1985 Profits Up 12.1% at Pacific Telesis Group

Pacific Telesis Group reported a 12.1% increase in 1985 earnings, but it said the California Public Utilities Commission’s refusal last month to boost Pacific Bell’s rates will have “an adverse impact” on the parent’s 1986 earnings.

Net income totaled $929.1 million last year, compared to $828.5 million in 1984, Pacific Telesis’ first year of operation as a regional holding company created to take over the assets of Pacific Telephone from American Telephone & Telegraph. Revenue rose 8.6% to $8.5 billion.

Earnings in last year’s fourth quarter rose just 3.6% to $208.2 million, however, as a result of about $35 million in two one-time charges--notably the settlement of a predivestiture antitrust lawsuit with MCI Communications. Revenue was up 8.7% to $2.17 billion.

“Increasing customer use of our service coupled with major productivity improvements continue to drive our strong financial performance,” said Donald E. Guinn, chairman and chief executive.

Local service revenue increased 11.7% and interstate network access revenue imposed by the Federal Communications Commission rose 17.7%.

The company ended the year with 5,393 fewer employees.

Guinn expressed disappointment over the PUC’s recent decision to slash Pacific Bell’s phone rates by $124 million a year. Pacific Bell had sought a $425.5-million increase.

The company has yet to complete its analysis of the order’s likely impact, spokesman Ginny Juhnke said, but Guinn is expected to make that known next week in a scheduled talk to financial analysts in New York.