SECURITIES AND EXCHANGE COMMISSION
                                
                                
                     Washington, D.C.  20549
                                
                                
                            FORM 8-K
                                
                                
                         CURRENT REPORT
                                
                                
                                
             Pursuant to Section 13 or 15(d) of the
                 Securities Exchange Act of 1934
                                
                                
                                
Date of Report (Date of earliest event reported)   June 10, 1994
                                                    . . . . . . .
. . .

                           GTE SOUTH INCORPORATED
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
           (Exact name of registrant as specified in its charter)


             Virginia                  2-36292                56-
0656680
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
         (State  or  other            (Commission            (IRS
Employer
            jurisdiction      of                File      Number)
Identification No.)
       incorporation)


19845 N. U.S. 31, P.O. Box 407, Westfield, Indiana     46074
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
     (Address of principal executive offices)        (Zip Code)


Registrant's telephone number, including area code        317-896-
6464
                                                          . . . .
. . .

  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
      (Former  name  or  former address, if  changed  since  last
report)
                     GTE SOUTH INCORPORATED
                                
                            FORM 8-K
                                
                       ITEM OF INFORMATION


Item 5.  Other Event

On December 31, 1993, GTE South Incorporated (the "Company")
entered into an Agreement of Merger with Contel of Kentucky,
Inc., a Kentucky corporation ("Contel Kentucky"), Contel of North
Carolina, Inc., a North Carolina corporation ("Contel North
Carolina"), Contel of South Carolina, Inc., a South Carolina
corporation ("Contel South Carolina"), and Contel of Virginia,
Inc., a Virginia corporation ("Contel Virginia").  The agreement
provides that the aforementioned companies (collectively, the
"Contel Subsidiaries") would merge with and into the Company,
with the Company to be the surviving corporation in the merger
(the "Merger").  Each of the Contel Subsidiaries is a wholly-
owned subsidiary of Contel Corporation, which is itself a wholly-
owned subsidiary of GTE Corporation.  The Contel Subsidiaries
provide communications services in the states of Kentucky, North
Carolina, South Carolina and Virginia.

The Merger, which is expected to occur on or after July 1, 1994,
will be accounted for in a manner consistent with a transfer of
entities under common control which is similar to a "pooling of
interests."  A copy of the merger agreement is attached as
Exhibit 2.1.

Included under Item 7 of this report are copies of the audited
financial statements of Contel of Kentucky, Inc., Contel of North
Carolina, Inc. and Contel of Virginia, Inc. for the years ended
December 31, 1993 and 1992.  In addition, included are copies of
the unaudited pro forma condensed consolidating balance sheet as
of March 31, 1994, and the unaudited pro forma condensed
consolidating statements of income for the three months ended
March 31, 1994 and 1993, and for the years ended December 31,
1993-1991.
Item 7.  Financial Statements, Pro Forma Financial Information
and Exhibits

Page
(a) Financial Statements

  CONTEL OF VIRGINIA, INC.
  Report of Independent Public Accountants . . . . . . . . . . . . .
. . . . . .  3
  Balance Sheets at December 31, 1993 and 1992 . . . . . . . . . . .
. . . . . .  4
  Statements of Income and Reinvested Earnings for Each of the Two
Years in
    the Period Ended December 31, 1993 . . . . . . . . . . . . . . .
. . . . . .  6
  Statements of Cash Flows for Each of the Two Years in the Period
Ended
    December 31, 1993  . . . . . . . . . . . . . . . . . . . . . . .
. . . . . .  7
  Notes to Financial Statements  . . . . . . . . . . . . . . . . . .
. . . . . .  8
  Condensed Balance Sheet at March 31, 1994 (Unaudited)  . . . . . .
. . . . . . 21
  Condensed Statements of Income for the Three Months Ended March 31,
1994 and
    1993 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 23
  Condensed Statements of Cash Flows for the Three Months Ended March
31, 1994
    and 1993 (Unaudited) . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 24
  Notes to Condensed Financial Statements (Unaudited)  . . . . . . .
. . . . . . 25

  CONTEL OF KENTUCKY, INC.
  Report of Independent Public Accountants . . . . . . . . . . . . .
. . . . . . 26
  Balance Sheets at December 31, 1993 and 1992 . . . . . . . . . . .
. . . . . . 27
  Statements of Income and Reinvested Earnings for Each of the Two
Years in
    the Period Ended December 31, 1993 . . . . . . . . . . . . . . .
. . . . . . 29
  Statements of Cash Flows for Each of the Two Years in the Period
Ended
    December 31, 1993  . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 30
  Notes to Financial Statements  . . . . . . . . . . . . . . . . . .
. . . . . . 31
  Condensed Balance Sheet at March 31, 1994 (Unaudited)  . . . . . .
. . . . . . 44
  Condensed Statements of Income for the Three Months Ended March 31,
1994 and
    1993 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 46
  Condensed Statements of Cash Flows for the Three Months Ended March
31, 1994
    and 1993 (Unaudited) . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 47
  Notes to Condensed Financial Statements (Unaudited)  . . . . . . .
. . . . . . 48

  CONTEL OF NORTH CAROLINA, INC.
  Report of Independent Public Accountants . . . . . . . . . . . . .
. . . . . . 49
  Balance Sheets at December 31, 1993 and 1992 . . . . . . . . . . .
. . . . . . 50
  Statements of Income and Reinvested Earnings for Each of the Two
Years in
    the Period Ended December 31, 1993 . . . . . . . . . . . . . . .
. . . . . . 52
  Statements of Cash Flows for Each of the Two Years in the Period
Ended
    December 31, 1993  . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 53
  Notes to Financial Statements  . . . . . . . . . . . . . . . . . .
. . . . . . 54
  Condensed Balance Sheet at March 31, 1994 (Unaudited)  . . . . . .
. . . . . . 67
  Condensed Statements of Income for the Three Months Ended March 31,
1994 and
    1993 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 69
  Condensed Statements of Cash Flows for the Three Months Ended March
31, 1994
    and 1993 (Unaudited) . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 70
  Notes to Condensed Financial Statements (Unaudited)  . . . . . . .
. . . . . . 71









                                1
(b) Pro Forma Financial Information (Unaudited)

Page
  Pro Forma Condensed Consolidating Balance Sheet  as of March 31,
1994. . . . . 73
  Pro Forma Condensed Consolidating Statement of Income for the Three
    Months Ended March 31, 1994  . . . . . . . . . . . . . . . . . .
. . . . . . 74
  Pro Forma Condensed Consolidating Statement of Income for the Three
    Months Ended March 31, 1993  . . . . . . . . . . . . . . . . . .
. . . . . . 75
  Pro Forma Condensed Consolidating Statement of Income for the Year
    Ended December 31, 1993  . . . . . . . . . . . . . . . . . . . .
. . . . . . 76
  Pro Forma Condensed Consolidating Statement of Income for the Year
    Ended December 31, 1992  . . . . . . . . . . . . . . . . . . . .
. . . . . . 77
  Pro Forma Condensed Consolidating Statement of Income for the Year
    Ended December 31, 1991  . . . . . . . . . . . . . . . . . . . .
. . . . . . 78
  Notes to Pro Forma Condensed Consolidating Financial Statements  .
. . . . . . 79

(c) Exhibits

   2.1 Agreement of Merger, dated December 31, 1993, between GTE
South
       Incorporated, Contel of Kentucky, Inc., Contel of North
Carolina, Inc.,
       Contel of South Carolina, Inc. and Contel of Virginia, Inc.
  23.1 Consent of Arthur Andersen & Co.




































                                2
                                
                                
                                
                                
                                
                                
            REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Board of Directors of
Contel of Virginia, Inc.:

We have audited the accompanying balance sheets of Contel of
Virginia, Inc. (a Virginia corporation), d/b/a GTE Virginia (the
Company), as of December 31, 1993 and 1992, and the related
statements of income, reinvested earnings and cash flows for the
years then ended.  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 audits.

We conducted our audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Contel of Virginia, Inc. as of December 31, 1993 and 1992, and
the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting
principles.

As discussed in Note 1 to the financial statements, effective
January 1, 1993, the Company changed its method of accounting for
postretirement benefits other than pensions.  Also as discussed
in Note 1, effective January 1, 1992, the Company changed its
method of accounting for income taxes.






                                             ARTHUR ANDERSEN &
CO.



Dallas, Texas
January 28, 1994.





                                3

                           CONTEL OF VIRGINIA, INC.

                                BALANCE SHEETS

                                    ASSETS


                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Current assets:
       Cash                                       $   9,252   $
1,940
       Accounts receivable
          Customers (including unbilled revenues)    81,732
63,229
          Affiliated companies                          133
3,903
          Other                                       9,577
1,242
          Allowance for uncollectible accounts       (1,073)
(5,077)
       Materials and supplies, at average cost        1,383
3,697
       Deferred income tax benefits                   7,349
- - --
       Prepayments and other                            434
102
                                                    108,787
69,036





    Property, plant and equipment:
       Original cost                                903,229
842,960
       Accumulated depreciation                    (307,690)
(263,217)
                                                    595,539
579,743





    Other assets                                      4,339
5,353










    Total assets                                  $ 708,665   $
654,132



                          See Notes to Financial Statements.




                                4
                           CONTEL OF VIRGINIA, INC.

                                BALANCE SHEETS

                     LIABILITIES AND SHAREHOLDER'S EQUITY


                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Current liabilities:
       Notes payable to affiliates                $  29,235   $
46,076
       Current maturities of long-term debt          59,354
10,344
       Accounts payable                              30,916
29,908
       Due to affiliated companies                   17,647
15,418
       Advanced billings and customer deposits        7,210
8,453
       Accrued taxes                                  9,414
4,132
       Accrued interest                               2,301
1,682
       Accrued payroll and vacations                  6,317
4,451
       Accrued dividends                             10,000
1,700
       Accrued restructuring costs and other         27,107
6,681
                                                    199,501
128,845


    Long-term debt                                  129,349
160,465


    Deferred credits:
       Deferred income taxes                         66,871
70,023
       Deferred investment tax credits                8,776
10,722
       Restructuring costs and other                 62,601
33,625
                                                    138,248
114,370



    Shareholder's equity:
       Common stock (3,409,944 shares outstanding)   34,099
34,099
       Other capital                                 35,775
35,775
       Reinvested earnings                          171,693
180,578
                                                    241,567
250,452






    Total liabilities and shareholder's equity    $ 708,665   $
654,132




                          See Notes to Financial Statements.




                                5
                           CONTEL OF VIRGINIA, INC.

                             STATEMENTS OF INCOME

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)
    Operating revenues:
       Local network services                     $ 108,008   $
110,182
       Network access services                      120,937
103,085
       Long distance services                        51,632
48,042
       Equipment sales and services                  12,442
10,201
       Other                                         19,834
15,366
                                                    312,853
286,876

    Operating expenses:
       Cost of sales and services                    77,745
77,704
       Depreciation and amortization                 57,454
49,596
       Marketing, selling, general
         and administrative                          91,708
89,170
       Restructuring costs                           45,290
- - --
                                                    272,197
216,470

    Net operating income                             40,656
70,406

    Other deductions:
       Interest expense                              15,920
18,637
       Other - net                                      678
6,973

    Income before income taxes                       24,058
44,796

    Income taxes                                      7,643
14,417

    Net income                                    $  16,415   $
30,379

                        STATEMENTS OF REINVESTED EARNINGS

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Balance at beginning of year                  $ 180,578   $
162,299
    Add -
       Net income                                    16,415
30,379
    Deduct -
       Cash dividends declared on common stock       25,300
12,100

    Balance at end of year                        $ 171,693   $
180,578


                          See Notes to Financial Statements.




                                6
                           CONTEL OF VIRGINIA, INC.

                           STATEMENTS OF CASH FLOWS

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Cash flows from operating activities:
       Net income                                 $  16,415   $
30,379
       Adjustments to reconcile net income to
       net cash from operating activities:
          Depreciation and amortization              57,454
49,596
          Restructuring costs                        45,290
- - --
          Deferred income taxes and investment
            tax credits                             (19,207)
6,473
          Provision for uncollectible accounts          447
5,819
          Changes in current assets and current
            liabilities                             (15,258)
(17,923)
          Other - net                                 8,526
(8,195)
          Net cash from operating activities         93,667
66,149


    Cash flows from investing activities:
       Capital expenditures                         (69,806)
(70,726)
       Other - net                                     (602)
877
          Net cash used in investing activities     (70,408)
(69,849)


    Cash flows from financing activities:
       Long-term debt retired                       (22,106)
(38,239)
       Long-term debt issued                         40,000
- - --
       Dividends paid to shareholder                (17,000)
(10,400)
       Net change in affiliate notes                (16,841)
53,586
          Net cash used in financing activities     (15,947)
4,947


    Increase in cash                                 7,312
1,247


    Cash:
          Beginning of year                          1,940
693

          End of year                            $   9,252    $
1,940







                            See Notes to Financial Statements.




                                7
                    CONTEL OF VIRGINIA, INC.
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                                
1.  Summary of Accounting Policies

Contel of Virginia, Inc., d/b/a GTE Virginia (the Company), is  a
wholly-owned  subsidiary  of  Contel  Corporation   (the   Parent
Company). The Parent Company is a wholly-owned subsidiary of  GTE
Corporation (GTE).

Transactions with Affiliates - Purchases

Certain  affiliated companies supply construction and maintenance
materials,   supplies  and  equipment  to  the  Company.    These
purchases  amounted  to  approximately $18.7  million  and  $25.0
million  for  the  years  1993  and  1992,  respectively.    Such
purchases  are recorded in the accounts of the Company  at  cost,
including a normal return realized by the affiliates.

The  Company  is  also  billed for data processing  services  and
equipment rentals, and receives management, consulting,  research
and  development  and  pension  management  services  from  other
affiliated  companies.  These charges amounted to  $58.8  million
and $52.4 million for the years 1993 and 1992, respectively.  The
amounts  charged for these affiliated transactions are  based  on
management's  best  estimate  of a proportional  cost  allocation
method.

Telephone Plant

Maintenance  and  repairs  are charged  to  income  as  incurred.
Additions  to, replacements and renewals of property are  charged
to telephone plant accounts.  Property retirements are charged in
total to the accumulated depreciation account.  No adjustment  to
depreciation  is  made  at  the time properties  are  retired  or
otherwise  disposed of, except in the case of  significant  sales
of property where profit or loss is recognized.

The Company provides for depreciation on telephone plant over the
estimated  useful  lives  of the assets using  the  straight-line
method, based upon rates prescribed by the Federal Communications
Commission  (FCC)  and the Virginia State Corporation  Commission
(VSCC).   The  provisions for depreciation and amortization  were
equivalent  to composite annual rates of 6.6% and  6.2%  for  the
years 1993 and 1992, respectively.

Regulatory Accounting

The  Company  follows the accounting prescribed  by  the  Uniform
System  of  Accounts  of the FCC and the VSCC  and  Statement  of
Financial  Accounting Standards (SFAS) No. 71 ,  "Accounting  for
the  Effects  of  Certain Types of Regulation".  This  accounting
recognizes  the economic effects of rate regulation by  recording
costs  and  a return on investment as such amounts are  recovered
through  rates authorized by regulatory authorities.  The Company
annually reviews the continued applicability of SFAS No. 71 based
on the current regulatory and competitive environment.





                                8
Revenue Recognition

Revenues are recognized when earned.  This is generally based  on
usage  of  the  Company's local exchange networks or  facilities.
For  other  products  and services, revenue  is  recognized  when
products are delivered or services are rendered to customers.

Materials and Supplies

Materials and supplies are stated at the lower of cost or  market
value.

Employee Benefit Plans

Effective  January  1, 1993, the Company adopted  SFAS  No.  106,
"Employers'  Accounting for Postretirement  Benefits  Other  Than
Pensions."  The new standard requires that the expected costs  of
postretirement  benefits be charged to expense during  the  years
that  the employees render service.  The Company elected to adopt
this  new  accounting standard on the delayed recognition  method
and  commencing January 1, 1993, began amortizing  the  estimated
unrecorded  accumulated  postretirement benefit  obligation  over
twenty years.

The Company also adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" effective January 1, 1993.  SFAS No. 112
requires employers to accrue the future cost of benefits provided
to  former  or  inactive  employees and  their  dependents  after
employment but before retirement.  Previously, the cost of  these
benefits  was  charged to expense as paid.  The  impact  of  this
change  in accounting on the Company's results of operations  was
immaterial.

Income Taxes

Investment  tax credits were repealed by the Tax  Reform  Act  of
1986  (the  Act).  Those credits claimed prior to  the  Act  were
deferred and are being amortized over the lives of the properties
giving rise to the credits.

As  further  explained in Note 6, during the  fourth  quarter  of
1992,  the  Company adopted SFAS No. 109, "Accounting for  Income
Taxes", retroactive to January 1, 1992.  SFAS No. 109 changed the
method by which companies account for income taxes.  Among  other
things,  the  Statement requires that deferred  tax  balances  be
adjusted to reflect new tax rates when they are enacted into law.
The  impact of this change in accounting on the Company's results
of operations was immaterial.

Financial Instruments

The  fair  values of financial instruments other  than  long-term
debt,  closely approximate their carrying values.  The  estimated
fair value of long-term debt at December 31, 1993 and 1992, based
on  either reference to quoted market prices or an option pricing
model,   exceeded  the  carrying  value  by  approximately  $15.0
million and $10.2 million, respectively.

Prior Year's Financial Statements

Reclassifications  of  prior year data  have  been  made  in  the
financial statements to conform to the 1993 presentation.


                                9
2.  Restructuring Costs

Results  for 1993 include a one-time pretax restructuring  charge
of  $45.3  million  related to the Company's re-engineering  plan
over the next three years.  The re-engineering plan will redesign
and  streamline processes to improve customer-responsiveness  and
product  quality,  reduce  the time necessary  to  introduce  new
products  and  services  and  further  reduce  costs.   The   re-
engineering  plan  includes $18.6 million to upgrade  or  replace
existing customer service and administrative systems and  enhance
network  software, $21.0 million for employee separation benefits
associated  with workforce reductions and $5.7 million  primarily
for  the  consolidation of facilities and  operations  and  other
related costs.



3.  Common Stock

The  authorized common stock of the Company consists of 5,000,000
shares with a par value of $10 per share.  All outstanding shares
of common stock are held by the Parent Company.

There  were no shares of common stock held by or for the  account
of  the  Company  and no shares were reserved  for  officers  and
employees, or for options, warrants, conversions or other rights.

At  December 31, 1993, $107.2 million of reinvested earnings  was
restricted  as to the payment of cash dividends on  common  stock
under the most restrictive terms of the Company's indentures.





























