PacTel to Study Spinoff of Core Phone Firms : Telecommunications: Such a move might enhance its position, making it more competitive by enabling it to offer a greater range of services.

Pacific Telesis stunned regulators and employees late Wednesday afternoon with word that its board will study the possibility of spinning off its core businesses that provide local telephone services into a company separate from its cellular and other operations.

Such a move might enhance PacTel’s position with investors, who have had to weigh the value of a company made up of many regulated and non-regulated businesses. PacTel was created in 1984 when the court-ordered breakup of AT&T;’s long-held monopoly went into effect.

PacTel, like other providers of local phone services, is also facing increasing competition, and the company’s current structure will hamper its ability to offer a variety of competitively priced services, telecommunications experts said.

Sam Ginn, PacTel chairman and chief executive, said in a statement that the board and management will undertake an “in-depth analysis” during the next several months to determine whether a spinoff of Pacific Bell, Nevada Bell and the Pacific Bell Directory to shareholders “would better position the resulting companies to pursue future opportunities.”

Should such a spinoff occur, PacTel would become the first of the seven regional Bell companies to break apart to adapt to the changing marketplace.

In a spinoff, a company creates new independent groups with shares distributed to current stockholders. The regional Bell companies were created in a similar spinoff from AT&T.;

A PacTel spokesman said the study would look at many options and “may conclude that the present structure is the most appropriate one.” He added that “it is an open issue.”

How PacTel shareholders might feel about holding shares separately in the regulated phone companies is unclear. The company made its announcement after the close of the stock market Wednesday. (In composite New York Stock Exchange trading, PacTel’s shares closed at $40, up 50 cents. The stock has fallen from a peak of $51.50 in 1990 and traded as low as $36.875 recently.)

Shares of PacTel, and those of many other Baby Bell companies, have performed miserably in recent years. In 1991, telephone stocks rose an average of just 0.7%, whereas the Dow Jones industrial average soared 20%. In this year’s first quarter, phone stocks plunged 12.5%, while the Dow added 2.1%.

Many of the Baby Bell companies that were a product of the breakup of AT&T; have shown little earnings growth the past few years because of costly efforts to transform them from stodgy utilities into technology companies with interests in cellular communications and information services.

PacTel has become a major cellular telephone operator in the United States and has started cellular businesses in Germany and Portugal. It also owns part of a cable television service in Britain.

PacTel has pledged $500 million in investment in the next few years to build up that European presence.

The cellular business now accounts for $2.4 billion in annual sales, or 22% of PacTel’s total revenue.

Having that growing non-regulated business attached to the regulated local Bell telephone company could hamper expansion into other businesses because of constraints imposed by the order under which AT&T; was broken up, telecommunications analysts said.

In California, the Public Utilities Commission now dictates that PacTel’s Pacific Bell subsidiary charge its residential telephone customers rates that, in effect, are lower than those it charges business customers. Some industry watchers say it is a form of subsidy for voters.

But now companies such as Teleport Communications Inc. are offering corporate customers a range of telecommunications services at lower prices than the regulated Pac Bell companies, thus skimming away the high-volume corporate business. One result is that business customers have begun to bypass the Bell phone companies. Ultimately, this trend could leave PacTel as the provider of last resort, as the U.S. Postal Service has become in competition with higher-priced but faster mail services such as Federal Express and United Parcel Service.

In San Francisco, Daniel W. Fessler, president of the PUC, said it would be the “prerogative of (PacTel) management to frame the terms of any proposal” to spin off the phone companies. Until that time, he said, “it’s difficult to imagine the level of scrutiny” that would be necessary, but he added that “it will be a matter of keen interest.”

Paul Fadelli, principal consultant to the state Senate’s Energy and Public Utilities Committee in Sacramento, said the news surprised him. He said legislators would have to ensure that there is “thorough scrutiny to make sure that the ratepayer is not put at harm . . . so that utilities can venture off into new diversified arenas.”

Every move the Bell operating companies make must still be cleared by Judge Harold Greene, the federal jurist in Washington who presided over the breakup of American Telephone & Telegraph.

A Pac Bell employee who asked not to be identified said that the announcement came as “a shock” but that “panic is certainly too strong a word” to describe the employees’ mood.

The employee added that “there is kind of a wait-and-see” attitude. Pac Bell has 57,000 employees.

Separately Wednesday, PacTel reported first-quarter net income of $331 million, up 24.4% from the same period last year. Sales in the quarter rose slightly to $2.47 billion from $2.41 billion.

Earnings would have been flat without one-time gains of about $45 million--primarily to reflect a government refund after settlement of an income tax matter.

Pacific Bell’s earnings for the quarter were $327 million, up 33.5% from the 1991 period. Revenue rose a smidgen to $2.2 billion from $2.16 billion. Without the one-time gains, Pac Bell’s earnings would have been $268 million, up 9.4%.

Times staff writer Tom Petruno in Los Angeles contributed to this story.