-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F6PvoKRQ1ucuZsYlcsHKgMRvObD3U9DPHURBk/FTqjIFqUgAtDfpa4F9qiUrfFlR iskYn4fEiW9olxpXLfRWuA== 0000732717-01-000019.txt : 20010313 0000732717-01-000019.hdr.sgml : 20010313 ACCESSION NUMBER: 0000732717-01-000019 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010312 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SBC COMMUNICATIONS INC CENTRAL INDEX KEY: 0000732717 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 431301883 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-08610 FILM NUMBER: 1565764 BUSINESS ADDRESS: STREET 1: 175 E HOUSTON STREET 2: ROOM 9-4 CITY: SAN ANTONIO STATE: TX ZIP: 78205 BUSINESS PHONE: 2108214105 MAIL ADDRESS: STREET 1: 175 E HOUSTON STREET 2: ROOM 9-4 CITY: SAN ANTONIO STATE: TX ZIP: 78205 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHWESTERN BELL CORP DATE OF NAME CHANGE: 19920703 10-K 1 0001.htm ANNUAL REPORT 10-K

FORM 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(Mark One)
|X|

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For fiscal year ended December 31, 2000

OR

|_|

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-8610

SBC COMMUNICATIONS INC.

Incorporated under the laws of the State of Delaware
I.R.S. Employer Identification Number 43-1301883

175 E. Houston, San Antonio, Texas 78205-2233
Telephone Number 210-821-4105

Securities registered pursuant to Section 12(b) of the Act: (See attached Schedule A)

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No _____

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( )

Based on composite closing sales price of $47.700 per share on February 28, 2001, the aggregate market value of all voting and non-voting stock held by non-affiliates was $160,900,329,871

As of February 28, 2001, 3,374,283,566 shares of Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

(1) Portions of SBC Communications Inc.‘s Annual Report to Shareowners for the fiscal year ended December 31, 2000 (Parts I and II).

(2) Portions of SBC Communications Inc.‘s Notice of 2001 Annual Meeting and Proxy Statement dated on or about March 12, 2001 (Parts III and IV).

SCHEDULE A

Securities Registered Pursuant To Section 12(b) Of The Act:

                                                              Name of each exchange
   Title of each class                                         on which registered


Common Shares (Par Value $1.00 Per Share)                 New York, Chicago and Pacific
                                                          Stock Exchanges

7.75% Exchangeable Notes,                                 New York Stock Exchange
 Due March 15, 2001

8.50% Pacific Telesis Group Corporation-                  New York Stock Exchange
 obligated mandatorily redeemable preferred
 securities of subsidiary trusts

6.875% Fifty Year Southwestern Bell                       New York Stock Exchange
 Telephone Company Debentures,
 Due March 31, 2048

Item                                                                               Page

                                                  PART I

1.  Business..................................................................       4
2.  Properties................................................................      16
3.  Legal Proceedings.........................................................      16
4.  Submission of Matters to a Vote of Security Holders.......................      16

Executive Officers of the Registrant..........................................      17

                                                 PART II

5.  Market for Registrant's Common Equity and Related
    Stockholder Matters.......................................................      18
6.  Selected Financial and Operating Data......................................     18
7.  Management's Discussion and Analysis of Financial Condition
    and Results of Operations.................................................      18
7A. Quantitative and Qualitative Disclosures about Market Risk................      18
8.  Financial Statements and Supplementary Data...............................      18
9.  Changes in and Disagreements with Accountants on Accounting
    and Financial Disclosure..................................................      18

                                                 PART III

10.  Directors and Executive Officers of the Registrant.......................      19
11.  Executive Compensation...................................................      19
12.  Security Ownership of Certain Beneficial Owners and Management...........      19
13.  Certain Relationships and Related Transactions...........................      19

                                                 PART IV

14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.........      20

PART I

ITEM 1. BUSINESS

GENERAL

SBC Communications Inc. (SBC) is a holding company incorporated under the laws of the State of Delaware in 1983 and has its principal executive offices at 175 E. Houston, San Antonio, Texas 78205-2233 (telephone number 210-821-4105). SBC maintains an Internet site at http://www.sbc.com. (This web site address is for information only and is not intended to be an active link or to incorporate any web site information into this document.)

Throughout this document SBC is referred to as "we" or "SBC".

History

SBC was formed as one of several regional holding companies created to hold AT&T Corp.‘s (AT&T) local telephone companies. On January 1, 1984, SBC was spun-off from AT&T pursuant to an anti-trust consent decree, becoming an independent publicly traded telecommunications services provider. At formation, we primarily operated in five southwestern states. SBC subsidiaries merged with Pacific Telesis Group (PAC) in 1997, Southern New England Telecommunications Corporation (SNET) in 1998 and Ameritech Corporation (Ameritech) in 1999, thereby expanding our wireline operations into a total of 13 states. Since we were formed, we have implemented plans to develop and expand into innovative new service and product offerings and to deliver those offerings, along with many other new services, to new national and global markets. Our strategy to enter new markets has been through mergers and acquisitions of complementary businesses, strategic partnerships, and the development of our global communications network. Our services and products are marketed under several established brands including Ameritech, Nevada Bell, Pacific Bell, SBC Telecom, SNET, Southwestern Bell, and our newly formed joint venture with BellSouth Corporation (BellSouth), Cingular Wireless (Cingular).

Scope

We rank among the largest providers of telecommunications services in the United States and the world. Through our subsidiaries, we provide a comprehensive offering of communications services and products in the United States and have investments in more than 20 countries. We offer our services and products to businesses and consumers, as well as other providers of telecommunications services.

The services and products that we offer vary by market, and include: local exchange services, wireless communications, long distance services, Internet services, cable television services, telecommunications equipment, messaging, paging, and directory advertising and publishing. We group our operating subsidiaries as follows, corresponding to our operating segments for financial reporting purposes:

wireline subsidiaries provide primarily land and wire based services,
wireless subsidiaries hold our investment in Cingular, which provides primarily radio wave based services,
directory subsidiaries provide services related to directory advertising and publishing,
international subsidiaries hold investments in foreign entities outside of the United States, and
other subsidiaries provide additional services primarily related to security monitoring (prior to 2001) and cable television services.

Our principal wireline subsidiaries provide telecommunications services in thirteen states: California, Texas, Illinois, Michigan, Ohio, Missouri, Connecticut, Indiana, Wisconsin, Oklahoma, Kansas, Arkansas and Nevada (13-state area). Certain wireline local exchange services offered in the 13-state area are provided through regulated subsidiaries which operate within authorized regions (in-region) subject to regulation by each state in which they operate and by the Federal Communications Commission (FCC). Additional information relating to regulation is contained under the heading “Government Regulation” below and in the 2000 SBC Annual Report to Shareowners under the heading “Operating Environment and Trends of the Business”, and is incorporated herein by reference pursuant to General Instruction G(2).

InterLATA Long Distance

In June 2000, the FCC granted SBC approval to offer long distance services in the state of Texas and we began offering these services on July 10, 2000. In October 2000, we filed applications with the FCC to offer long distance services in Kansas and Oklahoma. In January 2001, the FCC approved these applications effective March 7, 2001, and we began offering interLATA long distance service in those states under the Southwestern Bell brand. We continue to seek long distance approval in our other in-region states and have filed applications with state commissions in Arkansas, California, Missouri and Nevada.

Additional information on InterLATA Long Distance is contained in the 2000 Annual Report to Shareowners under the heading "Trends" on page 12 which is incorporated herein by reference pursuant to General Instruction G(2).

Broadband Initiative

In 1999, as the first post-Ameritech merger initiative, we announced a $6 billion initiative designed to transform the company into the largest single provider of advanced broadband services in America (Project Pronto). Project Pronto is expected to create a vast, sophisticated broadband platform that will allow high-speed voice, data and video services to be provided via Digital Subscriber Line (DSL) services. Project Pronto is expected to be substantially completed by the end of 2003, and was approximately 34 percent completed at December 31, 2000. At December 31, 2000 we had approximately 767,000 subscribers.

Additional information on Project Pronto is contained in the 2000 Annual Report to Shareowners under the heading “Trends” on page 12 which is incorporated herein by reference pursuant to General Instruction.

National Expansion

In 1999, we began to implement a “National-Local” strategy in conjunction with our acquisition of Ameritech. Under the National-Local strategy, we plan to offer local exchange services in 30 new markets across the country. We introduced service in five new markets during 2000 (Boston, Fort Lauderdale, Miami, New York, and Seattle) and two additional markets (Atlanta and Denver) in February 2001 and are required by the FCC to enter into the remaining 23 markets by April 2002.

Additional information on National Expansion is contained in the 2000 Annual Report to Shareowners under the heading “Regulatory Environment” on page 12 which is incorporated herein by reference pursuant to General Instruction G(2).

Business Combinations

Ameritech Corporation

In October 1999, an SBC subsidiary merged with Ameritech, and Ameritech became a wholly owned subsidiary of SBC. The transaction has been accounted for as a pooling of interests and a tax-free reorganization.

Southern New England Telecommunications Corporation

In October 1998, an SBC subsidiary merged with SNET, and SNET became a wholly owned subsidiary of SBC. The transaction has been accounted for as a pooling of interests and a tax-free reorganization.

Pacific Telesis Group

In April 1997, an SBC subsidiary merged with PAC, and PAC became a wholly owned subsidiary of SBC. The transaction has been accounted for as a pooling of interests and a tax-free reorganization.

Post-merger initiatives

As a result of the Ameritech, SNET and PAC mergers, we significantly integrated operations and consolidated some administrative and support functions. We recognized charges during 1999, 1998 and 1997 in connection with these merger initiatives. Charges arising out of the mergers relating to relocation, retraining and other effects of consolidating certain operations are being recognized in the periods those charges occur.

Additional information on business combinations is contained in Note 2 of the 2000 SBC Annual Report to Shareowners, and is incorporated herein by reference pursuant to General Instruction G(2).

BUSINESS OPERATIONS

Operating Segments

In the fourth quarter of 2000, we adjusted our segment reporting structure to reflect the current management of our business. We now have five reportable segments: wireline, wireless, directory, international and other. The primary change was to eliminate the information and entertainment segment by moving Ameritech’s cable television operations and recently sold security services to the other segment, and to display all directory operations as a separate segment. We evaluate performance based on income before income taxes adjusted for normalized (e.g., one-time) items.

Additional information about our reportable segments, including financial details and normalizing items, is included under the heading “Segment Results” on pages 6 through 10 and in Note 8 of the 2000 SBC Annual Report to Shareowners, and is incorporated herein by reference pursuant to General Instruction G(2).

Wireline

Wireline is SBC’s largest operating segment, providing approximately 78 percent of our normalized operating revenues in 2000. The wireline segment provides landline telecommunications services, including local, network access and long distance services, messaging, Internet services, sells customer premises and private branch exchange (PBX) equipment, and markets satellite television services. The wireline segment provides services through our wireline telecommunications subsidiaries to approximately 36.8 million residential and 23.8 million business access lines in our 13-state area.

Services and Products

Local exchange services - Local exchange services include traditional dial tone primarily used to make or receive voice, fax, or analog modem calls from a residence or business. We also offer this service on a wholesale basis to competitors. At December 31, 2000, we provided wholesale services to approximately 1.6 million access lines. Other local services include certain extended area service, directory assistance and operator services.

Vertical services include custom calling services such as Caller ID, Call Waiting, voice mail and other enhanced services. These features allow telephone users to manage their local services with enhanced features such as displaying the number and/or name of callers, signaling to the telephone user that additional calls are incoming, and to send and receive voice messages.

Data services - Revenues from data services may be classified as local, network access or long distance revenues and include high-speed data communication services used for transporting digital traffic from one computer system to another. Data services include digital products categorized into three basic categories:

Switched Transport services such as Integrated Services Digital Network (ISDN), Frame Relay, and DSL;
Dedicated Transport services such as Digital Services and Synchronous Optical Network (SONET); and
Application and Data Communications services which include Internet access and network integration.

ISDN transmits voice, video, and data over a single line in support of a wide range of applications, including Internet access. Frame Relay is a fast packet switching technology that allows data to travel in individual packets, or pieces, of information. DSL is a digital modem technology that converts existing twisted-pair telephone lines into access paths for multimedia and high-speed data communications to the Internet or private networks. DSL allows customers to simultaneously make a phone call and access information via the Internet or an office local area network. Digital Services are high-speed dedicated digital circuits offered with various speeds of transport. SONET provides customer access to our backbone network at very high speeds. Network integration services include installation of business data systems, local area networking, and other data networking solutions.

Sterling Acquisition

In March 2000, we acquired Sterling Commerce, Inc. (Sterling), a provider of electronic business integration solutions and a provider of E-Business Integration solutions. Sterling specializes in creating, powering and managing secure “e-Marketplace communities” where multiple buyers and sellers can conduct transactions immediately, exchange goods and services, facilitate business-to-business opportunities, and share information faster and at lower costs.

Additional information on the Sterling Acquisition is contained in Note 15 of the 2000 SBC Annual Report to Shareowners, and is incorporated herein by reference pursuant to General Instruction G(2).

Network access services - - Network access services connect a customer’s telephone or other equipment to the transmission facilities of other carriers that provide long distance and other communications services.

Wireline long distance - - Wireline long distance services primarily result from the transport of intraLATA telecommunications traffic that is outside of a local calling area. Federal regulation prohibits us from providing interLATA long distance services in nine of our thirteen in-region states. We provide wireline interLATA long distance to our customers in Connecticut, Texas, Kansas and Oklahoma. Long distance services also include other services such as Wide Area Telecommunications Service (WATS or 800 services) and other special services. In addition, since 1996, we have offered wireline interLATA long distance services to customers in selected areas outside the wireline subsidiaries’ authorized regions (out-region).

Customer premises equipment (CPE) - CPE and other equipment sales range from single-line and cordless telephones to sophisticated digital PBX systems. PBX is a private telephone switching system, usually located on a customer’s premises, which provides intra-premise telephone services as well as access to the public switched network.

Cable Television - We also operate a cable television system under the SNET brand in Connecticut that has been included in the wireline segment results. Our request to close this business is currently under review by the Connecticut Department of Public Utility Control and a final decision is expected in early 2001.

Internet Services - We offer a range of Internet services and products for residences and businesses, varying by market. Internet services offered include basic dial-up access service, dedicated access, web hosting, e-mail, and high-speed access services. During 2000, we formed a relationship with Prodigy Communications Corporation (Prodigy) that combined our consumer and small business Internet operations. We hold an approximate 43percent indirect ownership interest in Prodigy, which we account for using the equity method of accounting.

Cisco Agreement

In April 2000, we entered into a strategic marketing and sales alliance with Cisco Systems, Inc. (Cisco) to accelerate delivery of broadband services to customers. Through joint marketing and sales efforts, we will package Cisco equipment with advanced voice, broadband data and network integration services. The alliance also consists of a series of joint research and product development activities.

Covad Agreement

In September 2000, we announced an agreement making Covad Communications (Covad) an in-region and out-of-region DSL provider for SBC. We began marketing both symmetric business service DSL and asymmetric consumer service DSL provided by Covad. The companies are working together on network, provisioning and product planning activities needed to support the agreement. In November 2000, we purchased a minority ownership position (approximately 6 percent) in Covad.

Prodigy Credit Agreement

In January 2001, we restructured our agreements with Prodigy. As part of the restructuring, we agreed to provide a $110 million credit facility, as well as forgive a portion of the amounts that Prodigy owed us at December 31, 2000. We recognized a combined charge of $143 million ($89 million net of tax) in the fourth quarter of 2000, $110 million in equity in net income of affiliates reflecting previously unrecognized equity losses from our investment in Prodigy, and the remainder as either a reduction of revenue or increase in operating expense. The credit agreement will terminate on the earlier of December 31, 2003 or the termination of the commitments. The loans will bear interest at a rate per annum equal to the one month LIBOR rate plus 400 basis points and may be prepaid without penalty at any time. The principal and accrued interest on all outstanding loans are due upon termination of the credit agreement.

Additional information on the Prodigy Agreement is contained in Note 16 of the 2000 SBC Annual Report to Shareowners, and is incorporated herein by reference pursuant to General Instruction G(2).

Wireless

The wireless segment provides domestic wireless telecommunications services, including local, long distance and roaming services. Wireless services and products offered also include certain enhanced services, paging services and wireless equipment. The wireless operating segment provided approximately 15 percent of our operating revenues in 2000. Due to the contribution of substantially all of our domestic wireless operations to Cingular (discussed below), future wireless operating results will not include revenues or expenses from the wireless joint venture, instead we will reflect our 60 percent share of its net income as equity in net income of affiliates.

Wireless Acquisitions

In August 2000, we acquired wireless properties in Seattle and Spokane, Washington and Austin, Texas from GTE Corp. for approximately $1.3 billion. This acquisition also included rural service areas across Texas and Washington. In total these properties cover a population of more than 7.4 million people, and include approximately 318,000 customers. These properties have been contributed to Cingular.

Cingular Wireless Joint Venture

In October 2000, SBC and BellSouth began operations of their wireless joint venture, Cingular, which was formed in April 2000. At December 31, 2000, Cingular serves approximately 19 million customers and in March 2001, severed approximately 20 million customers, the second largest wireless operator in the United States. Economic ownership in Cingular is held 60 percent by SBC and 40 percent by BellSouth, with control shared equally. We are accounting for our interest under the equity method of accounting.

As a condition of the joint venture, the United States Department of Justice consent decree called for the disposition of overlapping wireless properties in Indianapolis, Indiana and selected Radiofone, Inc. properties in New Orleans and Baton Rouge, Louisiana.

Additional information on Cingular is contained in Note 6 of the 2000 SBC Annual Report to Shareowners, and is incorporated herein by reference pursuant to General Instruction G(2).

International

The international segment includes all of our international investments. We have direct or indirect interests in businesses located in more than 20 countries and as of December 31, 2000, have international investments with a carrying value of approximately $12.3 billion. Our international investments are an important component of our global strategy. Businesses include local and long distance telephone services, wireless communications, voice messaging, data services, video services, Internet access, telecommunications equipment, and directory publishing.

Europe

We hold a 41.6 percent stake in Tele Danmark A.S. (Tele Danmark), Denmark’s primary full-service communications operator. Tele Danmark has a 16.5 percent investment in Belgacom S.A. (Belgacom) as well as investments in wireless services in Poland, the Ukraine, Lithuania, Austria, the Netherlands and Germany. It has investments in competitive communications providers in Sweden, Germany, Switzerland and the Czech Republic. Tele Danmark also has investments in local telephone operations in Hungary and an international digital transmission link through Russia, Korea and Japan. SBC currently is able to elect six of twelve members of the Tele Danmark Board of Directors, including the Chairman, who would cast any tie-breaking vote.

During the fourth quarter of 2000, Tele Danmark reached an agreement to acquire a majority interest in diAx A.G (diAx), a wireless and long distance provider in Switzerland owned by SBC International and diAx Holdings. This transaction closed in January 2001.

In Belgium, SBC holds a 17.5 percent stake in Belgacom, the country’s primary full-service telecommunications operator, and effectively controls 24.4 percent of Belgacom when combined with its stake in Tele Danmark. With approximately 5.1 million access lines and more than 3.0 million cellular customers, Belgacom provides local, long distance, cellular and other communications services and offers directories and security services. Belgacom also has telecommunications investments in France and the Netherlands.

We hold a 15 percent equity interest in Cegetel S.A. (Cegetel), a holding company, through a joint venture with France’s Vivendi, a French diversified public company. Cegetel owns 80 percent of Societe Francaise de Radiotelephone, a wireless carrier in France with over 6.4 million customers. Cegetel offers both mobile and fixed line services.

In Germany, through our investment in Tele Danmark, we indirectly own 41.6 percent of Talkline Group, a cellular service provider and reseller. We sold our interest in Wer Liefert Was, a leading German-based publisher of business-to-business directories for several European countries, in December 2000.

During 2000, we sold our investment interests in MATAV, a Hungarian telecommunications company, and Netcom GSM, a telecommunications provider in Norway.

Asia

We own a 43.6 percent stake in TransAsia Telecommunications Inc. (TransAsia), a company that provides cellular services in Taiwan’s southern region, headquartered in Kaohsiung. At December 31, 2000, TransAsia served over 592,000 cellular customers.

In June 2000, we sold our interest in two undersea communications cables between the United States and China and Japan to Williams Communications.

North America

We have a 20 percent stake in Bell Canada, Canada’s premier telecommunications provider. Bell Canada offers a full range of services to more than 11.5 million residential and business customers, including local, long distance and wireless communications, Internet access, high-speed data services and directories.

We also own a 7.6 percent equity share in Mexico’s largest national telecommunications provider of wireline and wireless services, Telmex, which operates approximately 11.9 million access lines and through its spin-off cellular business, América Móvil S.A. de C.V. (América Móvil) and serves more than 9.7 million wireless customers. Through this relationship, we have worked with Telmex to develop an advanced network, and have helped Telmex achieve its goal of providing enhanced telephone service throughout Mexico.

In September 2000, Telmex announced the spin-off of its cellular business and most of its international investments, into a new company called América Móvil. Telmex shareholders received an equivalent number of América Móvil shares upon commencement of trading, which occurred in February 2001. As a result, we have an approximate 7.6 percent equity interest in America Móvil.

South America

In November 2000, we exchanged our interest in Brazilian wireless provider ATL - Algar Telecom Leste S.A. (ATL) for an 11.4 percent interest in Telecom Américas Ltd. (Telecom Americas), a joint venture with América Móvil and Bell Canada International Inc. that will provide wireless, video and data serves as well as internet access in Brazil, Columbia, Venezuela and Argentina.

Africa/Middle East

We hold an 18 percent ownership stake in Telkom S.A. Limited (Telkom), South Africa’s state-owned local exchange, long distance and cellular company. Currently, Telkom serves 6.1 million access lines in South Africa, and also is developing a second national wireless network, serving more than 3.6 million wireless customers through Telkom’s wireless subsidiary, Vodacom.

In Israel, we owned a 19.7 percent stake in Amdocs Limited (Amdocs), a major supplier of billing and customer service software used by telecommunications companies worldwide.

In the third quarter of 2000, we sold our investment in the Aurec companies in Israel.

Financial information about foreign and domestic operations is included in Note 7 of the 2000 SBC Annual Report to Shareowners, and is incorporated herein by reference pursuant to General Instruction G(2).

Other

SpectraSite Agreement

In August 2000, SBC and SpectraSite Communications, Inc. (SpectraSite) announced an agreement under which we will grant the exclusive rights to sublease space on approximately 3,900 communications towers to SpectraSite. SpectraSite has also agreed to build or buy an estimated 800 new towers for Cingular over the next five years. In December 2000, we received the first of several incremental payments that we are scheduled to receive over the next year. The total consideration of $1.3 billion, a combination of cash and SpectraSite common stock, will represent prepayments on the operating leases with SpectraSite and will be recognized as revenue over the life of the leases. Cingular will sublease space on the towers from SpectraSite and will have expansion rights on a majority of the existing towers. As a result of Cingular’s sublease payments to SpectraSite, which reduces Cingular’s net income, the SpectraSite arrangements will not have a material effect on our net income.

Security Monitoring Services

In December 2000, SBC and GTCR Golden Rauner LLC, through its affiliate Cambridge Protection Industries LLC (Cambridge), announced an agreement in which a Cambridge subsidiary will acquire SecurityLink. The transaction closed in January 2001.

Cable Television Services

We offer enhanced cable television services in the Chicago, Cleveland, Columbus and Detroit metropolitan areas through our subsidiary Ameritech New Media, Inc. (ANM). As of December 31, 2000, ANM provided cable services to approximately 304,000 customers in approximately 100 Midwestern communities. In 2000, ANM scaled back its construction of additional cable networks and expansion plans for new cable franchises and we are currently in negotiations to sell ANM.

ANM’s cable television systems are subject to Federal, state and local regulation, including regulation by the FCC and local franchising authorities. ANM has entered into approximately 115 cable television franchise agreements with local government authorities. Generally, these franchise agreements are in effect for a period of 15 years, and are transferable with regulatory approval.

MAJOR CLASSES OF SERVICE

The following table sets forth the percentage of consolidated total reported operating revenues by any class of service that accounted for 10 percent or more of our consolidated total operating revenues in any of the last three fiscal years.

                                                                                      
                                                     Percentage of Consolidated Total
                                                         Operating Revenues           
                                            2000              1999               1998 

Landline local service                       43%               39%                38%
Wireless subscriber                          10%               12%                11%
Network access                               20%               20%                21%

Landline local service and network access revenues are included in the wireline segment’s results of operations and each also exceeds 10 percent of wireline’s total operating revenues. Wireless subscriber revenues are included in the wireless segment’s results of operations and also exceed 10 percent of wireless’ total operating revenues. As a result of our contribution of substantially all of our wireless operations to Cingular in October 2000, our reported revenues and expenses for the fourth quarter of 2000, and in future periods, will no longer include these contributed wireless operations. Instead, our 60 percent share of Cingular’s operations will be reported in equity in net income of affiliates.

GOVERNMENT REGULATION

In the in-region states, certain of our wireline subsidiaries are subject to regulation by state commissions which have the power to regulate, in varying degrees, intrastate rates and services, including local, long distance and network access services. Certain wireline subsidiaries are also subject to the jurisdiction of the FCC with respect to interstate and international rates and services, including interstate access charges. Access charges are designed to compensate the wireline subsidiaries for the use of their facilities for the origination or termination of long distance and access services by other carriers. Cable television operations are also subject to certain FCC and state or local jurisdiction with respect to service requirements.

Additional information relating to Federal and state regulation of the wireline subsidiaries is contained in the 2000 SBC Annual Report to Shareowners under the heading “Regulatory Environment” beginning on page 12, and is incorporated herein by reference pursuant to General Instruction G(2).

IMPORTANCE, DURATION AND EFFECT OF LICENSES

Certain of our subsidiaries own or have licenses to various patents, copyrights, trademarks and other intellectual property necessary to conduct business. We also license other companies to use this intellectual property. We do not believe that the expiration of any of our intellectual property rights, or the nonrenewal of those rights, would have a material adverse affect on our results of operations.

MAJOR CUSTOMER

No customer accounted for more than 10 percent of our consolidated revenues in 2000, 1999 or 1998.

COMPETITION

Information relating to competition in each of our operating segments is contained in the 2000 SBC Annual Report to Shareowners under the heading “Competition” beginning on page 16, and is incorporated herein by reference pursuant to General Instruction G(2).

RESEARCH AND DEVELOPMENT

The majority of our research and development activities are related to our wireline segment. Applied research, technology planning and evaluation services are conducted at our subsidiary, SBC Technology Resources, Inc. We also have a research agreement with Telcordia Technologies, formerly Bell Communications Research, Inc.

EMPLOYEES

As of January 31, 2001, we employed 215,088 persons. Approximately two-thirds of our employees are represented by the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW). Collective bargaining agreements between the CWA and our subsidiaries expire in April 2001, with the IBEW agreement expiring as late as 2003.

On February 5, 2001, our telephone subsidiaries reached four tentative agreements with the CWA covering employees in thirteen states. The tentative agreements are labor contracts for three years and will replace the existing contracts that expire on March 31 and April 1, 2001. The agreements include a wage increase of approximately 12.25 percent over the life of the contracts, in addition to other economic provisions. The agreements must be ratified by CWA members covered by the tentative agreements and this ratification vote is expected by mid-March 2001.

The IBEW represents approximately 12,370 employees pursuant to a labor agreement expiring on June 28, 2003. However, the wages and certain other economic matters applicable to the final two years of that agreement will be bargained prior to the end of June 2001.

RECENT DEVELOPMENTS

In January 2001, the FCC approved our applications to provide interLATA long distance service for calls originating in Oklahoma and Kansas. We began offering long distance services in these states on March 7, 2001 under the Southwestern Bell brand.

In March 2001, the Missouri Public Service Commission approved our application to provide interLATA long distance services for calls originating in Missouri. We plan to file our application with the FCC to provide long distance services in Missouri in the near future and the FCC has 90 days from the filing date to rule on our application.

In March 2001, the Public Utility Commission of Ohio (PUCO) authorized our Ohio subsidiary to make a dividend payment, not to exceed approximately $113 million, to the parent company. The PUCO will consider future dividend payments at our request.

On March 1, 2001, we reminded investors that there are several factors that occurred in the second, third and fourth quarters of 2000, which are discussed under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2000 SBC Annual Report to Shareowners, that we expect will cause operating expenses in the first quarter of 2001 to be higher that they were in the first quarter of 2000. Starting in the second quarter, and through the remainder of 2001, the effect of these factors on comparisons with the corresponding quarters of 2000 will be reduced.

CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS

Information set forth in this report contains forward-looking statements that are subject to risks and uncertainties. We claim the protection of the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995.

The following factors could cause our future results to differ materially from those expressed in the forward-looking statements:

Adverse economic changes in the markets served by SBC, or countries in which SBC has significant investments.
Changes in available technology.
The final outcome of FCC rulemakings and judicial review, if any, of such rulemakings, including issues relating to jurisdiction.
The final outcome of state regulatory proceedings in SBC’s 13-state area, and judicial review, if any, of such proceedings, including proceedings relating to interconnection terms, access charges, universal service, unbundled network elements and resale rates, and reciprocal compensation.
Enactment of additional state, Federal and/or foreign regulatory laws and regulations pertaining to SBC’s subsidiaries and foreign investments.
The timing of entry and the extent of competition in the local and intraLATA toll markets in SBC’s 13-state area and SBC’s entry into the in-region long distance market.
The impact of the Ameritech transaction, including performance with respect to regulatory requirements and merger integration efforts.
The timing and cost of deployment of SBC’s broadband initiative also known as Project Pronto, its effect on the carrying value of the existing wireline network and the level of consumer demand for offered services.
The impact of the wireless joint venture with BellSouth Corporation, known as Cingular Wireless, including marketing and product development efforts, access to additional spectrum, technological advancements and financial capacity.

Readers are cautioned that other factors discussed in this report, although not enumerated here, also could materially impact our future earnings.

ITEM 2. PROPERTIES

Our properties do not lend themselves to description by character and location of principal units. At December 31, 2000, approximately 97 percent of our property, plant and equipment was owned by our wireline subsidiaries. Network access lines represented approximately 40 percent of the wireline subsidiaries’ investment in telephone plant; central office equipment represented approximately 41 percent; land and buildings represented approximately 9 percent; other equipment, comprised principally of furniture and office equipment and vehicles and other work equipment, represented approximately 7 percent; and other miscellaneous property represented approximately 3 percent.

Substantially all of the installations of central office equipment are located in buildings and on land which we own. Many garages, administrative and business offices and telephone centers are in leased quarters.

ITEM 3. LEGAL PROCEEDINGS

We are a party to various legal and regulatory proceedings arising in the ordinary course of business. While there can be no assurance as to the ultimate outcome of any pending proceedings, as of the date of this report, we do not believe that any pending legal proceedings to which we or our subsidiaries are subject are required to be disclosed as material legal proceedings pursuant to this item.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of shareowners in the fourth quarter of the fiscal year covered by this report.

EXECUTIVE OFFICERS OF THE REGISTRANT
(As of March 12, 2001)

Name Age Position Held Since

Edward E. Whitacre Jr. 59 Chairman and Chief Executive Officer 1/1990
James W. Callaway 54 Group President 11/1999
Cassandra C. Carr 56 Senior Executive Vice President - External Affairs 10/1998
James D. Ellis 57 Senior Executive Vice President and General Counsel 3/1989
Charles E. Foster 64 Group President 7/1995
Ross K. Ireland 54 Senior Executive Vice President - Services 1/2001
Karen E. Jennings 50 Senior Executive Vice President - Human Resources 10/1998
James S. Kahan 53 Senior Executive Vice President - Corporate 7/1993
Development
Donald E. Kiernan 60 Senior Executive Vice President and 7/1993
Chief Financial Officer
Forrest E. Miller 48 President and Chief Executive Officer 10/1999
(Southern New England Telecommunications
Corporation)
Edward A. Mueller 53 President and Chief Executive Officer 9/2000
(Ameritech Corporation)
Stanley T. Sigman 53 President and Chief Executive Officer 1/2001
(Southwestern Bell Telephone Company)
Rayford Wilkins, Jr. 49 President and Chief Executive Officer 9/2000
(Pacific Bell Telephone Company and Nevada Bell
Telephone Company)

All of the above executive officers have held high-level managerial positions with SBC or its subsidiaries for more than the past five years. Executive officers are not appointed to a fixed term of office.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The number of shareowners of record as of December 31, 2000 and 1999 were 1,148,570 and 1,038,807. During 2000, non-employee directors acquired from SBC shares of common stock pursuant to the Non-Employee Director Stock and Deferral Plan. Under the plan, a director may make an annual election to receive all or part of his or her annual retainer or fees in the form of SBC shares or deferred stock units (DSUs) that are convertible into SBC shares. Each Director also receives an annual grant of DSUs. During this period, an aggregate of 65,641 SBC shares and DSUs were acquired by non-employee directors at prices ranging from $36.38 to $56.00, in each case the fair market value of the shares on the date of acquisition. The issuances of shares and DSUs were exempt from registration pursuant to Section 4(2) of the Securities Act. Other information required by this Item is included in the 2000 SBC Annual Report to Shareowners under the headings “Quarterly Financial Information” on page 44, “Selected Financial and Operating Data” on page 4, and “Stock Trading Information” on the back cover, which are incorporated herein by reference pursuant to General Instruction G(2).

ITEM 6. SELECTED FINANCIAL AND OPERATING DATA

Information required by this Item is included in the 2000 SBC Annual Report to Shareowners under the heading “Selected Financial and Operating Data” on page 4 which is incorporated herein by reference pursuant to General Instruction G(2).

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Information required by this Item is included in the 2000 SBC Annual Report to Shareowners on page 5 through page 20, which is incorporated herein by reference pursuant to General Instruction G(2).

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information required by this Item is included in the 2000 SBC Annual Report to Shareowners under the heading “Market Risk” on page 19 through page 20, which is incorporated herein by reference pursuant to General Instruction G(2).

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information required by this Item is included in the 2000 SBC Annual Report to Shareowners on page 21 through page 44, which is incorporated herein by reference pursuant to General Instruction G(2).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

No changes in or disagreements with accountants have occurred on any accounting or financial disclosure matters during the period covered by this report.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding executive officers required by Item 401 of Regulation S-K is furnished in a separate disclosure at the end of Part I of this report since the registrant did not furnish such information in its definitive proxy statement prepared in accordance with Schedule 14A. Other information required by this Item 10 is included in the registrant’s definitive proxy statement, dated on or about March 12, 2001, under the heading “Board of Directors” beginning on page 4 and “Section 16(a) Beneficial Ownership Reporting Compliance” beginning on page 36 which is incorporated herein by reference pursuant to General Instruction G(3).

ITEM 11. EXECUTIVE COMPENSATION

Information required by this Item is included in the registrant’s definitive proxy statement, dated on or about March 12, 2001, under the headings “Compensation of Directors” from page 13 through page 14, and “Compensation Committee Interlocks and Insider Participation”, “Executive Compensation”, “Pension Plans”, and “Contracts with Management” from page 24 through page 35, which are incorporated herein by reference pursuant to General Instruction G(3).

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by this Item is included in the registrant’s definitive proxy statement, dated on or about March 12, 2001, under the heading “Common Stock Ownership of Directors and Officers” on page 15, which is incorporated herein by reference pursuant to General Instruction G(3).

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this Item is included in the registrant’s definitive proxy statement, dated on or about March 12, 2001, under the heading “Compensation of Directors” from page 13 through page 14 and “Contracts with Management” from page 34 through 35, which are incorporated herein by reference pursuant to General Instruction G(3).

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K<>

(a) Documents filed as a part of the report:

                                                                              Page


      (1) Report of Independent Auditors......................................    *
          Financial Statements covered by Report of Independent Auditors:
           Consolidated Statements of Income..................................    *
           Consolidated Balance Sheets........................................    *
           Consolidated Statements of Cash Flows..............................    *
           Consolidated Statements of Shareowners' Equity.....................    *
           Notes to Consolidated Financial Statements.........................    *

* Incorporated herein by reference to the appropriate portions of the registrant’s annual report to shareowners for the fiscal year ended December 31, 2000. (See Part II.)

                                                                               Page

      (2) Financial Statement Schedules:
           II - Valuation and Qualifying Accounts.............................   24

Financial Statement schedules other than those listed above have been omitted because the required information is contained in the financial statements and notes thereto, or because such schedules are not required or applicable.

      (3) Exhibits:

Exhibits identified in parentheses below, on file with the Securities and Exchange Commission (SEC), are incorporated herein by reference as exhibits hereto. Unless otherwise indicated, all exhibits so incorporated are from File No. 1-8610.

Exhibit
Number

3-a   Restated Certificate of Incorporation, filed with the Secretary of State of
      Delaware on April 30, 2000.

3-b   Bylaws dated April 30, 2000.  (Exhibit 3 to Form 8-K dated June 30, 2000.)

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 the registrant or any of its
      consolidated subsidiaries is filed herewith. Pursuant to this regulation, the
      registrant hereby agrees to furnish a copy of any such instrument to the SEC
      upon request.

4-b   Resolutions guaranteeing certain obligations of Pacific Telesis Group. (Exhibit
      4-g to Form 10-K for 1997.)

4-c   Guaranty of certain obligations of Pacific Bell Telephone Co. and Southwestern Bell Telephone
      Co. (Exhibit 4-d to Form 10-K for 1999)

4-d   Guaranty of certain obligations of Ameritech Capital Funding Corp., Illinois Bell Telephone
      Co., Indiana Bell Telephone Co. Inc., Michigan Bell Telephone Co., The Ohio Bell Telephone Co.,
      Pacific Bell Telephone Co., Southern New England Telecommunications Corp., The Southern New
      England Telephone Co., Southwestern Bell Telephone Co., Wisconsin Bell, Inc. (Exhibit 4-e to
      Form 10-K for 1999)

10-a  Short Term Incentive Plan.

10-b  Senior Management Long Term Incentive Plan.  (Exhibit 10-b to Form 10-K for 1992.)

10-c  Supplemental Life Insurance Plan.  (Exhibit 10-c to Form 10-K for 1997.)

      10-c(i)  Resolution amending the Plan, effective October 15, 2000.

10-d  Supplemental Retirement Income Plan.

10-e  Senior Management Deferred Compensation Plan (effective for Units of
      Participation Having a Unit Start Date Prior to January 1, 1988), revised
      July 30, 1993.

      10-e(i)  Resolution amending the Plan, effective October 15, 2000.

10-f  Senior Management Deferred Compensation Program of 1988 (effective for Units of
      Participation Having a Unit Start Date of January 1, 1988 or later), revised
      July 30, 1993.

      10-f(i)  Resolution amending the Plan, effective October 15, 2000.
               (Exhibit 10-e(i) to this Form 10-K.)

10-g  Senior Management Long Term Disability Plan.  (Exhibit 10-f to Form 10-K for 1986.)

10-h  Salary and Incentive Award Deferral Plan.

10-i  Financial Counseling Program.  (Exhibit 10-i to Form 10-K for 1997.)

      10-i(i)  Resolution amending the Plan, effective October 15, 2000.
               (Exhibit 10-c(i) to this Form 10-K.)

10-j  Supplemental Health Plan.  (Exhibit 10-j to Form 10-K for 1997.)

      10-j(i)  Resolution amending the Plan, effective October 15, 2000.
               (Exhibit 10-c(i) to this Form 10-K.)

10-k  Retirement Plan for Non-Employee Directors.  (Exhibit 10-k to Form 10-K for 1997.)

10-l  Form of Indemnity Agreement, effective July 1, 1986, between SBC and its
      directors and officers. (Appendix 1 to Definitive Proxy Statement dated March
      18, 1987.)

10-n  Forms of Change of Control Severance Agreements for officers of SBC and certain
      officers of SBC’s subsidiaries (Approved November 21, 1997). (Exhibit 10-n
      to Form 10-K for 1997.)

10-o  Stock Savings Plan.

10-p  1992 Stock Option Plan.

10-q  Officer Retirement Savings Plan.  (Exhibit 10-q to Form 10-K for 1997.)

10-r  1996 Stock and Incentive Plan.

10-s  Non-Employee Director Stock and Deferral Plan.

10-t  Pacific Telesis Group Deferred Compensation Plan for Nonemployee Directors.  (Exhibit 10gg to
      Form 10-K for 1996 of Pacific Telesis Group (Reg. 1-8609).)

      10-t(i)  Resolutions amending the Plan, effective November 21, 1997. (Exhibit 10-v(i) to
               Form 10-K for 1997.)

10-u  Pacific Telesis Group Outside Directors' Deferred Stock Unit Plan.  (Exhibit 10oo to
      Form 10-K for 1995 of Pacific Telesis Group (Reg. 1-8609).)

10-v  Pacific Telesis Group 1996 Directors' Deferred Compensation Plan.  (Exhibit 10qq to
      Form 10-K for 1996 of Pacific Telesis Group (Reg. 1-8609).)

      10-v(i)  Resolutions amending the Plan, effective November 21, 1997. (Exhibit 10-v(i) to
               Form 10-K for 1997.)

10-w  Pacific Telesis Group 1994 Stock Incentive Plan. (Attachment A to Pacific
      Telesis Group’s 1994 Proxy Statement filed March 11, 1994, and amended
      March 14 and March 25, 1994.)

      10-w(i)  Resolutions amending the Plan, effective January 1, 1995. (Attachment A to
      Pacific Telesis Group’s 1995 Proxy Statement, filed March 13, 1995.)

10-x  Pacific Telesis Group Nonemployee Director Stock Option Plan.  (Exhibit A to Pacific Telesis
      Group's 1990 Proxy Statement filed February 26, 1990.)

      10-x(i)  Resolutions amending the Plan, effective April 1, 1994. (Exhibit 10xx(i) to Form
      10-K for 1994 of Pacific Telesis Group (Reg. 1-8609).)

      10-y     2001 Incentive Plan.   (Appendix B to Definitive Proxy Statement dated March 12, 2001.)

12    Computation of Ratios of Earnings to Fixed Charges.

13    Portions of SBC’s Annual Report to shareowners for the fiscal year ended
      December 31, 2000. Only the information incorporated by reference into this Form
      10-K is included in the exhibit.

21    Subsidiaries of SBC.
23-a  Consent of Ernst & Young LLP.
23-b  Consent of Arthur Andersen LLP.
24    Powers of Attorney.
99-a  Report of Independent Accountants Arthur Andersen LLP.
99-b  Annual Report on Form 11-K for the SBC Savings Plan for the year 2000 to be
      filed under Form 10-K/A.

99-c  Annual Report on Form 11-K for the SBC Savings and Security Plan for the year
      2000 to be filed under Form 10-K/A.

99-d  Annual Report on Form 11-K for the Ameritech Savings and Security Plan for
      Non-Salaried Employees for the year 2000 to be filed under Form 10-K/A.

We will furnish to shareowners upon request, and without charge, a copy of the annual report to shareowners and the proxy statement, portions of which are incorporated by reference in the Form 10-K. We will furnish any other exhibit at cost.

(b) Reports on Form 8-K:

On October 3, 2000, we filed a Form 8-K, reporting on Item 5. Other Events. In the report, we reported the closing of our previously announced transaction to form Cingular Wireless (Cingular), a wireless joint venture with BellSouth Corporation.

Disposition of Assets and Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. In the report, we disclose information about our contribution of assets and interest held in Cingular.

SBC COMMUNICATIONS INC.                                                                                       Schedule II - Sheet 1
                                                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                                         Allowance for Uncollectibles
                                                              Dollars in Millions


- --------------------------------------------------- ---------------- ------------------------------------ ------------------ -------------
                      COL. A                            COL. B                     COL. C                      COL. D           COL. E
- --------------------------------------------------- ---------------- ------------------------------------ ------------------ -------------
                                                                                  Additions
- --------------------------------------------------- ---------------- ------------------------------------ ------------------ -------------
                                                                                              (2)
                                                                            (1)             Charged
                                                      Balance at          Charged           to Other                           Balance
                                                     Beginning of      to Costs and         Accounts         Deductions       at End of
                   Description                          Period       Expenses-Note (a)     -Note (b)          -Note (c)         Period
- --------------------------------------------------- ---------------- ------------------ ----------------- ------------------ -------------
 Year 2000......................................     $ 1,099                885               264             1,217(d)        $ 1,032
 Year 1999......................................     $   810              1,136               596             1,443           $ 1,099
 Year 1998......................................     $   737                896               603             1,426           $   810

__________

(a) Excludes direct charges and credits to expense on the statements of income and reinvested earnings related to interexchange carrier receivables.
(b) Includes amounts previously written off which were credited directly to this account when recovered and amounts related to long-distance carrier receivables which are being billed by SBC.
(c) Amounts written off as uncollectible.
(d) Includes $81 transferred to Cingular.

                                                            SBC COMMUNICATIONS INC.                                  Schedule II - Sheet 2
                                                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                                    Accumulated Amortization of Intangibles
                                                              Dollars in Millions


- -------------------------------------------------- ----------------- ------------------------------------ ------------------ --------------
                     COL. A                             COL. B                      COL. C                     COL. D           COL. E
- -------------------------------------------------- ----------------- ------------------------------------ ------------------ --------------
                                                                                   Additions
- -------------------------------------------------- ----------------- ------------------------------------ ------------------ --------------
                                                                            (1)                (2)
                                                      Balance at                             Charged                            Balance
                                                     Beginning of         Charged           to Other                           at End of
                   Description                          Period           to Expense         Accounts         Deductions         Period
- -------------------------------------------------- ----------------- ------------------- ---------------- ------------------ --------------
Year 2000......................................      $ 1,325              1,329(a)          (262)(b)         1,646(c)           $   746
Year 1999......................................      $ 1,111                378                8               172              $ 1,325
Year 1998......................................      $ 1,485                275                3               652(d)           $ 1,111

__________

(a) Includes impairment of underlying assets at SecurityLink.
(b) Primarily related to the transfer to Cingular.
(c) Includes $962 transfer to Cingular and $670 related to impairment at SecurityLink.
(d) Primarily related to the disposition of SBC Media Ventures, Inc. and an impairment of an investment in wireless video.

                                                            SBC COMMUNICATIONS INC.                                  Schedule II - Sheet 3
                                                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                                           Reserve for Restructuring
                                                              Dollars in Millions

- -------------------------------------------------- ----------------- ------------------------------------ ------------------ ---------------
                     COL. A                             COL. B                     COL. C                      COL. D            COL. E
- -------------------------------------------------- ----------------- ------------------------------------ ------------------ ---------------
                                                                                  Additions
- -------------------------------------------------- ----------------- ------------------------------------ ------------------ ---------------
                                                                            (1)               (2)
                                                      Balance at          Charged           Charged                             Balance
                                                     Beginning of      to Costs and         to Other         Deductions        at End of
                   Description                          Period           Expenses           Accounts          -Note (a)          Period
- -------------------------------------------------- ----------------- ------------------ ----------------- ------------------ ---------------
Year 2000......................................      $   14                   -                -                14              $    -
Year 1999......................................      $  123                   5                -               114              $   14
Year 1998......................................      $   86                 104                -                67              $  123

__________

(a) Includes $99 in 1999 and $30 in 1998 that was reversed to other operating expenses for amounts no longer required.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on the 12th day of March, 2001.

SBC COMMUNICATIONS INC.

                                               By /s/ Donald E. Kiernan
                                   (Donald E. Kiernan
                                                                  Senior Executive Vice President and
                                           Chief Financial Officer)

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Principal Executive Officer:
         Edward E. Whitacre, Jr.*
         Chairman and
         Chief Executive Officer

Principal Financial and
    Accounting Officer:
         Donald E. Kiernan
         Senior Executive Vice President and
         Chief Financial Officer

                                                /s/ Donald E. Kiernan
                                                                              (Donald E. Kiernan, as attorney-in-fact
                                                                    and on his own behalf as Principal
                                                               Financial Officer and Principal
                                             Accounting Officer)

March 12, 2001

Directors:
Edward E. Whitacre, Jr.*                                                      Charles F. Knight*
Clarence C. Barksdale*                                                         Lynn M. Martin*
James E. Barnes*                                                                   John B. McCoy*
August A. Busch III*                                                           Mary S. Metz*
William P. Clark*                                                                   Toni Rembe*
Martin K. Eby, Jr.*                                                                S. Donley Ritchey*
Herman E. Gallegos*                                                             Joyce M. Roche'*
Jess T. Hay*                                                                          Carlos Slim Helu'*
James A. Henderson*                                                          Laura D'Andrea Tyson*
Bobby R. Inman*                                                                  Patricia P. Upton*
* by power of attorney

EX-3 2 exh3a.htm EXHIBIT 3-A Exhibits

Exhibit 3-a

RESTATED CERTIFICATE OF INCORPORATION
OF
SBC COMMUNICATIONS INC.

SBC COMMUNICATIONS INC., a Corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is SBC Communications Inc., and the name under which
the corporation was originally incorporated was Southwestern Bell Corporation. The date of
filing of its original Certificate of Incorporation with the Secretary of State was October 5, 1983.
2. This Restated Certificate of Incorporation only restates and integrates and does not
further amend the provisions of the Restated Certificate of Incorporation of this corporation as
heretofore amended or supplemented and there is no discrepancy between those provisions and
the provisions of this Restated Certificate of Incorporation.
3. The text of the Restated Certificate of Incorporation as amended or supplemented
heretofore is hereby restated and without further amendments or changes to read as herein set
forth in full:

ARTICLE ONE

The name of the corporation is SBC Communications Inc.

ARTICLE TWO

The address of the registered office of the corporation in the State of Delaware is 1209
Orange Street, Wilmington, Delaware 19801, County of New Castle. The name of the registered
agent of the corporation at such address is The Corporation Trust Company.

ARTICLE THREE

The purpose of the corporation is to engage in any business, lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of Delaware.

ARTICLE FOUR

The corporation shall have perpetual existence.

ARTICLE FIVE

The aggregate number of shares which the corporation is authorized to issue is 7,010,000,000
shares, consisting of 7,000,000,000 common shares having a par value of $1 per share and
10,000,000 preferred shares having a par value of $1 per share.

The preferred shares may be issued from time to time in one or more series. The Board of
Directors is authorized to establish by resolution the number of preferred shares in each series, the
designation thereof, the powers, preferences, and rights and the qualifications, limitations or
restrictions of each series and the variations, if any, as between each series.

No holder of any class or series of shares shall have any preemptive right to purchase any
additional issue of shares of the corporation of any class or series or any security convertible into any
class or series of shares.

ARTICLE SIX

The business and affairs of the corporation shall be under direction of a Board of Directors.
The number of directors, their terms and the manner of their election shall be fixed by the Bylaws of
the corporation. The directors need not be elected by written ballot unless required by the Bylaws of
the corporation.

No director of this corporation shall be liable to this corporation or its stockholders 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 the corporation or its stockholders; 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 Delaware General Corporation Law; or 4) for any transaction from which a director
derived an improper benefit.

ARTICLE SEVEN

The Board of Directors is expressly authorized to adopt, amend or repeal the Bylaws of the
corporation, except that any Bylaw of the corporation providing for the maximum number of
Directors that may serve on the Board of Directors, or providing for a classified Board of Directors
with staggered terms of office or requiring the approval by the shareholders or the Board of Directors
of any business combinations may only be amended or repealed by a two-thirds majority vote of the
total number of shares of stock of the corporation then outstanding and entitled to vote.

ARTICLE EIGHT

Notwithstanding any other provisions of this Certificate of Incorporation or the Bylaws of the
corporation, no action which is required to be taken or which may be taken at any annual or special
meeting of stockholders of the corporation may be taken by written consent without a meeting,
except where such consent is signed by stockholders representing at least two-thirds of the total
number of shares of stock of the corporation then outstanding and entitled to vote thereon.

ARTICLE NINE

The corporation reserves the right to amend and repeal any provision contained in this
Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware. All rights
herein conferred are granted subject to this reservation.

4. This Restated Certificate of Incorporation was duly adopted by the Board of Directors on
June 30, 2000, in accordance with Section 245 of the General Corporation Law of the State of
Delaware.

IN WITNESS WHEREOF, said SBC Communications Inc. has caused this Restated
Certificate of Incorporation to be signed by Edward E. Whitacre, Jr., its Chairman of the Board of
Directors, President and Chief Executive Officer, and attested by Judith M. Sahm, its Secretary, this
30th day of June, 2000.
SBC COMMUNICATIONS INC.

(seal) /s/ Edward E. Whitacre, Jr.
Edward E. Whitacre, Jr.
Chairman of the Board, President
and Chief Executive Officer

Attest:/s/ Judith M. Sahm
Judith M. Sahm
Secretary

EX-10 3 exh10a.htm EXHIBIT 10-A SHORT TERM INCENTIVE PLAN

                                           SHORT TERM INCENTIVE PLAN

Exhibit 10-a



















                                                                               Plan Effective:  January 1, 1984
                                                                         Revisions Effective:  January 26, 2001



                                           SHORT TERM INCENTIVE PLAN


                                               TABLE OF CONTENTS



Section  Subject                                                        Page

1.      Purpose.........................................................1
2.      Definitions.....................................................1
3.      Eligibility.....................................................2
4.      Awards..........................................................3
5.      Adjustments ....................................................5
6.      Other Conditions ...............................................6
7.      Designation of Beneficiaries....................................6
8.      Plan Administration.............................................7
9.      Modification or Termination of Plan.............................7

                                           SHORT TERM INCENTIVE PLAN


1.      Purpose.  The purpose of the Short Term Incentive Plan (the "Plan") is to provide Eligible Employees
        with incentive compensation based upon the achievement of financial, service, and operating
        performance levels and management effectiveness.

2.      Definitions.  For purposes of this Plan, the following words and phrases shall have the meanings
        indicated, unless the context clearly indicates otherwise:

               Award Year.  "Award Year" shall mean the calendar year for which performance is used to
               determine one's award under the Plan.

               Chairman.  "Chairman" shall mean the Chairman of the Board of SBC Communications Inc.

               Committee.  "Committee" shall mean the Human Resources Committee of the Board of SBC
               Communications Inc.

               Eligible Employee.  "Eligible Employee" shall mean an Officer or a non-Officer employee of any
               SBC company who is designated by the Chairman as eligible to participate in the Plan.

               Officer.  "Officer" shall mean an individual who is designated by the Chairman as eligible to
               participate in the Plan who is an elected officer of SBC or of any SBC subsidiary (direct or
               indirect).

               Retirement.  "Retirement" shall mean the termination of an Eligible Employee's employment with
               SBC or any of its subsidiaries, for reasons other than death, on or after the earlier of the
               following dates:  (1) the date the Eligible Employee is Retirement Eligible as such term is
               defined in the SBC Supplemental Retirement Income Plan ("SRIP"); or (2) the date the Eligible
               Employee has attained one of the following combinations of age and service at termination of
               employment on or after April 1, 1997, except as otherwise indicated below:



                      Net Credited Service                Age

                      10 years or more                    65 or older
                      20 years or more                    55 or older
                      25 years or more                    50 or older
                      30 years or more                    Any age

               With respect to an Eligible Employee who is granted an EMP Service Pension under and pursuant
               to the provisions of the SBC Pension Benefit Plan - Nonbargained Program ("SBCPBP") upon
               termination of Employment, the term "Retirement" shall include such Eligible Employee's
               termination of employment.

        Termination Under EPR.  In determining whether an Eligible Employee's termination of employment under
        the Enhanced Pension and Retirement Program ("EPR") is a Retirement for purposes of this Plan, five
        years shall be added to each of age and net credited service ("NCS").  If with such additional age and
        years of service, (1) an Eligible Employee upon such termination of employment under EPR is Retirement
        Eligible according to the SBC Supplemental Retirement Income Plan ("SRIP") or (2) the Eligible
        Employee upon such termination of employment under EPR has attained one of the following combinations
        of age and service,

                   Actual NCS + 5 Years             Actual Age + 5 Years

                      10 years or more                    65 or older
                      20 years or more                    55 or older
                      25 years or more                    50 or older
                      30 years or more                    Any age

        then such termination of employment shall be a Retirement for all purposes under this Plan and the
        Eligible Employee shall be entitled to the treatment under this Plan afforded in the case of a
        termination of employment which is a Retirement.

               SBC.  "SBC" shall mean SBC Communications Inc.


3.      Eligibility.  Each Eligible Employee who during an Award Year was in active service may be eligible
        for an award under the Plan, as provided under Section 4 below.  Employees are not rendered ineligible
        by reason of being a member of the Board.

4.      Awards. The Committee with respect to Officers, or the Chairman with respect to non-Officer Eligible
        Employees, shall approve a Target Award for each employee eligible for an award under the Plan for
        each Award Year that the Committee or the Chairman, as applicable, intends to make awards.

        The Target Award applicable to an employee otherwise eligible for an award under the Plan for an Award
        Year shall be prorated over the Award Year or the employee shall be ineligible for an award, as
        follows:


              (1)     become eligible or               prorate according to time of
                      ineligible for an award          active service in each
                      under Plan or change from one    eligible position  to the
                      eligible position to another     nearest half month
                      after the beginning of the
                      Award Year

              (2)     inter-company transfers          prorate for each respective
                                                       entities' performance
                                                       according to time of active
                                                       service at each entity to the
                                                       nearest half month

              (3)     receipt of Disability            prorate to the day based on
                      Benefits for more than           service while not receiving
                      three months in an Award         Disability Benefits
                      Year

              (4)     receipt of Disability            no reduction is applicable
                      Benefits for three months        Target Award
                      or less in an Award Year

              (5)     Retirement                       prorate to date of Retirement

              (6)     leave of absence                 prorate to date leave
                                                       commences and from date leave
                                                       ceases unless otherwise
                                                       provided by the Committee or
                                                       the Chairman, as applicable

              (7)     death during an Award Year       prorate to date of death

              (8)     dismissal for cause during       no award
                      or after an Award Year

              (9)     termination with                 prorate to date of termination
                      severance payment

              (10)    resignation with no              no award
                      severance payment

        A percentage of the Target Award for each Award Year to be distributed to the award recipient will be
        determined by the Committee, or Chairman, for Officers and non-Officer Eligible Employees,
        respectively, based upon achievement of performance levels during such Award Year of criteria
        established by the Committee, or the Chairman, respectively.

        The criteria established by the Committee for Officers, or the Chairman with respect to non-Officer
        Eligible Employees, upon which the percentages of the Target Awards referred to above are determined
        shall give due regard, as the Committee, or the Chairman, as applicable, deems appropriate, to one or
        more of the following for the Award Year:

        (a)    Financial performance of SBC, individual operating entities thereof and/or SBC and its
               consolidated subsidiaries.

        (b)    Service performance of SBC and of individual operating entities; or other appropriate operating
               performance criteria for entities where service performance is not relevant.

        (c)    Other criteria in lieu of or in addition to the above as determined by the Committee or the
               Chairman, as applicable.

        The Committee then with respect to Officers, or the Chairman with respect to non-Officer Eligible
        Employees, shall determine the payout of Awards in such amounts and to such of the Eligible Employees
        as each may determine in its sole discretion.  Awards shall be paid in cash in the calendar year the
        awards are determined, except to the extent that an Eligible Employee has made an election to defer
        the receipt of such award pursuant to the SBC Salary and Incentive Award Deferral Plan or other SBC
        deferred compensation plan.