                               10
4.  Long-Term Debt

Long-term  debt outstanding, exclusive of current maturities,  is
as follows:

                                              December 31
                                            1993         1992
                                         (Thousands of Dollars)

Rural Electrification Administration

  2%, due 1998                           $   1,460    $   2,220

First Mortgage Bonds

  4.8% to 5.875%, through 1997               3,330        3,395
  6.25% to 7.375%, through 1996                 --          360
  8% to 9.875%, through 2009                58,862       73,444
  10.54% due 2008                           24,706       26,471
  12.5% due 1994                                --        3,500

Unsecured Note Payable

  8.25%, due 1997                              800          860

Unsecured Promissory Note Payable

  6.76%, due 1994                               --       50,000
  4.4925%, due 1995                         40,000           --

Capitalized Leases                             191          215

  Total long-term debt                   $ 129,349    $ 160,465


The  aggregate principal amount of bonds and debentures that  may
be  issued is subject to the restrictions and provisions  of  the
Company's indentures.

None  of the securities shown above were held in sinking or other
special funds of the Company or pledged by the Company.

Maturities,  installments and sinking fund requirements  for  the
five-year  period from January 1, 1994 are summarized  below  (in
thousands of dollars):


                 1994           $ 59,354
                 1995             46,402
                 1996              5,812
                 1997              9,007
                 1998              7,387

Substantially all of the Company's telephone plant is subject  to
the  liens  of the indentures under which the bonds listed  above
were issued.





                               11
5.  Notes Payable to Affiliates

The Company finances part of its construction program through the
use  of interim short-term notes payable to affiliates, which are
generally refinanced at a later date by the issuance of long-term
debt  or  equity.  During 1993 and 1992, the Company supplemented
its  internal  generation of cash with funds borrowed  from  GTE.
These  arrangements  require payment of  interest  based  on  GTE
Corporation's  daily intercompany interest rate (which  is  based
primarily on the costs associated with the issuance of commercial
paper).   In addition, a $2.3 billion line of credit is available
to   the  Company  through  shared  lines  with  GTE  and   other
affiliates.














































                               12
6.  Income Taxes

The provision for income taxes is as follows:


                                          1993         1992
                                    (Thousands of Dollars)

Current
  Federal                              $  22,768    $   6,735
  State and local                          4,082        1,209
    Total                                 26,850        7,944

Deferred
  Federal                                (14,626)       7,199
  State and local                         (2,635)       1,581
    Total                                (17,261)       8,780

Amortization of deferred
 investment tax credits                   (1,946)      (2,307)

    Total                              $   7,643    $  14,417



The  components of deferred income tax (benefit) expense  are  as
follows:


                                          1993         1992
                                     (Thousands of Dollars)

  Depreciation and amortization        $  11,032    $   5,903
  Employee benefit obligations           (13,926)      (1,136)
  Restructuring cost                     (17,393)          --
  Other - net                              3,026        4,013

    Total                              $ (17,261)   $   8,780



















                               13
A  reconciliation between the statutory Federal income  tax  rate
and the effective income tax rate is as follows:

                                             1993         1992

Statutory Federal income tax rate            35.0%        34.0%
  State and local income taxes, net of
    Federal income tax benefits               3.9          4.1
  Amortization of deferred investment
    tax credits                              (8.1)        (5.1)
  Depreciation of telephone plant
    construction costs previously
    deducted for tax purposes - net           1.6          1.2
  Rate differentials applied to
    reversing temporary differences          (3.1)        (2.0)
  Change in tax reserves                      2.4           --
  Other - net                                 0.1           --

Effective income tax rate                    31.8%        32.2%


As  a  result of implementing SFAS No. 109, the Company  recorded
additional  deferred income tax liabilities primarily related  to
temporary differences which had not previously been recognized in
accordance  with  established rate-making practices.   Since  the
manner in which income taxes are treated for rate-making has  not
changed,  pursuant  to  SFAS No. 71, a  corresponding  regulatory
asset  was also established.  In addition, deferred income  taxes
were  adjusted  and  a regulatory liability established  to  give
effect  to the current statutory Federal income tax rate and  for
unamortized   investment  tax  credits.   The   net   unamortized
regulatory  liability  balances at December  31,  1993  and  1992
amounted  to $15.7 million and $21.3 million, respectively.   The
regulatory liabilities are reflected as other deferred credits in
the   accompanying  Balance  Sheets.   These  amounts  are  being
amortized  over  the  lives  of the  related  depreciable  assets
concurrent  with  recovery in rates and in conformance  with  the
provisions  of  the  Internal  Revenue  Code.   The  assets   and
liabilities established in accordance with SFAS No. 71 have  been
increased for the tax effect of future revenue requirements.

The  tax  effects of all temporary differences that give rise  to
the deferred tax liability and deferred tax asset at December  31
are as follows:

                                             1993         1992
                                          (Thousands of Dollars)

  Depreciation and amortization           $  91,547    $  72,728
  Employee benefit obligations              (15,026)      (4,693)
  Restructuring cost                        (17,393)          --
  Other - net                                 3,063        3,630
    Total                                 $  62,191    $  71,665








                               14
7.  Employee Benefit Plans

The Company participates in the Parent Company's trusteed pension
plan  (the Plan), which covers substantially all employees.   The
benefits are based on an employee's years of service and  average
earnings   for  the  five  highest  consecutive  calendar   years
preceding  retirement.  The Company's policy is to  fund  pension
cost  in  accordance with applicable regulations.  Total  pension
(credits)  costs for 1993 and 1992 were $(3.3) million  and  $2.2
million, respectively.

The  net  assets  available for benefits are maintained  for  the
total Plan and amounted to $782.6 million.  The Plan's net assets
available for benefits exceeded projected benefit obligations  by
$534.7   million  as  computed  under  SFAS  No.  87  "Employers'
Accounting for Pensions" as of December 31, 1993.

As  described in Note 1, effective January 1, 1993,  the  Company
adopted  SFAS  No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions."

Substantially  all of the Company's employees are  covered  under
postretirement health care and life insurance benefit plans.  The
health care benefits paid under the plans are generally based  on
comprehensive hospital, medical and surgical benefit  provisions,
while  the life insurance benefits are currently based on  annual
earnings  at  the time of retirement.  The Company funds  amounts
for  postretirement benefits as deemed appropriate from  time  to
time.

The  postretirement benefit cost for 1993 includes the  following
components (in thousands of dollars):

                                                       1993
Service cost-benefits earned
  during the period                                 $   1,623
Interest cost on accumulated
  postretirement benefit obligation                     5,215
Amortization of transition obligation
  and prior service cost                                2,993
  Postretirement benefit cost                       $   9,831


During  1992,  the cost of postretirement health  care  and  life
insurance benefits on a pay-as-you-go basis was $2.0 million.
















                               15
The  following table sets forth the plans' funded status and  the
accrued  obligation  as  of December 31, 1993  (in  thousands  of
dollars):

                                                       1993
Accumulated postretirement benefit
  obligation attributable to:
    Retirees                                        $  42,739
    Fully eligible active plan participants             4,302
    Other active plan participants                     19,642
Total accumulated postretirement benefit
  obligation                                           66,683
Fair value of plan assets                                  82
Excess of accumulated obligation over plan
  assets                                               66,601
Unrecognized transition obligation                    (44,668)
Unrecognized net loss                                  (7,012)
  Accrued postretirement benefit obligation         $  14,921

The  assumed  discount  rate  used  to  measure  the  accumulated
postretirement benefit obligation was 7.5% at December 31,  1993.
The  expected long-term rate of return on plan assets  was  8.25%
for  1993.  The assumed health care cost trend rate in  1993  was
13%  for pre-65 participants and 9.5% for post-65 retirees,  each
rate  declining on a graduated basis to an ultimate rate  in  the
year  2004 of 6%.  A one percentage point increase in the assumed
health  care  cost  trend rate for each future  year  would  have
increased   1993  costs  by  $1.1  million  and  the  accumulated
postretirement benefit obligation at December 31,  1993  by  $7.8
million.

During   1993,   the  Company  made  certain   changes   to   its
postretirement health care and life insurance benefits  for  non-
union  employees  that  are effective  January  1,  1995.   These
changes  include, among others, newly established limits  to  the
Company's annual contribution to postretirement medical costs and
a revised sharing schedule based on a retiree's years of service.
The  net  effect of these changes reduced the accumulated benefit
obligation at December 31, 1993 by $8.7 million.






















                               16
8.  Commitments and Contingencies

The   Company's  anticipated  construction  costs  in  1994   are
approximately   $57.1  million,  for  which   the   Company   had
substantial purchase commitments as of December 31, 1993.

The  Company  has noncancelable lease contracts covering  certain
buildings,  office  space  and equipment.   The  lease  contracts
contain varying renewal options for terms up to 18 years.

Minimum  rental commitments for noncancelable leases for  periods
subsequent  to December 31, 1993 are as follows (in thousands  of
dollars):

           1994                  $   471
           1995                      358
           1996                      240
           1997                      223
           1998                      223
           Thereafter                  6,623

         Total minimum rental
           commitments                $ 8,138

The  total amounts of rents charged to expense were $3.7  million
and $4.5 million for the years 1993 and 1992, respectively.



9.  Property, Plant and Equipment

Telephone plant and equipment, including amounts for leases which
have been capitalized, consists of the following:


                                    1993        1992
                                 (Thousands of Dollars)

          Land and buildings         $  51,369    $  47,760
          Plant in service             840,377      781,388
          Plant under construction       6,402        6,565
          Other                          5,081        7,247
               Total telephone plant   903,229      842,960

          Accumulated depreciation    (307,690)    (263,217)

               Net telephone plant   $ 595,539    $ 579,743











                               17
10.  Regulatory Matters

The  Company  is subject to regulation by the FCC for  interstate
business and the VSCC for intrastate operations.

Intrastate Services

The  Company  provides long distance services  within  designated
geographic areas called Local Access and Transport Areas (LATAs).
For  intraLATA  network  access service,  the  VSCC  ordered  the
implementation    of   the   Originating   Responsibility    Toll
Compensation Plan.  Under this plan, the toll rate billed to  end
users  for  intraLATA  toll calls originating  in  the  Company's
service area are retained by the Company.  The Company, in  turn,
pays  access  charges to the carrier hauling and terminating  the
call  based  on  that  carrier's approved access  charge  tariff.
Likewise, the Company receives access charges for terminating any
intraLATA  toll call that originates outside of its service  area
based  on its approved access charge tariff.  The Company records
this revenue on a bill-and-keep basis.

Intrastate-interLATA network access service revenue is  recovered
through access charges paid by interexchange carriers for use  of
the   Company's   facilities  in  originating   and   terminating
intrastate toll messages between LATAs.  The Company records this
revenue on a bill-and-keep basis.


Interstate Services

For  the  provision of interstate services, the Company  operates
under  the  terms  of  the FCC's price cap incentive  plan.   The
"price  cap"  mechanism serves to limit the rates a  carrier  may
charge, rather than just regulating the rate of return which  may
be  achieved.   Under this approach, the maximum price  that  the
Local Exchange Carrier (LEC) may charge is increased or decreased
each  year  by  a  price  index  based  upon  inflation  less   a
predetermined  productivity  target.   LECs  may  within  certain
ranges price individual services above or below the overall cap.

As  a safeguard under its new price cap regulatory plan, the  FCC
has also adopted a productivity sharing feature.  Because of this
feature, under the minimum productivity-gain option, the  Company
must  share  equally with its ratepayers any realized  interstate
returns  above 12.25% up to 16.25%, and all returns  higher  than
16.25%, by temporarily lowering prospective prices. During  1994,
the  FCC  is  scheduled  to review the  LEC  price  cap  plan  to
determine whether it should be continued or modified.














                               18
Other Rate Matters

After  reviewing its experimental incentive regulation plan,  the
VSCC  ordered on December 17, 1993 that several modifications  to
the  plan should be made effective January 1, 1994.  The  Company
has  operated under the experimental plan since January 1,  1989.
These   modifications  include  a  lowering  of   the   Company's
authorized  Return  on Equity from the current  12-14%  range  to
10.55-12.55%  for  1994, with provisions for  annual  adjustments
beginning January 1, 1995.  The VSCC also ordered that 25% of the
Company's  yellow  page  advertising income  should  be  used  to
calculate its regulated earnings under the plan, but the  Company
may  file  to  restructure its rates on a revenue  neutral  basis
without filing a full rate case.  This new plan will be in  place
for  an  interim period, pending the completion of a  new  docket
commenced by the VSCC to investigate which changes should be made
on  a  permanent  basis.   The  Company  does  not  expect  these
proceedings  to  have  a  material  impact  on  its  results   of
operations.

Significant Customer

Revenues  received  from  AT&T  including  access,  billing   and
collection and interexchange leased facilities during  the  years
1993  and  1992  under  various arrangements  amounted  to  $65.5
million and $61.5 million, respectively.



































                               19
11.  Supplemental Cash Flow Disclosures

Set forth below is information with respect to changes in current
assets  and  current liabilities, and cash paid for interest  and
income taxes:

                                              1993         1992
                                         (Thousands of Dollars)

(Increase) decrease in current assets:
    Accounts  receivable  -  net                 $  (27,519)    $
(15,210)
      Materials    and    supplies                          2,314
(1,415)
  Prepayments and other                       (7,681)       7,496


Increase (decrease) in current liabilities:
  Accounts payable                             1,008        9,503
     Due    to   affiliated   companies                     2,229
(3,409)
  Advanced billings and customer deposits     (1,243)       1,599
       Accrued     liabilities                             14,088
(4,482)
         Other                                              1,546
(12,005)
      Total                                    $   (15,258)     $
(17,923)


Cash paid during the year for:
  Interest                                 $  15,233    $  18,383
  Income taxes                                20,644        9,358



12.  Legal Entity Merger

On  October 15, 1993 the Company filed an application to  legally
merge  into  GTE South Incorporated, a subsidiary  of  GTE.   The
merger  of the Company into GTE South Incorporated will  simplify
the  corporate  structure and will provide greater efficiency  of
operations through consolidation of record keeping and control of
expenses.  The new Company will have an enhanced market  presence
both  in the providing of competitive telecommunications services
and  the  procurement of capital.  Pending regulatory  approvals,
the Company expects the merger to be completed by July 1, 1994.


















                               20
                    CONTEL OF VIRGINIA, INC.
                                
               CONDENSED BALANCE SHEET (UNAUDITED)
                                
                             ASSETS


                                                       March 31,
                                                         1994
                                                     (Thousands
                                                     of Dollars)

CURRENT ASSETS:
 Cash                                                $     9,574
 Receivables, less allowance of $879                      98,444
 Materials and supplies, at average cost                   1,440
 Deferred income tax benefits                              4,834
 Prepayments and other                                       505
   Total current assets                                  114,797








PROPERTY, PLANT AND EQUIPMENT:
 Original cost                                           913,066
 Accumulated depreciation                               (318,311)
   Net property, plant and equipment                     594,755








OTHER ASSETS                                               1,335








   TOTAL ASSETS                                      $   710,887




  See Notes to Condensed Financial Statements.



                               21
                    CONTEL OF VIRGINIA, INC.
                                
               CONDENSED BALANCE SHEET (UNAUDITED)
                                
              LIABILITIES AND SHAREHOLDER'S EQUITY
                                
                                
                                                       March 31,
                                                         1994
                                                     (Thousands
                                                     of Dollars)

CURRENT LIABILITIES:
 Notes payable to affiliates                         $    29,121
 Current maturities of long-term debt                     99,355
 Accounts payable                                         40,858
 Accrued taxes                                            18,737
 Accrued interest                                          4,128
 Accrued payroll and vacations                             5,008
 Accrued restructuring costs and other                    27,021
   Total current liabilities                             224,228




LONG-TERM DEBT                                            89,125




DEFERRED CREDITS, primarily deferred
 income taxes and investment tax credits                 140,268




SHAREHOLDER'S EQUITY:
 Common stock                                             34,099
 Other capital                                            35,775
 Reinvested earnings                                     187,392
   Total shareholder's equity                            257,266




   TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY                  $
710,887







  See Notes to Condensed Financial Statements.



                               22
                    CONTEL OF VIRGINIA, INC.
                                
           CONDENSED STATEMENTS OF INCOME (UNAUDITED)

                                             Three Months Ended
                                                  March 31,
                                             1994        1993
                                            (Thousands of
Dollars)

OPERATING REVENUES:
 Local network services                  $    29,741 $    26,993
 Network access services                      34,649      32,913
 Long distance services                       14,423      12,480
 Equipment sales and services                  3,246       3,291
 Other                                         3,002       2,474
                                              85,061      78,151


OPERATING EXPENSES:
 Cost of sales and services                   19,659      18,704
 Depreciation and amortization                15,167      12,781
 Marketing, selling, general and
   administrative                             21,352      21,984
                                              56,178      53,469


 Net operating income                         28,883      24,682


OTHER (INCOME) DEDUCTIONS:
 Interest expense                              3,880       4,119
 Other - net                                    (117)
(17)


INCOME BEFORE INCOME TAXES                    25,120      20,580


INCOME TAXES                                   9,420       7,113


NET INCOME                               $    15,700 $    13,467








 Per share data is omitted since the Company's common stock is
100% owned by
 Contel Corporation (a wholly-owned subsidiary of GTE
Corporation).

 See Notes to Condensed Financial Statements.




                               23
                    CONTEL OF VIRGINIA, INC.
                                
         CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)



                                             Three Months Ended
                                                  March 31,
                                            1994        1993
                                           (Thousands of Dollars)


CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                              $    15,700 $    13,467

 Adjustments to reconcile net income to
   net cash from operating activities:
     Depreciation and amortization            15,167      12,781
     Deferred income taxes and investment
       tax credits                             1,042         397
     Provision for uncollectible accounts                 709
830
     Changes in current assets and current
       liabilities                           (14,072)
(13,918)
     Other  - net                              5,738      11,348
     Net cash from operating activities       24,284      24,905


CASH FLOWS FROM INVESTING ACTIVITIES:
 Capital expenditures                        (13,567)
(9,587)
 Other - net                                     (58)
(1,320)
     Net cash used in investing activities            (13,625)
(10,907)


CASH FLOWS FROM FINANCING ACTIVITIES:
 Long-term debt retired                         (223)
(934)
 Dividends paid to shareholder               (10,000)
(1,700)
 Net change in affiliate notes                  (114)
(10,183)
     Net cash used in financing activities            (10,337)
(12,817)


Increase in cash                                 322       1,181

Cash at beginning of period                    9,252       1,940

Cash at end of period                    $     9,574 $     3,121








 See Notes to Condensed Financial Statements.



                               24
                    CONTEL OF VIRGINIA, INC.
                                
       NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)


(1)  The condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations  of the Securities and Exchange Commission.   Certain
information   and  footnote  disclosures  normally  included   in
financial   statements  prepared  in  accordance  with  generally
accepted  accounting  principles have been condensed  or  omitted
pursuant to such rules and regulations.  However, in the  opinion
of  management of the Company, the condensed financial statements
include  all adjustments, which consist only of normal  recurring
accruals,  necessary to present fairly the financial  information
for such periods.  These condensed financial statements should be
read  in conjunction with the financial statements and the  notes
thereto  included  in  the  Company's 1993  Financial  Statements
included in this Form 8-K filing.

