstanding immediately
prior to the consummation of the Merger and the Exchange Ratio
determined as of the Effective Date. See "The Merger -- Terms
of the Merger."

c. Earnings per Common Share--Pro forma combined earnings per
common share information for each period presented is based on
the combined weighted average shares outstanding in each
period after conversion of PAC's weighted average shares
outstanding at a ratio of 0.733 shares of SBC Common Stock for
each share of PAC Common Stock.

d. Intercompany transactions -- there are no significant
intercompany transactions between SBC and PAC.

e. PAC has agreed that effective with the dividend for the second
quarter of 1996 its quarterly dividend per share will not
exceed 0.733 multiplied by SBC's quarterly dividend per share.
Dividends per share of the combined company are expected to be
equivalent to the dividend per share of SBC Common Stock.

NOTE 3 -- FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

The unaudited pro forma combined condensed financial
statements assume that the Merger qualifies as a tax-free reorganization for
federal income tax purposes.

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<PAGE> 68
DESCRIPTION OF SBC CAPITAL STOCK

The following description of certain terms of the capital
stock of SBC does not purport to be complete and is qualified in its entirety
by reference to the SBC Restated Certificate incorporated herein by reference,
to the Relative Rights, Preferences and Limitations of the Series A Junior
Participating Preferred Stock (the "SBC Participating Preferred") which are
incorporated herein by reference.

The authorized capital stock of SBC currently consists of
1,100,000,000 shares of SBC Common Stock, and 10,000,000 shares of preferred
stock, par value $1.00 per share issuable in series (the "SBC Preferred"). Each
share of SBC Common Stock trades with SBC Rights. See "-- Description of SBC
Rights." As of March 31, 1996, there were outstanding 609,247,226 shares of SBC
Common Stock, with an additional 11,236,075 shares issued and held in treasury.
There are no shares of SBC Preferred outstanding, but SBC has designated
4,000,000 shares as SBC Participating Preferred.

SBC COMMON STOCK

The holders of SBC Common Stock are entitled to one vote per
share for each share held of record on all matters voted on by shareowners,
including the election of directors, and are entitled to participate equally in
dividends when and as such dividends may be declared by the SBC Board out of
funds legally available therefor. As a Delaware corporation, SBC is subject to
statutory limitations on the declaration and payment of dividends. In the event
of a liquidation, dissolution or winding up of SBC, holders of SBC Common Stock
have the right to a ratable portion of assets remaining after satisfaction in
full of the prior rights of creditors, including holders of SBC's indebtedness,
all liabilities and the aggregate liquidation preferences of any outstanding
shares of SBC Preferred Stock. The holders of SBC Common Stock have no
conversion, redemption, preemptive or cumulative voting rights. All outstanding
shares of SBC Common Stock are, and the shares of SBC Common Stock to be issued
in the Merger will be, validly issued, fully paid and non-assessable. As of
March 31, 1996, there were 830,834 holders of record of SBC Common Stock.

Transfer Agent

The transfer agent and registrar for SBC Common Stock is The
Bank of New York, 48 Wall Street, New York, New York 10286.

SBC PREFERRED

The SBC Restated Certificate provides that the SBC Preferred
may be issued from time to time in one or more series. The SBC Board is
specifically authorized to establish the number of shares in any series and to
set the designation of any series and the powers, preferences, and rights and
the qualifications, limitations or restriction on each series of Preferred
Stock. The holders of SBC Preferred Stock will have no preemptive rights.

In connection with the SBC Rights Agreement, the SBC Board has
authorized the issuance of up to 4,000,000 shares of SBC Participating
Preferred. Upon issuance, each share of SBC Participating Preferred is
entitled to quarterly cash dividends equal to the greater of $5 or 200 times
(subject to antidilution adjustments for stock dividends and stock splits) the
aggregate value of all dividends or other distributions declared on SBC Common
Stock (other than distributions of SBC Common Stock) since the last quarterly
dividend payment date. The SBC Participating Preferred is not redeemable by
SBC.

Each share of SBC Participating Preferred is entitled to 200
votes (subject to antidilution adjustments) on all matters submitted to a vote
of the shareholders of SBC, voting together as one class with SBC Common Stock.
In addition, if at any time dividends in an amount equal to six quarterly
dividend payments shall have accrued and be unpaid, the SBC Board shall be
increased by two directors and holders of the SBC Participating Preferred shall
have the right to elect two members to the SBC Board until dividends on the SBC
Participating Preferred have been declared and paid or set apart for payment.
Except as required by applicable law, holders of SBC Participating Preferred
have no other special voting rights. Whenever dividends or distributions on
the SBC Participating Preferred are in arrears, SBC is prohibited from
declaring or paying dividends or distributions on, and SBC and any subsidiary

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are prohibited from redeeming or acquiring for value, any stock ranking junior
as to dividends or upon liquidation. During any such arrearage, SBC may
declare or pay dividends on stock ranking on a parity with the SBC
Participating Preferred as to dividends or upon liquidation only if declared or
paid ratably with the SBC Participating Preferred. During any such arrearage,
SBC and any subsidiary are prohibited from redeeming or acquiring for value any
such parity stock or any SBC Participating Preferred, except pursuant to an
exchange of parity stock for stock ranking junior to the SBC Participating
Preferred or pursuant to a purchase offer to the SBC Participating Preferred
and holders of parity stock on terms the SBC Board determines to be fair and
equitable.

The SBC Participating Preferred ranks junior to all other
series of SBC's preferred stock as to the payment of dividends and the
distribution of assets, unless the terms of any such series shall provide
otherwise.

Upon any liquidation, dissolution or winding up of SBC, the
SBC Participating Preferred is entitled to a liquidation preference of $100 per
share plus any accrued but unpaid dividends, subject to the prior rights of any
series of preferred stock ranking in liquidation senior to the SBC
Participating Preferred. In the event of any shortfall in the assets available
for distribution, any such liquidating distribution shall be made ratably to
the SBC Participating Preferred and any other series of preferred stock ranking
on a parity in proportion to their relative liquidation preferences. Following
such payment, no additional liquidating distributions may be made on the SBC
Participating Preferred until each share of SBC Common Stock shall have
received $0.50 (subject to antidilution adjustments). Thereafter, any
remaining assets shall be distributed to each share of SBC Participating
Preferred and each share of SBC Common Stock in the ratio of 200 to 1 (subject
to antidilution adjustments).

DESCRIPTION OF SBC RIGHTS

SBC has adopted a Rights Agreement (the "SBC Rights
Agreement") which is intended to protect shareowners in the event of
unsolicited offers or attempts to acquire SBC, including offers that do not
treat all shareowners equally, acquisitions in the open market of shares
constituting control without offering fair value to all shareowners and other
coercive or unfair takeover tactics that could impair the SBC Board's ability
to represent shareowners' interests fully. Pursuant to the SBC Rights
Agreement, the SBC Board declared a dividend distribution of one SBC Right for
each outstanding share of SBC Common Stock to shareowners of record at the
close of business on February 16, 1989 (the "SBC Rights Record Date"), and
authorized the issuance of one SBC Right (as adjusted pursuant to the SBC
Rights Agreement, as described below) for each share of SBC Common Stock issued
between the SBC Record Date and the SBC Distribution Date (as described below).
After giving effect to a stock split in May 1993, effected in the form of a
stock dividend, each share of SBC Common Stock outstanding or to be issued
prior to the SBC Distribution Date has or will have attached one-half of an SBC
Right. Each SBC Right entitles the registered holder to purchase from SBC one
one-hundredth of a share (an "SBC Unit") of SBC's Participating Preferred at a
price of $160 per SBC Unit, subject to adjustment, which is not exercisable
until after an SBC Distribution Date. The description and terms of the SBC
Rights are set forth in the SBC Rights Agreement dated as of January 27, 1989
and amended on August 5, 1992 and June 15, 1994 between SBC and The Bank of New
York, as Rights Agent. One-half of an SBC Right will be distributed with each
share of SBC Common Stock issued by SBC, including shares of SBC Common Stock
issued to holders of PAC Common Stock in the Merger.

The SBC Rights have certain anti-takeover effects. The SBC
Rights may cause substantial dilution to a person that attempts to acquire SBC
without the approval of the SBC Board. The SBC Rights, however, should not
affect offers for all outstanding shares of SBC Common Stock at a fair price
and otherwise in the best interests of SBC and its shareowners as determined by
the Board of Directors, since the SBC Board may, at its option, redeem all, but
not fewer than all, of the then-outstanding SBC Rights. The SBC Rights should
not interfere with any merger (such as the Merger) or other business
combination approved by the SBC Board since the SBC Board may, at its option,
at any time until 10 days following the SBC Stock Acquisition Date (as
described below), redeem all but not less than all of the then outstanding SBC
Rights at a redemption price of $.05 per share.

Initially, the SBC Rights are and will be attached to all
certificates representing SBC Common Stock (including shares issued in the
Merger) at the time outstanding. The SBC Rights will separate from the SBC
Common Stock on the SBC Distribution Date, which is defined as (i) 10 business
days after the public announcement by SBC or the SBC Acquiring Person (as
defined below) (the date of such public announcement, the "SBC Stock
Acquisition Date") that a person (an "SBC Acquiring Person") has acquired 20%
or more of the then outstanding SBC Common Stock, (ii) 10

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business days following commencement of a tender offer or exchange offer for
20% or more of the then outstanding SBC Common Stock or (iii) 10 business days
after an owner of 10% or more of the then outstanding SBC Common Stock is
determined to be an "SBC Adverse Person" by the SBC Board of Directors and a
majority of SBC's independent directors that are not officers of SBC. An SBC
Adverse Person is one who intends to have SBC repurchase such person's
ownership interest, who intends to pressure SBC into action for the short-term
financial gain of such person and such action is not in the best long-term
interests of SBC or its shareowners or whose ownership is likely to cause a
material adverse impact on the business or prospects of SBC (including, but not
limited to, impairment of SBC's (i) relationships with customers, (ii)
relationships with regulators or (iii) ability to maintain its competitive
position).

If an "SBC Flip-in Event" occurs, the holder of an SBC Right
is entitled to receive SBC Common Stock or other property of SBC valued at two
times the exercise price of the SBC Right. An SBC Flip-in Event occurs if a
person acquires 20% or more of the SBC Common Stock (except offers to acquire
all of the SBC Common Stock deemed by a majority of the SBC Board that are not
officers of SBC and who are not representatives, nominees or associates of an
SBC Acquiring Person to be fair and in the best interests of SBC) or if a
person is determined to be an SBC Adverse Person. Following the occurrence of a
Flip-in, SBC may substitute, without requiring payment, SBC Common Stock and
cash or other assets for an SBC Right.

To avoid the consequences of an SBC Flip-in Event, SBC may
redeem the SBC Rights in whole, but not in part, at a redemption price of $0.05
per SBC Right at any time prior to an SBC Stock Acquisition Date, except that
in certain circumstances a majority of directors not affiliated with an SBC
Acquiring Person or an SBC Adverse Person who were elected by a majority of
such unaffiliated and unassociated directors may need to approve the
redemption.

If an "SBC Flip Over Event" occurs, the holder of an SBC Right
is entitled to receive common stock of a company that has acquired SBC valued
at two times the exercise price of the SBC Right. An SBC Flip Over Event occurs
if SBC is acquired in a merger or other business combination in which SBC is
not the survivor or if 50% or more of SBC's assets, cash flow or earning power
is sold or transferred.

Following the occurrence of an SBC Flip-in Event or SBC Flip
Over Event, all SBC Rights that are beneficially owned by an SBC Acquiring
Person or an Adverse Person or any transferee thereof will be null and void.

The SBC Rights Agreement may be amended at any time prior to
an SBC Distribution Date, without the approval of SBC Rights Holders in any
manner, except to amend the SBC Redemption Price, the SBC Final Expiration Date
(as defined below), the SBC Purchase Price and the number of SBC Units for
which an SBC Right is exercisable.

The SBC Rights Agreement expires on January 27, 1999 (the "SBC
Final Expiration Date").

The foregoing description of the SBC Rights is qualified in
its entirety by reference to the SBC Rights Agreement.

COMPARISON OF CERTAIN RIGHTS OF SHAREOWNERS
OF SBC AND PAC

GENERAL

As a result of the Merger, holders of PAC Common Stock will become
holders of SBC Common Stock and the rights of all such former holders of PAC
Common Stock will thereafter be governed by the SBC Restated Certificate, the
SBC Bylaws and the DGCL. The rights of the holders of PAC Common Stock are
presently governed by the PAC Articles, the Bylaws of PAC (the "PAC Bylaws")
and the NPCL. The following summary, which does not purport to be a complete
statement of the general differences among the rights of the shareowners of SBC
and PAC, sets forth certain differences between the DGCL and the NPCL, between
the SBC Restated Certificate and the PAC Articles and between the SBC Bylaws
and the PAC Bylaws. This summary is qualified in its entirety by reference to
the full

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text of each of such documents, the DGCL and the NPCL. For information as to
how such documents may be obtained, see "Available Information."

SIZE AND CLASSIFICATION OF THE BOARD OF DIRECTORS; DIRECTOR DESIGNEES

SBC

The SBC Bylaws provide that the number of directors of SBC will be
determined from time to time by a majority of the SBC Board, but in no event
will the SBC Board be comprised of more than twenty-one members. The current
number of directors is 15. The SBC Restated Certificate also provides that the
SBC Board will be divided into three classes with the number of directors
divided as evenly as possible among the three classes. Each class is elected to
serve for a term of three years. Each year the term of one class of directors
expires and approximately one-third of the directors are elected. The
classified board provision and the limitation on the maximum number of
directors that may serve on the SBC Board may only be amended or repealed by a
two-thirds majority vote of the total number of shares of stock of SBC then
outstanding and entitled to vote. Pursuant to the Merger Agreement, at the
Effective Time, the number of directors comprising the full SBC Board will be
increased in order to enable approximately one-third of the SBC Board to be
comprised of Director Designees.

PAC

The NPCL provides that a corporation's board of directors shall consist
of at least one member and the authorized number of directors may be fixed or
variable within a fixed minimum or maximum as provided in either the
corporation's articles of incorporation or in the bylaws. The PAC Articles
provide that the number of directors may from time to time be increased or
decreased by resolution of the board of directors, provided that the number of
directors shall not be reduced to less than three (3). The PAC Board is
currently comprised of 10 members.

The PAC Articles also provide that the PAC Board will be divided into
three classes, with each class to serve for a term of three years. Each year
the term of one class of directors expires, and therefore approximately
one-third of the directors are elected in any given year.

REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS

SBC

Pursuant to the DGCL, any director or the entire SBC Board may be removed
only with cause by the affirmative vote of a majority of the outstanding shares
of SBC capital stock entitled to vote in the election of directors. The term
"cause" is not defined in the DGCL. Consequently, any question concerning the
legal standard for "cause" would have to be judicially determined, and such a
determination could be difficult, expensive and time-consuming. The SBC Bylaws
provide that any vacancy occurring on the SBC Board may be filled by the vote
of a majority of the directors remaining in office at the time of the vacancy.
The successors may serve the full or remaining term of the replaced directors.

PAC

Under the NPCL, a director may be removed by the vote of the holders of
not less than two-thirds of the voting power of the voting stock of a
corporation, subject to certain restrictions concerning cumulative voting.
However, a Nevada corporation may include in its articles of incorporation a
provision requiring the approval of a larger percentage of the voting power to
remove a director. The PAC Articles provide that any director may be removed
from office at any time, upon the vote of the PAC shareowners representing not
less than two-thirds of the voting power of the shares entitled to vote
thereon. Under the NPCL, any vacancy in the board of directors may be filled by
a majority of the remaining directors, though less than a quorum.

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ACTION BY WRITTEN CONSENT

SBC

Under the DGCL, unless otherwise provided in the certificate of
incorporation, shareowners may take action without a meeting, without prior
notice and without a vote, upon the written consent of shareowners having not
less than the minimum number of votes that would be necessary to authorize the
proposed action at a meeting at which all shares entitled to vote were present
and voted. However, the SBC Restated Certificate provides that action can be
taken by shareowners without a meeting if a consent in writing, setting forth
the actions so taken, is signed by the holders of at least two-thirds of all
the issued and outstanding shares of stock of SBC entitled to vote thereon at
any such meeting.

PAC

Under the NPCL, unless otherwise provided in the articles of
incorporation or the bylaws, shareowners may take action without a meeting,
without prior notice and without a vote, upon the written consent of
shareowners having at least a majority of the voting power, except that if a
different proportion of voting power is required for such an action at a
meeting, then that proportion is required. The PAC Bylaws provide, however,
that no action required or permitted to be taken at an annual or special
meeting of the shareowners of the corporation may be taken without a meeting,
and the power of the shareowners to consent in writing without a meeting to the
taking of any action is specifically denied.

MEETINGS OF SHAREOWNERS

SBC

Pursuant to the SBC Bylaws, a special meeting of shareowners may be
called at any time by either the SBC Board or the Chairman of the Board of SBC.
The SBC Chairman of the Board is required to call a special meeting whenever
requested to do so by shareowners representing two-thirds of the shares of SBC
then outstanding and entitled to vote at the meeting.

The SBC Bylaws provide that the presence in person or by proxy of forty
percent of the issued and outstanding shares of SBC stock entitled to vote will
constitute a quorum. When a quorum is present or represented at a meeting of
SBC shareowners, the vote of a majority of the votes cast will decide any
question brought before the meeting, unless the question is one upon which by
express provision of the DGCL, the SBC Restated Certificate or the SBC Bylaws a
different vote is required, in which case such express provision will govern
and control the decision of such question brought before the meeting. The DGCL
provides that quorum and voting requirements may be increased or decreased by
an amendment to the SBC Restated Certificate or the SBC Bylaws (which bylaw
amendment may, pursuant to the SBC Restated Certificate, be effected by the SBC
Board), so long as the requirement for a quorum does not fall below one-third
of the shares entitled to vote and subject to provisions of the DGCL setting
forth voting requirements for certain specified actions, such as mergers.

PAC

Under PAC's Bylaws, except as otherwise required by law, a special
meeting of shareowners may be called only by PAC's Chairman of the Board or by
PAC's President and must be called by PAC's Chairman of the Board, PAC's
President or the Secretary at the request in writing of a majority of the PAC
Board or the holders of sixty-six and two-thirds percent of the shares entitled
to vote at such meeting.

Under the NPCL, unless the articles of incorporation or bylaws provide
otherwise, shareowners holding at least a majority of the voting power are
necessary to constitute a quorum for the transaction of business. The PAC
Bylaws provide that the presence in person or by proxy of a majority of the
voting stock entitled to vote constitutes a quorum for the transaction of
business.

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SHAREOWNER PROPOSALS AND SHAREOWNER NOMINATIONS OF DIRECTORS

SBC

The SBC Bylaws establish procedures that must be followed for a
shareowner to submit a proposal (including voting on a slate of directors) to
be voted on by the shareowners of SBC at its annual meeting of shareowners and
a substantially similar procedure to be followed for the nomination and
election of directors. No business may be proposed by a shareowner at the
annual meeting of shareowners without giving written notice to the Secretary of
SBC not less than 60 days nor more than 90 days prior to the scheduled date of
the meeting. In the event, however, that less than 70 days' notice or prior
public disclosure of the date of the meeting is given to shareowners, notice by
the shareowner to be timely must be received not later than the close of
business on the tenth day following the earlier of (i) the day on which such
notice of the date of the meeting was mailed or (ii) the day on which such
public disclosure was made. The shareowner's notice must set forth (i) the name
and record address of such shareowner and (ii) the class or series and number
of shares of capital stock of SBC which are owned beneficially or of record by
such shareowner. In addition, with respect to business to be brought before an
annual meeting, the shareowner's notice must set forth (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting the business at the annual meeting and (ii) any material
interest the shareowner has in the proposal. Shareowner's notices relating to
director nominations must include (i) the name, age, business address and
residence address of the nominee, (ii) the principal occupation or employment
of the nominee, (iii) the class or series and number of shares of capital stock
of SBC which are owned beneficially or of record by the nominee and (iv) any
other information relating to the nominee and the shareowner making the
nomination that is required to be disclosed in a proxy statement or other
filings required to be made in connection with the solicitation of proxies for
the election of directors under the Exchange Act. If the Chairman of the SBC
Board determines that any such proposal (including a director or nomination)
was not made in accordance with these procedures or is otherwise not in
accordance with law, the Chairman of the SBC Board may so declare at the
meeting, and such defective proposal (or nomination) will be disregarded.