        The award to be distributed to an individual may be more or less in the Committee's or the Chairman's
        discretion, as applicable, including no award, than the percentage of the Target Award determined for
        such individual; for example, the Committee or the Chairman, as applicable, may approve an award
        greater than the Target Award, adjusted for performance, based on individual performance.

5.      Adjustments.

        (a)    In order to assure the incentive features of the Plan and to avoid distortion in the operation
               of the Plan, the Committee or the Chairman, as applicable, may make adjustments in the criteria
               established for any Award Year, whether before or after the end of the Award Year, to the
               extent the Committee or the Chairman, as applicable, deems appropriate, to compensate for or
               reflect any extraordinary changes which may have occurred during the Award Year which
               significantly alter the basis upon which performance levels were determined.  Such changes may
               include, without limitation, changes in accounting practices, tax laws, or other laws or
               regulations, or economic changes not in the ordinary course of business cycles.

        (b)    In the event of any change in outstanding shares of SBC by reason of any stock dividend or
               split, recapitalization, merger, consolidation, combination or exchange of shares or other
               similar corporate change, the Committee or the Chairman, as applicable, shall make such
               adjustments, if any, that the Committee or the Chairman, as applicable, deems appropriate in
               the performance levels established for any Award Year.

        (c)    The Senior Executive Vice President-Human Resources (or his or her successor) may approve a new
               Target Award for any Eligible Employee whose position is modified by changes in job
               responsibilities, reorganization, or otherwise; provided, however, such authority may not be
               exercised for positions with a total compensation market rate exceeding $2.0 million (in such a
               case the new Target Award shall be approved by the Committee).

6.      Other Conditions.

        (a)    No person shall have any claim to be granted an award under the Plan and there is no obligation
               for uniformity of treatment of Eligible Employees under the Plan.  Awards under the Plan may
               not be assigned or alienated.

        (b)    Neither the Plan nor any action taken hereunder shall be construed as giving to any employee
               the right to be retained in the employ of SBC or any subsidiary thereof.

        (c)    SBC or subsidiary thereof, as applicable, shall have the right to deduct from any award to be
               paid under the Plan any federal, state or local taxes required by law to be withheld with
               respect to such payment.

        (d)    Unless otherwise provided by the Committee, awards under the Plan shall be excluded in
               determining benefits under any pension, retirement, savings, disability, death, or other
               benefit plans of SBC except where required by law.

7.      Designation of Beneficiaries.  An Eligible Employee may designate pursuant to SBC's Rules for Employee
        Beneficiary Designations as may hereafter be amended from time-to-time ("Rules"), which Rules shall
        apply hereunder and are incorporated herein by this reference, a beneficiary or beneficiaries to
        receive in case of the employee's death all or part of the awards which may be made to the employee
        under the Plan.  A designation of beneficiary may be replaced by a new designation or may be revoked
        by the employee at any time.  A designation or revocation shall be on a form to be provided for the
        purpose and shall become effective only when filed with SBC during the employee's lifetime with
        written acknowledgement of receipt from SBC.  In case of the employee's death, an award made under the
        Plan with respect to which a designation of beneficiary has been made (to the extent it is valid and
        enforceable under applicable law) shall be paid to the designated beneficiary or beneficiaries.  Any
        award made to an employee who is deceased and not subject to such a designation shall be distributed
        in accordance with the Rules.

8.      Plan Administration.

        (a)    The Committee or the Chairman, as applicable, shall have full power to administer and interpret
               the Plan and to establish rules for its administration.  Awards under the Plan shall be
               conclusively determined by the Committee or the Chairman, as applicable.  Any determinations or
               actions required or permitted to be made by the Committee or the Chairman, as applicable, may
               be delegated by the Committee or the Chairman in its sole discretion.  The Committee or the
               Chairman, as applicable, or any delegate thereof, in making any determinations under or
               referred to in the Plan shall be entitled to rely on opinions, reports or statements of
               officers or employees of SBC and/or of any subsidiary thereof and of counsel, public
               accountants and other professional or expert persons.

        (b)    The Plan shall be governed by the laws of the State of Texas and applicable Federal law.

9.      Modification or Termination of Plan.  This Plan may be modified or terminated at any time in
        accordance with the provisions of SBC's Schedule of Authorizations.  A modification may affect present
        and future Eligible Employees.

                                           SHORT TERM INCENTIVE PLAN
                                           ADMINISTRATIVE GUIDELINES


                                               TABLE OF CONTENTS



Section        Subject                             Page

1.      Purpose.........................................................  1
2       Award Process...................................................  1
3.      Performance Criteria............................................  1&2
4.      Funding.........................................................  2
5.      Distribution of Awards..........................................  2&3
6.      Changes/Exceptions..............................................  3

SHORT TERM INCENTIVE PLAN
ADMINISTRATIVE GUIDELINES

1. Purpose. The purpose of these Guidelines is to outline the procedures to be followed in administering
SBC's Short Term Incentive Plan (the "Plan").

2. Award Process. The Committee shall approve a Target Award for each eligible Officer. The Chairman
shall approve a Target Award for each non-Officer Eligible Employee. These Target Awards are based on
market-based rates established for each Eligible Employee and shall generally be established in
January of the Award Year.

Annual financial and/or other performance objectives for Officers for an Award Year shall be approved
by the Committee each year, generally in January of the Award Year. Objectives for non-Officer
Eligible Employees shall be approved by the Chairman. Annual financial and/or other performance
results (upon which the payment of Awards for Officers shall be based), maximum funding levels, and
payout recommendations requiring Committee approval, will be submitted to and approved by the
Committee after the Award Year is completed. Results for non-Officer Eligible Employees shall be
approved by the Chairman.

An individual's Target Award will be prorated over the Award Year, if applicable, according to Section
3(b) of the Plan.

Target Awards will be adjusted for distribution based upon achievement during the Award Year, of the
financial and/or other performance criteria established by the Committee or the Chairman, as
applicable. Discretionary awards may also be granted as described in Section 5, to be paid out of
funds from the Discretionary Pools.

3. Performance Criteria. The performance criteria established by the Committee or the Chairman, as
applicable, may be one or more of the following:

• Financial Performance Criteria

Achievement of Value Added objectives or other financial objectives (e.g., gross contributions,
revenues, net income, operating contribution, etc.) will be used as financial performance criteria
for all entities.

Value Added shall be a measure of earnings above a return required by investors (i.e., generally,
net operating contribution less a capital charge).

Value Added or other financial measurement's performance is determined after adjustment in
accordance with the following:

In order to assure the incentive features of the Plan and to avoid distortion in the operation
of the Plan, the Committee or the Chairman, as applicable, shall make adjustments in the
criteria established for any Award Year, whether before or after the end of the Award Year to
compensate for or reflect any extraordinary changes which may have occurred during the Award
Year which alter the basis upon which performance levels were determined. Such changes include
the following: accounting changes, extraordinary items, income from discontinued operations,
and the impact of material events that have been publicly disclosed.

• Other Performance Criteria

Other performance criteria may include, but are not limited to, Value Drivers, i.e., quantifiable
operational and other indicators, such as revenue growth, customer or subscriber growth, operating
margin, etc., that are tied to the strategy of the operating entity and are key barometers of
value creation.

4. Funding. Each year, a maximum funding level of 1.0 percent of reported SBC net income (before any
extraordinary loss and/or cumulative effect of changes in accounting principles) minus amounts paid as
Key Executive Officer Short Term Award(s) pursuant to the 1996 Stock and Incentive Plan shall be
available to payment or awards under the Plan with respect to the preceding Award Year.

5. Distribution of Awards. Awards for the preceding Award Year will generally be distributed after
completion of the Award Year in accordance with the following paragraphs. Distribution of all awards
is subject to approval by the Committee or the Chairman, as applicable, generally obtained in January
following the completion of an Award Year.

Formula-Driven Awards -

The Committee, or the Chairman, as applicable, shall establish financial and/or other performance
objectives for SBC and such other entities as deemed appropriate by the Committee or the Chairman, as
applicable.

A percentage of the Target Award for the preceding Award Year is paid to Officers and to non-Officer
Eligible Employees in each entity based on the achievement of applicable financial and/or other
performance results of their entity.

Discretionary Pools -

After determination of formula-driven awards, the Committee for Officers and the Chairman for
non-Officer Eligible Employees may establish Discretionary Pools to reward individuals and/or entities
for exceptional performance. Maximum funding available for Discretionary Pools is the maximum funding
level described in Section 4 less the formula-driven amounts distributed.

The Committee or the Chairman, as applicable, will determine funding for each pool and provide
guidelines for distribution of awards. The following are examples of factors that may be considered:

• Financial results above objective
• Outstanding customer service results
• Advancement of workforce diversity
• Outstanding individual contribution

The Chairman will recommend to the Committee the discretionary awards for officers reporting directly
to the Chairman.

6. Changes/Exceptions. Changes in these Guidelines and exceptions to their provisions may be authorized
by the Committee.

EX-10 4 exh10c.htm SUPPLEMENTAL LIFE INSURANCE PLAN Exhibit 10-c(i)

Exhibit 10-c(i)

        Termination Under EPR.  In determining whether an Eligible Employee's termination of employment under
        the Enhanced Pension and Retirement Program ("EPR") is a Retirement for purposes of this Plan, five
        years shall be added to each of age and net credited service ("NCS").  If with such additional age and
        years of service, (1) an Eligible Employee upon such termination of employment under EPR is Retirement
        Eligible according to the SBC Supplemental Retirement Income Plan ("SRIP") or (2) the Eligible
        Employee upon such termination of employment under EPR has attained one of the following combinations
        of age and service,

        Actual NCS + 5 Years                Actual Age + 5 Years

        10 years or more                    65 or older
        20 years or more                    55 or older
        25 years or more                    50 or older
        30 years or more                    Any age

        then such termination of employment shall be a Retirement for all purposes under this Plan and the
        Eligible Employee shall be entitled to the treatment under this Plan afforded in the case of a
        termination of employment which is a Retirement.

EX-10 5 exh10d.htm SUPPLEMENTAL RETIREMENT INCOME PLAN Exhibit 10-d


Exhibit 10-d





                     SUPPLEMENTAL RETIREMENT INCOME PLAN













                                                   Effective:  January 1, 1984
                                         Revisions Effective:  October 1, 2000



                     SUPPLEMENTAL RETIREMENT INCOME PLAN


                              TABLE OF CONTENTS

      Section                                                      Page
      1.    Purpose                                                 1
      2.    Definitions                                             1
      3.    Plan ("SRIP") Benefits                                  5
            3.1   Termination of Employment/Vesting                 5
            3.2   Disability                                        7
            3.3   Benefit Payout Alternatives                       7
      4.    Death Benefits                                          10
            4.1   Death                                             10
            4.2   Disability                                        10
            4.3   Termination of Employment                         11
      5.    Payment                                                 11
            5.1   Commencement of Payments                          11
            5.2   Withholding; Unemployment Taxes                   11
            5.3   Recipients of Payments; Designation of            11
                    Beneficiary
            5.4   Additional Benefit                                11
            5.5   No Other Benefits                                 12
            5.6   Small Benefit                                     12
            5.7   Special Increases                                 12
      6.    Conditions Related to Benefits                          14
            6.1   Administration of Plan                            14
            6.2   No Right to SBC Assets                            14
            6.3   Trust Fund                                        14
            6.4   No Employment Rights                              14
            6.5   Modification or Termination of Plan               15
            6.6   Offset                                            16
            6.7   Change in Status                                  16
      7.    Miscellaneous                                           16
            7.1   Nonassignability                                  16
            7.2   Non-Competition                                   16
            7.3   Notice                                            17
            7.4   Validity                                          18
            7.5   Applicable Law                                    18
            7.6   Plan Provisions in Effect Upon                    18
                    Termination of Employment
      Attachment (Agreement)



                     SUPPLEMENTAL RETIREMENT INCOME PLAN

1.    Purpose.  The purpose of the Supplemental Retirement Income Plan
("Plan") is to provide Eligible Employees with retirement benefits to
supplement benefits payable pursuant to SBC's qualified group pension plans.

2.    Definitions.  For purposes of this Plan, the following words and
phrases shall have the meanings indicated, unless the context clearly
indicates otherwise:

      Administrative Committee.  "Administrative Committee" means a Committee
      consisting of the Senior Executive Vice President-Human Resources and
      two or more other members designated by the Senior Executive Vice
      President-Human Resources who shall administer the Plan.

      Agreement.  "Agreement" means the written agreement (substantially in
      the form attached to this Plan) that shall be entered into between SBC
      by the Senior Executive Vice President-Human Resources and a
      Participant to carry out the Plan with respect to such Participant.
      Entry into a new Agreement shall not be required upon amendment of the
      Plan or upon an increase in a Participant's Retirement Percent (which
      increase shall nevertheless be utilized to determine the Participant's
      benefits hereunder even though not reflected in the Participant's
      Agreement), except entry into a new Agreement shall be required in the
      case of an amendment which alters, to the detriment of a Participant,
      the benefits described in this Plan as applicable to such Participant
      (See Section 6.5).  Such new Agreement shall operate as the written
      consent required by Section 6.5 of the Participant to such amendment.

      Beneficiary.  "Beneficiary" shall mean any beneficiary or beneficiaries
      designated by the Eligible Employee pursuant to the SBC Rules for
      Employee Beneficiary Designations as may hereafter be amended from
      time-to-time ("Rules").

      Chairman.  "Chairman" shall mean the Chairman of the Board of SBC
      Communications Inc.

      Disability.  "Disability" means any Termination of Employment prior to
      being Retirement Eligible that the Administrative Committee, in its
      complete and sole discretion, determines is by reason of a
      Participant's total and permanent disability.  The Administrative
      Committee may require that the Participant submit to an examination by
      a competent physician or medical clinic selected by the Administrative
      Committee.  On the basis of such medical evidence, the determination of
      the Administrative Committee as to whether or not a condition of total
      and permanent disability exists shall be conclusive.

      Earnings.  "Earnings" means for a given calendar year the
      Participant's: (1) bonus made as a short term award during the calendar
      year but not exceeding 200% of the target amount of such bonus (or such
      other portion of the bonus as may be determined by the Human Resources
      Committee of the Board of SBC), plus (2) base salary before reduction
      due to any contribution pursuant to any deferred compensation plan or
      agreement provided by SBC, including but not limited to compensation
      deferred in accordance with Section 401(k) of the Internal Revenue Code.

      Eligible Employee.  "Eligible Employee" means an Officer or a
      non-Officer employee of any SBC company who is designated by the
      Chairman as eligible to participate in the Plan.  Effective on and
      after July 1, 1994, only an Officer may become an Eligible Employee.

      Final Average Earnings.  "Final Average Earnings" means the average of
      the Participant's Monthly Earnings for the thirty-six (36) consecutive
      months out of the one hundred twenty (120) months next preceding the
      Participant's Termination of Employment which yields the highest
      average earnings.  If the Participant has fewer than thirty-six (36)
      months of employment, the average shall be taken over his or her period
      of employment.

      Immediate Annuity Value.  "Immediate Annuity Value" means the annual
      amount of annuity payments that would be paid out of a plan on a single
      life annuity basis if payment of the plan's benefit was commenced
      immediately upon Termination of Employment, notwithstanding the form of
      payment of the plan's benefit actually made to the Participant (i.e.,
      joint and survivor annuity, lump sum, etc.) and notwithstanding the
      actual commencement date of the payment of such benefit.

      Mid-Career Hire.  "Mid-Career Hire" means an individual hired or
      rehired at age 35 or older (i) into a position eligible for benefits
      under this Plan or (ii) who is subsequently promoted to a position
      eligible for benefits under this Plan.

      Monthly Earnings.  "Monthly Earnings" means one-twelfth (1/12) of
      Earnings.

      Officer.  "Officer" shall mean an individual who is designated by the
      Chairman as eligible to participate in the Plan who is an elected
      officer of SBC or of any SBC subsidiary (direct or indirect).

      Participant.  A "Participant" means an Eligible Employee who has
      entered into an Agreement to Participate in the Plan.

      Retirement.  "Retirement" shall mean the Termination of Employment of
      an Eligible Employee for reasons other than death, on or after the
      earlier of the following dates:  (1) the date the Eligible Employee is
      Retirement Eligible or (2) the date the Eligible Employee has attained
      one of the following combinations of age and service at Termination of
      Employment on or after April 1, 1997, except as otherwise indicated
      below:

            Net Credited Service       Age

            10 years or more        65 or older
            20 years or more        55 or older
            25 years or more        50 or older
            30 years or more        Any age

      With respect to an Eligible Employee who is granted an EMP Service
      Pension under and pursuant to the provisions of the SBC Pension Benefit
      Plan - Nonbargained Program ("SBCPBP") upon Termination of Employment,
      the term "Retirement" shall include such Eligible Employee's
      Termination of Employment.

      Retirement Eligible.  "Retirement Eligible" or "Retirement Eligibility"
      means that a Participant has attained age 55; provided, however, if (1)
      the Participant is, or has been within the one year period immediately
      preceding the relevant date, an Officer with 30 or more Years of
      Service and has not attained age 55, or 2) the Participant has 15 or
      more Years of Service and has not attained age 55 and is, or has been
      within the one year period immediately preceding the relevant date, the
      Chairman or a Direct Reporting Officer as such term is defined in SBC's
      Schedule of Authorizations, he shall nevertheless be deemed to be
      Retirement Eligible.  Note:  Any reference in any other SBC plan to a
      person being eligible to retire with an immediate pension pursuant to
      the SBC Supplemental Retirement Income Plan shall be interpreted as
      having the same meaning as the term Retirement Eligible.

      Retirement Percent.  "Retirement Percent" means the percent specified
      in the Agreement with the Participant which establishes a Target
      Retirement Benefit (see Section 3.1) as a percentage of Final Average
      Earnings.

      SBC.  "SBC" means SBC Communications Inc.

      Service Factor.  "Service Factor" means, unless otherwise agreed in
      writing by the Participant and SBC, either (a) a deduction of 1.43
      percent, or .715 percent for Mid-Career Hires, multiplied by the number
      by which (i) thirty-five (or thirty in the case of an Officer) exceeds
      (ii) the number of Years of Service of the Participant, or (b) a credit
      of 0.71 percent multiplied by the number by which (i) the number of
      Years of Service of the Participant exceeds (ii) thirty-five (or thirty
      in the case of an Officer).  For purposes of the above computation, a
      deduction shall result in the Service Factor being subtracted from the
      Retirement Percent whereas a credit shall result in the Service Factor
      being added to the Retirement Percent.

      Termination of Employment.  "Termination of Employment" means the
      ceasing of the Participant's employment from the SBC controlled group
      of companies for any reason whatsoever, whether voluntarily or
      involuntarily.

      Year.  A "Year" is a period of twelve (12) consecutive calendar months.

      Year of Service. "Year of Service" means each complete Year of
      continuous, full-time service as an employee beginning on the date when
      a Participant first began such continuous employment with any SBC
      company and on each anniversary of such date, including service prior
      to the adoption of this Plan.

3.    Plan ("SRIP") Benefits

      3.1.  Termination of Employment/Vesting.  With respect to (1) a person
            who becomes a Participant prior to January 1, 1998, or (2) a
            person who prior to January 1, 1998 is an officer of a Pacific
            Telesis Group ("PTG") company and becomes a Participant after
            January 1, 1998, upon such a Participant's Termination of
            Employment, SBC shall pay to such Participant a monthly SRIP
            Benefit in accordance with Section 3.3.  The amount of such
            monthly SRIP Benefit is calculated as follows:

                    Final Average Earnings
                 x  Revised Retirement Percentage
                 =  Target Retirement Benefit
                 -  Immediate Annuity Value of any SBC/PTG Qualified Pensions
                 -  Immediate Annuity Value of any other SBC/PTG Non-Qualified
                      Pensions other than SRIP
                 =  Target Benefit
                 -  Age Discount    
                 =  SRIP Benefit immediately payable upon Termination of
                      Employment

            With respect to a person who is appointed an Officer and becomes
            a Participant on or after January 1, 1998, upon such a
            Participant's Termination of Employment, SBC shall pay to such
            Participant a monthly SRIP Benefit in accordance with Section
            3.3.  The amount of such monthly SRIP Benefit is calculated as
            follows:

                 Final Average Earnings
                 x  Revised Retirement Percentage
                 =  Target Retirement Benefit
                 -   Age Discount   
                 =  Discounted Target Benefit
                 -  Immediate Annuity Value of any SBC/PTG Qualified Pensions
                 -  Immediate Annuity Value of any SBC/PTG Non-Qualified
                       Pensions, other than SRIP
                 =   SRIP Benefit immediately payable upon Termination of
                       Employment

            Where in both of the above cases the following apply:

            (a)  Revised Retirement Percentage = Retirement Percent + Service
                 Factor

            (b)  For purposes of determining the Service Factor, the
                 Participant's actual Years of Service as of the date of
                 Termination of Employment, to the day, shall be used.

            (c)  For purposes of determining the Final Average Earnings, the
                 Participant's Earnings history as of the date of Termination
                 of Employment shall be used.

            (d)  Age Discount means the Participant's SRIP Benefit shall be
                 decreased by five-tenths of one percent (.5%) for each month
                 that the date of the commencement of payment precedes the
                 date on which the Participant will attain age 60.

                 Notwithstanding the foregoing, if at the time of Termination
                 of Employment the Participant (1) is, or has been within the
                 one year period immediately preceding Participant's
                 Termination of Employment, an Officer with 30 or more years
                 of Service or (2) has 15 or more Years of Service and is, or
                 has been within the one year period immediately preceding
                 Participant's Termination of Employment, the Chairman or a
                 Direct Reporting Officer, such Participant's Age Discount
                 shall be zero.

            Except to true up for an actual short term award paid following
            Termination of Employment, there shall be no recalculation of a
            Participant's monthly SRIP Benefit following Participant's
            Termination of Employment.

            If a Participant who has commenced payment of his or her SRIP
            Benefit dies, his or her Beneficiary shall be entitled to receive
            the remaining installments of such SRIP Benefit, if any, which
            are payable in accordance with Section 3.3.  If a Participant
            dies while in active service, Section 4 shall apply.

            Notwithstanding any other provision of this Plan, upon any
            Termination of Employment of the Participant for a reason other
            than death or Disability, SBC shall have no obligation to the
            Participant under this Plan if the Participant has less than 5
            Years of Service at the time of Termination of Employment.

      3.2   Disability.  Upon a Participant's Disability and application for
            benefits under the Social Security Act as now in effect or as
            hereinafter amended, the Participant will continue to accrue
            Years of Service during his or her Disability until the earliest
            of his or her:

            (a)   Recovery from Disability,

            (b)   Retirement, or

            (c)   Death.

            Upon the occurrence of either (a) Participant's recovery from
            Disability prior to his or her Retirement Eligibility if
            Participant does not return to employment, or (b) Participant's
            Retirement, the Participant shall be entitled to receive a SRIP
            Benefit in accordance with Section 3.1.

            For purposes of calculating the foregoing benefit, the
            Participant's Final Average Earnings shall be determined using
            his or her Earnings history as of the date of his or her
            Disability.

            If a Participant who continues to have a Disability dies prior to
            his or her Retirement Eligibility, the Participant will be
            treated in the same manner as if he or she had died while in
            employment (See Section 4.1).

      3.3   Benefit Payout Alternatives.  The normal form of a Participant's
            benefits hereunder shall be a Life with 10-Year Certain Benefit
            as described in Section 3.3(a).  However, a Participant may elect
            in his or her Agreement to convert his or her benefits hereunder,
            into one of the Alternative Benefits described in Section 3.3(b)
            and (c).

            (a)   Life with a 10-Year Certain Benefit.  An annuity payable
                  during the longer of (i) the life of the Participant or
                  (ii) the 10-year period commencing on the date of the first
                  payment and ending on the day next preceding the tenth
                  anniversary of such date (the "Life With 10-Year Certain
                  Benefit").  If a Participant who is receiving a Life with
                  10-Year Certain Benefit dies prior to the expiration of the
                  10-year period described in this Section 3.3(a), the
                  Participant's Beneficiary shall be entitled to receive the
                  remaining Life With 10-Year Certain Benefit installments
                  which would have been paid to the Participant had the
                  Participant survived for the entire such 10-year period.

            (b)   Joint and 100% Survivor Benefit.  A joint and one hundred
                  percent (100%) survivor annuity payable for life to the
                  Participant and at his or her death to his or her
                  Beneficiary, in an amount equal to one hundred percent
                  (100%) of the amount payable during the Participant's life,
                  for life (the "Joint and 100% Survivor Benefit").

            (c)   Joint and 50% Survivor Benefit.  A joint and fifty percent
                  (50%) survivor annuity payable for life to the Participant
                  and at his or her death to his or her Beneficiary, in an
                  amount equal to fifty percent (50%) of the amount payable
                  during the Participant's life, for life (the "Joint and 50%
                  Survivor Benefit").

            The Benefit Payout Alternatives described in Section 3.3(b) and
            3.3(c) shall be the actuarially determined equivalent (as
            determined by the Administrative Committee in its complete and
            sole discretion) of the Life With 10-Year Certain Benefit that is
            converted by such election.

            Any election made pursuant to this Section 3.3 shall be made in
            the Participant's Agreement and once made shall be irrevocable.
            Notwithstanding the foregoing, a Participant may elect in his or
            her Agreement to defer the time by which he or she is required to
            elect one of the foregoing forms of Benefit Payout Alternatives.
            Any such deferred election must be made by the Participant in
            writing to the Administrative Committee no later than the last
            day of the calendar year preceding the calendar year in which
            Participant's Retirement takes place or other benefit payment
            under this Plan commences.

            If a Participant's Agreement fails to show an election of a
            Benefit Payout Alternative, or if the Participant having chosen
            to defer his or her benefit election, fails to make a timely
            election of benefits, such Participant's form of benefit shall be
            the Life With 10-Year Certain Benefit which is described in
            Section 3.3(a).

            Notwithstanding the foregoing, in the event of the death of a
            designated annuitant during the life of the Participant, the
            Participant's election to have a Benefit Payout Alternative
            described in Section 3.3(b) or 3.3(c) shall be deemed to be
            revoked, in which event, subject to the conditions and
            limitations specified in the immediately preceding paragraph, or
            within the ninety-day period following the death of the annuitant
            if such period would end later than the time allowed for an
            election by the immediately preceding paragraph, the Participant
            may elect to have his or her benefit, or remaining benefit, under
            the Plan, as the case may be, paid in any of the forms described
            in this Section 3.3.  In the event the Participant's designated
            annuitant predeceases the Participant and the Participant fails
            to make a timely election in accordance with the provisions of
            the immediately preceding sentence, the Participant's benefit, or
            remaining benefit, as the case may be, shall be paid or
            reinstated, as the case may be, in the form of a Life With
            10-Year Certain Benefit as described in Section 3.3(a).  Any
            conversion of benefit from one form to another pursuant to the
            provisions of this paragraph shall be subject to actuarial
            adjustment (as determined by the Administrative Committee in its
            complete and sole discretion) such that the Participant's new
            benefit is the actuarial equivalent of the Participant's
            remaining prior form of benefit.  Payments pursuant to
            Participant's new form of benefit shall be effective commencing
            with the first monthly payment for the month following the death
            of the annuitant.

            Notwithstanding any other provision of this Plan to the contrary,
            payment in the form of a Benefit Payout Alternative described in
            Section 3.3(b) or 3.3(c), with a survivor annuity for the benefit
            of the Participant's spouse as Beneficiary, may be waived by the
            annuitant with the consent of the Participant in the event of the
            divorce (or legal separation) of said annuitant from said
            Participant.  In such event, the Participant's benefit shall be
            reinstated to the remainder of the Life with 10-Year Certain
            Benefit as described in Section 3.3(a) (i.e., the 10-Year period
            as described in Section 3.3(a) shall be the same 10-year period
            as if such form of benefit was the form of benefit originally
            selected and the expiration date of such period shall not be
            extended beyond its original expiration date) effective
            commencing with the first monthly payment following receipt of
            the waiver and Participant consent in a form acceptable to the
            Administrative Committee.  A waiver of the type described in this
            paragraph shall be irrevocable.

4.    Death Benefits

      4.1   Death.  If a Participant dies prior to his or her Retirement, a
            pre-retirement death benefit will be calculated and paid as
            though the Participant had retired on the day prior to the date
            of death.  Notwithstanding the provisions of Section 3.3, if a
            Participant's Agreement fails to show an election of a Benefit
            Payout Alternative, or if the Participant, having chosen to defer
            his benefit election, failed to make a timely election of
            benefits prior to his death, the form of the pre-retirement death
            benefit shall, at the option of the Participant's Beneficiary, be
            either the Life With 10-Year Certain Benefit form of the
            Participant's benefit or a Beneficiary Life Annuity (as such term
            is hereinafter described) based on the life expectancy of the
            Beneficiary.  If paid as a Beneficiary Life Annuity based on the
            Life of the Beneficiary, such benefit shall be the actuarially
            determined equivalent (as determined by the Administrative
            Committee in its complete and sole discretion) of the Life With
            10-Year Certain Benefit; provided, however, should the
            Beneficiary die prior to the payment to the Beneficiary of the
            total dollar amount of the Life with 10-Year Certain Benefit, the
            remaining dollar balance of such Life With 10-Year Certain
            Benefit shall be paid in accordance with the Participant's
            beneficiary designation and the Rules at the same monthly rate of
            payment as would have been the monthly payment pursuant to the
            10-year payment schedule had the Life With 10-Year Certain
            Benefit been selected.

      4.2   Disability.  In the event that a Participant terminates
            employment prior to Retirement by reason of a Disability that
            entitles the Participant to continue to accrue Years of Service
            until Retirement Eligibility pursuant to Section 3.2 and
            thereafter dies after attaining Retirement Eligibility, the
            Employer shall pay to the Participant's Beneficiary the Death
            Benefit specified in Section 4.1 based on the Participant's
            Monthly Earnings for the twelve (12) months preceding his or her
            Disability.  No death benefit shall be payable if the Participant
            dies prior to attaining Retirement Eligibility.

      4.3   Termination of Employment.  If a Participant terminates
            employment other than by reason of Disability prior to Retirement
            Eligibility, no death benefit shall be payable to the
            Participant's Beneficiary.

5.    Payment.

      5.1   Commencement of Payments.  Commencement of payments under this
            Plan shall begin not later than sixty (60) days following the
            occurrence of an event with entitles a Participant (or a
            Beneficiary) to payments under this Plan.

      5.2   Withholding; Unemployment Taxes.  To the extent required by the
            law in effect at the time payments are made, any taxes required
            to be withheld by the Federal or any state or local government
            shall be withheld from payments made hereunder.

      5.3   Recipients of Payments; Designation of Beneficiary.  All payments
            to be made under the Plan shall be made to the Participant during
            his or her lifetime, provided that if the Participant dies prior
            to the completion of such payments, then all subsequent payments
            under the Plan shall be made to the Participant's Beneficiary or
            Beneficiaries.

            In the event of the death of a Participant,
            distributions/benefits under this Plan shall pass to the
            Beneficiary (ies) designated by the Participant in accordance
            with the Rules.

      5.4   Additional Benefit.  The reduction of any benefits payable under
            the SBC Pension Benefit Plan ("SBCPBP"), which results from
            participation in the SBC Senior Management Deferred Compensation
            Program of 1988, will be restored under this Plan.

      5.5   No Other Benefits. No benefits shall be paid hereunder to the
            Participant or his or her Beneficiary except as specifically
            provided herein.

      5.6   Small Benefit.  Notwithstanding any election made by the
            Participant, the Administrative Committee in its sole discretion
            may pay any benefit in the form of a lump sum payment if the lump
            sum equivalent amount is or would be less than $10,000 when
            payment of such benefit would otherwise commence.

      5.7   Special Increases.

            5.7.1 1990 Special Increase.  Notwithstanding any other provision
                  of this Plan to the contrary:

                  (a)   Effective July 1, 1990, the monthly pension benefit
                        amount then being paid hereunder to a retired
                        Participant whose Plan payments began before January
                        1990 shall be increased by 1/30 of 5.0% for each
                        month from and including January 1988 or the month in
                        which said Participant's pension payments began,
                        whichever is later, through and including June 1990,
                        inclusive.

                  (b)   Effective July 1, 1990, the present and/or future
                        monthly payment hereunder of a surviving annuitant of
                        a Participant whose Plan payments began before
                        January 1990 or of a Participant who died in active
                        service before January 1990, shall be increased by
                        the same percentage as the related pension was or
                        would have been increased under the provisions of
                        Paragraph (a) of this Section 5.7.1.

            5.7.2 Enhanced Management Pension (EMP) Flow-Through For 
                  Participant Receiving Other Than an SBCPBP "Cash Balance"
                  Benefit. Notwithstanding any other provision of this Plan
                  to the contrary:

                  (a)   Effective December 30, 1991, a Participant who as of
                        the date of his or her Retirement satisfies the
                        requirements for a service pension under the terms of
                        the SBCPBP as it existed prior to December 30, 1991,
                        shall have his or her SRIP Benefit determined without
                        subtracting any increase in his or her SBCPBP (or
                        successor plan) pension amount attributable to the
                        Enhanced Management Pension ("EMP") provisions
                        thereof, i.e., EMP benefits will "flow-through" to
                        the Participant; provided, however, such additional
                        benefit amounts corresponding to term of employment
                        extending beyond age 65 through application of the
                        EMP provisions shall be subtracted.

                  (b)   EMP flow-through shall not apply in the case of any
                        person who becomes an Eligible Employee after
                        December 31, 1997.

            5.7.3 1993 Special Increase and Subsequent Special Increases.
                  Notwithstanding any other provisions of this Plan to the
                  contrary:

                  (a)   Effective July 1, 1993, the monthly pension benefit
                        amount then being paid hereunder to (1) all retired
                        Participants whose Plan payments began before July 1,
                        1993, (2) then current and contingent annuitants of
                        such retired Participants who elected one of the
                        Plan's survivor annuities and (3) then current
                        annuitants of employees who before July 1, 1993 died
                        in active service shall be increased in the same
                        percentages as the SBCPBP ad hoc pension increase
                        percentages effective July 1, 1993.

                  (b)   Any time after July 1, 1993 that SBCPBP is amended to
                        provide for an ad hoc pension increase for SBCPBP
                        nonbargained participants, the same percentage
                        increase shall apply to Plan benefit amounts.

6.    Conditions Related to Benefits.

      6.1   Administration of Plan.  The Administrative Committee shall be
            the sole administrator of the Plan and will administer the Plan,
            interpret, construe and apply its provisions in accordance with
            its terms.  The Administrative Committee shall further establish,
            adopt or revise such rules and regulations as it may deem
            necessary or advisable for the administration of the Plan.  All
            decisions of the Administrative Committee shall be final and
            binding unless the Board of Directors should determine otherwise.

      6.2   No Right to SBC Assets.  Neither a Participant nor any other
            person shall acquire by reason of the Plan any right in or title
            to any assets, funds or property of any SBC company whatsoever
            including, without limiting the generality of the foregoing, any
            specific funds or assets which SBC, in its sole discretion, may
            set aside in anticipation of a liability hereunder, nor in or to
            any policy or policies of insurance on the life of a Participant
            owned by SBC.  No trust shall be created in connection with or by
            the execution or adoption of this Plan or any Agreement, and any
            benefits which become payable hereunder shall be paid from the
            general assets of SBC.  A Participant shall have only a
            contractual right to the amounts, if any, payable hereunder
            unsecured by any asset of SBC.

      6.3   Trust Fund.  SBC shall be responsible for the payment of all
            benefits provided under the Plan.  At its discretion, SBC may
            establish one or more trusts, for the purpose of providing for
            the payment of such benefits.  Such trust or trusts may be
            irrevocable, but the assets thereof shall be subject to the
            claims of SBC's creditors.  To the extent any benefits provided
            under the Plan are actually paid from any such trust, SBC shall
            have no further obligation with respect thereto, but to the
            extent not so paid, such benefits shall remain the obligation of,
            and shall be paid by SBC.

      6.4   No Employment Rights.  Nothing herein shall constitute a contract
            of continuing employment or in any manner obligate any SBC
            company to continue the service of a Participant, or obligate a
            Participant to continue in the service of any SBC company and
            nothing herein shall be construed as fixing or regulating the
            compensation paid to a Participant.

      6.5   Modification or Termination of Plan. This Plan may be modified
            or terminated at any time in accordance with the provisions of
            SBC's Schedule of Authorizations.  A modification may affect
            present and future Eligible Employees.  SBC also reserves the
            sole right to terminate at any time any or all Agreements.  In
            the event of termination of the Plan or of a Participant's
            Agreement, a Participant shall be entitled to benefits hereunder,
            if prior to the date of termination of the Plan or of his or her
            Agreement, such Participant has attained 5 Years of Service, in
            which case, regardless of the termination of the
            Plan/Participant's Agreement, such Participant shall be entitled
            to benefits at such time as provided in and as otherwise in
            accordance with the Plan and his or her Agreement, provided,
            however, Participant's benefit shall be computed as if
            Participant had terminated employment as of the date of
            termination of the Plan or of his or her Agreement; provided
            further, however, Participant's service subsequent to
            Plan/Agreement termination shall be recognized for purposes of
            reducing or eliminating the Age discount provided for by Section
            3.1(d).  No amendment, including an amendment to this Section
            6.5, shall be effective, without the written consent of a
            Participant, to alter, to the detriment of such Participant, the
            benefits described in this Plan as applicable to such Participant
            as of the effective date of such amendment.  For purposes of this
            Section 6.5, an alteration to the detriment of a Participant
            shall mean a reduction in the amount payable hereunder to a
            Participant to which such Participant would be entitled if such
            Participant terminated employment at such time, or any change in
            the form of benefit payable hereunder to a Participant to which
            such Participant would be entitled if such Participant terminated
            employment at such time.  Any amendment which reduces
            Participant's benefit hereunder to adjust for a change in his or
            her pension benefit resulting from an amendment to any
            company-sponsored defined benefit pension plan which changes the
            pension benefits payable to all employees, shall not require the
            Participant's consent.  Written notice of any amendment shall be
            given to each Participant.

      6.6   Offset.  If at the time payments or installments of payments are
            to be made hereunder, a Participant or his Beneficiary or both
            are indebted to any SBC company, then the payments remaining to
            be made to the Participant or his Beneficiary or both may, at the
            discretion of the Board of Directors, be reduced by the amount of
            such indebtedness; provided, however, that an election by the
            Board of Directors not to reduce any such payment or payments
            shall not constitute a waiver of such SBC company's claim for
            such indebtedness.

      6.7   Change in Status.In the event of a change in the employment
            status of a Participant to a status in which he is no longer an
            Eligible Employee, the Participant shall immediately cease to be
            eligible for any benefits under this Plan except such benefits as
            had previously vested.  Only Participant's Years of Service and
            Earnings history prior to the change in his employment status
            shall be taken into account for purposes of determining
            Participant's vested benefits hereunder.

7.    Miscellaneous.

      7.1   Nonassignability. Neither a Participant nor any other person
            shall have any right to commute, sell, assign, transfer, pledge,
            anticipate, mortgage or otherwise encumber, transfer, hypothecate
            or convey in advance of actual receipt of the amounts, if any,
            payable hereunder, or any part thereof, which are, and all rights
            to which are, expressly declared to be unassignable and
            non-transferable.  No part of the amounts payable shall, prior to
            actual payment, be subject to seizure or sequestration for the
            payment of any debts, judgments, alimony or separate maintenance
            owed by a Participant or any other person, nor be transferable by
            operation of law in the event of a Participant's or any other
            person's bankruptcy or insolvency.

      7.2   Non-Competition.  Notwithstanding any other provision of this
            Plan, all benefits provided under the Plan with respect to a
            Participant shall be forfeited and canceled in their entirety if
            the Participant, without the consent of SBC and while employed by
            SBC or any subsidiary thereof or within three (3) years after
            termination of such employment, engages in competition with SBC
            or any subsidiary thereof or with any business with which SBC or
            a subsidiary or affiliated company has a substantial interest
            (collectively referred to herein as "Employer business") and
            fails to cease and desist from engaging in said competitive
            activity within 120 days following receipt of written notice from
            SBC to Participant demanding that Participant cease and desist
            from engaging in said competitive activity.  For purposes of this
            Plan, engaging in competition with any Employer business shall
            mean engaging by the Participant in any business or activity in
            the same geographical market where the same or substantially
            similar business or activity is being carried on as an Employer
            business.  Such term shall not include owning a nonsubstantial
            publicly traded interest as a shareholder in a business that
            competes with an Employer business.  However, engaging in
            competition with an Employer business shall include representing
            or providing consulting services to, or being an employee of, any
            person or entity that is engaged in competition with any Employer
            business or that takes a position adverse to any Employer
            business.  Accordingly, benefits shall not be provided under this
            Plan if, within the time period and without the written consent
            specified, Participant either engages directly in competitive
            activity or in any capacity in any location becomes employed by,
            associated with, or renders service to any company, or parent or
            affiliate thereof, or any subsidiary of any of them, if any of
            them is engaged in competition with an Employer business,
            regardless of the position or duties the Participant takes and
            regardless of whether or not the employing company, or the
            company that Participant becomes associated with or renders
            service to, is itself engaged in direct competition with an
            Employer business.

      7.3   Notice.  Any notice required or permitted to be given to the
            Administrative Committee under the Plan shall be sufficient if in
            writing and hand delivered, or sent by certified mail, to the
            principal office of SBC, directed to the attention of the Senior
            Vice President-Human Resources.  Any notice required or permitted
            to be given to a Participant shall be sufficient if in writing
            and hand delivered, or sent by certified mail, to Participant at
            Participant's last known mailing address as reflected on the
            records of his or her employing company.  Notice shall be deemed
            given as of the date of delivery or, if delivery is made by mail,
            as of the date shown on the postmark or on the receipt for
            certification.

      7.4   Validity.  In the event any provision of this Plan is held
            invalid, void or unenforceable, the same shall not affect, in any
            respect whatsoever, the validity of any other provision of this
            plan.

      7.5   Applicable Law.  This Plan shall be governed and construed in
            accordance with the laws of the State of Texas to the extent not
            preempted by the Employee Retirement Income Security Act of 1974,
            as amended, and regulations thereunder ("ERISA").

      7.6   Plan Provisions in Effect Upon Termination of Employment.  The
            Plan provisions in effect upon a Participant's termination of
            employment shall govern the provision of benefits to such
            Participant.  Notwithstanding the foregoing sentence, the
            benefits of a Participant whose Retirement occurred prior to
            February 1, 1989, shall be subject to the provisions of Section
            3.3 hereof.


                SUPPLEMENTAL RETIREMENT INCOME PLAN AGREEMENT

            THIS AGREEMENT is made and entered into at San Antonio, Texas as
of this _____ day of _______________, by and between SBC Communications Inc.
("SBC") and __________ ("Participant").

            WHEREAS, SBC has adopted a Supplemental Retirement Income Plan
(the "Plan"); and

            WHEREAS, the Participant has been determined to be eligible to
participate in the Plan; and

            WHEREAS, the Plan requires that an agreement be entered into
between SBC and Participant setting out certain terms and benefits of the
Plan as they apply to the Participant;

            NOW, THEREFORE, SBC and the Participant hereby agree as follows:

            1.    The Plan is hereby incorporated into and made a part of
                  this Agreement as though set forth in full herein.  The
                  parties shall be bound by, and have the benefit of, each
                  and every provision of the Plan as set forth in the Plan.

            2.    The Participant was born on ___________, and his or her
                  present employment began on _____________,

            3.    The Participant's "Retirement Percent" which is described
                  in the Plan shall be ________ percent (__%)

            4.    Election as to Form of Benefits.  The Participant elects
                  the Benefit Payout Alternative listed below next to which
                  the Participant has subscribed his or her initials.  If no
                  option is initialed, the Participant's form of benefit
                  under the Plan shall be the Life With 10-Year Certain
                  Benefit, which is listed under a. below:

                        a. Life with 10-Year Certain Benefit described in
                  Section 3.3(a) of the Plan.

                        b. Joint and 100% Survivor Benefit described in
                  Section 3.3(b) of the Plan.

                        c. Joint and 50% Survivor Benefit described in
                  Section 3.3(c) of the Plan.

                        d. The Participant elects to defer making an election
                  as to the form of benefit until no later than the
                           last day of the calendar year preceding the
                           calendar year in which the Participant's
                           Retirement takes place or SRIP benefit commences.

            This Agreement supersedes all prior Supplemental Retirement
Income Plan Agreements between SBC and Participant, and any amendments
thereto, and shall inure to the benefit of, and be binding upon, SBC, its
successors and assigns, and the Participant and his or her Beneficiaries.

            IN WITNESS WHEREOF, the parties hereto have signed and entered
into this Agreement on and as of the date first above written.



SBC:





By                             
     Senior Executive Vice President
      -Human Resources



PARTICIPANT:





By

EX-10 6 exh10h.htm EXHIBIT 10-H Exhibit 10-h

Exhibit 10-h








                                SALARY AND
                      INCENTIVE AWARD DEFERRAL PLAN


















                                                   Effective:  January 1, 1984
                                      Revisions Effective:  September 29, 2000


                              TABLE OF CONTENTS
Subject                                                          Page

Article 1 Statement of Purpose....................................1

Article 2 Definitions.............................................1

Article 3 Administration of the Plan..............................4

Article 4 Contributions...........................................4

      4.1   Elections to Make Contribution........................4
      4.2   Contributions to Pre-Tax Account; Interest/Dividends..5

Article 5 Distributions...........................................6

5.1   Distributions From Pre-Tax Account..........................6
5.2   Accelerated Distribution....................................7
5.3   Small Distribution..........................................8
5.4   Determination by Internal Revenue Service...................8
5.5   Emergency Distribution......................................8
5.6   Ineligible Participant......................................8

Article 6 Transition Provisions...................................8

6.1   Effective Dates.............................................9
6.2   Combination of Existing Contributions.......................9
6.3   Termination of Elections....................................9
6.4   Annual Base Salary Contribution Transition..................9

Article 7 Discontinuation, Termination, Amendment................10

7.1   SBC's Right to Terminate Plan..............................10
7.2   Amendment..................................................10

Article 8 Miscellaneous..........................................10

8.1   Additional Benefit.........................................10
8.2   Tax Withholding............................................10
8.3   Elections and Notices......................................10
8.4   Unsecured General Creditor.................................11
8.5   Offset.....................................................11
8.6   Non-Assignability..........................................11
8.7   Employment Not Guaranteed..................................12
8.8   Errors.....................................................12
8.9   Captions...................................................12
8.10  Governing Law..............................................12
8.11  Validity...................................................12
8.12  Successors and Assigns.....................................12


                           SBC COMMUNICATIONS INC.

                   SALARY AND INCENTIVE AWARD DEFERRAL PLAN

                    As amended through September 29, 2000

Article 1 - Statement of Purpose

      The purpose of the Salary and Incentive Award Deferral Plan ("Plan") is
to provide a select group of management employees consisting of Eligible
Employees of SBC Communications Inc. ("SBC" or the "Company") and its
Subsidiaries with a means for deferring the receipt of income.


Article 2 - Definitions

      For the purposes of this Plan, the following words and phrases shall
have the meanings indicated, unless the context indicates otherwise:

      Base Compensation.  The following types of cash-based compensation, in
each case as determined by SBC, paid by an Employer (but not including
payments made by a non-Employer, such as state disability payments), before
reduction due to any contribution pursuant to this Plan or reduction pursuant
to any deferral plan of an Employer, including but not limited to a plan that
includes a qualified cash or deferral arrangement under Section 401(k) of the
Internal Revenue Code, as amended ("Code"):

      (a) annual base salary.

      Payments by an Employer under a Disability plan made in lieu of any
compensation described in (a) above, shall be deemed to be a part of the
compensation it replaces for purposes of this definition.  Base Compensation
does not include the TEAM Award  (the annual award determined to be the "Team
Award" by SBC together with the individual award determined by SBC to be the
Individual Discretionary Award made in connection therewith) or comparable
awards, if any, determined by SBC to be used in lieu of these awards,
commissions or zone allowances or any other geographical differential and
shall not include payments made in lieu of unused vacation or other paid days
off, and such payments shall not be contributed to this Plan.

      Business Day.  Any day during regular business hours that SBC is open
for business.

      Chairman.  The Chairman of the Board of Directors of SBC Communications
Inc.

      Committee.  The Human Resources Committee of the Board of Directors of
SBC Communications Inc.

      Declared Rate.  The interest rate for each calendar year as determined
by the Senior Executive Vice President-Human Resources, with the concurrence
of the Senior Executive Vice President, Chief Financial Officer and Treasurer
and announced on or before January 1 of the applicable calendar year.
However, in no event will the Declared Rate for any calendar be less than the
Moody's Corporate Bond Yield Average-Monthly Average Corporates as published
by Moody's Investor's Service, Inc. (or any successor thereto) for the month
of September before the calendar year in question, or, if such yield is no
longer published, a substantially similar average selected by the Senior
Executive Vice President-Human Resources or his or her successor.

      Disability.  Absence of an Employee from work with an Employer under
the relevant Employer's disability plan, but only while such Employee is
deemed by the Employer to be an Employee of such Employer.

      Eligible Employee.  An Employee who:
      (a) is a full time, salaried Employee of SBC or an Employer and who is
on active duty, Disability or Leave of Absence;

      (b) is, as determined by SBC, a member of Employer's "select group of
management or highly compensated employees" within the meaning of the
Employment Retirement Income Security Act of 1974, as amended, and
regulations thereunder ("ERISA"), and

      (c) is (i) an Officer or (ii) a non-Officer Employee who has been
approved by the Chairman to be eligible to participate in this Plan.

      Notwithstanding the foregoing, SBC may, from time to time, exclude any
Employee or group of Employees from being deemed an "Eligible Employee" under
this Plan.

      In the event a court or other governmental authority determines that an
individual was improperly excluded from the class of persons who would be
considered Eligible Employees during a particular time for any reason, that
individual shall not be an Eligible Employee for purposes of the Plan for the
period of time prior to such determination.

      Employee.  Any person employed by an Employer, excluding persons hired
for a fixed maximum term and excluding persons who are neither citizens nor
permanent residents of the United States, all as determined by SBC.  For
purposes of this Plan, a person on Leave of Absence who otherwise would be an
Employee shall be deemed to be an Employee.

      Employer.  SBC Communications Inc. or any of its Subsidiaries.

      Executive Officer.  A person identified as an "executive officer" of
SBC in the then most recent SBC Form 10-K containing such information that
was filed with the United States Securities and Exchange Commission or who
subsequent to such filing was notified by SBC's General Counsel to be an
executive officer of SBC.

      Incentive Award.  A cash award paid by an Employer (and not by a
non-Employer, such as state disability payments) as either a short term or
long term award under the Short Term Incentive Plan or the 1996 Stock and
Incentive Plan; the Key Executive Officer Short Term Award paid under the
1996 Stock and Incentive Plan; or any other award that the Committee
designates as a short term or long term incentive award specifically for
purposes of this Plan (regardless of the purpose of the award) including an
award which would otherwise be paid in stock, other than stock of SBC.

      Leave of Absence.  Where a person is absent from employment with an
Employer on a formally granted leave of absence (i.e., the absence is with
formal permission in order to prevent a break in the continuity of term of
employment, which permission is granted (and not revoked) in conformity with
the rules of the Employer which employs the individual, as adopted from time
to time).  For purposes of this Plan, a Leave of Absence shall be deemed to
also include a transfer of a person to an entity by an Employer for a
rotational work assignment.  In the event a transfer to such an entity lasts
more than 5 years or the entity's rotational work assignment status is
canceled by SBC, it shall be deemed a Termination of Employment with the
Employer at that time for purposes of this Plan.  To be a rotational work
assignment, the Employer must have indicated in writing to the person that
the person was to be rehired by the Employer on termination of the rotational
work assignment.

      Officer.  An individual who is designated as an officer level Employee
for salary purposes on the records of SBC.

      Participant.  An Eligible Employee or former Eligible Employee who
participates in this Plan.

      Pre-Tax Account.  The account maintained on a pre-tax basis on the
books of account of SBC for each Participant.

      Retirement or Retire.  The Termination of Employment for reasons other
than death, on or after the earlier of the following dates:  (1) the date the
Employee is eligible to retire with an immediate pension pursuant to the SBC
Supplemental Retirement Income Plan ("SRIP"); or (2) the date the Employee
has attained one of the following combinations of age and service at
Termination of Employment, except as otherwise indicated below:

            Net Credited Service       Age
          10 years or more          65 or older
          20 years or more          55 or older
          25 years or more          50 or older
          30 years or more          Any age

      With respect to an Employee who is granted an EMP Service Pension under
and pursuant to the provisions of the SBC Pension Benefit Plan - Nonbargained
Program upon Termination of Employment, the term "Retirement" shall include
such Employee's Termination of Employment.

      Subsidiary.  Any corporation, partnership, venture or other entity in
which SBC holds, directly or indirectly, a 50% or greater ownership
interest.  SBC may, at its sole discretion, designate any other corporation,
partnership, venture or other entity a Subsidiary for the purpose of
participating in this Plan.

      Termination of Employment.  References herein to "Termination of
Employment," "Terminate Employment" or a similar reference, shall mean the
event where the Employee ceases to be an Employee of any Employer, including
but not limited to where the employing company ceases to be an Employer.

      Termination Under EPR.  In determining whether an Eligible Employee's
termination of employment under the Enhanced Pension and Retirement Program
("EPR") is a Retirement for purposes of this Plan, five years shall be added
to each of age and net credited service ("NCS").  If with such additional age
and years of service, (1) an Eligible Employee upon such termination of
employment under EPR is Retirement Eligible according to the SBC Supplemental
Retirement Income Plan ("SRIP") or (2) the Eligible Employee upon such
termination of employment under EPR has attained one of the following
combinations of age and service,

               Actual NCS + 5 Years         Actual Age + 5 Years

                  10 years or more              65 or older
                  20 years or more              55 or older
                  25 years or more              50 or older
                  30 years or more              Any age

then such termination of employment shall be a Retirement for all purposes
under this Plan and the Eligible Employee shall be entitled to the treatment
under this Plan afforded in the case of a termination of employment which is
a Retirement.


Article 3 - Administration of the Plan

      The Committee shall be the administrator of the Plan and will
administer the Plan, interpret, construe and apply its provisions in
accordance with its terms.  The Committee may further establish, adopt or
revise such rules and regulations as it may deem necessary or advisable for
the administration of the Plan.  References to determinations or other
actions by SBC, herein, shall mean actions authorized by the Committee, the
Chairman, the Senior Executive Vice President of SBC in charge of Human
Resources, or their respective successors or duly authorized delegates, in
each case in the discretion of such person; except that with respect to
Executive Officers, only the Committee may take such action.  All decisions
by SBC shall be final and binding.


Article 4 - Contributions

4.1   Election to Make Contributions.
      (a) An Eligible Employee may elect to participate in the Plan through
      payroll deductions contributed to the Plan as follows (such
      contributions to the Plan are "Employee Contributions"):

            (i) An Eligible Employee may elect to contribute up to 50% (in
            whole percentage increments) of his or her monthly Base
            Compensation, as the same may change from time to time; provided,
            however, any Base Compensation deferral hereunder is conditioned
            upon a 30% Base Compensation deferral election being in effect in
            the Stock Savings Plan.

            (ii) An Eligible Employee may elect to contribute up to 100% (in
            whole percentage increments or a specified dollar amount) of an
            Incentive Award.

      (b) An Eligible Employee may only make an election, change an election,
      or terminate an election to make Employee Contributions as follows:

            (i) An Employee who is an Eligible Employee as of September 30
            may make an election on or prior to the last Business Day of the
            immediately following November with respect to the contribution
            of Base Compensation and/or Incentive Awards paid on or after the
            immediately following January 1.

            (ii) An Employee who was not an Eligible Employee as of September
            30 but who is an Eligible Employee the immediately following
            December 31 (or such later date chosen by SBC, but not later than
            April 30) may make an election on or prior to the last Business
            Day of the immediately following May with respect to the
            contribution of Base Compensation and/or Incentive Awards paid on
            or after the immediately following July 1.

      SBC may refuse or terminate any election to make Employee Contributions
      at any time.

4.2   Contributions To Pre-Tax Account; Interest/Dividends.
      (a) Employee Contributions shall be made solely pursuant to a proper
election and only during the Employee's lifetime and while the Employee
remains an Eligible Employee (if the Employee ceases to be an Eligible
Employee, his or her election to make Employee Contributions shall be
cancelled); provided, however, Termination of Employment of an Eligible
Employee shall not constitute loss of eligibility solely with respect to
contribution of Base Compensation earned prior to termination but paid within
60 days thereafter or with respect to an Incentive Award paid after
Retirement (and such person shall be deemed an Eligible Employee for such
contributions).

      (b) Employee Contributions shall be credited to the Participant's
Pre-Tax Account in accordance with the provisions of Section 4.2(e) and shall
bear interest at the applicable Declared Rate on the balance from
month-to-month in such account.  The interest will be credited monthly to the
account at one-twelfth of the annual Declared Rate for that calendar year
compounded quarterly.

      (c) In addition, if the Participant's account under the Bell System
Senior Management Incentive Award Deferral Plan ("Predecessor Plan") was
transferred to this Plan as of January 1, 1984, the effective date of this
Plan, then the Participant's Pre-Tax Account under this Plan shall be
credited as of such date with the amount credited to the Participant's
account under the Predecessor Plan as of December 31, 1983, and such amount
shall bear interest in accordance with the terms of this Plan.

      (d) Deferred amounts related to Incentive Awards which would otherwise
have been distributed in shares of stock other than shares of common stock of
SBC shall be credited to the Participant's Pre-Tax Account as deferred
shares.  The Participant's Pre-Tax Account shall also be credited on each
dividend payment date with an amount equivalent to the dividend payable on
the number of such shares equal to the number of deferred shares in the
Participant's Pre-Tax Account on the record date for such dividend.  Such
amount shall then be converted to a number of additional deferred shares
determined by dividing such amount by the closing price of such shares on the
New York Stock Exchange on such date, or if not listed on such exchange, then
on the principal market for such shares.  If not traded on such exchange on
such date, then the closing price on the next preceding day the stock was so
traded shall be utilized.

      In the event of a merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend, stock split, share
combination, or stock dividend, stock split or other change in the corporate
structure of the issuer of stock described in the preceding paragraph,
affecting such stock, the Committee shall make an adjustment to the number
and class of shares of deferred stock, in its discretion, to avoid any
dilution or enlargement of rights.

      (e) Contributions to the Plan shall be deemed contributed when the
compensation would have otherwise actually been paid (using the "check date"
of the payment or contribution) were it not for an election under this Plan.
For example, a contribution from a payment of Base Compensation, delayed for
any reason, shall be deemed contributed when the delayed payment is made.


Article 5 - Distributions

5.1   Distributions From Pre-Tax Account.
      (a) Retirement.  Beginning March 10 (or such other date as determined
by SBC) of the first (1st) calendar year following the calendar year of the
Retirement of a Participant and on March 10 (or such other date as determined
by SBC) of each of the successive 14 calendar years, SBC shall distribute to
the Participant that portion of the Participant's Pre-Tax Account that is
equal to the total dollar amount of the Participant's Pre-Tax Account (and/or
number of deferred shares then held in the Participant's Pre-Tax Account)
divided by the number of remaining installments.  Notwithstanding the
foregoing, if the Participant Retires prior to 2001, then any undistributed
portion of the Participant's Pre-Tax Account will be distributed in a lump
sum on March 10 of the fifteenth (15th) calendar year following the calendar
year of the Retirement of the Participant.