(2)   On  April 13, 1994, the Virginia State Corporate Commission
approved  the  merger of the Company into GTE South  Incorporated
effective  on or after July 1, 1994.  The merger of  the  Company
into GTE South Incorporated will simplify the corporate structure
and   will  provide  greater  efficiency  of  operations  through
consolidation of record keeping and control of expenses.  The new
Company  will have enhanced market presence both in the providing
of competitive telecommunications services and the procurement of
capital.
































                               25
                                
                                
                                
                                
                                
                                
            REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Board of Directors of
Contel of Kentucky, Inc.:

We have audited the accompanying balance sheets of Contel of
Kentucky, Inc. (a Kentucky corporation), d/b/a GTE Kentucky (the
Company), as of December 31, 1993 and 1992, and the related
statements of income, reinvested earnings and cash flows for the
years then ended.  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 audits.

We conducted our audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Contel of Kentucky, Inc. as of December 31, 1993 and 1992, and
the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting
principles.

As discussed in Note 1 to the financial statements, effective
January 1, 1993, the Company changed its method of accounting for
postretirement benefits other than pensions.  Also as discussed
in Note 1, effective January 1, 1992, the Company changed its
method of accounting for income taxes.






                                             ARTHUR ANDERSEN &
CO.



Dallas, Texas
January 28, 1994.





                               26
                           CONTEL OF KENTUCKY, INC.

                                BALANCE SHEETS

                                    ASSETS


                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Current assets:
       Cash                                       $     105   $
46
       Accounts receivable
          Customers (including unbilled revenues)     8,964
7,422
          Affiliated companies                          307
1,655
          Other                                       2,722
958
          Allowance for uncollectible accounts         (100)
(404)
       Materials and supplies, at average cost          313
106
       Prepayments and other                          1,697
466
                                                     14,008
10,249





    Property, plant and equipment:
       Original cost                                202,393
182,083
       Accumulated depreciation                     (72,818)
(67,685)
                                                    129,575
114,398



    Other assets                                      2,038
3,357





    Total assets                                  $ 145,621   $
128,004












                          See Notes to Financial Statements.




                               27
                           CONTEL OF KENTUCKY, INC.

                                BALANCE SHEETS

                     LIABILITIES AND SHAREHOLDER'S EQUITY


                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Current liabilities:
       Notes payable to affiliates                $  19,775   $
13,990
       Current maturities of long-term debt             935
734
       Accounts payable                               3,909
7,559
       Due to affiliated companies                    7,817
2,815
       Advanced billings and customer deposits        1,090
1,607
       Accrued interest                                 616
86
       Accrued payroll and vacations                    632
493
       Accrued dividends                              5,000
- - --
       Accrued restructuring costs and other          5,047
1,730
                                                     44,821
29,014


    Long-term debt                                   24,484
25,536


    Deferred credits:
       Deferred income taxes                         12,906
11,257
       Deferred investment tax credits                2,423
2,981
       Restructuring costs and other                 11,038
6,361
                                                     26,367
20,599



    Shareholder's equity:
       Common stock (266,124 shares outstanding)      1,331
1,331
       Other capital                                 13,547
13,547
       Reinvested earnings                           35,071
37,977
                                                     49,949
52,855







    Total liabilities and shareholder's equity    $ 145,621   $
128,004




                          See Notes to Financial Statements.




                               28
                         CONTEL OF KENTUCKY, INC.

                             STATEMENTS OF INCOME

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)
    Operating revenues:
       Local network services                     $  19,640   $
19,259
       Network access services                       32,223
24,899
       Long distance services                           722
497
       Equipment sales and services                   3,448
2,802
       Other                                          4,078
3,807
                                                     60,111
51,264

    Operating expenses:
       Cost of sales and services                     9,946
9,868
       Depreciation and amortization                 11,266
11,214
       Marketing, selling, general
         and administrative                          15,212
13,110
       Restructuring costs                            6,530
- - --
                                                     42,954
34,192

    Net operating income                             17,157
17,072

    Other deductions:
       Interest expense                               2,544
2,637
       Other - net                                      120
803

    Income before income taxes                       14,493
13,632

    Income taxes                                      5,399
4,665

    Net income                                    $   9,094   $
8,967

                        STATEMENTS OF REINVESTED EARNINGS

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Balance at beginning of year                  $  37,977   $
32,510
    Add -
       Net income                                     9,094
8,967
    Deduct -
       Cash dividends declared on common stock       12,000
3,500

    Balance at end of year                        $  35,071   $
37,977


                          See Notes to Financial Statements.




                               29
                           CONTEL OF KENTUCKY, INC.

                           STATEMENTS OF CASH FLOWS

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Cash flows from operating activities:
       Net income                                 $   9,094   $
8,967
       Adjustments to reconcile net income to
       net cash from operating activities:
          Depreciation and amortization              11,266
11,214
          Restructuring costs                         6,530
- - --
          Deferred income taxes and investment
            tax credits                              (1,166)
(242)
          Provision for uncollectible accounts          413
839
          Changes in current assets and current
            liabilities                                (866)
(805)
          Other - net                                 2,697
(2,095)
          Net cash from operating activities         27,968
17,878


    Cash flows from investing activities:
       Capital expenditures                         (25,102)
(20,998)
       Other - net                                     (741)
(216)
          Net cash used in investing activities     (25,843)
(21,214)


    Cash flows from financing activities:
       Long-term debt retired                          (851)
(2,802)
       Dividends paid to shareholder                 (7,000)
(3,500)
       Increase in notes payable to affiliates        5,785
9,038
          Net cash (used in) from financing
            activities                               (2,066)
2,736


    Increase (decrease) in cash                          59
(600)


    Cash:
          Beginning of year                              46
646

          End of year                             $     105   $
46







                          See Notes to Financial Statements.
                                
                                
                                
                                
                               30
                    CONTEL OF KENTUCKY, INC.
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                                
1.  Summary of Accounting Policies

Contel of Kentucky, Inc., d/b/a GTE Kentucky (the Company), is  a
wholly-owned  subsidiary  of  Contel  Corporation   (the   Parent
Company). The Parent Company is a wholly-owned subsidiary of  GTE
Corporation (GTE).

Transactions with Affiliates - Purchases

Certain  affiliated companies supply construction and maintenance
materials,   supplies  and  equipment  to  the  Company.    These
purchases amounted to approximately $9.3 million and $4.7 million
for  the  years 1993 and 1992, respectively.  Such purchases  are
recorded  in  the  accounts of the Company at cost,  including  a
normal return realized by the affiliates.

The  Company  is  also  billed for data processing  services  and
equipment rentals, and receives management, consulting,  research
and  development  and  pension  management  services  from  other
affiliated  companies.  These charges amounted to  $14.1  million
and $11.5 million for the years 1993 and 1992, respectively.  The
amounts  charged for these affiliated transactions are  based  on
management's  best  estimate  of a proportional  cost  allocation
method.

Telephone Plant

Maintenance  and  repairs  are charged  to  income  as  incurred.
Additions  to, replacements and renewals of property are  charged
to telephone plant accounts.  Property retirements are charged in
total to the accumulated depreciation account.  No adjustment  to
depreciation  is  made  at  the time properties  are  retired  or
otherwise disposed of, except in the case of significant sales of
property where profit or loss is recognized.

The Company provides for depreciation on telephone plant over the
estimated  useful  lives  of the assets using  the  straight-line
method, based upon rates prescribed by the Federal Communications
Commission  (FCC)  and  the  Kentucky Public  Service  Commission
(KPSC).  The  provisions for depreciation and  amortization  were
equivalent  to composite annual rates of 5.9% and  6.5%  for  the
years 1993 and 1992, respectively.

Regulatory Accounting

The  Company  follows the accounting prescribed  by  the  Uniform
System  of  Accounts  of the FCC and the KPSC  and  Statement  of
Financial  Accounting Standards (SFAS) No. 71 ,  "Accounting  for
the  Effects  of  Certain Types of Regulation."  This  accounting
recognizes  the economic effects of rate regulation by  recording
costs  and  a return on investment as such amounts are  recovered
through  rates authorized by regulatory authorities.  The Company
annually reviews the continued applicability of SFAS No. 71 based
on the current regulatory and competitive environment.





                               31
Revenue Recognition

Revenues are recognized when earned.  This is generally based  on
usage  of  the  Company's local exchange networks or  facilities.
For  other  products  and services, revenue  is  recognized  when
products are delivered or services are rendered to customers.

Materials and Supplies

Materials and supplies are stated at the lower of cost or  market
value.

Employee Benefit Plans

Effective  January  1, 1993, the Company adopted  SFAS  No.  106,
"Employers'  Accounting for Postretirement  Benefits  Other  Than
Pensions."  The new standard requires that the expected costs  of
postretirement  benefits be charged to expense during  the  years
that  the employees render service.  The Company elected to adopt
this  new  accounting standard on the delayed recognition  method
and  commencing January 1, 1993, began amortizing  the  estimated
unrecorded  accumulated  postretirement benefit  obligation  over
twenty years.

The Company also adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" effective January 1, 1993.  SFAS No. 112
requires employers to accrue the future cost of benefits provided
to  former  or  inactive  employees and  their  dependents  after
employment but before retirement.  Previously, the cost of  these
benefits  was  charged to expense as paid.  The  impact  of  this
change  in accounting on the Company's results of operations  was
immaterial.

Income Taxes

Investment  tax credits were repealed by the Tax  Reform  Act  of
1986  (the  Act).  Those credits claimed prior to  the  Act  were
deferred and are being amortized over the lives of the properties
giving rise to the credits.

As  further  explained in Note 6, during the  fourth  quarter  of
1992,  the  Company adopted SFAS No. 109, "Accounting for  Income
Taxes", retroactive to January 1, 1992.  SFAS No. 109 changed the
method by which companies account for income taxes.  Among  other
things,  the  Statement requires that deferred  tax  balances  be
adjusted to reflect new tax rates when they are enacted into law.
The  impact of this change in accounting on the Company's results
of operations was immaterial.

Financial Instruments

The  fair  values of financial instruments other  than  long-term
debt,  closely approximate their carrying values.  The  estimated
fair value of long-term debt at December 31, 1993 and 1992, based
on  either reference to quoted market prices or an option pricing
model,  exceeded the carrying value by approximately $1.6 million
and $0.2 million, respectively.

Prior Year's Financial Statements

Reclassifications  of  prior year data  have  been  made  in  the
financial statements to conform to the 1993 presentation.


                               32
2.  Restructuring Costs

Results  for 1993 include a one-time pretax restructuring  charge
of $6.5 million related to the Company's re-engineering plan over
the  next three years.  The re-engineering plan will redesign and
streamline  processes  to  improve  customer-responsiveness   and
product  quality,  reduce  the time necessary  to  introduce  new
products  and  services  and  further  reduce  costs.   The   re-
engineering  plan  includes $2.7 million to  upgrade  or  replace
existing customer service and administrative systems and  enhance
network  software, $3.0 million for employee separation  benefits
associated  with workforce reductions and $0.8 million  primarily
for  the  consolidation of facilities and  operations  and  other
related costs.



3.  Common Stock

The  authorized common stock of the Company consists  of  300,000
shares  with a par value of $5 per share.  All outstanding shares
of common stock are held by the Parent Company.

There  were no shares of common stock held by or for the  account
of  the  Company  and no shares were reserved  for  officers  and
employees, or for options, warrants, conversions or other rights.

At  December  31, 1993, $20.9 million of reinvested earnings  was
restricted  as to the payment of cash dividends on  common  stock
under the most restrictive terms of the Company's indentures.





























                               33
4.  Long-Term Debt

Long-term  debt outstanding, exclusive of current maturities,  is
as follows:


                                              December 31
                                            1993         1992
                                         (Thousands of Dollars)

Rural Electrification Administration

  2%, due 2009                            $  2,192    $  2,594

Federal Financing Bank

  7.391% to 10.910%, through 2022           22,292      22,942


  Total long-term debt                    $ 24,484    $ 25,536


The  aggregate principal amount of bonds and debentures that  may
be  issued is subject to the restrictions and provisions  of  the
Company's indentures.

None  of the securities shown above were held in sinking or other
special funds of the Company or pledged by the Company.

Maturities,  installments and sinking fund requirements  for  the
five-year  period from January 1, 1994 are summarized  below  (in
thousands of dollars):


                 1994            $  935
                 1995               916
                 1996             1,334
                 1997             1,038
                 1998             1,083

Substantially all of the Company's telephone plant is subject  to
the  liens  of the indentures under which the bonds listed  above
were issued.


















                               34
5.  Notes Payable to Affiliates

The Company finances part of its construction program through the
use  of interim short-term notes payable to affiliates, which are
generally refinanced at a later date by the issuance of long-term
debt  or  equity.  During 1993 and 1992, the Company supplemented
its  internal  generation of cash with funds borrowed  from  GTE.
These  arrangements  require payment of  interest  based  on  GTE
Corporation's  daily intercompany interest rate (which  is  based
primarily on the costs associated with the issuance of commercial
paper).   In addition, a $2.3 billion line of credit is available
to   the  Company  through  shared  lines  with  GTE  and   other
affiliates.














































                               35
6.  Income Taxes

The provision for income taxes is as follows:


                                          1993         1992
                                     (Thousands of Dollars)

Current
  Federal                              $   5,142    $   3,893
  State and local                          1,423        1,014
    Total                                  6,565        4,907

Deferred
  Federal                                   (402)         247
  State and local                           (206)         142
    Total                                   (608)         389

Amortization of deferred
 investment tax credits                     (558)        (631)

    Total                              $   5,399    $   4,665



The  components of deferred income tax expense (benefit)  are  as
follows:


                                          1993         1992
                                     (Thousands of Dollars)

  Depreciation and amortization        $   3,211    $     (47)
  Employee benefit obligations            (2,025)        (156)
  Restructuring cost                      (2,506)          --
  Other-net                                  712          592

    Total                              $    (608)   $     389



















                               36
A  reconciliation between the statutory Federal income  tax  rate
and the effective income tax rate is as follows:

                                             1993         1992

Statutory Federal income tax rate            35.0%        34.0%
  State and local income taxes, net of
    Federal income tax benefits               5.5          5.6
  Amortization of deferred investment
    tax credits                              (3.9)        (4.6)
  Depreciation of telephone plant
    construction costs previously
    deducted for tax purposes - net           0.6          0.9
  Rate differentials applied to
    reversing temporary differences          (0.9)        (1.7)
  Other - net                                 1.0           --

Effective income tax rate                    37.3%        34.2%


As  a  result of implementing SFAS No. 109, the Company  recorded
additional  deferred income tax liabilities primarily related  to
temporary differences which had not previously been recognized in
accordance  with  established rate-making practices.   Since  the
manner in which income taxes are treated for rate-making has  not
changed,  pursuant  to  SFAS No. 71, a  corresponding  regulatory
asset  was also established.  In addition, deferred income  taxes
were  adjusted  and  a regulatory liability established  to  give
effect to the  current statutory Federal income tax rate and  for
unamortized   investment  tax  credits.   The   net   unamortized
regulatory  liability  balances at December  31,  1993  and  1992
amounted  to  $2.9  million and $3.8 million, respectively.   The
regulatory liabilities are reflected as other deferred credits in
the   accompanying  Balance  Sheets.   These  amounts  are  being
amortized  over  the  lives  of the  related  depreciable  assets
concurrent  with  recovery in rates and in conformance  with  the
provisions  of  the  Internal  Revenue  Code.   The  assets   and
liabilities established in accordance with SFAS No. 71 have  been
increased for the tax effect of future revenue requirements.

The  tax  effects of all temporary differences that give rise  to
the deferred tax liability and deferred tax asset at December  31
are as follows:

                                          1993         1992
                                       (Thousands of Dollars)

  Depreciation and amortization        $  15,468    $  11,146
  Employee benefit obligations            (1,548)      (1,130)
  Restructuring cost                      (2,506)          --
  Other - net                                558        1,454
    Total                              $  11,972    $  11,470



                                
                                
                                
                                
                                
                                
                               37
7. Employee Benefit Plans

The Company participates in the Parent Company's trusteed pension
plan  (the Plan), which covers substantially all employees.   The
benefits are based on an employee's years of service and  average
earnings   for  the  five  highest  consecutive  calendar   years
preceding  retirement.  The Company's policy is to  fund  pension
cost  in  accordance with applicable regulations.  Total  pension
(credits)  costs for 1993 and 1992 were $(477,000) and  $267,000,
respectively.

The  net  assets  available for benefits are maintained  for  the
total Plan and amounted to $632.9 million.  The Plan's net assets
available for benefits exceeded projected benefit obligations  by
$433.6   million  as  computed  under  SFAS  No.  87  "Employers'
Accounting for Pensions" as of December 31, 1993.

As  described in Note 1, effective January 1, 1993,  the  Company
adopted  SFAS  No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions."

Substantially  all of the Company's employees are  covered  under
postretirement health care and life insurance benefit plans.  The
health care benefits paid under the plans are generally based  on
comprehensive hospital, medical and surgical benefit  provisions,
while  the life insurance benefits are currently based on  annual
earnings  at  the time of retirement.  The Company funds  amounts
for  postretirement benefits as deemed appropriate from  time  to
time.

The  postretirement benefit cost for 1993 includes the  following
components (in thousands of dollars):

                                                       1993
Service cost-benefits earned
  during the period                                 $     195
Interest cost on accumulated
  postretirement benefit obligation                       875
Amortization of transition obligation
  and prior service cost                                  491
  Postretirement benefit cost                       $   1,561


During  1992,  the cost of postretirement health  care  and  life
insurance benefits on a pay-as-you-go basis was $365,000.

















                               38
The  following table sets forth the plans' funded status and  the
accrued  obligation  as  of December 31, 1993  (in  thousands  of
dollars):

                                                      1993
Accumulated postretirement benefit
  obligation attributable to:
    Retirees                                       $   7,129
    Fully eligible active plan participants              323
    Other active plan participants                     1,771
Total accumulated postretirement benefit
  obligation                                           9,223
Fair value of plan assets                                 --
Excess of accumulated obligation over plan
  assets                                               9,223
Unrecognized transition obligation                    (6,163)
Unrecognized net loss                                   (873)
  Accrued postretirement benefit obligation        $   2,187

The  assumed  discount  rate  used  to  measure  the  accumulated
postretirement benefit obligation was 7.5% at December 31,  1993.
The  assumed health care cost trend rate in 1993 was 13% for pre-
65   participants  and  9.5%  for  post-65  retirees,  each  rate
declining  on a graduated basis to an ultimate rate in  the  year
2004  of  6%.   A  one percentage point increase in  the  assumed
health  care  cost  trend rate for each future  year  would  have
increased   1993   costs   by  $178,000   and   the   accumulated
postretirement  benefit  obligation  at  December  31,  1993   by
$677,000.

During   1993,   the  Company  made  certain   changes   to   its
postretirement health care and life insurance benefits  for  non-
union  employees  that  are effective  January  1,  1995.   These
changes  include, among others, newly established limits  to  the
Company's annual contribution to postretirement medical costs and
a revised sharing schedule based on a retiree's years of service.
The  net  effect of these changes reduced the accumulated benefit
obligation at December 31, 1993 by $4.0 million.























