Southwestern Bell Corp said thatits planned acquisitions of cellular telephone and paging
systems, including those of &lt;Metromedia Inc>, will result in
some initial earnings dilution and an increase in debt ratio.
    In a letter to shareholders in its 1986 annual report, the
regional Bell company did not indicate the degree of earnings
dilution it expects from the acquisitions, which total some
1.38 billion dlrs. However, the company said the rise in its
debt ratio will be temporary and will leave its debt level
within an acceptable range.
    In its 1986 yearend financial statement, Southwestern Bell
listed a debt-to-equity ratio of 43.4 pct, down slightly from
43.7 pct in 1985.
    In 1986, the company earned 1.02 billion dlrs, or 10.26
dlrs a share, compared with 996.2 mln dlrs, or 10 dlrs a share
in 1985. Revenues dipped to 7.90 billion dlrs from 7.93 billion
dlrs.
    Southwestern Bell said it expects the new tax law to have a
negative impact on its cash flow, due mainly to the loss of
investment tax credits.
    By mid-year, however, the company said a reduced corporate
tax rate should have a positive impact on its net income and
cash flow.
    In addition, the company said it is projecting a 1.7 pct
gain in customer telephone lines and a three to four pct
increase in long distance calling volumes.
    Southwestern Bell said 1987 capital expenditures will be
lower that the 1.97 billion dlrs spent in 1986, a year in which
expenditures were held below budget.
 Reuter