      (b) Non-Retirement Termination of Employment.  Beginning March 10 (or
such other date as determined by SBC) of the calendar year following the
calendar year of Termination of Employment which is not a Retirement and on
March 10 (or such other date as determined by SBC) of each of the successive
2 calendar years, SBC shall distribute that portion of the Participant's
Pre-Tax Account that is equal to the total dollar amount of the Participant's
Pre-Tax Account (and/or number of deferred shares held in the Participant's
Pre-Tax Account) divided by the number of remaining installments.

      (c) Death.  Notwithstanding (a) or (b) above to the contrary, in the
event of the death of a Participant, any amounts remaining in the
Participant's Pre-Tax Account (and/or number of deferred shares then held in
the Participant's Pre-Tax Account) shall be promptly distributed to the
Participant's beneficiary designated in accordance with the SBC Rules for
Employee Beneficiary Designations, as the same may be amended from time to
time ("Rules").  If no designation has been made or if all designated
beneficiaries predecease the Participant, the Participant's Pre-Tax Account
shall be distributed according to the Rules.

      Notwithstanding any other provision of this Plan, if a surviving
beneficiary of a Plan participant disclaims in whole or in part, that
beneficiary's interest or share in the distribution of the Plan participant's
Plan proceeds, and such disclaimer satisfies the requirements of Section
2518(b) of the Internal Revenue Code (or any successor provision) and any
applicable state law, such disclaimer shall not constitute an assignment,
transfer or alienation by any method of such interest or share or proceeds
and the portion of such proceeds subject to such disclaimer shall be
distributed as if that beneficiary had predeceased the Plan participant.

      (d) Discharge for Cause/Non Competition.  Notwithstanding any other
provision of this Plan to the contrary, all amounts (including deferred
shares) then credited to the Participant's Pre-Tax Account shall be paid
immediately in a single payment if a Participant is discharged for cause by
his or her Employer, or if a Participant otherwise ceases to be employed by
his or her Employer and engages in competition with SBC or any direct or
indirect Subsidiary thereof or with any business with which a Subsidiary of
SBC or an affiliated company has a substantial interest (collectively
referred to herein as an "Employer Business"), or becomes employed by a
governmental agency having jurisdiction over the activities of SBC or any of
its Subsidiaries.  For purposes hereof, engaging in competition with any
Employer business shall mean engaging by the Participant in any business or
activity in the same geographical market where the same or substantially
similar business or activity is being carried on as an Employer business.
Such term shall not include owning a nonsubstantial publicly traded interest
as a shareholder in a business that competes with an Employer business.
However, engaging in competition with an Employer business shall include
representing or providing consulting services to, or being an employee of,
any person or entity that is engaged in competition with any Employer
business or that takes a position adverse to any Employer business in a
judicial, regulatory, legislative or administrative proceeding.  Further,
engaging in competition with an Employer business would result if the
Participant either engages directly in competitive activity or in any
capacity in any location becomes employed by, associated with, or renders
service to any company, or parent or affiliate thereof, or any subsidiary of
any of them, if any of them is engaged in competition with an Employer
business, regardless of the position or duties the Participant takes and
regardless of whether or not the employing company, or the company that the
Participant becomes associated with or renders service to, is itself engaged
in direct competition with an Employer business.

      (e) Deferred amounts held pending distribution shall continue to be
credited with interest or additional deferred shares, as applicable,
determined in accordance with Section 4.2(b) or 4.2 (d), as applicable.

      (f) The obligation to make distribution of deferred amounts credited to
a Participant's Pre-Tax Account during any calendar year, plus the additional
amounts credited on such deferred amounts pursuant to Section 4.2(b) or
4.2(d), as applicable, shall be borne by SBC or the applicable Employer which
otherwise would have paid the related award currently.  However, the
obligation to make distributions with respect to deferred amounts which are
related to amounts credited to a Participant's Pre-Tax Account as of the
effective date of the Plan pursuant to Section 4.2(c), and with respect to
which no SBC company would otherwise have paid the related award currently,
shall be borne by the Employer which employed the Participant on the
effective date of the Plan.

       (g) For the purpose of this Plan, a beneficiary designation like that
described in Section 5.1(c) that was made under the comparable provisions of
the Predecessor Plan shall be considered as a beneficiary designation made
under Section 5.1(c).

      (h) Notwithstanding the other provisions of this Section 5.1 to the
contrary, but subject to the provisions of Section 5.2(b), a Participant who
was a Participant on, and made contributions to the Plan prior to, September
1, 2000, may request that receipt of the cash portion of Participant's
Pre-Tax Account be deferred to Participant's death, or to be received earlier
if accelerated in accordance with the provisions of 5.2(a).  Approval of such
request shall be in SBC's sole discretion.

5.2   Accelerated Distribution.
      (a) On or before the last Business Day of a calendar year, a
Participant may elect to receive a distribution of all or a portion of the
Participant's Pre-Tax Account.  Such distribution shall be made March 10 (or
such other date as determined by SBC) of the immediately following calendar
year.  This distribution shall be in addition to the portion of the Pre-Tax
Account to be distributed at the same time under Section 5.1, which
distribution shall be calculated without regard to an election under this
section.

      (b) In the event the Participant Terminates Employment for reasons
other than Retirement, SBC may, at its sole discretion, accelerate the
distribution of all or a portion of a Participant's Pre-Tax Account to the
date of SBC's choosing, without notice to, or the consent of, the Participant.

5.3   Small Distribution.
      Notwithstanding any election made by the Participant, after the
Termination of Employment of the Participant for any reason, if at the time
the total value of the Participant's Pre-Tax Account is less than $10,000,
SBC may, in its discretion, distribute such account in the form of a lump sum
distribution.

5.4   Determination by Internal Revenue Service.
      In the event that a final determination shall be made by the Internal
Revenue Service or any court of competent jurisdiction that a Participant has
recognized gross income for Federal income tax purposes in excess of the
portion of Participant's Pre-Tax Account actually distributed by SBC, SBC
shall promptly distribute to the Participant that portion of Participant's
Pre-Tax Account to which such additional gross income is attributable.

5.5   Emergency Distribution.
      In the event that SBC, upon written petition of the Participant,
determines in its sole discretion that the Participant has suffered an
unforeseeable financial emergency, SBC shall distribute to the Participant,
as soon as practicable following such determination, that portion of
Participant's Pre-Tax Account determined by SBC to meet the emergency (the
"Emergency Distribution").  For purposes of this Plan, an unforeseeable
financial emergency is an unexpected need for cash arising from an illness,
casualty loss, sudden financial reversal, or other such unforeseeable
occurrence.  Cash needs arising from foreseeable events such as the purchase
of a house or education expenses for children shall not be considered to be
the result of an unforeseeable financial emergency.  Upon such distribution,
any election to make Employee Contributions by such Participant shall be
immediately cancelled, and the Participant shall not be permitted to make a
new election with respect to Employee Contributions that would be contributed
during the then current and immediately following calendar year.

5.6   Ineligible Participant.
      Notwithstanding any other provisions of this Plan to the contrary, if
SBC receives an opinion from counsel selected by SBC, or a final
determination is made by a Federal, state or local government or agency,
acting within its scope of authority, to the effect that an individual is
not, or was not at the time of his or her making Employee Contributions to
this Plan, to be a member of Employer's "select group of management or highly
compensated employees" within the meaning of ERISA, then such person will not
be eligible to participate in this Plan and shall receive an immediate lump
sum distribution of the Participant's Pre-Tax Account.  Upon such payment no
other distribution shall thereafter be payable under this Plan either to the
individual or any beneficiary of the individual, except as provided under
Section 8.1 Additional Benefit.


Article 6 - Transition Provisions

      The transition rules of this Article 6 shall supercede all other terms
      of this Plan.

6.1   Effective Dates.
      Except as otherwise provided herein, the amendments to this Plan made
September 1, 2000 (the "2000 Amendments") shall be effective September 1,
2000 and no election regarding the further deferral of a distribution of
contributions to this Plan may be made on or after September 1, 2000.

6.2   Combination of Existing Contributions.
      (a) Effective January 1, 2001, all prior contributions made to the Plan
by a Participant shall be combined into Participant's single Pre-Tax Account.

      (b) To the extent any Participant who retires before 2001 would, were
it not for the 2000 Amendments, under valid elections made prior to September
1, 2000, receive a distribution that would extend the Participant's
distributions beyond 2015, then the contributions so affected shall not be
combined with other contributions and shall be distributed in accordance with
such elections.  Notwithstanding the foregoing, the Participant may, with the
consent of SBC, elect to have all of Participant's contributions to the Plan
governed by this Plan as in effect after September 1, 2000.

      (c) In the event a Participant dies prior to 2001, the Participant's
accounts shall not be combined with and shall be distributed in accordance
with the Plan as it existed immediately prior to September 1, 2000.

6.3   Termination of Elections.
      (a) Distributions from the Plan that would be made in the year 2000
under the Plan as it existed immediately prior to September 1, 2000, based on
elections made before September 1, 2000, shall continue to be made in the
year 2000 as provided in the Plan immediately prior to September 1, 2000.
All other distribution elections are cancelled, including but not limited to
distributions which have already commenced, but only to the extent such
elections call for distributions after the year 2000.  All amounts (or
shares) remaining undistributed after such distributions shall be held and
distributed in accordance with the terms of the Plan as in effect after
September 1, 2000.

      (b) Contributions to the Plan that would be made in the year 2000 under
the Plan as it existed immediately prior to September 1, 2000, based on
elections made before September 1, 2000, shall continue to be made in the
year 2000 as provided in the Plan immediately prior to September 1, 2000.
Elections to participate in the Plan shall not automatically be renewed for
the year 2001.  Each Eligible Employee must make a new election after
September 1, 2000, in order to make Employee Contributions after 2000.
Provided, however, valid elections made prior to September 1, 2000, to
contribute Incentive Awards in 2001 shall be valid elections under this Plan.

6.4   Annual Base Salary Contribution Transition.
      Annual base salary earned prior to January 1, 2001, shall be
contributed when earned, while annual base salary earned on or after such
date shall be contributed when paid.  In order to avoid any double
contribution of annual base salary, that part of annual base salary earned in
the year 2000 shall not be included in any determination of contributions to
the Plan in a later calendar year, even though paid in such calendar year.


Article 7 - Discontinuation, Termination, Amendment.

7.1   SBC's Right to Terminate Plan.
      The Committee may terminate the Plan at any time.  Upon termination of
the Plan, contributions shall no longer be made under the Plan.

      After termination of the Plan, Participants shall continue to earn
interest/dividend equivalents and shall continue to receive all distributions
under this Plan at such time as provided in and pursuant to the terms and
conditions of this Plan at the time of the Plan's termination.

7.2   Amendment.
      This Plan may be modified or terminated at any time in accordance with
the provisions of SBC's Schedule of Authorizations; provided, however, that
no amendment, including but not limited to an amendment to this section,
shall be effective, without the consent of a Participant, to alter, to the
material detriment of such Participant, the distributions described in this
Plan as applicable to the Participant or to decrease such Participant's
Pre-Tax Account.  For purposes of this section, an alteration to the material
detriment of a Participant shall mean a material reduction in the period of
time over which Participant's Pre-Tax Account may be distributed to a
Participant or a reduction in the amounts then credited to a Participant's
Pre-Tax Account.  Any such consent may be in a writing, telecopy, or e-mail
or in another electronic format.  An election to make Employee Contributions
and the failure to terminate an election to make Employee Contributions when
able to do so shall each be conclusively deemed to be the consent of the
Participant to any and all amendments to the Plan prior to such election or
failure to terminate an election, and such consent shall be a condition to
making any election with respect to Employee Contributions.


Article 8 - Miscellaneous

8.1   Additional Benefit.
      The reduction of any benefit payable under the SBC Pension Benefit Plan
(or comparable plan identified by SBC as a replacement therefor), which
results from participation in this Plan, will be restored as an additional
benefit ("make-up piece") under this Plan.  The Participant shall elect prior
to commencement of payment of the make-up piece whether to receive such
benefit in cash in a lump sum (consisting of the present value equivalent of
the pension retirement benefit (life annuity) make-up piece) or such benefit
in an annuity form of payment.  Notwithstanding the proceeding provisions of
this section, if all or a portion of the make-up piece is paid pursuant to
SRIP or another non-qualified plan, then such amount shall not be payable
pursuant to this Plan.

8.2   Tax Withholding.
      Upon a distribution from Participant's Pre-Tax Account, SBC shall
withhold such amount (or shares) as determined by SBC to satisfy the minimum
amount of Federal, state, and local taxes required by law to be withheld as a
result of such distribution, or such greater amount as specified by the
Participant.

8.3   Elections and Notices.
      Notwithstanding anything to the contrary contained in this Plan, all
elections and notices of every kind shall be made on forms prepared by SBC or
made in such other manner as permitted or required by SBC, including through
electronic means, over the Internet or otherwise.  An election shall be
deemed made when received by SBC, which may waive any defects in form.
Unless made irrevocable by the electing person, each election with regard to
making Employee Contributions or distributions under the Plan shall become
irrevocable at the close of business on the last day to make such election.
SBC may limit the time an election may be made in advance of any deadline.

      Any notice or filing required or permitted to be given to SBC under the
Plan shall be delivered to the principal office of SBC, directed to the
attention of the Senior Executive Vice President-Human Resources of SBC or
his or her successor.  Such notice shall be deemed given on the date of
delivery.

      Notice to the Participant shall be deemed given when mailed (or sent by
telecopy) to the Participant's work or home address as shown on the records
of SBC or, at the option of SBC, to the Participant's e-mail address as shown
on the records of SBC.  It is the Participant's responsibility to ensure that
the Participant's addresses are kept up to date on the records of SBC.  In
the case of notices affecting multiple Participants, the notices may be given
by general distribution at the Participants' work locations.

      By participating in the Plan, each Participant agrees that SBC may
provide any documents required or permitted under the Federal or state
securities laws, including but not limited to the Securities Act of 1933 and
the Securities Exchange Act of 1934 by e-mail, by e-mail attachment, or by
notice by e-mail of electronic delivery through SBC's Internet Web site or by
other electronic means.

8.4   Unsecured General Creditor.
      Participants and their beneficiaries, heirs, successors, and assigns
shall have no legal or equitable rights, interest, or claims in any property
or assets of any Employer.  No assets of any Employer shall be held under any
trust for the benefit of Participants, their beneficiaries, heirs,
successors, or assigns, or held in any way as collateral security for the
fulfilling of the obligations of any Employer under this Plan.  Any and all
of each Employer's assets shall be, and remain, the general, unpledged,
unrestricted assets of such Employer.  The only obligation of an Employer
under the Plan shall be merely that of an unfunded and unsecured promise of
SBC to make distributions under, and in accordance with the terms of, the
Plan.

8.5   Offset.
      SBC may offset against the amount (or shares) otherwise distributable
to a Participant, any amounts due an Employer by a Participant, including but
not limited to overpayments under any compensation or benefit plans.

8.6   Non-Assignability.
      Neither a Participant nor any other person shall have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage, or otherwise
encumber, transfer, hypothecate or convey in advance of actual receipt, any
amounts (or shares)  distributable under the Plan, or any part thereof, which
are, and all rights to which are, expressly declared to be unassignable and
non-transferable.  No part of the amount (or shares) distributable shall,
prior to actual distribution, be subject to seizure or sequestration for the
payment of any debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, nor be transferable by operation of law in
the event of a Participant's or any other person's bankruptcy or insolvency.


8.7   Employment Not Guaranteed.
      Nothing contained in this Plan nor any action taken hereunder shall be
construed as a contract of employment or as giving any employee any right to
be retained in the employ of an Employer or to serve as a director.

8.8   Errors.
      At any time SBC may correct any error made under the Plan without
prejudice to SBC.  Such corrections may include, among other things,
refunding contributions to a Participant with respect to any period he or she
made Employee Contributions while not an Eligible Employee, or canceling the
enrollment of a non-Eligible Employee.

8.9   Captions.
      The captions of the articles, sections, and paragraphs of this Plan are
for convenience only and shall not control nor affect the meaning or
construction of any of its provisions.

8.10  Governing Law.
      To the extent not preempted by ERISA, this Plan shall be governed by
and construed in accordance with the substantive laws of the State of Texas,
excluding any conflicts or choice of law rule or principle that might
otherwise refer construction or interpretation of this Plan to provisions of
the substantive law of any jurisdiction other than the State of Texas.  Any
action seeking to enforce the rights of an employee, former employee or
person who holds such rights through, from or on behalf of such employee or
former employee under this Plan may be brought only in a Federal or state
court located in Bexar County, Texas.

8.11  Validity.
      In the event any provision of this Plan is held invalid, void, or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of this Plan.

8.12  Successors and Assigns.
      This Plan shall be binding upon SBC and its successors and assigns.

EX-10 7 exh10e.htm EXHIBIT 10-E(I) Exhibit 10-e(i)

Exhibit 10-e(i)

                                                   PLAN AMENDMENTS

                                  SBC SENIOR MANAGEMENT DEFERRED COMPENSATION PLAN
                                      SBC MANAGEMENT DEFERRED COMPENSATION PLAN
                                                  (8 - Year Units)

Section 9.14, reading as follows, is hereby added to each Plan:

9.14    Termination Under EPR.  Notwithstanding any other provisions of the Plan, if a Participant's
        employment terminates before the Participant attains age fifty-five, and if such termination is as an
        EPR Terminee under the Enhanced Pension and Retirement Program ("EPR") of the SBC Pension Benefit
        Plan-Nonbargained Program ("SBC PBP") or as a Deceased Electing Employee under EPR and is on or after
        the date Participant is within five years of being pension eligible, i.e., would be within five years
        of being eligible to retire with a service pension under the rules for service pension eligibility as
        in effect under the SBC PBP, and/or is a Senior Manager within five years of being eligible to retire
        with an immediate pension based on the eligibility rules of the SBC  Supplemental Retirement Income
        Plan, whether or not actually a participant in either such plan, or a Participant who is age 55 or
        over terminates employment under EPR, then the provisions of this Section 9.14 shall govern and
        control with respect to the distribution of the Plan's benefits if the benefits offered by this
        Section 9.14 are elected.  In such case, the Participant, or the Participant's Beneficiary(ies) if the
        Participant's employment terminates by reason of the Participant's death, may irrevocably elect in
        writing, in an EPR special election form accompanied by a Waiver Agreement, as described below, filed
        with the Company, to waive the Termination Benefit or the Pre-Retirement Survivor Benefit or the Early
        Retirement Benefit, as applicable, with respect to any or all Units of Participation, and in lieu of
        said Benefit for any such Unit, receive an "EPR Alternative Termination Benefit."

        Such an EPR Alternative Termination Benefit for a Unit shall be the Unit as described in the
        Participant's Agreement, provided in accordance with and governed in all respects by the terms of the
        Plan and said Agreement, except that the Plan and Agreement shall be applied with respect to such
        Unit, in accordance with Participant's special EPR election form applicable to such Unit, as if the
        Participant had remained in employment and retired upon the Participant's Early Retirement Date
        specified in his EPR special election form applicable to such Unit of Participation, regardless of
        Participant's actual termination date.  For purposes of applying the Plan and the Agreement, Normal
        Retirement shall be the Participant's sixty-fifth birthday and Early Retirement shall be the date
        specified by the Participant as Participant's Early Retirement date, which date shall be specified at
        the time the Waiver Agreement, as described below, is filed with the Company, and which date may be no
        earlier than Participant's fifty-fifth birthday.  In the event of Participant's death prior to age
        fifty-five, the EPR Alternative Termination Benefit for a Unit, whether such Benefit was elected by
        the Participant or Participant's Beneficiary(ies), shall be determined, as described below, by
        applying the Plan and Agreement with respect to such Unit as if the Participant had died upon or after
        reaching age fifty-five.

        Accordingly, notwithstanding any other provisions of the Plan, for purposes of application of this
        Section 9.14, in the event a Participant elects an EPR Alternative Termination Benefit in lieu of the
        Termination Benefit or the Early Retirement Benefit for a Unit, or a Beneficiary(ies) elects to
        receive an EPR Alternative Termination Benefit in lieu of a Pre-Retirement Survivor Benefit for a
        Unit, as applicable, survivor benefits for such Unit shall be determined as follows:  (a) If
        Participant dies on or after the date specified by Participant as Participant's Early Retirement date,
        Participant's Beneficiary(ies) shall receive the remaining installments of Participant's retirement
        benefit; or (b)  If Participant dies on or after age fifty-five but prior to the date specified by
        Participant as Participant's Early Retirement date, Participant's Beneficiary(ies) will receive
        survivor benefits in accordance with the next to the last paragraph in Section 6.2, i.e., the
        provision of the Plan that would have applied had Participant's death actually been an in service
        death which occurred upon or after attainment of age fifty-five; or (c)  If Participant's death occurs
        prior to age fifty-five, Participant's Beneficiary(ies) will receive at such time as Participant would
        have attained age fifty-five, survivor benefits in accordance with the next to the last paragraph in
        Section 6.2, i.e., the provision of the Plan that would have applied had Participant's death actually
        been an in service death which occurred upon attainment of age fifty-five; and (d)  Finally, the
        benefit described in Section 6.6 shall apply commencing on the later of the sixteenth year after
        commencement of payments pursuant to the EPR Alternative Termination Benefit or the first of the month
        following Participant's death.

        For purposes of computing the Vested Benefits (as such term is used in rabbi trusts ("Trusts")
        established by the Company for the purpose of providing for the payment of benefits under the Plan)
        corresponding to an EPR Alternative Termination Benefit, for all Trust purposes, including for
        purposes of determining the Trust funding level applicable for such EPR Alternative Termination
        Benefit, the Participant shall be treated for each such EPR Alternative Termination Benefit Unit as if
        continuing in employment until age fifty-five if the Participant dies before attaining age fifty-five
        or until the date of Participant's death if Participant dies after attaining age fifty-five or until
        reaching the Participant's Early Retirement date for such Unit as selected by the Participant if
        Participant survives until such date, i.e., the Trust funding for any such Unit and the security
        afforded Participant or Participant's Beneficiary(ies) thereby shall be no different as a result of
        this Section 9.14 than they would have been had Participant continued in employment in the absence of
        this Section 9.14 and lived until at least age fifty-five.

        Waiver of a Termination Benefit or Early Retirement Benefit with respect to a Unit by a Participant,
        or of a Pre-Retirement Survivor Benefit with respect to a Unit by a Beneficiary(ies), as applicable,
        and receipt of an EPR Alternative Termination Benefit in lieu thereof, shall be conditioned upon the
        agreement in writing by the Participant, or Participant's Beneficiary(ies), as applicable, at the time
        of Participant's termination of employment, to provisions substantially as follows:


                           SBC SENIOR MANAGEMENT DEFERRED COMPENSATION PLAN OF 1988
                               SBC MANAGEMENT DEFERRED COMPENSATION PLAN OF 1988
                                       (4-Year Units- Retirement Option)


Section 6.8, reading as follows, is hereby added to each Plan:

6.8     Termination Under EPR.  Notwithstanding any other provisions of the Plan, if a Participant's
        employment terminates before the Participant attains age fifty-five, and if such termination is as an
        EPR Terminee under the Enhanced Pension and Retirement Program ("EPR") of the SBC Pension Benefit
        Plan-Nonbargained Program ("SBC PBP") or as a Deceased Electing Employee under EPR, and is on or after
        the date Participant is within five years of being pension eligible, i.e., would be within five years
        of being eligible to retire with a service pension under the rules for service pension eligibility as
        in effect under the SBC PBP, and/or is a Senior Manager within five years of being eligible to retire
        with an immediate pension based on the eligibility rules of the SBC Supplemental Retirement Income
        Plan, whether or not actually a participant in either such plan, or a Participant who is age 55 or
        over terminates employment under EPR, then the provisions of this Section 6.8 shall govern and control
        with respect to the distribution of the Plan's benefits if the benefits offered by this Section 6.8
        are elected.  In such case, the Participant, or the Participant's Beneficiary(ies) if the
        Participant's employment terminates by reason of the Participant's death, may irrevocably elect in
        writing, in an EPR special election form filed with the Company, to waive the Termination Benefit or
        the Pre-Retirement Survivor Benefit or the Early Retirement Benefit, as applicable, with respect to
        any or all Units of Participation, and in lieu of said Benefit for any such Unit, receive an "EPR
        Alternative Termination Benefit".

        Such an EPR Alternative Termination Benefit for a Unit shall be the Unit as described in the
        Participant's Agreement, provided in accordance with and governed in all respects by the terms of the
        Plan and said Agreement, except that the Plan and Agreement shall be applied with respect to such
        Unit, in accordance with Participant's special EPR election form applicable to such Unit, as if the
        Participant had remained in employment and retired upon the Participant's Early Retirement Date
        specified in his EPR special election form applicable to such Unit of Participation, regardless of
        Participant's actual termination date.  For purposes of applying the Plan and the Agreement, Normal
        Retirement shall be the Participant's sixty-fifth birthday and Early Retirement shall be the date
        specified by the Participant as Participant's Early Retirement date, which date shall be specified in
        Participant's special EPR election form filed with the Company, and which date may be no earlier than
        Participant's fifty-fifth birthday.  In the event of Participant's death prior to age fifty-five, the
        EPR Alternative Termination Benefit for a Unit, whether such Benefit was elected by the Participant or
        Participant's Beneficiary(ies), shall be determined, as described below, by applying the Plan and
        Agreement with respect to such Unit as if the Participant had died upon or after reaching age
        fifty-five.

        Accordingly, notwithstanding any other provisions of the Plan, for purposes of application of this
        Section 6.8, in the event a Participant elects an EPR Alternative Termination Benefit in lieu of the
        Termination Benefit or the Early Retirement Benefit for a Unit, or a Beneficiary(ies) elects to
        receive an EPR Alternative Termination Benefit in lieu of a Pre-Retirement Survivor Benefit for a
        Unit, as applicable, survivor benefits for such Unit shall be determined as follows:  (a) If
        Participant dies on or after the date specified by Participant as Participant's Early Retirement date,
        Participant's Beneficiary(ies) shall receive the remaining installments of Participant's retirement
        benefit; or (b) If Participant dies on or after age fifty-five but prior to the date specified by
        Participant as Participant's Early Retirement date, Participant's Beneficiary(ies) will receive
        survivor benefits in  accordance with Section 6.6(b), i.e., the provision of the Plan that would have
        applied had Participant's death actually been an in service death which occurred upon or after
        attainment of age fifty-five, or  (c) If Participant's death occurs prior to age fifty-five,
        Participant's Beneficiary(ies) will receive at such time as Participant would have attained age
        fifty-five, survivor benefits in accordance with Section 6.6(b), i.e., the provision of the Plan that
        would have applied had Participant's death actually been an in service death which occurred upon
        attainment of age fifty-five; and  (d)  Finally, the benefit described in Section 6.6(e) shall apply
        commencing on the later of the sixteenth year after commencement of payments pursuant to the EPR
        Alternative Termination Benefit or the first of the month following Participant's death.

        For purposes of computing the Vested Benefits (as such term is used in rabbi trusts ("Trusts")
        established by the Company for the purpose of providing for the payment of benefits under the Plan)
        corresponding to an EPR Alternative Termination Benefit, for all Trust purposes, including for
        purposes of determining the Trust funding level applicable for such EPR Alternative Termination
        Benefit, the Participant shall be treated for each such EPR Alternative Termination Benefit Unit as if
        continuing in employment until age fifty-five if the Participant dies before attaining age fifty-five
        or until the date of Participant's death if Participant dies after attaining age fifty-five or until
        reaching the Participant's Early Retirement Date for such Unit as selected by the Participant if
        Participant survives until such date, i.e., the Trust funding for any such Unit and the security
        afforded Participant or Participant's Beneficiary(ies) thereby shall be no different as a result of
        this Section 6.8 than they would have been had Participant continued in employment in the absence of
        this Section 6.8 and lived until at least age fifty-five.


                                        SBC COMPENSATION DEFERRAL PLAN
                                       (4-Year Unit- Retirement Option)

Section 6.8, reading as follows, is hereby added to Plan:

6.8     Termination Under EPR.  Notwithstanding any other provisions of the Plan, if a Participant's
        employment terminates before the Participant attains age fifty-five, and if such termination is as an
        EPR Terminee under the Enhanced Pension and Retirement Program ("EPR") of the SBC Pension Benefit
        Plan-Nonbargained Program ("SBC PBP") or as a Deceased Electing Employee under EPR, and is on or after
        the date Participant is within five years of being pension eligible, i.e., would be within five years
        of being eligible to retire with a service pension under the rules for service pension eligibility as
        in effect under the SBC PBP, and/or is a Senior Manager within five years of being eligible to retire
        with an immediate pension based on the eligibility rules of the SBC Supplemental Retirement Income
        Plan, whether or not actually a participant in either such plan, or a Participant who is age 55 or
        over terminates employment under EPR, then the provisions of this Section 6.8 shall govern and control
        with respect to the distribution of the Plan's benefits if the benefits offered by this Section 6.8
        are elected.  In such case, the Participant, or the Participant's Beneficiary(ies) if the
        Participant's employment terminates by reason of the Participant's death, may irrevocably elect in
        writing, in an EPR special election form filed with the Company, to waive the Termination Benefit or
        the Pre-Retirement Survivor Benefit or the Early Retirement Benefit, as applicable, with respect to
        any or all Units of Participation, and in lieu of said Benefit for any such Unit, receive an "EPR
        Alternative Termination Benefit".

        Such an EPR Alternative Termination Benefit for a Unit shall be the Unit as described in the
        Participant's Agreement, provided in accordance with and governed in all respects by the terms of the
        Plan and said Agreement, except that the Plan and Agreement shall be applied with respect to such
        Unit, in accordance with Participant's special EPR election form applicable to such Unit, as if the
                                                                                                  -- --
        Participant had remained in employment and retired upon the Participant's Early Retirement Date
        specified in his EPR special election form applicable to such Unit of Participation, regardless of
        Participant's actual termination date.  For purposes of applying the Plan and the Agreement, Normal
        Retirement shall be the Participant's sixty-fifth birthday and Early Retirement shall be the date
        specified by the Participant as Participant's Early Retirement date, which date shall be specified in
        Participant's special EPR election form filed with the Company, and which date may be no earlier than
        Participant's fifty-fifth birthday.  In the event of Participant's death prior to age fifty-five, the
        EPR Alternative Termination Benefit for a Unit, whether such Benefit was elected by the Participant or
        Participant's Beneficiary(ies), shall be determined, as described below, by applying the Plan and
        Agreement with respect to such Unit as if the Participant had died upon or after reaching age
        fifty-five.

        Accordingly, notwithstanding any other provisions of the Plan, for purposes of application of this
        Section 6.8, in the event a Participant elects an EPR Alternative Termination Benefit in lieu of the
        Termination Benefit or the Early Retirement Benefit for a Unit, or a Beneficiary(ies) elects to
        receive an EPR Alternative Termination Benefit in lieu of a Pre-Retirement Survivor Benefit for a
        Unit, as applicable, survivor benefits for such Unit shall be determined as follows:  (a)  If
        Participant dies on or after the date specified by Participant as Participant's Early Retirement date,
        Participant's Beneficiary(ies) shall receive the remaining installments of Participant's retirement
        benefit; or (b)  If Participant dies on or after age fifty-five but prior to the date specified by
        Participant as Participant's Early Retirement date, Participant's Beneficiary(ies) will receive
        survivor benefits in  accordance with Section 6.6(b), i.e., the provision of the Plan that would have
        applied had Participant's death actually been an in service death which occurred upon or after
        attainment of age fifty-five, or (c)  If Participant's death occurs prior to age fifty-five,
        Participant's Beneficiary(ies) will receive at such time as Participant would have attained age
        fifty-five, survivor benefits in accordance with Section 6.6(b), i.e., the provision of the Plan that
        would have applied had Participant's death actually been an in service death which occurred upon
        attainment of age fifty-five.

        For purposes of computing the Vested Benefits (as such term is used in rabbi trusts ("Trusts")
        established by the Company for the purpose of providing for the payment of benefits under the Plan)
        corresponding to an EPR Alternative Termination Benefit, for all Trust purposes, including for
        purposes of determining the Trust funding level applicable for such EPR Alternative Termination
        Benefit, the Participant shall be treated for each such EPR Alternative Termination Benefit Unit as if
        continuing in employment until age fifty-five if the Participant dies before attaining age fifty-five
        or until the date of Participant's death if Participant dies after attaining age fifty-five or until
        reaching the Participant's Early Retirement Date for such Unit as selected by the Participant if
        Participant survives until such date, i.e., the Trust funding for any such Unit and the security
        afforded Participant or Participant's Beneficiary(ies) thereby shall be no different as a result of
        this Section 6.8 than they would have been had Participant continued in employment in the absence of
        this Section 6.8 and lived until at least age fifty-five.


                           SBC SENIOR MANAGEMENT DEFERRED COMPENSATION PLAN OF 1988
                                           (EARLY RETIREMENT OPTION)
                               SBC MANAGEMENT DEFERRED COMPENSATION PLAN OF 1988
                                        SBC COMPENSATION DEFERRAL PLAN
                                     (4-Year Units- Early Payment Option)

Section 7.6, reading as follows, is hereby added to each Plan:

7.6     Termination Under EPR.  Notwithstanding any other provisions of the Plan, if a Participant's
        employment terminates before the Participant attains age fifty-five and prior to the Early Payment
        Date with respect to a Unit of Participation, and if such termination is as an EPR Terminee under the
        Enhanced Pension and Retirement Program ("EPR") of the SBC Pension Benefit Plan-Nonbargained Program
        ("SBC PBP") or as a Deceased Electing Employee under EPR, and is on or after the date Participant is
        within five years of being pension eligible, i.e., would be within five years of being eligible to
        retire with a service pension under the rules for service pension eligibility as in effect under the
        SBC PBP, and/or is a Senior Manager within five years of being eligible to retire with an immediate
        pension based on the eligibility rules of the SBC Supplemental Retirement Income Plan, whether or not
        actually a Participant in either such Plan, or a Participant who is age 55 or over terminates
        employment under EPR, then the provisions of this Section 7.6 shall govern and control with respect
        to the distribution of the Plan's benefits if the benefits offered by this Section 7.6 are elected.
        In such case, the Participant, or the Participant's Beneficiary(ies) if the Participant's employment
        terminates by reason of the Participant's death, may irrevocably elect in writing, in an EPR special
        election form filed with the Company, to waive the Termination Benefit or the Pre-Retirement Survivor
        Benefit or the Early Payment Date benefit, as applicable, with respect to any or all Units of
        Participation, and in lieu of said Benefit for any such Unit, receive an "EPR Alternative Termination
        Benefit".

        Such EPR Alternative Termination Benefit for a Unit shall be the Unit as described in the
        Participant's Agreement, provided in accordance with and governed in all respects by the terms of the
        Plan and said Agreement, except that the Plan and Agreement shall be applied with respect to such
        Unit, in accordance with Participant's special EPR election form applicable to such Unit, as if the
        Participant had remained in employment and retired upon attaining the Early Payment Date specified in
        his EPR special election form applicable to such Unit of Participation, regardless of Participant's
        actual termination date.  For purposes of applying the Plan and the Agreement, Normal Retirement shall
        be the Participant's sixty-fifth birthday and Early Retirement shall be the Early Payment Date for
        such Unit, which date shall be specified in Participant's special EPR election form filed with the
        Company, and which date may be no later than the first day of the month after the Participant attains
        age sixty-five.  In the event of Participant's death prior to age fifty-five, the EPR Alternative
        Termination Benefit for a Unit, whether such Benefit was elected by the Participant or Participant's
        Beneficiary(ies), shall be determined, as described below, by applying the Plan and Agreement with
        respect to such Unit as if the Participant had died upon reaching age fifty-five.

        Accordingly, notwithstanding any other provisions of the Plan, for purposes of application of this
        Section 7.6, in the event a Participant elects an EPR Alternative Termination Benefit in lieu of the
        Termination Benefit or the Early Payment Date benefit for a Unit, or a Beneficiary(ies) elects to
        receive an EPR Alternative Termination Benefit in lieu of a Pre-Retirement Survivor Benefit for a
        Unit, as applicable, survivor benefits for such Unit shall be determined as follows:  (a)  If
        Participant dies on or after the Early Retirement Date for such Unit (i.e., on or after Participant's
        Early Retirement date for such Unit), Participant's Beneficiary(ies) shall receive the remaining
        installments of Participant's benefit; or (b)  If Participant dies on or after age fifty-five but
        prior to the Early Payment Date for a Unit (i.e., on or after Participant's Early Retirement date for
        such Unit), Participant's Beneficiary(ies) will receive survivor benefits in accordance with Section
        7.4(b), i.e., the provision of the Plan that would have applied had Participant's death actually been
        an in service death which occurred upon or after attainment of age fifty-five; or (c) If Participant's
        death occurs prior to age fifty-five, Participant's Beneficiary(ies) will receive at such time as
        Participant would have attained age fifty-five, survivor benefits in accordance with Section 7.4(b),
        i.e., the provision of the Plan that would have applied had Participant's death actually been an in
        service death which occurred upon attainment of age fifty-five.

        For purposes of computing the Vested Benefits (as such term is used in rabbi trusts ("Trusts")
        established by the Company for the purpose of providing for the payment of benefits under the Plan)
        corresponding to an EPR Alternative Termination Benefit, for all Trust purposes, including for
        purposes of determining the Trust funding level applicable for such EPR Alternative Termination
        Benefit, the Participant shall be treated for each such EPR Alternative Termination Benefit Unit as if
        continuing in employment until age fifty-five if the Participant dies before attaining age fifty-five
        or until the date of Participant's death if Participant dies after attaining age fifty-five or until
        reaching the Early Payment Date for a Unit (i.e., on or after Participant's Early Retirement date for
        such Unit) if Participant survives until such date, i.e., the Trust funding for any such Unit and the
        security afforded Participant or Participant's Beneficiary(ies) thereby shall be no different as a
        result of this Section 7.6 than they would have been had Participant continued in employment in the
        absence of this Section 7.6 and lived until at least age fifty-five.

EX-10 8 exh10o.htm EXHIBIT 10-O Exhibit 10-o



Exhibit 10-o



                              STOCK SAVINGS PLAN

















                                              Plan Effective:  January 1, 1991
                                           As amended through:  March 31, 2000


                              TABLE OF CONTENTS

  Article                                                                    Page
        1 Statement of Purpose                                                  1
        2 Definitions                                                           1
        3 Administration of the Plan                                            4
          3.1  The Committee                                                    4
          3.2  Authorized Shares of Stock                                       4
        4 Contributions                                                         5
          4.1  Election to Make Contributions                                   5
          4.2  Purchase of Share Units                                          5
          4.3  Reinvestment of Dividends                                        6
          4.4  Deferral of Other Stock Awards                                   6
        5 SBC Match                                                             7
          5.1  SBC Match                                                        7
          5.2  Vesting and Distribution of Share Units Acquired with            7
              Matching
              Contributions
        6 Distributions                                                         7
          6.1  Distributions of Share Units                                     7
          6.2  Accelerated Distribution                                         8
          6.3  Small Distribution                                               8
          6.4  Determination by Internal Revenue Service                        8
          6.5  Emergency Distribution                                           8
          6.6  Ineligible Participant                                           9
          6.7  Distribution Process                                             9
        7 Transition Provisions                                                 9
          7.1  Effective Dates                                                  9
          7.2  Combination of Share Units                                       9
          7.3  Termination of Elections                                        10
          7.4  Annual Base Salary Contribution Transition                      10
          7.5  Stock Options                                                   10
        8 Options                                                              10
          8.1  Grants                                                          10
          8.2  Term of Options                                                 11
          8.3  Exercise Price                                                  11
          8.4  Issuance of Options                                             11
          8.5  Exercise and Payment of Options                                 12
          8.6  Restrictions on Exercise and Transfer                           13
          8.7  Termination of Employment                                       13
        9 Discontinuation, Termination, Amendment                              13
          9.1  SBC's Right to Discontinue Offering Share Units                 13
          9.2  SBC's Right to Terminate Plan                                   13
          9.3  Amendment                                                       14
       10 Miscellaneous                                                        14
          10.1  Additional Benefit                                             14
          10.2  Tax Withholding                                                14
          10.3  Elections and Notices                                          15
          10.4  Unsecured General Creditor                                     15
          10.5  Offset                                                         15
          10.6  Non-Assignability                                              15
          10.7  Employment Not Guaranteed                                      16
          10.8  Errors                                                         16
          10.9  Captions                                                       16
          10.10  Governing Law                                                 16
          10.11  Validity                                                      16
          10.12  Successors and Assigns                                        16
          10.13  Participation in Predecessor Plans                            16



                           SBC COMMUNICATIONS INC.

                              STOCK SAVINGS PLAN

                      As amended through March 31, 2000


Article 1 - Statement of Purpose

      The purpose of the Stock Savings Plan ("Plan") is to increase stock
ownership by, and to provide retirement and savings opportunities to, a
select group of management employees consisting of Eligible Employees of SBC
Communications Inc. ("SBC" or the "Company") and its Subsidiaries.


Article 2 - Definitions

      For the purposes of this Plan, the following words and phrases shall
have the meanings indicated, unless the context indicates otherwise:

      After-Tax Account.  The account maintained on an after-tax basis on the
books of account of SBC for each Participant.

      Base Compensation.  The following types of cash-based compensation, in
each case as determined by SBC, paid by an Employer (but not including
payments made by a non-Employer, such as state disability payments), before
reduction due to any contribution pursuant to this Plan or reduction pursuant
to any deferral plan of an Employer, including but not limited to a plan that
includes a qualified cash or deferral arrangement under Section 401(k) of the
Internal Revenue Code, as amended ("Code"):

      (a) annual base salary;
      (b) commissions;
      (c) Team Award (the annual award determined to be the "Team Award" by
      SBC together with the individual award determined by SBC to be the
      Individual Discretionary Award made in connection therewith) or
      comparable awards, if any, determined by SBC to be used in lieu of
      these awards.  Unless otherwise provided by SBC, Team Award shall
      include, among other things, bonus awards under the Ameritech
      Management Incentive Plan or the Ameritech Senior Management Short Term
      Incentive Plan.



      Payments by an Employer under a Disability plan made in lieu of any
compensation described in (a), (b) or (c), above, shall be deemed to be a
part of the respective form of compensation it replaces for purposes of this
definition.  Base Compensation does not include zone allowances or any other
geographical differential and shall not include payments made in lieu of
unused vacation or other paid days off, and such payments shall not be
contributed to this Plan.

      Business Day.  Any day during regular business hours that SBC is open
for business.

      Chairman.  The Chairman of the Board of Directors of SBC Communications
Inc.

      Committee.  The Human Resources Committee of the Board of Directors of
SBC Communications Inc.

      Disability.  Absence of an Employee from work with an Employer under
the relevant Employer's disability plan, but only while such Employee is
deemed by the Employer to be an Employee of such Employer.

      Eligible Employee.  An Employee who:
      (a) is a full time, salaried Employee of SBC or an Employer in which
SBC has a direct or indirect 100% ownership interest and who is on active
duty, Disability or Leave of Absence;

      (b) is, as determined by SBC, a member of Employer's "select group of
management or highly compensated employees" within the meaning of the
Employment Retirement Income Security Act of 1974, as amended, and
regulations thereunder ("ERISA"), and

      (c) has an employment status which has been approved by  the Committee
or the Chairman to be eligible to participate in this Plan.

      Notwithstanding the foregoing, SBC may, from time to time, exclude any
Employee or group of Employees from being deemed an "Eligible Employee" under
this Plan.

      In the event a court or other governmental authority determines that an
individual was improperly excluded from the class of persons who would be
considered Eligible Employees during a particular time for any reason, that
individual shall not be an Eligible Employee for purposes of the Plan for the
period of time prior to such determination.

      Any Employee that holds options to acquire shares of AirTouch
Communications, Inc. or ordinary shares or American Depository Shares of
Vodafone AirTouch plc (or any similar rights), under the Pacific Telesis
Group Stock Option and Stock Appreciation Rights Plan or any other stock
option plan of an Employer is not an Eligible Employee and may not
participate in this Plan.

      Employee.  Any person employed by an Employer, excluding persons hired
for a fixed maximum term and excluding persons who are neither citizens nor
permanent residents of the United States, all as determined by SBC.  For
purposes of this Plan, a person on Leave of Absence who otherwise would be an
Employee shall be deemed to be an Employee.

      Employer.  SBC Communications Inc. or any of its Subsidiaries.

      Exercise Price.  The price per share of Stock purchasable under an
Option.

      Fair Market Value or FMV.  In valuing Stock or any other item subject
to valuation under this Plan, the Committee may use such index or measurement
as the Committee may reasonably determine from time to time, and such index
or measurement shall be the FMV of such Stock or other item.  In the absence
of such action by the Committee, FMV means, with respect to Stock, the
closing price on the New York Stock Exchange ("NYSE") of the Stock on the
relevant date, or if on such date the Stock is not traded on the NYSE, then
the closing price on the immediately preceding date such Stock is so traded.

      Leave of Absence.  Where a person is absent from employment with an
Employer on a formally granted leave of absence (i.e., the absence is with
formal permission in order to prevent a break in the continuity of term of
employment, which permission is granted (and not revoked) in conformity with
the rules of the Employer which employs the individual, as adopted from time
to time).  For purposes of this Plan, a Leave of Absence shall be deemed to
also include a transfer of a person to an entity by an Employer for a
rotational work assignment.  In the event a transfer to such an entity lasts
more than 5 years or the entity's rotational work assignment status is
canceled by SBC, it shall be deemed a Termination of Employment with the
Employer at that time for purposes of this Plan.  To be a rotational work
assignment, the Employer must have indicated in writing to the person that
the person was to be rehired by the Employer on termination of the rotational
work assignment.

      Options or Stock Options.  Options to purchase Stock issued  pursuant to
this Plan.

      Participant.  An  Eligible  Employee  or former  Eligible  Employee  who
participates in this Plan.

      Pre-Tax  Account.  The  account  maintained  on a  pre-tax  basis on the
books of account of SBC for each Participant.

      Retirement or Retire.  The Termination of Employment for reasons other
than death, on or after the earlier of the following dates:  (1) the date the
Employee is eligible to retire with an immediate pension pursuant to the SBC
Supplemental Retirement Income Plan ("SRIP"); or (2) the date the Employee
has attained one of the following combinations of age and service at
Termination of Employment, except as otherwise indicated below:

            Net Credited Service       Age
            10 years or more        65 or older
            20 years or more        55 or older
            25 years or more        50 or older
            30 years or more        Any age

      With respect to an Employee who is granted an EMP Service Pension under
and pursuant to the provisions of the SBC Pension Benefit Plan - Nonbargained
Program upon Termination of Employment, the term "Retirement" shall include
such Employee's Termination of Employment.

      Shares or Share Units.  An accounting entry representing the right to
receive an equivalent number of shares of Stock.

      Short Term Incentive Award.  An award paid by an Employer (and not by a
non-Employer, such as state disability payments) under the Short Term
Incentive Plan; an award under a similar plan intended by the Committee to be
in lieu of an award under such Short Term Incentive Plan; the Key Executive
Officer Short Term Award paid under the 1996 Stock and Incentive Plan; or any
other award that the Committee designates as a Short Term Incentive Award
specifically for purposes of this Plan (regardless of the purpose of the
award).

      Stock.  The common stock of SBC Communications Inc.

      Subsidiary.  Any corporation, partnership, venture or other entity in
which SBC holds, directly or indirectly, a 50% or greater ownership
interest.  The Committee may, at its sole discretion, designate any other
corporation, partnership, venture or other entity a Subsidiary for the
purpose of participating in this Plan.

      Termination of Employment.  References herein to "Termination of
Employment," "Terminate Employment" or a similar reference, shall mean the
event where the Employee ceases to be an Employee of any Employer, including
but not limited to where the employing company ceases to be an Employer.


Article 3 - Administration of the Plan

3.1  The Committee.
      The Committee shall be the administrator of the Plan and will
administer the Plan, interpret, construe and apply its provisions in
accordance with its terms.  The Committee may further establish, adopt or
revise such rules and regulations as it may deem necessary or advisable for
the administration of the Plan.  References to determinations or other
actions by SBC, herein, shall mean actions authorized by the Committee, the
Chairman, the Senior Executive Vice President of SBC in charge of Human
Resources, or their respective successors or duly authorized delegates, in
each case in the discretion of such person.  All decisions by SBC shall be
final and binding.

3.2  Authorized Shares of Stock.
      (a) Except as provided below, the number of shares of Stock which may
be distributed pursuant to the Plan, exclusive of Article 8, is 21,000,000.
The number of Stock Options and shares of Stock which may be issued pursuant
to Article 8 of the Plan is 34,000,000 each.  Of the foregoing Stock Options,
the number of incentive Stock Options which may be issued pursuant to the
Plan is 34,000,000.  Conversions of stock awards into Share Units pursuant to
Section 4.4 and their eventual distribution shall count only against the
limits of the plans from which they are transferred or contributed and shall
not be applied against the limits in this Plan.  To the extent Share Units
are acquired through deferrals of Stock or contributions of cash where the
payment of which would otherwise be deductible by SBC under Section 162(m) of
the Code regardless of the size of the distribution, and such Share Units are
available for distribution, they shall be distributed first.  In the event
SBC determines that continuing the purchase of Share Units under the Plan may
cause the number of shares of Stock that are to be distributed under this
Plan (which may take into account, among other things, the number of Share
Units acquired and the number of Stock Options issued or required to be
issued, reduced by the number of shares of Stock that would be withheld for
income tax purposes) to exceed the number of authorized shares of Stock, then
SBC may cancel further purchases of Share Units and require that any further
dividend equivalents on Share Units be paid in cash to the Participants.

      (b) In the event of a merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend, stock split, share
combination, or other change in the corporate structure of SBC affecting the
shares of Stock, such adjustment shall be made to the number and class of the
shares of Stock which may be delivered under the Plan (including but not
limited to individual limits), and in the number and class of and/or price of
shares of Stock subject to outstanding Options granted under the Plan, and/or
in the number of outstanding Options and Share Units, in each case as may be
determined to be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights.


Article 4 - Contributions

4.1   Election to Make Contributions.
      (a) An Eligible Employee may elect to purchase Share Units through
payroll deductions contributed to the Plan as follows (such contributions to
the Plan are "Employee Contributions"):
            (i) An Eligible Employee may elect to contribute from 6% to 30%
            (in whole percentage increments) of his or her monthly Base
            Compensation, as the same may change from time to time.

            (ii) An Eligible Employee may elect to contribute up to 100% (in
            whole percentage increments) of a Short Term Incentive Award.

      (b) An Eligible Employee may only make an election, change an election,
or terminate an election to purchase Share Units with Employee Contributions
as follows:

            (i) An Employee who is an Eligible Employee as of September 30
            may make an election on or prior to the last Business Day of the
            immediately following November with respect to the contribution
            of Base Compensation and/or Short Term Incentive Awards paid on
            or after the immediately following January 1.

            (ii) An Employee who was not an Eligible Employee as of September
            30 but who is an Eligible Employee the immediately following
            December 31 (or such later date chosen by the Chairman or the
            Committee, but not later than April 30) may make an election on
            or prior to the last Business Day of the immediately following
            May with respect to the contribution of Base Compensation and/or
            Short Term Incentive Awards paid on or after the immediately
            following July 1.

      SBC may refuse or terminate any election to purchase Share Units in the
Plan at any time; provided, however, only the Committee may take such action
with respect to persons who are "officer level" Employees as shown on the
records of SBC.


4.2   Purchase of Share Units.
      (a) Employee Contributions (as well as any corresponding SBC matching
contribution) shall be made solely pursuant to a proper election and only
during the Employee's lifetime and while the Employee remains an Eligible
Employee (if the Employee ceases to be an Eligible Employee, his or her
election to make Employee Contributions shall be cancelled); provided,
however, Termination of Employment of an Eligible Employee shall not
constitute loss of eligibility solely with respect to contribution of annual
base salary earned prior to termination but paid within 60 days thereafter or
with respect to a Short Term Incentive Award paid after Retirement (and such
person shall be deemed an Eligible Employee for such contributions).

      (b)  The number of Share Units purchased by a Participant during a
calendar month shall be found by dividing the Participant's contributions
during the month by the FMV on the last day of such month.

      (c)  Contributions to the Plan shall be deemed contributed when the
compensation would have otherwise actually been paid (using the "check date"
of the payment or contribution) were it not for an election under this Plan.
For example, a contribution from a payment of Base Compensation, delayed for
any reason, shall be deemed contributed when the delayed payment is made.

4.3   Reinvestment of Dividends.
      In the month containing a record date for a regular cash dividend on
SBC Stock, each Participant shall be credited with that number of Share Units
equal to the declared dividend per share of Stock multiplied by the number of
Share Units held by the Participant and divided by the FMV on the last day of
the month containing the dividend record date.

4.4   Deferral of Other Stock Awards.
      (a) Any Eligible Employee who (i) would receive from SBC a distribution
of Stock (including but not limited to the removal of restrictions on
restricted stock) pursuant to the 1996 Stock and Incentive Plan or pursuant
to any other plan or award specifically permitted to be contributed to this
Plan by the Committee and (ii) has not recognized any part of such
distribution for Federal income taxation purposes, may make an election on or
prior to the last Business Day of the calendar year prior to the calendar
year such Stock would otherwise actually been paid (or, for restricted stock,
the calendar year such restrictions would be removed and the stock recognized
for Federal income tax purposes) to convert such distribution into the number
of Share Units under this Plan equal to the number of shares of Stock to
which the Eligible Employee would be entitled; provided such person remains
an Eligible Employee at the time of such conversion.  Distribution of such
Share Units shall be governed solely by the provisions of this Plan.  SBC may
refuse or terminate any election under this Section 4.4 to convert a
distribution into Share Units in the Plan at any time; provided, however,
only the Committee may take such action with respect to persons who are
"officer level" Employees as shown on the records of SBC.

      (b)  Effective January 1, 2001, except for persons who die prior to
2001, deferrals of Stock made prior thereto under the Salary and Incentive
Award Deferral Plan will be converted into the number of Share Units equal to
the number of shares of Stock or the equivalent thereof then held by the
Participant through such Salary and Incentive Award Deferral Plan.  Any such
conversion shall not reduce or offset the number of authorized shares of
Stock under this Plan.  All elections made under such plan shall be
terminated and the distribution of such Share Units shall be governed solely
by the provisions of this Plan.

      (c)  The Committee may permit an Eligible Employee to purchase Share
Units under this Plan with amounts other than Base Compensation or Short Term
Incentive Awards on such terms and conditions as such Committee may permit
from time to time.

      (d)  In no event shall an acquisition of Share Units pursuant to this
Section 4.4 result in the crediting of an SBC matching contribution or
Options.


Article 5 - SBC Match

5.1   SBC Match.
      SBC shall credit each Participant's account with the number of Share
Units found by taking eighty percent (80%) of the Participant's contributions
from no more than six percent (6%) the Participant's Base Compensation made
during the month and dividing the resulting figure by the FMV of the Stock on
the last day of such month.  However, if during any month the Participant is
concurrently participating in this Plan and (a) the match eligible portion of
the SBC Savings Plan (which may be referred to as "basic contributions") or
(b) the match eligible portion of any other tax qualified or nonqualified
plan of an Employer, then the monthly matching contribution under this Plan
shall be reduced so that the total monthly matching contribution shall be
paid with respect to no more than:

      (x) six percent (6%) minus
      (y) the Participant's match eligible percentage determined under such other plan,

of the Participant's monthly Base Compensation.  In no event shall matching
contributions under this Plan and all other plans of SBC and all Employers
combined (including but not limited to the SBC Savings Plan) be paid with
respect to more than six percent (6%) of Participant's monthly Base
Compensation.  SBC match shall only be paid on Base Compensation contributed
to the Plan.

5.2   Vesting and Distribution of Share Units Acquired with Matching Contributions.
      A Participant's interest in Share Units purchased with SBC matching
contributions, as well as earnings thereon, shall vest at such time as
Participant shall have five (5) years of service as reflected on the records
of SBC and may be distributed in accordance with the Plan's distribution
provisions only after the Participant Terminates Employment or in or after
the calendar year in which the Participant reaches age 55.  Upon Termination
of Employment, all unvested Share Units shall be forfeited.


Article 6 - Distributions

6.1    Distributions of Share Units.
(a)   Beginning March 10 (or such other date as determined by SBC) of the
first (1st) calendar year following the calendar year of the Retirement of a
Participant and on March 10 (or such other date as determined by SBC) of each
of the successive 14 calendar years, SBC shall distribute that number of
Share Units that is equal to the total number of Share Units then held by the
Participant divided by the number of remaining installments.  Not withstanding
the foregoing, if the Participant Retires prior to 2001, then any undistributed
Share Units will be distributed in a lump sum on March 10 of the fifteenth
(15th) calendar following the calendar year of the Retirement of the
Participant.

      (b)  Beginning March 10 (or such other date as determined by SBC) of
the calendar year following the calendar year of Termination of Employment
which is not a Retirement and on March 10 (or such other date as determined
by SBC) of each of the successive 2 calendar years, SBC shall distribute that
number of Share Units that is equal to the total number of Share Units then
held by the Participant divided by the number of remaining installments.
Notwithstanding the foregoing, non-Retirement eligible Participants who
Terminate Employment prior to January 1, 2001, shall receive all
undistributed Share Units in a lump sum.

      (c) Notwithstanding (a) or (b), above, to the contrary, in the event
of the death of a Participant, all undistributed Share Units shall be
promptly distributed to the Participant's beneficiary in accordance with
the SBC Rules for Employee Beneficiary Designations, as the same may be
amended from time to time.

6.2   Accelerated Distribution.
      (a) On or before the last Business Day of a calendar year, a
Participant may elect to receive a distribution of all or a specified number
of the Participant's vested Share Units.  Such distribution shall be made
March 10 (or such other date as determined by SBC) of the immediately
following calendar year.  This distribution shall be in addition to the
number of Share Units to be distributed at the same time under Section 6.1,
to the extent any remain available for distribution, which Distribution shall
be calculated without regard to an election under this section.  No
distribution under this Section 6.2 (a) shall be made of Share Units acquired
with Employee Contributions or SBC matching contributions in the same
calendar year as the distribution.

      (b)  In the event the Participant Terminates Employment for reasons
other than Retirement, SBC may, at its sole discretion, accelerate the
distribution of all or part of the Share Units credited to the Participant to
the date of SBC's choosing, without notice to, or the consent of, the
Participant.

6.3   Small Distribution.
      Notwithstanding any election made by the Participant, after the
Termination of Employment of the Participant for any reason, if at the time
of a distribution the Participant's Share Units have a FMV of less than
$10,000, SBC may, in its discretion, convert and distribute the Participant's
Share Units in the form of a lump sum distribution.

6.4   Determination by Internal Revenue Service.
      In the event that a final determination shall be made by the Internal
Revenue Service or any court of competent jurisdiction that a Participant has
recognized gross income for Federal income tax purposes in excess of the
Share Units actually distributed by SBC, SBC shall promptly convert and
distribute to the Participant those Share Units to which such additional
gross income is attributable.