                               39
8.  Commitments and Contingencies

The   Company's  anticipated  construction  costs  for  1994  are
approximately   $13.8  million,  for  which   the   Company   had
substantial purchase commitments as of December 31, 1993.

The  Company  has noncancelable lease contracts covering  certain
buildings,  office  space  and equipment.   The  lease  contracts
contain varying renewal options for terms up to 8 years.

Minimum  rental commitments for noncancelable leases for  periods
subsequent  to December 31, 1993 are as follows (in thousands  of
dollars):

             1994                  $  30
             1995                     18
             1996                     11
             1997                     10
             1998                     10
             Thereafter               31

          Total minimum rental
          commitments              $ 110

The  total amounts of rents charged to expense were $0.6  million
for 1993 and 1992.


9.  Property, Plant and Equipment


Telephone plant and equipment consists of the following:


                                       1993         1992
                                    (Thousands of Dollars)

     Land and buildings             $   7,275    $   8,096
     Plant in service                 185,751      171,674
     Plant under construction           9,013        1,690
     Other                                354          623
          Total telephone plant       202,393      182,083

     Accumulated depreciation         (72,818)     (67,685)

          Net telephone plant       $ 129,575    $ 114,398












                               40
10.  Regulatory Matters

The  Company  is subject to regulation by the FCC for  interstate
business and the KPSC for intrastate operations.

Intrastate Services

The  Company  provides long distance services  within  designated
geographic areas called Local Access and Transport Areas (LATAs).
The  Company  receives  access revenues  from  the  primary  toll
carrier within the LATA.

Intrastate-interLATA   network  access   service   revenues   are
recovered  through access charges paid by interexchange  carriers
for   use   of  the  Company's  facilities  in  originating   and
terminating intrastate toll messages between LATAs.  The  Company
records this revenue on a bill-and-keep basis.

On  December 15, 1993, the KPSC approved the Company's request to
become a primary toll carrier under an Originating Responsibility
Plan,  effective March 1, 1994.  Under this type of  arrangement,
the  toll  rates  billed to end users for  intraLATA  toll  calls
originating in the Company's service area will be retained by the
Company on a bill-and-keep basis.  The Company, in turn, will pay
access  charges to the carrier hauling and terminating  the  call
based on that carrier's approved access charge tariff.  Likewise,
the  Company  will  receive access charges  for  terminating  any
intraLATA  toll call that originates outside of its service  area
based  on  its  approved access charge tariff.  The Company  will
receive  transitional  support  payments  for  any  revenue  loss
created  by  this  change in compensation arrangement  under  the
terms of an industry agreement.

Interstate Services

For  the  provision of interstate services, the Company  operates
under  the  terms  of  the FCC's price cap incentive  plan.   The
"price  cap"  mechanism serves to limit the rates a  carrier  may
charge, rather than just regulating the rate of return which  may
be  achieved.   Under this approach, the maximum price  that  the
Local Exchange Carrier (LEC) may charge is increased or decreased
each  year  by  a  price  index  based  upon  inflation  less   a
predetermined  productivity  target.   LECs  may  within  certain
ranges price individual services above or below the overall cap.

As  a safeguard under its new price cap regulatory plan, the  FCC
has also adopted a productivity sharing feature.  Because of this
feature, under the minimum productivity-gain option, the  Company
must  share  equally with its ratepayers any realized  interstate
returns  above 12.25% up to 16.25%, and all returns  higher  than
16.25%, by temporarily lowering prospective prices. During  1994,
the  FCC  is  scheduled  to review the  LEC  price  cap  plan  to
determine whether it should be continued or modified.










                               41
Other Rate Matters

On  August  1, 1993, the KPSC approved the Company's  request  to
reduce  its  local service revenue by $2.1 million to  bring  the
Company's  tariffed rates to the same rate levels as  GTE  South.
This  rate reduction was required by the KPSC as a condition  for
approval  of  the planned merger of the Company  into  GTE  South
Incorporated.

Significant Customer

Revenues  received  from  AT&T  including  access,  billing   and
collection and interexchange leased facilities during  the  years
1993 and 1992 under various arrangements amounted to $7.1 million
and $6.6 million, respectively.












































                               42
11.  Supplemental Cash Flow Disclosures

Set forth below is information with respect to changes in current
assets  and  current liabilities, and cash paid for interest  and
income taxes:

                                              1993         1992
                                           (Thousands of Dollars)

(Increase) decrease in current assets:
    Accounts  receivable  -  net                 $   (2,675)    $
(3,394)
  Materials and supplies                        (207)         342
     Prepayments    and    other                          (1,231)
(316)


Increase (decrease) in current liabilities:
  Accounts payable                            (3,650)       4,034
  Due to affiliated companies                  5,002          353
  Advanced billings and customer deposits       (517)         819
       Accrued     liabilities                              2,345
(2,310)
         Other                                                 67
(333)
      Total                                    $      (866)     $
(805)


Cash paid during the year for:
  Interest                                 $   3,030    $   2,110
  Income taxes                                 8,201        5,322


12. Legal Entity Merger

On September 27, 1993 the Company filed an application to legally
merge  into  GTE South Incorporated, a subsidiary  of  GTE.   The
merger  of the Company into GTE South Incorporated will  simplify
the  corporate  structure and will provide greater efficiency  of
operations through consolidation of record keeping and control of
expenses.  The new Company will have an enhanced market  presence
both  in the providing of competitive telecommunications services
and  the  procurement of capital.  Pending regulatory  approvals,
the Company expects the merger to be completed by July 1, 1994.



















                               43
                    CONTEL OF KENTUCKY, INC.
                                
               CONDENSED BALANCE SHEET (UNAUDITED)
                                
                             ASSETS


                                                       March 31,
                                                         1994
                                                     (Thousands
                                                     of Dollars)

CURRENT ASSETS:
 Cash                                                $        58
 Receivables, less allowances of $367                     12,510
 Materials and supplies, at average cost                     356
 Deferred income tax benefits                                943
 Prepayments and other                                        11
   Total current assets                                   13,878







PROPERTY, PLANT AND EQUIPMENT:
 Original cost                                           206,128
 Accumulated depreciation                                (75,091)
   Net property, plant and equipment                     131,037







OTHER ASSETS                                               1,319







   TOTAL ASSETS                                      $   146,234







  See Notes to Condensed Financial Statements.



                               44
                    CONTEL OF KENTUCKY, INC.
                                
               CONDENSED BALANCE SHEET (UNAUDITED)
                                
              LIABILITIES AND SHAREHOLDER'S EQUITY
                                
                                
                                                       March 31,
                                                         1994
                                                     (Thousands
                                                     of Dollars)

CURRENT LIABILITIES:
 Notes payable to affiliates                         $    29,764
 Accounts payable                                          8,032
 Accrued dividends                                         2,526
 Accrued restructuring costs and other                     6,335
   Total current liabilities                              46,657




LONG-TERM DEBT                                            24,123




DEFERRED CREDITS, primarily deferred
 income taxes and investment tax credits                  26,206




SHAREHOLDER'S EQUITY:
 Common stock                                              1,331
 Other capital                                            13,547
 Reinvested earnings                                      34,370
   Total shareholder's equity                             49,248




   TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY                  $
146,234










  See Notes to Condensed Financial Statements.



                               45
                    CONTEL OF KENTUCKY, INC.
                                
           CONDENSED STATEMENTS OF INCOME (UNAUDITED)

                                             Three Months Ended
                                                  March 31,
                                             1994        1993
                                            (Thousands of
Dollars)

OPERATING REVENUES:
 Local network services                  $     4,723 $     4,965
 Network access services                       6,731       6,896
 Long distance services                          147         178
 Equipment sales and services                    936         791
 Other                                           923       1,225
                                              13,460      14,055


OPERATING EXPENSES:
 Cost of sales and services                    3,194       2,373
 Depreciation and amortization                 3,496       2,750
 Marketing, selling, general and
   administrative                              3,104       3,583
                                               9,794       8,706


 Net operating income                          3,666       5,349


OTHER (INCOME) DEDUCTIONS:
 Interest expense                                753         612
 Other - net                                      (9)
(6)


INCOME BEFORE INCOME TAXES                     2,922       4,743


INCOME TAXES                                   1,096       1,639


NET INCOME                               $     1,826 $     3,104








 Per share data is omitted since the Company's common stock is
100% owned by
 Contel Corporation (a wholly-owned subsidiary of GTE
Corporation).


 See Notes to Condensed Financial Statements.



                               46
                    CONTEL OF KENTUCKY, INC.
                                
         CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)



                                             Three Months Ended
                                                  March 31,
                                            1994        1993
                                           (Thousands of Dollars)


CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                              $     1,826 $     3,104

 Adjustments to reconcile net income to
   net cash from operating activities:
     Depreciation and amortization             3,496       2,750
     Deferred income taxes and investment
       tax credits                               288        (524)
     Provision for uncollectible accounts                  76
56
     Changes in current assets and current
       liabilities                            (4,736)
1,294
     Other  - net                               (807)
3,243
     Net cash from operating activities          143       9,923


CASH FLOWS FROM INVESTING ACTIVITIES:
 Capital expenditures                         (4,932)
(5,401)
 Other - net                                     108        (120)
     Net cash used in investing activities             (4,824)
(5,521)


CASH FLOWS FROM FINANCING ACTIVITIES:
 Long-term debt retired                         (355)
(240)
 Dividends paid to shareholder                (5,000)
- - --
 Net change in affiliate notes                 9,989      (4,158)
     Net cash from (used in) financing
       activities                              4,634      (4,398)


Increase (decrease) in cash                      (47)
4

Cash at beginning of period                      105          46

Cash at end of period                    $        58 $        50







 See Notes to Condensed Financial Statements.



                               47
                    CONTEL OF KENTUCKY, INC.
                                
       NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)


(1)  The condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations  of the Securities and Exchange Commission.   Certain
information   and  footnote  disclosures  normally  included   in
financial   statements  prepared  in  accordance  with  generally
accepted  accounting  principles have been condensed  or  omitted
pursuant to such rules and regulations.  However, in the  opinion
of  management of the Company, the condensed financial statements
include  all adjustments, which consist only of normal  recurring
accruals,  necessary to present fairly the financial  information
for such periods.  These condensed financial statements should be
read  in conjunction with the financial statements and the  notes
thereto  included  in  the  Company's 1993  Financial  Statements
included in this Form 8-K filing.

(2)   On  September 27, 1993 the Company filed an application  to
legally  merge into GTE South Incorporated, a subsidiary of  GTE.
The  merger  of  the  Company into GTE  South  Incorporated  will
simplify  the  corporate  structure  and  will  provide   greater
efficiency of operations through consolidation of record  keeping
and  control of expenses.  The new Company will have an  enhanced
market   presence   both   in   the  providing   of   competitive
telecommunications  services  and  the  procurement  of  capital.
Approval  for  the  merger by the KPSC (Kentucky  Public  Service
Commission) was obtained on March 28, 1994 effective on or  after
July 1, 1994.






























                               48
                                
                                
                                
                                
                                
                                
            REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Board of Directors of
Contel of North Carolina, Inc.:

We have audited the accompanying balance sheets of Contel of
North Carolina, Inc. (a North Carolina corporation), d/b/a GTE
North Carolina (the Company), as of December 31, 1993 and 1992,
and the related statements of income, reinvested earnings and
cash flows for the years then ended.  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 audits.

We conducted our audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Contel of North Carolina, Inc. as of December 31, 1993 and
1992, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted
accounting principles.

As discussed in Note 1 to the financial statements, effective
January 1, 1993, the Company changed its method of accounting for
postretirement benefits other than pensions.  Also as discussed
in Note 1, effective January 1, 1992, the Company changed its
method of accounting for income taxes.






                                             ARTHUR ANDERSEN &
CO.



Dallas, Texas
January 28, 1994.




                               49
                        CONTEL OF NORTH CAROLINA, INC.

                                BALANCE SHEETS

                                    ASSETS


                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Current assets:
       Cash                                       $     465   $
259
       Accounts receivable
          Customers (including unbilled revenues)    11,167
8,519
          Affiliated companies                          171
1,036
          Other                                       5,260
2,220
          Allowance for uncollectible accounts         (448)
(225)
       Notes receivable from affiliate                   --
12,645
       Prepayments                                    1,635
125
       Materials and supplies and other                 490
609
                                                     18,740
25,188





    Property, plant and equipment:
       Original cost                                227,277
218,114
       Accumulated depreciation                     (91,536)
(82,796)
                                                    135,741
135,318



    Other assets                                      2,442
4,410









    Total assets                                  $ 156,923   $
164,916






                         See Notes to Financial Statements.





                               50

                        CONTEL OF NORTH CAROLINA, INC.

                                BALANCE SHEETS

                     LIABILITIES AND SHAREHOLDER'S EQUITY


                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Current liabilities:
       Notes payable to affiliates                $   5,727   $
- - --
       Current maturities of long-term debt          10,084
1,208
       Accounts payable                               8,650
5,727
       Due to affiliated companies                    4,026
3,090
       Advanced billings and customer deposits        2,107
2,048
       Accrued taxes                                    952
6,776
       Accrued payroll and vacations                  1,022
634
       Accrued rent                                   1,169
473
       Accrued dividends                                 --
14,000
       Accrued restructuring costs and other          5,198
1,553
                                                     38,935
35,509


    Long-term debt                                   29,465
39,519


    Deferred credits:
       Deferred income taxes                         18,596
15,440
       Deferred investment tax credits                2,588
3,302
       Restructuring costs and other                 15,710
10,605
                                                     36,894
29,347



    Shareholder's equity:
       Common stock (1,350,637 shares outstanding)    6,753
6,753
       Other capital                                 15,709
15,709
       Reinvested earnings                           29,167
38,079
                                                     51,629
60,541



    Total liabilities and shareholder's equity    $ 156,923   $
164,916






                         See Notes to Financial Statements.




                               51

                        CONTEL OF NORTH CAROLINA, INC.

                             STATEMENTS OF INCOME

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)
    Operating revenues:
       Local network services                     $  28,763   $
27,444
       Network access services                       46,400
44,583
       Equipment sales and services                   4,322
3,278
       Other                                          1,076
1,666
                                                     80,561
76,971

    Operating expenses:
       Cost of sales and services                    14,086
13,098
       Depreciation and amortization                 13,530
14,571
       Marketing, selling, general
         and administrative                          20,582
19,703
       Restructuring costs                            9,860
- - --
                                                     58,058
47,372

    Net operating income                             22,503
29,599

    Other deductions:
       Interest expense                               4,292
4,140
       Other - net                                      267
696

    Income before income taxes                       17,944
24,763

    Income taxes                                      6,456
8,768

    Net income                                    $  11,488   $
15,995

                        STATEMENTS OF REINVESTED EARNINGS

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Balance at beginning of year                  $  38,079   $
41,984
    Add -
       Net income                                    11,488
15,995
    Deduct -
       Cash dividends declared on common stock       20,400
19,900

    Balance at end of year                        $  29,167   $
38,079



                         See Notes to Financial Statements.



                               52

                         CONTEL OF NORTH CAROLINA, INC.

                           STATEMENTS OF CASH FLOWS

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Cash flows from operating activities:
       Net income                                 $  11,488   $
15,995
       Adjustments to reconcile net income to
       net cash from operating activities:
          Depreciation and amortization              13,530
14,571
          Restructuring costs                         9,860
- - --
          Deferred income taxes and investment
            tax credits                              (2,470)
(2,961)
          Provision for uncollectible accounts          986
505
          Changes in current assets and current
            liabilities                              (6,815)
1,699
          Other - net                                 4,023
(911)
          Net cash from operating activities         30,602
28,898


    Cash flows from investing activities:
       Capital expenditures                         (12,905)
(11,273)
       Other - net                                     (285)
(264)
          Net cash used in investing activities     (13,190)
(11,537)


    Cash flows from financing activities:
       Long-term debt retired                        (1,178)
(1,189)
       Dividends paid to shareholder                (34,400)
(5,900)
       Net change in affiliate notes                 18,372
(11,074)
          Net cash used in financing activities     (17,206)
(18,163)


    Increase (decrease) in cash                         206
(802)


    Cash:
          Beginning of year                             259
1,061

          End of year                             $     465   $
259








                         See Notes to Financial Statements.



                               53
                 CONTEL OF NORTH CAROLINA, INC.
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                                
1.  Summary of Accounting Policies

Contel  of  North Carolina, Inc., d/b/a GTE North  Carolina  (the
Company), is a wholly-owned subsidiary of Contel Corporation (the
Parent Company).  The Parent Company is a wholly-owned subsidiary
of GTE Corporation (GTE).

Transactions with Affiliates - Purchases

Certain  affiliated companies supply construction and maintenance
materials,   supplies  and  equipment  to  the  Company.    These
purchases amounted to approximately $3.3 million and $3.9 million
for  the  years 1993 and 1992, respectively.  Such purchases  are
recorded  in  the  accounts of the Company at cost,  including  a
normal return realized by the affiliates.

The  Company  is  also  billed for data processing  services  and
equipment rentals, and receives management, consulting,  research
and  development  and  pension  management  services  from  other
affiliated  companies.  These charges amounted to  $17.7  million
and $14.1 million for the years 1993 and 1992, respectively.  The
amounts  charged for these affiliated transactions are  based  on
management's  best  estimate  of a proportional  cost  allocation
method.

Telephone Plant

Maintenance  and  repairs  are charged  to  income  as  incurred.
Additions  to, replacements and renewals of property are  charged
to telephone plant accounts.  Property retirements are charged in
total to the accumulated depreciation account.  No adjustment  to
depreciation  is  made  at  the time properties  are  retired  or
otherwise disposed of, except in the case of significant sales of
property where profit or loss is recognized.

The Company provides for depreciation on telephone plant over the
estimated  useful  lives  of the assets using  the  straight-line
method, based upon rates prescribed by the Federal Communications
Commission   (FCC)  and  the  North  Carolina  Public   Utilities
Commission   (NCPUC).   The  provisions  for   depreciation   and
amortization  were equivalent to composite annual rates  of  6.1%
and 6.7% for the years 1993 and 1992, respectively.

Regulatory Accounting

The  Company  follows the accounting prescribed  by  the  Uniform
System  of  Accounts of the FCC and the NCPUC  and  Statement  of
Financial  Accounting Standards (SFAS) No. 71 ,  "Accounting  for
the  Effects  of  Certain Types of Regulation."  This  accounting
recognizes  the economic effects of rate regulation by  recording
costs  and  a return on investment as such amounts are  recovered
through  rates authorized by regulatory authorities.  The Company
annually reviews the continued applicability of SFAS No. 71 based
on the current regulatory and competitive environment.





                               54
Revenue Recognition

Revenues are recognized when earned.  This is generally based  on
usage  of  the  Company's local exchange networks or  facilities.
For  other  products  and services, revenue  is  recognized  when
products are delivered or services are rendered to customers.