PAC

The PAC Bylaws establish similar procedures that must be followed for a
shareowner to submit a proposal to be voted on by the shareowners of PAC at its
annual meeting of shareowners. For business to be properly brought before an
annual meeting by a shareowner, the shareowner must have given notice to the
Secretary of PAC within the time specified in the federal proxy rules for
timely submission of a shareowner proposal or, if not within such time, then
not less than twenty-five days nor more than sixty days prior to the meeting;
provided, however, that in the event that less than fifty days' notice or prior
public disclosure of the date of the meeting is given or made to shareowners,
notice by the shareowner to be timely must be so received by the earlier of (i)
the close of business on the fifteenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made, whichever first occurs, and (ii) two days prior to the date of the
annual meeting. The shareowner's notice must set forth (i) a brief description
of the proposal and the reasons for considering the proposal at the annual
meeting, (ii) the name and record address of the shareowner, (iii) the class
and number of shares of capital stock beneficially owned by the shareowner and
(iv) any material interest the shareowner has in the proposal. If the Chairman
of the PAC Board determines that the proposal was not properly brought before
the meeting in accordance with these procedures, he shall so declare at the
meeting and the proposal will not be considered.

REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS

SBC

Under the DGCL, the recommendation of the SBC Board and the approval of a
simple majority of the outstanding shares of SBC entitled to vote thereon are
required to effect a merger or consolidation or to sell, lease or exchange
substantially all of SBC's assets. Subject to the provisions of Section 203 of
the DGCL described below under "-- State Antitakeover Statutes," no vote of the
shareowners of SBC would be required if SBC were the surviving corporation of a
merger and (i) the merger agreement does not amend the SBC Restated
Certificate, (ii) each share of stock of SBC outstanding immediately before the
merger is to be an identical outstanding or treasury share of SBC stock after
the merger and (iii) the number of shares of SBC Common Stock to be issued in
the merger (or

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to be issuable upon conversion of any convertible instruments to be issued in
the merger) will not exceed twenty percent of the shares of SBC Common Stock
outstanding immediately before the merger. If SBC fails this test under the
DGCL, the recommendation of the SBC Board and the approval of a majority of the
outstanding shares of SBC entitled to vote thereon are required to effect a
merger.

PAC

Under the NPCL, for a plan of merger or exchange to be approved, the
board of directors must adopt the plan of merger or exchange and recommend it
to the shareowners for approval, unless the board determines that, due to a
conflict of interest or other special circumstances, it should make no
recommendation and communicates the basis for its determination to the
shareowners. The plan of merger must be approved by a majority of all votes
entitled to vote on the plan unless the NPCL, the PAC Articles, or the PAC
Board require a greater vote by classes of shareowners. Subject to the
provisions of the PAC Articles and NPCL Section 92A.130, no vote of the
shareowners of a corporation is required if such corporation will be the
surviving corporation in the merger and (i) the articles of incorporation of
the surviving corporation will not differ from its articles before the merger,
(ii) each shareowner of the surviving corporation whose shares were outstanding
immediately before the merger will hold the same number of shares, with
identical designations, preferences, limitations, and relative rights
immediately after the merger and (iii) the number of shares of common stock to
be issued in the merger (or to be issuable upon conversion of any convertible
instruments to be issued in the merger) will not exceed twenty percent of the
aggregate amount of shares of common stock outstanding immediately prior to the
merger.

AMENDMENT OF CORPORATE CHARTER AND BYLAWS

SBC

Under the DGCL, an amendment to the certificate of incorporation
generally requires the recommendation of the board of directors, the approval
of a majority of all shares entitled to vote thereon, voting together as a
single class, and the majority of the outstanding stock of each class entitled
to vote thereon.

Under the DGCL, a company's board of directors may amend the bylaws if
its certificate of incorporation contains a provision entitling the directors
to amend the bylaws. Even if the certificate of incorporation contains such a
provision, the shareowners also have the power to amend the bylaws. The SBC
Restated Certificate states that the SBC Board is expressly authorized to
adopt, amend or repeal the SBC Bylaws without the consent or vote of its
shareowners, except for certain SBC Bylaws described under "-- Size and
Classification of the Board of Directors; Director Designees" and "-- Fair
Price and Anti-Greenmail Provisions."

PAC

Under the NPCL, a company's articles of incorporation may be amended by
the recommendation of the board of directors and the vote of shareowners
holding at least a majority of the voting power, unless a greater proportion of
the voting power is required in its articles of incorporation. The PAC Articles
require the affirmative vote of the holders of at least sixty-six and
two-thirds percent of the voting power of the shares entitled to vote thereon
to amend or repeal the articles relating to: (i) the composition,
classification and number of directors, (ii) directors' and officers'
indemnification, and (iii) directors' and officers' liability.

Under the NPCL, a company's board of directors may amend the bylaws,
subject only to the power of the shareowners to amend the bylaws. The PAC
Bylaws provide that the PAC Board has the power to adopt, amend or repeal any
of the bylaws by the affirmative vote of a majority of the directors present,
except as otherwise required by the PAC Articles as described above. The PAC
Bylaws may also be altered, amended or repealed by action of the shareowners at
any meeting of the shareowners if notice of such alteration, amendment or
repeal be contained in the notice of such meeting; provided, however, that any
alteration, amendment or repeal of the PAC Bylaws by action of the shareowners
must be approved by the vote of at least sixty-six and two-thirds percent of
the voting power of the shares of PAC entitled to vote in the election of
directors, voting as one class.

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APPRAISAL AND DISSENTERS' RIGHTS

SBC

The DGCL provides appraisal rights in the case of certain mergers and
consolidations. Appraisal rights are not available to holders of (i) shares
listed on a national securities exchange or held of record by more than 2,000
shareowners or (ii) shares of the constituent corporation surviving the merger,
if the merger did not require the approval of the shareowners of such
corporation, unless in any case, the holders of such stock are required
pursuant to the merger to accept anything other than (A) shares of stock of the
surviving corporation, (B) shares of stock of another corporation which will be
either listed on a national securities exchange or held by more than 2,000
holders or (C) cash in lieu of fractional shares of the stock received.
Appraisal rights are not available for a sale of assets or an amendment to the
certificate of incorporation.

PAC

Under the NPCL, a shareowner is entitled to dissent from, and receive the
fair value of shares owned in the event of a plan of merger or exchange, if the
shareowner is entitled to vote on the transaction. However, there is no right
to dissent to a plan of merger or exchange in favor of the holders of shares of
any class or series, which (i) were listed on a national securities exchange or
designated as a national market security on an interdealer quotation system by
the National Association of Securities Dealers, Inc., or (ii) held by at least
2,000 shareowners of record, unless the articles of incorporation provide
otherwise or the holders are required to receive anything other than cash or
shares (or other owner's interests) of the surviving or acquiring entity or an
entity which is either listed on a national securities exchange or included
within the national market system by the National Association of Securities
Dealers, Inc. or held of record by at least 2,000 holders of shares (or other
owner's interests) or any combination of the foregoing.

FAIR PRICE AND ANTI-GREENMAIL PROVISIONS

SBC

The SBC Bylaws provide that certain "business combinations" involving
"interested stockholders" (defined generally to be beneficial owners of 10% or
more of the voting stock of SBC or any person acquiring any voting stock, in
the two year period prior to the business combination, from such a person in a
non-public offering) require approval by a vote of the holders of at least
two-thirds (66 2/3%) of the then-outstanding shares of capital stock of SBC
entitled to vote generally for the election of directors, voting as a single
class, if not previously approved by a majority of the members of the SBC Board
who are not affiliated with the interested stockholder (and those who became
directors after the time at which the interested stockholder acquired its
shares, if they are approved by a majority of the unaffiliated directors) or
unless certain minimum price and procedural criteria are satisfied. The minimum
price criteria require that the consideration paid to SBC's shareowners must be
either cash or the same type of consideration paid by the interested
stockholder in acquiring the largest portion of its SBC shares prior to the
proposed business combination and would generally have to be at least equal in
value to the greater of (i) the highest per share price paid by the interested
stockholder in acquiring any share of SBC Common Stock during the two years
prior to such announcement date or in the transaction in which it became an
interested stockholder (whichever is higher), (ii) the fair market value per
share of SBC Common Stock on the day after such announcement date or on the
date on which the interested stockholder became an interested stockholder
(whichever is higher), or (iii) the price per share determined pursuant to (ii)
multiplied by the ratio of (a) the highest per share price paid by the
interested stockholder in acquiring any share of SBC Common Stock during the
two years prior to such announcement to (b) the fair market value per share of
SBC Common Stock on the first day in such two-year period upon which the
interested stockholder acquired any shares of SBC Common Stock. This provision
may only be amended or repealed by a two-thirds majority vote of the total
number of shares of stock of SBC then outstanding and entitled to vote.

The SBC Bylaws do not contain any "Anti-Greenmail" provision.

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PAC

Neither the PAC Bylaws nor the PAC Articles contain any such "Fair Price"
or "Anti-Greenmail" provisions.

STATE ANTITAKEOVER STATUTES

SBC

Section 203 of the DGCL ("Section 203") prohibits a "business
combination" (as defined in Section 203, generally including mergers, sales and
leases of assets, issuances of securities and similar transactions) by SBC or a
subsidiary with an "interested stockholder" (as defined in Section 203,
generally the beneficial owner of 15 percent or more of SBC's voting stock)
within three years after the person or entity becomes an interested
stockholder, unless (i) prior to the person or entity becoming an interested
stockholder, the business combination or the transaction pursuant to which such
person or entity became an interested stockholder is approved by the SBC Board,
(ii) upon the consummation of the transaction in which the person or entity
became an interested stockholder, the interested stockholder holds at least 85
percent of the voting stock of SBC (excluding for purposes of determining the
number of shares outstanding, shares held by persons who are both officers and
directors of SBC and shares held by certain employee benefit plans) or (iii)
the business combination is approved by the SBC Board and by the holders of at
least two-thirds of the outstanding voting stock of SBC, excluding shares held
by the interested stockholder.

PAC

The NPCL has three provisions designed to deter takeover attempts.

(i) Control Share Acquisition Provision. Under the NPCL, once a person
has acquired or offers to acquire one- fifth, one-third or a majority of the
stock of a corporation, a shareowners' meeting must be held after delivery of
the "offeror's statements," at offeror's expense, so the shareowners can vote
on whether the shares proposed to be acquired (the "control shares") may
exercise voting rights. Except as otherwise provided in a company's articles of
incorporation, the approval of a majority of the outstanding stock not held by
the offeror is required so that the stock held by the offeror will have voting
rights. The Control Share Acquisition Provisions are applicable to any
acquisition of a controlling interest unless the articles of incorporation or
bylaws of a corporation in effect on the tenth day following the acquisition of
a controlling interest by an acquiring person provide that the Control Share
Acquisition Provisions do not apply.

(ii) Combination Moratorium Provision. The NPCL provides that a
corporation may not engage in any "combination" (broadly defined to include
mergers, sales and leases of assets, issuances of securities, and similar
transactions) with an "interested stockholder" (defined as the beneficial owner
of 10 percent or more of the voting power of the company) and certain
affiliates and associates for three years after the interested stockholder's
date of acquiring the shares, unless the combination or the purchase of shares
by the interested stockholder is approved by the board of directors before the
date the interested stockholder acquires the shares. After the initial three
year period, any combination must still be approved by a majority of the voting
power not beneficially owned by the interested stockholder or the interested
stockholder's affiliates or associates, unless the aggregate amount of cash and
the market value of consideration other than cash to be received by shareowners
as a result of the combination meets certain minimum requirements set forth in
the NPCL. Those minimum requirements are met if the consideration received by
the shareowners is at least equal to the highest of the following: (i) the
highest price per share paid by the interested stockholder within the three
year period immediately preceding the date of announcement of the combination
or in the transaction in which he became an interested stockholder; (ii) the
market value per share of each class or series of shares, including the common
shares, on the date of the announcement of the combination or on the date the
interested stockholder acquired his shares; or (iii) for holders of preferred
stock, the highest liquidation value of the preferred stock.

(iii) Other Constituencies. Under the NPCL, the selection of a period
for the achievement of corporate goals is the responsibility of the directors.
In addition, the directors and officers, in exercising their respective powers
with a view to the interests of the corporation, may consider (i) the interests
of the corporation's employees, suppliers, creditors and customers, (ii) the
economy of the state and nation, (iii) the interests of the community and of
society

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and (iv) the long-term as well as short-term interests of the corporation and
its shareowners, including the possibility that these interests may be best
served by the continued independence of the corporation. The directors also may
resist a change or potential change in control of the corporation if the
directors by a majority vote of a quorum determine that the change or potential
change is opposed to or not in the best interests of the corporation "upon
consideration of the interests of the corporation's stockholders" or for one of
the other reasons described above. Finally, the directors may take action to
protect the interests of the corporation and its shareowners by adopting or
executing plans that deny rights, privileges, power or authority to a holder of
a specified number of shares or percentage of share ownership or voting power.
See "--Duties of Directors," below.

Thus, holders of PAC Common Stock who become holders of SBC Common Stock
after the Merger is consummated will no longer be afforded certain statutory
protection provided by the NPCL in connection with the acquisition of a
controlling interest or other activities.

RIGHTS PLANS

SBC

Pursuant to the SBC Rights Agreement each share of SBC Common Stock has
attached to it a SBC Right which entitles the holder of such right to purchase
one share of SBC Participating Preferred for $160. Until the SBC Distribution
Date the SBC Rights remain attached to the Common Stock. Following the
Distribution Date the SBC Rights will separate. After the occurrence of an SBC
Flip-in Event or an SBC Flip Over Event the holders of the Rights will have the
right to purchase shares of SBC Common Stock having a market value of twice the
purchase price (i.e., $320 worth of SBC Common Stock for $160).

The SBC Board may, at its option, redeem the SBC Rights at a redemption
price of $0.05 per SBC Right, generally at any time prior to an SBC Stock
Acquisition Date. The SBC Rights will terminate on January 27, 1999. See
"Description of Capital Stock -- Description of SBC Rights."

PAC

The PAC Board declared a dividend distribution of rights ("PAC Rights")
to holders of outstanding Common Stock on October 10, 1989 pursuant to its
Rights Agreement (the "PAC Rights Agreement"). The PAC Rights and the PAC
Rights Agreements afford the holders of PAC Rights, rights similar to those
held by holders of SBC Rights. After the PAC Distribution Date (defined below),
each PAC Right entitles the holder to purchase from PAC one-one hundredth of a
share of Series A Participating Preferred Stock of PAC at a price of $150,
subject to adjustment for dilution. The Rights are not exercisable or separate
from the PAC Common Stock until the distribution date (the "PAC Distribution
Date") which is triggered in substantially the same manner as the SBC Rights
Agreement. On April 1, 1996 the definitions of PAC Acquiring Person (generally,
a person acquiring beneficial ownership of 20% or more of the PAC Common Stock)
and PAC Adverse Person (a person having beneficial ownership of at least 10% of
the PAC Common Stock) were amended to exclude SBC from such definitions,
thereby not causing a PAC Distribution Date or a PAC Stock Acquisition Date
(the date of a public announcement that a person has become a PAC Acquiring
Person) by the Merger Agreement or any of the transactions thereby
contemplated. In addition, the PAC Rights Agreement has been amended to provide
that the PAC Board may terminate the PAC Rights at any time prior to a PAC
Distribution Date or a PAC Stock Acquisition Date.

Upon the occurrence of certain events specified in the PAC Rights
Agreement, Rights holders will have the opportunity to purchase either shares
of PAC Common Stock or an acquiror's common stock having a market value of
twice the purchase price of a PAC Right for the purchase price of a PAC Right.

Anytime after the time a person becomes a PAC Acquiring Person or the
time a person becomes a PAC Adverse Person, for so long as no person (together
with affiliates and associates) beneficially owns 50% of the PAC Common Stock
outstanding, the PAC Board may exchange all of the outstanding Rights (except
voided Rights) at an exchange ratio of one share of PAC Common Stock for each
PAC Right.

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The description of the PAC Rights Agreement specifying the terms of the
PAC Rights is incorporated herein by reference. See "Incorporation of Certain
Documents by Reference." The foregoing description of the PAC Rights is
qualified in its entirety by reference to the PAC Rights Agreement.

The PAC Rights will expire on October 10, 1999, unless earlier
terminated.

LIMITATION ON DIRECTORS' LIABILITY

SBC

Section 102 of the DGCL allows a corporation to limit or eliminate the
personal liability of directors to the corporation and its shareowners for
monetary damages for breach of fiduciary duty as a director. However, this
provision excludes any limitation on liability (i) for any breach of the
director's duty of loyalty to the corporation or its shareowners, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for intentional or negligent payment of
unlawful dividends or stock purchase or redemption or (iv) for any transaction
from which the director derived an improper personal benefit. The SBC Restated
Certificate provides for the limitations on directors' liability as permitted
by this statute.

PAC

The PAC Articles provide that a director or officer shall not be
personally liable to PAC or its shareowners for damages for breach of fiduciary
duty as a director or officer to the fullest extent permitted under the NPCL,
which provides that a corporation's articles of incorporation may eliminate or
limit the personal liability of a director or officer to the corporation or its
shareowners for damages for breach of fiduciary duty as a director or officer,
but such a provision may not eliminate or limit the liability of a director or
officer for (a) acts or omissions which involve intentional misconduct, fraud
or a knowing violation of law; or (b) the payment of distributions in violation
of NPCL Section 78.300 (which permits distributions only in accordance with the
statute).

INDEMNIFICATION OF OFFICERS AND DIRECTORS

SBC

Section 145 of the DGCL provides that a corporation may indemnify its
officers and directors who were or are a party to any action, suit or
proceeding by reason of the fact that he or she was a director, officer, or
employee of the corporation by, among other things, a majority vote of a quorum
consisting of directors who were not parties to such action, suit, or
proceeding, provided that such officers and directors acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation. The SBC Restated Certificate provides for
indemnification of officers and directors as permitted by the DGCL. The SBC
Restated Certificate also provides for the payment of expenses incurred by
directors and officers in defending a proceeding in advance of the final
disposition of such proceeding as authorized by the SBC Board upon receipt of
an undertaking by or on behalf of that person to repay such amounts unless it
is ultimately determined that person is entitled to be indemnified under
Delaware Law.

PAC

Under the NPCL, a corporation may, and in certain circumstances must,
indemnify its officers, directors, employees or agents for expenses, judgments
or settlements, actually and reasonably incurred by them in connection with
suits and other legal proceedings, if they acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to criminal proceedings, had no reasonable cause
to believe that their conduct was unlawful. A corporation may adopt procedures
for advancing expenses to directors and officers prior to final adjudication,
as long as they undertake to repay the amounts advanced if it is ultimately
determined that they were not entitled to be indemnified. The PAC Articles
permit the PAC Board to authorize and approve indemnity agreements between the
corporation and each director and each officer which agreements provide that
the corporation indemnify (and advance expenses to) the indemnitee to the
fullest extent permitted by applicable law and which agreements shall provide
that in any proceeding to enforce the obligation to indemnify such person,

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the corporation shall have the burden to establish that such indemnification is
prohibited; provided, however, that such agreements shall, in form and content
acceptable to the PAC Board, exclude from indemnification a judgment or other
final adjudication adverse to indemnitee that established (a) that his or her
acts were committed in bad faith or were the result of deliberate dishonesty,
or (b) that he or she in fact gained a financial advantage to which he or she
was not legally entitled, in which event that amount of the indemnification
shall be reduced by the amount of such financial advantage gained.

CUMULATIVE VOTING

Neither SBC nor PAC permits cumulative voting of shares.

CONFLICT-OF-INTEREST TRANSACTIONS

SBC

The DGCL generally permits transactions involving a Delaware corporation
and an interested director or officer of that corporation if (i) the material
facts are disclosed and a majority of disinterested directors consents, (ii)
the material facts are disclosed and a majority of shares entitled to vote
thereon consents or (iii) the transaction is fair to the corporation at the
time it is authorized by the board of directors, a committee, or the
shareowners.

PAC

Similar to the DGCL, the NPCL generally permits transactions involving a
Nevada corporation and an interested director or officer of that corporation if
(i) the fact of the common directorship, office or financial interest is known
or disclosed to the board of directors and a majority of disinterested
directors consents, (ii) the fact of the common directorship, office or
financial interest is known or disclosed to the shareowners and a majority of
shares entitled to vote thereon consents, (iii) the fact of the common
directorship, office or financial interest is not disclosed or known to the
director or officer at the time the transaction is brought before the board of
directors for action or (iv) the contract or transaction is fair to the
corporation at the time it is authorized or approved.