6.5   Emergency Distribution.
      In the event that SBC, upon written petition of the Participant,
determines in its sole discretion that the Participant has suffered an
unforeseeable financial emergency, SBC shall convert and distribute to the
Participant, as soon as practicable following such determination, the number
of Share Units determined by SBC to meet the emergency (the "Emergency
Distribution").  For purposes of this Plan, an unforeseeable financial
emergency is an unexpected need for cash arising from an illness, casualty
loss, sudden financial reversal, or other such unforeseeable occurrence.
Cash needs arising from foreseeable events such as the purchase of a house or
education expenses for children shall not be considered to be the result of
an unforeseeable financial emergency.  Upon such distribution, any election
to make Employee Contributions by such Participant shall be immediately
cancelled, and the Participant shall not be permitted to make a new election
with respect to Employee Contributions that would be contributed during the
then current and immediately following calendar year.

6.6   Ineligible Participant.
      Notwithstanding any other provisions of this Plan to the contrary, if
SBC receives an opinion from counsel selected by SBC, or a final
determination is made by a Federal, state or local government or agency,
acting within its scope of authority, to the effect that an individual is
not, or was not at the time of his or her making Employee Contributions to
this Plan, to be a "management or highly compensated employee" within the
meaning of ERISA, then such person will not be eligible to participate in
this Plan and shall receive an immediate lump sum distribution of shares of
Stock corresponding to the vested portion of the Share Units standing
credited to his or her account.  Upon such payment no other distribution
shall thereafter be payable under this Plan either to the individual or any
beneficiary of the individual, except as provided under Section 10.1
Additional Benefit.

6.7   Distribution Process.
      Share Units shall be distributed under this Plan by taking the number
of Share Units to be distributed and converting them into an equal number of
shares of Stock.  (Once distributed, a Share Unit shall be canceled.)


Article 7 - Transition Provisions

      The transition rules of this Article 7 shall supercede all other terms
      of this Plan.

7.1   Effective Dates.
      Except as otherwise provided in this Article, the amendments to this
Plan made March 31, 2000 (the "2000 Amendments") shall be effective March 31,
2000.  No election to begin a Savings Unit nor an election regarding the
distribution or further deferral of a distribution of a Savings Unit may be
made on or after March 31, 2000.  (As used herein, "Savings Units" shall have
the same meaning as used in this Plan prior to such amendments.)

7.2   Combination of Share Units.
      (a)  Effective January 1, 2001, all Share Units (previously referred to
as "Shares") acquired under Savings Units by a Participant shall be combined
in a single account regardless of date acquired or the Savings Unit to which
they were related, except for the Share Units to be distributed under (b),
below.

      (b)  Share Units equal in value to, and constituting, a Participant's
tax basis in the Share Units acquired on an after-tax basis shall be valued
and distributed on or promptly after March 10, 2001, unless a later
distribution is required by SBC.

      (c)  To the extent any Participant who retires before 2001 would, were
it not for the 2000 Amendments, under valid elections made prior to March 31,
2000, receive a distribution under a Savings Unit(s) that would extend the
Participant's distributions beyond 2015, then the Savings Unit(s) so affected
shall not be combined with other Share Units and shall be distributed in
accordance with such elections.  Notwithstanding the foregoing, the
Participant may, with the consent of SBC, elect to have all undistributed
Shares in such Savings Unit(s) be governed by this Plan as in effect after
March 31, 2000.

      (d)  In the event a Participant dies prior to 2001, the Participant's
Savings Unit(s) shall not be combined with other Savings Units and shall be
distributed in accordance with the Plan as it existed immediately prior to
March 31, 2000, and deferrals under the Salary and Incentive Award Deferral
Plan by such Participant will not be transferred to this Plan but will be
paid out in accordance with the terms of that plan as it existed immediately
prior to March 31, 2000.

7.3   Termination of Elections.
      (a)  Distributions from the Plan that would be made in the year 2000
under the Plan as it existed immediately prior to March 31, 2000, based on
elections made before March 31, 2000,  shall continue to be made in the year
2000 as provided in the Plan immediately prior to March 31, 2000.  All other
distribution elections are cancelled, including but not limited to
distributions which have already commenced, but only to the extent such
elections call for distributions after the year 2000.  All Share Units
remaining undistributed after such distributions shall be held and
distributed in accordance with the terms of the Plan as in effect after March
31, 2000.

      (b)  Contributions to the Plan that would be made in the year 2000
under the Plan as it existed immediately prior to March 31, 2000, based on
elections made before March 31, 2000, shall continue to be made in the year
2000 as provided in the Plan immediately prior to March 31, 2000.  Elections
to participate in the Plan shall not automatically be renewed for the year
2001.  Each Eligible Employee must make a new election after March 31, 2000,
in order to purchase Share Units with Employee Contributions after 2000.
Provided, however, valid elections made prior to March 31, 2000, to
contribute Short Term Incentive Awards in 2001 shall be valid elections under
this Plan.

7.4   Annual Base Salary Contribution Transition.
      Annual base salary earned prior to January 1, 2001, shall be
contributed when earned, while annual base salary earned on or after such
date shall be contributed when paid.  In order to avoid any double
contribution of annual base salary, that part of annual base salary earned in
the year 2000 shall not be included in any determination of contributions to
the Plan in a later calendar year, even though paid in such calendar year.
This section shall not apply to employees of Ameritech Corporation or its
direct or indirectly held subsidiaries or to Employees who did not make
contributions to the Plan in 2000.

7.5   Stock Options.
      The August 2000 and February 2001 issuances of Options shall be
determined and made as the Plan was written immediately prior to March 31,
2000, so as not to enlarge or reduce the rights of Participants with Savings
Units commencing in 2000.


Article 8 - Options

8.1   Grants.  The Committee shall determine at its discretion whether the
Options issued pursuant to this Plan shall be non-qualified Stock Options or
incentive Stock Options within the meaning of Section 422 of the Code.  Any
Options issued hereunder shall be non-qualified Options unless the Committee
specifies prior to the issuance thereof that they shall be incentive Stock
Options.  Notwithstanding any other provision of the Plan, any incentive
Stock Options issued under this Plan shall be issued and exercised in
accordance with Section 422 of the Code.  The Options may be issued in
definitive form or recorded on the books and records of SBC for the account
of the Participant, at the discretion of SBC.  If SBC elects not to issue the
Options in definitive form, they shall be deemed issued, and the Participants
shall have all rights incident thereto as if they were issued on the dates
provided herein, without further action on the part of SBC or the
Participant.  In addition to the terms herein, all Options shall be subject
to such additional provisions and limitations as provided in any
Administrative Procedures adopted by the Committee prior to the issuance of
such Options.  The number of Options issued to a Participant shall be
reflected on the Participant's annual statement of account.

8.2   Term of Options.
      The Options may only be exercised:  (a) after the earlier of (i) the
expiration of one (1) year from date of issue or (ii) the Participant's
Termination of Employment, and (b) no later than the tenth (10th) anniversary
of their issue; and Options shall be subject to earlier termination as
provided herein.

8.3   Exercise Price.
      The Exercise Price of an Option shall be the FMV of the Stock on the
date of issuance of the Options.

8.4   Issuance of Options.
      (a)  On each June 1 a Participant shall receive two (2) Options for
each Share Unit acquired by the Participant during the immediately preceding
January through April period with Employee Contributions of Base Compensation
and/or Short Term Incentive Award.  A fractional number of Options shall be
rounded up to the next whole number.

      (b)  On each February 1 a Participant shall receive:

            (i)  two (2) Options for each Share Unit acquired by the
            Participant during the immediately preceding May through December
            with Employee Contributions of Base Compensation and/or Short
            Term Incentive Award; and

            (ii)  two (2) Options for each Share Unit acquired prior to such
            date by the Participant with dividend equivalents that were
            derived, directly or indirectly (such as dividend equivalents
            paid on Share Units acquired with dividend equivalents), from
            Share Units acquired with Employee Contributions during the
            immediately preceding January through December.

      A fractional number of Options shall be rounded up to the next whole
number.

      (c)  If Stock is not traded on the NYSE on any of the foregoing Option
issuance dates, then the Options shall not be issued until the next such day
on which Stock is so traded.

      (d)  If a Participant Terminates Employment other than (i) while
Retirement eligible or (ii) because of death or Disability, no further
Options shall be issued to or with respect to such Participant.

      (e)  No more than 400,000 Options shall be issued to any individual
under this Plan during a calendar year.  No Share Unit may be counted more
than once for the issuance of Options.

      (f)  The Committee may, in its sole discretion, at any time increase or
lower the number of Options that are to be issued for each Share Unit
acquired.  However, if the Committee lowers the number of Options, then such
change shall only be effective with respect to the next period in which a
Participant may change his or her Share Unit purchase election.

      (g)  The Committee may also, at any time and in any manner, limit the
number of Options which may be acquired as a result of the Short Term
Incentive Award being contributed to the Plan.  Further, except as otherwise
provided by the Committee, in determining the number of Options to be issued
to a Participant with respect to a Participant's contribution of a Short Term
Incentive Award to the Plan and subsequent crediting of Share Units, Options
may be issued only with respect to an amount which does not exceed the target
amount of such award (or such other portion of the award as may be determined
by the Committee).

8.5   Exercise and Payment of Options.
      Options shall be exercised by providing notice to the designated agent
selected by SBC (if no such agent has been designated, then to SBC), in the
manner and form determined by SBC, which notice shall be irrevocable, setting
forth the exact number of shares of Stock with respect to which the Option is
being exercised and including with such notice payment of the Exercise
Price.  When Options have been transferred, SBC or its designated agent may
require appropriate documentation that the person or persons exercising the
Option, if other than the Participant, has the right to exercise the Option.
No Option may be exercised with respect to a fraction of a share of Stock.

      The Exercise Price shall be paid in full at the time of exercise.  No
      Stock shall be issued or transferred until full payment has been
      received therefor.

      Payment may be made:

            (a) in cash, or

            (b) unless otherwise provided by the Committee at any time, and
      subject to such additional terms and conditions and/or modifications as
      SBC may impose from time to time, and further subject to suspension or
      termination of this provision by SBC at any time, by:

            (i) delivery of Stock owned by the Participant in partial (if in
            partial payment, then together with cash) or full payment;
            provided, however, as a condition to paying any part of the
            Exercise Price in Stock, at the time of exercise of the Option,
            the Participant must establish to the satisfaction of SBC that
            the Stock tendered to SBC must have been held by the Participant
            for a minimum of six (6) months preceding the tender; or

            (ii) if SBC has designated a stockbroker to act as SBC's agent to
            process Option exercises, issuance of an exercise notice to such
            stockbroker together with instructions irrevocably instructing
            the stockbroker:  (A) to immediately sell (which shall include an
            exercise notice that becomes effective upon execution of a limit
            order) a sufficient portion of the Stock to pay the Exercise
            Price of the Options being exercised and the required tax
            withholding, and (B) to deliver on the settlement date the
            portion of the proceeds of the sale equal to the Exercise Price
            and tax withholding to SBC.  In the event the stockbroker sells
            any Stock on behalf of a Participant, the stockbroker shall be
            acting solely as the agent of the Participant, and SBC disclaims
            any responsibility for the actions of the stockbroker in making
            any such sales.  No Stock shall be issued until the settlement
            date and until the proceeds (equal to the Exercise Price and tax
            withholding) are paid to SBC.

      If payment is made by the delivery of Stock, the value of the Stock
      delivered shall be equal to the FMV of the Stock on the day preceding
      the date of exercise of the Option.

      Restricted Stock may not be used to pay the Option exercise price.

8.6   Restrictions on Exercise and Transfer.
      No Option shall be transferable except: (a) upon the death of a
Participant in accordance with SBC's Rules for Employee Beneficiary
Designations; and (b) in the case of any holder after the Participant's
death, only by will or by the laws of descent and distribution.  During the
Participant's lifetime, the Participant's Options shall be exercisable only
by the Participant or by the Participant's guardian or legal representative.
After the death of the Participant, an Option shall only be exercised by the
holder thereof (including but not limited to an executor or administrator of
a decedent's estate) or his or her guardian or legal representative.

8.7   Termination of Employment.
      (a)  Not Retirement Eligible.  If a Participant Terminates Employment
while not Retirement eligible, a Participant's Options may be exercised, to
the extent then exercisable:

            (i) if such Termination of Employment is by reason of death or
            Disability, then for a period of three (3) years from the date of
            such Termination of Employment or until the expiration of the
            stated term of such Option, whichever period is shorter; or

            (ii) if such Termination of Employment is for any other reason,
            then for a period of one (1) year (three (3) months for Options
            granted before August 1, 1998) from the date of such Termination
            of Employment or until the expiration of the stated term of such
            Option, whichever period is shorter.

      (b)  Retirement Eligible.  If a Participant Terminates Employment while
Retirement eligible, a Participant's Option may be exercised, to the extent
then exercisable:  (i) for a period of five (5) years (three (3) years for
options granted before August 1, 1998) from the date of Retirement or (ii)
until the expiration of the stated term of such Option, whichever period is
shorter.  If a Participant Terminated Employment because of death or
Disability on or before March 31, 2000, the Participant  will be deemed to
have Terminated Employment while not Retirement eligible for purposes of this
section.


Article 9 - Discontinuation, Termination, Amendment.

9.1   SBC's Right to Discontinue Offering Share Units.
      SBC may at any time discontinue offerings of Share Units under the
Plan.  Any such discontinuance shall have no effect upon existing Share Units
or the terms or provisions of this Plan as applicable to such Share Units.

9.2   SBC's Right to Terminate Plan.
      No Share Units may be purchased with Employee Contributions after
December 31, 2004.  The Committee may terminate the Plan at any earlier
time.  Upon termination of the Plan, contributions shall no longer be made
under the Plan.

      After termination of the Plan, Participants shall continue to earn
dividend equivalents in the form of Share Units on undistributed Share Units
and shall continue to receive all distributions under this Plan at such time
as provided in and pursuant to the terms and conditions of Participant's
elections and this Plan.

9.3   Amendment.
      The Committee may at any time amend the Plan in whole or in part
including but not limited to changing the formulas for determining the amount
of SBC matching contributions under Article 5 or increasing or decreasing the
number of Options to be issued under Article 8; provided, however, that no
amendment, including but not limited to an amendment to this section, shall
be effective, without the consent of a Participant, to alter, to the material
detriment of such Participant, the distributions described in this Plan as
applicable to Share Units of the Participant or to decrease the number of
Share Units standing credited to such Participant's Accounts under the Plan.
For purposes of this section, an alteration to the material detriment of a
Participant shall mean a material reduction in the period of time over which
Stock may be distributed to a Participant, any reduction in the Participant's
number of vested Share Units or Options, or an increase in the Exercise Price
or decrease in the term of an Option.  Any such consent may be in a writing,
telecopy, or e-mail or in another electronic format.  An election to acquire,
or to modify an election to acquire, Share Units with Employee Contributions
and the failure to terminate an election to acquire Share Units with Employee
Contributions when able to do so shall each be conclusively deemed to be the
consent of the Participant to any and all amendments to the Plan prior to
such election or failure to terminate an election, and such consent shall be
a condition to making any election with respect to Employee Contributions.

      Notwithstanding anything to the contrary contained in this section of
the Plan, the Committee may modify this Plan with respect to any person
subject to the provisions of Section 16 of the Securities Exchange Act of
1934 as amended ("Exchange Act") to place additional restrictions on the
exercise of any Option or the transfer of any Stock not yet issued under the
Plan.

Article 10 - Miscellaneous

10.1  Additional Benefit.
      The reduction of any benefit payable under the SBC Pension Benefit Plan
(or comparable plan identified by SBC as a replacement therefor), which
results from participation in this Plan, will be restored as an additional
benefit ("make-up piece") under this Plan.  The Participant shall elect prior
to commencement of payment of the make-up piece whether to receive such
benefit in cash in a lump sum (consisting of the present value equivalent of
the pension retirement benefit (life annuity) make-up piece) or such benefit
in an annuity form of payment.  Notwithstanding the proceeding provisions of
this section, if all or a portion of the make-up piece is paid pursuant to
SRIP or another non-qualified plan, then such amount shall not be payable
pursuant to this Plan.

10.2  Tax Withholding.
      Upon distribution of Stock, including but not limited to, shares of
Stock issued upon the exercise of an Option, SBC shall withhold shares of
Stock sufficient in value, using the FMV on the date determined by SBC to be
used to value the Stock for tax purposes, to satisfy the minimum amount of
Federal, state, and local taxes required by law to be withheld as a result of
such distribution.

      Any fractional share of Stock payable to a Participant shall be
withheld as additional Federal withholding, or, at the option of SBC, paid in
cash to the Participant.

      Unless otherwise determined by the Committee, when the method of
payment for the Exercise Price is from the sale by a stockbroker pursuant to
Section 8.5(b)(ii), hereof, of the Stock acquired through the Option
exercise, then the tax withholding shall be satisfied out of the proceeds.
For administrative purposes in determining the amount of taxes due, the sale
price of such Stock shall be deemed to be the FMV of the Stock.

10.3  Elections and Notices.
      Notwithstanding anything to the contrary contained in this Plan, all
elections and notices of every kind shall be made on forms prepared by SBC or
made in such other manner as permitted or required by SBC, including through
electronic means, over the Internet or otherwise.  An election shall be
deemed made when received by SBC, which may waive any defects in form.
Unless made irrevocable by the electing person, each election with regard to
making Employee Contributions or distributions of Share Units shall become
irrevocable at the close of business on the last day to make such election.
SBC may limit the time an election may be made in advance of any deadline.

      Any notice or filing required or permitted to be given to SBC under the
Plan shall be delivered to the principal office of SBC, directed to the
attention of the Senior Executive Vice President-Human Resources of SBC or
his or her successor.  Such notice shall be deemed given on the date of
delivery.

      Notice to the Participant shall be deemed given when mailed (or sent by
telecopy) to the Participant's work or home address as shown on the records
of SBC or, at the option of SBC, to the Participant's e-mail address as shown
on the records of SBC.  It is the Participant's responsibility to ensure that
the Participant's addresses are kept up to date on the records of SBC.  In
the case of notices affecting multiple Participants, the notices may be given
by general distribution at the Participants' work locations.

      By participating in the Plan, each Participant agrees that SBC may
provide any documents required or permitted under the Federal or state
securities laws, including but not limited to the Securities Act of 1933 and
the Securities Exchange Act of 1934 by e-mail, by e-mail attachment, or by
notice by e-mail of electronic delivery through SBC's Internet Web site or by
other electronic means.

10.4  Unsecured General Creditor.
      Participants and their beneficiaries, heirs, successors, and assigns
shall have no legal or equitable rights, interest, or claims in any property
or assets of any Employer.  No assets of any Employer shall be held under any
trust for the benefit of Participants, their beneficiaries, heirs,
successors, or assigns, or held in any way as collateral security for the
fulfilling of the obligations of any Employer under this Plan.  Any and all
of each Employer's assets shall be, and remain, the general, unpledged,
unrestricted assets of such Employer.  The only obligation of an Employer
under the Plan shall be merely that of an unfunded and unsecured promise of
SBC to distribute shares of Stock corresponding to Share Units, and Options,
under the Plan.

10.5  Offset.
      SBC may offset against the amount of Stock otherwise distributable to a
Participant, any amounts due an Employer by a Participant, including but not
limited to overpayments under any compensation or benefit plans.  In
addition, SBC may also cancel a Stock Option to satisfy such an obligation to
an Employer.  For this purpose, each Stock Option shall be valued by
subtracting the Exercise Price of the Stock Option from the FMV of the Stock
on such date.

10.6  Non-Assignability.
      Neither a Participant nor any other person shall have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage, or otherwise
encumber, transfer, hypothecate or convey in advance of actual receipt,
shares of Stock corresponding to Share Units under the Plan, if any, or any
part thereof, which are, and all rights to which are, expressly declared to
be unassignable and non-transferable.  No part of the Stock distributable
shall, prior to actual distribution, be subject to seizure or sequestration
for the payment of any debts, judgments, alimony or separate maintenance owed
by a Participant or any other person, nor be transferable by operation of law
in the event of a Participant's or any other person's bankruptcy or
insolvency.

10.7  Employment Not Guaranteed.
      Nothing contained in this Plan nor any action taken hereunder shall be
construed as a contract of employment or as giving any employee any right to
be retained in the employ of an Employer or to serve as a director.

10.8  Errors.
      At any time SBC may correct any error made under the Plan without
prejudice to SBC.  Such corrections may include, among other things, changing
or revoking a Stock Option issuance, cancelling Share Units and refunding
contributions to a Participant with respect to any period he or she made
Employee Contributions while not an Eligible Employee, or cancelling the
enrollment of a non-Eligible Employee.

10.9  Captions.
      The captions of the articles, sections, and paragraphs of this Plan are
for convenience only and shall not control nor affect the meaning or
construction of any of its provisions.

10.10 Governing Law.
      To the extent not preempted by ERISA, this Plan shall be governed by
and construed in accordance with the substantive laws of the State of Texas,
excluding any conflicts or choice of law rule or principle that might
otherwise refer constructive or interpretation of this Plan to provisions of
the substantive law of any jurisdiction other than the State of Texas.  Any
action seeking to enforce the rights of an employee, former employee or
person who holds such rights through, from or on behalf of such employee or
former employee under this Plan may be brought only in a Federal or state
court located in Bexar County, Texas.

10.11 Validity.
      In the event any provision of this Plan is held invalid, void, or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of this Plan.

10.12 Successors and Assigns.
      This Plan shall be binding upon SBC and its successors and assigns.

10.13 Participation in Predecessor Plans.
      Effective November 21, 1997, the plans of the Stock Savings Program
were merged into the Stock Savings Plan.  All Share Units under the Stock
Based Savings Plan or the Management Stock Savings Plan were transferred to
this Plan as of that date and are governed by the terms of this Plan.

EX-10 9 exh10p.htm EXHIBIT 10-P EXHIBIT 10-p

Exhibit 10-p

1992 STOCK OPTION PLAN

Plan Effective: January 1, 1996

As amended through: March 31, 2000


                           TABLE OF CONTENTS


1.1      Purpose.................................................1

1.2      Additional Definitions..................................1

1.3      Effective Date..........................................2

2.1      The Committee...........................................2

2.2      Authority of the Committee..............................2

3.1      Number of Shares........................................3

3.2      Lapsed Options..........................................3

3.3      Adjustments in Authorized Shares........................3

4.1      Grant of Options........................................3

4.2      Form of Issuance........................................4

4.3      Option Price............................................4

4.4      Duration of Option......................................4

4.5      Vesting of Options......................................4

4.6      Exercise of Options.....................................4

4.7      Payment.................................................5

4.8      Termination of Employment...............................6

4.9      Transfers...............................................6

4.10     Restrictions on Exercise and Transfer of Options........6

4.11     Change in Control.......................................7

5.1      Amendment, Modification, and Termination................7

5.2      Awards Previously Granted...............................8

6.1      Tax Withholding.........................................8

7.1      Employment..............................................8

7.2      Participation...........................................8

7.3      Successors..............................................8

7.4      Governing Law...........................................8

SBC 1992 STOCK OPTION PLAN

ARTICLE 1. PURPOSE, DEFINITIONS AND EFFECTIVE DATE

1.1

Purpose. The purpose of the SBC 1992 Stock Option Plan (“Plan”) is to promote the success and enhance the value of SBC Communications Inc. (the “Company”) by linking the personal interests of the Employees of the Company and its Subsidiaries to the interests of the Company’s shareowners, and by providing Employees with an additional incentive for outstanding performance. To achieve this purpose, Options to purchase common stock of the Company may be granted to Employees of the Company and its Subsidiaries pursuant to the Plan.

1.2	Additional Definitions. In addition to definitions set forth elsewhere in the Plan, for purposes of the Plan:

(a)

“Cause” shall mean willful and gross misconduct on the part of a Participant that is materially and demonstrably detrimental to the Company or any Subsidiary as determined by the Committee in its sole discretion.

(b)

“Employee” shall mean any management employee of the Company or of one of its Subsidiaries in the third (3rd) level of management or above. Directors who are not otherwise employed by the Company or any of its Subsidiaries shall not be considered Employees under the Plan.

(c)

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any successor Act thereto.

(d)

“Fair Market Value” shall mean the closing price on the New York Stock Exchange (“NYSE”) for Shares on the relevant date, or if such date was not a trading day, the next preceding trading date, all as determined by the Company. A trading day is any day that the Shares are traded on the NYSE. In lieu of the foregoing, the Committee may select any other index or measurement to determine the Fair Market Value of Shares under the Plan.

(e)

“Option” shall mean the right to purchase one or more shares of the common stock of SBC Communications Inc. on the terms and conditions contained in this Plan, the rules of the Committee, and the terms of the Option.

(f)

“Retirement” shall mean the termination of a Participant’s employment with the Company or one of its Subsidiaries, for reasons other than death, disability (as that term is used in the SBC Senior Management Long Term Disability Plan) or for Cause, on or after the earlier of the following dates: (1) the date Participant is eligible to retire with an immediate pension pursuant to the SBC Supplemental Retirement Income Plan; or (2) the date the Participant has attained one of the following combinations of age and service at termination of employment on or after April 1, 1997, except as otherwise indicated below:

                Net Credited Service      Age

                  10 years or more     65 or older
                  20 years or more     55 or older
                  25 years or more     50 or older
                  30 years or more     Any age

With respect to a Participant who is granted an EMP Service Pension under and pursuant to the provisions of the SBC Pension Benefit Plan - Nonbargained Program upon termination of Employment, the term “Retirement” shall include such Participant’s termination of employment.

(g)

“Rotational Work Assignment Company” or "RWAC" shall mean Bell Communications Research, Inc., formerly the Central Services Organization, Inc., and/or any other entity with which SBC Communications Inc. or any of its subsidiaries may enter into an agreement to provide an employee for a rotational work assignment.

(h)

“Shares” or “Stock” or “Shares of Stock” shall mean the common stock of SBC Communications Inc.

(i)

“Subsidiary” shall mean any corporation in which the Company owns directly, or indirectly through subsidiaries, more than fifty percent (50%) of the total combined voting power of all classes of Stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns more than fifty percent (50%) of the combined equity thereof.

1.3 Effective Date. The Plan shall be effective on the date it is approved by the -------------- Company's shareowners.

ARTICLE 2. ADMINISTRATION

2.1 The Committee. The Plan shall be administered by a Committee or Committees ------------- (the "Committee") appointed by the Board of Directors.

2.2

Authority of the Committee. The Committee shall have full power, except as limited by law or by the Articles of Incorporation or Bylaws of the Company, and subject to the provisions of this Plan, to select the recipients of Options (“Participants”); determine the sizes of grants of Options under the Plan; determine the exercise price, duration, vesting requirements, and period of exercisability of each Option; determine the terms and conditions of such Option grants in a manner consistent with the Plan; construe and interpret the Plan and any agreement or instrument entered into under the Plan; establish, amend, or waive rules and regulations for the Plan’s administration; and, subject to the provisions of Article 5 - Amendment, Modification, and Termination, herein, amend the terms and conditions of any outstanding Option to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan.

All determinations and decisions made by the Committee pursuant to the provisions of the Plan, and all related orders and resolutions of the Board shall be final, conclusive, and binding on all persons, including the Company, its shareowners, Employees, Participants, and their estates and beneficiaries.

ARTICLE 3. SHARES SUBJECT TO THE PLAN

3.1	Number of Shares. Subject to adjustment as provided in Section 3.3 Adjustments in Authorized Shares, herein, the total number of Shares of Stock for which Options may be granted under the Plan may not exceed 36,000,000 Shares. These Shares may be either authorized but unissued or reacquired Shares.

3.2	Lapsed Options. If any Option granted under the Plan is canceled, terminates, expires, or lapses for any reason, any Shares subject to such Option again shall be available for the grant of an Option under the Plan.

3.3

Adjustments in Authorized Shares. In the event of a merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, stock split, share combination, or other change in the corporate structure of the Company affecting the Shares, such adjustment shall be made in the number and class of Shares which may be delivered under the plan, and in the number and class of and/or price of Shares subject to outstanding Options granted under the Plan, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights; and provided that the number of Shares subject to any Option shall always be a whole number.

ARTICLE 4. STOCK OPTIONS

4.1

Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to such Employees, at such times and on such terms and conditions, as shall be determined by the Committee; provided, however, no Options may be granted after the 10th anniversary of the effective date of the Plan. The Committee shall have discretion in determining the number of Options and the number of Shares subject to each Option granted to each Participant. Without limiting the generality of the foregoing, the Committee shall have the authority to establish guidelines setting forth anticipated grant levels which correspond to various salary grades or the equivalent thereof.

4.2

Form of Issuance. Options may be issued in the form of a certificate or may be recorded on the books and records of the Company for the account of the Participant. If an Option is not issued in the form of a certificate, then the Option shall be deemed granted upon issuance of a notice of the grant addressed to the recipient. The terms and conditions of an Option shall be set forth in the certificate, in the notice of the issuance of the grant, or in such other documents as the Committee shall determine. The Committee may require a Participant to enter into a written agreement containing terms and conditions relating to the Option and its exercise.

4.3	Option Price. The Option Price for each grant of an Option shall be determined by the Committee; provided, however, that the minimum Option Price shall be one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted.

4.4	Duration of Options. Each Option shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no Option shall be exercisable later than the tenth (10th) anniversary date of its grant.

4.5

Vesting of Options. Options shall vest at such times and under such terms and conditions as determined by the Committee. The Committee shall have the authority to accelerate the vesting of any Option; provided, however, that the Senior Executive Vice President - Human Resources, or his successor, or such other person designated by the Committee, shall have the authority to accelerate the vesting of Options for any Participant who is in the fifth level of management or below and who is not a Director or an officer (as that term is defined in Section 16 of the Exchange Act).

4.6.

Exercise of Options. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant. However, in no event may any Option granted under this Plan become exercisable prior to the first anniversary of the date of its grant, except as provided in Section 4.11 Change in Control.

Options shall be exercised by providing notice to the designated agent selected by the Company (if no such agent has been designated, then to the Company), in the manner and form determined by the Company, which notice shall be irrevocable, setting forth the exact number of Shares with respect to which the Option is being exercised and including with such notice payment of the Option Price. When Options have been transferred, the Company or its designated agent may require appropriate documentation that the person or persons exercising the Option, if other than the Participant, has the right to exercise the Option. No Option may be exercised with respect to a fraction of a Share.

4.7	Payment. The Option Price shall be paid in full at the time of exercise. No Shares shall be issued or transferred until full payment has been received therefor.

Payment may be made: (a) in cash, or

(b)

unless otherwise provided by the Committee at any time, and subject to such additional terms and conditions and/or modifications as the Committee or the Company may impose from time to time, and further subject to suspension or termination of this provision by the Committee or the Company at any time, by:

(i)

delivery of Shares of Stock owned by the Participant in partial (if in partial payment, then together with cash) or full payment; provided, however, as a condition to paying any part of the Option Price in Stock, at the time of exercise of the Option, the Participant must establish to the satisfaction of the Company that the Stock tendered to the Company must have been held by the Participant for a minimum of six (6) months preceding the tender; or

(ii)

if the Company has designated a stockbroker to act as the Company’s agent to process Option exercises, issuance of an exercise notice to such stockbroker together with instructions irrevocably instructing the stockbroker: (A) to immediately sell (which shall include an exercise notice that becomes effective upon execution of a limit order) a sufficient portion of the Shares to pay the Option Price of the Options being exercised and the required tax withholding, and (B) to deliver on the settlement date the portion of the proceeds of the sale equal to the Option Price and tax withholding to the Company. In the event the stockbroker sells any Shares on behalf of a Participant, the stockbroker shall be acting solely as the agent of the Participant, and the Company disclaims any responsibility for the actions of the stockbroker in making any such sales. No Stock shall be issued until the settlement date and until the proceeds (equal to the Option Price and tax withholding) are paid to the Company.

If payment is made by the delivery of Shares of Stock, the value of the Shares delivered shall be equal to the Fair Market Value of the Shares on the day preceding the date of exercise of the Option.

Restricted Stock may not be used to pay the Option Price. 4.8 Termination of Employment. -------------------------

(a)

Termination by Reason of Death or Disability. In the event the employment of a Participant is terminated by reason of death or disability (as that term is used in the SBC Senior Management Long Term Disability Plan), any outstanding Options granted to the Participant shall vest as of the date of termination of employment and may be exercised, if at all, no more than one (1) year following termination of employment, unless the Options, by their terms, expire earlier.

(b)

Termination by Retirement. In the event the employment of a Participant is terminated by reason of Retirement, any outstanding Options granted to the Participant which are vested as of the date of termination of employment may be exercised, if at all, no more than three (3) years following termination of employment, unless the Options, by their terms, expire earlier. If the Participant is Retirement eligible at the time the Participant terminates employment by reason of death or disability (as defined above) after March 31, 2000, then for purposes of this section, the Participant shall be deemed to have terminated employment by reason of Retirement.

(c)

Termination of Employment for Other Reasons. If the employment of a Participant shall terminate for any reason other than the reasons set forth in (a) or (b), above, and other than for Cause, all outstanding Options granted to the Participant which are vested as of the date of termination of employment may be exercised by the Participant within the period beginning on the effective date of termination of employment and ending three (3) months after such date, unless the Options, by their terms, expire earlier.

(d)

Termination for Cause. If the employment of a Participant shall terminate for Cause, all outstanding Options held by the Participant shall immediately terminate and be forfeited to the Company, and no additional exercise period shall be allowed.

(e)

Options not Vested at Termination. Any outstanding Options not vested as of the effective date of termination of employment shall expire immediately and shall be forfeited to the Company.

4.9

Transfers. For purposes of the Plan, transfer of employment of a Participant between the Company and any one of its Subsidiaries (or between Subsidiaries) or between the Company or a Subsidiary and a RWAC, to the extent the term of employment at a RWAC is equal to or less than five years shall not be deemed a termination of employment.

4.10

Restrictions on Exercise and Transfer of Options. During the Participant’s lifetime, the Participant’s Options shall be exercisable only by the Participant or by the Participant’s guardian or legal representative. After the death of the Participant, except as otherwise provided by the Company’s Rules for Employee Beneficiary Designations, an Option shall only be exercised by the holder thereof (including, but not limited to, an executor or administrator of a decedent’s estate) or his or her guardian or legal representative.

No Option shall be transferable except: (a) in the case of the Participant, only upon the Participant’s death and in accordance with the Company’s Rules for Employee Beneficiary Designations; and (b) in the case of any holder after the Participant’s death, only by will or by the laws of descent and distribution.

4.11

Change in Control. Upon the occurrence of a Change in Control, all Options held by Participants hereunder shall immediately become vested and exercisable, notwithstanding the provisions of Section 4.6 Exercise of Options to the contrary. A “Change in Control” shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the shareowners of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the total voting power represented by the Company’s then outstanding voting securities, or (ii) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new Director whose election by the Board of Directors or nomination for election by the Company’s shareowners was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the shareowners of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least eighty percent (80%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareowners of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets.

ARTICLE 5. AMENDMENT, MODIFICATION, AND TERMINATION

5.1

Amendment, Modification, and Termination. The Board or the Committee may at any time and from time to time, terminate, amend, or modify the Plan. However, no such amendment, modification, or termination of the Plan may be made without the approval of the shareowners of the Company, if such approval is required by the Internal Revenue Code, by the insider trading rules of Section 16 of the Exchange Act, by any national securities exchange or system on which the Shares are then listed or reported, or by a regulatory body having jurisdiction with respect hereto.

5.2	Awards Previously Granted. No termination, amendment, or modification of the Plan shall in any material manner adversely affect any Option previously granted under the Plan, without the written consent of the Participant holding such Option.

ARTICLE 6. WITHHOLDING

6.1

Tax Withholding. Upon exercise of an Option, the Company shall withhold Shares sufficient in value, using the Fair Market Value on the date determined by the Company to be used to value the Shares for tax purposes, to satisfy the minimum amount of Federal, state, and local taxes required by law to be withheld as a result of such exercise.

Any fractional share of Stock payable to a Participant shall be withheld as additional Federal withholding, or, at the option of the Company, paid in cash to the participant.

Unless otherwise determined by the Committee, when the method of payment for the Option Price is from the sale by a stockbroker pursuant to Section 4.7(b)(ii), hereof, of the Stock acquired through the Option exercise, then the tax withholding shall be satisfied out of the proceeds. For administrative purposes in determining the amount of taxes due, the sale price of such Stock shall be deemed to be the Fair Market Value of the Stock.

ARTICLE 7. MISCELLANEOUS

7.1	Employment. Nothing in the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary thereof to terminate any Participant’s employment at any time, nor confer upon any Participant any right to continue in the employment of the Company or any Subsidiary thereof.

7.2	Participation. No Employee shall have the right to be selected to receive an Option under the Plan, or, having been so selected, to be selected to receive a future Option.

7.3

Successors. All obligations of the Company under the Plan shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

7.4

Governing Law. This Plan shall be governed by and construed in accordance with the substantive laws of the State of Texas, excluding any conflicts or choice of law rule or principle that might otherwise refer constructive or interpretation of this Plan to provisions of the substantive law of any jurisdiction other than the State of Texas. Any action seeking to enforce the rights of an employee, former employee or person who holds such rights through, from or on behalf of such employee or former employee under this Plan may be brought only in a Federal or state court located in Bexar County, Texas.

EX-10 10 exh10r.htm EXHIBIT 10-R Exhibit 10-r



Exhibit 10-r







                              1996 STOCK AND INCENTIVE PLAN






















                                              Plan Effective:  January 1, 1996
                                      As amended through:   September 29, 2000



                              TABLE OF CONTENTS

Article 1   Establishment and Purpose..................................1

1.1   Establishment of the Plan........................................1
1.2   Purpose of the Plan..............................................1
1.3   Effective Date of the Plan.......................................1

Article 2   Definitions................................................1

Article 3   Administration.............................................6

3.1   The Committee....................................................6
3.2   Authority of the Committee.......................................6

Article 4   Shares Subject to the Plan.................................7

4.1   Number of Shares.................................................7
4.2   Lapsed Awards....................................................8
4.3   Adjustments in Authorized Plan Shares............................8

Article 5   Eligibility and Participation..............................8

5.1   Eligibility......................................................8
5.2   Actual Participation.............................................8

Article 6   Stock Options..............................................8

6.1   Grant of Options.................................................8
6.2   Form of Issuance.................................................9
6.3   Exercise Price...................................................9
6.4   Duration of Options..............................................9
6.5   Vesting of Options...............................................9
6.6   Exercise of Options.............................................10
6.7   Payment.........................................................10
6.8   Termination of Employment.......................................11
6.9   Employee Transfers..............................................12
6.10  Restrictions on Exercise and Transfer of Options................13
6.11  Competition.....................................................13

Article 7   Restricted Stock..........................................14

7.1   Grant of Restricted Stock.......................................14
7.2   Restricted Stock Agreement......................................14
7.3   Transferability.................................................14
7.4   Other Restrictions..............................................14
7.5   Removal of Restrictions.........................................14
7.6   Voting Rights, Dividends and Other Distributions................15
7.7   Termination of Employment Due to Death or Disability............15
7.8   Termination of Employment for Other Reasons.....................15
7.9   Employee Transfers..............................................15
7.10  Other Grants....................................................15

Article 8   Performance Units and Performance Shares..................16

8.1   Grants of Performance Units and Performance Shares..............16
8.2   Value of Performance Shares and Units...........................16
8.3   Performance Period..............................................16
8.4   Performance Goals...............................................16
8.5   Dividend Equivalents on Performance Shares......................18
8.6   Form and Timing of Payment of Performance Units
       and Performance Shares.........................................18
8.7   Termination of Employment Due to Death, Disability,
       or Retirement..................................................19
8.8   Termination of Employment for Other Reasons.....................20
8.9   Termination of Employment for Cause.............................20
8.10  Nontransferability..............................................20

Article 9   Beneficiary Designation...................................20

Article 10  Deferrals.................................................20

Article 11  Employee Matters..........................................20

11.1  Employment Not Guaranteed.......................................20
11.2  Participation...................................................21

Article 12  Change in Control.........................................21

Article 13  Amendment, Modification, and Termination..................21

13.1  Amendment, Modification, and Termination........................21
13.2  Awards Previously Granted.......................................21

Article 14  Withholding...............................................21

14.1  Tax Withholding.................................................21
14.2  Share Withholding...............................................21

Article 15  Successors................................................22

Article 16  Legal Construction........................................22

16.1  Gender and Number...............................................22
16.2  Severability....................................................22
16.3  Requirements of Law.............................................23
16.4  Securities Law Compliance.......................................23
16.5  Governing Law...................................................23


                           SBC Communications Inc.
                        1996 Stock and Incentive Plan


Article 1   Establishment and Purpose.

   1.1      Establishment of the Plan.  SBC Communications Inc., a Delaware
            corporation (the "Company" or "SBC"), hereby establishes an
            incentive compensation plan (the "Plan"), as set forth in this
            document.

   1.2      Purpose of the Plan.  The purpose of the Plan is to promote the
            success and enhance the value of the Company by linking the
            personal interests of Participants to those of the Company's
            shareowners, and by providing Participants with an incentive for
            outstanding performance.

                The Plan is further intended to attract and retain the
            services of Participants upon whose judgment, interest, and
            special efforts the successful operation of SBC and its
            subsidiaries is dependent.

   1.3      Effective Date of the Plan.  The Plan shall become effective on
            January 1, 1996; however, grants may be made before that time
            subject to becoming effective on or after that date.  During the
            first year this Plan is effective, Awards shall be issued only to
            the extent the potential payout of Shares shall not exceed 10% of
            the Shares approved for issuance under this Plan.

Article 2   Definitions.

                Whenever used in the Plan, the following terms shall have the
            meanings set forth below and, when the meaning is intended, the
            initial letter of the word is capitalized:

               (a)   "Award" means, individually or collectively, a grant
                      under this Plan of Nonqualified Stock Options,
                      Incentive Stock Options, Restricted Stock, Performance
                      Units, or Performance Shares.

               (b)   "Award Agreement" means an agreement which may be
                      entered into by each Participant and the Company,
                      setting forth the terms and provisions applicable to
                      Awards granted to Participants under this Plan.

               (c)   "Board" or "Board of Directors" means the SBC Board of
                      Directors.

               (d)   "Cause" shall mean willful and gross misconduct on the
                      part of an Employee that is materially and demonstrably
                      detrimental to the Company or any Subsidiary as
                      determined by the Committee in its sole discretion.

               (e)   "Change in Control" shall be deemed to have occurred if
                      (i) any "person" (as such term is used in Sections
                      13(d) and 14(d) of the Exchange Act), other than a
                      trustee or other fiduciary holding securities under an
                      employee benefit plan of the Company or a corporation
                      owned directly or indirectly by the shareowners of the
                      Company in substantially the same proportions as their
                      ownership of stock of the Company, is or becomes the
                      "beneficial owner" (as defined in Rule 13d-3 under said
                      Act), directly or indirectly, of securities of the
                      Company representing twenty percent (20%) or more of
                      the total voting power represented by the Company's
                      then outstanding voting securities, or (ii) during any
                      period of two (2) consecutive years, individuals who at
                      the beginning of such period constitute the Board of
                      Directors of the Company and any new Director whose
                      election by the Board of Directors or nomination for
                      election by the Company's shareowners was approved by a
                      vote of at least two-thirds (2/3) of the Directors then
                      still in office who either were Directors at the
                      beginning of the period or whose election or nomination
                      for election was previously so approved, cease for any
                      reason to constitute a majority thereof, or (iii) the
                      shareowners of the Company approve a merger or
                      consolidation of the Company with any other
                      corporation, other than a merger or consolidation which
                      would result in the voting securities of the Company
                      outstanding immediately prior thereto continuing to
                      represent (either by remaining outstanding or by being
                      converted into voting securities of the surviving
                      entity) at least eighty percent (80%) of the total
                      voting power represented by the voting securities of
                      the Company or such surviving entity outstanding
                      immediately after such merger or consolidation, or the
                      shareowners of the Company approve a plan of complete
                      liquidation of the Company or an agreement for the sale
                      or disposition by the Company of all or substantially
                      all the Company's assets.

               (f)   "Code" means the Internal Revenue Code of 1986, as
                      amended from time to time.

               (g)   "Committee" means the committee or committees, as
                      specified in Article 3, appointed by the Board to
                      administer the Plan with respect to grants of Awards.

               (h)   "Director" means any individual who is a member of the
                      SBC Board of Directors.

               (i)   "Disability" shall mean the Participant's inability to
                      perform the Participant's normal Employment functions
                      due to any medically determinable physical or mental
                      disability, which can last or has lasted 12 months or
                      is expected to result in death.

               (j)   "Employee" means any management employee of the Company
                      or of one of the Company's Subsidiaries.  "Employment"
                      means the employment of an Employee by the Company or
                      one of its Subsidiaries.  Directors who are not
                      otherwise employed by the Company shall not be
                      considered Employees under this Plan.

               (k)   "Exchange Act" means the Securities Exchange Act of
                      1934, as amended from time to time, or any successor
                      Act thereto.

               (l)   "Exercise Price" means the price at which a Share may be
                      purchased by a Participant pursuant to an Option, as
                      determined by the Committee.

               (m)   "Fair Market Value" shall mean the closing price on the New
                      York Stock Exchange ("NYSE") for Shares on the relevant
                      date, or if such date was not a trading day, the next
                      preceding trading date, all as determined by the Company.
                      A trading day is any day that the Shares are traded on
                      the NYSE.  In lieu of the foregoing, the Committee may
                      select any other index or measurement to determine the
                      Fair Market Value of Shares under the Plan.

               (n)   "Incentive Stock Option" or "ISO" means an option to
                      purchase Shares from SBC, granted under this Plan,
                      which is designated as an Incentive Stock Option and is
                      intended to meet the requirements of Section 422 of the
                      Code.

               (o)   "Insider" shall mean an Employee who is, on the
                      relevant date, an officer, director, or ten percent
                      (10%) beneficial owner of the Company, as those terms
                      are defined under Section 16 of the Exchange Act.

               (p)   "Key Executive Officer Short Term Award" means a
                      Performance Unit expressed in dollars.

               (q)   "Nonqualified Stock Option" or "NQSO" means the option to
                      purchase Shares from SBC, granted under this Plan, which
                      is not intended to be an Incentive Stock Option.

               (r)   "Option" or "Stock Option" shall mean an Incentive
                      Stock Option or a Nonqualified Stock Option, and shall
                      include a Restoration Option.

               (s)   "Participant" means a person who holds an outstanding
                      Award granted under the Plan.

               (t)   "Performance Unit" and "Performance Share" shall each
                      mean an Award granted to an Employee pursuant to
                      Article 8 herein.

               (u)   "Plan" means this 1996 Stock and Incentive Plan.  The
                      Plan may also be referred to as the "SBC 1996 Stock and
                      Incentive Plan" or as the "SBC Communications Inc. 1996
                      Stock and Incentive Plan."

               (v)   "Restricted Stock" means an Award of Stock granted to
                      an Employee pursuant to Article 7 herein.

               (w)   "Restriction Period" means the period during which
                      Shares of Restricted Stock are subject to restrictions
                      or conditions under Article 7.

               (x)   "Retirement" or to "Retire" shall mean the termination
                      of a Participant's employment with the Company or one
                      of its Subsidiaries, for any reason other than death,
                      Disability or for Cause, on or after the earlier of the
                      following dates, or as otherwise provided by the
                      Committee: (1) the date the Participant would be
                      eligible to retire with an immediate pension under the
                      rules of the SBC Supplemental Retirement Income Plan,
                      whether or not actually a participant in such plan; or
                      (2) the date the Participant has attained one of the
                      following combinations of age and service at
                      termination of employment on or after April 1, 1997,
                      except as otherwise indicated below:

                             Net Credited Service        Age
                              10 Years of more         65 or older
                              20 years or more         55 or older
                              25 years or more         50 or older
                              30 years or more         Any age

                      With respect to a Participant who is granted an EMP
                      Service Pension under and pursuant to the provisions of
                      the SBC Pension Benefit Plan - Nonbargained Program
                      upon termination of employment, the terms "Retirement"
                      or to "Retire" shall include such Participant's
                      termination of employment.

                      Termination Under EPR.  In determining whether an
                      Eligible Employee's termination of employment under the
                      Enhanced Pension and Retirement Program ("EPR") is a
                      Retirement for purposes of this Plan, five years shall
                      be added to each of age and net credited service
                      ("NCS").  If with such additional age and years of
                      service, (1) an Eligible Employee upon such termination
                      of employment under EPR is Retirement Eligible
                      according to the SBC Supplemental Retirement Income
                      Plan ("SRIP") or (2) the Eligible Employee upon such
                      termination of employment under EPR has attained one of
                      the following combinations of age and service,

                      Actual NCS + 5 Years       Actual Age + 5 Years

                        10 years or more              65 or older
                        20 years or more              55 or older
                        25 years or more              50 or older
                        30 years or more              Any age

                      then such termination of employment shall be a
                      Retirement for all purposes under this Plan and the
                      Eligible Employee shall be entitled to the treatment
                      under this Plan afforded in the case of a termination
                      of employment which is a Retirement.

               (y)    "Rotational Work Assignment Company ("RWAC") shall mean
                      any entity with which SBC Communications Inc. or any of
                      its Subsidiaries may enter into an agreement to provide
                      an employee for a rotational work assignment.

               (z)    "Shares" or "Stock" means the shares of common stock of
                      the Company.

               (aa)   "Subsidiary" shall mean any corporation in which the
                      Company owns directly, or indirectly through
                      subsidiaries, more than fifty percent (50%) of the total
                      combined voting power of all classes of Stock, or any
                      other entity (including, but not limited to,
                      partnerships and joint ventures) in which the Company
                      owns more than fifty percent (50%) of the combined
                      equity thereof.

               (bb)  "Window Period" means the period beginning on the third
                      business day following the date of public release of the
                      Company's quarterly sales and earnings information, and
                      ending on the twelfth business day following such date.

Article 3   Administration.

   3.1      The Committee.  Administration of the Plan shall be bifurcated as
            follows:

                (a)   With respect to Insiders, the Plan and all Awards
                      hereunder shall be administered only by the Human
                      Resources Committee of the Board or such other
                      Committee as may be appointed by the Board for this
                      purpose (the "Disinterested Committee"), where each
                      Director on such Disinterested Committee is a
                      "Disinterested Person" (or any successor designation
                      for determining who may administer plans, transactions
                      or awards exempt under Section 16(b) of the Exchange
                      Act), as that term is used in Rule 16b-3 under the
                      Exchange Act, as that rule may be modified from time to
                      time.

                (b)   The Disinterested Committee and such other Committee as
                      the Board may create, if any, specifically to
                      administer the Plan with respect to non-Insiders (the
                      "Non-Insider Committee") shall each have full authority
                      to administer the Plan and all Awards hereunder with
                      respect to all persons who are not Insiders, except as
                      otherwise provided herein or by the Board.  Either
                      Committee may be replaced by the Board at any time.

   3.2      Authority of the Committee.  The Committee shall have full power
            except as limited by law and subject to the provisions herein, to
            select the recipients of Awards, to determine the size and types
            of Awards; to determine the terms and conditions of such Awards
            in a manner consistent with the Plan; to construe and interpret
            the Plan and any agreement or instrument entered into under the
            Plan; to establish, amend, or waive rules and regulations for the
            Plan's administration; and (subject to the provisions of Article
            13 herein) to amend the terms and conditions of any outstanding
            Award to the extent such terms and conditions are within the
            discretion of the Committee as provided in the Plan.  Further,
            the Committee shall make all other determinations which may be
            necessary or advisable for the administration of the Plan.

                No Award other than Restoration Options may be made under the
            Plan after December 31, 2010.

                All determinations and decisions made by the Committee
            pursuant to the provisions of the Plan and all related orders or
            resolutions of the Board shall be final, conclusive, and binding
            on all persons, including the Company, its stockholders,
            Employees, Participants, and their estates and beneficiaries.

                Subject to the terms of this Plan, the Committee is
            authorized, and shall not be limited in its discretion, to use
            any of the Performance Criteria specified herein in its
            determination of Awards under this Plan.

Article 4   Shares Subject to the Plan.

   4.1      Number of Shares.  Subject to adjustment as provided in Section
            4.3 herein, the number of Shares available for grant under the
            Plan shall not exceed 60 million Shares of Stock.  No more than
            10% of the Shares approved for issuance under this Plan may be
            Shares of Restricted Stock.  No more than 40% of the Shares
            approved for issuance under this Plan may be issued to
            Participants as a result of Performance Share or Restricted Stock
            Awards.  The Shares granted under this Plan may be either
            authorized but unissued or reacquired Shares.  The Disinterested
            Committee shall have full discretion to determine the manner in
            which Shares available for grant are counted in this Plan.

                Without limiting the discretion of the Committee under this
            section, unless otherwise provided by the Committee, the
            following rules will apply for purposes of the determination of
            the number of Shares available for grant under the Plan or
            compliance with the foregoing limits:

                (a)   The grant of a Stock Option or a Restricted Stock Award
                      shall reduce the Shares available for grant under the
                      Plan by the number of Shares subject to such Award.
                      However, to the extent the Participant uses previously
                      owned Shares to pay the Exercise Price or any taxes, or
                      Shares are withheld to pay taxes, these Shares shall be
                      available for regrant under the Plan.

                (b)   With respect to Performance Shares, the number of
                      Performance Shares granted under the Plan shall be
                      deducted from the number of Shares available for grant
                      under the Plan. The number of Performance Shares which
                      cannot be, or are not, converted into Shares and
                      distributed (including deferrals) to the Participant
                      (after any applicable tax withholding) following the
                      end of the Performance Period shall increase the number
                      of Shares available for regrant under the Plan by an
                      equal amount.

                (c)   With respect to Performance Units representing a fixed
                      dollar amount that may only be settled in cash, the
                      Performance Units Award shall not affect the number of
                      Shares available under the Plan.

   4.2      Lapsed Awards.  If any Award granted under this Plan is canceled,
            terminates, expires, or lapses for any reason, Shares subject to
            such Award shall be again available for the grant of an Award
            under the Plan.

   4.3      Adjustments in Authorized Plan Shares.  In the event of any
            merger, reorganization, consolidation, recapitalization,
            separation, liquidation, Stock dividend, split-up, Share
            combination, or other change in the corporate structure of the
            Company affecting the Shares, an adjustment shall be made in the
            number and class of Shares which may be delivered under the Plan
            (including individual limits), and in the number and class of
            and/or price of Shares subject to outstanding Awards granted
            under the Plan, and/or the number of outstanding Options, Shares
            of Restricted Stock, and Performance Shares constituting
            outstanding Awards, as may be determined to be appropriate and
            equitable by the Committee, in its sole discretion, to prevent
            dilution or enlargement of rights.

Article 5   Eligibility and Participation.

   5.1      Eligibility.  All management Employees are eligible to
            participate in this Plan.

   5.2      Actual Participation.  Subject to the provisions of the Plan, the
            Committee may, from time to time, select from all eligible
            Employees, those to whom Awards shall be granted and shall
            determine the nature and amount of each Award.  No Employee is
            entitled to receive an Award unless selected by the Committee.

Article 6   Stock Options.

   6.1      Grant of Options.  Subject to the terms and provisions of the
            Plan, Options may be granted to Employees at any time and from
            time to time, and under such terms and conditions, as shall be
            determined by the Committee.  The Committee shall have discretion
            in determining the number of Shares subject to Options granted to
            each Employee; provided, however, that the maximum number of
            Shares subject to Options which may be granted to any single
            Employee during any calendar year shall not exceed 2% of the
            Shares approved for issuance under this Plan.  The Committee may
            grant ISOs, NQSOs, or a combination thereof; provided, however,
            that no ISO may be issued after January 1, 2006.  The Committee
            may authorize the automatic grant of additional Options
            ("Restoration Options") when a Participant exercises already
            outstanding Options, or options granted under a prior option plan
            of the Company, on such terms and conditions as it shall
            determine.  Unless otherwise provided by the Committee, the
            number of Restoration Options granted to a Participant with
            respect to the exercise of an option (including an Option under
            this Plan) shall not exceed the number of Shares delivered by the
            Participant in payment of the Exercise Price of such option,
            and/or in payment of any tax withholding resulting from such
            exercise, and any Shares which are withheld to satisfy
            withholding tax liability arising out of such exercise.  A
            Restoration Option shall have an Exercise Price of not less than
            100% of the per Share Fair Market Value on the date of grant of
            such Restoration Option, and shall be subject to all the terms
            and conditions of the original grant, including the expiration
            date, and such other terms and conditions as the Committee in its
            sole discretion shall determine.

   6.2      Form of Issuance.  Each Option grant may be issued in the form of
            an Award Agreement and/or may be recorded on the books and
            records of the Company for the account of the Participant. If an
            Option is not issued in the form of an Award Agreement, then the
            Option shall be deemed granted as determined by the Committee.
            The terms and conditions of an Option shall be set forth in the
            Award Agreement, in the notice of the issuance of the grant, or
            in such other documents as the Committee shall determine.  Such
            terms and conditions shall include the Exercise Price, the
            duration of the Option, the number of Shares to which an Option
            pertains (unless otherwise provided by the Committee, each Option
            may be exercised to purchase one Share), and such other
            provisions as the Committee shall determine, including, but not
            limited to whether the Option is intended to be an ISO or a NQSO.

   6.3      Exercise Price.  Unless a greater Exercise Price is determined by
            the Committee, the Exercise Price for each Option Awarded under
            this Plan shall be equal to one hundred percent (100%) of the
            Fair Market Value of a Share on the date the Option is granted.

   6.4      Duration of Options.  Each Option shall expire at such time as
            the Committee shall determine at the time of grant (which
            duration may be extended by the Committee); provided, however,
            that no Option shall be exercisable later than the tenth (10th)
            anniversary date of its grant.

   6.5      Vesting of Options.  Options shall vest at such times and under
            such terms and conditions as determined by the Committee;
            provided, however, unless a later vesting period is provided by
            the Committee at or before the grant of an Option, one-third of
            the Options will vest on each of the first three anniversaries of
            the grant; if one Option remains after equally dividing the grant
            by three, it will vest on the first anniversary of the grant, if
            two Options remain, then one will vest on each of the first two
            anniversaries.  The Committee shall have the right to accelerate
            the vesting of any Option; however, the Chairman of the Board or
            the Senior Vice President-Human Resources, or their respective
            successors, or such other persons designated by the Committee,
            shall have the authority to accelerate the vesting of Options for
            any Participant who is not an Insider.

   6.6      Exercise of Options.  Options granted under the Plan shall be
            exercisable at such times and be subject to such restrictions and
            conditions as the Committee shall in each instance approve, which
            need not be the same for each grant or for each Participant.

                Options shall be exercised by providing notice to the
            designated agent selected by the Company (if no such agent has
            been designated, then to the Company), in the manner and form
            determined by the Company, which notice shall be irrevocable,
            setting forth the exact number of Shares with respect to which
            the Option is being exercised and including with such notice
            payment of the Exercise Price.  When Options have been
            transferred, the Company or its designated agent may require
            appropriate documentation that the person or persons exercising
            the Option, if other than the Participant, has the right to
            exercise the Option.  No Option may be exercised with respect to
            a fraction of a Share.

   6.7      Payment.  The Exercise Price shall be paid in full at the time of
            exercise.  No Shares shall be issued or transferred until full
            payment has been received therefor.

