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             California Public Utilities Commission
505 Van Ness Avenue, Room 5301            San Francisco, CA 94102
CONTACT:  Armando Rendon             April 10, 1996      CPUC-023
          415-703-1366                               (A90-09-043)

         CPUC ORDERS GTEC/CONTEL TO SPLIT MERGER SAVINGS
               BETWEEN SHAREHOLDERS AND CUSTOMERS

     The California Public Utilities Commission (CPUC) today
ordered GTE California (GTEC) and Contel of California (Contel)
to do an even split of $139 million between shareholders and
customers as the most equitable way of sharing savings from
merger of the firms.
     About $69.7 million will be returned to customers over four
years, and should begin to show up as a monthly credit on May
bills.
     The Commission approved the merger in April 1994 and ordered
all projected merger savings returned to customers, citing Public
Utilities Code Section 854(b)(1) which required "net benefits" be
awarded to the merged companies' ratepayers.  The firms had the
option of showing why all the expected savings in labor and other
costs from the merger should not go solely to customers.
     When GTEC and Contel filed a request at that time to
"augment the record," the merger was stayed.  The companies'
filing argued for splitting the savings from the merger 50-50
between customers and shareholders.  At the time, the PU Code
required the refund of "net benefits" to customers "to the
fullest extent possible."
     Passage of AB 119 last year by the State Legislature
eliminated reference to net benefits, requiring that, to obtain
approval, a proposed merger must simply provide short and long
term "economic" benefits to customers and fairly allocate savings
to shareholders and customers.  The statute now requires that
customers get no less than 50 percent of the benefits.
     The CPUC gave interim approval to the companies' merger in
March 1991, but required their regulated California subsidiaries
be kept separate until the CPUC approved a comprehensive
consolidation plan.  Their plan, filed in September 1992, was
provisionally approved in the April 1994 decision.
     Additional hearings will be held shortly to determine how to
integrate GTEC's rates with Contel's.                      -###-