Materials and Supplies

Materials and supplies are stated at the lower of cost or  market
value.   Cost  of  materials and supplies is  determined  by  the
average cost method of inventory valuation.

Employee Benefit Plans

Effective  January  1, 1993, the Company adopted  SFAS  No.  106,
"Employers'  Accounting for Postretirement  Benefits  Other  Than
Pensions."  The new standard requires that the expected costs  of
postretirement  benefits be charged to expense during  the  years
that  the employees render service.  The Company elected to adopt
this  new  accounting standard on the delayed recognition  method
and  commencing January 1, 1993, began amortizing  the  estimated
unrecorded  accumulated  postretirement benefit  obligation  over
twenty years.

The Company also adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" effective January 1, 1993.  SFAS No. 112
requires employers to accrue the future cost of benefits provided
to  former  or  inactive  employees and  their  dependents  after
employment but before retirement.  Previously, the cost of  these
benefits  was  charged to expense as paid.  The  impact  of  this
change  in accounting on the Company's results of operations  was
immaterial.

Income Taxes

Investment  tax credits were repealed by the Tax  Reform  Act  of
1986  (the  Act).  Those credits claimed prior to  the  Act  were
deferred and are being amortized over the lives of the properties
giving rise to the credits.

As  further  explained in Note 6, during the  fourth  quarter  of
1992,  the  Company adopted SFAS No. 109, "Accounting for  Income
Taxes", retroactive to January 1, 1992.  SFAS No. 109 changed the
method by which companies account for income taxes.  Among  other
things,  the  Statement requires that deferred  tax  balances  be
adjusted to reflect new tax rates when they are enacted into law.
The  impact of this change in accounting on the Company's results
of operations was immaterial.













                               55
Financial Instruments

The  fair  values of financial instruments other  than  long-term
debt,  closely approximate their carrying values.  The  estimated
fair value of long-term debt at December 31, 1993 and 1992, based
on  either reference to quoted market prices or an option pricing
model,  exceeded the carrying value by approximately $2.3 million
and $2.6 million, respectively.

Prior Year's Financial Statements

Reclassifications  of  prior year data  have  been  made  in  the
financial statements to conform to the 1993 presentation.



2.  Restructuring Costs

Results  for 1993 include a one-time pretax restructuring  charge
of $9.9 million related to the Company's re-engineering plan over
the  next three years.  The re-engineering plan will redesign and
streamline  processes  to  improve  customer-responsiveness   and
product  quality,  reduce  the time necessary  to  introduce  new
products  and  services  and  further  reduce  costs.   The   re-
engineering  plan  includes $4.0 million to  upgrade  or  replace
existing customer service and administrative systems and  enhance
network  software, $4.6 million for employee separation  benefits
associated  with workforce reductions and $1.3 million  primarily
for  the  consolidation of facilities and  operations  and  other
related costs.



3.  Common Stock

The  authorized common stock of the Company consists of 2,000,000
shares  with a par value of $5 per share.  All outstanding shares
of common stock are held by the Parent Company.

There  were no shares of common stock held by or for the  account
of  the  Company  and no shares were reserved  for  officers  and
employees, or for options, warrants, conversions or other rights.

At  December  31, 1993, $16.1 million of reinvested earnings  was
restricted  as to the payment of cash dividends on  common  stock
under the most restrictive terms of the Company's indentures.














                               56
4.  Long-Term Debt

Long-term  debt outstanding, exclusive of current maturities,  is
as follows:


                                              December 31
                                            1993         1992
                                         (Thousands of Dollars)

Rural Electrification Administration

  2%, due 1997                           $     981    $  1,299

Rural Telephone Bank

  7.5% to 9.5%, through 2011                17,083      17,173

Federal Financing Bank

  8.686% to 12.201%, through 2014            7,786       7,908

First Mortgage Bonds

  8.25% to 9.5%, through 2002                2,725       4,598
  10% to 10.25%, due 1996                      890       1,035
  12.5%, due 1994                               --       7,500

Capitalized Leases                              --           6

  Total long-term debt                    $ 29,465    $ 39,519

The  aggregate principal amount of bonds and debentures that  may
be  issued is subject to the restrictions and provisions  of  the
Company's indentures.

None  of the securities shown above were held in sinking or other
special funds of the Company or pledged by the Company.

Maturities,  installments and sinking fund requirements  for  the
five-year  period from January 1, 1994 are summarized  below  (in
thousands of dollars):

                 1994           $ 10,084
                 1995              1,589
                 1996              2,053
                 1997              1,295
                 1998                488

Substantially all of the Company's telephone plant is subject  to
the  liens  of the indentures under which the bonds listed  above
were issued.









                               57
5.  Notes Payable to Affiliates

The Company finances part of its construction program through the
use  of interim short-term notes payable to affiliates, which are
generally refinanced at a later date by the issuance of long-term
debt  or  equity.  During 1993 and 1992, the Company supplemented
its  internal  generation of cash with funds borrowed  from  GTE.
These  arrangements  require payment of  interest  based  on  GTE
Corporation's  daily intercompany interest rate (which  is  based
primarily on the costs associated with the issuance of commercial
paper).   In addition, a $2.3 billion line of credit is available
to   the  Company  through  shared  lines  with  GTE  and   other
affiliates.














































                               58
6.  Income Taxes

The provision for income taxes is as follows:


                                          1993         1992
                                    (Thousands of Dollars)

Current
  Federal                              $   7,636    $   9,354
  State and local                          1,290        2,375
    Total                                  8,926       11,729

Deferred
  Federal                                 (1,857)      (1,796)
  State and local                             99         (374)
    Total                                 (1,758)      (2,170)

Amortization of deferred
 investment tax credits                     (712)        (791)

    Total                              $   6,456    $   8,768



The components of deferred income tax benefit are as follows:


                                          1993         1992
                                     (Thousands of Dollars)

  Depreciation and amortization        $   3,026    $  (2,695)
  Employee benefit obligations            (2,185)         113
  Restructuring cost                      (3,787)          --
  Other-net                                1,188          412

    Total                              $  (1,758)   $  (2,170)



















                               59
A  reconciliation between the statutory Federal income  tax  rate
and the effective income tax rate is as follows:

                                             1993         1992

Statutory Federal income tax rate            35.0%        34.0%
  State and local income taxes, net of
    Federal income tax benefits               5.0          5.3
  Amortization of deferred investment
    tax credits                              (4.0)        (3.2)
  Depreciation of telephone plant
    construction costs previously
    deducted for tax purposes - net           0.3          0.4
  Rate differentials applied to
    reversing temporary differences          (1.4)        (1.1)
  Other - net                                 1.1           --

Effective income tax rate                    36.0%        35.4%


As  a  result of implementing SFAS No. 109, the Company  recorded
additional  deferred income tax liabilities primarily related  to
temporary differences which had not previously been recognized in
accordance  with  established rate-making practices.   Since  the
manner in which income taxes are treated for rate-making has  not
changed,  pursuant  to  SFAS No. 71, a  corresponding  regulatory
asset  was also established.  In addition, deferred income  taxes
were  adjusted  and  a regulatory liability established  to  give
effect  to the current statutory Federal income tax rate and  for
unamortized   investment  tax  credits.   The   net   unamortized
regulatory  liability  balances at December  31,  1993  and  1992
amounted  to  $5.9  million and $8.7 million, respectively.   The
regulatory liabilities are reflected as other deferred credits in
the   accompanying  Balance  Sheets.   These  amounts  are  being
amortized  over  the  lives  of the  related  depreciable  assets
concurrent  with  recovery in rates and in conformance  with  the
provisions  of  the  Internal  Revenue  Code.   The  assets   and
liabilities established in accordance with SFAS No. 71 have  been
increased for the tax effect of future revenue requirements.

The  tax  effects of all temporary differences that give rise  to
the deferred tax liability and deferred tax asset at December  31
are as follows:

                                             1993         1992
                                          (Thousands of Dollars)

  Depreciation and amortization           $  21,493    $  14,998
  Employee benefit obligations               (1,262)        (809)
  Restructuring cost                         (3,787)          --
  Other - net                                   917        1,461

    Total                                 $  17,361    $  15,650








                               60
7.  Employee Benefit Plans

The Company participates in the Parent Company's trusteed pension
plan  (the Plan), which covers substantially all employees.   The
benefits are based on an employee's years of service and  average
earnings   for  the  five  highest  consecutive  calendar   years
preceding  retirement.  The Company's policy is to  fund  pension
cost  in  accordance with applicable regulations.  Total  pension
(credits)  costs for 1993 and 1992 were $(0.4) million  and  $0.4
million, respectively.

The  net  assets  available for benefits are maintained  for  the
total Plan and amounted to $782.6 million.  The Plan's net assets
available for benefits exceeded projected benefit obligations  by
$534.7   million  as  computed  under  SFAS  No.  87  "Employers'
Accounting for Pensions" as of December 31, 1993.

As  described in Note 1, effective January 1, 1993,  the  Company
adopted  SFAS  No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions."

Substantially  all of the Company's employees are  covered  under
postretirement health care and life insurance benefit plans.  The
health care benefits paid under the plans are generally based  on
comprehensive hospital, medical and surgical benefit  provisions,
while  the life insurance benefits are currently based on  annual
earnings  at  the time of retirement.  The Company funds  amounts
for  postretirement benefits as deemed appropriate from  time  to
time.

The  postretirement benefit cost for 1993 includes the  following
components (in thousands of dollars):

                                                       1993
Service cost-benefits earned
  during the period                                 $     268
Interest cost on accumulated
  postretirement benefit obligation                     1,106
Actual return on plan assets                              (57)
Amortization of transition obligation
  and prior service cost                                  763
  Postretirement benefit cost                       $   2,080

During  1992,  the cost of postretirement health  care  and  life
insurance benefits on a pay-as-you-go basis was $0.4 million.
















                               61
The  following table sets forth the plans' funded status and  the
accrued  obligation  as  of December 31, 1993  (in  thousands  of
dollars):

                                                       1993
Accumulated postretirement benefit
  obligation attributable to:
    Retirees                                        $   7,501
    Fully eligible active plan participants             1,439
    Other active plan participants                      4,638
Total accumulated postretirement benefit
  obligation                                           13,578
Fair value of plan assets                                 709
Excess of accumulated obligation over plan
  assets                                               12,869
Unrecognized transition obligation                     (9,168)
Unrecognized net loss                                  (1,620)
  Accrued postretirement benefit obligation         $   2,081

The  assumed  discount  rate  used  to  measure  the  accumulated
postretirement benefit obligation was 7.5% at December 31,  1993.
The  expected long-term rate of return on plan assets  was  8.25%
for  1993.  The assumed health care cost trend rate in  1993  was
13%  for pre-65 participants and 9.5% for post-65 retirees,  each
rate  declining on a graduated basis to an ultimate rate  in  the
year  2004 of 6%.  A one percentage point increase in the assumed
health  care  cost  trend rate for each future  year  would  have
increased   1993  costs  by  $0.2  million  and  the  accumulated
postretirement benefit obligation at December 31,  1993  by  $1.9
million.

During   1993,   the  Company  made  certain   changes   to   its
postretirement health care and life insurance benefits  for  non-
union  employees  that  are effective  January  1,  1995.   These
changes  include, among others, newly established limits  to  the
Company's annual contribution to postretirement medical costs and
a revised sharing schedule based on a retiree's years of service.
The  net  effect of these changes reduced the accumulated benefit
obligation at December 31, 1993 by $1.9 million.






















                               62
8.  Commitments and Contingencies

The   Company's  anticipated  construction  costs  for  1994  are
approximately   $21.1  million,  for  which   the   Company   had
substantial purchase commitments as of December 31, 1993.

The  Company  has noncancelable lease contracts covering  certain
buildings,  office  space  and equipment.   The  lease  contracts
contain varying renewal options for terms up to 97 years.

Minimum  rental commitments for noncancelable leases for  periods
subsequent  to December 31, 1993 are as follows (in thousands  of
dollars):


              1994                  $    45
              1995                       44
              1996                       84
              1997                       84
              1998                       84
              Thereafter              2,928

         Total minimum rental
           commitments              $ 3,269

The  total amounts of rents charged to expense were $1.2  million
and $1.5 million for the years 1993 and 1992, respectively.



9.  Property, Plant and Equipment

Telephone plant and equipment, including amounts for leases which
have been capitalized, consists of the following:


                                      1993         1992
                                   (Thousands of Dollars)

  Land and buildings                $   9,810    $   8,911
  Plant in service                    213,694      207,806
  Plant under construction              3,258          611
  Other                                   515          786
       Total telephone plant          227,277      218,114

  Accumulated depreciation            (91,536)     (82,796)

       Net telephone plant          $ 135,741    $ 135,318










                               63
10.  Regulatory Matters

The  Company  is subject to regulation by the FCC for  interstate
business and the NCPUC for intrastate operations.

Intrastate Services

The  Company  provides long distance services  within  designated
geographic areas called Local Access and Transport Areas (LATAs).
The  Company receives intrastate-intraLATA network access service
revenue  through  participation in an access charge  based  pool.
The  Company remits intraLATA end user toll billings to the pool,
and bills the pool access charges.

Intrastate-interLATA network access service revenue is  recovered
through access charges paid by interexchange carriers for use  of
the   Company's   facilities  in  originating   and   terminating
intrastate toll messages between LATAs.  The Company records this
revenue on a bill-and-keep basis.

Effective January 1, 1994, the Company will implement and receive
intraLATA compensation through an Originating Responsibility Plan
(ORP).   Under this plan, the toll rates billed to end users  for
intraLATA  toll calls originating in the Company's  service  area
will be retained by the Company.  The Company, in turn, will  pay
access  charges to the carrier hauling and terminating  the  call
based  on that carrier's approved access charge tariff.  Likewise
the  Company  will  receive access charges  for  terminating  any
intraLATA  toll call that originates outside of its service  area
based  on  its  approved access charge tariff. The  Company  will
record  this  revenue on a bill-and-keep basis and  will  receive
transitional  support payments for any revenue  loss  created  by
this  change  in compensation arrangement under the terms  of  an
industry agreement.

Interstate Services

For  the  provision of interstate services, the Company  operates
under  the  terms  of  the FCC's price cap incentive  plan.   The
"price  cap"  mechanism serves to limit the rates a  carrier  may
charge, rather than just regulating the rate of return which  may
be  achieved.   Under this approach, the maximum price  that  the
Local Exchange Carrier (LEC) may charge is increased or decreased
each  year  by  a  price  index  based  upon  inflation  less   a
predetermined  productivity  target.   LECs  may  within  certain
ranges price individual services above or below the overall cap.

As  a safeguard under its new price cap regulatory plan, the  FCC
has also adopted a productivity sharing feature.  Because of this
feature, under the minimum productivity-gain option, the  Company
must  share  equally with its ratepayers any realized  interstate
return  above  12.25% up to 16.25%, and all returns  higher  than
16.25%, by temporarily lowering prospective prices. During  1994,
the  FCC  is  scheduled  to review the  LEC  price  cap  plan  to
determine whether it should be continued or modified.








                               64
Other Rate Matters

In 1994, the NCPUC approved the Company's request to reduce local
basic  service rates by $4.6 million on an annual basis. The  new
rates are effective June 1, 1994.

Significant Customer

Revenues  received  from  AT&T  including  access,  billing   and
collection and interexchange leased facilities during  the  years
1993  and  1992  under  various arrangements  amounted  to  $16.2
million and $12.7 million, respectively.














































                               65
11.  Notes Receivable from Affiliate

During  1993 and 1992, the Company provided excess funds  to  GTE
Corporation.  These funds were available on demand and treated as
cash  investments.  The investments earn interest  based  on  GTE
Corporation's  daily intercompany interest rate (which  is  based
primarily on the costs associated with issuing commercial  paper)
and  are  reported  by  the  Company  as  Notes  receivable  from
affiliate.



12.  Supplemental Cash Flow Disclosures

Set forth below is information with respect to changes in current
assets  and  current liabilities, and cash paid for interest  and
income taxes:

                                              1993         1992
                                           (Thousands of Dollars)

(Increase) decrease in current assets:
    Accounts  receivable  -  net                 $   (5,586)    $
(3,514)
  Materials and supplies, prepayments
       and     other                                      (1,391)
(310)


Increase (decrease) in current liabilities:
  Accounts payable                             2,923        2,417
  Due to affiliated companies                    936          235
  Advanced billings and customer deposits         59          307
  Accrued liabilities                         (3,638)       3,556
        Other                                               (118)
(992)
    Total                                  $  (6,815)   $   1,699


Cash paid during the year for:
  Interest                                 $   4,245    $   4,207
  Income taxes                                14,507        7,090



13.  Legal Entity Merger

On  October  1, 1993 the Company filed an application to  legally
merge  into  GTE South Incorporated, a subsidiary  of  GTE.   The
merger  of the Company into GTE South Incorporated will  simplify
the  corporate  structure and will provide greater efficiency  of
operations through consolidation of record keeping and control of
expenses.  The new Company will have an enhanced market  presence
both  in the providing of competitive telecommunications services
and  the  procurement of capital.  Pending regulatory  approvals,
the Company expects the merger to be completed by July 1, 1994.







                               66
                 CONTEL OF NORTH CAROLINA, INC.
                                
               CONDENSED BALANCE SHEET (UNAUDITED)
                                
                             ASSETS


                                                       March 31,
                                                         1994
                                                     (Thousands
                                                     of Dollars)

CURRENT ASSETS:
 Cash                                                $       225
 Receivables, less allowances of $551                     15,655
 Materials and supplies, at average cost                     225
 Deferred income tax benefits                              1,263
 Prepayments and other                                        55
   Total current assets                                   17,423







PROPERTY, PLANT AND EQUIPMENT:
 Original cost                                           228,812
 Accumulated depreciation                                (93,881)
   Net property, plant and equipment                     134,931







OTHER ASSETS                                               2,137







   TOTAL ASSETS                                      $   154,491







  See Notes to Condensed Financial Statements.



                               67
                 CONTEL OF NORTH CAROLINA, INC.
                                
               CONDENSED BALANCE SHEET (UNAUDITED)
                                
              LIABILITIES AND SHAREHOLDER'S EQUITY
                                
                                
                                                       March 31,
                                                         1994
                                                     (Thousands
                                                     of Dollars)

CURRENT LIABILITIES:
 Notes payable to affiliates                         $     4,715
 Current maturities of long-term debt                     10,094
 Accounts payable                                          7,030
 Accrued taxes                                             2,578
 Accrued interest                                            427
 Accrued payroll and vacations                               862
 Accrued restructuring costs and other                     7,607
   Total current liabilities                              33,313




LONG-TERM DEBT                                            29,281




DEFERRED CREDITS, primarily deferred
 income taxes and investment tax credits                  36,579




SHAREHOLDER'S EQUITY:
 Common stock                                              6,753
 Other capital                                            15,709
 Reinvested earnings                                      32,856
   Total shareholder's equity                             55,318




   TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY                  $
154,491







  See Notes to Condensed Financial Statements.