                Payment may be made:

                (a)   in cash, or

                (b)   unless otherwise provided by the Committee at any time,
                      and subject to such additional terms and conditions
                      and/or modifications as the Committee or the Company
                      may impose from time to time, and further subject to
                      suspension or termination of this provision by the
                      Committee or Company at any time, by:

                      (i)  delivery of Shares of Stock owned by the
                           Participant in partial (if in partial payment,
                           then together with cash) or full payment;
                           provided, however, as a condition to paying any
                           part of the Exercise Price in Stock, at the time
                           of exercise of the Option, the Participant must
                           establish to the satisfaction of the Company that
                           the Stock tendered to the Company must have been
                           held by the Participant for a minimum of six (6)
                           months preceding the tender; or

                      (ii) if the Company has designated a stockbroker to act
                           as the Company's agent to process Option
                           exercises, issuance of an exercise notice together
                           with instructions to such stockbroker irrevocably
                           instructing the stockbroker:  (A) to immediately
                           sell (which shall include an exercise notice that
                           becomes effective upon execution of a limit order)
                           a sufficient portion of the Shares to pay the
                           Exercise Price of the Options being exercised and
                           the required tax withholding, and (B) to deliver
                           on the settlement date the portion of the proceeds
                           of the sale equal to the Exercise Price and tax
                           withholding to the Company.  In the event the
                           stockbroker sells any Shares on behalf of a
                           Participant, the stockbroker shall be acting
                           solely as the agent of the Participant, and the
                           Company disclaims any responsibility for the
                           actions of the stockbroker in making any such
                           sales.  No Stock shall be issued until the
                           settlement date and until the proceeds (equal to
                           the Option Price and tax withholding) are paid to
                           the Company.

                If payment is made by the delivery of Shares of Stock, the
            value of the Shares delivered shall be equal to the Fair Market
            Value of the Shares on the day preceding the date of exercise of
            the Option.

                Restricted Stock may not be used to pay the Option Price.

   6.8      Termination of Employment.

                Unless otherwise provided by the Committee, the following
            limitations on exercise of Options shall apply upon termination
            of Employment:

                (a)   Termination by Death or Disability.  In the event the
                      Employment of a Participant shall terminate by reason
                      of death or Disability, all outstanding Options granted
                      to that Participant shall immediately vest as of the
                      date of termination of Employment and may be exercised,
                      if at all, no more than three (3) years from the date
                      of the termination of Employment, unless the Options,
                      by their terms, expire earlier.  However, in the event
                      the Participant was eligible to Retire at the time of
                      termination of Employment, notwithstanding the
                      foregoing, the Options may be exercised, if at all, no
                      more than five (5) years from the date of the
                      termination of Employment, unless the Options, by their
                      terms, expire earlier.

                (b)   Termination for Cause.  If the Employment of a
                      Participant shall be terminated by the Company for
                      Cause, all outstanding Options held by the Participant
                      shall immediately be forfeited to the Company and no
                      additional exercise period shall be allowed, regardless
                      of the vested status of the Options.

                (c)   Retirement or Other Termination of Employment.  If the
                      Employment of a Participant shall terminate for any
                      reason other than the reasons set forth in (a) or (b),
                      above, all outstanding Options which are vested as of
                      the effective date of termination of Employment may be
                      exercised, if at all, no more than five (5) years from
                      the date of termination of Employment if the
                      Participant is eligible to Retire, or one (1) year from
                      the date of the termination of Employment if the
                      Participant is not eligible to Retire, as the case may
                      be, unless in either case the Options, by their terms,
                      expire earlier.  In the event of the death of the
                      Participant after termination of Employment, this
                      paragraph (c) shall still apply and not paragraph (a),
                      above.

                (d)   Options not Vested at Termination.  Except as provided
                      in paragraph (a), above, all Options held by the
                      Participant which are not vested on or before the
                      effective date of termination of Employment shall
                      immediately be forfeited to the Company (and shall once
                      again become available for grant under the Plan).

                (e)   Notwithstanding the foregoing, the Committee may, in
                      its sole discretion, establish different terms and
                      conditions pertaining to the effect of termination of
                      Employment, but no such modification shall shorten the
                      terms of Options issued prior to such modification.

   6.9      Employee Transfers.  For purposes of the Plan, transfer of
            employment of a Participant between the Company and any one of
            its Subsidiaries (or between Subsidiaries) or between the Company
            or a Subsidiary and a RWAC, to the extent the period of
            employment at a RWAC is equal to or less than five (5) years,
            shall not be deemed a termination of Employment.  Provided,
            however, for purposes of this Article 6, termination of
            employment with a RWAC without a concurrent transfer to the
            Company or any of its Subsidiaries shall be deemed a termination
            of Employment as that term is used herein.  Similarly,
            termination of an entity's status as a Subsidiary or as a RWAC
            shall be deemed a termination of Employment of any Participants
            employed by such Subsidiary or RWAC.

   6.10     Restrictions on Exercise and Transfer of Options.  Unless
            otherwise provided by the Committee:

                (a)   During the Participant's lifetime, the Participant's
                      Options shall be exercisable only by the Participant or
                      by the Participant's guardian or legal representative.
                      After the death of the Participant, except as otherwise
                      provided by SBC's Rules for Employee Beneficiary
                      Designations, an Option shall only be exercised by the
                      holder thereof (including, but not limited to, an
                      executor or administrator of a decedent's estate) or
                      his or her guardian or legal representative.

                (b)   No Option shall be transferable except: (i) in the case
                      of the Participant, only upon the Participant's death
                      and in accordance with the SBC Rules for Employee
                      Beneficiary Designations; and (ii) in the case of any
                      holder after the Participant's death, only by will or
                      by the laws of descent and distribution.

   6.11     Competition and Solicitation.  In the event a Participant directly or
            indirectly, engages in competitive activity, or has become
            associated with, employed by, controls, or renders service to any
            business that is engaged in competitive activity, with (i) the
            Company, (ii) any Subsidiary, or (iii) any business in which any
            of the foregoing have a substantial interest, or if the
            Participant attempts, directly or indirectly, to induce any
            employee of the Company or a Subsidiary to be employed or perform
            services elsewhere without the permission of the Company, then
            the Company may (i) cancel any Option granted to such
            Participant, whether or not vested, in whole or in part; and/or
            (ii) rescind any exercise of the Participant's Options that
            occurred on or after that date six months prior to engaging in
            such activity, in which case the Participant shall pay the
            Company the gain realized or received upon such exercise of
            Options.  "Has become associated with" shall include, among other
            things, beneficial ownership of 1/10 of 1% or more of a business
            engaged in competitive activity.  The determination of whether a
            Participant has engaged in any such activity and whether to
            cancel Options and/or rescind the exercise of Options may be made
            by the Committee, the Senior Executive Vice President of the
            Company in charge of Human Resources or such person's successor,
            or the delegate of or a committee appointed by any of the
            foregoing, and in each case such determination shall be final,
            conclusive and binding on all persons.


Article 7   Restricted Stock.

   7.1      Grant of Restricted Stock.  Subject to the terms and provisions
            of the Plan, the Committee, at any time and from time to time,
            may grant Shares of Restricted Stock to eligible Employees in
            such amounts and upon such terms and conditions as the Committee
            shall determine.  In addition to any other terms and conditions
            imposed by the Committee, vesting of Restricted Stock may be
            conditioned upon the attainment of Performance Goals based on
            Performance Criteria in the same manner as provided in Section
            8.4, herein, with respect to Performance Shares.  No Employee may
            receive, in any calendar year, in the form of Restricted Stock
            more than one-third of 1% of the Shares approved for issuance
            under this Plan.

   7.2      Restricted Stock Agreement.  The Committee may require, as a
            condition to an Award, that a recipient of a Restricted Stock
            Award enter into a Restricted Stock Award Agreement, setting
            forth the terms and conditions of the Award.  In lieu of a
            Restricted Stock Award Agreement, the Committee may provide the
            terms and conditions of an Award in a notice to the Participant
            of the Award, on the Stock certificate representing the
            Restricted Stock, in the resolution approving the Award, or in
            such other manner as it deems appropriate.

   7.3      Transferability.  Except as otherwise provided in this Article 7,
            the Shares of Restricted Stock granted herein may not be sold,
            transferred, pledged, assigned, or otherwise alienated or
            hypothecated until the end of the applicable Restriction Period
            established by the Committee, which shall not be less than a
            period of three years.

   7.4      Other Restrictions.  The Committee shall impose such other
            conditions and/or restrictions on any Shares of Restricted Stock
            granted pursuant to the Plan as it may deem advisable including,
            without limitation, a requirement that Participants pay a
            stipulated purchase price for each Share of Restricted Stock
            and/or restrictions under applicable Federal or state securities
            laws; and may legend the certificates representing Restricted
            Stock to give appropriate notice of such restrictions.

                The Company shall also have the right to retain the
            certificates representing Shares of Restricted Stock in the
            Company's possession until such time as all conditions and/or
            restrictions applicable to such Shares have been satisfied.

   7.5      Removal of Restrictions.  Except as otherwise provided in this
            Article 7, Shares of Restricted Stock covered by each Restricted
            Stock grant made under the Plan shall become freely transferable
            by the Participant after the last day of the Restriction Period
            and completion of all conditions to vesting, if any.  However,
            unless otherwise provided by the Committee, the Committee, in its
            sole discretion, shall have the right to immediately waive all or
            part of the restrictions and conditions with regard to all or
            part of the Shares held by any Participant at any time.

   7.6      Voting Rights, Dividends and Other Distributions.  During the
            Restriction Period, Participants holding Shares of Restricted
            Stock granted hereunder may exercise full voting rights and shall
            receive all regular cash dividends paid with respect to such
            Shares.  Except as provided in the following sentence, in the
            sole discretion of the Committee, other cash dividends and other
            distributions paid to Participants with respect to Shares of
            Restricted Stock may be subject to the same restrictions and
            conditions as the Shares of Restricted Stock with respect to
            which they were paid.  If any such dividends or distributions are
            paid in Shares, the Shares shall be subject to the same
            restrictions and conditions as the Shares of Restricted Stock
            with respect to which they were paid.

   7.7      Termination of Employment Due to Death or Disability.  In the
            event the Employment of a Participant shall terminate by reason
            of death or Disability, all Restriction Periods and all
            restrictions imposed on outstanding Shares of Restricted Stock
            held by the Participant shall immediately lapse and the
            Restricted Stock shall immediately become fully vested as of the
            date of termination of Employment.

   7.8      Termination of Employment for Other Reasons.  If the Employment
            of a Participant shall terminate for any reason other than those
            specifically set forth in Section 7.7 herein, all Shares of
            Restricted Stock held by the Participant which are not vested as
            of the effective date of termination of Employment immediately
            shall be forfeited and returned to the Company.

   7.9      Employee Transfers.  For purposes of the Plan, transfer of
            employment of a Participant between the Company and any one of
            its Subsidiaries (or between Subsidiaries) or between the Company
            or a Subsidiary and a RWAC, to the extent the period of
            employment at a RWAC is equal to or less than five (5) years,
            shall not be deemed a termination of Employment.  Provided,
            however, for purposes of this Article, termination of employment
            with a RWAC without a concurrent transfer to the Company or any
            of its Subsidiaries shall be deemed a termination of Employment
            as that term is used herein.  Similarly, termination of an
            entity's status as a Subsidiary or as a RWAC shall be deemed a
            termination of Employment of any Participants employed by such
            Subsidiary or RWAC.

   7.10     Other Grants.  Subject to the terms and provisions of the Plan,
            the Committee, at any time and from time to time, may make grants
            of cash or other property to eligible Employees in such amounts
            and upon such terms and conditions as the Committee shall
            determine.  If the grant is in the form of stock or shares in a
            company other than SBC, the award shall be subject to tax
            withholding in accordance with Article 14, hereof, in the same
            manner as Stock.

Article 8   Performance Units and Performance Shares.

   8.1      Grants of Performance Units and Performance Shares.  Subject to
            the terms of the Plan, Performance Shares and Performance Units
            may be granted to eligible Employees at any time and from time to
            time, as determined by the Committee.  The Committee shall have
            complete discretion in determining the number of Performance
            Units and/or Performance Shares Awarded to each Participant.

   8.2      Value of Performance Shares and Units.

                (a)   A Performance Share is equivalent in value to a Share
                      of Stock.  In any calendar year, no individual may be
                      Awarded Performance Shares having a potential payout of
                      Shares of Stock exceeding two-thirds of 1% of the
                      Shares approved for issuance under this Plan.

                (b)   A Performance Unit shall be equal in value to a fixed
                      dollar amount determined by the Committee.  In any
                      calendar year, no individual may be Awarded Performance
                      Units having a potential payout equivalent exceeding
                      the Fair Market Value of two-thirds of 1% of the Shares
                      approved for issuance under this Plan.  The number of
                      Shares equivalent to the potential payout of a
                      Performance Unit shall be determined by dividing the
                      maximum cash payout of the Award by the Fair Market
                      Value per Share on the effective date of the grant.  In
                      the event the Committee denominates a Performance Unit
                      Award in dollars instead of Performance Units, the
                      Award may be referred to as a Key Executive Officer
                      Short Term Award.  In all other respects, the Key
                      Executive Officer Short Term Award will be treated in
                      the same manner as Performance Units under this Plan.

   8.3      Performance Period.  The Performance Period for Performance
            Shares and Performance Units is the period over which the
            Performance Goals are measured.  The Performance Period is set by
            the Committee for each Award; however, in no event shall an Award
            have a Performance Period of less than one year.

   8.4      Performance Goals.  For each Award of Performance Shares or
            Performance Units, the Committee shall establish performance
            objectives ("Performance Goals") for the Company, its
            Subsidiaries, and/or divisions of any of foregoing, based on the
            Performance Criteria and other factors set forth in (a) through
            (d), below.  Performance Goals shall include payout tables,
            formulas or other standards to be used in determining the extent
            to which the Performance Goals are met, and, if met, the number
            of Performance Shares and/or Performance Units which would be
            converted into Stock and/or cash (or the rate of such conversion)
            and distributed to Participants in accordance with Section 8.6.
            All Performance Shares and Performance Units which may not be
            converted under the Performance Goals or which are reduced by the
            Committee under Section 8.6 or which may not be converted for any
            other reason after the end of the Performance Period shall be
            canceled at the time they would otherwise be distributable.  When
            the Committee desires an Award to qualify under Section 162(m) of
            the Code, as amended, the Committee shall establish the
            Performance Goals for the respective Performance Shares and
            Performance Units prior to or within 90 days of the beginning of
            the service relating to such Performance Goal, and not later than
            after 25% of such period of service has elapsed.  For all other
            Awards, the Performance Goals must be established before the end
            of the respective Performance Period.

                (a)   The Performance Criteria which the Committee is
                      authorized to use, in its sole discretion, are any of
                      the following criteria or any combination thereof:

                      (1)  Financial performance of the Company (on a
                           consolidated basis), of one or more of its
                           Subsidiaries, and/or a division of any of the
                           foregoing.  Such financial performance may be
                           based on net income and/or Value Added (after-tax
                           cash operating profit less depreciation and less a
                           capital charge).

                      (2)  Service performance of the Company (on a
                           consolidated basis), of one or more of its
                           Subsidiaries, and/or of a division of any of the
                           foregoing.  Such service performance may be based
                           upon measured customer perceptions of service
                           quality.

                      (3)  The Company's  Stock price; return on
                           shareholders' equity; total shareholder return
                           (Stock price appreciation plus dividends, assuming
                           the reinvestment of dividends); and/or earnings
                           per share.

                      (4)  With respect to the Company (on a consolidated
                           basis), to one or more of its Subsidiaries, and/or
                           to a division of any of the foregoing:  sales;
                           costs; market share of a product or service;
                           return on net assets; return on assets; return on
                           capital; profit margin; and/or operating revenues,
                           expenses or earnings.

                (b)   If the performance of more than one Subsidiary is being
                      measured to determine the attainment of performance
                      goals, then a weighted average of the Subsidiaries'
                      results shall be used, as determined by the Committee,
                      including, but not limited to, basing such weighting
                      upon the revenues, assets or net income for each
                      Subsidiary for any year prior to the Performance Period
                      or by using budgets to weight such Subsidiaries.

                (c)   Except to the extent otherwise provided by the
                      Committee in full or in part, if any of the following
                      events occur during a Performance Period and would
                      directly affect the determination of whether or the
                      extent to which Performance Goals are met, they shall
                      be disregarded in any such computation:  changes in
                      accounting principles; extraordinary items; changes in
                      tax laws affecting net income and/or Value Added;
                      natural disasters, including floods, hurricanes, and
                      earthquakes; and intentionally inflicted damage to
                      property which directly or indirectly damages the
                      property of the Company or its Subsidiaries.  No such
                      adjustment shall be made to the extent such adjustment
                      would cause the Performance Shares or Performance Units
                      to fail to satisfy the performance based exemption of
                      Section 162(m) of the Code.

   8.5      Dividend Equivalents on Performance Shares.  Unless reduced or
            eliminated by the Committee, a cash payment in an amount equal to
            the dividend payable on one Share will be made to each
            Participant for each Performance Share which on the record date
            for the dividend had been awarded to the Participant and not
            converted, distributed (or deferred) or canceled.

   8.6      Form and Timing of Payment of Performance Units and Performance
            Shares.  As soon as practicable after the applicable Performance
            Period has ended and all other conditions (other than Committee
            actions) to conversion and distribution of a Performance Share
            and/or Performance Unit Award have been satisfied (or, if
            applicable, at such other time determined by the Committee at or
            before the establishment of the Performance Goals for such
            Performance Period), the Committee shall determine whether and
            the extent to which the Performance Goals were met for the
            applicable Performance Units and Performance Shares.  If
            Performance Goals have been met, then the number of Performance
            Units and Performance Shares to be converted into Stock and/or
            cash and distributed to the Participants shall be determined in
            accordance with the Performance Goals for such Awards, subject to
            any limits imposed by the Committee.  Unless the Participant has
            elected to defer all or part of his Performance Units or
            Performance Shares as provided in Article 10, herein, payment of
            Performance Units and Performance Shares shall be made in a
            single lump sum, as soon as reasonably administratively possible
            following the determination of the number of Shares or amount of
            cash to which the Participant is entitled.  Performance Units
            will be distributed to Participants in the form of cash.
            Performance Shares will be distributed to Participants in the
            form of 50% Stock and 50% Cash, or at the Participant's election,
            100% Stock or 100% Cash.  In the event the Participant is no
            longer an Employee at the time of the distribution, then the
            distribution shall be 100% in cash, provided the Participant may
            elect to take 50% or 100% in Stock.  At any time prior to the
            distribution of the Performance Shares and/or Performance Units
            (or if distribution has been deferred, then prior to the time the
            Awards would have been distributed), unless otherwise provided by
            the Committee, the Committee shall have the authority to reduce
            or eliminate the number of Performance Units or Performance
            Shares to be converted and distributed or to mandate the form in
            which the Award shall be paid (i.e., in cash, in Stock or both,
            in any proportions determined by the Committee).

                Unless otherwise provided by the Committee, any election to
            take a greater amount of cash or Stock with respect to
            Performance Shares must be made in the calendar year prior to the
            calendar year in which the Performance Shares are distributed (or
            if distribution has been deferred, then in the year prior to the
            year the Performance Shares would have been distributed absent
            such deferral).  In addition, if required in order to exempt the
            transaction from the provisions of Section 16(b) of the Exchange
            Act, any election by an Insider to take a greater amount in cash
            must be made during a Window Period and shall be subject to
            Committee approval.

                For the purpose of converting Performance Shares into cash
            and distributing the same to the holders thereof (or for
            determining the amount of cash to be deferred), the value of a
            Performance Share shall be the average of the Fair Market Values
            of Shares for the period of five (5) trading days ending on the
            valuation date.  The valuation date shall be the first business
            day of the second month in the year of distribution (or the year
            it would have been distributed were it not deferred).
            Performance Shares to be distributed in the form of Stock will be
            converted at the rate of one (1) Share of Stock per Performance
            Share.

   8.7      Termination of Employment Due to Death, Disability, or
            Retirement.  If the Employment of a Participant shall terminate
            by reason of death or Disability, the Participant shall receive a
            lump sum payout of all outstanding Performance Units and
            Performance Shares calculated as if all unfinished Performance
            Periods had ended with 100% of the Performance Goals achieved,
            payable in the year following the date of termination of
            Employment.  In the event of Retirement, the full Performance
            Units and Performance Shares shall be converted and distributed
            based on and subject to the achievement of the Performance Goals
            and in accordance with all other terms of the Award and this Plan.

   8.8      Termination of Employment for Other Reasons.  If the Employment
            of a Participant shall terminate for other than a reason set
            forth in Section 8.7 (and other than for Cause), the number of
            Performance Units and Performance Shares to be converted and
            distributed shall be converted and distributed based upon the
            achievement of the Performance Goals and in accordance with all
            other terms of the Award and the Plan; however, the Participant
            may receive no more than a prorated payout of all Performance
            Units and Performance Shares, based on the portions of the
            respective Performance Periods that have been completed.

   8.9      Termination of Employment for Cause.  In the event that a
            Participant's Employment shall be terminated by the Company for
            Cause, all Performance Units and Performance Shares shall be
            forfeited by the Participant to the Company.

   8.10     Nontransferability.  Performance Units and Performance Shares may
            not be sold, transferred, pledged, assigned, or otherwise
            alienated or hypothecated, other than in accordance with the SBC
            Rules for Employee Beneficiary Designations.

Article 9   Beneficiary Designation.  In the event of the death of a
            Participant, distributions or Awards under this Plan, other than
            Restricted Stock, shall pass in accordance with the SBC Rules for
            Employee Beneficiary Designations.

Article 10  Deferrals. Unless otherwise provided by the Committee, a
            Participant may, as permitted by the Stock Savings Plan or the
            Salary and Incentive Award Deferral Plan, defer all or part of
            awards made under this Plan in accordance with and subject to the
            terms of such plans.

Article 11. Employee Matters.

   11.1     Employment Not Guaranteed.  Nothing in the Plan shall interfere
            with or limit in any way the right of the Company or any
            Subsidiary to terminate any Participant's Employment at any time,
            nor confer upon any Participant any right to continue in the
            employ of the Company or one of its Subsidiaries.

   11.2     Participation.  No Employee shall have the right to be selected
            to receive an Award under this Plan, or, having been so selected,
            to be selected to receive a future Award.

Article 12  Change in Control.

            Upon the occurrence of a Change in Control:

                (a)   Any and all Options granted hereunder immediately shall
                      become vested and exercisable;

                (b)   Any Restriction Periods and all restrictions imposed on
                      Restricted Shares shall lapse and they shall
                      immediately become fully vested;

                (c)   The 100% Performance Goal for all Performance Units and
                      Performance Shares relating to incomplete Performance
                      Periods shall be deemed to have been fully achieved and
                      shall be converted and distributed in accordance with
                      all other terms of the Award and this Plan; provided,
                      however, notwithstanding anything to the contrary in
                      this Plan, no outstanding Performance Unit or
                      Performance Share may be reduced.

Article 13. Amendment, Modification, and Termination.

   13.1     Amendment, Modification, and Termination.  The Board may at any
            time suspend or terminate the Plan in whole or in part; the
            Disinterested Committee may at any time and from time to time,
            alter or amend the Plan in whole or in part.

   13.2     Awards Previously Granted.  No termination, amendment, or
            modification of the Plan shall adversely affect in any material
            way any Award previously granted under the Plan, without the
            written consent of the Participant holding such Award.

Article 14  Withholding.

   14.1     Tax Withholding.  The Company shall deduct or withhold an amount
            sufficient to satisfy Federal, state, and local taxes (including
            the Participant's employment tax obligations) required by law to
            be withheld with respect to any taxable event arising or as a
            result of this Plan ("Withholding Taxes").

   14.2     Share Withholding.  Upon the exercise of Options, the lapse of
            restrictions on Restricted Stock, the distribution of Performance
            Shares in the form of Stock, or any other taxable event hereunder
            involving the transfer of Stock to a Participant, the Company
            shall withhold Stock equal in value, using the Fair Market Value
            on the date determined by the Company to be used to value the
            Stock for tax purposes, to the Withholding Taxes applicable to
            such transaction.

                Any fractional Share of Stock payable to a Participant shall
            be withheld as additional Federal withholding, or, at the option
            of the Company, paid in cash to the Participant.

                Unless otherwise determined by the Committee, when the method
            of payment for the Exercise Price is from the sale by a
            stockbroker pursuant to Section 6.7(b)(ii), herein, of the Stock
            acquired through the Option exercise, then the tax withholding
            shall be satisfied out of the proceeds.  For administrative
            purposes in determining the amount of taxes due, the sale price
            of such Stock shall be deemed to be the Fair Market Value of the
            Stock.

                Prior to the end of any Performance Period a Participant may
            elect to have a greater amount of Stock withheld from the
            distribution of Performance Shares to pay withholding taxes;
            provided, however, the Committee may prohibit or limit any
            individual election or all such elections at any time.  In
            addition, if required in order to exempt the transaction from the
            provisions of Section 16(b) of the Exchange Act, any such
            election by an Insider must be made during a Window Period and
            shall be subject to Committee approval.


Article 15  Successors.

                All obligations of the Company under the Plan, with respect
            to Awards granted hereunder, shall be binding on any successor to
            the Company, whether the existence of such successor is the
            result of a direct or indirect purchase, merger, consolidation,
            or otherwise, of all or substantially all of the business and/or
            assets of the Company.

Article 16  Legal Construction.

   16.1     Gender and Number. Except where otherwise indicated by the
            context, any masculine term used herein also shall include the
            feminine; the plural shall include the singular and the singular
            shall include the plural.

   16.2     Severability.  In the event any provision of the Plan shall be
            held illegal or invalid for any reason, the illegality or
            invalidity shall not affect the remaining parts of the Plan, and
            the Plan shall be construed and enforced as if the illegal or
            invalid provision had not been included.

   16.3     Requirements of Law.  The granting of Awards and the issuance of
            Shares under the Plan shall be subject to all applicable laws,
            rules, and regulations, and to such approvals by any governmental
            agencies or national securities exchanges as may be required.

   16.4     Securities Law Compliance.  With respect to Insiders,
            transactions under this Plan are intended to comply with all
            applicable conditions or Rule 16b-3 or its successors under the
            Exchange Act.  To the extent any provision of the plan or action
            by the Committee fails to comply with a condition of Rule 16b-3
            or its successors, it shall not apply to the Insiders or
            transactions thereby.

    16.5    Governing Law.  This Plan shall be governed by and construed in
            accordance with the substantive laws of the State of Texas,
            excluding any conflicts or choice of law rule or principle that
            might otherwise refer constructive or interpretation of this Plan
            to provisions of the substantive law of any jurisdiction other
            than the State of Texas.  Any action seeking to enforce the
            rights of an employee, former employee or person who holds such
            rights through, from or on behalf of such employee or former
            employee under this Plan may be brought only in a Federal or
            state court located in Bexar County, Texas.

EX-10 11 exh10s.htm EXHIBIT 10-S Exhibit 10-s

Exhibit 10-s













                               Non-Employee Director
                              Stock and Deferral Plan















                                    Plan Effective Date:    November 21, 1997
                                    As Amended Through:     November 17, 2000


Contents

Article 1. Purpose ..........................................................1

Article 2. Definitions.......................................................1

Article 3. Eligibility and Administration....................................2
      3.1   Eligibility......................................................2
      3.2   The Human Resources Committee....................................2
      3.3   Administration by the Committee..................................2
      3.4   Decisions Binding................................................2

Article 4. Payment of Annual Retainer........................................2
      4.1   Form of Annual Retainer..........................................2
      4.2   Payment of Shares................................................2
      4.3   Holding Period for Shares........................................3

Article 5. Award of Stock Units for Non-Employee Directors...................3
      5.1   Award of Deferred Stock Units for Non-Employee Directors.........3
      5.2   Award of Deferred Stock Units for New Non-Employee Directors.....3
      5.3   Deferral of Retainers, Committee Fees, and Meeting Fees
              into Stock Units...............................................3
      5.4   Payout of Deferred Stock Units...................................4
      5.5   Stock Units......................................................4
      5.6   Holding Period for Shares........................................4

Article 6. Cash Deferral Account.............................................4
      6.1   Cash Deferral Account............................................4
      6.2   Cash Deferral Elections..........................................5
      6.3   Interest on Cash Deferral Accounts...............................5
      6.4   Form and Timing of Payout of Cash Deferral Accounts..............5
      6.5   Conversion of a Participant's Cash Deferral Account
              to Deferred Stock Units........................................6

Article 7. Amendment, Modification, and Termination..........................6
      7.1   Amendment, Modification, and Termination.........................6
      7.2   Awards Previously Granted........................................6

Article 8. Miscellaneous.....................................................6
      8.1   Competition......................................................6
      8.2   Elections........................................................6
      8.3   Assignment.......................................................7
      8.4   Severability.....................................................7
      8.5   Death of a Director/Beneficiary Designation......................7
      8.6   No Right of Nomination...........................................7
      8.7   Shares Available/Fractional Shares...............................7
      8.8   Successors.......................................................7
      8.9   Requirements of Law..............................................7
      8.10  Governing Law....................................................8
      8.11  Adjustments......................................................8


SBC Communications Inc.
Non-Employee Director Stock and Deferral Plan

Article 1. Purpose

      The purpose of the Non-Employee Director Stock and Deferral Plan (the "Plan")
(formerly the Deferred Compensation Plan for Non-Employee Directors) is to promote
the achievement of long-term objectives of SBC Communications Inc. ("SBC" or the
"Company") by linking the personal interests of Non-Employee Directors to those of
the Company's shareholders and to attract and retain Non-Employee Directors of
outstanding competence.


Article 2. Definitions

      Whenever used in the Plan, the following terms shall have the meanings set
forth below and, when the defined meaning is intended, the initial letter of the
word is capitalized:

      (a)   "Award" means, individually or collectively, an award under this Plan
            of Stock Units.
      (b)   "Board" or "Board of Directors" means the Board of Directors of the
            Company.
      (c)   "Committee" means the Human Resources Committee of the Board of
            Directors of the Company.
      (d)   "Company" means SBC Communications Inc., a Delaware corporation,
            together with any and all Subsidiaries.
      (e)   "Director" means any individual who is a member of the Board of
            Directors of the Company, including Advisory Directors.
      (f)   "Employee" means any full-time, nonunion, salaried employee of the
            Company or of the Company's Subsidiaries.  For purposes of the Plan, an
            individual whose only employment relationship with the Company is as a
            Director shall not be deemed to be an Employee.
      (g)   "Fair Market Value" or "FMV" shall mean the closing price on the New
            York Stock Exchange ("NYSE") for Shares on the relevant date, or if
            such date was not a trading day, the next preceding trading date, all
            as determined by the Company.  A trading day is any day that the Shares
            are traded on the NYSE.  In lieu of the foregoing, the Board may select
            any other index or measurement to determine the FMV of Shares under the
            Plan.
      (h)   "Non-Employee Director" means any individual who is a member of the
            Board of Directors of the Company, but who is not otherwise an Employee
            of the Company, nor has otherwise been an Employee of the Company.
      (i)   "Participant" means a person who is entitled to participate in the Plan.
      (j)   "Shares" means shares of Common Stock of the Company, par value one
            dollar ($1.00) per share.
      (k)   "Stock Unit" or "Unit" means an Award acquired by a Participant as a measure
            of participation under the Plan, and having a value equal to a Share.


Article 3. Eligibility and Administration

3.1   Eligibility.  Persons eligible to participate in the Plan are limited to
Non-Employee Directors.

3.2   The Human Resources Committee.  The Plan shall be administered by the Human
Resources Committee of the Board of Directors of the Company, subject to the
restrictions set forth in the Plan.

3.3   Administration by the Committee.  The Committee shall have the full power,
discretion, and authority to interpret and administer the Plan in a manner
consistent with the Plan's provisions.  However, in no event shall the Committee
have the power to determine Plan eligibility, or to determine the number, the
value, the vesting period, or the timing of Awards to be made under the Plan (all
such determinations being automatic pursuant to the provisions of the Plan).

3.4   Decisions Binding.  All determinations and decisions made by the Committee
pursuant to the Plan, and all related orders or resolutions of the Committee shall
be final, conclusive, and binding on all persons, including the Company, its
shareholders, Participants, and their estates and beneficiaries.


Article 4. Payment of Annual Retainer

4.1   Form of Annual Retainer.  In lieu of receiving the annual retainer (which
term, as used in this Plan, shall include any additional annual retainer for
committee chairman) in cash, effective for payments on or after January 1, 1998, a
Non-Employee Director may elect to receive all (100%) or fifty percent (50%) of the
Director's annual retainer in the form of Shares.  Such election shall be made
prior to the beginning of, and will be effective for, the calendar year in which
the annual retainer will be paid.  Each election shall become irrevocable as of the
last day such election may be made.  Provided, however, Non-Employee Directors not
serving on the Board prior to January 1, 1998, may, at any time within thirty (30)
days of their original election to the Board, make an irrevocable election with
respect to payments not yet made, effective for the then current calendar year.
Unless the Non-Employee Director notifies the Secretary of the Company otherwise
prior to the beginning of each subsequent calendar year, the election will renew
automatically for an additional calendar year.

4.2   Payment of Shares.  One fourth of the annual retainer is paid in advance on
the first day of each quarter (if not a business day, then the next preceding
business day) and is fully earned on that date.  A Director whose term will expire
during the quarter and who is not nominated for re-election will receive a
pro-rated quarterly retainer.  For their first retainer payment only, newly elected
Non-Employee Directors are paid the first day of the quarter next occurring on a
pro-rata basis.  When the retainer is increased after the first day of a calendar
quarter, the increased amount will be paid the first day of the following quarter.
Each fraction of a month is considered a whole month.  The Shares paid pursuant to
Section 4.1 shall be delivered as soon as administratively possible following the
scheduled retainer payment date.  The number of Shares to be paid shall equal the
portion of the quarterly retainer being taken in stock, divided by the Fair Market
Value of a Share on the date of the scheduled payment of the retainer.  Any
fractional Share shall be paid in cash as provided hereunder.

4.3   Holding Period for Shares.  Any Shares acquired by a Director under this
Article 4 may not be sold for one year after acquisition.  Thereafter, such Shares
shall only be sold pursuant to an effective registration statement or pursuant to
an exemption from the Securities Act of 1933, including sales pursuant to Rule 144
thereunder.  The Company may place a legend on the certificates for such Shares
evidencing this restriction.


Article 5. Award of Stock Units for Non-Employee Directors

5.1   Award of Deferred Stock Units for Non-Employee Directors.  Commencing
November 21, 1997, and then effective the day of each annual meeting of the
Company's shareholders thereafter, each Non-Employee Director shall be Awarded that
number of Stock Units that is equal to: (a) fifty percent (50%) of the annual
retainer as in effect at the time of the Award divided by (b) the Fair Market Value
of a Share on the date of the Award.  Effective with the annual meeting in 2001,
the percentage in (a), above, shall be increased to one hundred fifty percent
(150%).  Each Award is intended to be in consideration for service until the next
annual meeting of shareholders, but will be fully earned on the date of the Award.
Provided, however, if the Director terminates service on or before the day of the
annual meeting of shareholders, the Award to be paid on such meeting date will not
be issued.

5.2   Award of Deferred Stock Units for New Non-Employee Directors.  The following
applies only to Non-Employee Directors who originally became a Non-Employee
Director after November 21, 1997.  Each Non-Employee Director shall receive an
annual Award of Stock Units effective the day of the annual meeting of
shareholders.  The number of Stock Units in each such Award shall equal thirteen
thousand dollars ($13,000), divided by the Fair Market Value of a Share on the date
of the Award.  Each Award is intended to be in consideration for service until the
next annual meeting of shareholders, but will be fully earned on the date of the
Award.  If the Director terminates service on the day of the annual meeting of
shareholders, no such Award will be issued.  No Director shall receive more than
ten (10) Awards under this Section 5.2.

5.3   Deferral of Retainers, Committee Fees, and Meeting Fees into Stock Units.
Effective for payments on or after January 1, 1998, each Non-Employee Director may
elect to defer all (100%) or fifty percent (50%) of the cash portion of the
Director's annual retainer into Stock Units.  In addition, a Non-Employee Director
may elect to defer all (100%) of the Director's Board and committee fees
(collectively "Fees") into Stock Units.  The number of Stock Units acquired shall
equal the Fees and/or the portion of the annual retainer being deferred into Stock
Units, divided by the Fair Market Value of a Share on the date of the scheduled
payment of the Fees.

      Any deferral election under this Section 5.3 shall be made prior to the
beginning of, and will be effective for, the calendar year in which such payments
would otherwise be made.  Each such election shall become irrevocable as of the
last day such election may be made.  Provided, however, Non-Employee Directors not
serving on the Board prior to January 1, 1998, may, at any time within thirty (30)
days of their original election to the Board, make an irrevocable election with
respect to payments not yet made, effective for the then current calendar year.
Unless the Non-Employee Director notifies the Secretary of the Company otherwise
prior to the beginning of each subsequent calendar year, each election hereunder
will renew automatically for an additional calendar year.

5.4   Payout of Deferred Stock Units.  All Stock Units shall be paid out in the
form of one Share for each Stock Unit.  The Participant shall elect the timing of
the payout for Stock Unit Awards no later than the calendar year prior to the first
scheduled payment of such Stock Units; any prior elections by the Participant shall
become irrevocable at that time.  One election will apply to all Stock Units,
whether from deferrals, annual Awards or otherwise.  Stock Units acquired under
this Plan shall be paid out in a lump sum payment or in up to fifteen (15) annual
installments, as elected by the Participant.  The lump sum payment or the first
installment, as the case may be, shall be payable on the first day of February of
the year following the calendar year of the termination of the Participant's
service as a Director.  All annual installments thereafter shall be payable on the
anniversary of the first such payment.  If the Director fails to make a timely
election as to the number of installments, the Stock Units shall be paid out in
four (4) annual installments.

      For Participants electing a payout of Stock Units in installments, the number
of Stock Units to be paid out in each installment shall equal the number of Stock
Units available for payout, divided by the number of remaining installments
(including the installment being made).  A fractional Stock Unit shall be paid in
cash.

5.5   Stock Units.  Each Stock Unit shall represent an unfunded and unsecured
promise by SBC to issue a Share.  On the record date for cash dividends payable on
a Share, Participants holding Stock Units shall earn dividend equivalents paid in
the form of additional Stock Units added to their account.  The number of Stock
Units so added shall equal the dividends on an equal number of Shares, divided by
the Fair Market Value of a Share on the record date.

5.6   Holding Period for Shares.  Any Shares acquired by a Director under this
Article 5 may not be sold for one year after acquisition.  Thereafter, such Shares
shall only be sold pursuant to an effective registration statement or pursuant to
an exemption from the Securities Act of 1933, including sales pursuant to Rule 144
thereunder.  The Company may place a legend on the certificates for such Shares
evidencing this restriction.


Article 6. Cash Deferral Account

6.1   Cash Deferral Account.  A cash deferral account (the "Cash Deferral Account")
shall be established and maintained by the Company for each Participant that makes
a cash deferral under the Plan.  Each Cash Deferral Account shall be credited as of
the date the amount deferred otherwise would have become due and payable to the
Participant and shall be credited to reflect the interest return thereon.  The
establishment and maintenance of such Cash Deferral Accounts, however, shall not be
construed as entitling any Participant to any specific assets of the Company and
shall represent an unfunded and unsecured promise of the Company the amounts due
thereunder.

6.2   Cash Deferral Elections.  Effective for payments on or after January 1, 1998,
each Non-Employee Director may elect to defer all (100%) or fifty percent (50%) of
the cash portion of the Director's annual retainer into the Director's Cash
Deferral Account.  In addition, a Non-Employee Director may elect to defer all
(100%) of the Director's Board and committee fees (collectively "Fees") into the
Director's Cash Deferral Account.

      Any deferral election under this Section 6.2 shall be made prior to the
beginning of, and will be effective for, the calendar year in which such payments
would otherwise be made.  Each such election shall become irrevocable as of the
last day such election may be made.  Provided, however, Non-Employee Directors not
serving on the Board prior to January 1, 1998, may, at any time within thirty (30)
days of their original election to the Board, make an irrevocable election with
respect to payments not yet made, effective for the then current calendar year.
Unless the Non-Employee Director notifies the Secretary of the Company otherwise
prior to the beginning of each subsequent calendar year, each election hereunder
will renew automatically for an additional calendar year.

      Deferral elections under the Plan made prior to November 21, 1997, shall
remain in place through the end of 1997, and all such deferrals shall be credited
to the Cash Deferral Account and continue to earn interest in accordance with
Section 6.3.  Any new Non-Employee Director joining the Board after November 21,
1997, and before January 1, 1998, may make an election with respect to 1997 annual
retainers and fees in accordance with the Plan as it read immediately prior to the
modifications of November 21, 1997.

6.3   Interest on Cash Deferral Accounts.  The annual rate of interest on amounts
in the Cash Deferral Accounts for 1997 and subsequent calendar years shall be the
Moody's Corporate Bond Yield Average-Monthly Average Corporates as published by
Moody's Investor Service, Inc. (or any successor thereto) for the month of
September before the calendar year in question (if such yield is no longer
published, a substantially similar average selected by the Human Resources
Committee) or such other rate as the Human Resources Committee shall determine
prior to the year for which the interest rate would be applicable.  Interest shall
be credited quarterly, in arrears.

6.4   Form and Timing of Payout of Cash Deferral Accounts.  Cash Deferral Accounts
shall be paid out in cash.  The Participant shall elect the timing of the payout
for Participant's Cash Deferral Account no later than the calendar year prior to
the first scheduled payment thereof; any prior elections by the Participant shall
become irrevocable at that time.  One election shall apply to a Participant's
entire Cash Deferral Account.  A Participant's Cash Deferral Account shall be paid
out in a lump sum payment or in up to fifteen (15) annual installments, as elected
by the Participant.  The lump sum payment or the first installment, as the case may
be, shall be payable on the first day of February of the year following the
calendar year of the termination of the Participant's service as a Director.  All
annual installments thereafter shall be payable on the anniversary of the first
such payment.  If the Director fails to make a timely election as to the number of
installments, the Participant's Cash Deferral Account shall be paid out in four (4)
annual installments.  Each installment shall equal the amount available for payout,
divided by the number of remaining installments (including the installment being
made).

6.5   Conversion of a Participant's Cash Deferral Account to Deferred Stock Units.
Each year, on or before the tenth day following the Company's public release of its
annual summary statement of earnings (typically in January of each year) (such
tenth day to be the "Conversion Date"), a Non-Employee Director may elect to
convert all or part of the balance of his or her Cash Deferral Account into Stock
Units, effective the Conversion Date.  Each such election shall become irrevocable
as of the last day such election may be made.  A Non-Employee Director who elects
to convert his or her Cash Deferral Account shall receive the number of Stock Units
found by dividing the Non-Employee Director's balance in the Cash Deferral Account
as of such Conversion Date, together with all accrued but not yet credited
interest, or such lesser amount of the Cash Deferral Account elected by the
Non-Employee Director, by the Fair Market Value of a Share on such date.  Upon such
conversion, the Participant's Cash Deferral Account shall be reduced by the amount
so converted.


Article 7. Amendment, Modification, and Termination

7.1   Amendment, Modification, and Termination.  Subject to the terms set forth in
this Article 7, the Board may terminate, amend, or modify the Plan at any time and
from time to time.

7.2   Awards Previously Granted.  Unless required by law, no termination,
amendment, or modification of the Plan shall in any material manner adversely
affect any Award previously provided under the Plan, without the written consent of
the Participant holding the Award.


Article 8. Miscellaneous

8.1   Competition.  Notwithstanding any election hereunder, in the event a Director
ceases to be a Director of the Company and becomes a proprietor, officer, partner,
employee, director or otherwise becomes affiliated with any business that is in
competition with the Company or any of its subsidiaries, or becomes employed by any
governmental agency having jurisdiction over the activities of the Company or any
of its subsidiaries, all as determined by the Committee in its sole discretion, the
entire balance hereunder may be immediately paid out at the election of the
Company, in which case no further amounts may be earned under this Plan.

8.2   Elections.  All elections and notices of any kind hereunder shall be in
writing and provided to the Secretary of the Company in a form prescribed by the
Secretary.

8.3   Assignment.  Except as otherwise provided herein, no rights under this Plan
may be assigned by a Participant.

8.4   Severability.  In the event any provision of the Plan shall be held illegal
or invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if the
illegal or invalid provision had not been included.

8.5   Death of a Director/Beneficiary Designation.  Each Participant under the Plan
may, from time to time, name any beneficiary or beneficiaries (who may be named
primarily or contingently) to whom any benefit under the Plan is to be paid in the
event of his or her death.  Each designation will revoke all prior designations by
the same Participant, shall be in a form prescribed by the Secretary of SBC, and
will be effective only when filed by the Participant in writing with the Secretary
during his or her lifetime.  In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate.

      In the event of the death of a Participant before full payment of all amounts
due hereunder, the balance shall be paid in a lump sum as soon as administratively
possible in accordance with the foregoing.  Notwithstanding this, if the
Participant so elects as part of the Participant's deferral elections, the Stock
Units and/or the Cash Deferral Account will be paid out in the number of annual
installments elected by the Participant, beginning on the first day of the month
following the Participant's death and occurring annually thereafter; provided,
however, if distributions to the Participant have already commenced at the time of
the Participant's death, then under this election, distributions will continue as
scheduled.

8.6   No Right of Nomination.  Nothing in the Plan shall be deemed to create any
obligation on the part of the Board to nominate any Director for reelection by the
Company's shareholders.

8.7   Shares Available/Fractional Shares.  The Shares delivered under the Plan may
be either authorized but unissued Shares, or Shares which have been or may be
reacquired by the Company, as determined from time to time by the Board.

      In no case shall a fractional Share be issued under this Plan.  Any
fractional Share payable hereunder, upon the conversion of a Stock Unit or
otherwise, shall be payable in cash in an amount equal to such fraction of a Share
times the Fair Market Value of a Share on the date the fractional Share would
otherwise be payable.

8.8   Successors.  All obligations of the Company under the Plan with respect to
Awards granted hereunder shall be binding on any successor to the Company, whether
the existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

8.9   Requirements of Law.  The granting of Awards under the Plan shall be subject
to all applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.

8.10  Governing Law.  The Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the internal, substantive laws of the State of
Texas.

8.11  Adjustments.  In the event of a merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend, stock split, share
combination, or other change in the corporate structure of SBC affecting SBC
Shares, such adjustment shall be made in the number and characteristics of
outstanding Stock Units and/or the number and class of securities into which the
Stock Units may be converted, in each case as may be determined to be appropriate
and equitable by the Board of Directors, in its sole discretion, to prevent
dilution or enlargement of rights.

EX-12 12 exh12.htm EXHIBIT 12 EXHIBIT 12

EXHIBIT 12

                            SBC COMMUNICATIONS, INC.
    SUPPLEMENTAL PRO FORMA COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
                               Dollars in Millions





                                            12/31/00  12/31/99  12/31/98 12/31/97   12/31/96

                                            --------  --------  --------- --------    -------
Income Before Income Taxes, Extraordinary
  Items and Cumulative Effect of
  Accounting Changes                        $ 12,367  $ 10,382  $ 11,859    6,356   $  8,789                                                                   $
     Add:  Interest Expense                    1,592     1,430     1,605    1,550      1,418
     Dividends on Preferred Securities           118       118       114       98         68
        1/3 Rental Expense                       252       236       228      202        188
                                            ---------  --------  --------- --------  ---------


     Adjusted Earnings                      $ 14,329  $ 12,166  $ 13,806    8,206   $ 10,463                                                                   $
                                            =========  ========  ========= ========  =========


Total Interest Charges                      $  1,693   $ 1,511  $  1,691    1,700   $  1,589                                                                   $
Dividends on Preferred Securities                118       118       114       98         68
1/3 Rental Expense                               252       236       228      202        188
                                            --------- --------  --------- --------  ---------


     Adjusted Fixed Charges                 $  2,063   $ 1,865  $  2,033    2,000   $  1,845                                                                   $
                                            ========= ========  ========= ========  =========

EX-13 13 exh13.htm ANNUAL REPORT Annual Report 2000 Selected Financial and Operating Data

-------------------------------------------------------------------------------------------------------
Dollars in millions except per share amounts
- -------------------------------------------------------------------------------------------------------
At December 31 or for the year ended:          2000       1999       1998       1997        1996
- -------------------------------------------------------------------------------------------------------
Financial Data 1
Operating revenues                        $  51,476  $  49,531  $  46,241  $  43,126  $   40,515
- -------------------------------------------------------------------------------------------------------
Operating expenses                        $  40,733  $  37,933  $  35,018  $  35,524  $   30,466
- -------------------------------------------------------------------------------------------------------
Operating income                          $  10,743  $  11,598  $  11,223  $   7,602  $   10,049
- -------------------------------------------------------------------------------------------------------
Interest expense                          $   1,592  $   1,430  $   1,605  $   1,550  $    1,418
- -------------------------------------------------------------------------------------------------------
Equity in net income of affiliates        $     897  $     912  $     613  $     437  $      470
- -------------------------------------------------------------------------------------------------------
Other income (expense) - net              $   2,561  $    (354) $   1,702  $     (93) $     (215)
- -------------------------------------------------------------------------------------------------------
Income taxes                              $   4,921  $   4,280  $   4,380  $   2,451  $    3,368
- -------------------------------------------------------------------------------------------------------
Income before extraordinary items and
  cumulative effect of accounting change  $   7,967  $   6,573  $   7,735  $   4,087  $    5,705
- -------------------------------------------------------------------------------------------------------
Net Income 2                              $   7,967  $   8,159  $   7,690  $   4,087  $    5,795
- -------------------------------------------------------------------------------------------------------
Earnings per common share:
 Income before extraordinary items and
  cumulative effect of accounting change  $    2.35  $    1.93  $    2.27  $    1.21  $     1.67
- -------------------------------------------------------------------------------------------------------
Net Income 2                              $    2.35  $    2.39  $    2.26  $    1.21  $     1.70
- -------------------------------------------------------------------------------------------------------
Earnings per common share - assuming
dilution:
 Income before extraordinary items and
  cumulative effect of accounting change  $    2.32  $    1.90  $    2.24  $    1.20  $     1.66
- -------------------------------------------------------------------------------------------------------
Net Income 2                              $    2.32  $    2.36  $    2.23  $    1.20  $     1.69
- -------------------------------------------------------------------------------------------------------
Total assets                              $  98,651  $  83,215  $  74,966  $  69,917  $   65,765
- -------------------------------------------------------------------------------------------------------
Long-term debt                            $  15,492  $  17,475  $  17,170  $  17,787  $   16,536
- -------------------------------------------------------------------------------------------------------
Construction and capital expenditures     $  13,124  $  10,304  $   8,882  $   8,856  $    8,304
- -------------------------------------------------------------------------------------------------------
Free cash flow 3                          $   1,175  $   6,274  $   4,099  $   2,723  $    2,964
- -------------------------------------------------------------------------------------------------------
Dividends declared per common share 4     $   1.015  $   0.975  $   0.935  $   0.895  $    0.860
- -------------------------------------------------------------------------------------------------------
Book value per common share               $    9.00  $    7.87  $    6.69  $    5.26  $     4.94
- -------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges             6.95       6.52       6.79       4.10        5.67
- -------------------------------------------------------------------------------------------------------
Debt ratio                                     45.2%      42.9%      47.3%      54.9%      55.6%
- -------------------------------------------------------------------------------------------------------
Weighted average common shares
  outstanding (000,000)                       3,392      3,409      3,406      3,391       3,409
- -------------------------------------------------------------------------------------------------------
Weighted average common shares
  outstanding with dilution (000,000)         3,433      3,458      3,450      3,420       3,429
- -------------------------------------------------------------------------------------------------------
End of period common shares
  outstanding (000,000)                       3,386      3,395      3,406      3,398       3,389
- -------------------------------------------------------------------------------------------------------
Operating Data
- -------------------------------------------------------------------------------------------------------
Network access lines in service (000)        61,250     60,697     58,980     56,707      53,891
- -------------------------------------------------------------------------------------------------------
Access minutes of use (000,000)             281,581    264,010    247,597    228,300     208,230
- -------------------------------------------------------------------------------------------------------
Wireless customers (000) - Cingular/SBC 5    19,681     11,151      8,686      7,556       6,018
- -------------------------------------------------------------------------------------------------------
Number of employees                         220,090    204,530    200,380    202,440     185,400
- -------------------------------------------------------------------------------------------------------

Certain one-time items are included in the results for each year presented. See Results of Operations for a summary of the 2000, 1999 and 1998 one-time items. In 1997, results include the incremental operating impacts attributable to the operations of the overlapping Ameritech Corporation (Ameritech) wireless properties sold in 1999, charges resulting from the merger integration process with Pacific Telesis Group (PAC), and charges related to a work force restructuring at Belgacom S.A. Additionally, we recognized gains from the sale of our interests in Bell Communications Research, Inc. and from settlement gains at PAC associated with lump sum pension payments for 1996 retirements. Excluding these items, SBC Communications Inc. (SBC) reported an adjusted net income of $5,836, or $1.71 diluted earnings per share in 1997. In 1996, results include the incremental operating impacts attributable to the operations of the overlapping Ameritech wireless properties sold in 1999. Excluding these items, SBC reported an adjusted income before cumulative effect of accounting change of $5,216, or $1.52 diluted earnings per share, and an adjusted net loss of $1,493, or $0.43 diluted earnings per share in 1996.
Amounts include the following extraordinary items and cumulative effect of accounting change: 1999, gain on sale of overlapping cellular properties and change in directory accounting at Ameritech; 1998, early retirement of debt and change in directory accounting at Southern New England Telecommunications Corp. (SNET); 1996, change in directory accounting at PAC.
Free cash flow is net cash provided by operating activities less construction and capital expenditures.
Dividends declared by SBC’s Board of Directors; these amounts do not include dividends declared and paid by Ameritech, SNET and PAC prior to their respective mergers.
All periods exclude customers from the overlapping Ameritech wireless properties sold in 1999. Beginning in 2000, the number presented is the total customers served by Cingular Wireless, in which we own a 60% equity interest.

Management's Discussion and Analysis of Financial Condition and Results of Operations
Dollars in millions except per share amounts

Throughout this document, SBC Communications Inc. is referred to as “we” or “SBC”. We are a holding company whose subsidiaries and affiliates operate in the communications services industry. Our subsidiaries and affiliates provide wireline and wireless telecommunications services and equipment, directory advertising and cable television services both domestically and worldwide.

This discussion should be read in conjunction with the consolidated financial statements and the accompanying notes. A reference to a Note in this section refers to the accompanying Notes to the Consolidated Financial Statements.

Results of Operations

Overview
Reported financial results are summarized as follows:

- -------------------------------------------------------------------------------------------------
                                                                                Percent Change
                                                                              -------------------
                                                                                2000 vs.  1999 vs.
                                                  2000       1999       1998      1999      1998
- -------------------------------------------------------------------------------------------------
Operating revenues                          $   51,476 $   49,531  $   46,241      3.9%      7.1%
Operating expenses                              40,733     37,933      35,018      7.4       8.3
Operating income                                10,743     11,598      11,223     (7.4)      3.3
Other income (expense) - net                     2,561       (354)      1,702        -         -
Income before extraordinary items and
  cumulative effect of accounting change         7,967      6,573       7,735     21.2     (15.0)
Extraordinary items                                  -      1,379         (60)       -         -
Cumulative effect of accounting change               -        207          15        -         -
Net income                                       7,967      8,159       7,690     (2.4)      6.1
=================================================================================================

In 1999 and 1998, net income reflected a cumulative effect of accounting change related to accounting for directory revenues and expenses (see Note 1). In 1999, we recognized an extraordinary gain from the sale of overlapping cellular properties relating to the Ameritech Corporation (Ameritech) merger (see Note 15). In 1998, we incurred an extraordinary loss related to the early retirement of debt.

The reported results shown in the table above also include one-time items that we normalize for management purposes. Excluding these items, 2000 income before extraordinary items and cumulative effect of accounting change would have been $7,746, or 4.1% higher than 1999 earnings of $7,439. The corresponding diluted earnings per share amounts would be $2.26 in 2000, or 5.1% higher than $2.15 in 1999. In 1999, income before extraordinary items and cumulative effect of accounting change would have been 12.5% higher than 1998 earnings of $6,611. The corresponding diluted earnings per share amounts would have been 12.0% higher than $1.92 in 1998. The following table summarizes these items and their combined annual effect on the relevant income or expense lines. Each individual item is described following the table. The impact of proportionately consolidating our 60% interest in Cingular Wireless (Cingular) is not included in the table below. For a discussion of this item, please refer to the wireless segment results later in this document.

Normalizing Items Summary

- ---------------------------------------------------------------------------------------------------
                                                2000              1999              1998
- ---------------------------------------------------------------------------------------------------
Operating revenues                        $      (23) 6         $  529  8,9       $  884  14,16
Operating expenses                             1,405  3,4,5,6    1,454  8,9,10,12  1,148  14,16,17
- ---------------------------------------------------------------------------------------------------
Operating income                              (1,428)             (925)             (264)
- ---------------------------------------------------------------------------------------------------
Interest expense                                   -                12  9             21  14,16
Interest income                                    -                 -                 -
Equity in net income of affiliates               (36) 1,3,6        131  11             -
Other income (expense) - net                   2,149  1,2,4,6,7    (22) 8,9        2,040  13,15,16,17
- ---------------------------------------------------------------------------------------------------
Income before income taxes                       685              (828)            1,755
- ---------------------------------------------------------------------------------------------------
Income taxes *                                   464                38               631
- ---------------------------------------------------------------------------------------------------
Income before extraordinary items and
  cumulative effect of accounting change  $      221            $ (886)           $1,124
===================================================================================================

* All normalizing items except 5 below have tax impacts.

Normalized results for 2000 exclude the following items:

Gains of $1,886 ($1,248 net of tax) related to the sale of direct and indirect investments in MATAV and Netcom GSM, two international equity affiliates, and from the contribution of our investment in ATL - Algar Telecom Leste S.A. (ATL), a Brazilian telecommunications company, to Telecom Americas Ltd. (Telecom Americas).
Gains of $238 ($155 net of tax) on the sale of Teléfonos de México, S.A. de C.V. (Telmex) L shares associated with our private purchase of a note receivable with characteristics that will essentially offset future mark to market adjustments on the Debt Exchangeable for Common Stock (DECS).
Pension settlement gains of $512 ($328 net of tax) associated with pension litigation, first quarter payments primarily related to employees who terminated employment during 1999 and gains resulting from a voluntary retirement program net of enhanced pension and postretirement benefits associated with that program (see Note 12).
Costs of $1,205 ($800 net of tax) associated with strategic initiatives and other adjustments resulting from the merger integration process with Ameritech.
A charge of $132 (with no tax effect) related to in-process research and development from the March 2000 acquisition of Sterling Commerce, Inc. (Sterling) (see Note 15).
Combined charges of $971 ($677 net of tax) related to valuation adjustments of SecurityLink, Ameritech’s electronic security operations, and certain cost investments accounted for under Financial Accounting Standards Board Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, and the restructure of agreements with Prodigy Communications Corporation, including the extension of a credit facility and recognition of previously unrecognized equity losses from our investment (see Note 16).
Gains of $359 ($99 net of tax) primarily related to our required disposition of overlapping wireless properties in connection with our contribution of operations to Cingular.