DIVIDENDS AND OTHER DISTRIBUTIONS

SBC

The DGCL generally allows dividends to be paid out of surplus of the
corporation or, in case there is no surplus, out of the net profits of the
corporation for the current fiscal year and/or the prior fiscal year. No
dividends may be paid if it would result in the capital of the corporation
being less than the capital represented by the preferred stock of the
corporation.

PAC

Under the NPCL, a corporation may pay dividends or make other
distributions with respect to its stock unless, after giving effect to the
dividend or distribution, either the corporation would not be able to pay its
debts as they become due in the usual course of business or, except as
otherwise specifically allowed by its articles of incorporation, the
corporation's total assets would be less than the sum of its total liabilities
plus the amount that would be needed, if the corporation were to be dissolved
at that time, to satisfy the preferential rights of shareowners whose rights
are superior to those shareowners receiving the dividend or distribution.

DUTIES OF DIRECTORS

SBC

The DGCL does not contain a specific provision elaborating on the duties
of a board of directors with respect to the best interests of the corporation.
Delaware courts have permitted directors to consider various constituencies
provided that there be some rationally related benefit to the shareowners.

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PAC

The NPCL permits a board of directors to consider, including in
connection with a change or potential change in control of the corporation, (i)
the interests of the corporation's employees, suppliers, creditors and
customers, (ii) the economy of the state and nation, (iii) the interests of the
community and of society and (iv) the long-term as well as short-term interests
of the corporation and its shareowners, including the possibility that these
interests may be best served by the continued independence of the corporation.
The PAC Articles provide that the PAC Board, when evaluating any offer of
another party to (a) tender or exchange for any equity security of PAC, (b)
merge or consolidate PAC with another corporation, or (c) purchase or otherwise
acquire all or substantially all of the properties and assets of PAC, may, in
connection with the exercise of its judgment in determining what is in the best
interests of PAC and its shareowners, give due consideration to (i) all
relevant factors, including without limitation the social, legal, environmental
and economic effects on the employees, customers, suppliers and other affected
persons, firms and corporations, and on the communities and geographical areas
in which PAC and its subsidiaries operate or are located and on any of the
businesses and properties of the corporation or any of its subsidiaries, as
well as such other factors as the directors deem relevant, (ii) not only the
financial consideration being offered in relation to the then current market
price for PAC's outstanding shares of capital stock, but also in relation to
the then current value of PAC in a freely negotiated transaction and in
relation to the PAC Board's estimate of the future value of PAC (including the
unrealized value of its properties and assets) as an independent going concern,
and (iii) the obligations of the corporation, and any of its subsidiaries, to
provide stable, reliable public utility services on a continuing or long term
basis.

ISSUANCE OF RIGHTS OR OPTIONS TO PURCHASE SHARES TO DIRECTORS, OFFICERS AND
EMPLOYEES

Neither the DGCL nor the NPCL contains any provision requiring the
issuance of rights or options to officers, directors and employees to be
approved by a shareowner vote.

LOANS TO DIRECTORS

Both the DGCL and the NPCL allow loans to and guarantees of obligations
of officers and directors without any shareowner approval.

EXPERTS

The consolidated financial statements and schedules of SBC at December
31, 1995 and 1994, and for the years ended December 31, 1995, 1994 and 1993,
incorporated by reference in this Joint Proxy Statement/Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
accountants, as set forth in their reports thereon, which are incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.

The consolidated financial statements of PAC as of December 31, 1995 and
1994 and for the years ended December 31, 1995, 1994 and 1993, incorporated by
reference in this Joint Proxy Statement/Prospectus have been audited by Coopers
& Lybrand L.L.P., independent accountants. The financial statements audited by
Coopers & Lybrand L.L.P. have been incorporated herein by reference in reliance
upon their report given upon their authority as experts in accounting and
auditing.

VALIDITY OF SHARES

The validity of the SBC Common Stock to be issued pursuant to the Merger
will be passed upon for SBC by James D. Ellis, Senior Executive Vice President
and General Counsel of SBC. As of March 31, 1996, Mr. Ellis owned less than .1%
of the shares (and options representing shares) of SBC Common Stock.

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APPENDIX A

Agreement and Plan of Merger, among Pacific Telesis Group, SBC Communications
Inc. and SBC Communications (NV) Inc., dated as of
April 1, 1996

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AGREEMENT AND PLAN OF MERGER

Among

PACIFIC TELESIS GROUP

SBC COMMUNICATIONS INC.

and

SBC COMMUNICATIONS (NV) INC.

Dated as of April 1, 1996

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (hereinafter calledthis "Agreement"),
dated as of April 1, 1996, among PacificTelesis Group, a Nevada corporation
(the "Company"), SBCCommunications Inc., a Delaware corporation ("SBC"), and
SBCCommunications (NV) Inc., a Nevada corporation and a wholly-owned subsidiary
of SBC ("Merger Sub," the Company andMerger Sub sometimes being hereinafter
collectively referred to as the "Constituent Corporations.")

RECITALS

WHEREAS, the respective boards of directors of each of SBC, Merger
Sub and the Company have approved the merger of Merger Sub with and into the
Company (the "Merger") and approved and adopted the Merger upon the terms and
subject to the conditions set forth in this Agreement;

WHEREAS, it is intended that, for federal income tax purposes, the
Merger shall qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended, and the rules and regula
tions promulgated thereunder (the "Code");

WHEREAS, for financial accounting purposes, it is intended that the
Merger shall be accounted for as a

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"pooling-of-interests;" and

WHEREAS, the Company, SBC and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.

NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:

ARTICLE I

The Merger; Closing; Effective Time

1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.3)
Merger Sub shall be merged with and into the Company and the separate corporate
existence of Merger Sub shall thereupon cease. The Company shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Nevada, and the separate corporate existence of the Company with all
its rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
Nevada Private Corporations Law (the "NPCL").

1.2. Closing. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Pillsbury Madison & Sutro LLP, San Francisco,
California at 9:00 A.M. on the third business day on which the last to be
fulfilled or waived of the conditions set forth in Article VII (other than
those conditions that by their nature are to be satis fied at the Closing, but
subject to the fulfillment or waiver of those conditions) shall be satisfied or
waived in accordance with this Agreement or (ii) at such other place and time
and/or on such other date as the Company and SBC may agree in writing (the
"Closing Date").

1.3. Effective Time. As soon as practicable following the
Closing, the Company and SBC will cause Articles of Merger (the "Articles of
Merger") to be signed, acknowledged and delivered for filing with the Secretary
of State of Nevada as provided in Section 92A.200 of the NPCL. The Merger
shall become effective at the time when the Articles of Merger have been duly
filed with the Secretary of State of Nevada or such other time as shall be
agreed upon by the parties and set forth in the Articles of Merger and in
accordance with the NPCL (the "Effective Time").

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ARTICLE II

Articles of Incorporation and By-Laws
of the Surviving Corporation

2.1. The Articles of Incorporation. The articles of incorporation
of the Company as in effect immediately prior to the Effective Time shall be
the articles of incorporation of the Surviving Corporation (the "Charter"),
until duly amended as provided therein or by applicable law, except that (i)
Article Fourth of the Charter shall be amended to read in its entirety as
follows: "The aggregate number of shares that the Corporation shall have the
authority to issue is 1,000 shares of Common Stock, par value $1.00 per share."
and (ii) Article Fifth of the Charter shall be amended to read in its entirety
as follows: "The governing board of this corporation shall be known as the
board of directors and its members shall be known as directors, and the number
of directors may from time to time be increased or decreased by resolution of
the board of directors." The Articles of Merger shall set forth the amendments
to the articles of incorporation of the Surviving Corporation described in this
Section 2.1.

2.2. The By-Laws. The by-laws of the Company in effect at the
Effective Time shall be the by-laws of the Surviving Corporation (the
"By-Laws"), until thereafter amended as provided therein or by applicable law.

ARTICLE III

Officers, Directors and Management

3.1. Directors of Surviving Corporation. The directors of Merger Sub
at the Effective Time shall, from and after the Effective Time, be the
directors of the Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Charter and the By-Laws.

3.2. Officers of Surviving Corporation. The officers of the Company
at the Effective Time shall, from and after the Effective Time, be the officers
of the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Charter and the By-Laws.

3.3 Election to SBC's Board of Directors. At the Effective Time of
the Merger, SBC shall increase the size of its Board of Directors in order to
enable approxi

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mately one-third of the SBC Board of Directors to be com prised of
directors selected by the SBC Board of Directors in consultation with the Chief
Executive Officer and Board of Directors of the Company from among the members
of the Company's Board of Directors (the "Director Designees"), to be appointed
to the SBC Board of Directors, and the SBC Board of Directors shall appoint
each of the Director Designees to the SBC Board of Directors as of the
Effective Time, with such Director Designees to be divided as nearly as evenly
as is possible among the classes of directors of SBC.

3.4 Management. At the Effective Time of the Merger, SBC shall cause
Mr. Philip J. Quigley to be appointed President and Chief Executive Officer of
the Surviving Corporation and Vice Chairman of the Board of Directors of SBC.

ARTICLE IV

Effect of the Merger on Capital Stock;
Exchange of Certificates

4.1. Effect on Capital Stock. At the Effective Time, as a result of
the Merger and without any action on the part of the holder of any capital
stock of the Company:

(a) Merger Consideration. Subject to Section 4.1(c) and Section
4.2(d), each share of the Common Stock, par value $0.10 per share, of the
Company (each a "Company Share" and together the "Company Shares") issued and
outstanding immediately prior to the Effective Time (other than Company Shares
that are owned by SBC, Merger Sub or any other direct or indirect subsidiary of
SBC (collectively, the "SBC Companies") or Company Shares that are owned by the
Company or any direct or indirect subsidiary of the Company and in each case
not held on behalf of third parties (collectively, "Excluded Company Shares"))
shall be converted into the right to receive, and become exchangeable for, the
Exchange Ratio (as defined in Section 9.13) of a share (the "Merger
Consideration") of Common Stock, par value $1 per share, of SBC ("SBC Common
Stock"). All references in this agreement to SBC Common Stock to be issued
pursuant to the Merger shall be deemed to include the corresponding rights
("SBC Rights") to purchase shares of SBC Common Stock pursuant to the SBC
Rights Agreement (as defined in Section 5.1(b)(i)), except where the context
otherwise requires. At the Effective Time, all Company Shares shall no longer
be outstanding, shall be cancelled and retired and shall cease to exist, and
each certificate (a "Certificate") formerly representing any of such Company
Shares (other than Excluded Company Shares) shall thereafter

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represent only the right to receive the Merger Consideration and the
right, if any, to receive pursuant to Section 4.2(d) cash in lieu of fractional
shares into which such Company Shares have been converted pursuant to this
Section 4.1(a) and any distribution or dividend pursuant to Section 4.2(b), in
each case without interest.

(b) Cancellation of Shares. Each Company Share issued and outstanding
immediately prior to the Effective Time and owned by any of the SBC Companies
or owned by the Company or any direct or indirect subsidiary of the Company
(other than Company Shares that are in each case owned on behalf of third
parties), shall, by virtue of the Merger and without any action on the part of
the holder thereof, no longer be outstanding, shall be cancelled and retired
without payment of any consideration therefor and shall cease to exist.

(c) Restricted Stock. Each Company Share issued and outstanding
immediately prior to the Effective Time that is restricted under the Company's
1994 Stock Incentive Plan or Restricted Stock Plan shall be converted into the
right to receive, and become exchangeable for a fraction of a share of SBC
Common Stock equal to the Exchange Ratio, having the same restrictions, terms
and conditions as were applicable to such Company Share of restricted stock.

(d) Outside Directors Deferred Stock Unit Plan. Each stock unit
outstanding immediately prior to the Effective Time under the Outside
Directors' Deferred Stock Unit Plan and representing one Company Share shall be
converted into the right to receive a stock unit representing a fraction of a
share of SBC Common Stock equal to the Exchange Ratio and having the same terms
and conditions as were applicable to such stock unit before the Effective Time.

(e) Merger Sub. At the Effective Time, each share of Common Stock, par
value $1.00 per share, of Merger Sub issued and outstanding immediately prior
to the Effective Time shall be converted into one share of common stock of the
Surviving Corporation, and the Surviving Corporation shall be a wholly-owned
subsidiary of SBC.

4.2. Exchange of Certificates for Shares.

(a) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause an exchange agent selected by SBC with the
Company's prior approval, which shall not be unreasonably withheld (the
"Exchange Agent") to mail to each holder of record of a Certificate in respect
of Company Shares (other than holders of a Certificate in respect of Excluded
Company Shares) (i) a letter of transmittal specifying that delivery shall be
effected, and that risk of loss and title to the

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Certificates shall pass, only upon delivery of the Certificates (or
affidavits of loss in lieu thereof) to the Exchange Agent, such letter of
transmittal to be in such form and have such other provisions as SBC and the
Company may reasonably agree, and (ii) instructions for exchanging the
Certificates for (A) certificates representing shares of SBC Common Stock and
(B) any unpaid dividends and other distributions and cash in lieu of fractional
shares. Subject to Section 4.2(g), upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor (x) a certificate representing that number of whole shares of
SBC Common Stock that such holder is entitled to receive pursuant to this
Article IV, (y) a check in the amount (after giving effect to any required tax
withholdings) of (A) any cash in lieu of fractional shares plus (B) any unpaid
non-stock dividends and any other dividends or other distributions that such
holder has the right to receive pursuant to the provisions of this Article IV,
and the Certificate so surrendered shall forthwith be cancelled. No interest
will be paid or accrued on any amount payable upon due surrender of the
Certificates. In the event of a transfer of ownership of Company Shares that
is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of SBC Common Stock, together with a
check for any cash to be paid upon due surrender of the Certificate and any
other divi dends or distributions in respect thereof, may be issued and/or paid
to such a transferee if the Certificate formerly representing such Company
Shares is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. If any certificate for shares
of SBC Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the Person (as defined below) requesting such
exchange shall pay any transfer or other taxes required by reason of the
issuance of certificates for shares of SBC Common Stock in a name other than
that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of SBC or the Exchange Agent that such tax has
been paid or is not applicable.

For the purposes of this Agreement, the term "Person" shall mean any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as defined in Section 5.1(d))
or other entity of any kind or nature.

(b) Distributions with Respect to Unexchanged Shares;

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Voting. (i) Whenever a dividend or other distribution is declared by
SBC in respect of SBC Common Stock, the record date for which is at or after
the Effective Time, that declaration shall include dividends or other
distributions in respect of all shares issuable pursuant to this Agreement. No
dividends or other distributions in respect of the SBC Common Stock shall be
paid to any holder of any unsurrendered Certificate until such Certificate is
surrendered for exchange in accordance with this Article IV herein. Subject to
the effect of applicable laws, following surrender of any such Certificate,
there shall be issued and/or paid to the holder of the certificates
representing whole shares of SBC Common Stock issued in exchange therefor,
without interest, (A) at the time of such sur render, the dividends or other
distributions with a record date after the Effective Time and a payment date on
or prior to the date of issuance of such whole shares of SBC Common Stock and
not previously paid and (B) at the appropriate payment date, the dividends or
other distributions payable with respect to such whole shares of SBC Common
Stock with a record date after the Effective Time but with a payment date
subsequent to surrender. For purposes of dividends or other distributions in
respect of shares of SBC Common Stock, all shares of SBC Common Stock to be
issued pursuant to the Merger shall be deemed issued and outstanding as of the
Effective Time.

(ii) Holders of unsurrendered Certificates shall be entitled to vote
after the Effective Time at any meeting of SBC stockholders with a record date
at or after the Effective Time the number of whole shares of SBC Common Stock
represented by such Certificates, regardless of whether such holders have
exchanged their Certificates.

(c) Transfers. After the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the Company Shares that were
outstanding immediately prior to the Effective Time.

(d) Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of SBC Common Stock will be issued and any
holder of Company Shares entitled to receive a fractional share of SBC Common
Stock but for this Section 4.2(d) shall be entitled to receive a cash payment
in lieu thereof, which payment shall represent such holder's proportionate
interest in a share of SBC Common Stock based on the closing price of a share
of SBC Common Stock, as reported in The Wall Street Journal, New York City
edition, on the trading day immediately prior to the Effective Time.

(e) Termination of Exchange Period; Unclaimed Stock. Any shares of SBC
Common Stock and any portion of the cash, dividends or other distributions with
respect to the SBC

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Common Stock deposited by the SBC with the Exchange Agent (including
the proceeds of any investments thereof) that remains unclaimed by the
stockholders of the Company 180 days after the Effective Time shall be paid to
SBC. Any stockholders of the Company who have not theretofore com plied with
this Article IV shall thereafter look only to SBC for payment of their shares
of SBC Common Stock and any cash, dividends and other distributions in respect
thereof issuable and/or payable pursuant to Section 4.1, Section 4.2(b) and
Section 4.2(d) upon due surrender of their Certificates (or affidavits of loss
in lieu thereof), in each case, without any interest thereon. Notwithstanding
the foregoing, none of SBC, the Surviving Corporation, the Exchange Agent or
any other Person shall be liable to any former holder of Company Shares for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.

(f) Lost, Stolen or Destroyed Certificates. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost, stolen or
destroyed and the posting by such Person of a bond in the form customarily
required by SBC as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the shares of SBC Common Stock, any
unpaid dividends or other distributions and any cash payment in lieu of a
fractional share in respect thereof issuable and/or payable pursuant to this
Article IV upon due surrender of and deliverable in respect of the Company
Shares represented by such Certificate pursuant to this Agreement, in each
case, without interest.

(g) Affiliates. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any "affiliate" (as determined
pursuant to Section 6.7) of the Company shall not be exchanged until SBC has
received a written agreement from such Person as provided in Section 6.7
hereof.

4.3. Dissenters' Rights. In accordance with Section 92A.390 of the
NPCL, no appraisal rights shall be available to holders of Company Shares in
connection with the Merger.

4.4. Adjustments to Prevent Dilution. In the event that prior to
the Effective Time there is a change in the number of Company Shares or shares
of SBC Common Stock or securities convertible or exchangeable into or
exercisable for Company Shares or shares of SBC Common Stock issued and
outstanding as a result of a distribution, reclassification, stock split
(including a reverse split), stock dividend or distribution, or other similar

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transaction, the Exchange Ratio shall be equitably adjusted
to eliminate the effects of such event.

ARTICLE V

Representations and Warranties

5.1. Representations and Warranties of the Company, SBC and Merger
Sub. Except as set forth in the corresponding sections or subsections of the
disclosure letter, dated the date hereof, delivered by the Company to SBC or by
SBC to the Company (each a "Disclosure Letter", and the "Company Disclosure
Letter" and the "SBC Disclosure Letter", respectively), as the case may be, the
Company (except for subparagraphs (b)(ii), (b)(iii), (c)(ii) and (p)(ii) below
and references in subparagraphs (a), (e) and (h)(i) below to documents made
available by SBC to the Company) hereby represents and warrants to SBC and
Merger Sub, and SBC (except for subparagraphs (b)(i), (c)(i), (j), (o) and
(p)(i) below and references in subparagraphs (a), (e) and (h)(i) below to
documents made available by the Company to SBC), on behalf of itself and Merger
Sub, hereby represents and warrants to the Company, that:

(a) Organization, Good Standing and Qualification. Each of it and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization and has
all requisite corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently conducted and
is qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership or operation of its properties or conduct
of its business requires such qualifi cation, except where the failure to be so
qualified or in good standing is not, when taken together with all other such
failures, reasonably likely to have a Material Adverse Effect (as defined
below) on it. It has made available to SBC, in the case of the Company, and to
the Company, in the case of SBC, a complete and correct copy of its certificate
of incorporation and by-laws, each as amended to date. Such certificates of
incorporation and by-laws as so made available are in full force and effect.