                               68
                 CONTEL OF NORTH CAROLINA, INC.
                                
           CONDENSED STATEMENTS OF INCOME (UNAUDITED)

                                             Three Months Ended
                                                  March 31,
                                             1994        1993
                                            (Thousands of
Dollars)

OPERATING REVENUES:
 Local network services                  $     7,289 $     6,950
 Network access services                       8,699      12,106
 Long distance services                        1,797         251
 Equipment sales and services                    872         849
 Other                                           251         429
                                              18,908      20,585


OPERATING EXPENSES:
 Cost of sales and services                    3,897       3,026
 Depreciation and amortization                 3,540       3,379
 Marketing, selling, general and
   administrative                              4,528       4,331
                                              11,965      10,736


 Net operating income                          6,943       9,849


OTHER (INCOME) DEDUCTIONS:
 Interest expense                              1,047       1,060
 Other - net                                      (3)
(37)


INCOME BEFORE INCOME TAXES                     5,899       8,826


INCOME TAXES                                   2,211       3,051


NET INCOME                               $     3,688 $     5,775








 Per share data is omitted since the Company's common stock is
100% owned by
 Contel Corporation (a wholly-owned subsidiary of GTE
Corporation).


 See Notes to Condensed Financial Statements.



                               69
                 CONTEL OF NORTH CAROLINA, INC.
                                
         CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)



                                             Three Months Ended
                                                  March 31,
                                            1994        1993
                                           (Thousands of Dollars)


CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                              $     3,688 $     5,775

 Adjustments to reconcile net income to
   net cash from operating activities:
     Depreciation and amortization             3,540       3,379
     Deferred income taxes and investment
       tax credits                                21        (529)
     Provision for uncollectible accounts                 237
108
     Changes in current assets and current
       liabilities                            (3,780)
(3,762)
     Other  - net                               (176)
2,223
     Net cash from operating activities        3,530       7,194


CASH FLOWS FROM INVESTING ACTIVITIES:
 Capital expenditures                         (2,595)
(1,351)
 Other - net                                      11        (353)
     Net cash used in investing activities             (2,584)
(1,704)


CASH FLOWS FROM FINANCING ACTIVITIES:
 Long-term debt retired                         (174)
(221)
 Dividends paid to shareholders                   --     (14,000)
 Net change in affiliate notes                (1,012)
8,642
     Net cash used in financing activities             (1,186)
(5,579)


Decrease in cash                                (240)
(89)

Cash at beginning of period                      465         259

Cash at end of period                    $       225 $       170








 See Notes to Condensed Financial Statements.



                               70
                 CONTEL OF NORTH CAROLINA, INC.
                                
       NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)


(1)  The condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations  of the Securities and Exchange Commission.   Certain
information   and  footnote  disclosures  normally  included   in
financial   statements  prepared  in  accordance  with  generally
accepted  accounting  principles have been condensed  or  omitted
pursuant to such rules and regulations.  However, in the  opinion
of  management of the Company, the condensed financial statements
include  all adjustments, which consist only of normal  recurring
accruals,  necessary to present fairly the financial  information
for such periods.  These condensed financial statements should be
read  in conjunction with the financial statements and the  notes
thereto  included  in  the  Company's 1993  Financial  Statements
included in this Form 8-K filing.

(2)   On  April  25, 1994, the North Carolina Utility  Commission
(NCUC)  approved  the  merger  of  the  Company  into  GTE  South
Incorporated effective on or after July 1, 1994.  The  merger  of
the  Company  into  GTE  South  Incorporated  will  simplify  the
corporate  structure  and  will  provide  greater  efficiency  of
operations through consolidation of record keeping and control of
expenses.   The  new Company will have enhanced  market  presence
both  in the providing of competitive telecommunications services
and  the  procurement of capital.  In addition, tariff  revisions
were  filed with the NCUC on February 25, 1994 to reduce  revenue
by $6.6 million, effective June 1, 1994.






























                               71
         GTE SOUTH INCORPORATED AND CONTEL SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
                                
                                
The following Unaudited Pro Forma Condensed Consolidating Balance
Sheet  at March 31, 1994, gives effect to the proposed Merger  as
if  it  had occurred as of the balance sheet date.  The following
Unaudited Pro Forma Condensed Consolidating Statements of  Income
for the three month periods ended March 31, 1994 and 1993 and for
the  years ended December 31, 1993, 1992 and 1991 give effect  to
the  proposed  Merger as if it had occurred at the  beginning  of
each   of  the  respective  periods  presented.   The  pro  forma
consolidating financial statements give effect to the Merger as a
"pooling of interests" for accounting purposes and should be read
in   conjunction  with  the  historical  consolidated   financial
statements  and  the related notes contained  in  the  GTE  South
Incorporated  Annual  Reports on Form 10-K  for  the  year  ended
December 31, 1993 and subsequent filings with the SEC.

The  pro forma data are presented for informational purposes only
and  are  not necessarily indicative of the operating results  or
financial  position that would have occurred had the Merger  been
consummated  at  the  dates indicated, nor are  they  necessarily
indicative of future operating results or financial position.



































                               72
<TABLE>
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
        PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEETS
                      As of March 31, 1994
                      (Thousand of Dollars)
<CAPTION>
                                                                          Contel      Contel
                                    GTE         Contel       Contel       North       South
Surviving
                                   South       Virginia     Kentucky     Carolina    Carolina
Eliminations(a) Corporation
                                 ----------   ----------   ----------   ----------   ---------
- - ----------     -----------
<S>                              <C>          <C>          <C>          <C>          <C>          <C>
<C>
Accounts Receivable - Net        $  145,012   $   98,444   $   12,510   $   15,655   $   3,173    $
(3,655)    $  271,139
Other Current Assets                 71,163       16,353        1,368        1,768         333
90,985
Property, Plant & Equipment       2,387,635      913,066      206,128      228,812      31,620
3,767,261
Less: Accumulated Depreciation
  and Amortization                 (901,281)    (318,311)     (75,091)     (93,881)     (8,073)
(1,396,637)
Other Assets                         99,647        1,335        1,319        2,137         131
104,569
                                 ----------   ----------   ----------   ----------   ---------    -----
- - ----     ----------
  Total Assets                   $1,802,176   $  710,887   $  146,234   $  154,491   $  27,184    $
(3,655)    $2,837,317
                                 ==========   ==========   ==========   ==========   =========
=========     ==========

Accounts Payable                 $   46,636   $   40,858   $    8,032   $    7,030   $   3,090    $
(3,655)    $  101,991
Other Current Liabilities           371,518      183,370       38,625       26,283       4,588
624,384
Long-Term Borrowings                366,381       89,125       24,123       29,281       6,261
515,171
Deferred Taxes & Credits            377,775      140,268       26,206       36,579       5,027
585,855
Preferred Stock Subject to
  Mandatory Redemption                3,135           --           --           --          --
3,135
Shareholders' Equity:
  Common Shareholder's Equity       636,319      257,266       49,248       55,318       8,218
1,006,369
  Preferred Stock                       412           --           --           --          --
412
                                 ----------   ----------   ----------   ----------    --------
- - ---------     ----------
  Total Shareholders' Equity        636,731      257,266       49,248       55,318       8,218
- - --      1,006,781
                                 ----------   ----------   ----------   ----------    --------
- - ---------     ----------
  Total Liabilities and
    Shareholders' Equity         $1,802,176   $  710,887   $  146,234   $  154,491   $  27,184    $
(3,655)    $2,837,317
                                 ==========   ==========   ==========   ==========   =========
=========     ==========
<FN>
(a) Elimination of Intercompany receivables and payables.

The accompanying notes are an integral part of these pro forma statements.
</TABLE>
                               73
<TABLE>
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
     PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF INCOME
                Three Months Ended March 31, 1994
                      (Thousand of Dollars)
<CAPTION>
                                                                          Contel      Contel
                                    GTE         Contel       Contel       North       South
Surviving
                                   South       Virginia     Kentucky     Carolina    Carolina
Corporation
                                 ----------   ----------   ----------   ----------   ---------   ------
- - -----
<S>                              <C>          <C>          <C>          <C>          <C>         <C>
OPERATING REVENUES:
  Local network services         $   72,053   $   29,741   $    4,723   $    7,289   $   1,358   $
115,164
  Network access services            73,206       34,649        6,731        8,699       1,145
124,430
  Long distance services              6,426       14,423          147        1,797          62
22,855
  Equipment sales and services       12,367        3,246          936          872         174
17,595
  Other                              26,907        3,002          923          251          34
31,117
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
                                    190,959       85,061       13,460       18,908       2,773
311,161
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
OPERATING EXPENSES:
  Cost of sales and services         47,663       19,659        3,194        3,897       1,031
75,444
  Depreciation and amortization      42,590       15,167        3,496        3,540         534
65,327
  Marketing, selling, general
    and administrative               58,396       21,352        3,104        4,528         841
88,221
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
                                    148,649       56,178        9,794       11,965       2,406
228,992
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
NET OPERATING INCOME                 42,310       28,883        3,666        6,943         367
82,169
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
OTHER (INCOME) DEDUCTIONS:
  Interest expense                    8,625        3,880          753        1,047         145
14,450
  Other-net                           3,818         (117)          (9)          (3)         (2)
3,687
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
INCOME BEFORE INCOME TAXES           29,867       25,120        2,922        5,899         224
64,032

INCOME TAXES                         11,238        9,420        1,096        2,211          84
24,049
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
NET INCOME                       $   18,629   $   15,700   $    1,826   $    3,688   $     140   $
39,983
                                 ==========   ==========   ==========   ==========   =========
===========
<FN>
The accompanying notes are an integral part of these pro forma statements.
</TABLE>
                               74
<TABLE>
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
     PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF INCOME
                Three Months Ended March 31, 1993
                      (Thousand of Dollars)
<CAPTION>
                                                                          Contel      Contel
                                    GTE         Contel       Contel       North       South
Surviving
                                   South       Virginia     Kentucky     Carolina    Carolina
Corporation
                                 ----------   ----------   ----------   ----------   ---------   ------
- - -----
<S>                              <C>          <C>          <C>          <C>          <C>         <C>
OPERATING REVENUES:
  Local network services         $   94,655   $   26,993   $    4,965   $    6,950   $   1,389   $
134,952
  Network access services           100,591       32,913        6,896       12,106       1,223
153,729
  Long distance services              8,396       12,480          178          251         388
21,693
  Equipment sales and services       16,957        3,291          791          849         159
22,047
  Other                              25,334        2,474        1,225          429          76
29,538
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
                                    245,933       78,151       14,055       20,585       3,235
361,959
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
OPERATING EXPENSES:
  Cost of sales and services         51,007       18,704        2,373        3,026         545
75,655
  Depreciation and amortization      52,811       12,781        2,750        3,379         573
72,294
  Marketing, selling, general
    and administrative               72,589       21,984        3,583        4,331         827
103,314
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
                                    176,407       53,469        8,706       10,736       1,945
251,263
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
NET OPERATING INCOME                 69,526       24,682        5,349        9,849       1,290
110,696
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
OTHER (INCOME) DEDUCTIONS:
  Interest expense                   17,497        4,119          612        1,060         138
23,426
  Other-net                            (607)         (17)          (6)         (37)         (2)
(669)
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
INCOME BEFORE INCOME TAXES           52,636       20,580        4,743        8,826       1,154
87,939

INCOME TAXES                         19,490        7,113        1,639        3,051         398
31,691
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
NET INCOME                       $   33,146   $   13,467   $    3,104   $    5,775   $     756   $
56,248
                                 ==========   ==========   ==========   ==========   =========
===========
<FN>
The accompanying notes are an integral part of these pro forma statements.
</TABLE>
                               75
<TABLE>
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
     PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF INCOME
                  Year Ended December 31, 1993
                      (Thousand of Dollars)
<CAPTION>
                                                                          Contel      Contel
                                    GTE         Contel       Contel       North       South
Surviving
                                   South       Virginia     Kentucky     Carolina    Carolina
Corporation
                                 ----------   ----------   ----------   ----------   ---------   ------
- - -----
<S>                              <C>          <C>          <C>          <C>          <C>         <C>
OPERATING REVENUES:
  Local network services         $  379,533   $  108,008   $   19,640   $   28,763   $   5,337   $
541,281
  Network access services           395,480      120,937       32,223       46,400       4,736
599,776
  Long distance services             28,783       51,632          722           --       1,752
82,889
  Equipment sales and services       75,141       12,442        3,448        4,322         598
95,951
  Other                              74,360       19,834        4,078        1,076         175
99,523
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
                                    953,297      312,853       60,111       80,561      12,598
1,419,420
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
OPERATING EXPENSES:
  Cost of sales and services        207,570       77,745        9,946       14,086       2,585
311,932
  Depreciation and amortization     207,324       57,454       11,266       13,530       2,193
291,767
  Marketing, selling, general
    and administrative              305,968       91,708       15,212       20,582       3,415
436,885
  Restructuring costs (a)            99,583       45,290        6,530        9,860       1,730
162,993
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
                                    820,445      272,197       42,954       58,058       9,923
1,203,577
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
NET OPERATING INCOME                132,852       40,656       17,157       22,503       2,675
215,843
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
OTHER (INCOME) DEDUCTIONS:
  Interest expense                   69,519       15,920        2,544        4,292         547
92,822
  Gain on disposition of assets (b) (63,112)          --           --           --          --
(63,112)
  Other-net                            (414)         678          120          267          35
686
                                  ---------   ----------   ----------   ----------   ---------
- - -----------
INCOME BEFORE INCOME TAXES          126,859       24,058       14,493       17,944       2,093
185,447

INCOME TAXES                         65,513        7,643        5,399        6,456         701
85,712
                                  ---------   ----------   ----------   ----------   ---------
- - -----------
NET INCOME                        $  61,346   $   16,415   $    9,094   $   11,488   $   1,392   $
99,735
                                  =========   ==========   ==========   ==========   =========
===========
<FN>
(a) Reflects expenses related to a one-time restructuring charge for the implementation of a re-
engineering
    plan.
(b) Reflects the pre-tax gain on the disposition of properties in Georgia, Tennessee and West Virginia
representing
    367,000 access lines.  See Note 2 to the pro forma financial statements.

The accompanying notes are an integral part of these pro forma statements.
</TABLE>
                               76
<TABLE>
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
     PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF INCOME
                  Year Ended December 31, 1992
                      (Thousand of Dollars)
<CAPTION>
                                                                          Contel      Contel
                                    GTE         Contel       Contel       North       South
Surviving
                                   South       Virginia     Kentucky     Carolina    Carolina
Corporation
                                 ----------   ----------   ----------   ----------   ---------   ------
- - -----
<S>                              <C>          <C>          <C>          <C>          <C>         <C>
OPERATING REVENUES:
  Local network services         $  371,535   $  110,182   $   19,259   $   27,444   $    5,258  $
533,678
  Network access services           412,604      103,085       24,899       44,583        3,673
588,844
  Long distance services             47,947       48,042          497           --        2,538
99,024
  Equipment sales and services       79,431       10,201        2,802        3,278          529
96,241
  Other                              63,451       15,366        3,807        1,666          211
84,501
                                 ----------   ----------   ----------   ----------   ----------
- - ----------
                                    974,968      286,876       51,264       76,971       12,209
1,402,288
                                 ----------   ----------   ----------   ----------   ----------
- - ----------
OPERATING EXPENSES:
  Cost of sales and services        204,825       77,704        9,868       13,098        2,232
307,727
  Depreciation and amortization     206,905       49,596       11,214       14,571        2,322
284,608
  Marketing, selling, general
    and administrative              279,689       89,170       13,110       19,703        3,166
404,838
                                 ----------   ----------   -----------   ---------   ----------
- - ----------
                                    691,419      216,470       34,192       47,372        7,720
997,173
                                 ----------   ----------   ----------   ----------   ----------
- - ----------
NET OPERATING INCOME                283,549       70,406       17,072       29,599        4,489
405,115
                                 ----------   ----------   ----------   ----------   ----------
- - ----------
OTHER (INCOME) DEDUCTIONS:
  Interest expense                   67,778       18,637        2,637        4,140          539
93,731
  Other-net                          (1,174)       6,973          803          696          127
7,425
                                 ----------   ----------   ----------   ----------   ----------
- - ----------
INCOME BEFORE INCOME TAXES          216,945       44,796       13,632       24,763        3,823
303,959

INCOME TAXES                         79,691       14,417        4,665        8,768        1,328
108,869
                                 ----------   ----------   ----------   ----------   ----------
- - ----------
NET INCOME                       $  137,254   $   30,379   $    8,967   $   15,995   $    2,495   $
195,090
                                 ==========   ==========   ==========   ==========   ==========
==========
<FN>
The accompanying notes are an integral part of these pro forma statements.
</TABLE>
                               77
<TABLE>
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
     PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF INCOME
                  Year Ended December 31, 1991
                      (Thousand of Dollars)
<CAPTION>
                                                                          Contel      Contel
                                    GTE         Contel       Contel       North       South
Surviving
                                   South       Virginia     Kentucky     Carolina    Carolina
Corporation
                                 ----------   ----------   ----------   ----------   ---------   ------
- - -----
<S>                              <C>          <C>          <C>          <C>          <C>         <C>
OPERATING REVENUES:
  Local network services         $  359,419   $  105,214   $    18,581  $   26,111   $   4,975   $
514,300
  Network access services           340,539       99,256        24,114      34,035       3,813
501,757
  Long distance services            138,249       48,019           232      11,936       1,739
200,175
  Equipment sales and services       79,857        9,391         2,403       2,681         663
94,995
  Other                              45,359       17,956         5,869       3,159         475
72,818
                                 ----------   ----------   -----------   ---------   ---------
- - -----------
                                    963,423      279,836        51,199      77,922      11,665
1,384,045
                                 ----------   ----------   -----------   ---------   ---------
- - -----------
OPERATING EXPENSES:
  Cost of sales and services        220,457      100,381        10,664      13,413       2,468
347,383
  Depreciation and amortization     203,108       44,432        10,502      16,596       2,175
276,813
  Marketing, selling, general
    and administrative              301,943       86,335        14,923      21,401       3,811
428,413
                                 ----------   ----------   -----------   ---------   ---------
- - -----------
                                    725,508      231,148        36,089      51,410       8,454
1,052,609
                                 ----------   ----------   -----------   ---------   ---------
- - -----------
NET OPERATING INCOME                237,915       48,688        15,110      26,512       3,211
331,436
                                 ----------   ----------   -----------   ---------   ---------
- - -----------
OTHER (INCOME) DEDUCTIONS:
  Interest expense                   69,648       17,649         2,496       4,309         540
94,642
  Other-net                          (2,293)        (108)           10        (334)        (56)
(2,781)
                                 ----------   ----------   -----------   ---------   ---------
- - -----------
INCOME BEFORE INCOME TAXES          170,560       31,147        12,604      22,537       2,727
239,575

INCOME TAXES                         56,388        7,900         4,158       7,434         838
76,718
                                 ----------   ----------   -----------   ---------   ---------
- - -----------
NET INCOME                       $  114,172   $   23,247   $     8,446   $  15,103   $   1,889   $
162,857
                                 ==========   ==========   ===========   =========   =========
===========
<FN>
The accompanying notes are an integral part of these pro forma statements.
</TABLE>
                               78
         GTE SOUTH INCORPORATED AND CONTEL SUBSIDIARIES
 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL
                           STATEMENTS
                                
1.  Basis of Presentation

The  pro forma condensed consolidating financial statements  give
effect to the Merger as a "pooling of interests" and are based on
historical  amounts.  All material intercompany items  have  been
eliminated in the pro forma statements.