Normalized results for 1999 exclude the following items:

Charges totaling $1,766 ($1,457 net of tax) including recognition of impairment of long-lived assets, adjustments to the estimate of allowance for doubtful accounts, estimation of deferred taxes on international investments, wireless conversion costs and other items (see Note 2).
Elimination of income of $197 ($119 net of tax) from the incremental impacts of overlapping wireless properties sold in October 1999 relating to the Ameritech merger.
Pension settlement gains of $566 ($368 net of tax) associated with lump sum pension payments that exceeded the projected service and interest costs.
Gains of $131 ($77 net of tax) recognized from the sale of property by an international equity affiliate.
A reduction of $45 ($27 net of tax) related to a portion of a first quarter 1998 charge to cover the cost of consolidating security monitoring centers and company-owned wireless retail stores.

Normalized results for 1998 exclude the following items:

Gain of $1,543 ($1,012 net of tax) from the sale of Telecom Corporation of New Zealand Limited (TCNZ) shares.
Charges of $433 ($268 net of tax) related to strategic initiatives resulting from the merger integration process with Southern New England Telecommunications Corp. (SNET).
Gains of $358 ($219 net of tax) from the sale of certain non-core businesses, principally the required disposition of our investment in MTN, a cellular company in South Africa.
Elimination of income of $221 ($123 net of tax) from the incremental impacts of overlapping wireless properties sold in October 1999 relating to the Ameritech merger.
Gains of $170 ($102 net of tax) from the sale of certain telephone and directory assets.
Charges of $104 ($64 net of tax) to cover the cost of consolidating security monitoring centers and company-owned wireless retail stores.

The primary factors contributing to the 2000 and 1999 increases in consolidated normalized revenues were growth in demand for data communications and wireless services and products. These increases were offset in 2000 and partially offset in 1999 by increased operating expenses related to the buildout of our broadband network and investments in new products and services, including Digital Subscriber Line (DSL), national expansion and long distance service. The national expansion initiative is our plan to enter the top 30 metropolitan markets beyond our traditional regions by April 2002. InterLATA long distance service was launched in Texas on July 10, 2000.

The contribution of our wireless operations to Cingular in October 2000, which we account for under the equity method of accounting, means that our reported revenues and expenses lines in 2001 will no longer include our wireless operations. Instead, our 60% share of Cingular’s operations will be reported in the equity in net income of affiliates line item (see Note 6).

Segment Results

Our segments are strategic business units that offer different products and services and are managed accordingly. We evaluate performance based on income before income taxes adjusted for normalizing (e.g., one-time) items. Transactions among segments are reported at fair value and the accounting policies of the segments are the same as those described in Note 1.

As a result of the reorganization of management in the fourth quarter of 2000, we have adjusted our segment reporting structure. We now have five reportable segments that reflect the current management of our business: wireline, wireless, directory, international and other. Directory, which was formerly included in the information and entertainment segment, is now a stand-alone segment. SecurityLink and Ameritech’s cable television operations, which were formerly included in the information and entertainment segment, as well as Ameritech’s paging operations, which were formerly included in the wireless segment, and all corporate operations, which were formerly included in corporate, adjustments and eliminations have been moved to the other segment.

The wireline segment provides landline telecommunications services, including local, network access and long distance services, messaging and Internet services and sells customer premise and private business exchange equipment.

Prior to the fourth quarter of 2000, the wireless segment included our consolidated businesses that provided wireless telecommunications services and sold wireless equipment. In October 2000, we contributed substantially all of our wireless businesses to Cingular and began reporting results from Cingular’s operations as equity income in the consolidated financial statements (see Note 6). However, for internal management purposes, we analyze Cingular’s results using proportional consolidation and therefore will discuss Cingular’s results on that basis in the wireless segment.

The directory segment consists of all SBC directory operations, including yellow and white pages advertising and electronic publishing. All investments with primarily international operations are included in the international segment.

The following tables show components of normalized results of operations by segment. A discussion of significant segment results is also presented. Intercompany interest affects the segment results of operations but is not discussed as it is eliminated in consolidation. The consolidated results section discusses interest income, interest expense, other income (expense) - net and income taxes.

Wireline
Normalized Results

- ----------------------------------------------------------------------------------------
                                                                    Percent Change
                                                                ------------------------
                                                                    2000 vs.    1999 vs.
                                   2000       1999       1998         1999        1998
- ----------------------------------------------------------------------------------------
Operating revenues
  Local service                  $  22,126  $  19,544 $  17,546       13.2%       11.4%
  Network access                    10,496     10,189     9,677        3.0         5.3
  Long distance service              2,975      3,395     3,695      (12.4)       (8.1)
  Other                              4,379      4,302     4,446        1.8        (3.2)
- ----------------------------------------------------------------
Total Operating Revenues            39,976     37,430    35,364        6.8         5.8
- ----------------------------------------------------------------
Operating expenses
  Operations and support            23,958     21,486    20,342       11.5         5.6
  Depreciation and amortization      7,656      6,825     6,437       12.2         6.0
- ----------------------------------------------------------------
Total Operating Expenses            31,614     28,311    26,779       11.7         5.7
- ----------------------------------------------------------------
Operating Income                     8,362      9,119     8,585       (8.3)        6.2
- ----------------------------------------------------------------
Interest Expense                     1,240      1,188     1,250        4.4        (5.0)
- ----------------------------------------------------------------
Other Income (Expense) - Net            70        115       (20)     (39.1)         -
- ----------------------------------------------------------------
Income Before Income Taxes       $   7,192  $   8,046 $   7,315      (10.6)%      10.0%
========================================================================================

Local service revenues increased $2,582, or 13.2%, in 2000 and $1,998, or 11.4%, in 1999. Excluding the operations of Sterling, acquired in March 2000, the increase was approximately 10.9% in 2000. Approximately $619 of the increase in 2000 was attributable to increased demand from business customers for network integration and Internet services. In 1999, revenues from a network integration company acquired in the second quarter of 1999 contributed approximately $578 to the increase. Demand for DSL and dial-up Internet services in the residential market increased local service revenues by approximately $164 in 2000 and $24 in 1999. Increased demand for wholesale services, including the resale and sale of unbundled network elements, accounted for approximately $389 of the increase in 2000 and $193 in 1999. Additionally, directory assistance revenues increased approximately $75 in 2000, primarily due to price increases in California, Illinois and Texas, and by $16 in 1999, due to the introduction of national directory assistance.

Total access lines in service at the end of 2000 increased by approximately 1%, while access lines in service at the end of 1999 increased more than 3%. The lower growth rate in access lines is due largely to competitive losses, as discussed in the “Competition” section of “Operating Environment and Trends of the Business”, as well as DSL penetration, particularly in California, which has reduced demand for additional lines. Vertical services revenues, which include custom calling services, such as Caller ID, Call Waiting, voice mail and other enhanced services, increased by approximately 10% to more than $3.7 billion in 2000 and increased by 14% to more than $3.3 billion in 1999.

Local service revenues also increased as a result of regulatory actions that decreased one or more other types of operating revenues. In 2000, the introduction of extended area service plans and the September 1999 Texas Universal Service Fund (TUSF) rate rebalancing collectively increased local service revenues by approximately $140. In 1999, the introduction of extended area service plans, the introduction of the California High Cost Fund (CHCF) and the TUSF rate rebalancing collectively increased local service revenues by approximately $185. However, these regulatory actions had only a nominal effect on overall revenue because they decreased intrastate network access revenues by approximately $95 in 2000 and $87 in 1999 and decreased long distance revenues by approximately $22 in 2000 and $112 in 1999. The Texas Public Utility Commission has stated that the TUSF is intended, among other things, to help support the provision of basic local telephone service to high-cost rural areas.

Network access revenues increased $307, or 3.0%, in 2000 and $512, or 5.3%, in 1999 due primarily to demand for special access and switched data transport services, as well as higher network usage by alternative providers of intraLATA toll services. Additionally, in 1999, customer number portability cost recovery, net of a Federal Communications Commission (FCC) retroactive rate decrease, contributed approximately $183 to the increase. The increase in 2000 was partially offset by the effects of the July 2000 implementation of the Coalition for Affordable Local and Long Distance Service (CALLS) proposal, as discussed under “Regulatory Environment”, of approximately $293. Also offsetting the 2000 increase were the effects of the TUSF described in local service above of $95 as well as other state regulatory rate reductions of $183. Partially offsetting the 1999 increase were the effects of rate reductions of approximately $296 related to the FCC’s productivity factor adjustment and access reform, state regulatory rate reductions, including reduction of cellular interconnection rates and the intrastate rate reduction by the Texas legislature of approximately $144, and the effects of the TUSF and CHCF described in local service above of $87.

Long distance service revenues decreased $420, or 12.4%, in 2000 and $300, or 8.1%, in 1999. Competitive losses, primarily resulting from dialing parity implementation, decreased long distance revenues by approximately $329 in 2000 and $202 in 1999. Decreases also resulted from the effects of regulatory actions of approximately $22 in 2000 and $112 in 1999, as discussed in local service, related to the continued introduction of extended area service plans.

The decreases in 2000 were partially offset by approximately $64 from the entry into the Texas long distance market for interLATA and interstate services and $31 due to price increases in Illinois, Indiana, Michigan and Ohio. In 1999, the decreases were partially offset by approximately $128 due to increased demand at Ameritech’s long distance unit, certified to provide long distance service outside SBC’s region, and increased demand and toll messages for SNET All Distance.

Other operating revenues increased $77, or 1.8%, in 2000 and decreased $144, or 3.2%, in 1999. Equipment sales, primarily residential, increased approximately $177 in 2000 and were flat in 1999, while the payphone business declined $124 in 2000 and $176 in 1999. Sales of other nonregulated products and services increased in both 2000 and 1999.

Operations and support expenses increased $2,472, or 11.5%, in 2000 and $1,144, or 5.6%, in 1999. Approximately $931 of the 2000 and $301 of the 1999 increases were related to costs associated with the continued rollout of DSL. Costs associated with network integration and E-Commerce services, including acquisitions in 2000 and 1999, increased approximately $853 in 2000 and $575 in 1999. Personnel increases related to continued demand for new products and services increased operations and support expenses by approximately $520 in 2000 and $133 in 1999. In addition, our national expansion initiative increased expenses by approximately $307 in 2000 and $69 in 1999. Costs associated with reciprocal compensation declined in 2000 by approximately $176 primarily due to rate reductions and settlements we reached with other carriers during the year. By contrast, reciprocal compensation costs increased by approximately $288 in 1999. The 1999 increases were partially offset by a change in accounting for software costs which required approximately $345 to be capitalized rather than expensed in 1999.

Depreciation and amortization expenses increased $831, or 12.2%, in 2000 and $388, or 6.0%, for 1999. Overall higher plant levels increased depreciation expense by approximately $308 in 2000 and $326 in 1999. Our acquisition of Sterling in March 2000 caused an increase of approximately $263 in 2000. Amortization of capitalized software also increased approximately $198 in 2000 over the 1999 amount of $37 due to the 1999 adoption of a new accounting standard requiring the capitalization of certain internal use software.

Wireless
Normalized Results

- ---------------------------------------------------------------------------------------
                                                                   Percent Change
                                                                -----------------------
                                                                   2000 vs.   1999 vs.
                                   2000       1999       1998        1999       1998
- ---------------------------------------------------------------------------------------
Operating revenues
  Subscriber revenue             $   6,479  $   5,307 $   4,540      22.1%       16.9%
  Other                              1,463      1,318       936      11.0        40.8
- ----------------------------------------------------------------
Total Operating Revenues             7,942      6,625     5,476      19.9        21.0
- ----------------------------------------------------------------
Operating expenses
  Operations and support             5,349      4,464     3,885      19.8        14.9
  Depreciation and amortization      1,086        918       680      18.3        35.0
- ----------------------------------------------------------------
Total Operating Expenses             6,435      5,382     4,565      19.6        17.9
- ----------------------------------------------------------------
Operating Income                     1,507      1,243       911      21.2        36.4
- ----------------------------------------------------------------
Interest Expense                       424        226       189      87.6        19.6
- ----------------------------------------------------------------
Other Income (Expense) - Net          (108)      (134)     (177)    (19.4)      (24.3)
- ----------------------------------------------------------------
Income Before Income Taxes       $     975  $     883 $     545      10.4%       62.0%
=======================================================================================

As a result of our joint venture agreement with BellSouth Corporation (BellSouth) (see Note 6), we account for our interest in Cingular under the equity method of accounting. However, for evaluating results of Cingular internally, we use proportional consolidation. In the table above, amounts for 2000 include nine months of our historical wireless operations and three months of 60% of the results of Cingular plus our wireless properties not yet contributed. Results for 1999 and 1998 reflect our historical wireless operations that have been contributed or are pending contribution to Cingular. As certain wireless operations of BellSouth and SBC will be contributed to Cingular in future periods, the fourth quarter 2000 results are not completely indicative of prospective proportionate results.

Wireless subscriber revenues increased $1,172, or 22.1%, in 2000 and $767, or 16.9%, in 1999. Acquisitions of wireless properties accounted for approximately one-third of the increase in 2000, with the remaining increase due to net customer additions. For the fourth quarter of 2000, Cingular had approximately 814,000 net customer additions and wireless customers totaling 19,680,000 at December 31, 2000, compared to 16,599,000 at December 31, 1999 on a pro forma basis. The 1999 increase in revenues is primarily due to 2,465,000 in net customer additions, which includes approximately 1,237,000 customers attributable to the third quarter 1999 acquisitions of Comcast Cellular Corporation (Comcast) and Cellular Communications of Puerto Rico, Inc. (Cellular Communications). The 2000 and 1999 increases were partially offset by declines in average revenue per customer due to the continued migration of customers to flat rate plans.

Other revenues increased $145, or 11.0%, in 2000 and $382, or 40.8%, in 1999. The 2000 increase was predominately due to increased equipment sales, related to the increase in customer additions, as noted above. The 1999 increase was primarily attributable to a $291 increase in outcollect roaming revenues (revenues from other carriers’ customers roaming on our networks) and increased equipment sales related to the increase in customer additions.

Operations and support expenses increased $885, or 19.8%, in 2000 and $579, or 14.9%, in 1999 due primarily to growth in the number of customers, which included customers attributable to the third quarter 1999 acquisitions, discussed in subscriber revenues above. The 1999 results also were impacted by increased incollect roaming expenses and software costs capitalized rather than expensed in 1999.

Depreciation and amortization expenses increased $168, or 18.3%, in 2000 and $238, or 35.0%, in 1999. The increases were primarily related to third quarter 1999 acquisitions; however, 2000 included approximately a $35 decrease resulting from a purchase price allocation true-up adjustment related to the acquisitions.

Directory
Normalized Results

- --------------------------------------------------------------------------------------
                                                                   Percent Change
                                                                ----------------------
                                                                   2000      1999 vs.
                                                                     vs.
                                   2000       1999       1998       1999       1998
- --------------------------------------------------------------------------------------
Operating Revenues               $   4,340  $   4,126 $   3,753       5.2%       9.9%
- ----------------------------------------------------------------
Operating expenses
  Operations and support             2,008      2,081     1,919      (3.5)       8.4
  Depreciation and amortization         32         33        36      (3.0)      (8.3)
- ----------------------------------------------------------------
Total Operating Expenses             2,040      2,114     1,955      (3.5)       8.1
- ----------------------------------------------------------------
Operating Income                     2,300      2,012     1,798      14.3       11.9
- ----------------------------------------------------------------
Interest Expense                         4          9         9     (55.6)        -
- ----------------------------------------------------------------
Other Income (Expense) - Net            65          8         8         -         -
- ----------------------------------------------------------------
Income Before Income Taxes       $   2,361  $   2,011 $   1,797      17.4%      11.9%
======================================================================================

Directory operating revenues increased $214, or 5.2%, in 2000 and $373, or 9.9%, in 1999. Increased demand for directory advertising services contributed approximately $173 to the increase in 2000, combined with an increase of $33 related to a change in the timing of directory publications. The 1999 increase includes approximately $107 related to the previously discussed change in directory accounting at Ameritech, $57 for changes in the directory publishing schedule and $30 due to the restructuring of certain agreements that shifted directory revenues from the wireline segment.

Operations and support expenses decreased $73, or 3.5%, in 2000 and increased $162, or 8.4%, in 1999. The decreased expenses in 2000 were primarily related to cost savings from the merger integration process with Ameritech. The 1999 results reflect approximately a $103 increase in expenses as a result of a change in directory accounting at Ameritech.

International
Normalized Results

- ---------------------------------------------------------------------------------------
                                                                    Percent Change
                                                                 ----------------------
                                                                    2000 vs.   1999 vs.
                                       2000      1999       1998     1999       1998
- ---------------------------------------------------------------------------------------
Operating Revenues                 $     328 $     255 $     149      28.6%      71.1%
- -----------------------------------------------------------------
Operating Expenses                       475       266       227      78.6       17.2
- -----------------------------------------------------------------
Operating Income (Loss)                 (147)      (11)      (78)       -       (85.9)
- -----------------------------------------------------------------
Interest Expense                         174       235       213     (26.0)      10.3
- -----------------------------------------------------------------
Equity in Net Income of Affiliates       862       739       588      16.6       25.7
- -----------------------------------------------------------------
Other Income (Expense) - Net             389       209       156      86.1       34.0
- -----------------------------------------------------------------
Income Before Income Taxes         $     930 $     702 $     453      32.5%      55.0%
=======================================================================================

Operating revenues increased $73, or 28.6%, in 2000 and $106, or 71.1%, in 1999. The increases were primarily from increased volume-related long distance revenues. Revenues for 2001 will not include those of our German directory investment, Wer Liefert Was (WLW), which was sold in December 2000. Revenues related to WLW in 2000 and 1999 were approximately $40 and $46.

Operating expenses increased $209, or 78.6%, in 2000 and $39, or 17.2%, in 1999. The increases were largely due to the costs associated with the increased long distance volumes as noted above, and partly due to an increase in corporate support charges in 2000. In 2001, expenses will be lower by the amount that was associated with the operations of WLW, approximately $36 in 2000 and $35 in 1999.

Equity in net income of affiliates increased $123, or 16.6%, in 2000 and $151, or 25.7%, in 1999. The 2000 increase includes increased equity in net income, including our share of certain disposition gains, of approximately $219 from investments in Telmex, Tele Danmark, and Belgacom S.A. (Belgacom). A full twelve months of operations from Bell Canada in 2000 resulted in approximately $48 higher equity income than the seven months of operations in 1999. Our investment in Cegetel S.A. produced positive equity income for the first time in 2000 leading to an increase of approximately $17 over prior year equity losses. Offsetting these increases are reductions to equity in net income of approximately $35, as a result of the sale of our investment in the Aurec companies in Israel and MATÁV, a Hungarian telecommunications company. Our investment in diAx A.G. (diAx), a Swiss mobile landline operator, contributed approximately $32 in increased losses in equity income due to increased operating losses, as well as severance accruals and other one-time adjustments. Our investment in Telkom SA Limited (Telkom) had approximately $20 in lower equity income from the prior year due mainly to one-time adjustments. Additionally, our investment in ATL had equity losses of approximately $80.

The 1999 increase includes increased equity in net income of approximately $134 from investments in Telmex, Israel and Tele Danmark. The investment in Bell Canada, along with increased earnings at MATÁV, contributed approximately $71 to the increase. These increases were partially offset by approximately $83 of reduced earnings from the sale of our investment in TCNZ and lower earnings from Telkom and Belgacom.

The equity earnings in 2000 discussed above were lower by approximately $75 due to exchange rate changes from the prior year in the value of our foreign affiliates’ local currencies, primarily Tele Danmark and Belgacom. Our earnings from foreign affiliates will continue to be sensitive to exchange rate changes in the value of the respective local currencies. Our foreign investments are recorded under accounting principles generally accepted in the United States, which include adjustments for the purchase method of accounting and exclude certain adjustments required for local reporting in specific countries, such as inflation adjustments. Equity earnings in 2001 will reflect a full year of operations without our investments in the Aurec companies in Israel and MATÁV. Additionally, in the fourth quarter of 2000, we exchanged our 25% equity investment in ATL for an 11.4% cost investment in Telecom Americas. However, through our investment in América Móvil S.A. de C.V., we have a 3.3% indirect equity investment in Telecom Americas (see Note 7). In January 2001, Tele Danmark acquired our investment in diAx for approximately 1,200 million Swiss francs (approximately $783) in cash and notes (see Note 7).

Other
Normalized Results

- --------------------------------------------------------------------------------------
                                                                   Percent Change
                                                                ----------------------
                                                                  2000 vs.    1999 vs.
                                     2000       1999      1998       1999       1998
- --------------------------------------------------------------------------------------
Operating Revenues               $   1,120  $   1,080 $   1,137       3.7%      (5.0)%
- ----------------------------------------------------------------
Operating Expenses                     749        920       866     (18.6)       6.2
- ----------------------------------------------------------------
Operating Income                       371        160       271         -      (41.0)
- ----------------------------------------------------------------
Interest Expense                       898        702       662      27.9        6.0
- ----------------------------------------------------------------
Other Income (Expense) - Net         1,270        581       641         -       (9.4)
- ----------------------------------------------------------------
Income Before Income Taxes       $     743  $      39 $     250         -      (84.4)%
======================================================================================

Operating revenues increased $40, or 3.7%, in 2000 and decreased $57, or 5.0%, in 1999. SecurityLink accounted for almost one-half of the total operating revenues in this segment and were essentially flat in both 2000 and 1999. Growth in subscribers at Ameritech’s cable operations increased revenues by approximately $36 in 2000 and $51 in 1999. 1999 also included a decrease in revenues of approximately $96 primarily due to the 1998 sale of video related operations. The January 2001 sale of SecurityLink (see Note 16) will cause a significant decline in 2001 revenues.

Operating expenses decreased $171, or 18.6%, in 2000 and increased $54, or 6.2%, in 1999. Both 2000 and 1999 include decreases related to sales of video related and other operations. SecurityLink and cable television personnel costs increased in 1999 primarily related to customer growth. The sale of SecurityLink mentioned above will also cause a significant decline in 2001 expenses.

Consolidated Results

Interest expense increased $162, or 11.3%, in 2000 and decreased $175, or 10.9%, in 1999. The 2000 increase was primarily due to higher composite rates and increased debt levels. The 1999 decrease was due primarily to reductions in interest expense resulting from lower average debt levels due to debt retirements in 1998 and early 1999.

Interest income increased $152 in 2000 and decreased $55 in 1999. The 2000 increase was primarily due to the income accrued from Cingular, after our contribution in October 2000, on notes receivable previously eliminated in consolidation (see Note 6). However, this income was mostly offset against our equity earnings from Cingular, which included the interest expense on these notes. The 1999 decrease was primarily due to incremental 1998 interest income attributable to a receivable generated on the 1998 sale of our investment in TCNZ.

Other income (expense) - net includes items that we normalized as previously described in the “Overview” section. In addition to those items, results for 2000 also include gains of approximately $87 that were recognized for market adjustments on shares of Amdocs Limited (Amdocs), one of our equity investees, used for deferred compensation. An offsetting deferred compensation expense was recorded in operations and support expense. Results for 2000 also include the sale of our interests in WLW, the Aurec companies in Israel and certain cost investments which resulted in gains totaling approximately $295. Additionally, we sold our remaining Telmex L shares not related to the DECS for a gain, which was partially offset by appreciation in the market value of Telmex L shares underlying the DECS, for a net gain of approximately $117 (see Note 7). These gains were partially offset by lower income from our wireless minority interest and dividends paid on preferred securities issued by Ameritech subsidiaries of approximately $208.

Results for 1999 include a gain from the sale of a portion of Amdocs, of approximately $92 and gains of $63 representing dividends and market adjustments on Amdocs shares used for contributions to the SBC Foundation and deferred compensation. Results for 1999 also include a gain of approximately $59 recognized from the sale of our investment in Chile and a gain of $81 recognized from the sales of certain discontinued plant and other investments. These gains were offset by increased expenses related to higher appreciation in the market value of Telmex L shares underlying the DECS than in the comparable periods of 1998, net of gains recognized from the sale of certain Telmex L shares, of approximately $296, and dividends paid on preferred securities issued by Ameritech subsidiaries, losses on forward exchange contracts and other nonoperating items of $76. In addition, higher wireless minority interest resulted in approximately $287 of expense.

During 1998, we recognized expenses of approximately $237 related to an impairment of an international investment and investments in certain wireless technologies, primarily wireless video, and $154 related to the combination of dividends paid on preferred securities owned by Ameritech subsidiaries, losses on forward exchange contracts and debt redemption costs. In addition, wireless minority interest resulted in approximately $290 of expense. Partially offsetting these expenses was other income related to a special dividend of approximately $158 received from Amdocs and gains of $127 recognized on the sale and the charitable contribution of our available-for-sale investment in Telewest Communications plc.

The changes in the market value of the DECS were offset in other income (expense) - net in the fourth quarter of 2000 because of the note we purchased with offsetting characteristics. These changes will also not be reflected in the first quarter of 2001 when the DECS mature.

Income taxes reflect the tax effect of the normalizing items previously described in the “Overview” section. Excluding these items, income taxes for 2000, 1999 and 1998 were higher due primarily to higher income before income taxes. The net effective tax rate on the normalizing items differed as a result of nondeductible items included in the charges and valuation adjustments to certain deferred tax assets.

Extraordinary items in 1999 included an extraordinary gain of $1,379, net of taxes of $960, related to the sale of overlapping wireless properties in October 1999 relating to the Ameritech merger (see Note 15). In 1998, we recorded an extraordinary loss of $60 related to the repurchase of approximately $684 of long-term debt.

Cumulative effect of accounting change includes a change in the method of recognizing directory publishing revenues and related expenses at Ameritech, effective January 1, 1999, and at SNET effective January 1, 1998, as discussed in Note 1. The cumulative after-tax effect of applying the new method to prior years was recognized as of January 1, 1999 and 1998 as a one-time, non-cash gain applicable to continuing operations of $207, or $0.06 per share and $15, or $0.01 per share, net of deferred taxes of $125 and $11.

Operating Environment and Trends of the Business

Overview
The United States’ telecommunications industry continues in an extended period of transition from a tightly regulated industry overseen by multiple regulatory bodies to a market-driven industry monitored by state and federal agencies. Our wireline telecommunications subsidiaries remain subject to varying degrees of regulation by state regulatory commissions for intrastate services and by the FCC for interstate services.

The telecommunications industry also is changing internationally, as government-owned telephone monopolies are being privatized in many countries and competitive entrants are authorized. United States-controlled companies have acquired or formed investments, joint ventures or strategic relationships with these newly privatized companies or their new competitors involving any or all of the range of telecommunications services. Foreign-controlled companies have also acquired or formed such relationships with United States companies.

As a result, the competitive and regulatory environment of the telecommunications industry continues to change. This presents both new opportunities and new risks for our business.

Trends
Over the next few years, we expect an increasing percentage of our growth to come from three major drivers: data and broadband, long distance and wireless.

Data and Broadband In October 1999, as the first post-Ameritech merger initiative, we announced plans to upgrade our network to make broadband services available to approximately 80% of our United States wireline customers over the four years through 2003 (Project Pronto). At December 31, 2000, we had approximately 767,000 DSL subscribers. Additionally, more than half, or 18.3 million wireline customer locations were DSL-capable at December 31, 2000. We expect to invest an estimated total of $6 billion in fiber, electronics and other technology for Project Pronto over the next two to three years, of which a total of approximately $2 billion had been expended as of December 31, 2000. The build-out will include transferring certain portions of our existing copper network to a new fiber network. Over the deployment period, marketing costs will be incurred depending on the rate of customer sign-ups and installations. See “Promoting Advanced Services” under “Ameritech Merger” below for further discussion of DSL.

Long Distance We offer landline interLATA long distance services to customers in selected areas outside our wireline subsidiaries’ operating areas. Further, under the SNET brand, we offer interLATA long distance services to customers in Connecticut. In June 2000, the FCC approved our application to provide interLATA long distance service for calls originating in Texas. Approval was effective July 10, 2000, and we officially launched service under the Southwestern Bell brand at that time, offering domestic residential and business long distance services as well as international calling plans. In September 2000, the Oklahoma Corporation Commission (OCC) approved our application to provide interLATA long distance service for calls originating in Oklahoma and in October 2000 the Kansas Corporation Commission approved our application to provide such service for calls originating in Kansas. In January 2001, the FCC approved these applications effective March 7, 2001, and we expect to launch interLATA long distance service in those states under the Southwestern Bell brand shortly thereafter. We continue to seek long distance approval in our other in-region states and have filed applications with state commissions in Arkansas, California, Missouri and Nevada.

Wireless In October 2000, we launched Cingular, our wireless joint venture with BellSouth, creating the second-largest wireless provider in the United States and a nationwide platform for future growth in wireless services (see Note 6). Cingular’s top priorities for 2001 include geographic expansion, further rollout of wireless data services and integration of operations to strengthen its competitive position and realize cost synergies. The fastest-growing area of the wireless business is data, and Cingular plans to accelerate its entry into this business. In late 2000, Cingular launched wireless data services in California and Nevada and expects to expand into several additional markets in 2001. Additionally, Cingular expects to eventually transition to a third generation (3G) wireless communications standard, which is used for high-speed wireless data and Internet services.

Regulatory Environment

Wireline
Federal Regulation Under the Telecommunications Act of 1996 (Telecom Act), before being permitted to offer landline interLATA long distance service in any state within the 12-state region encompassed by the regulated operating areas of Southwestern Bell Telephone Company (SWBell), Pacific Bell Telephone Company (PacBell), Ameritech and Nevada Bell (these areas with the addition of SNET’s area are referred to as our 13-state area), we are required to apply for and obtain state-specific approval from the FCC. The FCC’s approval, which involves consultation with the United States Department of Justice and the appropriate state commission, requires favorable determinations that our wireline subsidiaries have entered into interconnection agreement(s) that satisfy a 14-point “competitive checklist” or, alternatively, the subsidiaries have a statement of terms and conditions effective in that state under which they offer the “competitive checklist” items. The FCC also must make favorable public interest and structural separation determinations in connection with each application. See “Long Distance” above and “State Regulation” below for the status of our state applications.

Ameritech Merger On October 8, 1999, we completed the merger of one of our subsidiaries with Ameritech (see Note 2).

The FCC issued an order approving the transaction, subject to certain conditions, including fostering out-of-region competition, promoting advanced services, opening local markets to competition and improving residential services. These FCC conditions require specific performance and reporting and contain enforcement provisions that could potentially trigger more than $2 billion in payments, as described below, if certain goals are not met. Associated with these conditions, in 2000 we incurred approximately $355 in additional expenses, including immaterial payments for failing to meet certain performance measurements. The following is a brief summary of the major conditions:

Out-of-Region Competition In 1999, we began implementation of our “National-Local” strategy in conjunction with our acquisition of Ameritech. Under the National-Local strategy, we will offer local exchange services in 30 new markets across the country in combination with other major national and international initiatives. We introduced service in five new markets in 2000 (Boston, Fort Lauderdale, Miami, New York and Seattle), and plan to enter at least 10 more in 2001.

We are required by the FCC to enter these 30 markets as a provider of local services to business and residential customers by April 2002. Failure to meet the FCC condition requirements could result in a payment of up to $40 for each market.

Opening Local Markets to Competition We are required to file performance measurement data reflecting 20 different categories with the FCC and relevant state commissions on a monthly basis. These performance measurements address functions that the FCC believes may have a particularly direct effect on our local competitors and their customers, such as our response to competitors’ requests for information and interconnection. If these performance goals are not met, payments of up to $863 over the three years beginning January 2001 (and an additional $8 prior to June 2004) could be triggered.

We are developing and deploying, with competitor input, uniform electronic operational support systems (OSS) throughout our 13-state area that support the pre-ordering, ordering, provisioning, maintenance, repair and billing of resold local services and unbundled network elements. The OSS includes uniform application-to-application interfaces and graphical user interfaces. We are also developing uniform business rules for completing competitor service requests across our 13-state area and are providing free training and OSS expert teams for competitors with annual revenues under $300. Beginning in 2002, payments of up to $60 could be triggered if deployment targets for OSS and uniform business rules are not met. Additionally, we restructured OSS charges to eliminate any flat rate up-front charge for the right to use our standard interfaces for accessing OSS.

Improving Residential Service We will offer residential customers a plan with no minimum monthly long distance fees for at least three years after entering the long distance business in that market. In addition, we will offer a low-income Lifeline Universal Service plan to low-income residential customers in each state in our 13-state area.
Promoting Advanced Services We established separate subsidiaries to provide advanced services, such as DSL, in order that the subsidiaries be exempt from a Telecom Act provision requiring them to make the services available for resale to competitors. These subsidiaries are required to use the same processes for the ordering and provisioning of our wireline services as competitors, pay an equivalent price for facilities and services and locate at least 10% of their DSL service facilities in low-income areas. See “Data and Broadband” under “Trends” above for further discussion of Project Pronto.

In January 2001, the United States Court of Appeals for the District of Columbia (Court of Appeals) struck down the FCC merger condition that allowed our separate affiliates offering DSL and other advanced services exemption from the Telecom Act resale requirement. Although the merger condition allows us to re-absorb the affiliates into our telephone companies under such circumstances, the final resolution of this issue remains uncertain. However, potential efficiency benefits likely outweigh resale and unbundling obligations that would apply to advanced services and we do not believe, at this time, that this issue will have a material effect on our results of operations or financial position.

Interconnection Under the Telecom Act, regional Bell operating companies and GTE Corp. (GTE) were required to allow competitors to put equipment in their offices "necessary" for connecting to the local network. In March 1999, the FCC issued rules allowing competitors to install any equipment that is "used" or "useful" for interconnection, even if some equipment has other functions. In March 2000, the Court of Appeals overturned that portion of the FCC's interconnection rules, stating that the FCC went beyond what was authorized by the Telecom Act, and ordered the FCC to reconsider that portion of the rules. The FCC is expected to issue a decision in response to that order in mid-2001. The effect of any future decisions on our results of operations and financial position cannot be determined at this time.

In July 2000, the Eighth Circuit Court of Appeals (8^th Circuit) issued a decision striking down FCC rules governing the rates incumbent local exchange carriers, such as our wireline subsidiaries, charge competitors for interconnection and for leasing portions of the incumbents’ telephone networks. The decision rejected FCC pricing rules that required incumbents to charge competitors rates based on hypothetical costs and held that prices should instead be based on actual (but not necessarily historical) costs incurred by carriers to provide interconnection or access to unbundled network elements. In addition, the decision rejected FCC rules governing the amount incumbents must discount services purchased by competitors for resale to end users, holding that the discount should be based on actual, not hypothetical, avoided costs. The 8^th Circuit remanded the pricing issues back to the FCC. The 8^th Circuit also reaffirmed its prior conclusion that incumbents cannot be required to create new combinations of unbundled network elements for competitors, nor to provide competitors better quality interconnection or access to unbundled network elements than the incumbents provide to themselves. In January 2001, the United States Supreme Court (Supreme Court) agreed to hear an appeal of certain portions of the 8^th Circuit’s ruling, including its invalidation of the FCC’s pricing rules and its rule governing new combinations of network elements. A Supreme Court decision is not expected until the fourth quarter of 2001, at the earliest. Until the Supreme Court issues its decision on the appeal issues, the FCC rules continue in effect. The effect of any future decision on our financial position or results of operations cannot currently be determined.

Unbundled Network Elements/Line Sharing In November 1999, the FCC adopted an order providing that incumbent local exchange carriers must continue leasing certain parts of their telephone network to competitors at a discount, as well as revised rules that expand the definitions of certain unbundled network elements (UNE). However, the order limited discounted access to switches serving customers with four or more lines under certain conditions. In addition, the FCC declined to expand its regulation to include mandatory leasing of high speed Internet and data equipment. In November 1999, the FCC also issued an order requiring incumbents to share telephone lines with data competitors. Using a technology called line sharing, the incumbents split the frequency of a telephone line so that the data competitors' DSL service is carried on a portion of it.

Several parties have petitioned the FCC for reconsideration of various aspects of the UNE order. In addition, the United States Telecom Association and others appealed the UNE order to the Court of Appeals. Parties have also sought reconsideration of the FCC’s DSL line sharing order and petitioned the Court of Appeals for review of their line sharing order. Most notably, several parties requested that the FCC require our wireline subsidiaries and other incumbents to provide and support line sharing on a UNE platform as well as make DSL a UNE product. In January 2001, the FCC released a decision on petitions for reconsideration of various line sharing provisions of the UNE order, as well as initiating further notices of proposed rulemaking relating to line sharing. Although we are still evaluating the effect of this decision, we do not believe it creates any new obligations. Absent action by the FCC or Court of Appeals modifying or vacating certain aspects of the UNE or line sharing orders, the effects of both orders on our results of operations and financial position, although not determinable at this time, are expected to be unfavorable.

Reciprocal Compensation is billed to our wireline subsidiaries by competitors for the termination of certain local exchange traffic to their customers. We believe that under the Telecom Act the state commissions have authority to order reciprocal compensation only for intrastate local traffic, while the FCC has authority over interstate and interexchange traffic. We believe most Internet traffic is interexchange and interstate. Several state commissions have taken the position that a connection to the Internet is intrastate or local traffic and ordered us to pay reciprocal compensation to certain competitors pursuant to existing contracts. In February 1999, the FCC declared that Internet traffic is not intrastate or local traffic, but instead is primarily interstate, subject to interstate jurisdiction. However, the FCC found that existing federal law does not address to what extent, if any, compensation should be paid to competitors that deliver Internet traffic to Internet service providers and initiated a proceeding to establish such rules. Pending the completion of that proceeding, the FCC held that state commissions, interpreting existing contracts and consistent with federal law, might nevertheless order payment of reciprocal compensation for Internet traffic in certain circumstances. The FCC's February 1999 decision was appealed to the Court of Appeals by MCI WorldCom, Inc. (MCI), US West, Inc. (US West) and GTE. In its appeal, MCI disputed that a connection to the Internet is part of interstate communication. US West and GTE appealed the FCC's conclusion that states may require reciprocal compensation for such traffic pending completion of FCC rulemaking. In March 2000, the Court of Appeals vacated the FCC's February 1999 holding that Internet traffic is interstate and remanded to the FCC for a more reasoned explanation of that conclusion. The Court of Appeals did not decide an appeal of the FCC's February 1999 conclusion that states may require reciprocal compensation for Internet traffic.

In June 1999, the United States Court of Appeals for the Seventh Circuit (7^th Circuit) issued an opinion affirming an order of the Illinois Commerce Commission (ICC) directing us to pay reciprocal compensation on Internet traffic under existing interconnection agreements. The 7^th Circuit only reviewed whether the ICC’s determination that the parties intended that calls to Internet service providers would be subject to reciprocal compensation violated federal law. The 7^th Circuit declined to review any contract issues and concluded that the ICC’s determination did not violate federal law as it was expressly permitted under the February 1999 FCC ruling regarding reciprocal compensation. Our petition for rehearing of the 7^th Circuit decision was denied and in November 2000, we filed a petition for review with the Supreme Court, which remains pending.

Additionally, in December 2000, the United States Court of Appeals for the Tenth Circuit issued an order affirming the ruling of the OCC directing us to pay reciprocal compensation on Internet traffic under an existing interconnection agreement.

Other appeals of reciprocal compensation decisions currently are pending before the United States Court of Appeals for the Sixth Circuit and United States District Courts in Texas, Indiana, Ohio, Wisconsin and California. We record expense for amounts sought by competitors for the termination of Internet traffic to Internet service providers.

Coalition for Affordable Local and Long Distance Service (CALLS) In March 2000, members of CALLS - SBC, Verizon Communications (formerly Bell Atlantic Corp. and GTE), BellSouth, AT&T and Sprint Corp. proposed a plan to significantly restructure telecommunications industry federal price cap regulation. In May 2000, the FCC approved the CALLS proposal with an effective date of July 1, 2000.

Significant points of the five-year plan include:

reduction of switched access rates in 2000 (these are the rates that long distance carriers pay local telephone companies);
continuation of a productivity factor after 2000 until a targeted average rate for traffic-sensitive charges is achieved;
consolidation of the residential and single-line business customers’ presubscribed interexchange carrier charge with the subscriber line charge into one lower charge on customer local telephone bills;
creation of an incremental $650 in universal service funding (universal service funding helps provide telephone service to economically disadvantaged customers, rural customers, schools and libraries).

The plan is expected to produce initial revenue reductions that are somewhat larger than those under prior price cap requirements, but eliminate mandatory annual price cap reductions over the life of the plan, resulting in minimal future effects on net revenues over the life of the plan compared to the prior price cap formula. During the third and fourth quarters of 2000, we experienced a net reduction in revenues of approximately $344 as a result of this plan (versus approximately $205 that would have occurred under prior price cap requirements).

SecurityLink In October 2000, under terms of a consent decree reached with the FCC, we agreed to enter into an agreement to divest SecurityLink by February 2001 or pay a $1 penalty to the United States government. The FCC found that certain 1996 and 1997 acquisitions by SecurityLink violated provisions of the Telecom Act. In December 2000, we reached an agreement to sell SecurityLink and the sale was consummated on January 26, 2001 (see Note 16).

The effects of the FCC decisions on the above topics are dependent on many factors including, but not limited to, the ultimate resolution of the pending appeals; the number and nature of competitors requesting interconnection, unbundling or resale; and the results of the state regulatory commissions’ review and handling of related matters within their jurisdictions. Accordingly, we are not able to assess the impact of the FCC orders and proposed rulemaking.

State Regulation The following provides an overview of state regulation in the 13 states in which our wireline subsidiaries operated at December 31, 2000:

- -------------------------------------------------------- ---------------------------
                                          Number of
                                        Signed Wireline
                                        Interconnection    Long Distance Application
    State      Alternative Regulation 1  Agreements 2              Status
- ---------------------------------------------------------------------------------------
Arkansas             Yes                     97            Decision expected in 2001 3
- ------------------------------------------------------------------------------------
California     Yes, through 12/2001         197            Decision expected in 2001 3
- ------------------------------------------------------------------------------------
Connecticut          Yes                     40            Long distance service
                                                           provided
- ------------------------------------------------------------------------------------
Illinois             Yes,                   103            Filing planned in 2001 4
                pending state approval
- ------------------------------------------------------------------------------------
Indiana         Yes, through 12/2003         92            Filing planned in 2001 4
                pending state approval
- ------------------------------------------------------------------------------------
Kansas               Yes                    113            FCC approval effective
                                                           March 7, 2001
- ------------------------------------------------------------------------------------
Michigan             Yes                     75            Filing planned in 2001 4
- ------------------------------------------------------------------------------------
Missouri             Yes                     99            Decision expected in 2001 3
- ------------------------------------------------------------------------------------
Nevada               Yes                     49            Decision expected in 2001 3
- ------------------------------------------------------------------------------------
Ohio           Yes, through 12/2003         100            Filing planned in 2001 4
- ------------------------------------------------------------------------------------
Oklahoma             Yes                     82            FCC approval effective
                                                           March 7, 2001
- ------------------------------------------------------------------------------------
Texas                Yes                    300            Long distance service
                                                           provided effective July 2000
- ------------------------------------------------------------------------------------
Wisconsin            Yes                     66            Filing planned in 2001 4
- ------------------------------------------------------------------------------------

Notes:

Alternative regulation is other than rate of return regulation.
Interconnection agreements are signed with competitors for the purpose of allowing them to exchange local calls with the incumbent telephone company and, at their option, to resell services and obtain unbundled network elements.
Awaiting determination by state commissions on our compliance with the 14-point competitive checklist. FCC approval is required subsequent to state determination.
Will require approval by the state commission and the FCC.

The following presents highlights of certain regulatory developments:

Texas Legislation Effective September 1, 1999, state law extended incentive regulation in Texas indefinitely, providing more pricing flexibility on certain products offered by SWBell, such as Caller ID, operator service and directory assistance, and allowing SWBell to package some services in ways attractive to customers. State law also required SWBell to reduce the intrastate switched access rate it charges to long distance carriers by 1 cent on September 1, 1999, and by 2 additional cents on July 1, 2000. The 2-cent reduction in intrastate access rates resulted in a reduction of intrastate network access revenues of approximately $69 in 2000.

California Marketing Ruling In December 1999, a California Public Utilities Commission (CPUC) administrative judge ruled that PacBell must pay $44 in penalties and contact customers for potential refunds for alleged overly aggressive and deceptive marketing practices related to packages of enhanced services such as Caller ID and call forwarding. We believe the findings in this decision are unwarranted and appealed the ruling to the CPUC in January 2000. This appeal remains pending.

Michigan Telecommunications Legislation In July 2000, the Michigan legislature amended the Michigan Telecommunications Act, eliminating the monthly intrastate end-user common line (EUCL) charge and implementing price caps for telecommunications services to end users, except those covered by individual contracts, at May 1, 2000 levels for the earlier of four years or until the Michigan Public Service Commission (MPSC) determines the market for individual services is competitive. The law also authorized an expansion of local calling areas so that many short toll calls could be reclassified as local calls; however, in February 2001, the MPSC issued a decision providing that this portion of the law will be implemented in the narrowest possible fashion and we expect a reduction in 2001 revenues of approximately $29 associated with the expansion of local calling areas. Additionally, the law gave the MPSC more authority to regulate disputes between telecommunications companies.

In July 2000, we filed suit in federal court challenging the constitutionality of this legislation and in September 2000, temporary stays of the price cap provision and the EUCL charge elimination were issued pending the outcome of that challenge. In October 2000, we re-implemented the EUCL charge prospectively, which is subject to refund if the legislation is upheld, and at December 31, 2000, we had approximately $34 accrued in the event of a potential refund. The EUCL charge legislation reduced revenues by approximately $72 in 2000 and could potentially reduce revenues by more than $150 in 2001.

Ohio Service Quality Investigation In July 2000, the Public Utilities Commission of Ohio (PUCO) issued an order finding that we violated Ohio's minimum telephone service standards and required us to issue approximately $5 in customer credits and to spend an additional $4 on projects that will benefit customers. The PUCO's findings related to the timeliness of service installation/repair and inadequate recordkeeping, among other things. The order also placed certain restrictions on the manner in which our employees are able to sell basic, preferred and inside wire maintenance services. Effective October 1, 2000, the order precluded the payment of dividends by our Ohio subsidiary to the parent company without prior PUCO approval. In January 2001, the PUCO held hearings on the dividend restriction issue and is expected to issue an order regarding whether to remove the prohibition on dividend payment in early 2001. The PUCO also suggested that we restore service in Ohio to appropriate levels or face additional penalties of up to $122. Additionally, in October 2000, the PUCO ordered an outside audit of Ohio service conditions covering the period August 1999 to December 2001 and required us to pay certain on-going expenses of the PUCO staff in relation to the Ohio service quality investigation. We do not expect the payment of these expenses to have a material effect on our results of operations or financial position.

Illinois Service Standards The ICC has imposed a $30 penalty for failure to satisfy a service repair standard imposed by the merger with Ameritech. The fine is related to calendar year 2000 performance and was imposed through credits to customer bills beginning in February 2001. These amounts were recorded as operating expenses and fully accrued in 2000.

Ameritech Customer Credits In the third quarter of 2000, we announced, as part of both a voluntary credit program as well as negotiations with state utility commissions in Wisconsin and Michigan to resolve ongoing service issues in Ameritech areas, that we will provide credits for lost dial tone or delays in obtaining new service to certain residential customers in the Ameritech region. In addition to matters discussed above, such credits were recorded as operating expense and totaled approximately $38 in 2000. Any credits to be provided in 2001 are not determinable at this time; however, we do not expect that these credits will have a material effect on our financial position or results of operations.

Competition
Competition continues to increase for telecommunications and information services. Recent changes in legislation and regulation have increased the opportunities for alternative communications service providers. Technological advances have expanded the types and uses of services and products available. As a result, we face increasing competition as well as new opportunities in significant portions of our business.

Wireline
Our wireline subsidiaries expect increased competitive pressure in 2001 and beyond from multiple providers in various markets, including facilities-based local competitors, interexchange carriers and resellers. At this time, we are unable to assess the effect of competition on the industry as a whole, or financially on us, but expect both losses of market share in local service and gains resulting from new business initiatives, vertical services and new service areas. Competition also continues to intensify in our intraLATA long distance markets. For example, it is estimated that providers other than PacBell serve more than half of the business intraLATA long distance customers in PacBell’s service areas. In addition, intraLATA toll dialing parity, implemented throughout our 13-state area in 1999, will continue to increase competition in intraLATA long distance markets.

Recent state legislative and regulatory developments allow increased competition for local exchange services. Companies wishing to provide competitive local service have filed numerous applications with each of the state commissions throughout our 13-state area, and the commission of each state has been approving these applications since late 1995. Under the Telecom Act, companies seeking to interconnect to our wireline subsidiaries’ networks and exchange local calls must enter into interconnection agreements with us. These agreements are then subject to approval by the appropriate state commission. We have reached over 1,400 wireline interconnection agreements with competitive local service providers, and most have been approved by the relevant state commission. In addition, AT&T, MCI and other competitors are reselling our local exchange services, and as of December 31, 2000, we had approximately 1.6 million access lines (approximately 2.7% of our total access lines) supporting services of resale competitors throughout our 13-state area, primarily in Texas, California and Illinois. We expect resale access lines to increase, both absolutely and as a percentage of our total access lines, in 2001. Many competitors have placed facilities in service and have begun advertising campaigns and offering services. We were also granted facilities-based and resale operating authority in certain territories served by other local exchange carriers and began offering local services to these areas in late 2000.

In California, the CPUC authorized facilities-based local services competition effective January 1996 and resale competition effective March 1996. While the CPUC has established local competition rules and interim prices, several issues still remain to be resolved, including final rates for line sharing. PacBell has incurred substantial costs implementing local competition and number portability. In November 1998, the CPUC issued a decision authorizing PacBell to recover local competition implementation costs and PacBell will recover approximately $88 via a customer surcharge over 2001 and 2002. In June 1999, the CPUC issued a ruling recategorizing certain PacBell services, including the maintenance of inside wiring, calling card, collect and person to person calls and the provisioning of directory assistance to interexchange carriers, as competitive products thereby allowing greater pricing flexibility. In its ruling, the CPUC approved an increase in the maximum price for both inside wire repair services and interexchange directory assistance.

In Illinois, the ICC approved Advantage Illinois in 1994, providing a framework for regulating Ameritech by capping prices for noncompetitive services. In this order, the ICC approved a price cap on the monthly line charge for residential customers and residential calling rates within local calling areas for an initial five year period that ended in October 1999. In January 2000 the ICC initiated a review of Advantage Illinois with respect to its effectiveness and whether any modifications are necessary. We expect the ICC to complete this review by July 2001. The price cap on residential rates will remain in effect until the review is completed.

In Oklahoma, the OCC approved a rule in October 1999 creating alternative regulation for companies that opt into the alternative regulation rule. In March 2000, the Oklahoma legislature allowed the OCC’s alternative regulation rule to go into effect. Effective June 2000, SWBell opted into alternative regulation and is now regulated under price cap regulation instead of rate of return regulation. Under the new regulation, the cost of network infrastructure deployment, including DSL and switch replacement deployment, is currently estimated at $200 in total capital expenditures over the next three years. Other items under the new regulation include promotional discounts on UNEs provided to competitors, pricing flexibility and ratepayer benefits. The ratepayer benefits include SWBell’s obligation to pay $30 into an education information technology fund as well as waiver of the Oklahoma universal access fund surcharge for five years. SWBell’s current fund surcharge is approximately $2 annually and SWBell will pay the current assessment into the fund even though it has waived collection of this amount from customers.

In Indiana, the Indiana Court of Appeals (Indiana Court) issued a decision in October 1999 reversing a portion of the 1997 Indiana Utility Regulatory Commission (IURC) Opportunity Indiana order, which had directed Ameritech to reduce rates for basic residential and business services and remanded the rate issue to the IURC. Also in the October 1999 decision, the Indiana Court affirmed the IURC’s order requiring Ameritech to comply with the infrastructure investment commitments made in Opportunity Indiana. Ameritech sought rehearing of this portion of the decision and in March 2000, the Indiana Court denied the petition for rehearing. This ruling is not expected to have a material effect on our results of operations or financial position. In September 2000, a settlement agreement was executed extending alternative regulation in Indiana through 2003. This agreement is pending before the IURC for approval, which is expected in 2001.

In Connecticut, the Connecticut Department of Public Utility Control (CDPUC) approved an alternative regulation plan for SNET in 1996. With the five-year monitoring period ending in 2001, the CDPUC initiated a docket in July 2000 to review SNET’s alternative regulation plan. SNET has requested limited modifications to the current plan, including the ability to adjust local residential service rates annually based on the rate of inflation and application of a single set of high quality service standards for SNET and all other companies providing telecommunications services in Connecticut. The plan is currently under review by the CDPUC, and a final decision is expected in early 2001.

Wireless
Cingular, our wireless joint venture formed with BellSouth in April 2000, began operations in October 2000. Cingular serves approximately 19 million customers, is the second-largest wireless operator in the United States, and has approximately 190 million potential customers in 38 states, the District of Columbia, Puerto Rico and the United States Virgin Islands (see Note 6).

Cingular targets further geographic expansion through possible spectrum exchanges and auctions. In November 2000, Cingular announced a deal to swap spectrum with VoiceStream Wireless Corp. adding spectrum in New York City, St. Louis and Detroit in exchange for surplus spectrum in Los Angeles and San Francisco. This deal is expected to close in mid-2001. Cingular has also invested in a participant in a December 2000/January 2001 FCC auction of wireless spectrum licenses once held by a New York wireless company that filed for bankruptcy protection. A number of legal issues have emerged in connection with this auction, including the validity of bids, and it is unclear how a resolution of these issues will affect Cingular. Another auction of spectrum which can be used to provide high-speed wireless data Internet services is scheduled for the fourth quarter of 2001 and Cingular is currently evaluating its alternatives.

Directory and Other
Our directory subsidiaries face competition from over 100 publishers of printed directories in their operating areas. Direct and indirect competition also exists from other advertising media, including newspapers, radio, television and direct mail providers, as well as from directories offered over the Internet.

Our cable subsidiary offers cable television service in approximately 100 communities in the Midwest and faces competition from other cable and satellite television providers in those areas. We are currently considering a variety of options for the future of our cable subsidiary.

International
Telmex In September 2000, in an effort to promote competition, the Mexican government passed new telecommunications rules for Telmex effective January 2001. The rules established interconnection pricing guidelines and also bar Telmex from charging less for a service than the cost to provide it. Telmex obtained an injunction in Mexican court against these rules and hearings remain pending. In December 2000, Telmex and certain competitors reached an agreement that provided, among other things, that competitors pay approximately $140 to Telmex for past-due amounts related to interconnection rates and approximately $550 for local network costs incurred by Telmex in 1997. The agreement also established an interconnection rate of 1.25 cents per minute for 2001, compared with approximately 3.34 cents in 2000. In addition, as part of the agreement, Telmex will continue negotiations with competitors regarding a new cost-based international settlement model and will review the proportional return mechanism. In January 2001, the United States Trade Representative (USTR), attributing progress made under the agreement, discontinued its case against Telmex before the World Trade Organization; however the USTR reserved the right to formally request an investigation in the future.

As of December 31, 2000, Telmex had approximately 70% of the long distance market in Mexico. Telmex’s share of international long distance traffic is expected to decline significantly when the proportional return mechanism expires. This mechanism guarantees Telmex the same percentage of incoming traffic as outgoing traffic. Mexican regulators postponed the elimination of the proportional return mechanism, which had been scheduled for year-end 1999. The mechanism may expire at the end of 2001, but regulators have not yet provided a definitive time frame for the expiration. Aggressive local competition is expected in 2001, primarily for business customers. We do not expect the carrier agreement or rules affecting Telmex to have a material impact on our financial position or results of operations.

European Union Regulation In December 2000, the European Parliament issued a regulation effective December 31, 2000, requiring carriers that hold significant market power (SMP) in the European Union countries to provide competitors unbundled access to their local loops. Both Tele Danmark and Belgacom were determined to hold SMP and therefore must meet this requirement. In order to meet Danish regulatory requirements, Tele Danmark has been providing this access since 1998 and Belgacom began complying with the regulation at December 31, 2000 as required.

Liquidity and Capital Resources
We had $643 of cash and cash equivalents available at December 31, 2000. Commercial paper borrowings as of December 31, 2000 totaled $6,437 out of $8,000 authorized. We have entered into agreements with several banks for lines of credit totaling $4,200, all of which may be used to support commercial paper borrowings (see Note 9). We had no borrowings outstanding under these lines of credit as of December 31, 2000.

Cash from Operating Activities
During 2000, 1999 and 1998, our primary source of funds continued to be cash generated from operations, as shown in the consolidated statements of cash flows. Net cash provided by operating activities exceeded our construction and capital expenditures during 2000, 1999 and 1998; this excess is referred to as free cash flow, a supplemental measure of liquidity. We generated free cash flow of $1,175, $6,274 and $4,099 in 2000, 1999 and 1998.

In August 2000, we announced a definitive agreement under which we will grant the exclusive right to lease 3,900 communication towers to SpectraSite Communications Inc. (SpectraSite), plus an estimated 800 new towers under a five-year exclusive build-to-suit agreement, for a total of at least 4,700 towers. In consideration for the transaction, which will close incrementally over 18 months, we will receive prepaid rents totaling $983 in cash and SpectraSite common stock valued at $325, or $22.659 per share at closing. As of December 31, 2000, we have closed on 739 towers for proceeds of $175 in cash and $58 in SpectraSite common stock. As part of the agreement, SpectraSite has committed to sublease space on the towers to Cingular (see Note 6). This agreement did not have a material effect on our net income in 2000.

Cash from Investing Activities
To provide high-quality communications services to our customers we must make significant investments in property, plant and equipment. The amount of capital investment is influenced by demand for services and products, continued growth and regulatory commitments.

Our capital expenditures totaled $13,124, $10,304 and $8,882 for 2000, 1999 and 1998. Capital expenditures in the wireline segment, which represented the majority of our total capital expenditures, increased by 29.0% in 2000 compared to 1999, primarily attributed to the expansion of our local exchange service into new markets, DSL, digital and broadband network upgrades and regulatory commitments. The wireline segment capital expenditures increased by 17.2% in 1999 compared to 1998, due primarily to demand-related growth, network upgrades, customer-contracted requirements, ISDN projects and regulatory commitments. The wireline segment’s capital expenditures were relatively unchanged in 1998 compared to 1997.

In 2001, management expects total capital spending to be between $12,000 and $13,000. Capital expenditures in 2001 will relate primarily to the continued evolution of the wireline subsidiaries’ networks, including amounts projected for Project Pronto, our broadband initiative, DSL, and regulatory processes to gain state approvals for long distance service offerings.

In 2000, 1999 and 1998, cash expenses on acquisitions exceeded receipts from dispositions (see Note 15).

Cash from Financing Activities
Dividends declared by the Board of Directors of SBC were $1.015 per share in 2000, $0.975 per share in 1999 and $0.935 per share in 1998. These per share amounts do not include dividends declared and paid by Ameritech and SNET prior to their respective 1999 and 1998 mergers. The total dividends paid by SBC, Ameritech and SNET were $3,443 in 2000, $3,312 in 1999 and $3,177 in 1998. SBC’s dividend policy considers both the expectations and requirements of shareowners, internal requirements of SBC and long-term growth opportunities.