As used in this Agreement, (i) the term "Subsidiary" means, with
respect to the Company, SBC or Merger Sub, as the case may be, any entity,
whether incorporated or unincorporated, of which at least fifty percent of the
securities or ownership interests having by their terms ordinary voting power
to elect at least fifty percent of the board of directors or other persons
perform ing similar functions is directly or indirectly owned by such party or
by one or more of its respective Subsidiaries

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or by such party and any one or more of its respective Subsidiaries,
(ii) the term "Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the total enterprise value of such Person and its
Subsidiaries, taken as a whole, other than general changes in (A) the
telecommunications industry, (B) economic conditions or (C) the securities
markets that, in any of (A), (B) or (C), affect the total enterprise value of
such Person and its Subsidiaries, taken as a whole, on the one hand, and the
other party and its Subsidiaries, on the other hand, substan tially
proportionately relative to the other party, and (iii) reference to "the other
party" means, with respect to the Company, SBC and means, with respect to SBC,
the Company.

(b) Capital Structure. (i) The authorized capital stock of the Company
consists of 1,100,000,000 Company Shares, of which 428,434,672 Company Shares
were issued and outstanding and 4,392,923 Company Shares were held in treasury
as of the close of business on March 29, 1996, and 50,000,000 shares of
Preferred Stock, par value $0.10 per share (the "Preferred Shares"), of which
no shares were outstanding as of the close of business on March 29, 1996. All
of the outstanding Company Shares have been duly authorized and are validly
issued, fully paid and nonassessable. Other than 6,000,000 Preferred Shares,
designated "Series A Participating Preferred Stock", reserved for issuance
pursuant to the Rights Agreement, dated as of September 22, 1989, between the
Company and American Transtech Inc., as Rights Agent (the "Rights Agreement"),
and Company Shares subject to issuance as set forth below, the Company has no
Company Shares or Preferred Shares reserved for issuance. As of March 29,
1996, there were not more than 16,500,000 Company Shares that the Company was
obligated to issue pursuant to the Company's Supplemental Retirement and
Savings Plan for Salaried Employees, Supplemental Retirement and Savings Plan
for Nonsalaried Employees, 1994 Stock Incentive Plan, Restricted Stock Plan,
Shareholder Dividend Reinvestment and Stock Purchase Plan, Nonemployee Director
Stock Option Plan, Non-employee Directors Stock Grant Plan, Senior Management
Long Term Incentive Plan and Stock Option and Stock Appreciation Rights Plan
(collectively the "Stock Plans"). Each of the outstanding shares of capital
stock or other securities of each of the Company's "Significant Subsidiaries"
(as defined in Rule 1.02(w) of Regulation S-X promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) is duly
authorized, validly issued, fully paid and nonassessable and owned by the
Company or a direct or indirect wholly-owned Subsidiary of the Company, free
and clear of any lien, pledge, security interest, claim or other encumbrance.
Except as set forth above, there are no preemptive or other outstanding rights,
options, warrants, conversion rights, stock appreciation

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rights, redemption rights, repurchase rights, agreements, arrangements
or commitments to issue or sell any shares of capital stock or other securities
of the Company or any of its Significant Subsidiaries or any securities or
obliga tions convertible or exchangeable into or exercisable for, or giving any
Person a right to subscribe for or acquire, any securities of the Company or
any of its Significant Subsidiaries, and no securities or obligations
evidencing such rights are authorized, issued or outstanding. The Company does
not have outstanding any bonds, debentures, notes or other obligations the
holders of which have the right to vote (or convertible into or exercisable for
securities having the right to vote) with the stockholders of the Company on
any matter ("Voting Debt").

(ii) The authorized capital stock of SBC consists of 1,100,000,000
shares of SBC Common Stock, of which 609,069,574 shares were issued and
outstanding and 11,413,727 shares were held in treasury as of the close of
business on March 28, 1996, and 10,000,000 shares of Preferred Stock, par value
$1.00 per share (the "SBC Preferred Shares"), of which no shares were
outstanding as of the close of business on March 28, 1996. All of the
outstanding shares of SBC Common Stock have been duly authorized and are
validly issued, fully paid and nonassess able. SBC has no shares of SBC Common
Stock or SBC Preferred Shares reserved for issuance except that SBC has
reserved 8,000,000 SBC Preferred Shares for issuance pursuant to the Rights
Agreement, dated as of January 27, 1989, between SBC and American Transtech,
Inc., as Rights Agent, as amended by the Amendment of Rights Agreement, dated
as of August 5, 1992, between SBC and The Bank of New York, as successor Rights
Agent, and the Second Amendment of Rights Agreement, dated as of June 15, 1994,
between SBC and The Bank of New York, as successor Rights Agent (as amended,
the "SBC Rights Agreement"). As of March 28, 1996, there were not more than
24,000,000 shares of SBC Common Stock that SBC was obligated to issue pursuant
to SBC's Senior Management Long Term Incentive Plan, Senior Management
Incentive Award Deferral Plan, Restricted Stock Plan for Non-Employee
Directors, Stock Savings Program, 1994 Stock Option Plan, 1996 Stock and
Incentive Plan, 1995 Management Stock Option Plan, Savings Plan and the Savings
and Security Plan (collectively, the "SBC Stock Plans"). Each of the
outstanding shares of capital stock of each of SBC's Significant Subsidiaries
is duly authorized, validly issued, fully paid and nonassessable and owned by
SBC or a direct or indirect wholly-owned subsidiary of SBC, free and clear of
any lien, pledge, security interest, claim or other encumbrance. Except as set
forth above, there are no pre emptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or

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commitments to issue or to sell any shares of capital stock or other
securities of SBC or any of its Significant Subsidiaries or any securities or
obligations convertible or exchangeable into or exercisable for, or giving any
Person a right to subscribe for or acquire, any securities of the Com pany or
any of its Significant Subsidiaries, and no securi ties or obligation
evidencing such rights are authorized, issued or outstanding. SBC does not
have outstanding any bonds, debentures, notes or other obligations the holders
of which have the right to vote (or convertible into or exer cisable for
securities having the right to vote) with the stockholders of SBC on any matter
("SBC Voting Debt").

(iii) The authorized capital stock of Merger Sub consists of 1,000
shares of Common Stock, par value $1.00 per share, all of which are validly
issued and outstanding. All of the issued and outstanding capital stock of
Merger Sub is, and at the Effective Time will be, owned by SBC, and there are
(i) no other shares of capital stock or other voting securities of Merger Sub,
(ii) no securities of Merger Sub convertible into or exchangeable for shares of
capital stock or other voting securities of Merger Sub and (iii) no options or
other rights to acquire from Merger Sub, and no obligations of Merger Sub to
issue, any capital stock, other voting securities or securities convertible
into or exchangeable for capital stock or other voting securities of Merger
Sub. Merger Sub has not conducted any business prior to the date hereof and
has no, and prior to the Effective Time will have no, assets, liabilities or
obligations of any nature other than those incident to its formation and
pursuant to this Agreement and the Merger and the other transactions
contemplated by this Agreement.

(c) Corporate Authority; Approval and Fairness. (i) The Company has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and to consummate, subject only to approval of this Agreement by the
holders of a majority of the outstanding Company Shares (the "Company Requisite
Vote") and the Company Required Consents (as defined in Section 5.1(d)), the
Merger. This Agreement is a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles (the "Bankruptcy and Equity
Exception"). The board of directors of the Company (A) has unanimously
approved this Agreement and the Merger and the other transactions contem plated
hereby and (B) has received the opinion of its financial advisors, Salomon
Brothers Inc, in a customary form and to the effect that the Merger
Consideration to be

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received by the holders of the Company Shares in the Merger is fair to such
holders from a financial point of view.

(ii) SBC and Merger Sub each has all requisite corporate power and
authority and each has taken all corporate action necessary in order to
execute, deliver and perform its obligations under this Agreement and to
consummate, subject only to the stockholder approval necessary to permit the
issuance of SBC Common Stock required to be issued pursuant to Article IV (the
"SBC Requisite Vote") and the SBC Required Consents (as defined in Section
5.1(d)), the Merger. This Agreement is a valid and binding agreement of SBC
and Merger Sub, enforceable against each of SBC and Merger Sub in accordance
with its terms, subject to the Bankruptcy and Equity Exception. SBC has
received the opinion of its financial advisors, Lazard Freres & Co. LLC, in a
customary form and to the effect that the Merger Consideration to be paid by
SBC in the Merger is fair to SBC from a financial point of view. The shares of
SBC Common Stock, when issued pursuant to this Agreement, will be validly
issued, fully paid and nonassessable, and no stockholder of SBC will have any
preemptive right of subscription or purchase in respect thereof.

(d) Governmental Filings; No Violations. (i) Other than the filings
and/or notices (A) pursuant to Section 1.3, (B) under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Exchange
Act and the Securities Act of 1933, as amended (the "Securities Act"), (C) to
comply with state securities or "blue-sky" laws, (D) the necessary notices and,
if any, approvals of the Federal Communications Commission ("FCC") pursuant to
the Communications Act of 1934, as amended and (E) the necessary notices and
necessary approvals, if any, of the state and foreign public utility
commissions or similar state or foreign regulatory bodies (each a "PUC")
identified in its respective Disclosure Letter pursuant to applicable state or
foreign laws regulating the telephone, mobile cellular, paging, cable
television or other telecommunications business ("Utilities Laws") (such
filings and/or notices of SBC being the "SBC Required Consents" and of the
Company being the "Company Required Consents"), no notices, reports or other
filings are required to be made by it with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
it from, any governmental or regulatory authority, court, agency, commission,
body or other governmental entity ("Governmental Entity"), in connection with
the execution and delivery of this Agreement by it and the consummation by it
of the Merger and the other transactions contemplated hereby, except those that
the failure to make or obtain are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on it or prevent,
materially delay

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or materially impair its ability to consummate the transactions contemplated by
this Agreement.

(ii) The execution, delivery and performance of this Agreement by it do
not, and the consummation by it of the Merger and the other transactions
contemplated hereby will not, constitute or result in (A) a breach or violation
of, or a default under, its certificate of incorporation or by-laws or the
comparable governing instruments of any of its Significant Subsidiaries, (B) a
breach or violation of, or a default under, the acceleration of any obligations
or the creation of a lien, pledge, security interest or other encumbrance on
its assets or the assets of any of its Subsidiaries (with or without notice,
lapse of time or both) pursuant to, any agreement, lease, contract, note,
mortgage, indenture, arrangement or other obligation ("Contracts") binding upon
it or any of its Subsidiaries or any Law (as defined in Section 5.1(i)) or
governmental or non-governmental permit or license to which it or any of its
Subsidiaries is subject or (C) any change in the rights or obligations of any
party under any of its Contracts, except, in the case of clause (B) or (C)
above, for any breach, violation, default, acceleration, creation or change
that, individually or in the aggregate, is not reasonably likely to have a
Material Adverse Effect on it or prevent, material ly delay or materially
impair its ability to consummate the transactions contemplated by this
Agreement. The Company Disclosure Letter, with respect to the Company, and the
SBC Disclosure Letter, with respect to SBC, sets forth a correct and complete
list of its Contracts and Contracts of its Subsidiaries pursuant to which
consents or waivers are or may be required prior to consummation of the
transactions contemplated by this Agreement other than those where the failure
to obtain such consents or waivers is not reasonably likely to have a Material
Adverse Effect on it or prevent or materially impair its ability to consummate
the transactions contemplated by this Agreement.

(e) Reports; Financial Statements. It has delivered to the other party,
each registration statement, report, proxy statement or information statement
prepared by it since December 31, 1995 (the "Audit Date"), including its Annual
Report on Form 10-K for the year ended December 31, 1995 in the form (including
exhibits, annexes and any amend ments thereto) filed with the Securities and
Exchange Commission (the "SEC") (collectively, including any such reports filed
subsequent to the date hereof, its "Reports"). As of their respective dates,
its Reports did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circum stances in which they were
made, not misleading. Each of the consolidated balance sheets included in or
incorporated by reference into its Reports (including the related notes

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and schedules) fairly presents the consolidated financial position of
it and its Subsidiaries as of its date and each of the consolidated statements
of income and of cash flows included in or incorporated by reference into its
Reports (including any related notes and schedules) fairly presents the results
of operations, retained earnings and cash flows, as the case may be, of it and
its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to notes and normal year-end audit adjustments that will
not be material in amount or effect), in each case in accordance with generally
accepted accounting principles ("GAAP") consistently applied during the periods
involved, except as may be noted therein. Since December 31, 1992, it and each
Subsidiary required to make filings under Utilities Laws has filed with the
applicable PUCs or the FCC, as the case may be, all material forms, statements,
reports and documents (including exhibits, annexes and any amendments thereto)
required to be filed by them, and each such filing complied in all material
respects with all applicable laws, rules and regulations, other than such
failures to file and non-compliance that are, individually or in the aggregate,
not reasonably likely to have a Material Adverse Effect on it or prevent or
materially impair its ability to consummate the transactions contemplated by
this Agreement. To its knowledge, as of the date hereof, no Person or "group"
"beneficially owns" 5% or more of its outstanding voting securities, with the
terms "beneficially owns" and "group" having the meanings ascribed to them
under Rule 13d-3 and Rule 13d-5 under the Securities Exchange Act of 1934.

(f) Absence of Certain Changes. Except as disclosed in its Reports filed
prior to the date hereof or as expressly contemplated by this Agreement, since
the Audit Date it and its Subsidiaries have conducted their respective
businesses only in, and have not engaged in any material transaction other than
according to, the ordinary and usual course of such businesses and there has
not been (i) any change in the financial condition, properties, prospects,
business or results of operations of it and its Subsidi aries, except those
changes that are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on it; (ii) any damage, destruction or other
casualty loss with respect to any asset or property owned, leased or otherwise
used by it or any of its Subsidiaries, whether or not covered by insurance,
which damage, destruction or loss is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on it; (iii) any declaration,
setting aside or payment of any dividend or other distribution in respect of
its capital stock, except publicly announced regular quarterly cash dividends
on its common stock; or (iv) any change by it in accounting principles,
practices or methods. Since the Audit Date, except as provided for herein, in
the Company Disclosure Letter or as disclosed in its Reports filed prior to the

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date hereof, there has not been any increase in the compensation
payable or that could become payable by it or any of its Subsidiaries to
officers or key employees or any amendment of any of its Compensation and
Benefit Plans (as defined in Section 5.1(h)(i)) other than increases or
amendments in the ordinary course.

(g) Litigation and Liabilities. Except as disclosed in its Reports
filed prior to the date hereof, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending or, to the knowledge of its executive officers, threatened against it
or any of its Affiliates (as defined in Rule 12b-2 under the Exchange Act) or
(ii) obligations or liabilities, whether or not accrued, contingent or
otherwise and whether or not required to be disclosed, including those relating
to matters involving any Environmental Law (as defined in Section 5.1(k)), or
any other facts or circum stances, in either such case, of which its executive
officers have actual knowledge that are reasonably likely to result in any
claims against or obligations or liabilities of it or any of its Affiliates,
except for those that are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on it or prevent or mater ially impair
its ability to consummate the transactions contemplated by this Agreement.

(h) Employee Benefits.

(i) A copy of each bonus, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, employment, termination, severance,
compensation, medical, health or other plan, agreement, policy or arrangement
that covers employees, directors, former employees or former directors of it
and its Subsidiaries (its "Compensation and Benefit Plans") and any trust
agreements or insurance contracts forming a part of such Compensation and
Benefit Plans has been made available by it to the other party prior to the
date hereof and each such Compensation and Benefit Plan is listed in Section
5.1(h) of its respective Disclosure Letter.

(ii) All of its Compensation and Benefit Plans are in substantial
compliance with all applicable law, including the Code and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Each of its
Compensation and Benefit Plans that is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA (a "Pension Plan") and that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determi nation letter from the Internal Revenue Service (the "IRS"),
and it is not aware of any circumstances likely to result in revocation of any
such favorable determination

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letter. There is no pending or, to the knowledge of its executive
officers, threatened material litigation relating to its Compensation and
Benefit Plans. Neither it nor any Subsidiary has engaged in a transaction with
respect to any of its Compensation and Benefit Plans that, assuming the taxable
period of such transaction expired as of the date hereof, would subject it or
any of its Subsidiaries to a material tax or penalty imposed by either Section
4975 of the Code or Section 502 of ERISA.

(iii) As of the date hereof, no liability under Subtitle C or D of Title
IV of ERISA (other than the payment of prospective premium amounts to the
Pension Benefit Guaranty Corporation in the normal course) has been or is
expected to be incurred by it or any Subsidiary with respect to any ongoing,
frozen or terminated "single-employer plan", within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one employer with it
under Section 4001 of ERISA or Section 414 of the Code (its "ERISA Affiliate")
(each such single-employer plan, its "ERISA Affiliate Plan"). It and its
Subsidiaries and ERISA Affiliates have not contributed, or been obligated to
contribute, to a multiemployer plan under Subtitle E of Title IV of ERISA at
any time since September 26, 1980. No notice of a "reportable event", within
the meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived, has been required to be filed for any of its Pension Plans
or any of its ERISA Affiliate Plans within the 12-month period ending on the
date hereof or will be required to be filed in connection with the transactions
contemplated by this Agreement.

(iv) All contributions required to be made under the terms of any of its
Compensation and Benefit Plans as of the date hereof have been timely made or
have been reflected on the most recent consolidated balance sheet filed or
incorporated by reference in its Reports prior to the date hereof. Neither any
of its Pension Plans nor any of any of its ERISA Affiliate Plans has an
"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA. Neither it nor its
Subsidiaries has provided, or is required to provide, security to any of its
Pension Plans or to any of its ERISA Affiliate Plans pursuant to Section
401(a)(29) of the Code.

(v) Under each of its Pension Plans which is a single-employer plan and
each of its ERISA Affiliate Plans, as of the last day of the most recent plan
year ended prior to the date hereof, the actuarially determined present value
of all "benefit liabilities", within the meaning of

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Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such Pension Plan's or ERISA Affiliate
Plan's most recent actuarial valuation), did not exceed the then current value
of the assets of such Pension Plan or ERISA Affiliate Plan, and there has been
no material change in the financial condition of such Pension Plan or ERISA
Affiliate Plan since the last day of the most recent plan year.

(vi) Neither it nor its Subsidiaries have any obligations for retiree
health and life benefits under any of its Compensation and Benefit Plans,
except as set forth in its Reports filed prior to the date hereof or as
required by applicable law.

(vii) The consummation of the Merger (or its approval by its
stockholders) and the other transactions contemplated by this Agreement will
not (x) entitle any of its employees or directors or any employees of its
Subsidiaries to severance pay, directly or indirectly, upon termination of
employment, (y) accelerate the time of payment or vesting or trigger any
payment of compensation or benefits under, increase the amount payable or
trigger any other material obligation pursuant to, any of its Compensation and
Benefit Plans or (z) result in any breach or violation of, or a default under,
any of its Compensation and Benefit Plans.

(i) Compliance with Laws. Except as set forth in its Reports filed
prior to the date hereof, the businesses of each of it and its Subsidiaries
have not been, and are not being, conducted in violation of any law, statute,
ordinance, regulation, judgment, order, decree, injunction, arbitration award,
license, authorization, opinion, agency requirement or permit of any
Governmental Entity or common law (collectively, "Laws"), except for violations
or possible violations that are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on it or prevent or
materially impair its ability to consummate the transactions contemplated by
this Agreement. Except as set forth in its Reports filed prior to the date
hereof, no investigation or review by any Governmental Entity with respect to
it or any of its Subsidiaries is pending or, to the actual knowledge of its
executive officers, threatened, nor has any Governmental Entity indicated an
intention to conduct the same, except for those the outcome of which are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on it or prevent or materially impair its ability to consummate the
transactions contemplated by this Agreement. To the actual knowledge of its
executive officers, no material change is required in its or any of its Subsid
iaries' processes, properties or procedures in connection with any such Laws,
and it has not received any notice or

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communication of any material noncompliance with any such Laws that has
not been cured as of the date hereof, except for such changes and noncompliance
that are not, individ ually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it or prevent or materially impair its ability to
consummate the transactions contem plated by this Agreement. Each of it and
its Subsidiaries has all permits, licenses, franchises, variances, exemp tions,
orders and other governmental authorizations, con sents and approvals
(collectively, "Permits"), necessary to conduct their business as presently
conducted, except for those the absence of which are not, individually or in
the aggregate, reasonably likely to have a Material Adverse Effect on it or
prevent or materially impair its ability to consummate the transactions
contemplated by this Agreement.

(j) Takeover Statutes. The Board of Directors of the Company has taken
or will take all appropriate and necessary actions such that Sections 78.378 et
seq. and 78.411 et seq. of the NPCL will not have any effect on the Merger or
the other transactions contemplated by this Agreement. No other "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover
statute or regulation (each a "Takeover Statute") is, as of the date hereof, is
applicable to the Merger or the other transactions contemplated by this
Agreement.