The  pro  forma balance sheets have been prepared as  though  the
Merger  occurred  as of the balance sheet date.   The  pro  forma
income  statements  have  been  prepared  as  though  the  Merger
occurred  as of the beginning of the period presented.   The  pro
forma results do not give effect to any synergies that might have
occurred  had the Merger been consummated at the dates indicated,
nor  are  they necessarily indicative of future operating results
or financial position.

Organizational and other costs to be incurred in connection  with
the Merger are not expected to be material.

2.  Acquisition and Disposition of Assets

On November 1, 1993, GTE South Incorporated (the "Company") in  a
series  of  transactions  with ALLTEL Corporation  exchanged  its
telephone  plant in service, materials and supplies and customers
(representing 244,000 access lines) in the State of  Georgia  for
similar  assets (including 38,000 access lines) in  Illinois  and
$446  million in cash (the ALLTEL transaction).  This transaction
was accounted for as a sale and a gain was recognized.

On  December  31, 1993, the Company sold its telephone  plant  in
service,  materials  and  supplies  and  customers  (representing
123,000  access  lines)  in  the  states  of  West  Virginia  and
Tennessee to Citizens Utilities Company for $291 million in  cash
(the  Citizens transaction).  This transaction was accounted  for
as a sale and a gain was recognized.

The  proceeds from these transactions were used to pay down  $402
million  of  debt  and  pay  $281 million  of  dividends  to  GTE
Corporation  (GTE),  the  Company's parent.   The  remainder  was
advanced to GTE in the form of an interest bearing loan.

The  accompanying  pro forma condensed income statements  include
the operating results of the properties sold through the date  of
sale.  For comparability, the table below includes adjustments to
remove  the operating results of those properties and to  include
the operating results of properties acquired, including interest,
as  if  the ALLTEL and Citizens transactions occurred as  of  the
beginning  of  each period presented.  Net income  in  1993  also
excludes  after-tax gains of $25,999 related to  the  ALLTEL  and
Citizens transactions.

                           Three           Months           Ended
Year Ended
                                           (Thousands of Dollars)
                                 3/31/94                  3/31/93
12/31/93     12/31/92    12/31/91
Operating Revenues    $311,161  $300,065     $1,181,562
$1,147,729  $1,130,476
Net Operating Income    82,169    90,022        160,068(a)
340,520     278,654
Net Income         39,983    54,276         73,035(a)   195,878
168,565

(a) Net operating income and net income in 1993 includes one-time
restructuring costs of $162,993 ($100,411 after tax).
                               79
                            SIGNATURE


Pursuant  to the requirements 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.





                                           GTE SOUTH INCORPORATED
                                               (Registrant)






Date:  June 10, 1994                        WILLIAM M. EDWARDS,
III
                                            WILLIAM M. EDWARDS,
III
                                                  Controller
                                           (Chief Accounting
Officer)


































                               80
                                                       Exhibit
2.1

                       AGREEMENT OF MERGER


      THIS  AGREEMENT  OF MERGER dated as of  this  31st  day  of
December, 1993, is entered into between GTE SOUTH INCORPORATED, a
Virginia corporation ("GTE South"), CONTEL OF KENTUCKY,  INC.,  a
Kentucky   corporation  ("Contel  Kentucky"),  CONTEL  OF   NORTH
CAROLINA,  INC.,  a  North  Carolina corporation  ("Contel  North
Carolina"),  CONTEL  OF SOUTH CAROLINA, INC.,  a  South  Carolina
corporation  ("Contel South Carolina"), and CONTEL  OF  VIRGINIA,
INC., a Virginia corporation ("Contel Virginia").

                          I.  RECITALS
                                
      A.   GTE  Corporation, a New York corporation ("GTE"),  now
owns  or  will  own at all times pertinent hereto, including  the
Effective  Date  of the merger, all of the common  stock  of  GTE
South,  Contel  Kentucky,  Contel North  Carolina,  Contel  South
Carolina and Contel Virginia.

      B.   GTE  South,  Contel Kentucky, Contel  North  Carolina,
Contel  South Carolina and Contel Virginia desire that GTE South,
Contel Kentucky, Contel North Carolina, Contel South Carolina and
Contel  Virginia be merged into GTE South and that GTE  South  be
the  surviving corporation.  The laws of the states of  Virginia,
Kentucky, North Carolina and South Carolina permit this merger.

      C.  The outstanding capital stock of GTE South consists  of
18,936,000 shares of common stock.

      D.   The  outstanding  capital  stock  of  Contel  Kentucky
consists of 266,124 shares of common stock.

      E.   The outstanding capital stock of Contel North Carolina
consists of 1,350,637 shares of common stock.

      F.   The outstanding capital stock of Contel South Carolina
consists of 6,212 shares of common stock.

      G.   The  outstanding  capital  stock  of  Contel  Virginia
consists of 3,409,944 shares of common stock.

                           II.  MERGER

      A.   The  manner of converting the shares of  each  of  the
constituent corporations into shares of the surviving corporation
and such other provisions as are deemed necessary or desirable to
accomplish the merger are appended hereto as the Plan  of  Merger
contained in Exhibit 1.

      B.   On  the  Effective  Date of  the  merger,  as  defined
hereafter  in  paragraph C., the assets and  liabilities  of  GTE
South,  Contel  Kentucky,  Contel North  Carolina,  Contel  South
Carolina and Contel Virginia shall be carried on the books of the
surviving  corporation at the amounts at which they  respectively
were  carried  on  such date on the books of  GTE  South,  Contel
Kentucky, Contel North Carolina, Contel South Carolina and Contel
Virginia.   The  capital  surplus  and  earned  surplus  of   the
surviving corporation shall be the sum of the respective  capital
surpluses  and  earned surpluses of GTE South,  Contel  Kentucky,
Contel  North Carolina, Contel South Carolina and Contel Virginia
subject  in  each  case  to  such  adjustment,  eliminations   or
transfers  as  may  be  required to give effect  to  the  merger.
Except as from time to time restricted by contract or by statute,
the  aggregate  amount  of the net assets of  GTE  South,  Contel
Kentucky, Contel North Carolina, Contel South Carolina and Contel
Virginia which was legally available for the payment of dividends
immediately  prior  to the merger shall continue  to  be  legally
available   for  the  payment  of  dividends  by  the   surviving
corporation.

      C.   This  merger shall become effective upon the  date  of
issuance of a Certificate of Merger by the Corporation Commission
of  the Commonwealth of Virginia, where the surviving corporation
is domiciled, which date is herein called the "Effective Date."

      D.   The merger may be abandoned and terminated at any time
by  mutual  agreement of the Boards of Directors of  the  merging
companies.

      E.   This  Agreement  embodies  the  entire  agreement  and
understanding of the parties relating to its subject  matter  and
supersedes  any  prior  agreements  and  understandings  relating
thereto.

      F.   For the convenience of the parties, this Agreement may
be  executed in one or more counterparts, each of which shall  be
deemed  an  original, but all of which together shall  constitute
one and the same document.

     IN WITNESS WHEREOF, this Agreement of Merger has been signed
by  the  President or a Vice President and the  Secretary  or  an
Assistant Secretary of each of the corporations and each  of  the
corporations  has  caused  the  corporate  seal  to  be  hereunto
affixed, all as of the day first above written, pursuant  to  the
approval and authority duly given by resolutions adopted by their
respective boards of directors.

                                   GTE SOUTH INCORPORATED,
ATTEST:                            a Virginia corporation


      J. WILMA ALY               By:   GERALD K. DINSMORE
__________________________
___________________________
Assistant Secretary                   Gerald K. Dinsmore
                                      President


                                   CONTEL OF KENTUCKY, INC.,
ATTEST:                            a Kentucky corporation


      J. WILMA ALY               By:   GERALD K. DINSMORE
__________________________
___________________________
Assistant Secretary                   Gerald K. Dinsmore
                                      President


                                     CONTEL  OF  NORTH  CAROLINA,
INC.,
ATTEST:                            a North Carolina corporation


      J. WILMA ALY               By:   GERALD K. DINSMORE
__________________________
___________________________
Assistant Secretary                   Gerald K. Dinsmore
                                      President


                                     CONTEL  OF  SOUTH  CAROLINA,
INC.,
ATTEST:                            a South Carolina corporation


      J. WILMA ALY               By:   GERALD K. DINSMORE
__________________________
___________________________
Assistant Secretary                   Gerald K. Dinsmore
                                      President


                                   CONTEL OF VIRGINIA, INC.,
ATTEST:                            a Virginia corporation


      J. WILMA ALY               By:   GERALD K. DINSMORE
__________________________
___________________________
Assistant Secretary                   Gerald K. Dinsmore
                                      President
                                PLAN OF MERGER         EXHIBIT 1

                               OF

                    CONTEL OF KENTUCKY, INC.,
                 CONTEL OF NORTH CAROLINA, INC.,
               CONTEL OF SOUTH CAROLINA, INC., AND
                    CONTEL OF VIRGINIA, INC.

                              INTO

                     GTE SOUTH INCORPORATED
                                
                               I.
The Corporations Proposing to Merge
     Contel of Kentucky, Inc. (hereinafter referred to as "Contel
Kentucky"),  a  Kentucky corporation, Contel of  North  Carolina,
Inc.  (hereinafter  referred to as "Contel  North  Carolina"),  a
North  Carolina  corporation,  Contel  of  South  Carolina,  Inc.
(hereinafter  referred to as "Contel South  Carolina"),  a  South
Carolina  corporation, and Contel of Virginia, Inc.  (hereinafter
referred  to as "Contel Virginia"), a Virginia corporation,  will
be merged into GTE South Incorporated (hereinafter referred to as
"GTE  South"),  a  Virginia corporation,  the  latter  being  the
surviving  corporation  which is already  qualified  to  transact
business  as  a  foreign corporation in the States  of  Kentucky,
North Carolina and South Carolina.

       The   foregoing  corporations  are  hereinafter  sometimes
referred to collectively as the "constituent corporations."

                               II.
Terms and Conditions of the Merger
     The terms and conditions of the merger are as follows:

      (a)   Prior to the effective date, Contel Corporation  will
distribute  one  hundred percent (100%) of the shares  of  Contel
Kentucky, Contel North Carolina, Contel South Carolina and Contel
Virginia to GTE Corporation.

      (b)   On the effective date, Contel Kentucky, Contel  North
Carolina,  Contel  South  Carolina and Contel  Virginia  will  be
merged  into  GTE  South, and GTE South will  exchange  2,064,000
shares  of its common stock with GTE Corporation for all  of  the
outstanding  shares of common stock of Contel  Kentucky  (266,124
shares),  Contel North Carolina (1,350,637 shares), Contel  South
Carolina (6,212 shares), and Contel Virginia (3,409,944 shares).

      (c)   No  later  than  the effective  date,  the  following
securities  of  Contel  Kentucky, Contel North  Carolina,  Contel
South Carolina and Contel Virginia will be assumed by GTE South:











      Description  of  the Security                   Outstanding
Amount
                                             as of June 30, 1993
Contel Kentucky

2% REA Deferred Interest                           $     300
2% REA Note Due 03/31/2004                         2,902,720
7.391% FFB Note Due 12/31/20                       3,489,863
7.739% FFB Note Due 12/31/18                       1,959,082
7.927% FFB Note Due 12/31/16                       1,329,134
7.975% FFB Note Due 12/31/14                       2,751,424
8.331% FFB Note Due 12/31/12                       2,218,856
8.541% FFB Note Due 12/31/12                         892,860
9.209% FFB Note Due 12/31/2017                     2,433,954
9.406% FFB Note Due 12/31/2022                     2,500,000
9.994% FFB Note Due 06/30/15                       1,414,494
10.209% FFB Note Due 12/31/13                      1,399,515
10.910% FFB Note Due 12/31/13                      2,493,451


Contel North Carolina

2% A REA Bond Due 11/30/97                         $1,451,180
7.5% B RTB Bond Due 04/19/2008                       275,416
8.686% C-1 FFB Bond Due 03/31/2013                 1,794,189
10.734% C-4 FFB Bond Due 12/31/14                  1,424,040
10.910% C-2 FFB Bond Due 12/31/13                  2,805,970
10.910% C-3 FFB Bond Due 12/31/14                    947,195
12.201% C-5 FFB Bond Due 12/31/14                    960,849
9.5% I Mortgage Bond Due 06/01/95                    637,500
9.25% J Mortgage Bond Due 04/01/96                   575,500
8.25% K Mortgage Bond Due 10/01/97                   930,000
8.75% L Mortgage Bond Due 05/31/94                 1,480,000
10.25% M Mortgage Bond Due 06/01/96                  810,000
8.625% N Mortgage Bond Due 12/01/20                1,200,000
10.0% Q Mortgage Bond Due 06/01/96                   225,000
12.5% T Mortgage Bond Due 12/31/94                 7,500,000
9.5% U-1 RTB Bond Due 3/18/2023                    10,769,573
9.5% U-2 RTB Bond Due 3/18/2023                    6,216,627


Contel South Carolina

2% REA Note Due 02/19/2006                         $ 906,935
2% REA Deferred Interest                                 427
7% RTB Note Due 02/08/2012                           745,767
7% RTB Note Due 02/28/2012                         1,668,250
7% RTB Note Due 02/28/2018                           595,732
9.50% Unsecured Note Due 3/01/2010                 3,000,000










Contel Virginia

6.76% Promissory Note (GTE) Due 12/06/94           $50,000,000
8.25% Unsecured Note Due 01/15/97                    860,000
2% A REA Bond Due 12/31/98                         2,220,000
5.875% K Mortgage Bond Due 07/15/97                  770,000
4.8% Q Mortgage Bond Due 09/01/95                    690,000
8.5% U Mortgage Bond Due 06/01/2001                1,462,000
8.0% V Mortgage Bond Due 04/01/2003                2,200,000
5.875% EE Mortgage Bond Due 06/30/97               1,975,000
8.0% FF Mortgage Bond Due 06/30/99                 1,975,000
8.375% GG Mortgage Bond Due 12/30/2001             1,600,000
8.0% II Mortgage Bond Due 09/30/98                 3,010,000
8.375% JJ Mortgage Bond Due 02/15/2004             2,150,000
8.625% OO Mortgage Bond Due 12/15/2002             4,000,000
9.875% PP Mortgage Bond Due 09/30/2009             9,100,000
12.5% TT Mortgage Bond Due 12/31/94                6,800,000
10.54% VV Mortgage Bond Due 11/30/2008             28,235,294
8.88% WW Mortgage Bond Due 11/30/2009              40,000,000

                              III.
Articles of Incorporation and Surviving Corporation
      The  Articles of Incorporation of the surviving corporation
will not be affected by the merger.

                               IV.
Bylaws of Surviving Corporation
     The Bylaws of the surviving corporation will not be affected
by this merger.

                               V.
Additional Description of Surviving Corporation
     On the Effective Date, the directors of GTE South shall
become the directors of the surviving corporation.

                               VI.
Approval of the Plan
     This Plan will be submitted for consideration to the Board
of Directors of each of the constituent corporations.  If the
Plan is duly approved by resolution of the Board of Directors of
each of the constituent corporations, then the Plan will be
submitted for approval by the respective stockholders in the
manner required by the laws of the respective states of
incorporation.  In the event the Plan is duly approved by the
stockholders, the Plan, together with other appropriate
documentation, will be filed, and the merger will become
effective, in accordance with the laws of the state of Virginia.


THE STATE OF TEXAS  )
                    )    ss.
COUNTY OF DALLAS         )

     BE IT REMEMBERED that on this 31st day of December, 1993,
personally came before me, a Notary Public in and for the State
of Texas, Gerald K. Dinsmore and J. Wilma Aly, President and
Assistant Secretary, respectively, of GTE SOUTH INCORPORATED, a
corporation of the State of Virginia, the corporation described
in and which executed the foregoing Agreement of Merger and Plan
of Merger, known to me to personally be such, and they, and each
of them, duly executed said Agreement of Merger and Plan of
Merger before me and acknowledged the said Agreement of Merger
and Plan of Merger to be their act and deed and the act and deed
of the corporation; that the signatures of the said President and
Assistant Secretary of the corporation to the foregoing Agreement
of Merger and Plan of Merger are in the handwriting of the said
President and Assistant Secretary of said corporation,
respectively, and that the seal affixed to said Agreement of
Merger and Plan of Merger is the corporate seal of the
corporation, and that the facts stated therein are true.

     IN WITNESS WHEREOF, I have hereunto set my hand and seal the
day and year aforesaid.



                                   C. K. RUDOLPH-FEASLEY
                                   ______________________________
                                   C. K. Rudolph-Feasley
                                   Notary Public, State of Texas

My Commission Expires:
November 14, 1997.
_____________________





































THE STATE OF TEXAS  )
                    )    ss.
COUNTY OF DALLAS         )

     BE IT REMEMBERED that on this 31st day of December, 1993,
personally came before me, a Notary Public in and for the State
of Texas, Gerald K. Dinsmore and J. Wilma Aly, President and
Assistant Secretary, respectively, of CONTEL OF KENTUCKY, INC., a
corporation of the State of Kentucky, the corporation described
in and which executed the foregoing Agreement of Merger and Plan
of Merger, known to me to personally be such, and they, and each
of them, duly executed said Agreement of Merger and Plan of
Merger before me and acknowledged the said Agreement of Merger
and Plan of Merger to be their act and deed and the act and deed
of the corporation; that the signatures of the said President and
Assistant Secretary of the corporation to the foregoing Agreement
of Merger and Plan of Merger are in the handwriting of the said
President and Assistant Secretary of said corporation,
respectively, and that the seal affixed to said Agreement of
Merger and Plan of Merger is the corporate seal of the
corporation, and that the facts stated therein are true.

     IN WITNESS WHEREOF, I have hereunto set my hand and seal the
day and year aforesaid.



                                   C. K. RUDOLPH-FEASLEY
                                   ______________________________
                                   C. K. Rudolph-Feasley
                                   Notary Public, State of Texas

My Commission Expires:
November 14, 1997.
_____________________


























THE STATE OF TEXAS  )
                    )    ss.
COUNTY OF DALLAS         )

     BE IT REMEMBERED that on this 31st day of December, 1993,
personally came before me, a Notary Public in and for the State
of Texas, Gerald K. Dinsmore and J. Wilma Aly, President and
Assistant Secretary, respectively, of CONTEL OF NORTH CAROLINA,
INC., a corporation of the State of North Carolina, the
corporation described in and which executed the foregoing
Agreement of Merger and Plan of Merger, known to me to personally
be such, and they, and each of them, duly executed said Agreement
of Merger and Plan of Merger before me and acknowledged the said
Agreement of Merger and Plan of Merger to be their act and deed
and the act and deed of the corporation; that the signatures of
the said President and Assistant Secretary of the corporation to
the foregoing Agreement of Merger and Plan of Merger are in the
handwriting of the said President and Assistant Secretary of said
corporation, respectively, and that the seal affixed to said
Agreement of Merger and Plan of Merger is the corporate seal of
the corporation, and that the facts stated therein are true.