In January 2000, the Board of Directors approved the repurchase of up to 100 million shares of SBC common stock. In 2000 we expended $2,255 on these stock repurchases. As of January 31, 2001 we have repurchased a total of approximately 59 million shares of the 100 million that were authorized (see Note 17).

In February 2001, we called approximately $500 of the Trust Originated Preferred Securities (TOPrS) with an interest rate of 7.56%. The TOPrS have an original maturity of 30 years and are included on the balance sheet as corporation-obligated mandatorily redeemable preferred securities of subsidiary trusts.

In May 2000, we issued $1,000 in notes through private placement. These notes have a 6.72% interest rate and will mature May 2001. In April 2000, we issued notes for $1,015 with an interest rate of 6.33% that also mature in May 2001.

In December 1999, we called approximately $31 of debt issued by our capital financing subsidiaries that was scheduled to mature in December 2004. The net income effect of retiring this debt did not materially impact our financial statements. During 1999, subsequent to the completion of the acquisitions of Comcast and Cellular Communications, we retired $1,415 of Comcast’s and Cellular Communications’ long-term debt with no effect on net income. In May 1999, we issued $750 of unsecured 6.25% Eurodollar notes, due May 2009, through our capital financing subsidiaries.

During 1998, we redeemed $2,789 of long-term debt, including mortgage bonds. Also in 1998, we issued $2,150 of notes and debentures. In February 1998, we also issued $750 of unsecured 5.88% Eurodollar notes, due February 2003, with proceeds used primarily to fund our investment in Tele Danmark.

In April 1998, an SBC subsidiary issued, through private placement, 3,250 shares of stated rate auction preferred stock (STRAPS) in four separate series. Net proceeds from these issuances totaled $322.

We expect to fund ongoing capital expenditures, the repurchase of stock and merger initiative expenses with cash provided by operations and incremental borrowings.

Other
Our total capital consists of debt (long-term debt and debt maturing within one year), TOPrS and shareowners’ equity. Total capital increased $8,850 in 2000 and $3,453 in 1999. The increase in 2000 was primarily due to increased debt levels and 2000 earnings. The 1999 increase was due to 1999 earnings, partially offset by lower debt levels.

Our debt ratio was 45.2%, 42.9% and 47.3% at December 31, 2000, 1999 and 1998. The debt ratio is affected by the same factors that affect total capital.

Market Risk
We are exposed to market risks primarily from changes in interest rates, foreign currency exchange rates and certain equity stock prices. In managing exposure to these fluctuations, we may engage in various hedging transactions that have been authorized according to documented policies and procedures. We do not use derivatives for trading purposes, to generate income or to engage in speculative activity. Our capital costs are directly linked to financial and business risks. We seek to manage the potential negative effects from market volatility and market risk. The majority of our financial instruments are medium- and long-term fixed rate notes and debentures. Fluctuations in market interest rates can lead to significant fluctuations in the fair value of these notes and debentures. It is our policy to manage our debt structure and foreign exchange exposure in order to manage capital costs, control financial risks and maintain financial flexibility over the long term. Where appropriate, we will take actions to limit the negative effect of interest and foreign exchange rates, liquidity and counterparty risks on shareowner value.

Quantitative Information About Market Risk

Interest Rate Sensitivity The principal amounts by expected maturity, average interest rate and fair value of SBC’s liabilities that are exposed to interest rate risk are described in Notes 9 and 10.

Following are our interest rate derivatives subject to interest rate risk:

- ---------------------------------------------------------------------------------------------
                                                          Maturity
                            -----------------------------------------------------------------
                                                                                       Fair
                                                                      After            Value
                               2001   2002     2003    2004    2005    2005   Total  12/31/00
- ---------------------------------------------------------------------------------------------
Interest Rate Derivatives
- ---------------------------------------------------------------------------------------------
Interest Rate Swaps:
- ---------------------------------------------------------------------------------------------
Receive Fixed/Pay Variable
  Notional Amount                 -   $130     $315    $200     $25    $325    $995      $4
Variable Rate Payable 1         5.8%   5.6%     5.8%    5.9%    6.0%    6.1%
Weighted Average Fixed
Rate Receivable                 5.9%   5.9%     5.9%    5.7%    5.5%    5.6%
- ---------------------------------------------------------------------------------------------
Receive Variable/Pay Fixed
  Notional Amount               $20     $5        -       -       -       -     $25       -
Fixed Rate Payable              7.5%   8.2%       -       -       -       -
Weighted Average Variable
  Rate Receivable 2             6.1%   5.6%       -       -       -       -
- --------------------------------------------------------------------------------------------
Lease Obligations:
- --------------------------------------------------------------------------------------------
Variable Rate Leases 3          $42      -        -     $81       -       -    $123    $123
Average Interest Rate 3         6.2%   5.8%     5.9%    5.9%      -       -
=============================================================================================

Interest payable based on Three Month London Interbank Offer Rate (LIBOR) plus or minus a spread.
Interest receivable based on Three Month Commercial Paper Index published by The Federal Reserve.
Average interest rate based on current and implied forward rates for One Month LIBOR plus 30 basis points.
The lease obligations require interest payments only until maturity.

In 2000, a $10 interest rate swap contract, linked to the variable rate debt, matured and interest rate swap contracts of $350 linked to variable rate debt were exited with minimal effect on net income.

There has been no material change in the market risks shown in the table above since December 31, 1999.

Qualitative Information About Market Risk

Foreign Exchange Risk From time to time we make investments in businesses in foreign countries, are paid dividends, receive proceeds from sales or borrow funds in foreign currency. Before making an investment, or in anticipation of a foreign currency receipt, we will often enter into forward foreign exchange contracts, generally for short periods of time. The contracts are used to provide currency at a fixed rate. Our policy is to measure the risk of adverse currency fluctuations by calculating the potential dollar losses resulting from changes in exchange rates that have a reasonable probability of occurring. We cover the exposure that results from changes that exceed acceptable amounts. We do not speculate in foreign exchange markets.

Equity Risk We have equity price risk exposure from outstanding employee stock options linked to Vodafone AirTouch stock. The amount of these stock options is not significant (see Note 14).

Interest Rate Risk We issue debt in fixed and floating rate instruments. Interest rate swaps are used for the purpose of controlling interest expense by managing the mix of fixed and floating rate debt. We do not seek to make a profit from changes in interest rates. We manage interest rate sensitivity by measuring potential increases in interest expense that would result from a probable change in interest rates. When the potential increase in interest expense exceeds an acceptable amount, we reduce risk through the issuance of fixed rate (in lieu of variable rate) instruments and purchasing derivatives.

New Accounting Standards On January 1, 2001, we adopted Financial Accounting Standards Board Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities”, which requires all derivatives to be recorded on the balance sheet at fair value. Our adoption did not have a significant effect on our financial position or results of operations.

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this report contains forward-looking statements that are subject to risks and uncertainties. SBC claims the protection of the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995.

The following factors could cause SBC's future results to differ materially from those expressed in the forward-looking statements:

Adverse economic changes in the markets served by SBC, or countries in which SBC has significant investments.
Changes in available technology.
The final outcome of FCC rulemakings and judicial review, if any, of such rulemakings, including issues relating to jurisdiction.
The final outcome of state regulatory proceedings in SBC’s 13-state area, and judicial review, if any, of such proceedings, including proceedings relating to interconnection terms, access charges, universal service, unbundled network elements and resale rates, and reciprocal compensation.
Enactment of additional state, federal and/or foreign regulatory laws and regulations pertaining to SBC’s subsidiaries and foreign investments.
The timing of entry and the extent of competition in the local and intraLATA toll markets in SBC’s 13-state area and SBC’s entry into the in-region long distance market.
The impact of the Ameritech transaction, including performance with respect to regulatory requirements and merger integration efforts.
The timing and cost of deployment of SBC’s broadband initiative, also known as Project Pronto, its effect on the carrying value of the existing wireline network and the level of consumer demand for offered services.
The impact of the wireless joint venture with BellSouth Corporation, known as Cingular Wireless, including marketing and product development efforts, access to additional spectrum, technological advancements and financial capacity.

Readers are cautioned that other factors discussed in this report, although not enumerated here, also could materially impact SBC's future earnings.

Report of Management

The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States. The integrity and objectivity of the data in these financial statements, including estimates and judgments relating to matters not concluded by year end, are the responsibility of management, as is all other information included in the Annual Report, unless otherwise indicated.

The financial statements of SBC Communications Inc. (SBC) have been audited by Ernst & Young LLP, independent auditors. Management has made available to Ernst & Young LLP all of SBC’s financial records and related data, as well as the minutes of shareowners’ and directors’ meetings. Furthermore, management believes that all representations made to Ernst & Young LLP during its audit were valid and appropriate.

Management has established and maintains a system of internal accounting controls that provides reasonable assurance as to the integrity and reliability of the financial statements, the protection of assets from unauthorized use or disposition and the prevention and detection of fraudulent financial reporting. The concept of reasonable assurance recognizes that the costs of an internal accounting controls system should not exceed, in management’s judgment, the benefits to be derived.

Management also seeks to ensure the objectivity and integrity of its financial data by the careful selection of its managers, by organizational arrangements that provide an appropriate division of responsibility and by communication programs aimed at ensuring that its policies, standards and managerial authorities are understood throughout the organization. Management continually monitors the system of internal accounting controls for compliance. SBC maintains an internal auditing program that independently assesses the effectiveness of the internal accounting controls and recommends improvements thereto.

The Audit Committee of the Board of Directors, which consists of nine directors who are not employees, meets periodically with management, the internal auditors and the independent auditors to review the manner in which they are performing their respective responsibilities and to discuss auditing, internal accounting controls and financial reporting matters. Both the internal auditors and the independent auditors periodically meet alone with the Audit Committee and have access to the Audit Committee at any time.





/s/ Edward E. Whitacre Jr.
Edward E. Whitacre Jr.
Chairman of the Board and
Chief Executive Officer


/s/ Donald E. Kiernan
Donald E. Kiernan
Senior Executive Vice President and
Chief Financial Officer

Report of Independent Auditors

The Board of Directors and Shareowners SBC Communications Inc.

We have audited the accompanying consolidated balance sheets of SBC Communications Inc. (the Company) as of December 31, 2000 and 1999, and the related consolidated statements of income, shareowners’ equity, and cash flows for each of the three years in the period ended December 31, 2000. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the 1998 financial statements of Ameritech Corporation, a wholly owned subsidiary, which statements reflect total operating revenues constituting approximately 37% of the Company’s related consolidated financial statement total for the year ended December 31, 1998. Those statements were audited by other auditors whose report has been furnished to us. Our opinion, insofar as it relates to the 1998 data included for Ameritech Corporation, is based solely on the report of the other auditors.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of SBC Communications Inc. at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.

/s/Ernst & Young LLP
San Antonio, Texas
February 9, 2001

SBC Communications Inc.
Consolidated Statements of Income
Dollars in millions except per share amounts

--------------------------------------------------------------------------------------------------------------
                                                                          2000           1999            1998
- --------------------------------------------------------------------------------------------------------------
Operating Revenues
Landline local service                                             $    22,099    $    19,432     $    17,506
Wireless subscriber                                                      4,945          5,851           5,265
Network access                                                          10,427         10,094           9,575
Long distance service                                                    3,178          3,485           3,688
Directory advertising                                                    4,439          4,266           3,929
Other                                                                    6,388          6,403           6,278
- --------------------------------------------------------------------------------------------------------------
Total operating revenues                                                51,476         49,531          46,241
- --------------------------------------------------------------------------------------------------------------
Operating Expenses
Operations and support                                                  30,985         29,380          27,177
Depreciation and amortization                                            9,748          8,553           7,841
- --------------------------------------------------------------------------------------------------------------
Total operating expenses                                                40,733         37,933          35,018
- --------------------------------------------------------------------------------------------------------------
Operating Income                                                        10,743         11,598          11,223
- --------------------------------------------------------------------------------------------------------------
Other Income (Expense)
Interest expense                                                        (1,592)        (1,430)         (1,605)
Interest income                                                            279            127             182
Equity in net income of affiliates                                         897            912             613
Other income (expense) - net                                             2,561           (354)          1,702
- --------------------------------------------------------------------------------------------------------------
Total other income (expense)                                             2,145           (745)            892
- --------------------------------------------------------------------------------------------------------------
Income Before Income Taxes                                              12,888         10,853          12,115
- --------------------------------------------------------------------------------------------------------------
Income taxes                                                             4,921          4,280           4,380
- --------------------------------------------------------------------------------------------------------------
Income Before Extraordinary Items and Cumulative
 Effect of Accounting Change                                             7,967          6,573           7,735
- --------------------------------------------------------------------------------------------------------------
Extraordinary items, net of tax                                              -          1,379             (60)
Cumulative effect of accounting change, net of tax                           -            207              15
- --------------------------------------------------------------------------------------------------------------
Net Income                                                         $     7,967    $     8,159     $     7,690
==============================================================================================================
Earnings Per Common Share:
 Income Before Extraordinary Items and Cumulative
   Effect of Accounting Change                                     $      2.35    $      1.93     $      2.27
 Net Income                                                        $      2.35    $      2.39     $      2.26
==============================================================================================================
Earnings Per Common Share-Assuming Dilution:
 Income Before Extraordinary Items and Cumulative
   Effect of Accounting Change                                     $      2.32    $      1.90     $      2.24
 Net Income                                                        $      2.32    $      2.36     $      2.23
==============================================================================================================

The accompanying notes are an integral part of the consolidated financial statements.

SBC Communications Inc.
Consolidated Balance Sheets
Dollars in millions except per share amounts

-----------------------------------------------------------------------------------------------------
                                                                                  December 31,
                                                                             ------------------------
                                                                                 2000          1999
- -----------------------------------------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents                                                  $      643    $      495
Accounts receivable - net of allowances for uncollectibles of
  $1,032 and $1,099                                                            10,144         9,378
Prepaid expenses                                                                  550           651
Deferred income taxes                                                             671           767
Notes receivable from Cingular Wireless                                         9,568             -
Other current assets                                                            1,640           639
- -----------------------------------------------------------------------------------------------------
Total current assets                                                           23,216        11,930
- -----------------------------------------------------------------------------------------------------
Property, Plant and Equipment - Net                                            47,195        46,571
- -----------------------------------------------------------------------------------------------------
Intangible Assets - Net of Accumulated Amortization of
  $746 and $1,325                                                               5,475         6,796
- -----------------------------------------------------------------------------------------------------
Investments in Equity Affiliates                                               12,378        10,648
- -----------------------------------------------------------------------------------------------------
Other Assets                                                                   10,387         7,270
- -----------------------------------------------------------------------------------------------------
Total Assets                                                               $   98,651    $   83,215
- -----------------------------------------------------------------------------------------------------
Liabilities and Shareowners' Equity
Current Liabilities
Debt maturing within one year                                              $   10,470    $    3,374
Accounts payable and accrued liabilities                                       15,432        11,717
Accrued taxes                                                                   3,592         3,386
Dividends payable                                                                 863           836
- ------------------------------------------------------------------------------------------------------
Total current liabilities                                                      30,357        19,313
- ------------------------------------------------------------------------------------------------------
Long-Term Debt                                                                 15,492        17,475
- ------------------------------------------------------------------------------------------------------
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes                                                           6,806         4,821
Postemployment benefit obligation                                               9,767         9,612
Unamortized investment tax credits                                                318           389
Other noncurrent liabilities                                                    4,448         3,879
- ------------------------------------------------------------------------------------------------------
Total deferred credits and other noncurrent liabilities                        21,339        18,701
- ------------------------------------------------------------------------------------------------------
Corporation-Obligated Mandatorily Redeemable Preferred
  Securities Of Subsidiary Trusts#                                              1,000         1,000
- ------------------------------------------------------------------------------------------------------
Shareowners' Equity
Preferred shares ($1 par value, 10,000,000 authorized: none issued)                 -             -
Common shares ($1 par value, 7,000,000,000 authorized: issued
   3,433,124,836 at December 31, 2000 and 1999)                                 3,433         3,433
Capital in excess of par value                                                 12,125        12,453
Retained earnings                                                              18,341        13,798
Guaranteed obligations of employee stock ownership plans (ESOP)                   (21)         (106)
Deferred compensation - leveraged ESOP (LESOP)                                    (37)          (73)
Treasury shares (46,416,071 at December 31, 2000 and
  37,752,621 at December 31, 1999, at cost)                                    (2,071)       (1,717)
Accumulated other comprehensive income                                         (1,307)       (1,062)
- ------------------------------------------------------------------------------------------------------
Total shareowners' equity                                                      30,463        26,726
- ------------------------------------------------------------------------------------------------------
Total Liabilities and Shareowners' Equity                                  $   98,651    $   83,215
======================================================================================================

# The trusts contain assets of $1,030 in principal amount of the Subordinated Debentures of Pacific Telesis Group.
The accompanying notes are an integral part of the consolidated financial statements.

SBC Communications Inc.
Consolidated Statements of Cash Flows
Dollars in millions, increase (decrease) in cash and cash equivalents

-------------------------------------------------------------------------------------------------------------
                                                                             2000         1999        1998
- -------------------------------------------------------------------------------------------------------------
Operating Activities
Net income                                                             $    7,967   $    8,159   $   7,690
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Depreciation and amortization                                             9,748        8,553       7,841
  Undistributed earnings from investments in equity affiliates               (521)        (471)       (256)
  Provision for uncollectible accounts                                        885        1,136         896
  Amortization of investment tax credits                                      (71)         (85)        (96)
  Deferred income tax expense                                               1,164        1,061         840
  Gain on sales of investments                                             (2,415)        (335)     (2,215)
  Extraordinary items, net of tax                                               -       (1,379)         60
  Cumulative effect of accounting change, net of tax                            -         (207)        (15)
  Changes in operating assets and liabilities:
    Accounts receivable                                                    (1,892)        (731)     (2,257)
    Other current assets                                                     (446)         335         310
    Accounts payable and accrued liabilities                                1,405        2,054       1,175
  Other - net                                                              (1,525)      (1,512)       (992)
- -------------------------------------------------------------------------------------------------------------
Total adjustments                                                           6,332        8,419       5,291
- -------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities                                  14,299       16,578      12,981
- -------------------------------------------------------------------------------------------------------------

Investing Activities
Construction and capital expenditures                                     (13,124)     (10,304)     (8,882)
Investments in affiliates                                                       -           51         (77)
Purchase of short-term investments                                           (539)         (26)        (42)
Proceeds from short-term investments                                           84           31         355
Dispositions                                                                4,476        4,867       2,727
Acquisitions                                                               (5,299)      (5,198)     (3,261)
Other                                                                          (1)           2          11
- -------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities                                     (14,403)     (10,577)     (9,169)
- -------------------------------------------------------------------------------------------------------------

Financing Activities
Net change in short-term borrowings with original
 maturities of three months or less                                         5,169         (787)       (589)
Issuance of other short-term borrowings                                         -            -           2
Repayment of other short-term borrowings                                        -            -          (8)
Issuance of long-term debt                                                  1,087          738       2,890
Repayment of long-term debt                                                (1,128)      (2,301)     (2,860)
Early extinguishment of debt and related call premiums                          -          (31)       (765)
Issuance of common shares                                                       -          313         464
Issuance of preferred shares of subsidiaries                                    -          103         322
Purchase of treasury shares                                                (2,255)      (1,169)       (498)
Issuance of treasury shares                                                   732          318         308
Dividends paid                                                             (3,418)      (3,287)     (3,131)
Other                                                                          65           (2)          3
- -------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities                           252       (6,105)     (3,862)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                          148         (104)        (50)
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents beginning of year                                   495          599         649
- -------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents End of Year                                  $      643   $      495   $     599
=============================================================================================================

The accompanying notes are an integral part of the consolidated financial statements.

SBC Communications Inc.
Consolidated Statements of Shareowners' Equity
Dollars and shares in millions except per share amounts

---------------------------------------------------------------------------------------------------------------
                                                          2000                1999                1998
- ---------------------------------------------------------------------------------------------------------------
                                                    Shares    Amount    Shares    Amount    Shares    Amount
- ---------------------------------------------------------------------------------------------------------------
Common Stock
Balance at beginning of year                          3,433   $  3,433    3,434   $  3,434    3,428   $  3,428
Purchase of shares                                        -          -       (8)        (8)     (13)       (13)
Issuance of shares                                        -          -        7          7       19         19
- ---------------------------------------------------------------------------------------------------------------
Balance at end of year                                3,433   $  3,433    3,433   $  3,433    3,434   $  3,434
===============================================================================================================
Capital in Excess of Par Value
Balance at beginning of year                                  $ 12,453            $ 12,439            $ 12,375
Purchase of shares                                                   -                (398)               (487)
Issuance of shares                                                (678)                215                 370
Other                                                              350                 197                 181
- ---------------------------------------------------------------------------------------------------------------
Balance at end of year                                        $ 12,125            $ 12,453            $ 12,439
===============================================================================================================
Retained Earnings
Balance at beginning of year                                  $ 13,798            $  8,948            $  4,429
Net income ($2.35, $2.39 and $2.26 per share)                    7,967               8,159               7,690
Dividends to shareowners
 ($1.015, $0.975 and $0.935 per share)                          (3,443)             (3,312)             (3,177)
Other                                                               19                   3                   6
- ---------------------------------------------------------------------------------------------------------------
Balance at end of year                                        $ 18,341            $ 13,798            $  8,948
===============================================================================================================
Guaranteed Obligations of ESOP
Balance at beginning of year                                  $   (106)           $   (261)           $   (409)
Reduction of debt associated with ESOP                              85                 155                 148
- ---------------------------------------------------------------------------------------------------------------
Balance at end of year                                        $    (21)           $   (106)           $   (261)
===============================================================================================================
Deferred Compensation - LESOP
Balance at beginning of year                                  $    (73)           $    (82)           $   (119)
Cost of LESOP trust shares allocated to employees                   36                   9                  37
- ---------------------------------------------------------------------------------------------------------------
Balance at end of year                                        $    (37)           $    (73)           $    (82)
===============================================================================================================
Treasury Shares
Balance at beginning of year                            (38)  $ (1,717)     (28)  $   (882)     (30)  $   (730)
Purchase of shares                                      (49)    (2,255)     (23)    (1,169)     (12)      (498)
Issuance of shares                                       41      1,901       13        334       14        346
- ---------------------------------------------------------------------------------------------------------------
Balance at end of year                                  (46)  $ (2,071)     (38)  $ (1,717)     (28)  $   (882)
===============================================================================================================
Accumulated Other Comprehensive Income,
 net of tax
Balance at beginning of year                                  $ (1,062)           $   (822)           $ (1,111)
Foreign currency translation adjustment,
 net of taxes of $(234), $290 and $37                             (435)               (336)                224
Reclassification adjustment to net income for
 cumulative translation adjustment on securities sold              329                   -                  56
Unrealized gains (losses) on available-for-sale securities,
 net of taxes of $(22), $61 and $37                                (40)                113                  69
Less reclassification adjustment for net gains
 included in net income                                            (99)                (17)                (60)
- ---------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss)                                 (245)               (240)                289
- ---------------------------------------------------------------------------------------------------------------
Balance at end of year                                        $ (1,307)           $ (1,062)           $   (822)
===============================================================================================================
Total Comprehensive Income
Net income                                                    $  7,967            $  8,159            $  7,690
Other comprehensive income (loss) per above                       (245)               (240)                289
- ---------------------------------------------------------------------------------------------------------------
Total Comprehensive Income                                    $  7,722            $  7,919            $  7,979
===============================================================================================================

The accompanying notes are an integral part of the consolidated financial statements.

Notes to Consolidated Financial Statements
Dollars in millions except per share amounts

Note 1. Summary of Significant Accounting Policies

Basis of Presentation - Throughout this document, SBC Communications Inc. is referred to as “we” or “SBC”. The consolidated financial statements include the accounts of SBC and its majority-owned subsidiaries. The statements reflect mergers of our subsidiaries with Southern New England Telecommunications Corporation (SNET) and Ameritech Corporation (Ameritech) as poolings of interests (see Note 2). Our subsidiaries and affiliates operate in the communications services industry, providing wireline and wireless telecommunications services and equipment, directory advertising and cable television service both domestically and worldwide.

All significant intercompany transactions are eliminated in the consolidation process. Our investment in Cingular Wireless (Cingular) is accounted for under the equity method of accounting (see Note 6). Investments in partnerships, joint ventures and less than majority-owned subsidiaries are principally accounted for under the equity method. Earnings from certain foreign investments accounted for using the equity method are included for periods ended within three months of our year end.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain amounts in prior period financial statements have been reclassified to conform to the current year’s presentation.

Income Taxes - Deferred income taxes are provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes.

Investment tax credits earned prior to their repeal by the Tax Reform Act of 1986 are amortized as reductions in income tax expense over the lives of the assets which gave rise to the credits.

Cash Equivalents - Cash and cash equivalents include all highly liquid investments with original maturities of three months or less and the carrying amounts approximate fair value.

Deferred Charges - Directory advertising costs are deferred until the directory is published and advertising revenues related to these costs are recognized.

Revenue Recognition/Cumulative Effect of Accounting Change - In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (SAB 101), which we adopted effective January 1, 2000. SAB 101 addresses, among other items, when revenue relating to nonrefundable, up-front fees should be recognized. Upon adoption, we performed a detailed analysis of our activation fees and recorded deferred revenues and associated expenses accordingly. These deferred amounts will be recognized over the average customer life of five years. Expenses, though exceeding revenue, were only deferred to the extent of revenue. Accordingly, these adjustments had no significant effect on operating or net income.

Certain revenues derived from local telephone and wireless services are billed monthly in advance and are recognized the following month when services are provided. Revenues derived from other telecommunications services, principally network access, long distance and wireless airtime usage, are recognized monthly as services are provided.

Ameritech, prior to January 1, 1999, and SNET, prior to January 1, 1998, recognized revenues and expenses related to publishing directories using the “amortization” method, under which revenues and expenses were recognized over the lives of the directories, generally one year. Effective January 1, 1999, for Ameritech and January 1, 1998, for SNET, the accounting was changed to the “issue basis” method of accounting, which recognizes the revenues and expenses at the time the related directory is published. The change in methodology was made because the issue basis method is generally followed in the publishing industry, including by our other directory subsidiaries, and better reflects the operating activity of the business.

The cumulative after-tax effect of applying the changes in method to prior years was recognized as of January 1, 1999 and 1998, as one-time, non-cash gains of $207, or $0.06 per share, and $15, or $0.01 per share, net of deferred taxes of $125 and $11. Had the current method been applied during prior periods, income before extraordinary items and cumulative effect of accounting change would not have been materially affected.

Property, Plant and Equipment - Property, plant and equipment is stated at cost. The cost of additions and substantial improvements to property, plant and equipment is capitalized. The cost of maintenance and repairs of property, plant and equipment is charged to operating expenses. Property, plant and equipment is depreciated using straight-line methods over their estimated economic lives. Certain subsidiaries follow composite group depreciation methodology; accordingly, when a portion of their depreciable property, plant and equipment is retired in the ordinary course of business, the gross book value is reclassified to accumulated depreciation; no gain or loss is recognized on the disposition of this plant.

Software Costs - It is our policy to capitalize certain costs incurred in connection with developing or obtaining internal use software. Capitalized software costs are included in Property, Plant and Equipment and are being amortized over three years.

Intangible Assets - Intangible assets consist primarily of customer lists and the excess of consideration paid over net assets acquired in business combinations. These assets are being amortized using the straight-line method, over periods generally ranging from three to forty years. Management periodically reviews the carrying value and lives of all intangible assets based on expected future cash flows.

Advertising Costs - Costs for advertising products and services or corporate image are expensed as incurred.

Foreign Currency Translation - Local currencies are generally considered the functional currency for our share of foreign investments, except in countries considered highly inflationary. We translate our share of foreign assets and liabilities at exchange rates in effect at the balance sheet dates. Revenues and expenses are translated using average rates for the year. The resulting foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive income in the accompanying consolidated balance sheets. Other transaction gains and losses resulting from exchange rate changes on transactions denominated in a currency other than the local currency are included in earnings as incurred.

Derivative Financial Instruments - In June 1998, the Financial Accounting Standards Board issued Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (FAS 133), which will require all derivatives to be recorded on the balance sheet at fair value, and will require changes in the fair value of the derivatives to be recorded in net income or comprehensive income. We adopted FAS 133 on January 1, 2001, as a one-time, non-cash cumulative effect of accounting change. However, because of our minimal use of derivatives, the adoption of this standard did not have a significant effect on our financial position or results of operations.

We do not invest in derivatives for trading purposes. From time to time as part of our risk management strategy, we use derivative financial instruments, including interest rate swaps, to hedge exposures to interest rate risk on debt obligations, and foreign currency forward exchange contracts to hedge exposures to changes in foreign currency rates for transactions related to foreign investments. Derivative contracts are entered into for hedging of firm commitments only. Interest rate swap settlements are recognized as adjustments to interest expense in the consolidated statements of income when paid or received. Foreign currency forward exchange contracts are set up to coincide with firm commitments. Gains and losses are deferred until the underlying transaction being hedged occurs, and then are recognized as part of that transaction (see Note 10).

Note 2. Completion of Mergers

In October 1999, SBC and Ameritech completed the merger of an SBC subsidiary with Ameritech in a transaction in which each share of Ameritech common stock was exchanged for 1.316 shares of SBC common stock (equivalent to approximately 1,446 million shares). Ameritech became a wholly owned subsidiary effective with the merger, and the transaction has been accounted for as a pooling of interests and a tax-free reorganization. Financial statements for prior periods have been restated to include the accounts of Ameritech. Transaction costs related to the merger were $77 ($48 net of tax). Of this total, $25 ($16 net of tax) is included in expenses in 1999 and $52 ($32 net of tax) in 1998.

In October 1998, SBC and SNET completed the merger of an SBC subsidiary with SNET in a transaction in which each share of SNET common stock was exchanged for 1.7568 shares of SBC common stock (equivalent to approximately 120 million shares). SNET became a wholly owned subsidiary effective with the merger, and the transaction was accounted for as a pooling of interests and a tax-free reorganization.

Post-Merger Initiatives

Upon completion of each merger, we reviewed operations throughout the merged company. We formed review teams that performed comprehensive evaluations of companywide operations. Based on these merger integration reviews, we made certain strategic decisions, integrated certain operations and consolidated some administrative and support functions resulting in one-time charges. The following tables summarize the charges incurred for each merger related to these reviews and decisions:

    -----------------------------------------------------------------------
    Pre-tax charges                                 Ameritech        SNET
    -----------------------------------------------------------------------
    Reorganization                               $      582    $       82
    Impairments/asset valuation                         690           321
    Wireless conversion                                 220             -
    Regulatory and legal                                164             -
    Merger approval                                      31             -
    Other items and estimates of other obligations       79             -
    -----------------------------------------------------------------------
    Total one-time charges                       $    1,766    $      403
    =======================================================================

    -----------------------------------------------------------------------
    After-tax charges                               Ameritech        SNET
    -----------------------------------------------------------------------
    Reorganization                               $      379    $       50
    Impairments/asset valuation                         472           199
    Wireless conversion                                 143             -
    Regulatory and legal                                102             -
    Merger approval                                      19             -
    Other items and estimates of other obligations      342             -
    -----------------------------------------------------------------------
    Total one-time charges                       $    1,457    $      249
    =======================================================================

One-time charges incurred in the third and fourth quarter of 1999 totaled $1,766 ($1,457 net of tax). These charges included various regulatory and legal issues, merger approval and other related costs of $274 ($174 net of tax). In addition, these charges included costs related to strategic decisions reached by the review teams of $1,492 ($1,283 net of tax) in 1999. Charges in the fourth quarter of 1998 for the SNET merger of $403 ($249 net of tax) also related to the strategic decisions reached by the review teams. At December 31, 2000, 1999 and 1998, remaining accruals for anticipated cash expenditures related to the SNET decisions and decisions related to the 1997 pooling of interests with Pacific Telesis Group (PAC) were approximately $11, $52 and $323. Anticipated cash expenditures related to the accruals for the Ameritech merger decisions totaled $147 and $703 at December 31, 2000 and 1999. In addition, as discussed in Note 8, we have ongoing expenses associated with the mergers.

Reorganization - - We centralized several key functions that will support the wireline operations including network planning, strategic marketing and procurement. We also consolidated a number of corporatewide support activities, including research and development, information technology, financial transaction processing and real estate management. These initiatives resulted in the creation of some jobs and the elimination and realignment of others, with many of the affected employees changing job responsibilities and in some cases assuming positions in other locations.

We recognized net charges of approximately $582 ($379 net of tax) during the fourth quarter of 1999 and $82 ($50 net of tax) during the fourth quarter of 1998 in connection with these initiatives. The charges were comprised mainly of postemployment benefits, primarily related to severance, and costs associated with closing duplicate operations, primarily contract cancellations. Other charges arising out of the mergers related to relocation, retraining and other effects of consolidating certain operations are being recognized in the periods those charges are incurred. The fourth quarter 1999 charge is net of $45 ($29 net of tax) of reversals of accruals made in connection with the SNET and PAC mergers that were related to plans now superseded by the current reorganization plans.

Impairments/Asset Valuation - As a result of our merger integration plans, strategic review of domestic operations and organizational alignments, we reviewed the carrying values of the long-lived assets in the third and fourth quarter of 1999 and the fourth quarter of 1998. The reviews were conducted companywide, although the 1998 review focused primarily on SNET and the 1999 review focused primarily on Ameritech. These reviews included estimating remaining useful lives and cash flows and identifying assets to be abandoned. Where this review indicated impairment, fair market values including, in some cases, discounted cash flows as an estimate of fair value, related to those assets were analyzed to determine the amount of the impairment. As a result of these reviews, we wrote off certain assets and recognized impairments to the value of other assets with a combined charge of $690 ($472 net of tax) in the third and fourth quarter of 1999 and $321 ($199 net of tax) in the fourth quarter of 1998.

The 1999 adjustments include an impairment of $300 ($224 net of tax) related to SecurityLink. This impairment adjustment, taken as a reduction in goodwill of $300, reflects a reduction of the investment to fair market value based upon the value of comparable businesses. In connection with this adjustment, we shortened the estimated life of the remaining goodwill on the security business from 40 to 15 years. In January 2001, we sold SecurityLink. As a result of the sale, we took an additional charge of $614 ($454 net of tax) (see Note 16).

Also in 1999, we performed a review of the allowance for doubtful accounts at the Ameritech subsidiaries and recognized a charge of $212 ($135 net of tax). This charge resulted from adjusting Ameritech’s estimation methods to the method we use. Other 1999 adjustments consisted primarily of valuation adjustments on certain analog switching equipment at Ameritech and certain cost investments.

The 1998 impairments and writeoffs primarily related to recognition of an impairment of the assets supporting SNET’s video and telephony operations, and also included charges for required changes in wireless equipment, inventory and sites.

Wireless Conversion - In December 1999, Ameritech notified its wireless customers that the current wireless network platform (Code Division Multiple Access or CDMA) would be converted to our network platform (Time Division Multiple Access or TDMA). As part of the conversion, we sold the CDMA network assets and leased them back over the conversion period. A charge of $220 ($143 net of tax) was recognized in the fourth quarter of 1999 to recognize the loss on the sale and leaseback and to replace the customers’ CDMA handsets.

Other Items and Estimates of Other Obligations - We performed reviews of Ameritech’s accounting operations and applied consistent accounting techniques between the merging companies. As a result, we recognized charges in 1999 related to the impact of several regulatory and legal rulings of $164 ($102 net of tax). Also in 1999, we incurred a charge of $31 ($19 net of tax) for Ameritech merger approval costs. In 1999 charges for deferred taxes on Ameritech’s international investments of $289, net charges related to the routine deferral of certain costs and revenues by Ameritech of $62 ($40 net of tax) and other miscellaneous items of $17 ($13 net of tax) were recognized.

Note 3. Subsidiary Financial Information

We have fully and unconditionally guaranteed certain outstanding capital securities of PAC, Pacific Bell Telephone Company (PacBell), and Southwestern Bell Telephone Company (SWBell), each of which is a wholly owned subsidiary of SBC. In September 2000, new SEC rules became effective for reporting parent company guarantees of subsidiary securities. In accordance with these new rules, we are providing the following condensed consolidating financial information.

The Parent column presents investments in all subsidiaries under the equity method of accounting. PAC, PacBell and SWBell are listed separately because each has securities that we have guaranteed that would otherwise require SEC periodic reporting. PacBell is a wholly owned subsidiary of PAC, and the new rules require that its financial information also be included in the PAC column. All other wholly owned subsidiaries that do not have securities guaranteed by us that would require separate reporting are presented in the Other column. The consolidating adjustments column (Adjs.) eliminates the intercompany balances and transactions between our subsidiaries, as well as removing the double presentation of PacBell, in order to reconcile to the SBC consolidated financial information. See Note 8 for a discussion of conforming items on the segments and subsidiaries.

    Condensed Consolidating Statements of Income
    For the Twelve Months Ended December 31, 2000

                                              Parent    PAC     PacBell   SWBell    Other     Adjs.     Total
    -------------------------------------------------------------------------------------------------- ------------
    Total operating revenues                $      -  $ 11,978 $ 10,356 $  11,580 $ 29,121 $ (11,559) $  51,476
    Total operating expenses                   (1,119)   7,974    7,437     8,636   26,445    (8,640)    40,733
    -------------------------------------------------------------------------------------------------- ------------
    Operating income                            1,119    4,004    2,919     2,944    2,676    (2,919)    10,743
    -------------------------------------------------------------------------------------------------- ------------
    Interest expense                              504      434      391       383    1,280    (1,400)     1,592
    Equity in net income of affiliates          7,417       16        -         -      945    (7,481)       897
    Royalty income (expense)                      460     (415)    (407)     (460)     415       407          -
    Other income (expense) - net                 (192)       9        2        10    3,961      (950)     2,840
    -------------------------------------------------------------------------------------------------- ------------
    Income before income taxes                  8,300    3,180    2,123     2,111    6,717    (9,543)    12,888
    -------------------------------------------------------------------------------------------------- ------------
    Income taxes                                  333    1,243      847       778    2,567      (847)     4,921
    -------------------------------------------------------------------------------------------------- ------------
    Net Income                              $   7,967 $  1,937 $  1,276 $   1,333 $  4,150 $  (8,696) $   7,967
    ================================================================================================== ============


    Condensed Consolidating Statements of Income
    For the Twelve Months Ended December 31, 1999

                                                 Parent    PAC     PacBell   SWBell    Other     Adjs.     Total
    ---------------------------------------------------------------------------------------------------- ----------
    Total operating revenues                   $       - $ 11,727 $  9,718 $  11,173 $ 27,558 $ (10,645) $  49,531
    Total operating expenses                        (228)   8,861    7,459     8,358   21,869    (8,386)    37,933
    ---------------------------------------------------------------------------------------------------- ----------
    Operating income                                 228    2,866    2,259     2,815    5,689    (2,259)    11,598
    ---------------------------------------------------------------------------------------------------- ----------
    Interest expense                                 206      455      388       384    1,327    (1,330)     1,430
    Equity in net income of affiliates             8,137        -        -         -      937    (8,162)       912
    Other income (expense) - net                     113      100       42         6      471      (959)      (227)
    ---------------------------------------------------------------------------------------------------- ----------
    Income before income taxes                     8,272    2,511    1,913     2,437    5,770   (10,050)    10,853
    ---------------------------------------------------------------------------------------------------- ----------
    Income taxes                                     106      990      752       896    2,288      (752)     4,280
    ---------------------------------------------------------------------------------------------------- ----------
    Income before extraordinary items
      and cumulative effect of
      accounting change                            8,166    1,521    1,161     1,541    3,482    (9,298)     6,573
    ---------------------------------------------------------------------------------------------------- ----------
    Extraordinary items                                -        -        -         -    1,379         -      1,379
    Cumulative effect of accounting
      change                                          (7)    (218)  (1,010)     (274)     706     1,010        207
    ---------------------------------------------------------------------------------------------------- ----------
    Net Income                                 $   8,159 $  1,303 $    151 $   1,267 $  5,567 $  (8,288) $   8,159
    ==================================================================================================== ==========


    Condensed Consolidating Statements of Income
    For the Twelve Months Ended December 31, 1998

                                                 Parent    PAC     PacBell   SWBell    Other     Adjs.     Total
    ---------------------------------------------------------------------------------------------------- ----------
    Total operating revenues                   $       - $ 11,288 $  9,406 $  10,752 $ 25,189 $ (10,394) $  46,241
    Total operating expenses                        (135)   8,613    7,107     7,958   19,570    (8,095)    35,018
    ---------------------------------------------------------------------------------------------------- ----------
    Operating income                                 135    2,675    2,299     2,794    5,619    (2,299)    11,223
    ---------------------------------------------------------------------------------------------------- ----------
    Interest expense                                 359      504      426       374    1,107    (1,165)     1,605
    Equity in net income of affiliates             7,371        -        -         -      616    (7,374)       613
    Other income (expense) - net                     624       (2)      (1)      (10)   2,011      (738)     1,884
    ---------------------------------------------------------------------------------------------------- ----------
    Income before income taxes                     7,771    2,169    1,872     2,410    7,139    (9,246)    12,115
    ---------------------------------------------------------------------------------------------------- ----------
    Income taxes                                      81      896      734       883    2,520      (734)     4,380
    Income before extraordinary items
      and cumulative effect of
      accounting change                            7,690    1,273    1,138     1,527    4,619    (8,512)     7,735
    ---------------------------------------------------------------------------------------------------- ----------
    Extraordinary items                                -      (62)     (61)        -        2        61        (60)
    Cumulative effect of accounting
      change                                           -        -        -         -       15         -         15
    ---------------------------------------------------------------------------------------------------- ----------
    Net Income                                 $   7,690 $  1,211 $  1,077 $   1,527 $  4,636 $  (8,451) $   7,690
    ==================================================================================================== ==========

    Condensed Consolidating Balance Sheets
    December 31, 2000

                                                 Parent    PAC     PacBell   SWBell    Other     Adjs.     Total
    ---------------------------------------------------------------------------------------------------- ----------
    Cash and cash equivalents                  $     436 $      5 $      9 $      52 $     150 $      (9) $     643
    Accounts receivable - net                      9,503    2,838    2,219     2,111     8,662   (15,189)    10,144
    Other current assets                           2,195      480      474       697     9,057      (474)    12,429
    ---------------------------------------------------------------------------------------------------- ----------
    Total current assets                          12,134    3,323    2,702     2,860    17,869   (15,672)    23,216
    ---------------------------------------------------------------------------------------------------- ----------
    Property, plant and equipment - net              138   13,461   13,028    14,984    18,612   (13,028)    47,195
    ---------------------------------------------------------------------------------------------------- ----------
    Intangible assets - net                            -        -        -         -     5,475         -      5,475
    ---------------------------------------------------------------------------------------------------- ----------
    Investments in equity affiliates              30,072      611        -         -    14,952   (33,257)    12,378
    ---------------------------------------------------------------------------------------------------- ----------
    Other assets                                   2,186    2,136    2,061       272    10,643    (6,911)    10,387
    ---------------------------------------------------------------------------------------------------- ----------
    Total Assets                               $  44,530 $ 19,531 $ 17,791 $  18,116 $  67,551 $ (68,868) $  98,651
    ==================================================================================================== ==========

    Debt maturing within one year              $   8,918 $  1,214 $  1,776 $   2,648 $   4,157 $  (8,243) $  10,470
    Other current liabilities                      2,527    3,906    3,794     4,112    15,845   (10,297)    19,887
    ---------------------------------------------------------------------------------------------------- ----------
    Total current liabilities                     11,445    5,120    5,570     6,760    20,002   (18,540)    30,357
    ---------------------------------------------------------------------------------------------------- ----------
    Long-term debt                                   568    4,353    4,293     3,976    11,445    (9,143)    15,492
    ---------------------------------------------------------------------------------------------------- ----------
    Postemployment benefit  obligation                83    3,000    2,817     2,993     3,691    (2,817)     9,767
    ---------------------------------------------------------------------------------------------------- ----------
    Other noncurrent liabilities                   1,971    1,686    1,536     1,314     6,601    (1,536)    11,572
    ---------------------------------------------------------------------------------------------------- ----------
    Corporation-obligated mandatorily
      redeemable preferred securities of
      subsidiary trusts                                -    1,000        -         -         -         -      1,000
    ---------------------------------------------------------------------------------------------------- ----------
    Total shareowners' equity                     30,463    4,372    3,575     3,073    25,812   (36,832)    30,463
    ---------------------------------------------------------------------------------------------------- ----------
    Total Liabilities
      and Shareowners' Equity                  $  44,530 $ 19,531 $ 17,791 $  18,116 $  67,551 $ (68,868) $  98,651
    ==================================================================================================== ==========


    Condensed Consolidating Balance Sheets
    December 31, 1999

                                                 Parent    PAC     PacBell   SWBell    Other     Adjs.     Total
    ---------------------------------------------------------------------------------------------------- ----------
    Cash and cash equivalents                  $     100 $     13 $     11 $      49 $     333 $     (11) $     495
    Accounts receivable - net                      8,012    2,538    1,929     1,913    11,678   (16,692)     9,378
    Other current assets                             224      471      378       491       871      (378)     2,057
    ---------------------------------------------------------------------------------------------------- ----------
    Total current assets                           8,336    3,022    2,318     2,453    12,882   (17,081)    11,930
    ---------------------------------------------------------------------------------------------------- ----------
    Property, plant and equipment - net               89   12,628   12,213    13,958    19,896   (12,213)    46,571
    ---------------------------------------------------------------------------------------------------- ----------
    Intangible assets - net                            -      824        -         -     5,972         -      6,796
    ---------------------------------------------------------------------------------------------------- ----------
    Investments in equity affiliates              23,461      199        -         -    13,125   (26,137)    10,648
    ---------------------------------------------------------------------------------------------------- ----------
    Other assets                                   2,203    1,683    1,407        20     8,563    (6,606)     7,270
    ---------------------------------------------------------------------------------------------------- ----------
    Total Assets                               $  34,089 $ 18,356 $ 15,938 $  16,431 $  60,438 $ (62,037) $  83,215
    ==================================================================================================== ==========

    Debt maturing within one year              $   3,364 $  1,869 $  1,674 $   2,086 $   9,180 $ (14,799) $   3,374
    Other current liabilities                      1,347    3,075    2,865     3,041    10,114    (4,503)    15,939
    ---------------------------------------------------------------------------------------------------- ----------
    Total current liabilities                      4,711    4,944    4,539     5,127    19,294   (19,302)    19,313
    ---------------------------------------------------------------------------------------------------- ----------
    Long-term debt                                   685    4,551    4,491     4,211    13,201    (9,664)    17,475
    ---------------------------------------------------------------------------------------------------- ----------
    Postemployment benefit  obligation               111    2,888    2,703     3,049     3,564    (2,703)     9,612
    ---------------------------------------------------------------------------------------------------- ----------
    Other noncurrent liabilities                   1,856    1,845    1,486     1,143     4,271    (1,512)     9,089
    ---------------------------------------------------------------------------------------------------- ----------
    Corporation-obligated mandatorily
     redeemable preferred securities of
     subsidiary trusts                                 -    1,000        -         -         -         -      1,000
    ---------------------------------------------------------------------------------------------------- ----------
    Total shareowners' equity                     26,726    3,128    2,719     2,901    20,108   (28,856)    26,726
    ---------------------------------------------------------------------------------------------------- ----------
    Total Liabilities
     and Shareowners' Equity                   $  34,089 $ 18,356 $ 15,938 $  16,431 $  60,438 $ (62,037) $  83,215
    ===================================================================================================== ==========

    Condensed Consolidating Statements of Cash Flows
    Twelve Months Ended December 31, 2000

                                                 Parent     PAC    PacBell   SWBell    Other     Adjs.     Total
    ----------------------------------------------------------------------------------------------------- ----------
    Net cash from operating activities         $   4,008 $  4,306 $  3,196 $   4,152 $   3,914 $  (5,277) $  14,299
    Net cash from investing activities            (4,309)  (2,797)  (2,679)   (3,630)   (4,081)    3,093    (14,403)
    Net cash from financing activities               637   (1,517)    (519)     (519)      (16)    2,186        252
    ----------------------------------------------------------------------------------------------------- ----------
    Net Increase (Decrease) in Cash            $     336 $     (8)$     (2)$       3 $    (183)$       2  $     148
    ===================================================================================================== ==========


    Condensed Consolidating Statements of Cash Flows
    Twelve Months Ended December 31, 1999

                                                 Parent     PAC    PacBell   SWBell    Other     Adjs.     Total
    ----------------------------------------------------------------------------------------------------- ----------
    Net cash from operating activities         $   2,337 $  3,212 $  3,233 $   4,393 $   9,639 $  (6,236) $  16,578
    Net cash from investing activities              (268)  (2,787)  (2,437)   (2,882)   (4,447)    2,244    (10,577)
    Net cash from financing activities            (2,283)    (431)    (799)   (1,522)   (5,065)    3,995     (6,105)
    ----------------------------------------------------------------------------------------------------- ----------
    Net Increase (Decrease) in Cash            $    (214)$     (6)$     (3)$     (11)$     127 $       3  $    (104)
    ===================================================================================================== ==========


    Condensed Consolidating Statements of Cash Flows
    Twelve Months Ended December 31, 1998

                                                 Parent     PAC    PacBell   SWBell    Other     Adjs.     Total
    ----------------------------------------------------------------------------------------------------- ----------
    Net cash from operating activities         $   1,707 $  3,023 $  2,443 $   3,126 $   4,589 $  (1,907) $  12,981
    Net cash from investing activities               563   (2,420)  (2,140)   (2,566)   (5,029)    2,423     (9,169)
    Net cash from financing activities            (2,166)    (631)    (332)     (579)      333      (487)    (3,862)
    ----------------------------------------------------------------------------------------------------- ----------
    Net Increase (Decrease) in Cash            $     104 $    (28)$    (29)$     (19)$    (107)$      29  $     (50)
    ===================================================================================================== ==========

Note 4. Earnings Per Share

A reconciliation of the numerators and denominators of basic earnings per share and diluted earnings per share for income before extraordinary items and cumulative effect of accounting change for the years ended December 31, 2000, 1999 and 1998 are shown in the table below:

    -------------------------------------------------------------------------------------------
    Year Ended December 31,                                2000            1999           1998
    -------------------------------------------------------------------------------------------
    Numerators
    Numerator for basic earnings per share:
      Income before extraordinary items and
       cumulative effect of accounting change         $   7,967       $   6,573      $   7,735
      Dilutive potential common shares:
       Other stock-based compensation                         6               4              4
    -------------------------------------------------------------------------------------------
    Numerator for diluted earnings per share          $   7,973       $   6,577      $   7,739
    ===========================================================================================
    Denominators
    Denominator for basic earnings per share:
      Weighted average number of common
       shares outstanding (000,000)                       3,392           3,409          3,406
      Dilutive potential common shares (000,000):
       Stock options                                         33              42             38
       Other stock-based compensation                         8               7              6
    -------------------------------------------------------------------------------------------
    Denominator for diluted earnings per share            3,433           3,458          3,450
    ===========================================================================================
    Basic earnings per share
      Income before extraordinary items and
       cumulative effect of accounting change         $    2.35       $    1.93      $    2.27
      Extraordinary items                                     -            0.40          (0.02)
      Cumulative effect of accounting change                  -            0.06           0.01
    -------------------------------------------------------------------------------------------
    Net income                                        $    2.35       $    2.39      $    2.26
    ===========================================================================================
    Diluted earnings per share
      Income before extraordinary items and
       cumulative effect of accounting change         $    2.32       $    1.90      $    2.24
      Extraordinary items                                     -            0.40          (0.02)
      Cumulative effect of accounting change                  -            0.06           0.01
    -------------------------------------------------------------------------------------------
    Net income                                        $    2.32       $    2.36      $    2.23
    ===========================================================================================

Note 5. Property, Plant and Equipment

Property, plant and equipment is summarized as follows at December 31:

    --------------------------------------------------------------------------- ------------
                                                Lives (years)       2000           1999
    --------------------------------------------------------------------------- ------------
    Land                                              -      $        592     $      589
    Buildings                                       35-45           9,864         10,284
    Central office equipment                         3-10          47,094         43,335
    Cable, wiring and conduit                       10-50          47,143         48,785
    Other equipment                                  5-15          10,529         10,455
    Software                                          3             1,438            786
    Under construction                                -             3,093          2,098
    --------------------------------------------------------------------------- ------------
                                                                  119,753        116,332
    --------------------------------------------------------------------------- ------------
    Accumulated depreciation and amortization                      72,558         69,761
    --------------------------------------------------------------------------- ------------
    Accumulated depreciation and amortization                      72,558         69,761
    --------------------------------------------------------------------------- ------------
    Property, plant and equipment - net                      $     47,195     $   46,571
    ========================================================================================

Our depreciation expense was $8,480, $8,175 and $7,566 for 2000, 1999 and 1998.

Certain facilities and equipment used in operations are leased under operating or capital leases. Rental expenses under operating leases for 2000, 1999 and 1998 were $755, $707 and $683. At December 31, 2000, the future minimum rental payments under noncancelable operating leases for the years 2001 through 2005 were $393, $350, $275, $288 and $169 with $479 due thereafter. Capital leases are not significant.

Note 6. Investment in Cingular Wireless

In October 2000, SBC and BellSouth Corporation (BellSouth) began contributions of their wireless properties and formally began operations of their wireless joint venture, Cingular, formed in April 2000. Cingular serves approximately 19 million customers, is the second-largest wireless operator in the United States, and has approximately 190 million potential customers in 38 states, the District of Columbia, Puerto Rico and the United States Virgin Islands. Economic ownership in Cingular is held 60% by SBC and 40% by BellSouth, with control shared equally. Cingular is managed jointly with a four-seat board of directors (two seats from each company). We are accounting for our investment under the equity method of accounting. The contributions to Cingular were made after we received the approval of the United States Department of Justice and the FCC.

The following table is a reconciliation of our investment in Cingular:

    --------------------------------------------------------
                                                    2000
    --------------------------------------------------------
    Beginning of year                         $        -
    Contributions                                  2,688
    Equity in net income                              80
    --------------------------------------------------------
    End of year                               $    2,768
    ========================================================

Undistributed earnings from Cingular were $80 at December 31, 2000.

Our initial contributions to Cingular included the assets and liabilities of the wireless operations contributed, totaling a net asset contribution of $2,688. Included in these amounts were approximately $9,400 payable to SBC and $2,500 receivable from SBC, amounts which were previously eliminated in the consolidation process. The notes receivable from Cingular are shown separately in the consolidated balance sheets; their payment is expected in conjunction with Cingular obtaining alternative financing. The payables to Cingular are included in accounts payable and accrued liabilities as shown in Note 18.

We continue to employ approximately 15,000 wireless employees, incurring costs for their salaries and related benefits. We have entered into a services contract with Cingular under which these employees provide services to Cingular, and we bill Cingular for these costs. For the fourth quarter of 2000, we billed Cingular approximately $117 for these employee-related costs.

In addition, our wireline operations have historically recorded network access revenue from interconnection agreements with our wireless properties, which was eliminated in the consolidation process. For operations contributed to Cingular, this network access revenue is no longer eliminated. During the fourth quarter of 2000, the incremental amount of network access revenue from Cingular, which was previously eliminated, was approximately $37.

At December 31, 2000, we had accounts receivable from Cingular of $134, accounts payable to Cingular of $3,072 and notes receivable from Cingular of $9,568 with an interest rate of 7.5%, which includes a net interest receivable of $159. Included in the accounts payable to Cingular is approximately $558 for properties we committed to contribute to Cingular at a future date.

The following table presents summarized financial information for Cingular at December 31, or for the three months then ended:

    ----------------------------------------------------------
    Income Statement                                  2000
    ----------------------------------------------------------
      Operating revenues                          $  3,060
      Operating income                                 381
      Net income                                       127
    ==========================================================
    Balance Sheet
    ----------------------------------------------------------
      Current assets                              $  2,343
      Noncurrent assets                             15,575
      Current liabilities                            3,467
      Noncurrent liabilities                        12,000
    ==========================================================

Note 7. Other Equity Investments

Investments in equity affiliates are accounted for under the equity method and include the June 1999 purchase of a 20% interest in Bell Canada, the largest supplier of telecommunications services in Canada, and a 41.6% interest in Tele Danmark A.S. (Tele Danmark), the national communications provider in Denmark (see Note 15). SBC currently is able to elect six of twelve members of the Tele Danmark Board of Directors, including the Chairman, who would cast any tie-breaking vote.

In November 2000, Tele Danmark signed agreements to increase its investment in Sunrise, a Swiss landline and Internet operator, and to purchase a 70% stake in diAx A.G. (diAx), a Swiss mobile and landline operator, with the intent of consolidating its Swiss operations by subsequently merging diAx with Sunrise. As part of this transaction, Tele Danmark will obtain our 40% interest in diAx and we will receive 1,200 million Swiss francs (approximately $783) in cash and notes. The transaction received regulatory approval and closed in January 2001. Due to the nature of our investment in Tele Danmark, we will account for the consideration received as a dividend from an equity investee.

Investments in equity affiliates also include our investment in Teléfonos de México, S.A. de C.V. (Telmex), Mexico’s national telecommunications company. We are a member of a consortium that holds all of the AA shares of Telmex stock, representing voting control of the company. Another member of the consortium, Carso Global Telecom, S.A. de C.V., has the right to appoint a majority of the directors of Telmex. In 1999 and through the third quarter of 2000, we also owned class L shares, which have limited voting rights. Throughout 1999 and the first seven months of 2000, we sold portions of our class L shares in response to open market share repurchases by Telmex, so that our total equity investment remained below 10% of Telmex’s total equity capitalization. In September of 2000, we sold the remainder of our class L shares in conjunction with the purchase of a note receivable with characteristics that will essentially offset future mark to market adjustments on our Debt Exchangeable for Common Stock (DECS), which are redeemable in either L shares or cash upon maturity in 2001. At December 31, 2000 and 1999, we held an approximate 7.6% and 8.9% equity interest in Telmex.

In September 2000, Telmex announced the spinoff of its cellular business and most of its international investments, into a new company called América Móvil S.A. de C.V. (America Movil). Telmex shareholders received an equivalent number of America Movil shares upon commencement of trading, which occurred in February 2001. As a result, we have an approximate 7.6% equity interest in America Movil.

Other major equity investments that we hold include a 17.5% interest in Belgacom S.A. (Belgacom), the national communications provider in Belgium, an 18% interest in Telkom S.A. Limited (Telkom), the state-owned telecommunications company of South Africa, a 43.6% interest in TransAsia, a Taiwanese wireless company, and a 15% interest in Cegetel S.A., a joint venture providing a broad range of telecommunications offerings in France. Tele Danmark also holds a 16.5% interest in Belgacom.

In the third quarter of 2000, we exercised our rights to sell our interest in MATAV, a Hungarian telecommunications company, and our interest in Netcom GSM, a wireless telecommunications provider in Norway (see Note 15).