(k) Environmental Matters. Except as disclosed in its Reports filed
prior to the date hereof and except for such matters that, alone or in the
aggregate, are not reasonably likely to have a Material Adverse Effect on it:
(i) each of it and its Subsidiaries has complied with all applicable
Environmental Laws (as defined below); (ii) the properties currently owned or
operated by it or any of its Subsidiaries (including soils, groundwater,
surface water, buildings or other structures) are not contaminated with any
Hazardous Substances (as defined below); (iii) the properties formerly owned or
operated by it or any of its Subsidiaries were not contaminated with Hazardous
Substances during the period of ownership or operation by it or any of its
Subsidiaries; (iv) neither it nor any of its Subsidiaries is subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither it nor any Subsidiary has been associated with any
release or threat of release of any Hazardous Substance; (vi) neither it nor
any Subsidiary has received any notice, demand, letter, claim or request for
information alleging that it or any of its Subsidiaries may be in violation of
or liable under any Environmental Law; (vii) neither it nor any of its
Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or is subject to any indemnity or
other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are no

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circumstances or conditions involving it or any of its Subsidiaries
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use, or transfer of any
of its properties pursuant to any Environmental Law.

As used herein, the term "Environmental Law" means any Law relating
to: (A) the protection, investigation or restoration of the environment,
health, safety, or natural resources, (B) the handling, use, presence,
disposal, release or threatened release of any Hazardous Substance or (C)
noise, odor, wetlands, pollution, contamination or any injury or threat of
injury to persons or property in connection with any Hazardous Substance.

As used herein, the term "Hazardous Substance" means any substance
that is: listed, classified or regulated pursuant to any Environmental Law,
including any petroleum product or by-product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon.

(l) Accounting and Tax Matters. As of the date hereof, neither it nor
any of its affiliates (as determined in accordance with Section 6.7) has taken
or agreed to take any action, nor do its executive officers have any actual
knowledge of any fact or circumstance, that would prevent SBC from accounting
for the business combination to be effected by the Merger as a
"pooling-of-interests" or prevent the Merger and the other transactions
contemplated by this Agreement from qualifying as a "reorganization" within the
meaning of Section 368(a) of the Code.

(m) Taxes. It and each of its Subsidiaries have prepared in good faith
and duly and timely filed (taking into account any extension of time within
which to file) all material Tax Returns (as defined below) required to be filed
by any of them and all such filed tax returns are complete and accurate in all
material respects and: (i) it and each of its Subsidiaries have paid all Taxes
(as defined below) that are shown as due on such filed Tax Returns or that it
or any of its Subsidiaries is obligated to withhold from amounts owing to any
employee, creditor or third party, except with respect to matters contested in
good faith or for such amounts that, alone or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on it; (ii) as of the date
hereof, there are not pending or, to the actual knowledge of its executive
officers threatened in writing, any audits, examinations, investigations or
other proceedings in respect of Taxes or Tax matters; and (iii) there are not,
to the actual knowledge of its executive officers, any unresolved questions or
claims concerning its or any of its Subsidiaries' Tax liability that are
reasonably likely to have a Material Adverse Effect

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on it. Neither it nor any of its Subsidiaries has any liability with
respect to income, franchise or similar Taxes in excess of the amounts accrued
in respect thereof that are reflected in the financial statements included in
its Reports, except such excess liabilities as are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on it. No
payments to be made to any of the officers and employees of it or its
Subsidiaries will as a result of consummation of the Merger be subject to the
deduction limitations under Section 280G of the Code.

As used in this Agreement, (i) the term "Tax" (including, with
correlative meaning, the terms "Taxes", and "Taxable") includes all federal,
state, local and foreign income, profits, franchise, gross receipts,
environmental, customs duty, capital stock, severance, stamp, payroll, sales,
employment, unemployment, disability, use, property, withholding, excise,
production, value added, occupancy and other taxes, duties or assessments of
any nature whatsoever, together with all interest, penalties and additions
imposed with respect to such amounts and any interest in respect of such
penalties and additions, and (ii) the term "Tax Return" includes all returns
and reports (including elections, declarations, disclosures, schedules,
estimates and informa tion returns) required to be supplied to a Tax authority
relating to Taxes.

(n) Labor Matters. Neither it nor any of its Subsidiaries is the subject
of any material proceeding asserting that it or any of its Subsidiaries has
committed an unfair labor practice or is seeking to compel it to bargain with
any labor union or labor organization nor is there pending or, to the knowledge
of its executive officers, threatened, nor has there been for the past five
years, any labor strike, dispute, walkout, work stoppage, slow-down or lockout
involving it or any of its Subsidiaries, except in each case as is not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on it.

(o) Rights Agreement. (i) The Company has adopted an amendment to the
Rights Agreement with the effect that neither SBC nor Merger Sub shall be
deemed to be either an (i) Acquiring Person or (ii) Adverse Person (as each
term is defined in the Rights Agreement) and the Distribution Date (as defined
in the Rights Agreement) shall not be deemed to occur and that the Rights will
not separate from the Company Shares, as a result of entering into this
Agreement or consummating the Merger and/or the other transactions contemplated
hereby.

(ii) The Company has taken all necessary action with respect to all of
the outstanding Rights (as defined in the Rights Agreement) so that, as of
immediately prior to the

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Effective Time, as a result of entering into this Agreement or
consummating the Merger and/or the other transactions contemplated by this
Agreement, (A) neither the Company nor SBC will have any obligations under the
Rights or the Rights Agreement and (B) the holders of the Rights will have no
rights under the Rights or the Rights Agreement.

(p) Brokers and Finders. Neither it nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated in this Agreement except
that (i) the Company has employed Salomon Brothers Inc as its financial
advisor, the arrangements with which have been disclosed to SBC prior to the
date hereof, and (ii) SBC and Merger Sub have employed Lazard Freres & Co. LLC
as their financial advisor, the arrangements with which have been disclosed to
the Company prior to the date hereof.

ARTICLE VI

Covenants

6.1. Interim Operations. (a) The Company and SBC each covenants
and agrees as to itself and its Subsidiaries that, after the date hereof and
prior to the Effective Time (unless SBC or the Company, as the case may be,
shall otherwise approve in writing, which approval shall not be unreasonably
withheld or delayed, and except as otherwise expressly contemplated by this
Agreement or in its respective Disclosure Letter or as required by applicable
Law):

(i) the business of it and its Subsidiaries shall be conducted in the
ordinary and usual course and, to the extent consistent therewith, it and its
Subsidiaries shall use all reasonable efforts to preserve its business
organization intact and maintain its existing relations and goodwill with
customers, suppliers, regulators, distribu tors, creditors, lessors, employees
and business associates;

(ii) it shall not (A) amend its certificate of incorporation or by-laws
or amend, modify or terminate the SBC Rights Agreement or the Rights Agreement,
as the case may be, other than, in the case of SBC, an amendment to the
certificate of incorporation of SBC for the purpose of increasing the
authorized number of shares of SBC Common Stock as contemplated by SBC's March
12, 1996 Proxy Statement; (B) split, combine, subdivide or reclassify its
outstanding shares of capital stock; (C) declare, set aside or pay any dividend
payable in cash, stock or property in respect of any capital stock, other than
(I) in the case of

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the Company, the quarterly dividend declared on March 22, 1996, payable
on May 1, 1996 to stockholders of record on April 9, 1996 and per share regular
quarterly cash dividends thereafter not in excess of the Exchange Ratio
multiplied by the dividend per share of SBC Common Stock in such quarter, and
(II) in the case of SBC, regular quarterly cash and dividends not in excess of
$0.43 per share of SBC Common Stock; or (D) repurchase, redeem or otherwise
acquire, except (I) in the case of the Company, in connection with the Stock
Plans and (II) in the case of SBC, in connection with the SBC Stock Plans, or
permit any of its Subsidiaries to purchase or otherwise acquire, any shares of
its capital stock or any securities convertible into or exchangeable or
exercisable for any shares of its capital stock;

(iii) neither it nor any of its Subsidiaries shall knowingly take any
action that would prevent the Merger from qualifying for "pooling of interests"
accounting treatment or as a "reorganization" within the meaning of Section
368(a) of the Code or that would cause any of its representations and
warranties herein to become untrue in any material respect;

(iv) neither it nor any of its Subsidiaries shall terminate, establish,
adopt, enter into, make any new grants or awards of stock-based compensation or
other benefits under, amend or otherwise modify, any Compensation and Benefit
Plans or increase the salary, wage, bonus or other compensation of any
directors, officers or employees except (A) for grants or awards to directors,
officers and employees of it or its Subsidiaries under existing Compensation
and Benefit Plans in such amounts and on such terms as are consistent with past
practice, (B) in the normal and usual course of business (which shall include
normal periodic performance reviews and related compensation and benefit
increases and the provision of individual Compensation of Benefit Plans
consistent with past practice for newly hired officers and employees and the
adoption of Compensation and Benefit Plans for employees of new Subsidiaries in
amounts and on terms consistent with past practice) or (C) for actions
necessary to satisfy existing contractual obligations under Compensation and
Benefit Plans existing as of the date hereof; and

(v) neither it nor any of its Subsidiaries will authorize, or enter into
an agreement to do any of the fore going.

(b) SBC covenants and agrees as to itself and its Subsidiaries that after
the date hereof and prior to the Effective Time (unless the Company shall
otherwise approve in writing, which approval shall not be unreasonably withheld
or delayed, and except as otherwise expressly contemplated by this Agreement or
the SBC Disclosure Letter

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or as required by applicable Law):

(i) Neither SBC nor any of its Subsidiaries shall issue any preferred
stock or incur any indebtedness for borrowed money or guarantee any such
indebtedness if SBC should reasonably anticipate that after such incurrence any
of SBC's or any of its Subsidiaries' outstanding senior indebtedness would be
rated BBB or lower by Standard & Poor's;

(ii) Neither SBC nor any of its Subsidiaries shall make any capital
expenditures in any calendar year in an aggregate amount in excess of 150% of
the aggregate amount of capital expenditures reflected in SBC's capital
expenditure budget for such year, a copy of which has been provided to the
Company;

(iii) Neither SBC nor any of its Subsidiaries shall issue, deliver, sell
or encumber shares of any class of its common stock or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, except (A) in public offerings for cash where the aggregate proceeds to
SBC are less than $1 billion in any calendar year, (B) shares issuable pursuant
to stock options and other awards outstanding on the date hereof under the SBC
Stock Plans, awards of options and other awards granted hereafter under the SBC
Stock Plans in accordance with this Agreement and shares issuable pursuant to
such awards, and (C) to fund the cost of any acquisition of a
telecommunications business, whether by merger, consolidation, purchase of
assets or otherwise;

(iv) Neither SBC nor any of its subsidiaries, other than in transactions
between themselves, shall sell or otherwise transfer, directly or indirectly,
any of its indirect investment in AA shares of Telefonos de Mexico S.A. de
C.V.;

(v) Neither SBC nor any of its Subsidiaries shall enter any business
other than the telecommunications business and those businesses traditionally
associated with the telecommunications business; and

(vi) Neither SBC nor any of its Subsidiaries shall agree prior to the
Effective Time to do any of the foregoing after the Effective Time.

(c) The Company covenants and agrees as to itself and its Subsidiaries
that, after the date hereof and prior to the Effective Time (unless SBC shall
otherwise approve in writing, which approval shall not be unreasonably withheld
or delayed, and except as otherwise expressly contemplated by this Agreement or
the Company Disclosure Letter or as

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required by applicable Law):

(i) Neither the Company nor any of its Subsidiaries shall issue any
preferred stock or incur any indebtedness for borrowed money or guarantee any
such indebtedness if the Company should reasonably anticipate that after such
incurrence any of the Company's or any of its Subsidiaries' outstanding senior
indebtedness would be rated BBB or lower by Standard & Poor's;

(ii) Neither the Company nor any of its Subsidiaries shall make any
capital expenditures in any calendar year in an aggregate amount in excess of
the aggregate amount reflected in the Company's capital expenditure budget for
such year, a copy of which has been provided to SBC, plus $250 million;
provided, however, that the foregoing shall not limit in any respect the
ability of Pacific Bell or Nevada Bell to make or commit to capital
expenditures with respect to any aspect of their respective existing businesses;

(iii) Neither the Company nor any of its Subsidiaries shall issue,
deliver, sell, or encumber shares of any class of its common stock or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares except (A) shares issued pursuant to options and other awards
outstanding on the date hereof under the Stock Plans, awards of options and
other awards granted hereafter under the Stock Plans in accordance with this
Agreement and shares issuable pursuant to such awards, and (B) up to an
aggregate amount of $300 million of such stock (valued at its fair market value
as of the date of the agreement to make such acquisition) in any calendar year
to fund, in whole or in part, the cost of any acquisition or acquisitions
permitted under clause (iv) below;

(iv) Neither the Company nor any of its Subsidiaries shall spend in
excess of $600 million in any calendar year to acquire any business, whether by
merger, consolidation, purchase of property or assets or otherwise (valuing any
non-cash consideration at its fair market value as of the date of the agreement
for such acquisition), unless such business is acquired directly by the Company
and is within the Company's existing lines of business. Notwithstanding the
foregoing, neither the Company nor any of its Subsidiaries shall acquire (A)
any cellular, personal communications services or wireless cable business
servicing any territory outside of the states of California and Nevada, or (B)
any business servicing any territory outside the United States unless such
business primarily consists of the long distance telephone business, the
internet services business, or the internet hubbing business. None of the
foregoing shall limit in any respect the ability of Pacific Bell and Nevada

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Bell to acquire businesses which would be subject to regulation within
California and Nevada, respectively. For purposes of this clause (iv), the
amount spent with respect to any acquisition shall be deemed to include the
aggregate amount of capital expenditures that the Company is obligated to make
at any time or plans to make as a result of such acquisition within two years
after the date of acquisition;

(v) Neither the Company nor its Subsidiaries shall enter any business
other than the telecommunications business and those businesses traditionally
associated with the telecommunications business; and

(vi) Neither the Company nor any of its Subsidiaries shall agree prior
to the Effective Time to do any of the foregoing after the Effective Time.

(d) SBC and the Company agree that any written approval obtained under
this Section 6.1 may be relied upon by the other party if signed by the Chief
Executive Officer or another executive officer of the other party.

6.2. Acquisition Proposals. The Company and SBC each agrees that
neither it nor any of its Subsidiaries nor any of the officers and directors of
it or its Subsidiaries shall, and that it shall direct and use its best efforts
to cause its and its Subsidiaries' employees, agents and representatives
(including any investment banker, attorney or accountant retained by it or any
of its Subsidiaries) (SBC, its Subsidiaries and their officers and directors,
employees, agents and representatives being the "SBC Representatives" and the
Company, its Subsidiaries and their officers, directors, employees, agents and
representatives being the "Company Representatives") not to, directly or
indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries
or the making of any proposal or offer with respect to a merger,
reorganization, share exchange, consolidation or similar transaction involving,
or any purchase of all or any significant portion of the assets or any equity
securities of, it or any of its Subsidiaries that, in any such case, could
reasonably be expected to lead to a breach of this Agreement or otherwise
interfere with the completion of the Merger contemplated by this Agreement (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal"). The Company and SBC each further agrees that neither it nor any of
its Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall direct and use its best efforts to cause
its and its Subsidiaries' employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its Subsidi
aries) not to, directly or indirectly, have any discussion with or provide any
confidential information or data to any Person relating to an Acquisition
Proposal or engage in any

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negotiations concerning an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal;
provided, however, that nothing contained in this Agreement shall prevent
either the Company or SBC or its board of directors from (A) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal; (B) engaging in any discussions or negotiations with or providing any
information to, any Person in response to an unsolicited bona fide written
Acquisition Proposal by any such Person; or (C) recommending such an
unsolicited bona fide written Acquisition Proposal to the stockholders of the
Company or SBC, as the case may be, if and only to the extent that, in such
case referred to in clause (B) or (C), (i) the board of directors of the
Company or SBC, as the case may be, concludes in good faith (after consultation
with its financial advisor) that such Acquisition Proposal is reasonably
capable of being completed, taking into account all legal, financial,
regulatory and other aspects of the proposal and the Person making the
proposal, and would, if consummated, result in a transaction more favorable to
the Company's or SBC's stockholders from a financial point of view than the
transaction contemplated by this Agreement (any such more favorable Acquisition
Proposal being referred to in this Agreement as a "Superior Proposal"), (ii)
the board of directors of the Company or SBC, as the case may be, determines in
good faith after consultation with outside legal counsel that such action is
necessary for its board of directors to comply with their respective fiduciary
duties under applicable law and (iii) prior to providing any information or
data to any Person in connection with an Acquisition Proposal by any such
Person, such board of directors receives from such Person an executed
confidenti ality agreement on terms substantially similar to those contained in
the confidentiality agreement previously entered into between SBC and the
Company in connection with their consideration of the Merger. The Company and
SBC each agrees that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal. The Company and SBC each
agrees that it will take the necessary steps to promptly inform the individuals
or entities referred to in the first sentence hereof of the obligations
undertaken in this Section 6.2. The Company and SBC each agrees that it will
notify the other immediately if any such inquiries, proposals or offers are
received by, any such information is requested from, or any such discussions or
negotiations are sought to be initiated or continued with, any of its
representatives indicating, in connection with such notice, the name of such
Person and the terms and conditions of any proposals or offers and thereafter
shall keep SBC or the Company, as the case may be, informed, on a current
basis, of the status and terms of any such proposals or offers and

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the status of any such discussions or negotiations. The Com pany also
agrees that it will promptly request each Person that has heretofore executed a
confidentiality agreement in connection with its consideration of any
Acquisition Proposal to return all confidential information heretofore
furnished to such Person by or on behalf of it or any of its Subsidiaries.

6.3. Information Supplied. The Company and SBC each agrees, as to
itself and its Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion or incorporation by reference
in (i) the Registration Statement on Form S-4 to be filed with the SEC by SBC
in connection with the issuance of shares of SBC Common Stock in the Merger
(including the joint proxy statement and prospectus (the "Prospectus/Proxy
Statement") constituting a part thereof) (the "S-4 Registration Statement")
will, at the time the S-4 Registration Statement becomes effective under the
Securities Act, and (ii) the Prospectus/Proxy Statement and any amendment or
supplement thereto will, at the date of mailing to stockholders and at the
times of the meetings of stockholders of the Company and SBC to be held in
connection with the Merger, in any such case, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

6.4. Stockholders Meetings. The Company will take, in accordance
with applicable law and its certificate of incorporation and by-laws, all
action necessary to convene a meeting of holders of Company Shares (the
"Stockholders Meeting") as promptly as practicable after the S-4 Registration
Statement is declared effective to consider and vote upon the approval of this
Agreement and the Merger. SBC will take, in accordance with applicable law and
its certificate of incorporation and by-laws, all action necessary to convene a
meeting of holders of SBC Common Stock as promptly as practicable after the S-4
Registration Statement is declared effective to consider and vote upon the
approval of the issuance of SBC Common Stock in the Merger. In the event that,
after adjustment pursuant to Section 6.16, the Exchange Ratio shall be less
than 0.667 of a share of SBC Common Stock (other than as a result of any
adjustment pursuant to Section 4.4), then the Company shall, as promptly as
practicable after the determination of the Exchange Ratio convene another
Stockholders Meeting in accordance with this Section at which the holders of
Company Shares shall be requested again to consider and vote upon the
transactions contemplated hereby taking into account the Exchange Ratio, as
adjusted. SBC and the Company shall cooperate in all reasonable respects to
effectuate promptly the holding of such additional Stockholders Meeting.

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Subject to fiduciary obligations under applicable law, each of the
Company's and SBC's board of directors shall recommend approval of the
transactions contemplated hereby and shall take all lawful action to solicit
such approval.

6.5. Filings; Other Actions; Notification. (a) SBC and the Company
shall promptly prepare and file with the SEC the Prospectus/Proxy Statement,
and SBC shall prepare and file with the SEC the S-4 Registration Statement as
promptly as practicable. SBC and the Company each shall use all reasonable
efforts to have the S-4 Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing, and promptly
thereafter mail the Prospectus/Proxy Statement to the respective stockholders
of each of the Company and SBC. SBC shall also use all reasonable efforts to
obtain prior to the effective date of the S-4 Registration Statement all
necessary state securities law or "blue sky" permits and approvals required in
connection with the Merger and to consummate the other transactions
contemplated by this Agreement and will pay all expenses incident thereto.

