SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: September 29, 1995
SOUTHWESTERN BELL TELEPHONE COMPANY
A Missouri Corporation
Commission File No. 1-2346
IRS Employer No. 43-0529710
One Bell Center, St. Louis, Missouri 63101-3099
Telephone Number (314) 235-9800
Item 5. Other Events
SBC Communications Inc. (SBC) has accounted for the effects of
regulation on Southwestern Bell Telephone Company (the Telephone
Company) in accordance with Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" (Statement No. 71). Statement No. 71 requires
depreciation of telephone plant using lives set by regulators
which are generally longer than those established by unregulated
companies, and deferral of certain costs and obligations based on
regulatory actions (regulatory assets and liabilities).
On September 29, 1995, SBC announced that the Telephone Company
will discontinue its application of Statement No. 71. The rapid
pace of change within the telecommunications industry and the
evolution of the regulatory framework in which the Telephone
Company operates have resulted in price-based regulation for most
of the Telephone Company's revenues and accelerated competition
in the Telephone Company's markets. The most significant example
of these changes is in the Telephone Company's Texas operations
where progressive legislation which recently became effective
permits price regulation and opens local telephone markets to
competition. As a result, management believes that the Telephone
Company no longer meets the criteria for application of Statement
No. 71.
Therefore, in September 1995, the Telephone Company will
recognize for financial reporting purposes a non-cash,
extraordinary charge to net income of approximately $2.8 billion.
This is comprised of an after-tax charge of $2.9 billion to
reduce the net carrying value of telephone plant partially offset
by an after-tax benefit of $80 million for the elimination of net
regulatory liabilities. There will be no change in the Telephone
Company's accounting and reporting for regulatory purposes.
The adjustment to the net carrying value of telephone plant will
be reflected through a $4.7 billion increase in accumulated
depreciation. Prospectively, the Telephone Company will use
shorter lives for many of its plant categories which more closely
reflect the economic and technological lives of the plant.
Following is a comparison of new lives to those prescribed by
regulators for selected plant categories:
Average Lives (in Years)
Regulator- Estimated
Telephone Plant Category Prescribed Economic
Digital Switch 17 11
Digital Circuit 12 7
Copper Cable 24 18
Fiber Cable 27 20
Conduit 57 50
The increase in accumulated depreciation includes an adjustment
of approximately $450 million to fully depreciate analog
switching equipment scheduled for replacement. Remaining analog
switching equipment will be depreciated using an average
remaining life of four years.
Management does not expect a significant increase in depreciation
expense in the near future to result from the discontinuance of
Statement No. 71.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Southwestern Bell Telephone
Company
/s/ Edward L. Glotzbach
Edward L. Glotzbach
Vice President-Chief Financial
Officer and Treasurer
September 29, 1995