In January 2000, we purchased a 25% investment in ATL - Algar Telecom Leste S.A. (ATL), a Brazilian telecommunications company. In the fourth quarter of 2000, we closed an agreement with America Movil and Bell Canada International to form a new, facilities-based communications company, Telecom Américas Ltd. (Telecom Americas), which will serve as the three companies’ principal vehicle for expansion in Latin America. We obtained an 11.4% stake in Telecom Americas by contributing our investment in ATL. Our investment in Telecom Americas will be accounted for under the cost method of accounting. As a result of the transaction, we recognized a direct gain of approximately $179 ($116 net of tax).

The following table is a reconciliation of our investments in equity affiliates other than Cingular:

    -------------------------------------------------------------------------------------
                                                    2000           1999          1998
    -------------------------------------------------------------------------------------
    Beginning of year                         $   10,648     $    7,412    $    4,453
    Additional investments                           783          3,702         3,159
    Equity in net income                             817            912           613
    Dividends received                              (376)          (445)         (344)
    Currency translation adjustments                (849)          (707)          169
    Dispositions and other adjustments            (1,413)          (226)         (638)
    -------------------------------------------------------------------------------------
    End of year                               $    9,610     $   10,648    $    7,412
    =====================================================================================

The currency translation adjustment for 2000 primarily reflects the effect of exchange rate fluctuations on our investments in Tele Danmark, Telmex, Telkom and Bell Canada. Dispositions and other adjustments for 2000 reflect the sale of Telmex L shares, the sale of our investment in MATÁV and the contribution of ATL to Telecom Americas.

The currency translation adjustment for 1999 primarily reflects the effect of exchange rate fluctuations on our investments in Tele Danmark and Belgacom. Dispositions and other adjustments for 1999 reflect the sale of portions of Telmex L shares and the sale of our investment in Chile.

The currency translation adjustment for 1998 primarily reflects the effect of exchange rate fluctuations on our investment in Tele Danmark partially offset by exchange rate fluctuations on our investment in Telkom. Dispositions and other adjustments for 1998 reflect the sale of Telecom Corporation of New Zealand Limited (TCNZ) shares, a write-down of an international investment and the sale of portions of Telmex L shares.

Undistributed earnings from equity affiliates were $2,060 and $1,788 at December 31, 2000 and 1999.

The following table presents summarized financial information of significant international investments accounted for using the equity method taking into account all adjustments necessary to conform to GAAP, but excluding our purchase adjustments including goodwill, at December 31, or for the year then ended:

    ---------------------------------------------------------------------------------
    Income Statements                                  2000        1999          1998
    ---------------------------------------------------------------------------------
      Operating revenues                         $   40,190   $  32,776     $  24,232
      Operating income                               11,911       8,941         6,383
      Net income                                      5,714       4,892         3,515
    =================================================================================
    Balance Sheets
    ---------------------------------------------------------------------------------
      Current assets                             $   17,092   $  13,961
      Noncurrent assets                              37,052      40,616
      Current liabilities                            16,490      13,395
      Noncurrent liabilities                         25,318      23,376
    =================================================================================

At December 31, 2000, we had goodwill, net of accumulated amortization of approximately $5,265 related to investments in equity affiliates. Based on the December 31, 2000, quoted market price, the aggregate market value of our investment in Tele Danmark was approximately $3,700. The fair value of our investment in Telmex, based on the equivalent value of Telmex L shares, at December 31, 2000, was approximately $2,400. Our weighted average share of operating revenues shown above was 17% in 2000 and 19% in 1999 and 1998.

Note 8. Segment Information

As a result of the reorganization of management in the fourth quarter of 2000, we have adjusted our segment reporting structure. We now have five reportable segments that reflect the current management of our business: wireline, wireless, directory, international and other. Directory, which was formerly included in the information and entertainment segment, is now a stand-alone segment. SecurityLink and Ameritech’s cable television operations, which were formerly included in the information and entertainment segment, as well as Ameritech’s paging operations, which were formerly included in the wireless segment, and all corporate operations, which were formerly included in corporate, adjustments, and eliminations have been moved to the other segment.

The directory segment includes all directory operations of SBC including yellow and white pages advertising and electronic publishing. All investments with primarily international operations are included in the international segment.

Included in the other segment are differences in accounting between subsidiaries and consolidated financial statements for pension and postretirement benefits and the treatment of conforming accounting adjustments arising out of the pooling of interests transactions with Ameritech, SNET and PAC that were required to be treated as cumulative effect of accounting changes by the subsidiaries.

Normalized results for 2000 exclude the following items:

Gains of $1,886 ($1,248 net of tax) related to the sale of direct and indirect investments in MATÁV and Netcom GSM, two international equity affiliates, and from the contribution of our investment in ATL to Telecom Americas.
Gains of $238 ($155 net of tax) on the sale of Telmex L shares associated with our private purchase of a note receivable with characteristics that will essentially offset future mark to market adjustments on DECS.
Pension settlement gains of $512 ($328 net of tax) associated with pension litigation, first quarter payments primarily related to employees who terminated employment during 1999 and gains resulting from a voluntary retirement program net of enhanced pension and postretirement benefits associated with that program (see Note 12).
Costs of $1,205 ($800 net of tax) associated with strategic initiatives and other adjustments resulting from the merger integration process with Ameritech.
A charge of $132 (with no tax effect) related to in-process research and development from the March 2000 acquisition of Sterling Commerce, Inc. (Sterling) (see Note 15).
Combined charges of $971 ($677 net of tax) related to valuation adjustments of SecurityLink and certain cost investments accounted for under Financial Accounting Standards Board Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (FAS 115), and the restructure of agreements with Prodigy Communications Corporation (Prodigy), including the extension of a credit facility and recognition of previously unrecognized equity losses from our investment (see Note 16).
Gains of $359 ($99 net of tax) primarily related to our required disposition of overlapping wireless properties in connection with our contribution of operations to Cingular.

Normalized results for 1999 exclude the following items:

Charges totaling $1,766 ($1,457 net of tax) including, recognition of impairment of long-lived assets, adjustments to the estimate of allowance for doubtful accounts, estimation of deferred taxes on international investments, wireless conversion costs and other items (see Note 2).
Elimination of income of $197 ($119 net of tax) from the incremental impacts of overlapping wireless properties sold in October 1999 related to the Ameritech merger.
Pension settlement gains of $566 ($368 net of tax) associated with lump sum pension payments that exceeded the projected service and interest costs.
Gains of $131 ($77 net of tax) recognized from the sale of property by an international equity affiliate.
A reduction of $45 ($27 net of tax) related to a portion of a first quarter 1998 charge to cover the cost of consolidating security monitoring centers and company-owned wireless retail stores.

Normalized results for 1998 exclude the following items:

Gain of $1,543 ($1,012 net of tax) from the sale of TCNZ shares.
Charges of $433 ($268 net of tax) related to strategic initiatives resulting from the merger integration process with SNET.
Gains of $358 ($219 net of tax) from the sale of certain non-core businesses, principally the required disposition of our investment in MTN, a cellular company in South Africa.
Elimination of income of $221 ($123 net of tax) from the incremental impacts of overlapping wireless properties sold in October 1999 related to the Ameritech merger.
Gains of $170 ($102 net of tax) from the sale of certain telephone and directory assets.
Charges of $104 ($64 net of tax) to cover the cost of consolidating security monitoring centers and company-owned wireless retail stores.

Segment results, including a reconciliation to SBC consolidated results, for 2000, 1999 and 1998 are as follows:

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

                                                                                                   Cingular De-                Normalizing
At December 31, 2000 or for the year ended    Wireline  Wireless  Directory   International Other  consolidation Eliminations  Adjustments    Total
- ------------------------------------------------------------------------------------------------------------------------------------------------------
Revenues from external customers              $ 39,789 $   7,941 $     4,251 $      320   $   1,034 $    (1,836)  $        -   $      (23)  $  51,476
Intersegment revenues                              187         1          89          8          86           -         (371)           -           -
Depreciation and amortization                    7,656     1,086          32         17         560        (253)           -          650       9,748
Equity in net income of affiliates                 (12)       12           -        862           (1)        72            -          (36)        897
Interest expense                                 1,240       424           4        174         898        (139)      (1,009)           -       1,592
Income before income taxes                       7,192       975       2,361        930         743           2            -          685      12,888
Segment assets                                 64,565     12,475       2,808     12,282      58,315     (10,751)     (41,043)           -      98,651
Investment in equity method investees               23       232          20      9,394       2,749         (40)           -            -      12,378
Expenditures for additions to                   11,293       856          35          -         940           -            -            -      13,124
  long-lived assets
======================================================================================================================================================

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

                                                                                                   Cingular De-                Normalizing
At December 31, 1999 or for the year ended    Wireline  Wireless  Directory   International Other  consolidation Eliminations  Adjustments    Total
- ------------------------------------------------------------------------------------------------------------------------------------------------------
Revenues from external customers             $  37,108 $   6,624 $     4,045 $      242   $     983 $         -   $        -  $       529   $  49,531
Intersegment revenues                              322         1          81         13          97           -         (514)           -           -
Depreciation and amortization                    6,825       918          33         17         345           -            -          415       8,553
Equity in net income of affiliates                  (2)       42           -        739           2           -            -          131         912
Interest expense                                 1,188       226           9        235         702           -         (942)          12       1,430
Income before income taxes                       8,046       883       2,011        702          39           -            -         (828)     10,853
Segment assets                                  53,692    11,559       2,422     12,613      44,815           -      (41,886)           -      83,215
Investment in equity method investees               31       216          48     10,372         (19)          -            -            -      10,648
Expenditures for additions to                    8,754       988          52          1         509           -            -            -      10,304
  long-lived assets
======================================================================================================================================================

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

                                                                                                   Cingular De-                Normalizing
At December 31, 1998 or for the year ended    Wireline  Wireless  Directory   International Other  consolidation Eliminations  Adjustments    Total
- ------------------------------------------------------------------------------------------------------------------------------------------------------
Revenues from external customers             $  35,059 $   5,475 $     3,680 $      132   $   1,011 $         -            -  $       884   $  46,241
Intersegment revenues                              305         1          73         17         126           -         (522)           -           -
Depreciation and amortization                    6,437       680          36         18         345           -            -          325       7,841
Equity in net income of affiliates                  (5)       25           -        588           5           -            -            -         613
Interest expense                                 1,250       189           9        213         662           -         (739)          21       1,605
Income before income taxes                       7,315       545       1,797        453         250           -            -        1,755      12,115
Segment assets                                  50,921     9,124       2,065     11,230      38,385           -      (36,759)           -      74,966
Investment in equity method investees               47       244          34      7,106         (19)          -            -            -       7,412
Expenditures for additions to                    7,471       978          35         13         385           -            -            -       8,882
  long-lived assets
======================================================================================================================================================

Geographic Information

SBC’s investments outside of the United States are primarily accounted for under the equity method of accounting, and accordingly, we do not include in our operating revenues and expenses, the revenues and expenses of our individual investees. Specifically, less than 1% of total operating revenues for all years presented are from outside the United States.

Long-lived assets consist primarily of net property, plant and equipment, net goodwill and the book value of our equity investees and are shown in the table below:

     ---------------------------------------------------------
     December 31,                        2000        1999
     ---------------------------------------------------------
     United States                  $  53,885   $   48,924
     Canada                             3,593        3,770
     Denmark                            3,024        3,019
     Mexico                               738          906
     Belgium                              861          831
     South Africa                         596          708
     Hungary                                -          532
     France                               406          459
     Other foreign countries              189          129
     ---------------------------------------------------------
     Total                          $  63,292   $   59,278
     =========================================================

Note 9. Debt

Long-term debt of SBC and its subsidiaries, including interest rates and maturities, is summarized as follows at December 31:

     --------------------------------------------------------------------------------------------
                                                                            2000          1999
     --------------------------------------------------------------------------------------------
      Notes and debentures
        4.38% - 6.00%   2000 - 2008 1                                $     2,831   $     3,056
        6.03% - 7.85%   2000 - 2048 2                                     14,584        13,990
        8.00% - 10.50%  2000 - 2031                                          556           577
     --------------------------------------------------------------------------------------------
                                                                          17,971        17,623
        Unamortized discount - net of premium                                 51           236
     --------------------------------------------------------------------------------------------
     Total notes and debentures                                           18,022        17,859
     --------------------------------------------------------------------------------------------
     Guaranteed obligations of ESOP 3
        8.10% - 9.40%   2000                                                   -            88
     Capitalized leases                                                       84           258
     --------------------------------------------------------------------------------------------
     Total long-term debt, including current maturities                   18,106        18,205
     Current maturities                                                   (2,614)         (730)
     --------------------------------------------------------------------------------------------
     Total long-term debt                                            $    15,492   $    17,475
     ============================================================================================

Includes $250 of 5.9% debentures maturing in 2038 with a put option by holder in 2005.
Includes $125 of 6.35% debentures maturing in 2026 with a put option by holder in 2006.
See Note 13.

At December 31, 2000, the aggregate principal amounts of long-term debt and weighted average interest rate scheduled for repayment for the years 2001 through 2005 were $2,614 (6.7%), $1,089 (6.6%), $1,678 (6.0%), $1,097 (6.5%) and $1,158 (6.9%) with $10,419 (6.9%) due thereafter. As of December 31, 2000, we were in compliance with all covenants and conditions of instruments governing our debt. Substantially all of our outstanding long-term debt is unsecured.

In January 2000, we voluntarily guaranteed existing publicly, but unlisted, issued debt securities issued by Ameritech Capital Funding Corporation, Illinois Bell Telephone Company, Indiana Bell Telephone Company, Inc., Michigan Bell Telephone Company, The Ohio Bell Telephone Company, PacBell, SNET, The Southern New England Telephone Company, SWBell and Wisconsin Bell, Inc. Each guarantee will apply as long as the individual company remains a wholly owned subsidiary of SBC.

Financing Activities - In May 2000, we issued $1,000 in notes through private placement. These notes have a 6.72% interest rate and will mature May 2001. In April 2000, we issued notes for $1,015 with an interest rate of 6.33% that also mature in May 2001.

In December 1999, we called approximately $31 of debt that was scheduled to mature in December 2004. The net income effect of retiring this debt did not materially impact our financial statements. During 1999, subsequent to the completion of the acquisitions of Comcast Cellular Corporation (Comcast) and Cellular Communications of Puerto Rico, Inc. (Cellular Communications), we retired $1,415 of Comcast's and Cellular Communications' long-term debt with no effect on net income. In May 1999, we issued $750 of 6.25% unsecured Eurodollar notes, due May 2009.

In 1998, we issued approximately $2,150 in notes and debentures. The notes and debentures bear interest rates ranging from 5.65% to 6.88% and mature between 2001 and 2048. Also, in 1998, we issued $750 of 5.88% unsecured Eurodollar notes, due February 2003. We used proceeds from these borrowings primarily to fund our investment in Tele Danmark.

Debt maturing within one year consists of the following at December 31:

     --------------------------------------------------------------------------------------
                                                                  2000             1999
     --------------------------------------------------------------------------------------
     Commercial paper                                       $    6,437       $    2,623
     Current maturities of long-term debt                        2,614              730
     Other short-term debt                                       1,419               21
     --------------------------------------------------------------------------------------
     Total                                                  $   10,470       $    3,374
     ======================================================================================

The weighted average interest rate on commercial paper debt at December 31, 2000 and 1999 was 6.51% and 5.72%. We have entered into agreements with several banks for committed lines of credit totaling $4,200, all of which may be used to support commercial paper borrowings. We had no borrowings outstanding under these lines of credit as of December 31, 2000 or 1999.

Note 10. Financial Instruments

The carrying amounts and estimated fair values of our long-term debt, including current maturities and other financial instruments, are summarized as follows at December 31:

     ---------------------------------------------------------------------------------------------
                                                        2000                      1999
     ---------------------------------------------------------------------------------------------
                                                Carrying       Fair       Carrying       Fair
                                                 Amount       Value        Amount       Value
     ---------------------------------------------------------------------------------------------
     Notes and debentures                     $    18,022  $    17,592  $   17,859   $   17,086
     TOPrS                                          1,000          990       1,000          924
     Preferred stock of subsidiaries                  820          820         820          820
     Guaranteed obligations of ESOP 1                   -            -          88           94
     =============================================================================================

See Note 13.

The fair values of our notes and debentures, including ESOP obligations, were estimated based on quoted market prices, where available, or on the net present value method of expected future cash flows using current interest rates. The fair value of the Trust Originated Preferred Securities (TOPrS) was estimated based on quoted market prices. The carrying amounts of preferred stock of subsidiaries and commercial paper debt approximate fair values. Our short-term investments and customer deposits are recorded at amortized cost and the carrying amounts approximate fair values.

Preferred Stock Issuances by Subsidiaries - In April 1998, a subsidiary issued, through private placement, 3,250 shares in multiple series of stated rate auction preferred stock (STRAPS). Net proceeds from these issuances totaled $322. Dividends accrue on the STRAPS at varying rates, which are adjusted periodically through separate auctions on each series. Dividends are cumulative from the date of issuance. The dividend rates for each series ranged from 4.88% to 4.98% as of December 31, 2000.

In June 1997 and December 1999, a subsidiary issued $250 and $100 of preferred stock in private placements. The holders of the preferred stock may require SBC’s subsidiary to redeem the shares after May 20, 2004. Holders receive quarterly dividends based on a rolling three-month London Interbank Offer Rate (LIBOR). The dividend rate for the December 31, 2000 payment was 7.59%.

As of December 31, 2000, a subsidiary has outstanding $85 of Series A Preferred Stock (7.04%, subject to mandatory redemption in 2001) and $60 of Series B Preferred Stock (variable rate, 4.98% as of December 31, 2000, not subject to mandatory redemption).

The preferred stock of subsidiaries discussed above is included in other noncurrent liabilities on the consolidated balance sheets.

Pacific Telesis Financing I and II (the Trusts) were formed in 1996 for the exclusive purpose of issuing preferred and common securities representing undivided beneficial interests in the Trusts and investing the proceeds from the sales of TOPrS in unsecured subordinated debt securities of PAC. Under certain circumstances, dividends on TOPrS could be deferred for up to a period of five years. As of December 31, 2000, the Trusts held subordinated debt securities of PAC in principal amounts of $516 and $514 with interest rates of 7.56% and 8.50%. The TOPrS are priced at $25 per share, have an original 30-year maturity that may be extended up to 49 years, are callable in 2001 at par and are included on the balance sheets as corporation-obligated mandatorily redeemable preferred securities of subsidiary trusts. The proceeds were used to retire short-term indebtedness, primarily commercial paper. SBC has guaranteed payment of the obligations of the TOPrS. We redeemed approximately $500 of the TOPrS with an interest rate of 7.56% in February of 2001.

Derivatives - - We enter into foreign currency contracts to hedge exposure to adverse exchange rate fluctuations. We also use interest rate swaps to manage interest rate risk. Related gains and losses are reflected in net income. The carrying amounts and estimated fair values of our derivative financial instruments are summarized as follows at December 31:

     ---------------------------------------------------------------------------------------------
                                                        2000                      1999
     ---------------------------------------------------------------------------------------------
                                               Carrying/                 Carrying/
                                                Notional       Fair       Notional       Fair
                                                 Amount       Value        Amount       Value
     ---------------------------------------------------------------------------------------------
     Foreign exchange contracts - long        $         -  $        -   $        -   $      142
     Foreign exchange contracts - short                11           -            -            -
     Interest rate swaps                            1,020           4        1,180          (14)
     =============================================================================================

Prior to its merger with an SBC subsidiary, PAC issued stock options to its employees during a spinoff of certain wireless properties. Some of these options were still outstanding when PAC merged with an SBC subsidiary in 1997 (see Note 13). SBC had used equity swaps to hedge the equity price risk related to these spunoff operations’ employee stock options. However, in 1999 we evaluated the related risk level and exited all of our related equity swap contracts, receiving cash for the appreciated value of the contracts and recognizing a minimal gain.

Note 11. Income Taxes

Significant components of our deferred tax liabilities and assets are as follows at December 31:

     --------------------------------------------------------------------------------
                                                                 2000           1999
     --------------------------------------------------------------------------------
     Depreciation and amortization                         $    7,683     $    6,865
     Equity in foreign affiliates                                 789            540
     Deferred directory expenses                                  533            524
     Other                                                      1,794          1,254
     --------------------------------------------------------------------------------
     Deferred tax liabilities                                  10,799          9,183
     --------------------------------------------------------------------------------
     Employee benefits                                          2,069          2,418
     Currency translation adjustments                             698            586
     Allowance for uncollectibles                                 205            222
     Unamortized investment tax credits                           122            147
     Other                                                      2,052          1,850
     --------------------------------------------------------------------------------
     Deferred tax assets                                        5,146          5,223
     --------------------------------------------------------------------------------
     Deferred tax assets valuation allowance                      156             99
     --------------------------------------------------------------------------------
     Net deferred tax liabilities                          $    5,809     $    4,059
     ================================================================================

The increase in the valuation allowance is the result of an evaluation of the uncertainty associated with the realization of certain deferred tax assets. The valuation allowance is maintained in deferred tax assets for certain unused federal and state loss carryforwards.

The components of income tax expense are as follows:

     ---------------------------------------------------------------------------------------------
                                                                2000         1999           1998
     ---------------------------------------------------------------------------------------------
     Federal:
       Current                                             $   3,249    $   2,883      $   3,151
       Deferred - net                                          1,051          814            671
       Amortization of investment tax credits                    (71)         (85)           (96)
     ---------------------------------------------------------------------------------------------
                                                               4,229        3,612          3,726
     ---------------------------------------------------------------------------------------------
     State and local:
       Current                                                   575          421            485
       Deferred - net                                            113          247            169
       Foreign                                                     4            -              -
     ---------------------------------------------------------------------------------------------
                                                                 692          668            654
     ---------------------------------------------------------------------------------------------
     Total                                                 $   4,921    $   4,280      $   4,380
     =============================================================================================

A reconciliation of income tax expense and the amount computed by applying the statutory federal income tax rate (35%) to income before income taxes, extraordinary items and cumulative effect of accounting change is as follows:

     ----------------------------------------------------------------------------------------------------
                                                                              2000       1999      1998
     ----------------------------------------------------------------------------------------------------
     Taxes computed at federal statutory rate                            $   4,511    $ 3,798   $ 4,240
     Increases (decreases) in income taxes resulting from:
      Amortization of investment tax credits over the life of the plant
        that gave rise to the credits                                          (46)       (55)      (62)
      State and local income taxes - net of federal income tax benefit         450        440       424
        Other - net                                                              6         97      (222)
     ----------------------------------------------------------------------------------------------------
     Total                                                               $   4,921    $ 4,280   $ 4,380
     ====================================================================================================

Note 12. Employee Benefits

Pensions - - Substantially all of our employees are covered by one of various noncontributory pension and death benefit plans. Management employees participate in either cash balance or defined lump sum pension plans. The pension benefit formula for most nonmanagement employees is based on a flat dollar amount per year according to job classification. Most employees can elect to receive their pension benefits in either a lump sum payment or annuity.

Our objective in funding the plans, in combination with the standards of the Employee Retirement Income Security Act of 1974 (as amended), is to accumulate funds sufficient to meet its benefit obligations to employees upon their retirement. Contributions to the plans are made to a trust for the benefit of plan participants. Plan assets consist primarily of stocks, U.S. government and domestic corporate bonds, index funds and real estate.

Effective with the Ameritech merger, we performed a midyear valuation for all pension plans in 1999. The amounts that follow reflect the impacts and assumptions of the midyear valuation.

The following table presents the change in the pension plan benefit obligation for the years ended December 31:

     ----------------------------------------------------------------------------
                                                           2000          1999
     ----------------------------------------------------------------------------
     Benefit obligation at beginning of year           $ 25,685      $ 27,528
     Service cost - benefits earned during the period       525           584
     Interest cost on projected benefit obligation        1,927         1,831
     Amendments                                             425           460
     Actuarial (gain)/loss                                  940        (1,121)
     Special termination benefits                         1,104            32
     Benefits paid                                       (5,029)       (3,629)
     ----------------------------------------------------------------------------
     Benefit obligation at end of year                 $ 25,577      $ 25,685
     ============================================================================

The following table presents the change in pension plan assets for the years ended December 31 and the pension plans’ funded status at December 31:

     ----------------------------------------------------------------------------
                                                         2000           1999
     ----------------------------------------------------------------------------
     Fair value of plan assets at beginning of year $  45,958      $  41,794
     Actual return on plan assets                          95          8,065
     Benefits paid                                     (5,239)        (3,901)
     ----------------------------------------------------------------------------
     Fair value of plan assets at end of year 1     $  40,814      $  45,958
     ============================================================================

     Funded status                                  $  15,237      $  20,273
     Unrecognized prior service cost                    1,963          1,898
     Unrecognized net gain                            (11,395)       (17,926)
     Unamortized transition asset                        (683)        (1,036)
     ----------------------------------------------------------------------------
     Prepaid pension cost                           $   5,122      $   3,209
     ============================================================================

1 Plan assets include SBC common stock of $18 at December 31, 2000, and $34 at December 31, 1999.

The following table presents amounts recognized in our consolidated balance sheets at December 31:

     ----------------------------------------------------------------------------
                                                         2000           1999
     ----------------------------------------------------------------------------
     Prepaid pension cost                           $    5,122     $    3,539
     Accrued pension liability                               -           (330)
     ----------------------------------------------------------------------------
     Net amount recognized                          $    5,122     $    3,209
     ============================================================================

Net pension benefit is composed of the following:

     -----------------------------------------------------------------------------------------
                                                            2000          1999        1998
     -----------------------------------------------------------------------------------------
     Service cost - benefits earned during the period  $     525     $     584    $    548
     Interest cost on projected benefit obligation         1,927         1,831       1,813
     Expected return on plan assets                       (3,149)       (2,951)     (2,722)
     Amortization of prior service cost                       43           (35)        (57)
     Recognized actuarial gain                              (491)         (273)       (161)
     -----------------------------------------------------------------------------------------
     Net pension benefit                               $  (1,145)    $    (844)   $   (579)
     =========================================================================================

Significant weighted-average assumptions used in developing pension information include:

     ---------------------------------------------------------------------------------------------
                                                                 2000         1999         1998
     ---------------------------------------------------------------------------------------------
     Discount rate for determining projected benefit obligation  7.75%        7.75%         7.0%
     Long-term rate of return on plan assets                     8.50%        8.50%         8.5%
     Composite rate of compensation increase                     4.25%        4.25%         4.2%
     =============================================================================================

The projected benefit obligation is the actuarial present value of all benefits attributed by the pension benefit formula to previously rendered employee service. It is measured based on assumptions concerning future interest rates and employee compensation levels. Should actual experience differ from the actuarial assumptions, the benefit obligation will be affected.

In October 2000, we implemented a voluntary enhanced pension and retirement program (EPR) to reduce the number of management employees. The program offered eligible management employees who decided to terminate employment an enhanced pension benefit and increased eligibility for post-retirement medical and dental benefits. Enhanced pension benefits related to this program were recognized as an expense of $1.1 billion in 2000. Approximately 7,000 of the employees who accepted this offer terminated employment before December 31, 2000; however, under the program, approximately 2,400 employees were retained for up to one year. Lump sum payments for settlement of pension balances, which are paid by the pension trusts, are expected to occur throughout 2001. We recognized $896 in net settlement and curtailment gains in the fourth quarter of 2000 associated with the EPR program.

In addition to the net pension benefit and EPR related amounts reported above, we recognized $1.2 billion in net settlement gains in 2000 and $566 in 1999. In addition to payments made for EPR, there were a significant amount of lump sum pension payments that caused a partial settlement of Ameritech’s pension plans. We anticipate that additional lump sum payments will require the recognition of additional settlement gains in 2001.

In December 2000 and December 1999, under the provisions of Section 420 of the Internal Revenue Code, we transferred $220 and $280 in pension assets to a health care benefit account for the reimbursement of certain retiree health care benefits paid by us.

Supplemental Retirement Plans - We also provide senior and middle management employees with nonqualified, unfunded supplemental retirement and savings plans. These plans include supplemental defined pension benefits as well as compensation deferral plans, some of which include a corresponding match by us based on a percentage of the compensation deferral. Expenses related to these plans were $191, $146 and $114 in 2000, 1999 and 1998. Liabilities of $1,283 and $1,287 related to these plans have been included in other noncurrent liabilities in our consolidated balance sheets at December 31, 2000 and 1999.

Postretirement Benefits - We provide certain medical, dental and life insurance benefits to substantially all retired employees under various plans and accrue actuarially determined postretirement benefit costs as active employees earn these benefits. In 1998, for certain plans, postretirement benefit cost reflects an estimate of potential future cost sharing by retirees. We maintain Voluntary Employee Beneficiary Association trusts to fund postretirement benefits. Assets consist principally of stocks and U.S. government and corporate bonds.

The following table sets forth the change in the benefit obligation for the years ended December 31:

     ----------------------------------------------------------------------------
                                                              2000           1999
     ----------------------------------------------------------------------------
     Benefit obligation at beginning of year            $   15,511     $   15,489
     Service cost - benefits earned during the period          245            260
     Interest cost on projected benefit obligation           1,201          1,050
     Amendments                                               (134)            (2)
     Actuarial (gain)/loss                                   1,776           (515)
     Special termination benefits                               79              -
     Benefits paid                                            (876)          (771)
     ----------------------------------------------------------------------------
     Benefit obligation at end of year                  $   17,802     $   15,511
     ============================================================================

The following table sets forth the change in plan assets for the years ended December 31 and the plans' funded status at December 31:

     ----------------------------------------------------------------------------
                                                         2000           1999
     ----------------------------------------------------------------------------
     Fair value of plan assets at beginning of year $    7,871     $    6,869
     Actual return on plan assets                         (401)         1,199
     Employer contribution                                  42             93
     Benefits paid                                        (292)          (290)
     ----------------------------------------------------------------------------
     Fair value of plan assets at end of year 1     $    7,220     $    7,871
     ============================================================================

     Funded status                                  $  (10,582)    $   (7,640)
     Unrecognized prior service cost                       680            960
     Unrecognized net (gain)/loss                          203         (2,460)
     ----------------------------------------------------------------------------
     Accrued postretirement benefit obligation      $   (9,699)    $   (9,140)
     ============================================================================

1 Plan assets include SBC common stock of $1 at December 31, 2000, and $10 at December 31, 1999.

Postretirement benefit cost is composed of the following:

     -----------------------------------------------------------------------------------------
                                                                  2000         1999       1998
     -----------------------------------------------------------------------------------------
      Service cost - benefits earned during the  period     $      245    $      260  $    193
      Interest cost on accumulated postretirement
       benefit obligation (APBO)                                 1,201         1,050       904
      Expected return on assets                                   (549)         (504)     (419)
      Amortization of prior service cost                           147           157      (260)
      Recognized actuarial gain                                    (33)          (13)      (12)
     -----------------------------------------------------------------------------------------
      Postretirement benefit cost                           $    1,011    $      950  $    406
     =========================================================================================

The fair value of plan assets restricted to the payment of life insurance benefits was $1,114 and $1,277 at December 31, 2000 and 1999. At December 31, 2000 and 1999, the accrued life insurance benefits included in the APBO were $593 and $540.

In addition to the postretirement benefit cost reported in the table above, we recognized $107 in net curtailment losses in 2000 associated with EPR. Enhanced benefits related to this program were recognized as an expense of $71 in 2000.

The assumed medical cost trend rate in 2001 is 8.0% for retirees 64 and under and 9.0% for retirees 65 and over, decreasing to 5.0% in 2006, prior to adjustment for cost-sharing provisions of the medical and dental plans for active and certain recently retired employees. The assumed dental cost trend rate in 2001 is 5.25%, reducing to 5.0% in 2002. A one percentage-point change in the assumed health care cost trend rate would have the following effects:

     ----------------------------------------------------------------------------------------
                                                   One Percentage-        One Percentage-
                                                   Point Increase         Point Decrease
     ----------------------------------------------------------------------------------------
      Effect on total of service and
        interest cost components                    $       192             $       155
      Effect on postretirement
        benefit obligation                                1,999                   1,651
     ----------------------------------------------------------------------------------------

Significant assumptions for the discount rate, long-term rate of return on plan assets and composite rate of compensation increase used in developing the APBO and related postretirement benefit costs were the same as those used in developing the pension information. Due to the Ameritech merger, a midyear valuation also was performed for all postretirement benefit plans in 1999.

Note 13. Other Employee Benefits

Employee Stock Ownership Plans - We maintain contributory savings plans that cover substantially all employees. Under the savings plans, we match a stated percentage of eligible employee contributions, subject to a specified ceiling.

As a result of past mergers, we have six leveraged ESOPs as part of our existing savings plans. Five of the ESOPs were funded with notes issued by the savings plans to various lenders, the proceeds of which were used to purchase shares of SBC’s common stock in the open market. The original principal amounts were paid off in 2000 with our contributions to the savings plans, dividends paid on SBC shares and interest earned on funds held by the ESOPs. We extended the terms of certain ESOPs through previous internal refinancing of the debt, resulting in unallocated shares remaining in those ESOPs at December 31, 2000.

One ESOP purchased PAC treasury shares in exchange for a promissory note from the plan to PAC. Principal and interest on the note are paid from employer contributions and dividends received by the trust. All PAC shares were exchanged for SBC shares effective with the merger April 1, 1997. The provisions of the ESOP were unaffected by this exchange.

Our match of employee contributions to the savings plans is fulfilled with shares of stock allocated from the ESOPs and with purchases of SBC’s stock in the open market. Shares held by the ESOPs are released for allocation to the accounts of employees as employer-matching contributions are earned. Benefit cost is based on a combination of the contributions to the savings plans and the cost of shares allocated to participating employees’ accounts. Both benefit cost and interest expense on the notes are reduced by dividends on SBC’s shares held by the ESOPs and interest earned on the ESOPs’ funds.

Information related to the ESOPs and the savings plans is summarized below:

     --------------------------------------------------------------------------------------------
                                                                   2000        1999        1998
     --------------------------------------------------------------------------------------------
     Benefit expense - net of dividends and interest income    $    134    $     90    $     77
     Interest expense - net of dividends and interest income          5          10          25
     --------------------------------------------------------------------------------------------
     Total expense                                             $    139    $    100    $    102
     ============================================================================================
     Company contributions for ESOPs                           $     47    $    104    $    142
     ============================================================================================
     Dividends and interest income for debt service            $     93    $     75    $    100
     ============================================================================================

SBC shares held by the ESOPs are summarized as follows at December 31 (in millions):

     --------------------------------------------------------------------------
                                                             2000        1999
     --------------------------------------------------------------------------
     Unallocated                                                8          16
     Allocated to participants                                103         101
     --------------------------------------------------------------------------
     Total                                                    111         117
     ==========================================================================

Note 14. Stock-Based Compensation

Under our various plans, senior and other management employees and non-employee directors have received stock options, stock appreciation rights (SARs), performance stock units and nonvested stock units. Stock options issued through December 31, 2000, carry exercise prices equal to the market price of the stock at the date of grant and have maximum terms ranging from five to ten years. Beginning in 1994 and ending in 1999, certain Ameritech employees were awarded grants of nonqualified stock options with dividend equivalents. Depending upon the grant, vesting of stock options may occur up to four years from the date of grant. Performance stock units are granted to key employees based upon the common stock price at the date of grant and are awarded in the form of common stock and cash at the end of a two- or three-year period, subject to the achievement of certain performance goals. Nonvested stock units are valued at the market price of the stock at the date of grant and vest over a three- to five-year period. Up to 431 million shares may be issued under these plans.

We measure compensation cost for these plans using the intrinsic value-based method of accounting as allowed in Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (FAS 123). Accordingly, no compensation cost for our stock option plans has been recognized. Had compensation cost for stock option plans been recognized using the fair value-based method of accounting at the date of grant for awards in 2000, 1999 and 1998 as defined by FAS 123, our net income would have been $7,800, $7,969 and $7,537, and basic net income per share would have been $2.30, $2.34 and $2.21. The compensation cost that has been charged against income for our other stock-based compensation plans totaled $4, $36 and $83 for 2000, 1999 and 1998.

For purposes of these pro forma disclosures, the estimated fair value of the options granted is amortized to expense over the options’ vesting period. The fair value for these options was estimated at the date of grant, using a Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 2000, 1999 and 1998: risk-free interest rate of 6.67%, 5.31% and 5.69%; dividend yield of 2.19%, 1.65% and 2.38%; expected volatility factor of 16%, 15% and 18%; and expected option life of 4.6, 4.5 and 5.0 years.

As of December 31, 1998, 29,390 shares of nonperformance-based restricted stock issued to Ameritech employees were outstanding under the Ameritech plans. Shareowners’ equity reflects deferred compensation for the unvested stock awarded. This amount was reduced and charged against operations (together with any change in market price) as the employees vested in the stock. All restricted stock under Ameritech plans vested as a result of the Ameritech merger with one of our subsidiaries in 1999.

Information related to options and SARs is summarized below (shares in millions):

     -------------------------------------------------------------------------------------
                                                                            Weighted-
                                                                        Average Exercise
                                                               Number         Price
     -------------------------------------------------------------------------------------
     Outstanding at January 1, 1998                               144         $22.27
      Granted                                                      35          39.46
     Exercised                                                    (26)         20.61
     Forfeited/Expired                                             (7)         29.64
     -------------------------------------------------------------------
     Outstanding at December 31, 1998
         (73 exercisable at weighted-average price of $20.85)     146          26.26
     Granted                                                       26          48.70
     Exercised                                                    (19)         23.13
     Forfeited/Expired                                             (4)         39.06
     -------------------------------------------------------------------
     Outstanding at December 31, 1999
         (116 exercisable at weighted-average price of $26.91)    149          30.24
     Granted                                                      51           39.62
     Exercised                                                    (30)         24.14
     Forfeited/Expired                                            (14)         41.05
     -------------------------------------------------------------------
     Outstanding at December 31, 2000
         (101 exercisable at weighted-average price of $29.22)    156         $33.55
     =====================================================================================

Information related to options and SARs outstanding at December 31, 2000:

     --------------------------------------------------------------------------------------------------
     Exercise Price Range             $10.90 - $17.39  $17.40 - $29.99 $30.00 - $35.49  $35.50 - $59.00
     --------------------------------------------------------------------------------------------------
     Number of options and SARs
      (in millions):
        Outstanding                               8               61               8               79
        Exercisable                               8               61               8               24
     Weighted-average exercise price:
        Outstanding                          $15.26           $24.08          $34.17           $42.64
        Exercisable                          $15.26           $24.08          $34.17           $45.65
     Weighted-average remaining
      contractual life                   3.25 years       5.38 years      7.30 years       8.52 years
     ==================================================================================================

The weighted-average, grant-date fair value of each option granted during 2000, 1999 and 1998 was $8.31, $9.31 and $8.71.

As of December 31, additional shares available under stock options with dividend equivalents were approximately 1 million in 2000, 2 million in 1999 and 2 million in 1998.

Options and SARs held by the continuing employees of PAC at the time of the AirTouch Communications, Inc. (AirTouch) spinoff were supplemented with an equal number of options and SARs for common shares of spunoff operations. The exercise prices for outstanding options and SARs held by continuing employees of PAC were adjusted downward to reflect the value of the supplemental spunoff operations’ options and SARs. The balance sheet reflects a related liability equal to the difference between the current market price of the spunoff operations’ stock and the exercise prices of the supplemental options outstanding. The spunoff operations’ options and SARs have been adjusted for Vodafone’s acquisition of AirTouch and for Vodafone’s five-for-one stock split in 1999. As of December 31, 2000, 227,025 supplemental spunoff operations’ options and SARs were outstanding with expiration dates ranging from 2001 to 2003. Outstanding options and SARs that were held by employees of the wireless operations at the spinoff date were replaced by options and SARs for common shares of the spunoff operations. The spunoff operations assumed liability for these replacement options and SARs.

Note 15. Acquisitions and Dispositions

Acquisitions - - In August 2000, we acquired wireless properties in Seattle and Spokane, Washington and Austin, Texas from GTE Corporation for approximately $1,349. This acquisition also included rural service areas across Texas and Washington. In total, these properties cover a population of more than 7.4 million people and include approximately 318,000 customers. These acquisitions were included in the contribution to Cingular (see Note 6).

In March 2000, we acquired Sterling, a provider of electronic business integration solutions, in an all cash tender offer valued at approximately $3,576. We accounted for the transaction under the purchase method of accounting. The assets acquired include certain intangible assets such as developed technology, tradename, assembled workforce, customer relationships and goodwill, which will be amortized over their remaining useful lives of between 3 and 20 years. We expensed the acquired in-process research and development of approximately $132 in March 2000.

In July 1999, we completed the acquisition of Comcast, the wireless subsidiary of Comcast Corporation, in a transaction valued at $1.8 billion including assumption of $1.4 billion in debt. With the acquisition, we added approximately 862,000 wireless subscribers in Pennsylvania, Delaware, New Jersey and Illinois. This acquisition was included in the contribution to Cingular (see Note 6).

In June 1999, we acquired 20% of Bell Canada, a subsidiary of BCE Inc., a publicly traded Canadian communications company, for approximately $3,447.

In January 1998, we purchased a 34% interest in Tele Danmark, the national communications provider in Denmark, from the Kingdom of Denmark for approximately $3.1 billion. As part of the investment agreement, Tele Danmark repurchased and retired all remaining shares owned by the Danish government, effectively increasing our equity ownership to 41.6% of Tele Danmark (see Note 7).

These acquisitions were primarily accounted for under the purchase method of accounting. The purchase prices in excess of the underlying fair value of identifiable net assets acquired are being amortized over periods not to exceed 40 years. Results of operations of the properties acquired have been included in the consolidated financial statements from their respective dates of acquisition.

Dispositions - - Due to our wireless property contribution to Cingular in October 2000, we were required to sell our overlapping properties, which included selected Radiofone properties in New Orleans and Baton Rouge, Louisiana, and Indianapolis, Indiana, which resulted in a pre-tax gain of $357 (see Note 6).

In August 2000, Tele Danmark and SBC sold their interests in Netcom GSM, a wireless telecommunications provider in Norway, to a third party and we recorded a direct and indirect pre-tax gain of approximately $546.

In July 2000, we exercised our right to sell our interest in MATÁV to Deutsche Telekom, our partner in the investment, for approximately $2,199. The transaction closed in August 2000 with a pre-tax gain of approximately $1,153.

In October 1999, we completed the required disposition, as a condition of the merger with Ameritech, of 20 Midwestern cellular properties consisting of the competing cellular licenses in several markets, including, but not limited to, Chicago, Illinois, and St. Louis, Missouri. We recognized an extraordinary gain from these sales of approximately $1,379, or $0.40 per share.

During the third quarter of 1998, we sold our interest in MTN, a cellular company in South Africa, to the remaining shareholders of MTN for $337. The sale fulfilled our obligation to divest MTN as a requirement of the acquisition of Telkom. As a result of the sale, we realized a pre-tax gain of $250.

In April 1998, we sold substantially all of our remaining interest in TCNZ in a global stock offering. Net proceeds received in two installment payments in April 1998 and March 1999 were approximately $2.1 billion resulting in a pre-tax gain of approximately $1,543.

The above developments did not have a significant impact on consolidated results of operations for 2000, 1999 or 1998, nor would they had they occurred on January 1 of the respective periods.

Note 16. Valuation Adjustments

SecurityLink - In December 2000, we entered into a definitive agreement to sell SecurityLink, our electronic security services operations, for $100 in cash and $379 in notes. The sale closed in January 2001. As a result of the sale, as well as a general decline in the market value of companies in the security industry, we reviewed the carrying value of our investment in SecurityLink. This review included estimating remaining useful lives and cash flows. As this review indicated impairment, fair market values, including in some cases discounted cash flows as an estimate of fair value, related to those assets were analyzed, as well as compared to market values of comparable publicly traded companies, to determine the amount of the impairment. As a result of this review, we recognized impairments to the carrying value of SecurityLink of approximately $614 ($454 net of tax) in the fourth quarter of 2000. Approximately $430 of that charge was a write-off of goodwill.

Prodigy - - In December 2000, we restructured our agreements with Prodigy. As part of the restructuring, we agreed to provide a $110 credit facility to Prodigy, as well as forgive a portion of the amounts that Prodigy owed us at December 31, 2000. SBC recognized a combined charge of $143 ($89 net of tax) in the fourth quarter of 2000, comprised of $110 in equity in net income of affiliates reflecting previously unrecognized equity losses from our investment in Prodigy, and the remainder as either a reduction of revenue or increase in operating expense.

Cost Investments - We have cost investments in alternative providers of digital subscriber line services accounted for under FAS 115. We periodically review the investments to determine whether an investment’s decline in value is other than temporary. If so, the cost basis of the investment is written down to fair value which is the new cost basis. We concluded that the precipitous decline of the market values of those companies, as well as difficulties experienced by many companies in that industry, indicated the decline in value of our investments was other than temporary. As a result of these reviews, we recognized a combined charge of $214 ($134 net of tax) in the fourth quarter of 2000 in other income (expense) - net.

Note 17. Shareowners’ Equity

Share Repurchase - From time to time, we repurchase shares of common stock for distribution, to offset shares distributed through our employee benefit plans or in connection with certain acquisitions. In January 2000, the Board of Directors approved the repurchase of up to 100 million shares of SBC common stock. As of January 31, 2001, we have repurchased a total of approximately 59 million shares of our common stock of the 100 million authorized to be repurchased.

Note 18. Additional Financial Information

     ----------------------------------------------------------------------------------------
                                                                         December 31,
                                                                   --------------------------
     Balance Sheets                                                      2000          1999
     ----------------------------------------------------------------------------------------
     Intangible assets:
        Licenses                                                   $      530    $    4,178
        Goodwill                                                        3,947         2,269
        Customer lists                                                    485           740
        Other                                                           1,259           934
     ----------------------------------------------------------------------------------------
                                                                        6,221         8,121
     Less: accumulated amortization                                       746         1,325
     ----------------------------------------------------------------------------------------
     Intangible assets - net                                       $    5,475    $    6,796
     ========================================================================================

     Accounts payable and accrued liabilities:
        Accounts payable                                           $    5,018    $    4,834
        Accounts payable - Cingular                                     2,514             -
        Advance billing and customer deposits                           1,322         1,481
        Compensated future absences                                       837           711
        Accrued interest                                                  440           427
        Accrued payroll                                                   986           800
        Other                                                           4,315         3,464
     ----------------------------------------------------------------------------------------
     Total                                                         $   15,432    $   11,717
     ========================================================================================

     ----------------------------------------------------------------------------------------
     Statements of Income                                    2000        1999          1998
     ----------------------------------------------------------------------------------------
     Advertising expense                             $        774  $      812    $      814
     ========================================================================================

     Interest expense incurred                       $      1,693  $    1,511    $    1,691
     Capitalized interest                                    (101)        (81)          (86)
     ----------------------------------------------------------------------------------------
     Total interest expense                          $      1,592  $    1,430    $    1,605
     ========================================================================================

     ----------------------------------------------------------------------------------------
     Statements of Cash Flows                                2000        1999          1998
     ----------------------------------------------------------------------------------------
     Cash paid during the year for:
        Interest                                     $      1,681  $    1,516    $    1,713
        Income taxes, net of refunds                        3,120       2,638         2,676
     ========================================================================================

No customer accounted for more than 10% of consolidated revenues in 2000, 1999 or 1998.

Approximately two-thirds of our employees are represented by the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW). On February 5, 2001, our telephone subsidiaries reached four tentative agreements with the CWA covering employees in 13 states. The tentative agreements are labor contracts for three years and will replace the existing contracts that expire on March 31 and April 1, 2001. The agreements include a wage increase of approximately 12.25% over the life of the contracts, in addition to other economic provisions. The agreements must be ratified by CWA members covered by the tentative agreements and this ratification vote is expected by mid-March, 2001.

Note 19. Quarterly Financial Information (Unaudited)

     -----------------------------------------------------------------------------------------------
                  Total                            Basic     Diluted           Stock Price
     Calendar   Operating   Operating    Net      Earnings   Earnings  -----------------------------
     Quarter    Revenues     Income     Income   Per Share  Per Share     High      Low      Close
     -----------------------------------------------------------------------------------------------
     2000
     First     $  12,572   $   3,076  $  1,822   $   0.54   $   0.53  $  49.00  $  34.81  $  42.13
     Second       13,211       2,998     1,851       0.54       0.54     50.00     40.44     43.25
     Third        13,454       2,846     2,999       0.89       0.88     50.19     38.44     49.88
     Fourth       12,239       1,823     1,295       0.38       0.38     58.50     42.63     47.75
     -------------------------------------------
     Annual    $  51,476   $  10,743  $  7,967       2.35       2.32
     ===============================================================================================

     -----------------------------------------------------------------------------------------------
     1999
     First     $  11,812   $   3,051  $  1,980   $   0.58   $   0.57  $  59.94  $  46.06  $  47.19
     Second       12,268       3,227     1,938       0.57       0.56     58.00     48.00     58.00
     Third        12,545       2,462     1,135       0.33       0.33     59.88     45.38     51.06
     Fourth       12,906       2,858     3,106       0.91       0.90     55.50     44.06     48.75
     -------------------------------------------
     Annual    $  49,531   $  11,598  $  8,159       2.39       2.36
     ===============================================================================================

We restated the first quarter of 2000 and all four quarters of 1999 to conform with current year presentation. The first quarter of 1999 includes a cumulative effect of accounting change of $207, or $0.06 per share from a change in accounting for directory operations at Ameritech. The fourth quarter of 1999 includes an extraordinary gain of $1,379, or $0.04 per share on the sale of the overlapping wireless properties.

There were also normalizing (e.g., one-time) items which are included in the information above, but are excluded from the information that management uses to evaluate the performance of each segment of the business (see Note 8).

The quarterly impact of the 2000 normalizing items was as follows:

Gains of $1,699 ($1,125 net of tax) in the third quarter related to the sale of direct and indirect investments in MATÁV and Netcom GSM, two international equity affiliates and $187 ($123 net of tax) in the fourth quarter from the contribution of our investment in ATL to Telecom Americas.

Gains of $238 ($155 net of tax) in the third quarter on the sale of Telmex L shares associated with our private purchase of a note receivable with characteristics that will essentially offset future mark to market adjustments on the DECS.

Pension settlement gains of $250 ($161 net of tax) in the first quarter, $124 ($80 net of tax) in the second quarter, $29 ($19 net of tax) in the third quarter and $109 ($68 net of tax) in the fourth quarter associated with pension litigation, first quarter payments primarily related to employees who terminated employment during 1999 and gains resulting from a voluntary retirement program net of enhanced pension and postretirement benefits associated with that program (see Note 12).

Costs of $141 ($117 net of tax) in the first quarter, $239 ($153 net of tax) in the second quarter, $400 ($258 net of tax) in the third quarter and $425 ($272 net of tax) in the fourth quarter associated with strategic initiatives and other adjustments resulting from the merger integration process with Ameritech.

A charge of $132 (with no tax effect) in the first quarter related to in-process research and development from the March 2000 acquisition of Sterling.

Combined charges of $971 ($677 net of tax) related to valuation adjustments of SecurityLink and certain cost investments accounted for under FAS 115 and the restructure of agreements with Prodigy, including the extension of a credit facility and recognition of previously unrecognized equity losses from our investment.

Gains of $359 ($99 net of tax) in the fourth quarter primarily related to our required disposition of overlapping wireless properties in connection with our contribution of operations to Cingular.

The quarterly impact of the 1999 normalizing items was as follows:

Charges of $881 ($883 net of tax) in the third quarter and $885 ($574 net of tax) in the fourth quarter including, recognition of impairment of long-lived assets, adjustments to the estimate of allowance for doubtful accounts, estimation of deferred taxes on international investments, wireless conversion costs and other items (see Note 2).

Elimination of income of $66 ($39 net of tax) in the first quarter, $50 ($28 net of tax) in the second quarter, $73 ($47 net of tax) in the third quarter and $8 ($5 net of tax) in the fourth quarter from the incremental impacts of overlapping wireless properties required sold in October 1999 relating to the Ameritech merger.

Pension settlement gains of $566 ($368 net of tax) in the fourth quarter associated with lump sum pension payments that exceeded the projected service and interest costs.

Gains of $131 ($77 net of tax) in the fourth quarter recognized from the sale of property by an international equity affiliate.

A reduction of $45 ($27 net of tax) in the first quarter related to a portion of a first quarter 1998 charge to cover the cost of consolidating security monitoring centers and company-owned wireless retail stores.

EX-21 14 exh21.htm EXHIBIT 21 Exhibit 21

EXHIBIT 21

                            PRINCIPAL SUBSIDIARIES OF
                             SBC COMMUNICATIONS INC.
                             AS OF DECEMBER 31, 2000



                                       State of             Conducts
        Name                         Incorporation        Business Under

Ameritech Corporation                  Delaware               Same

Pacific Telesis Group                   Nevada                Same

SBC International, Inc.                Delaware               Same

Southern New England                  Connecticut             Same
 Telecommunications
 Corporation

Southwestern Bell                      Missouri               Same
 Telephone Company

Southwestern Bell                      Missouri               Same
 Yellow Pages, Inc.

EX-23 15 exh23a.htm EXHIBIT 23-A EXHIBIT 23-a

Exhibit 23-a

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in this Annual Report (Form 10-K) of SBC Communications Inc.
(SBC) of our report dated February 9, 2001, included in the 2000 Annual Report to Shareowners of SBC.

Our audits also included the financial statement schedules of SBC listed in Item 14(a). These schedules are
the responsibility of SBC's management. Our responsibility is to express an opinion based on our audits. We
did not audit the 1998 financial statements of Ameritech Corporation, a wholly owned subsidiary, which
statements reflect total assets constituting approximately 40% of SBC's related 1998 consolidated financial
statement totals and which reflect total operating revenues constituting approximately 37% of SBC's related
consolidated financial statement totals for the year ended 1998. Those statements and schedules were audited
by other auditors whose report has been furnished to us. In our opinion, based on our audits, and the report
of other auditors, the financial statement schedules referred to above, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material respects the information set
forth therein.

We consent to the incorporation by reference in the Registration Statements (Form S-8) pertaining to the SBC
Savings Plan and the SBC Savings and Security Plan and other certain plans (Nos. 333-24295, 333-66105 and
333-88667), the Stock Savings Plan (Nos. 33-37451, 33-54291 and 333-34062), the 1992 Stock Option Plan (No.
33-49855), the 1995 Management Stock Option Plan (Nos. 33-61715, 333-49343 and 333-95887), the 1996 Stock and
Incentive Plan and the 2001 Incentive Plan (Nos. 333-30669 (1996 Plan only) and 333-54398), and in the
Registration Statements (Form S-3) pertaining to SBC Communications Capital Corporation and SBC
Communications Inc. (Nos. 33-45490 and 33-56909) and in the related prospectuses, of our report dated
February 9, 2001, with respect to the consolidated financial statements incorporated herein by reference, and
our report included in the preceding paragraph with respect to the financial statement schedules included in
this Annual Report (Form 10-K) for the year ended December 31, 2000.

/s/Ernst & Young LLP
San Antonio, Texas
March 8, 2001

EX-23 16 exh23b.htm EXHIBIT 23-B EXHIBIT 23b

Exhibit 23-b

                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS



As independent public accountants, we hereby consent to the inclusion in this Form 10-K of our report dated
January 21, 1999 (Exhibit 99-a), as included in Ameritech Corporation's annual report on Form 10-K for the
year ended December 31, 1998.  It should be noted that we have not audited any financial statements of the
company subsequent to December 31, 1998 or performed any audit procedures subsequent to the date of our
report.







/s/Arthur Andersen LLP
Chicago, Illinois
March 8, 2001

EX-24 17 exh24.htm POWER OF ATTORNEY Exhibit 24

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, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; 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, Peter A. Ritcher, Michael J. Viola, 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 annual report, and thereafter to execute and file any amendment or
amendments thereto, 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 executed this Power of Attorney the 26th day of January
2001.

/s/ Edward E. Whitacre, Jr.
Edward E. Whitacre, Jr.
Chairman of the Board, Director
and Chief Executive Officer



                                               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, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

               WHEREAS, the undersigned is an officer of the Corporation;

               NOW, THEREFORE, the undersigned hereby constitutes and appoints Edward E. Whitacre, Jr., James
D. Ellis, Peter A. Ritcher, Michael J. Viola, 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 annual report, and thereafter to execute and file any amendment or
amendments thereto, 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 executed this Power of Attorney the 26th day of January
2001.





/s/ Donald E. Kiernan 
Donald E. Kiernan
Senior Executive Vice President and
Chief Financial Officer

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, Peter A. Ritcher,
Michael J. Viola, 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 office
and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any
amendment or amendments thereto, 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 executed this Power of Attorney the 26th day of January
2001.

/s/ Clarence C. Barksdale
Clarence C. Barksdale
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ James E. Barnes
James E. Barnes
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ Augusta A. Busch III
August A. Busch III
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ William P. Clark
William P. Clark
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ Martin K. Eby, Jr.
Martin K. Eby, Jr.
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ Herman E. Gallegos
Herman E. Gallegos
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ Jess T. Hay
Jess T. Hay
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ James A. Henderson
James A. Henderson
Director



                                               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, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

               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, Peter A. Ritcher,
Michael J. Viola, 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 office
and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any
amendment or amendments thereto, 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 executed this Power of Attorney the 26th day of January
2001.





/s/ Carlos Slim Helu 
Carlos Slim Helu
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ Bobby R. Inman
Bobby R. Inman
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ Charles F. Knight
Charles F. Knight
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ Lynn M. Martin
Lynn M. Martin
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ John B. McCoy
John B. McCoy
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ Mary S. Metz
Mary S. Metz
Director



                                               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, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

               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, Peter A. Ritcher,
Michael J. Viola, 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 office
and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any
amendment or amendments thereto, 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 executed this Power of Attorney the 26th day of January
2001.





/s/ Toni Rembe
Toni Rembe
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ S. Donley Ritchey
S. Donley Ritchey
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ Joyce M. Roche
Joyce M. Roche
Director



                                               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, under the provisions of the
Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and

               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, Peter A. Ritcher,
Michael J. Viola, 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 office
and capacity in the Corporation, to execute and file such annual report, and thereafter to execute and file any
amendment or amendments thereto, 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 executed this Power of Attorney the 26th day of January
2001.





/s/ Laura D'Andrea Tyson    
Laura D'Andrea Tyson
Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Corporation;

IN WITNESS WHEREOF, the undersigned executed this Power of Attorney the 26th day of January
2001.

/s/ Patricia P. Upton
Patricia P. Upton
Director

EX-99 18 exh99a.htm REPORT OF INDEPENDENT ACCOUNTANTS Exhibit 99-a

Exhibit 99-a

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

Board of Directors, Ameritech Corporation

We have audited the consolidated statements of income, shareowners' equity and cash flows of Ameritech
Corporation (a Delaware corporation) and subsidiaries for the year ended December 31, 1998, as included in
Ameritech's annual report on Form 10-K for the year ended December 31, 1998. These financial statements are
the responsibility of the company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the results of operations and cash flows for Ameritech Corporation and subsidiaries for the year
ended December 31, 1998, in conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole.
The financial statement schedule included in Item 14(a)(2) of Ameritech's Form 10-K for the year ended
December 31, 1998 is the responsibility of Ameritech's management and is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

/s/Arthur Andersen LLP
Chicago, Illinois
January 21, 1999

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