(b) The Company and SBC each shall use all reasonable efforts to cause to
be delivered to the other party and its directors a letter of its independent
auditors, dated (i) the date on which the S-4 Registration Statement shall
become effective and (ii) the Closing Date, and addressed to the other party
and its directors, in form and substance customary for "comfort" letters
delivered by independent public accountants in connection with registration
statements similar to the S-4 Registration Statement.

(c) The Company and SBC shall cooperate with each other and use (and
shall cause their respective Subsidiaries to use) all their respective
reasonable efforts to take or cause to be taken all actions, and do or cause to
be done all things, necessary, proper or advisable on its part under this
Agreement and applicable Laws to consummate and make effective the Merger and
the other transactions contemplated by this Agreement as soon as practicable,
including preparing and filing as promptly as practicable all documentation to
effect all necessary applications, notices, petitions, filings and other
documents and to obtain as promptly as practicable all consents, registrations,
approvals, permits and authorizations necessary or advisable to be obtained
from any third party and/or any Governmental Entity in order to consummate the
Merger or any of the other transactions contemplated by this Agreement;
provided, however, that, except as contemplated by Section 6.16, nothing in
this Section 6.5 shall require, or be construed to require, SBC or the Company
to proffer to, or agree to, any concession to any Governmental Entity that SBC
concludes is reasonably likely to materially reduce the economic or

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business benefits SBC expects, as of the date hereof, to realize from
the Merger. Subject to applicable laws relat ing to the exchange of
information, SBC and the Company shall have the right to review in advance, and
to the extent practicable each will consult the other on, all the informa tion
relating to SBC or the Company, as the case may be, and any of their respective
Subsidiaries, that appear in any filing made with, or written materials
submitted to, any third party and/or any Governmental Entity in connection with
the Merger and the other transactions contemplated by this Agreement. In
exercising the foregoing right, each of the Company and SBC shall act
reasonably and as promptly as practicable.

(d) The Company and SBC each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be
reasonably necessary or advisable in connection with the Prospectus/Proxy
Statement, the S-4 Registration Statement or any other statement, filing,
notice or application made by or on behalf of SBC, the Company or any of their
respective Subsidiaries to any third party and/or any Governmental Entity in
connection with the Merger and the transactions contemplated by this Agreement.

(e) The Company and SBC each shall keep the other apprised of the status
of matters relating to completion of the transactions contemplated hereby,
including promptly furnishing the other with copies of notice or other
communications received by SBC or the Company, as the case may be, or any of
its Subsidiaries, from any third party and/or any Governmental Entity with
respect to the Merger and the other transactions contemplated by this
Agreement. Each of the Company and SBC shall give prompt notice to the other
of any change that is reasonably likely to result in a Material Adverse Effect
on it.

6.6. Access; Consultation. (a) Upon reasonable notice, and except as
may otherwise be required by appli cable law, the Company and SBC each shall
(and shall cause its Subsidiaries to) afford the other's officers, employees,
counsel, accountants and other authorized representatives ("Representatives")
reasonable access, during normal business hours throughout the period prior to
the Effective Time, to its properties, books, contracts and records and, during
such period, each shall (and shall cause its Subsidiaries to) furnish promptly
to the other all infor mation concerning its business, properties and personnel
as may reasonably be requested, provided that no investigation pursuant to this
Section shall affect or be deemed to modify any representation or warranty made
by the Company, SBC or Merger Sub hereunder, and provided, further, that the
fore going shall not require the Company or SBC to permit any

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inspection, or to disclose any information, that in the reasonable
judgment of the Company or SBC, as the case may be, would result in the
disclosure of any trade secrets of third parties or violate any of its
obligations with respect to confidentiality if the Company or SBC, as the case
may be, shall have used all reasonable efforts to obtain the consent of such
third party to such inspection or disclo sure. All requests for information
made pursuant to this Section shall be directed to an executive officer of the
Company or SBC, as the case may be, or such Person as may be designated by any
such executive officer, as the case may be.

(b) From the date hereof to the Effective Time, SBC and the Company agree
to consult with each other on a regular basis on a schedule to be agreed with
regard to their respective operations.

6.7. Affiliates. (a) Each of the Company and SBC shall deliver to
the other a letter identifying all Persons whom such party believes to be, at
the date of the Stockholders Meeting, "affiliates" of such party for purposes
of Rule 145 under the 1933 Act. Each of the Company and SBC shall use all
reasonable efforts to cause each Person who is identified as an "affiliate" in
the letter referred to above to deliver to SBC prior to the date of the
Stockholders Meeting a written agreement providing that each such Person will
agree not to sell, pledge, transfer or otherwise dispose of the shares of SBC
Common Stock to be received by such Person in the Merger except in compliance
with the applicable provisions of the 1933 Act and, if the Merger qualifies for
pooling of interests accounting treatment, until such time as financial results
covering at least 30 days of combined operations of SBC and the Company shall
have been published. Prior to the Effective Time, each of the Company and SBC
shall amend and supplement such letter and use all reasonable efforts to cause
each additional Person who is identified as an "affiliate" to execute a written
agreement as set forth in this Section 6.7.

(b) If the Merger would otherwise qualify for pooling-of-interests
accounting treatment, shares of SBC Common Stock issued to such affiliates of
the Company in exchange for Company Shares shall not be transferable until such
time as financial results covering at least 30 days of combined operations of
SBC and the Company have been published within the meaning of Section 201.01 of
the SEC's Codification of Financial Reporting Policies, regardless of whether
each such affiliate has provided the written agreement referred to in this
Section, except to the extent permitted by, and in accordance with, SEC
Accounting Series Release 135 and SEC Staff Accounting Bulletins 65 and 76.
Any Company Shares held by any such affiliate shall not be

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transferable, regardless of whether such affiliate has provided the
applicable written agreement referred to in this Section, if such transfer,
either alone or in the aggregate with other transfers by affiliates, would
preclude SBC's ability to account for the business combination to be effected
by the Merger as a pooling of interests. The Company shall not register the
transfer of any Certificate, unless such transfer is made in compliance with
the foregoing.

6.8. Stock Exchange Listing and De-listing. SBC shall use its best
efforts to cause the shares of SBC Common Stock to be issued in the Merger to
be approved for listing on the New York Stock Exchange ("NYSE"), subject to
official notice of issuance, prior to the Closing Date. The Surviving
Corporation shall use its best efforts to cause the Company Shares to be
de-listed from the NYSE and de-registered under the Exchange Act as soon as
practicable following the Effective Time.

6.9. Publicity. The initial press release with respect to the Merger
shall be a joint press release and thereafter the Company and SBC each shall
consult with each other prior to issuing any press releases or otherwise making
public announcements with respect to the Merger and the other transactions
contemplated by this Agreement and prior to making any filings with any third
party and/or any Governmental Entity (including any national securities
exchange) with respect thereto, except as may be required by law or by
obligations pursuant to any listing agreement with or rules of any national
securities exchange.

6.10. Benefits.

(a) Stock Options.

(i) At the Effective Time, each outstanding option to purchase Company
Shares (a "Company Option") under the Stock Plans, whether vested or unvested,
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Company Option, the same number of
shares of SBC Common Stock as the holder of such Company Option would have been
entitled to receive pursuant to the Merger had such holder exercised such
Company Option in full immediately prior to the Effective Time (rounded down to
the nearest whole number) (a "Substitute Option"), at an exercise price per
share (rounded up to the nearest whole cent) equal to (y) the aggregate
exercise price for the Company Shares otherwise purchasable pursuant to such
Company Option divided by (z) the number of full shares of SBC Common Stock
deemed purchasable pursuant to such Company Option in accordance with the
foregoing. At or prior to the Effective Time, the Company shall make all
necessary arrangements with respect

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to the Stock Plans to permit the assumption of the unexer cised Company
Options by SBC pursuant to this Section and as soon as practicable after the
Effective Time SBC shall use its best efforts to register under the Securities
Act of 1933 on Form S-8 or other appropriate form (and use its best efforts to
maintain the effectiveness thereof) shares of SBC Common Stock issuable
pursuant to all Substitute Options.

(ii) Effective at the Effective Time, SBC shall assume each Company
Option in accordance with the terms of the Stock Plan under which it was issued
and the stock option agreement by which it is evidenced.

(b) Employee Benefits. SBC agrees that it shall cause the Surviving
Corporation for at least two years after the Effective Time to provide or cause
to be provided to employees of the Company and its Subsidiaries compensation
and benefit plans that are no less favorable, in the aggregate, than the
Company Compensation and Benefit Plans disclosed on Section 6.10(b) of the
Company Disclosure Letter; provided, however, if during this period SBC
implements any widespread increase or decrease in benefits under compensation
and benefit plans or in the cost thereof to participants under compensation and
benefit plans applicable to employees of SBC and its Subsidiaries (other than
the Surviving Corporation and its Subsidiaries), the Surviving Corporation
shall proportionately adjust the benefits under the Company's compensation and
benefit plans or the cost thereof to participants, and provided, further with
respect to employees who are subject to collective bargaining, all benefits
shall be provided in accordance with the applicable collective bargaining
agreement. At or prior to the Effective Time, the Company shall make all
necessary arrangements to cause any Company Share units under the Company's
Compensation and Benefit Plans to be converted into share units with respect to
SBC Common Stock by multiplying the Company Shares subject to such Company
Share units by the fraction of a share of SBC Common Stock equal to the
Exchange Ratio. SBC shall, and shall cause the Surviving Corporation to,
honor, pursuant to their terms, all employee benefit obligations to current and
former employees under the Compensation and Benefit Plans to the extent such
Compensation and Benefit Plans are disclosed on Section 6.10(b) of the Company
Disclosure Letter.

6.11. Expenses. Except as otherwise provided in Section 8.5(b) and
8.5(c), whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement shall be paid by the party
incurring such expense, except for expenses to be borne by SBC or the Company
pursuant to Section 6.16 and except that expenses incurred in connection with
the filing

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fee for the S-4 Registration Statement and printing and mailing the
Prospectus/Proxy Statement and the S-4 Registration Statement and the filing
fee under the HSR Act shall be shared equally by SBC and the Company.

6.12. Indemnification; Directors' and Officers' Insurance. (a)
From and after the Effective Time, SBC agrees that it will indemnify and hold
harmless each present and former director and officer of the Company (when
acting in such capacity) determined as of the Effective Time (the "Indemnified
Parties"), against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of or pertain ing to matters existing or occurring at or prior to
the Effective Time, whether asserted or claimed prior to, at or after the
Effective Time, to the fullest extent that the Company would have been
permitted under Nevada law and its articles of incorporation or by-laws in
effect on the date hereof to indemnify such Person (and SBC shall also advance
expenses as incurred to the fullest extent permitted under applicable law,
provided the Person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such Person is not
entitled to indemnification).

(b) Any Indemnified Party wishing to claim indemni fication under
paragraph (a) of this Section 6.12, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify SBC thereof, but the
failure to so notify shall not relieve SBC of any liability it may have to such
Indemnified Party if such failure does not materially prejudice the
indemnifying party. In the event of any such claim, action, suit, proceeding
or investigation (whether arising before or after the Effective Time), (i) SBC
or the Surviving Corporation shall have the right to assume the defense thereof
and SBC shall not be liable to such Indemnified Parties for any legal expenses
of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if SBC
or the Surviving Corporation elects not to assume such defense or counsel for
the Indemnified Parties advises that there are issues which raise conflicts of
interest between SBC or the Surviving Corporation and the Indemnified Parties,
the Indemnified Parties may retain counsel satisfactory to them, and SBC or the
Surviving Corporation shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received; provided, however, that SBC shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all

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Indemnified Parties in any jurisdiction (unless there is a conflict of
interest as provided above) (ii) the Indemnified Parties will cooperate in the
defense of any such matter and (iii) SBC shall not be liable for any settlement
effected without its prior written consent.

(c) The Surviving Corporation shall maintain a policy of officers' and
directors' liability insurance for acts and omissions occurring prior to the
Effective Time ("D&O Insurance") with coverage in amount and scope at least as
favorable as the Company's existing directors' and officers' liability
insurance coverage for a period of six years after the Effective Time so long
as the annual premium therefor is not in excess of the last annual premium paid
prior to the date hereof (the "Current Premium"); provided, however, if the
existing D&O Insurance expires, is terminated or cancelled during such six year
period, the Surviving Corpora tion will use its best efforts to obtain D&O
Insurance in an amount and scope as great as can be obtained for the remainder
of such period for a premium not in excess (on an annualized basis) of 175% of
the Current Premium.

(d) If the Surviving Corporation or any of its successors or assigns
(i) shall consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all of its
properties and assets to any individual, corporation or other entity, then and
in each such case, proper provisions shall be made so that the successors and
assigns of the Surviving Corporation shall assume all of the obligations set
forth in this Section.

(e) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, their heirs and
their representatives.

6.13. Takeover Statute. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement, each of SBC and the Company and its board of directors shall grant
such approvals and take such actions as are necessary so that such transactions
may be consummated as promptly as practicable on the terms contemplated by this
Agreement or by the Merger and otherwise act to eliminate or minimize the
effects of such statute or regulation on such transactions. The Company will
cause the Rights Agent to promptly execute the Rights Amendment.

6.14. Dividends. The Company shall coordinate with SBC the
declaration, setting of record dates and payment dates of dividends on Company
Shares so that holders of Company Shares do not receive dividends on both
Company Shares and SBC Common Stock received in the Merger

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in respect of any calendar quarter or fail to receive a dividend on
either Company Shares or SBC Common Stock received in the Merger in respect of
any calendar quarter.

6.15. Confidentiality. The Company, SBC and Merger Sub each
agrees not to disclose or permit the disclosure for any purpose other than the
transactions contemplated hereby of any non-public, confidential or proprietary
information furnished to such party by another party hereto in connection with
the transactions contemplated by this Agreement, provided that such disclosure
may be made (a) to any Person who is an officer, director or employee of such
party, or to counsel, accountants and financial advisors to such party solely
for their use in evaluating the transactions contemplated by this Agreement,
(b) with the prior written consent of all parties to this Agreement or (c)
pursuant to a subpoena or order issued by a court, arbitrator or governmental
body, agency or official.

6.16. Determination of SBC and Company Costs. (a) Within five (5)
days after the Determination Date (as defined in Section 9.12) each of SBC and
the Company shall simultaneously exchange with the other written
notice of the dollar amount of the Regulatory Approval Costs which it
believes, in good faith, to be the appropriate amount of the Regulatory
Approval Costs for it to bear, which amount shall not exceed fifty percent
(50%) of the Regulatory Approval Costs (a "Tentative Share").

(b) In the event that SBC's Tentative Share and the Company's Tentative
Share both equal fifty percent (50%) of the Regulatory Approval Costs, then the
SBC Costs shall equal fifty percent (50%) of the Regulatory Approval Costs and
the Company Costs shall equal fifty percent (50%) of the Regulatory Approval
Costs, and the Exchange Ratio shall be adjusted to the Revised Exchange Ratio.

(c) In the event the Tentative Share of one party (the "Higher Party")
exceeds the Tentative Share of the other party (the "Lower Party") and neither
paragraph (b) nor (d) of this Section 6.16 would otherwise apply, then the
Higher Party shall elect, by providing written notice of such decision to the
Lower Party, to either: (i) accept as its share of the Regulatory Approval
Costs an amount equal to the difference between the Regulatory Approval Costs
and the greater of (A) the Tentative Share of the Lower Party and (B) the
lesser of (X) 50% of the Regulatory Approval Costs and (Y) the Termination Fee
(the greater of (A) and (B) being the Lower Party's Share), and such amount
shall constitute the SBC Costs (if the Higher Party is SBC) or the Company
Costs (if the Higher Party is the Company), and the Tentative Share of the
Lower Party shall constitute the SBC Costs (if the Lower Party is SBC) or the
Company Costs (if

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the Lower Party is the Company); or (ii) subject to any Lower Party
Election (as defined below) terminate this Agreement pursuant to the applicable
provisions of Section 8.3(b)(vii) or 8.4(v) hereof after providing the Lower
Party with ten (10) days prior written notice of its intent to so terminate the
Agreement (the "Notice of Proposed Termination") provided, however, that in the
event the Higher Party elects to terminate this Agreement as provided for in
clause (ii), above, then the Lower Party may, within five (5) days of receipt
of notice of the Notice of Proposed Termination, provide written notice to the
Higher Party of the election of the Lower Party (the "Lower Party Election") to
bear as its share of the Regulatory Approval Costs an amount equal to the
difference between the Regulatory Approval Costs and the Tentative Share of the
Lower Party, and such amount shall constitute the SBC Costs (if the Lower Party
is SBC) or the Company Costs (if the Lower Party is the Company), and the
Tentative Share of the Lower Party shall constitute the SBC Costs (if the
Higher Party is SBC) or the Company Costs (if the Higher Party is the Company);
provided further, however, that the Lower Party Election shall only be
available if the Lower Party's Tentative Share is at least 80% of Higher
Party's Tentative Share. At the Effective Time, the Exchange Ratio shall be
adjusted to the Revised Exchange Ratio.

(d) In the event the Tentative Share of each of SBC and Company is smaller
than fifty percent (50%) of the Regulatory Approval Costs (a "Failure to Agree
Event"), then this Agreement shall terminate pursuant to Section 8.1(b).

6.17. Control of the Company's Operations. Nothing contained in
this Agreement shall give SBC, directly or indirectly, rights to control or
direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.

ARTICLE VII

Conditions

7.1. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:

(a) Stockholder Approval. This Agreement (including the Exchange Ratio
if required to be approved at an additional Stockholders Meeting by Section 6.4
hereof) shall

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have been duly approved by holders of Company Shares constituting the
Company Requisite Vote and have been duly approved by the sole stockholder of
Merger Sub, and the issuance of SBC Common Stock pursuant to the Merger shall
have been duly approved by the holders of shares of SBC Common Stock
constituting the SBC Requisite Vote;

(b) NYSE Listing. The shares of SBC Common Stock issuable to the Company
stockholders pursuant to this Agreement shall have been authorized for listing
on the NYSE upon official notice of issuance.

(c) Governmental Consents. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, the decision and order of the California Public Utilities
Commission ("CPUC") authorizing the Merger and making any required determ
inations under Section 854(a)-(c) of the California Public Utilities Code,
including its determination as to any required allocation of economic benefits,
if any, of the Merger, between shareholders and ratepayers, shall have become
final, and other than the filing provided for in Section 1.3, all notices,
reports and other filings required to be made prior to the Effective Time by
the Company or SBC or any of their respective Subsidiaries with, and all
consents, registrations, approvals, permits and authorizations required to be
obtained prior to the Effective Time by, the Company or SBC or any of their
respective Subsidiaries from, any Governmental Entity (collectively,
"Governmental Consents") in connection with the execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby shall have been made or obtained (as the case may be) upon
terms and conditions that are not reasonably likely to have a Material Adverse
Effect on SBC or the Company, it being understood that in the event the CPUC
were to require by final decision and order that an allocation of economic
benefit to ratepayers is required under Section 854(b) of the California Public
Utilities Code, the effect of any such final decision and order shall not be
considered to have a Material Adverse Effect on SBC or the Company.

(d) Litigation. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger or the
other transactions contemplated by this Agreement or that is, individually or
in the aggregate with all other such Laws, reasonably likely to have a Material
Adverse Effect on SBC or the Company (collectively, an "Order"), and no
Governmental Entity shall have instituted any proceeding or threatened to
institute any proceeding seeking any such

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Order.

(e) S-4. The S-4 Registration Statement shall have become effective
under the Securities Act. No stop order suspending the effectiveness of the
S-4 Registration Statement shall have been issued, and no proceedings for that
purpose shall have been initiated or be threatened by the SEC.

(f) Accountants' Letters. SBC and the Company shall have received the
"comfort" letters described in Section 6.5(b). SBC and the Company shall have
received letters from their respective independent public accounting firms to
the effect that the Merger will qualify for "pooling of interests" accounting
treatment.

(g) Blue Sky Approvals. SBC shall have received all state securities and
"blue sky" permits and approvals necessary to consummate the transactions
contemplated hereby.

(h) Allocation of Certain Costs. The determination of SBC and Company
Costs as provided in Section 6.16 shall have been completed.

7.2. Conditions to Obligations of SBC and Merger Sub. The
obligations of SBC and Merger Sub to effect the Merger are also subject to the
satisfaction or waiver by SBC at or prior to the Effective Time of the
following conditions:

(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement shall be true and correct as of the
date of this Agreement and (except to the extent such representa tions and
warranties speak as of an earlier date) as of the Closing Date as though made
on and as of the Closing Date, and SBC shall have received a certificate signed
on behalf of the Company by an executive officer of the Company to such effect.

(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and SBC shall have
received a certificate signed on behalf of the Company by an executive officer
of the Company to such effect.

(c) Consents Under Agreements. The Company shall have obtained the
consent or approval of each Person whose consent or approval shall be required
in order to consummate the transactions contemplated by this Agreement under
any Contract to which the Company or any of its Subsidiaries is a party, except
those for which the failure to obtain such

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consent or approval, individually or in the aggregate, is not reasonably
likely to have, a Material Adverse Effect on the Company or is not reasonably
likely to materially adversely affect the ability of the Company to consummate
the transactions contemplated by this Agreement.

(d) Tax Opinion. SBC shall have received the opinion of Sullivan &
Cromwell, special counsel to SBC, dated the Closing Date, to the effect that
the Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and that each of SBC, Merger
Sub and the Company will be a party to that reorganization within the meaning
of Section 368(b) of the Code.

7.3. Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:

(a) Representations and Warranties. The representations and warranties
of SBC and Merger Sub set forth in this Agreement shall be true and correct as
of the date of this Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date, and the Company shall have received a
certificate signed on behalf of SBC by an executive officer of SBC to such
effect.

(b) Performance of Obligations of SBC and Merger Sub. Each of SBC and
Merger Sub shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date, and the Company shall have received a certificate signed on behalf of SBC
and Merger Sub by an executive officer of SBC to such effect.

(c) Consents Under Agreements. SBC shall have obtained the consent or
approval of each Person whose consent or approval shall be required in order to
consummate the transactions contemplated by this Agreement under any Contract
to which SBC or any of its Subsidiaries is a party, except those for which
failure to obtain such consents and approvals, individually or in the
aggregate, is not reasonably likely to have a Material Adverse Effect on SBC or
is not reasonably likely to materially adversely affect the ability of SBC to
consummate the transactions contemplated by this Agreement.

(d) Tax Opinion. The Company shall have received the opinion of
Pillsbury Madison & Sutro LLP, counsel to the Company, dated the Closing Date,
to the effect that the

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Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that each
of SBC, Merger Sub and the Company will be a party to that reorganization
within the meaning of Section 368(b) of the Code.

ARTICLE VIII

Termination

8.1. Termination by Mutual Consent; Automatic Termination. (a) This
Agreement may be terminated and the Merger may be abandoned at any time prior
to the Effective Time, whether before or after the approval by stockholders of
the Company and SBC referred to in Section 7.1(a), by mutual written consent of
the Company and SBC, by action of their respective boards of directors.

(b) This Agreement shall be terminated and the Merger shall be abandoned
upon the occurrence of a Failure to Agree Event as provided in Section 6.16(d).

8.2. Termination by Either SBC or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the board of directors of either SBC or the Company if (i)
the Merger shall not have been consummated by March 31, 1997, whether such date
is before or after the date of approval by the stockholders of the Company or
SBC; provided, however, that if SBC or the Company determines that additional
time is necessary in connection with obtaining a required approval of the CPUC,
the Termination Date may be extended by SBC or the Company from time to time by
written notice to the other party to a date not beyond December 31, 1997 (the
"Termination Date"), (ii) the approval of the Company's stockholders required
by Sec tion 7.1(a) shall not have been obtained at a meeting duly convened
therefor or at any adjournment or postponement thereof, (iii) the approval of
SBC's stockholders as required by Section 7.1(a) shall not have been obtained
at a meeting duly convened therefor, or (iv) any Order permanently restraining,
enjoining or otherwise prohibiting consummation of the Merger shall become
final and non-appeal able (whether before or after the approval by the
stockholders of the Company or SBC); provided, that the right to terminate this
Agreement pursuant to clause (i) above shall not be available to any party that
has breached in any material respect its obligations under this Agreement in
any manner that shall have proximately contributed to the failure of the Merger
to be consummated.

8.3. Termination by the Company. This Agreement may be terminated
and the Merger may be abandoned at any

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time prior to the Effective Time, whether before or after the approval
by stockholders of the Company referred to in Section 7.1(a), by action of the
board of directors of the Company:

(a) If (i) the Company is not in material breach of any of the terms of
this Agreement, (ii) the board of directors of the Company approves entering
into a binding written agreement concerning a transaction that constitutes a
Superior Proposal and the Company notifies SBC in writing that the Company
wishes to enter into such agreement, (iii) SBC does not make, within ten
business days of receipt of the Company's written notification of its desire to
enter into a binding agreement for a Superior Proposal, an offer that the board
of directors of the Company believes, in good faith after consultation with its
financial advisors, is at least as favorable, from a financial point of view,
to the stockholders of the Company as the Superior Proposal and (iv) the
Company prior to such termination pays to SBC in immediately available funds
any fees required to be paid pursuant to Section 8.5. The Company agrees to
notify SBC promptly if its wish to enter into a written agreement referred to
in its notification shall change at any time after giving such notification.

(b) If (i) the board of directors of SBC shall have withdrawn or
adversely modified its approval or recommendation of this Agreement or failed
to reconfirm its recommendation of this Agreement within fifteen business days
after a written request by the Company to do so, (ii) Section 6.2 shall be
breached by SBC in any material respect and SBC shall have failed to promptly
terminate the activity giving rise to such breach and use best efforts to cure
such breach upon notice thereof from the Company or SBC shall breach Section
6.2 by failing to promptly notify the Company as required thereunder, (iii)
there has been a material breach by SBC or Merger Sub of any representation,
warranty, covenant or agreement (other than Section 6.2) contained in this
Agreement that is not curable or, if curable, is not cured within 30 days after
written notice of such breach is given by the Company to the party committing
such breach, (iv) if SBC or any SBC Representatives shall take any of the
actions that would be proscribed by Section 6.2 but for the exception therein
allowing certain actions to be taken pursuant to clause (B) or (C) of the
proviso thereof; provided, that, the Company shall not have any right to
terminate this Agreement pursuant to this Section 8.3(b)(iv) as a result of the
taking of any such action during the first 45 days after the date hereof (the
"45 Day Period") unless the Company exercises its right of termination prior to
the later of (x) the end of the 45 Day Period and (y) 15 business days after
the date the Company receives written notice from SBC of the action giving rise
to a right of termination, (v) the persons comprising the

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members of the SBC Board of Directors as of the date hereof (the
"Incumbent Directors") and any additional members of SBC Board of Directors
whose election or nomination for election as a director is supported by a
majority of the Incumbent Directors (such additional member of SBC Board of
Directors thereafter being an Incumbent Director) shall cease to constitute a
majority of the members of the Board of Directors of SBC or any Person or
"group" (as defined in Rule 13d-5 under the Securities Exchange Act of 1934)
shall own capital stock of SBC with voting power sufficient to cast a majority
of the votes entitled to be cast for the election of directors of SBC, (vi)
SBC, directly or through any of its Subsidiaries, shall, in any calendar year,
enter into an agreement or agreements to spend in excess of $5 billion (valuing
any non-cash consideration at its fair market value as of the date of the
agreement to make such acquisition) to acquire one or more businesses, whether
by merger, consolidation, purchase of property or assets or otherwise, or (vii)
pursuant to Section 6.16(c), the Company is the Higher Party and neither
paragraph (b) or (d) of Section 6.16 would otherwise apply and SBC does not
make a timely Lower Party Election.

8.4. Termination by SBC. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the stockholders of SBC referred to in Section 7.1(a), by
action of the board of directors of SBC if (i) the board of directors of the
Company shall have withdrawn or adversely modified its approval or
recommendation of this Agreement or failed to reconfirm its recommendation of
this Agreement within fifteen business days after a written request by SBC to
do so, (ii) Section 6.2 shall be breached by the Company in any material
respect and the Company shall have failed to promptly terminate the activity
giving rise to such breach and use best efforts to cure such breach upon notice
thereof from SBC or the Company shall breach Section 6.2 by failing to promptly
notify SBC as required thereunder, (iii) there has been a material breach by
the Company of any representation, warranty, covenant or agreement (other than
Section 6.2) contained in this Agreement that is not curable or, if curable, is
not cured within 30 days after written notice of such breach is given by SBC to
the party committing such breach, (iv) if the Company or any Company
Representative shall take any of the actions that would be proscribed by
Section 6.2 but for the exception therein allowing certain actions to be taken
pursuant to clause (B) or (C) of the proviso thereof; provided, that, SBC shall
not have any right to terminate this Agreement pursuant to this Section 8.4(iv)
as a result of the taking of any such action during the 45 Day Period unless
SBC exercises its right of termination prior to the later of (x) the end of the
45 Day Period and (y) 15 business days after the date SBC receives written
notice from the Company of the action giving rise to

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a right of termination or (v) pursuant to Section 6.16(c) SBC is the
Higher Party and neither paragraph (b) or (d) of Section 6.16 would otherwise
apply and the Company does not make a timely Lower Party Election.

8.5. Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to
this Article VIII, this Agreement (other than as set forth in Section 9.1)
shall become void and of no effect with no liability on the part of any party
hereto (or of any of its directors, officers, employees, agents, legal or
financial advisors or other representatives); provided, however, no such
termination shall relieve any party hereto from any liability for any breach of
this Agreement.

(b) In the event that (i) a bona fide Acquisition Proposal with respect
to the Company or any Subsidiary of the Company shall have been made to the
Company or any of its Subsidiaries and made known to stockholders generally or
has been made directly to stockholders generally or any Person shall have
publicly announced an intention (whether or not conditional) to make a bona
fide Acquisition Proposal with respect to the Company or any Subsidiary of the
Company and such Acquisition Proposal or announced intention shall
not have been withdrawn prior to the Stockholders Meeting and thereafter this
Agreement is terminated by either SBC or the Company pursuant to Section
8.2(ii), or (ii) this Agreement is terminated (x) by the Company pursuant to
Section 8.3(a) or (y) by SBC pursuant to Section 8.4(i), (ii), (iv) or (v),
then the Company shall promptly, but in no event later than two days after the
date of such termination (except as otherwise provided in Section 8.3(a), pay
SBC a fee equal to $300 million (the "Termination Fee"), which amount shall be
exclusive of any expenses to be paid pursuant to Section 6.11, payable by wire
transfer of same day funds; provided, however, that no Termination Fee shall be
payable to SBC pursuant to clause (i) of this paragraph (b) or pursuant to a
termination by SBC pursuant to Section 8.4(iv) as a result of the taking of any
action during the 45 Day Period unless and until within 9 months of such
termination, the Company or any Subsidiary of the Company enters into any
agreement (I) pursuant to which any Person (other than SBC) (an "Acquiring
Party") proposes to acquire, by purchase, merger, consolidation, sale, assign
ment, lease, transfer or otherwise, thirty percent or more of the voting power
of the outstanding securities of the Company or any Significant Subsidiary of
the Company or a majority of the assets of the Company or any Significant
Subsidiary of the Company, (II) pursuant to which there is proposed to be
consummated a merger, consolidation or similar transaction between the Company
or any of its Subsidiaries and an Acquiring Party in which shareholders of the
Company immediately prior to such merger, consolidation

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or similar transaction would not (if such transaction were consummated
on the date of such agreement) own securities representing at least seventy
percent of the outstanding voting power of the surviving entity (or, if
applicable, any entity in control of such Acquiring Party) of such merger,
consolidation or similar transaction immediately following the consummation
thereof or (III) pursuant to which any of the transactions described in (I) or
(II) is proposed, assuming that the references to thirty percent and seventy
percent were both to fifty percent; provided, further, however, that, no fee
shall be payable in the case of (I) and (II) above where the persons comprising
the Board of Directors of the Company prior to entering into such agreement are
intended to constitute after consummation a majority of the members of the
Board of Directors of the Company, in the case of (I) or the surviving entity
(or, if applicable, any entity in control of such Acquiring Party) in the case
of (II). The Company acknowledges that the agreements contained in this
Section 8.5(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, SBC and Merger Sub would not
enter into this Agreement; accordingly, if the Company fails to promptly pay
the amount due pursuant to this Sec tion 8.5(b), and, in order to obtain such
payment, SBC or Merger Sub commences a suit which results in a judgment against
the Company for the fee set forth in this para graph (b), the Company shall pay
to SBC or Merger Sub its costs and expenses (including attorneys' fees) in
connection with such suit, together with interest on the amount of the fee at
the prime rate of Citibank N.A. in effect on the date such payment was required
to be made. In the event of a termination by SBC pursuant to Section 8.4(iv)
as a result of the taking of any action during the 45 Day Period, the Company
shall promptly pay upon SBC's request all charges and expenses incurred by SBC
and Merger Sub in connection with this Agreement and the transactions
contemplated hereby, which payments shall be credited against any Termination
Fee that may subsequently become payable.

(c) In the event that (i) a bona fide Acquisition Proposal with respect
to SBC or any Subsidiary of SBC shall have been made to SBC or any of its
Subsidiaries and made known to stockholders generally or has been made directly
to stockholders generally or any Person shall have publicly announced an
intention (whether or not conditional) to make a bona fide Acquisition Proposal
with respect to SBC or any Subsidiary of SBC and thereafter this Agreement is
term inated by either the Company or SBC pursuant to Sec tion 8.2(iii), or (ii)
this Agreement is terminated by the Company pursuant to Section 8.3(b)(i),
(ii), (iv), (v), (vi) or (vii), then SBC shall promptly, but in no event later
than two days after the date of such termination, pay the Company a fee equal
to the Termination Fee, which amount shall be exclusive of any expenses to be
paid pursuant to

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Section 6.11, payable by wire transfer of same day funds; provided,
however, that no Termination Fee shall be payable to the Company pursuant to
clause (i) of this paragraph (c) or pursuant to a termination by the Company
pursuant to Section 8.3(iv) as a result of the taking of any action during the
45 Day Period unless and until, within 9 months of such termination, SBC or any
Subsidiary of SBC enters into any agreement (I) pursuant to which any Person
(other than the Company) (a "SBC Acquiring Party") proposes to acquire, by
purchase, merger, consolidation, sale, assignment, lease, transfer or
otherwise, thirty percent or more of the voting power of the outstanding
securities of SBC or any Significant Subsidiary of SBC or a majority of the
assets of SBC or any Significant Subsidiary of SBC, (II) pursuant to which
there is proposed to be consummated a merger, consolidation or similar
transaction between SBC or any of its Subsidiaries and a SBC Acquiring Party in
which shareholders of SBC immediately prior to such merger, consolidation or
similar transaction would not (if such transaction were consummated on the date
of such agreement) own securities representing at least seventy percent of the
outstanding voting power of the surviving entity (or, if applicable, any entity
in control of such SBC Acquiring Party) of such consolidation, merger or
similar transaction immediately following the consummation thereof or (III)
pursuant to which any of the transactions described in (I) or (II) is proposed,
assuming that the references to thirty percent and seventy percent were both to
fifty percent; provided, further, however, that except that, no fee shall be
payable in the case of (I) and (II) above where the persons comprising the
Board of Directors of SBC prior to entering into such agreement are intended to
constitute after consummation a majority of the members of the Board of
Directors of SBC, in the case of (I) or the surviving entity (or, if
applicable, any entity in control of such Acquiring Party) in the case of (II).
SBC acknowledges that the agreements contained in this Section 8.5(c) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, the Company would not enter into this Agreement;
accordingly, if SBC fails to promptly pay the amount due pursuant to this
Section 8.5(c), and, in order to obtain such payment, the Company commences a
suit which results in a judgment against SBC for the fee set forth in this
paragraph (c), SBC shall pay to the Company its costs and expenses (including
attorneys' fees) in connection with such suit, together with interest on the
amount of the fee at the prime rate of Citibank N.A. in effect on the date such
payment was required to be made. In the event of a termination by the Company
pursuant to Section 8.3(b)(iv) as a result of the taking of any action during
the 45 Day Period SBC shall promptly pay upon the Company's request all charges
and expenses incurred by the Company in connection with this Agreement and the
trans actions contemplated hereby, which payments shall be

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credited against any Termination Fee that may subsequently become payable.

ARTICLE IX

Miscellaneous and General

9.1. Survival. This Article IX and the agree ments of the Company,
SBC and Merger Sub contained in Sections 6.10 (Benefits), 6.11 (Expenses) and
6.12 (Indemnification; Directors' and Officers' Insurance) shall survive the
consummation of the Merger. This Article IX and the agreements of the Company,
SBC and Merger Sub contained in Section 6.11 (Expenses), Section 6.15
(Confidentiality) and Section 8.5 (Effect of Termination and Abandonment) shall
survive the termination of this Agreement. All other representations,
warranties, covenants and agreements in this Agreement shall not survive the
consummation of the Merger or the termination of this Agreement.

9.2. Modification or Amendment. Subject to the provisions of the
applicable law, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties.

9.3. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.

9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each such counter part being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.

9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. (a) THIS
AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE
INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE
STATE OF CALIFORNIA WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF,
EXCEPT THAT NEVADA LAW SHALL APPLY TO THE EXTENT REQUIRED IN CONNECTION WITH
THE EFFECTUATION OF THE MERGER. The parties hereby irrevocably submit to the
jurisdiction of the Federal courts of the United States of America located in
the States of California and Texas solely in respect of the interpreta tion and
enforcement of the provisions of this Agreement and of the documents referred
to in this Agreement, and in respect of the transactions contemplated hereby
and thereby, and hereby waive, and agree not to assert, as a defense in any
action, suit or proceeding for the interpretation or

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enforcement hereof or of any such document, that it is not subject
thereto or that such action, suit or proceeding may not be brought or is not
maintainable in said courts or that the venue thereof may not be appropriate or
that this Agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect
to such action or proceeding shall be heard and determined in such a Federal
court. The parties hereby consent to and grant any such court jurisdiction over
the Person of such parties and over the subject matter of such dispute and
agree that mailing of process or other papers in connection with any such
action or proceeding in the manner provided in Section 9.6 or in such other
manner as may be permitted by law, shall be valid and sufficient service
thereof.

(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH
PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii)
EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5.

9.6. Notices. Any notice, request, instruction or other document to
be given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:

if to SBC or Merger Sub

SBC Communications Inc.
175 E. Houston
San Antonio, Texas 78205-2233
Attention: Chairman and
Chief Executive Officer
Fax: (210) 351-2298

with copies to:
SBC Communications Inc.
175 E. Houston
San Antonio, Texas 78205-2233
Attention: Senior Executive Vice President

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and General Counsel
Fax: (210) 351-2298

Benjamin F. Stapleton, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Fax: (212) 558-3588

if to the Company

Pacific Telesis Group
130 Kearny Street
San Francisco, California 94108
Attention: President and
Chief Executive Officer
Fax: (415) 362-2913

with copies to:
Pacific Telesis Group
130 Kearny Street
San Francisco, California 94108
Attention: Executive Vice President,
General Counsel, External
Affairs and Secretary
Fax: (415)362-2913

James M. Canty, Esq.
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Fax: (415) 983-1200

or to such other persons or addresses as may be designated in writing
by the party to receive such notice as provided above.

9.7. Entire Agreement. This Agreement (includ ing any exhibits
hereto), the Company Disclosure Letter and the SBC Disclosure Letter constitute
the entire agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof. EACH PARTY HERETO AGREES THAT, EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER SBC
AND MERGER SUB NOR THE COMPANY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES,
AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY
ITSELF OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND
LEGAL ADVISORS OR OTHER REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND
DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE OTHER'S
REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY

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ONE OR MORE OF THE FOREGOING.

9.8. No Third Party Beneficiaries. Except as provided in Section
6.12 (Indemnification; Directors' and Officers' Insurance), this Agreement is
not intended to confer upon any Person other than the parties hereto any rights
or remedies hereunder.

9.9. Obligations of SBC and of the Company. Whenever this Agreement
requires a Subsidiary of SBC to take any action, such requirement shall be
deemed to include an undertaking on the part of SBC to cause such Subsidiary to
take such action. Whenever this Agreement requires a Subsidiary of the Company
to take any action, such require ment shall be deemed to include an undertaking
on the part of the Company to cause such Subsidiary to take such action and,
after the Effective Time, on the part of the Surviving Corporation to cause
such Subsidiary to take such action.

9.10. Severability. The provisions of this Agree ment shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.

9.11. Interpretation. The table of contents and headings herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including"
are used in this Agreement, they shall be deemed to be followed by the words
"without limitation."

9.12. Certain Costs. Within five (5) days after the date upon which
the conditions set forth in Section 7.1(c) have been satisfied or waived (or
such earlier date as the parties may otherwise agree) (the "Estimate Date"),
SBC and Company shall determine the present value as of the Estimate Date in
the manner hereinafter set forth of the net costs, fees and expenses and other
financial effects

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which have been or are to be incurred or sustained by the Company, the
Surviving Corporation or any Subsidiary thereof in connection with or as a
result of state Governmental Consents (the "Regulatory Approval Costs"). Such
present value shall be calculated on an after-tax basis using an assumed
combined tax rate of forty-one percent (41%), a discount rate of ten percent
(10%) and a term equal to the period over which such amounts are likely to be
incurred or sustained (but in all events the parties hereto agree that the
term, for purposes of such calculation, shall not exceed 5.6 years after the
Estimate Date unless the use of such term would materially distort the economic
impact to the parties). If SBC and the Company do not for any reason agree on
the present value of the Regulatory Approval Costs within ten (10) days of the
Estimate Date, then each of SBC and Company shall select a nationally
recognized public accounting firm, other than a firm then employed as an
auditor of either SBC or Company (each, an "Independent Accounting Firm")
within ten (10) days after the Estimate Date and such accounting firms shall
jointly select within five (5) additional days a third similarly qualified
public accounting firm (the "Third Firm"), and each such accounting firm shall
be instructed to provide, within ten (10) days after the selection of the Third
Firm (or such later date as the parties may mutually agree) (the "Determination
Date"), written notice of each such accounting firm's estimate of the present
value of the Regulatory Approval Costs (each of the amounts so determined by
the Independent Accounting Firms, an "Estimated Cost Amount," and the amount so
determined by the Third Firm, the "Third Firm Estimate") simultaneously to each
of SBC and Company. If the Third Firm Estimate is less than the amount of the
smaller Estimated Cost Amount, or larger than the amount of the higher
Estimated Cost Amount, then the Regulatory Approval Costs shall be the
Estimated Cost Amount closest to the Third Firm Estimate. If the Third Firm
Estimate is less than the amount of the higher Estimated Cost Amount and larger
than the amount of the smaller Estimated Cost Amount, then the Regulatory
Approval Costs shall equal the average of the Third Party Estimate and the
Estimated Cost Amount closest to the Third Party Estimate. Each party will
bear the fees, costs and expenses of the Independent Accounting Firm selected
by such party and shall jointly bear the fees, costs and expenses of the Third
Firm.

9.13. Certain Defined Terms. For purposes of this Agreement, the
following capitalized terms shall have the following meanings:

"Company Costs" means the Company's share of the Regulatory Approval
Costs, as determined pursuant to Section 6.16 hereof.

"Company Value" means $53.875 multiplied by 0.733

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(equitably adjusted for any event effecting SBC Common Stock or Company
Shares of the type referred to in Section 4.4 hereof, occurring after the date
hereof and up to and including the Estimate Date) multiplied by the number of
outstanding Company Shares as of the Estimate Date (the "Company Share
Number").

"Exchange Ratio" means 0.733 of a share of SBC Common Stock (or, in
the event of an adjustment pursuant to Section 6.16 hereof, the Revised
Exchange Ratio).

"Revised Company Value" means Company Value less Company Costs.

"Revised Exchange Ratio" means (i)(A) the Revised Ratio divided by
(B) 1.000 minus the Revised Ratio, multiplied by (ii) the SBC Share Number
divided by the Company Share Number.

"Revised Ratio" means (i) the Revised Company Value divided by (ii)
the sum of the Revised SBC Value and the Revised Company Value.

"Revised SBC Value" means SBC Value less SBC Costs.

"SBC Costs" means SBC's share of the Regulatory Approval Costs, as
determined pursuant to Section 6.16 hereof.

"SBC Value" means $53.875 (equitably adjusted for any event affecting
SBC Common Stock of the type referred to
in Section 4.4 hereof, occurring after the date hereof and up to and including
the Estimate Date) multiplied by the number of outstanding shares of SBC Common
Stock as of the Estimate Date (the "SBC Share Number").

9.14. Assignment. This Agreement shall not be assignable by operation
of law or otherwise; provided, however, that SBC may designate, by written
notice to the Company, another wholly-owned direct or indirect Subsidiary to be
a Constituent Corporation in lieu of Merger Sub, in which event all references
herein to Merger Sub shall be deemed references to such other Subsidiary except
that all representations and warranties made herein with respect to Merger Sub
as of the date of this Agreement shall be deemed representations and warranties
made with respect to such other subsidiary as of the date of such designation.

IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.

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PACIFIC TELESIS GROUP

By: /s/ P. J. Quigley
Name: P. J. Quigley
Title:

SBC COMMUNICATIONS INC.

By: /s/ Edward E. Whitacre, Jr.
Name: Edward E. Whitacre, Jr.
Title:

SBC COMMUNICATIONS (NV) INC.

By: /s/ Edward E. Whitacre, Jr.
Name: Edward E. Whitacre, Jr.
Title:

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<PAGE> 135
APPENDIX B

Opinion of Lazard Freres & Co. LLC

[TO COME]

B-1
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APPENDIX C

Opinion of Salomon Brothers Inc

[TO COME]

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

SBC's Bylaws provide that SBC shall indemnify any person who was or is a
party or is threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (including any action
or suit by or in the right of SBC) by reason of the fact that such person is or
was a director, officer, employee or agent of SBC or is or was serving at the
request of SBC as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, but in each case only if and to the extent
permitted under applicable state or federal law.

SBC's Bylaws further state that the indemnification provided therein
shall not be deemed exclusive of any other rights to which those indemnified
may be entitled, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, and personal representatives of such a person.

Section 145 of the DGCL permits a corporation to indemnify its directors
and officers against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third parties, if
such directors or officers acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reason to believe
their conduct was unlawful. In a derivative action, i.e., one by or in the
right of the corporation, indemnification may be made only for expenses
actually and reasonably incurred by directors and officers in connection with
the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent
that the court in which the action or suit was brought shall determine upon
application that the defendant officers or directors are fairly and reasonably
entitled to indemnity for such expenses despite such adjudication of liability.

The SBC Restated Certificate provides that no director of SBC shall be
liable to SBC or its shareowners for monetary damages for breach of fiduciary
duty as a director, except for liability (1) for any breach of the director's
duty of loyalty to SBC or its shareowners; (2) for acts or omissions not in
good faith or which involve intentional misconduct or knowing violation of the
law; (3) under Section 174 of the DGCL; or (4) for any transaction from which a
director derived an improper benefit.

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ITEM 21. EXHIBITS

(a) Exhibits

Exhibit
Number

2 Agreement and Plan of Merger, among PAC, SBC and Merger Sub
dated as of April 1, 1996. (Exhibit 2 to Report on Form 8-K
(File No. 1-8610), dated April 1, 1996.)

3-a Restated Certificate of Incorporation of SBC, filed with the
Secretary of State of Delaware on April 28, 1995. (Exhibit 3 to
Form 10-Q (File No. 1-8610) for the first quarter 1995.)

3-b Bylaws of SBC dated June 28, 1991. (Exhibit 3-b to Form 10-Q
(File No. 1-8610) for the second quarter 1991.)

4-a Pursuant to Regulation S-K, Item 601(b)(4)(iii)(A), no
instrument which defines the rights of holders of long-term debt
of SBC or any of its consolidated subsidiaries is filed
herewith. Pursuant to this regulation, SBC hereby agrees to
furnish a copy of any such instrument to the SEC upon request.

4-b Form of Rights Agreement, dated as of January 27, 1989, between
SBC and American Transtech, Inc., as Rights Agent, which
includes as Exhibit B thereto the form of Rights Certificate.
(Exhibit 4-a to Form 8-A (File No. 1-8610), dated February 9,
1989.)

4-c Amendment of Rights Agreement, dated as of August 5, 1992, among
SBC, American Transtech, Inc., and The Bank of New York, the
successor Rights Agent, which includes the Form of Rights
Certificate as an attachment identified as Exhibit B. (Exhibit
4-a to Form 8-K (File No. 1-8610), dated August 7, 1992.)

4-d Form of Rights Certificate (included in the attachment to the
Amendment of Rights Agreement and identified as Exhibit B.)
(Exhibit 4-b to Form 8-K (File No. 1-8610), dated August 7,
1992.)

4-e Second Amendment of Rights Agreement, dated June 15, 1994,
between SBC and The Bank of New York, as successor Rights Agent.
(Exhibit 4-e to Form 8-A/A (File No. 1-8610), dated June 22,
1994.)

5 Opinion of James D. Ellis, Senior Executive Vice President and
General Counsel of SBC, regarding validity of securities being
registered.*

8-a Opinion of Sullivan & Cromwell regarding certain federal income
tax matters.*

8-b Opinion of Pillsbury Madison & Sutro LLP regarding certain
federal income tax matters.*

10-a Support Agreement, dated November 10, 1986, between SBC and
Southwestern Bell Capital Corporation (Exhibit 4-b to
Registration Statement No. 33-11669).

10-b Senior Management Short Term Incentive Plan, revised January 1,
1991. (Exhibit 10-a to Form 10-K (File No. 1-8610) for 1990.)

- ----------------------------------

* To be filed by Amendment.

II-2
<PAGE> 139
10-c Senior Management Long Term Incentive Plan, revised effective
January 1, 1993. (Exhibit 10-b to Form 10-K (File No. 1-8610)
for 1992.)

10-d Senior Management Survivor Benefit Plan. (Exhibit 10-c to Form
10-K (File No. 1-8610) for 1986.)

10-e Senior Management Supplemental Retirement Income Plan, revised
effective January 1, 1993. (Exhibit 10-d to Form 10-K (File No.
1-8610) for 1992.)

10-f Senior Management Deferred Compensation Plan (effective for
Units of Participation Having a Unit Start Date Prior to January
1, 1988 or later), revised July 30, 1993. (Exhibit 10.5 to
Registration Statement No. 33-54795.)

10-g Senior Management Deferred Compensation Plan of 1988 (effective
for Units of Participation Having a Unit Start Date of January
1, 1988 or later), revised July 30, 1993. (Exhibit 10.6 to
Registration Statement No. 33-54795.)

10-h Senior Management Long Term Disability Plan. (Exhibit 10-f to
Form 10-K (File No. 1-8610) for 1986.)

10-i Senior Management Incentive Award Deferral Plan. (Exhibit 10-g
to Form 10-K (File No. 1-8610) for 1986.)

10-j Senior Management Financial Counseling Program. (Exhibit 10-h to
Form 10-K (File No. 1-8610) for 1986.)

10-k Senior Management Executive Health Plan, effective January 1,
1987. (Exhibit 10-i to Form 10-K (File No. 1-8610) for 1986.)

10-l Retirement Plan for Non-Employee Directors. (Exhibit 10-t to
Form 10-K (File No. 1-8610) for 1986.)

10-m Form of Indemnity Agreement, effective July 1, 1986, between SBC
and each of its directors and officers. (Appendix 1 to
Definitive Proxy Statement (File No. 1-8610) dated March 18,
1987.)

10-n Form of Change of Control Severance Agreements for all Officers
and certain Officers of SBC's subsidiaries. (Exhibit 10-p to
Form 10-K (File No. 1-8610) for 1988.)

10-o Stock Savings Plan, revised effective February 1, 1994.
(Appendix A to Definitive Proxy Statement (File No. 1-8610)
dated March 18, 1994.)

10-p 1992 Stock Option Plan, revised effective December 1, 1993.
(Exhibit 10.15 to Registration Statement No. 33-54795.)

10-q Key Executive Officer Short Term Incentive Plan. (Appendix B to
Definitive Proxy Statement (File No. 1-8610) dated March 18,
1994.)

10-r Restricted Stock Plan for Non-Employee Directors. (Exhibit 10.17
to Registration Statement No. 33-54795.)

10-s Officer Retirement Savings Plan. (Exhibit 10.18 to Registration
Statement No. 33-54795.)

II-3
<PAGE> 140
10-t 1996 Stock and Incentive Plan. (Appendix to Definitive Proxy
Statement (File No. 1-8610) dated March 12, 1996.)

21-a Subsidiaries of SBC (Exhibit 21a to Form 10-K (File No. 1-8610)
for 1995).

23-a Consent of Ernst & Young LLP

23-b Consent of Coopers & Lybrand L.L.P.

23-c Consent of James D. Ellis, Senior Executive Vice President and
General Counsel of SBC. (Included in the opinion filed as
Exhibit 5 to this Registration Statement and incorporated herein
by reference)*

23-d Consent of Sullivan & Cromwell. (Included in the opinion filed
as Exhibit 8-a to this Registration Statement and incorporated
herein by reference)*

23-e Consent of Pillsbury Madison & Sutro LLP. (Included in the
opinion filed as Exhibit 8-b to this Registration Statement and
incorporated herein by reference)*

23-f Consent of Salomon Brothers Inc*

23-g Consent Lazard Freres & Co. LLC*

23-h Consent of Person Named as About to Become a Director*

24 Powers of Attorney

99-a Form of Proxy of SBC*

99-b Form of Proxy of PAC*

- ----------------------------------

* To be filed by Amendment.

II-4
<PAGE> 141
ITEM 22. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;

(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933,

(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and

(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.

(2) The undersigned registrant hereby undertakes that, for the
purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(3) The undersigned Registrant hereby undertakes to remove from
registration by means of a post-effective amendment any of the securities
which remain unsold at the termination of the offering.

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the Registration Statement.

(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

(c) (1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information called for by
the other items of the applicable form.

(2) The undersigned registrant hereby undertakes that every
prospectus (i) that is filed pursuant to paragraph (1) immediately
preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment
to the Registration Statement and will not be used until such amendment
is effective, and that, for purposes of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall

II-5
<PAGE> 142
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.

(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

(e) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.

(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

II-6
<PAGE> 143
SIGNATURES

THE REGISTRANT:

Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that is has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Antonio, State of Texas, on the 17th day of
April, 1996.

SBC COMMUNICATIONS INC.

By: /s/ Donald E. Kiernan
---------------------
Donald E. Kiernan
Senior Vice President, Treasurer
and Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

<TABLE>
<S> <C>
Principal Executive Officer: Edward E. Whitacre, Jr.,*
Chairman and Chief Executive Officer

Principal Financial and Accounting Officer: Donald E. Kiernan,
Senior Vice President, Treasurer
and Chief Financial Officer

By: /s/ Donald E. Kiernan
---------------------
Donald E. Kiernan, as attorney-in-fact for
Mr. Whitacre, the Directors, and on
his own behalf as Principal Financial
Officer and Principal Accounting Officer

DIRECTORS: April 17, 1996
Edward E. Whitacre, Jr.*
Clarence C. Barksdale*
James E. Barnes*
Jack S. Blanton*
August A. Busch III*
Ruben R. Cardenas*
Martin K. Eby, Jr.*
Tom C. Frost*
Jess T. Hay*
Bobby R. Inman*
Charles F. Knight*
Sybil C. Mobley*
Haskell M. Monroe, Jr.*
Carlos Slim Helu*
Patricia P. Upton*
</TABLE>

- ----------------------------------

* By power of attorney

II-7

<PAGE> 1
EXHIBIT 23-a

Consent of Independent Accountants

We consent to the reference to our firm under the captions "Experts" and
"Selected Historical and Pro Forma Combined Financial Data" in the Registration
Statement on Form S-4 and related Joint Proxy Statement/Prospectus of SBC
Communications Inc. (SBC) for the registration of shares of SBC Common Stock
and to the incorporation by reference therein of our reports dated February 9,
1996, with respect to the consolidated financial statements and schedules of
SBC included in or incorporated by reference in its Annual Report (Form 10-K)
for the year ended December 31, 1995, filed with the Securities and Exchange
Commission.

/s/ Ernst & Young LLP

San Antonio, Texas
April 15, 1996

<PAGE> 1
EXHIBIT 23-b

Consent of Independent Accountants

We consent to the incorporation by reference in this registration
statement of SBC Communications Inc. on Form S-4 of our reports dated February
22, 1996 on our audits of the consolidated financial statements and the
financial statement schedule of Pacific Telesis Group as of December 31, 1995
and 1994 and for the years ended December 31, 1995, 1994 and 1993, which
reports are included or incorporated by reference in Pacific Telesis Group's
1995 Annual Report on Form 10-K. We also consent to the references to our Firm
under the caption "Experts."

/s/ Coopers & Lybrand L.L.P.

San Francisco, California
April 16, 1996

<PAGE> 1
EXHIBIT 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

THAT, WHEREAS, SBC COMMUNICATIONS INC., a Delaware corporation,
hereinafter referred to as the "Corporation," proposes to file with the
Securities and Exchange Commission at Washington, D.C., under the provisions of
the Securities Act of 1933, as amended, a Registration Statement on Form S-4
for the issuance of shares of the Corporation's Common Stock pursuant to the
merger agreement among SBC Communications Inc., Pacific Telesis Group, and SBC
Communications (NV) Inc., dated April 1, 1996; and

WHEREAS, the undersigned is an officer and a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James D.
Ellis, Donald E. Kiernan, Alfred G.Richter, Jr., Roger W. Wohlert, or any one
of them, all of the City of San Antonio and State of Texas, his attorneys for
him and in his name, place and stead, and in each of his offices and capacities
in the Corporation, to execute and file such Registration Statement, and
thereafter to execute and file any and all amended registration statements and
amended prospectuses or amendments or supplements to any of the foregoing,
hereby giving and granting to said attorneys full power and authority to do and
perform each and every act and thing whatsoever requisite and necessary to be
done in and concerning the premises, as fully to all intents and purposes as
the undersigned might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand the date
set forth below.

/s/ Edward E. Whitacre, Jr. April 16, 1996
- --------------------------- --------------
Edward E. Whitacre, Jr. Date
Chairman of the Board and
Chief Executive Officer

<PAGE> 2

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

NOW, THEREFORE, the undersigned hereby constitutes and appoints Edward E.
Whitacre, Jr., James D. Ellis, Donald E. Kiernan, Alfred G. Richter, Jr., Roger
W. Wohlert, or any one of them, all of the City of San Antonio and State of
Texas, the undersigned's attorneys for the undersigned and in the undersigned's
name, place and stead, and in the undersigned's offices and capacities in the
Corporation, to execute and file such Registration Statement, and thereafter to
execute and file any and all amended registration statements and amended
prospectuses or amendments or supplements to any of the foregoing, hereby
giving and granting to said attorneys full power and authority to do and
perform each and every act and thing whatsoever requisite and necessary to be
done in and concerning the premises, as fully to all intents and purposes as
the undersigned might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand the date
set forth below.

<TABLE>
<S> <C>
/s/ Clarence C. Barksdale April 13, 1996
- ------------------------- --------------
Clarence C. Barksdale Date
Director

/s/ James E. Barnes April 15, 1996
- ------------------- --------------
James E. Barnes Date
Director

/s/ Jack S. Blanton April 15, 1996
- ------------------- --------------
Jack S. Blanton Date
Director

/s/ August A. Busch III April 15, 1996
- ----------------------- --------------
August A. Busch III Date
Director
</TABLE>

<PAGE> 3

<TABLE>
<S> <C>
/s/ Ruben R. Cardenas April 13, 1996
- --------------------- --------------
Ruben R. Cardenas Date
Director

/s/ Martin K. Eby, Jr. April 13, 1996
- ---------------------- --------------
Martin K. Eby, Jr. Date
Director

/s/ Tom C. Frost April 15, 1996
- ---------------- --------------
Tom C. Frost Date
Director

/s/ Jess T. Hay April 15, 1996
- --------------- --------------
Jess T. Hay Date
Director

/s/ Bobby R. Inman April 13, 1996
- ------------------ --------------
Bobby R. Inman Date
Director

/s/ Charles F. Knight April 12, 1996
- --------------------- --------------
Charles F. Knight Date
Director

/s/ Sybil C. Mobley April 13, 1996
- ------------------- --------------
Sybil C. Mobley Date
Director

/s/ Haskell M. Monroe, Jr. April 14, 1996
- -------------------------- --------------
Haskell M. Monroe, Jr. Date
Director

/s/ Carlos Slim Helu April 15, 1996
- -------------------- --------------
Carlos Slim Helu Date
Director

/s/ Patricia P. Upton April 13, 1996
- --------------------- --------------
Patricia P. Upton Date
Director
</TABLE>