     IN WITNESS WHEREOF, I have hereunto set my hand and seal the
day and year aforesaid.



                                   C. K. RUDOLPH-FEASLEY
                                   ______________________________
                                   C. K. Rudolph-Feasley
                                   Notary Public, State of Texas

My Commission Expires:
November 14, 1997.
_____________________

























THE STATE OF TEXAS  )
                    )    ss.
COUNTY OF DALLAS         )

     BE IT REMEMBERED that on this 31st day of December, 1993,
personally came before me, a Notary Public in and for the State
of Texas, Gerald K. Dinsmore and J. Wilma Aly, President and
Assistant Secretary, respectively, of CONTEL OF SOUTH CAROLINA,
INC., a corporation of the State of South Carolina, the
corporation described in and which executed the foregoing
Agreement of Merger and Plan of Merger, known to me to personally
be such, and they, and each of them, duly executed said Agreement
of Merger and Plan of Merger before me and acknowledged the said
Agreement of Merger and Plan of Merger to be their act and deed
and the act and deed of the corporation; that the signatures of
the said President and Assistant Secretary of the corporation to
the foregoing Agreement of Merger and Plan of Merger are in the
handwriting of the said President and Assistant Secretary of said
corporation, respectively, and that the seal affixed to said
Agreement of Merger and Plan of Merger is the corporate seal of
the corporation, and that the facts stated therein are true.

     IN WITNESS WHEREOF, I have hereunto set my hand and seal the
day and year aforesaid.



                                   C. K. RUDOLPH-FEASLEY
                                   ______________________________
                                   C. K. Rudolph-Feasley
                                   Notary Public, State of Texas

My Commission Expires:
November 14, 1997.
_____________________

























THE STATE OF TEXAS  )
                    )    ss.
COUNTY OF DALLAS         )

     BE IT REMEMBERED that on this 31st day of December, 1993,
personally came before me, a Notary Public in and for the State
of Texas, Gerald K. Dinsmore and J. Wilma Aly, President and
Assistant Secretary, respectively, of CONTEL OF VIRGINIA, INC., a
corporation of the State of Virginia, the corporation described
in and which executed the foregoing Agreement of Merger and Plan
of Merger, known to me to personally be such, and they, and each
of them, duly executed said Agreement of Merger and Plan of
Merger before me and acknowledged the said Agreement of Merger
and Plan of Merger to be their act and deed and the act and deed
of the corporation; that the signatures of the said President and
Assistant Secretary of the corporation to the foregoing Agreement
of Merger and Plan of Merger are in the handwriting of the said
President and Assistant Secretary of said corporation,
respectively, and that the seal affixed to said Agreement of
Merger and Plan of Merger is the corporate seal of the
corporation, and that the facts stated therein are true.

     IN WITNESS WHEREOF, I have hereunto set my hand and seal the
day and year aforesaid.



                                   C. K. RUDOLPH-FEASLEY
                                   ______________________________
                                   C. K. Rudolph-Feasley
                                   Notary Public, State of Texas

My Commission Expires:
November 14, 1997.
_____________________


























                                                     Exhibit 23.1
                                                                 






            CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS



As independent public accountants, we hereby consent to the use
in this Form 8-K of our reports dated January 28, 1994, related
to the December 31, 1992 and 1993 financial statements of Contel
of Virginia, Inc., Contel of Kentucky, Inc. and Contel of North
Carolina, Inc.  It should be noted that we have not audited any
financial statements of these companies subsequent to December
31, 1993 or performed any audit procedures subsequent to the date
of our reports.





                                             ARTHUR ANDERSEN &
CO.


Dallas, Texas,
June 10, 1994.
[{"type": "8-K", "sequence": "1", "secsgml_size_bytes": 188452}]
{"company-data": {"conformed-name": "GTE SOUTH INC", "cik": "0000040878", "assigned-sic": "4813", "irs-number": "560656680", "state-of-incorporation": "VA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "002-36292", "film-number": "94533852"}, "business-address": {"street1": "ONE TAMPA CITY CTR", "city": "TAMPA", "state": "FL", "zip": "33602", "phone": "8132244011"}, "former-company": [{"former-conformed-name": "GENERAL TELEPHONE CO OF THE SOUTH", "date-changed": "19880330"}, {"former-conformed-name": "GENERAL TELEPHONE CO OF THE SOUTHEAST", "date-changed": "19860401"}]}
SECURITIES AND EXCHANGE COMMISSION
                                
                                
                     Washington, D.C.  20549
                                
                                
                            FORM 8-K
                                
                                
                         CURRENT REPORT
                                
                                
                                
             Pursuant to Section 13 or 15(d) of the
                 Securities Exchange Act of 1934
                                
                                
                                
Date of Report (Date of earliest event reported)   June 10, 1994
                                                    . . . . . . .
. . .

                           GTE SOUTH INCORPORATED
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
           (Exact name of registrant as specified in its charter)

             Virginia                  2-36292                56-
0656680
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
         (State  or  other            (Commission            (IRS
Employer
            jurisdiction      of                File      Number)
Identification No.)
       incorporation)

19845 N. U.S. 31, P.O. Box 407, Westfield, Indiana     46074
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
     (Address of principal executive offices)        (Zip Code)

Registrant's telephone number, including area code        317-896-
6464
                                                          . . . .
. . .

  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
      (Former  name  or  former address, if  changed  since  last
report)
                     GTE SOUTH INCORPORATED
                                
                            FORM 8-K
                                
                       ITEM OF INFORMATION

Item 5.  Other Event

On December 31, 1993, GTE South Incorporated (the "Company")
entered into an Agreement of Merger with Contel of Kentucky,
Inc., a Kentucky corporation ("Contel Kentucky"), Contel of North
Carolina, Inc., a North Carolina corporation ("Contel North
Carolina"), Contel of South Carolina, Inc., a South Carolina
corporation ("Contel South Carolina"), and Contel of Virginia,
Inc., a Virginia corporation ("Contel Virginia").  The agreement
provides that the aforementioned companies (collectively, the
"Contel Subsidiaries") would merge with and into the Company,
with the Company to be the surviving corporation in the merger
(the "Merger").  Each of the Contel Subsidiaries is a wholly-
owned subsidiary of Contel Corporation, which is itself a wholly-
owned subsidiary of GTE Corporation.  The Contel Subsidiaries
provide communications services in the states of Kentucky, North
Carolina, South Carolina and Virginia.

The Merger, which is expected to occur on or after July 1, 1994,
will be accounted for in a manner consistent with a transfer of
entities under common control which is similar to a "pooling of
interests."  A copy of the merger agreement is attached as
Exhibit 2.1.

Included under Item 7 of this report are copies of the audited
financial statements of Contel of Kentucky, Inc., Contel of North
Carolina, Inc. and Contel of Virginia, Inc. for the years ended
December 31, 1993 and 1992.  In addition, included are copies of
the unaudited pro forma condensed consolidating balance sheet as
of March 31, 1994, and the unaudited pro forma condensed
consolidating statements of income for the three months ended
March 31, 1994 and 1993, and for the years ended December 31,
1993-1991.
Item 7.  Financial Statements, Pro Forma Financial Information
and Exhibits

Page
(a) Financial Statements

  CONTEL OF VIRGINIA, INC.
  Report of Independent Public Accountants . . . . . . . . . . . . .
. . . . . .  3
  Balance Sheets at December 31, 1993 and 1992 . . . . . . . . . . .
. . . . . .  4
  Statements of Income and Reinvested Earnings for Each of the Two
Years in
    the Period Ended December 31, 1993 . . . . . . . . . . . . . . .
. . . . . .  6
  Statements of Cash Flows for Each of the Two Years in the Period
Ended
    December 31, 1993  . . . . . . . . . . . . . . . . . . . . . . .
. . . . . .  7
  Notes to Financial Statements  . . . . . . . . . . . . . . . . . .
. . . . . .  8
  Condensed Balance Sheet at March 31, 1994 (Unaudited)  . . . . . .
. . . . . . 21
  Condensed Statements of Income for the Three Months Ended March 31,
1994 and
    1993 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 23
  Condensed Statements of Cash Flows for the Three Months Ended March
31, 1994
    and 1993 (Unaudited) . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 24
  Notes to Condensed Financial Statements (Unaudited)  . . . . . . .
. . . . . . 25

  CONTEL OF KENTUCKY, INC.
  Report of Independent Public Accountants . . . . . . . . . . . . .
. . . . . . 26
  Balance Sheets at December 31, 1993 and 1992 . . . . . . . . . . .
. . . . . . 27
  Statements of Income and Reinvested Earnings for Each of the Two
Years in
    the Period Ended December 31, 1993 . . . . . . . . . . . . . . .
. . . . . . 29
  Statements of Cash Flows for Each of the Two Years in the Period
Ended
    December 31, 1993  . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 30
  Notes to Financial Statements  . . . . . . . . . . . . . . . . . .
. . . . . . 31
  Condensed Balance Sheet at March 31, 1994 (Unaudited)  . . . . . .
. . . . . . 44
  Condensed Statements of Income for the Three Months Ended March 31,
1994 and
    1993 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 46
  Condensed Statements of Cash Flows for the Three Months Ended March
31, 1994
    and 1993 (Unaudited) . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 47
  Notes to Condensed Financial Statements (Unaudited)  . . . . . . .
. . . . . . 48

  CONTEL OF NORTH CAROLINA, INC.
  Report of Independent Public Accountants . . . . . . . . . . . . .
. . . . . . 49
  Balance Sheets at December 31, 1993 and 1992 . . . . . . . . . . .
. . . . . . 50
  Statements of Income and Reinvested Earnings for Each of the Two
Years in
    the Period Ended December 31, 1993 . . . . . . . . . . . . . . .
. . . . . . 52
  Statements of Cash Flows for Each of the Two Years in the Period
Ended
    December 31, 1993  . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 53
  Notes to Financial Statements  . . . . . . . . . . . . . . . . . .
. . . . . . 54
  Condensed Balance Sheet at March 31, 1994 (Unaudited)  . . . . . .
. . . . . . 67
  Condensed Statements of Income for the Three Months Ended March 31,
1994 and
    1993 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 69
  Condensed Statements of Cash Flows for the Three Months Ended March
31, 1994
    and 1993 (Unaudited) . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 70
  Notes to Condensed Financial Statements (Unaudited)  . . . . . . .
. . . . . . 71

                                1
(b) Pro Forma Financial Information (Unaudited)

Page
  Pro Forma Condensed Consolidating Balance Sheet  as of March 31,
1994. . . . . 73
  Pro Forma Condensed Consolidating Statement of Income for the Three
    Months Ended March 31, 1994  . . . . . . . . . . . . . . . . . .
. . . . . . 74
  Pro Forma Condensed Consolidating Statement of Income for the Three
    Months Ended March 31, 1993  . . . . . . . . . . . . . . . . . .
. . . . . . 75
  Pro Forma Condensed Consolidating Statement of Income for the Year
    Ended December 31, 1993  . . . . . . . . . . . . . . . . . . . .
. . . . . . 76
  Pro Forma Condensed Consolidating Statement of Income for the Year
    Ended December 31, 1992  . . . . . . . . . . . . . . . . . . . .
. . . . . . 77
  Pro Forma Condensed Consolidating Statement of Income for the Year
    Ended December 31, 1991  . . . . . . . . . . . . . . . . . . . .
. . . . . . 78
  Notes to Pro Forma Condensed Consolidating Financial Statements  .
. . . . . . 79

(c) Exhibits

   2.1 Agreement of Merger, dated December 31, 1993, between GTE
South
       Incorporated, Contel of Kentucky, Inc., Contel of North
Carolina, Inc.,
       Contel of South Carolina, Inc. and Contel of Virginia, Inc.
  23.1 Consent of Arthur Andersen & Co.

                                2
                                
                                
                                
                                
                                
                                
            REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Contel of Virginia, Inc.:

We have audited the accompanying balance sheets of Contel of
Virginia, Inc. (a Virginia corporation), d/b/a GTE Virginia (the
Company), as of December 31, 1993 and 1992, and the related
statements of income, reinvested earnings and cash flows for the
years then ended.  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 audits.

We conducted our audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Contel of Virginia, Inc. as of December 31, 1993 and 1992, and
the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting
principles.

As discussed in Note 1 to the financial statements, effective
January 1, 1993, the Company changed its method of accounting for
postretirement benefits other than pensions.  Also as discussed
in Note 1, effective January 1, 1992, the Company changed its
method of accounting for income taxes.

                                             ARTHUR ANDERSEN &
CO.

Dallas, Texas
January 28, 1994.

                                3

                           CONTEL OF VIRGINIA, INC.

                                BALANCE SHEETS

                                    ASSETS

                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Current assets:
       Cash                                       $   9,252   $
1,940
       Accounts receivable
          Customers (including unbilled revenues)    81,732
63,229
          Affiliated companies                          133
3,903
          Other                                       9,577
1,242
          Allowance for uncollectible accounts       (1,073)
(5,077)
       Materials and supplies, at average cost        1,383
3,697
       Deferred income tax benefits                   7,349
- - --
       Prepayments and other                            434
102
                                                    108,787
69,036

    Property, plant and equipment:
       Original cost                                903,229
842,960
       Accumulated depreciation                    (307,690)
(263,217)
                                                    595,539
579,743

    Other assets                                      4,339
5,353

    Total assets                                  $ 708,665   $
654,132

                          See Notes to Financial Statements.

                                4
                           CONTEL OF VIRGINIA, INC.

                                BALANCE SHEETS

                     LIABILITIES AND SHAREHOLDER'S EQUITY

                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Current liabilities:
       Notes payable to affiliates                $  29,235   $
46,076
       Current maturities of long-term debt          59,354
10,344
       Accounts payable                              30,916
29,908
       Due to affiliated companies                   17,647
15,418
       Advanced billings and customer deposits        7,210
8,453
       Accrued taxes                                  9,414
4,132
       Accrued interest                               2,301
1,682
       Accrued payroll and vacations                  6,317
4,451
       Accrued dividends                             10,000
1,700
       Accrued restructuring costs and other         27,107
6,681
                                                    199,501
128,845

    Long-term debt                                  129,349
160,465

    Deferred credits:
       Deferred income taxes                         66,871
70,023
       Deferred investment tax credits                8,776
10,722
       Restructuring costs and other                 62,601
33,625
                                                    138,248
114,370

    Shareholder's equity:
       Common stock (3,409,944 shares outstanding)   34,099
34,099
       Other capital                                 35,775
35,775
       Reinvested earnings                          171,693
180,578
                                                    241,567
250,452

    Total liabilities and shareholder's equity    $ 708,665   $
654,132

                          See Notes to Financial Statements.

                                5
                           CONTEL OF VIRGINIA, INC.

                             STATEMENTS OF INCOME

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)
    Operating revenues:
       Local network services                     $ 108,008   $
110,182
       Network access services                      120,937
103,085
       Long distance services                        51,632
48,042
       Equipment sales and services                  12,442
10,201
       Other                                         19,834
15,366
                                                    312,853
286,876

    Operating expenses:
       Cost of sales and services                    77,745
77,704
       Depreciation and amortization                 57,454
49,596
       Marketing, selling, general
         and administrative                          91,708
89,170
       Restructuring costs                           45,290
- - --
                                                    272,197
216,470

    Net operating income                             40,656
70,406

    Other deductions:
       Interest expense                              15,920
18,637
       Other - net                                      678
6,973

    Income before income taxes                       24,058
44,796

    Income taxes                                      7,643
14,417

    Net income                                    $  16,415   $
30,379

                        STATEMENTS OF REINVESTED EARNINGS

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Balance at beginning of year                  $ 180,578   $
162,299
    Add -
       Net income                                    16,415
30,379
    Deduct -
       Cash dividends declared on common stock       25,300
12,100

    Balance at end of year                        $ 171,693   $
180,578

                          See Notes to Financial Statements.

                                6
                           CONTEL OF VIRGINIA, INC.

                           STATEMENTS OF CASH FLOWS

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Cash flows from operating activities:
       Net income                                 $  16,415   $
30,379
       Adjustments to reconcile net income to
       net cash from operating activities:
          Depreciation and amortization              57,454
49,596
          Restructuring costs                        45,290
- - --
          Deferred income taxes and investment
            tax credits                             (19,207)
6,473
          Provision for uncollectible accounts          447
5,819
          Changes in current assets and current
            liabilities                             (15,258)
(17,923)
          Other - net                                 8,526
(8,195)
          Net cash from operating activities         93,667
66,149

    Cash flows from investing activities:
       Capital expenditures                         (69,806)
(70,726)
       Other - net                                     (602)
877
          Net cash used in investing activities     (70,408)
(69,849)

    Cash flows from financing activities:
       Long-term debt retired                       (22,106)
(38,239)
       Long-term debt issued                         40,000
- - --
       Dividends paid to shareholder                (17,000)
(10,400)
       Net change in affiliate notes                (16,841)
53,586
          Net cash used in financing activities     (15,947)
4,947

    Increase in cash                                 7,312
1,247

    Cash:
          Beginning of year                          1,940
693

          End of year                            $   9,252    $
1,940

                            See Notes to Financial Statements.

                                7
                    CONTEL OF VIRGINIA, INC.
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                                
1.  Summary of Accounting Policies

Contel of Virginia, Inc., d/b/a GTE Virginia (the Company), is  a
wholly-owned  subsidiary  of  Contel  Corporation   (the   Parent
Company). The Parent Company is a wholly-owned subsidiary of  GTE
Corporation (GTE).

Transactions with Affiliates - Purchases

Certain  affiliated companies supply construction and maintenance
materials,   supplies  and  equipment  to  the  Company.    These
purchases  amounted  to  approximately $18.7  million  and  $25.0
million  for  the  years  1993  and  1992,  respectively.    Such
purchases  are recorded in the accounts of the Company  at  cost,
including a normal return realized by the affiliates.

The  Company  is  also  billed for data processing  services  and
equipment rentals, and receives management, consulting,  research
and  development  and  pension  management  services  from  other
affiliated  companies.  These charges amounted to  $58.8  million
and $52.4 million for the years 1993 and 1992, respectively.  The
amounts  charged for these affiliated transactions are  based  on
management's  best  estimate  of a proportional  cost  allocation
method.

Telephone Plant

Maintenance  and  repairs  are charged  to  income  as  incurred.
Additions  to, replacements and renewals of property are  charged
to telephone plant accounts.  Property retirements are charged in
total to the accumulated depreciation account.  No adjustment  to
depreciation  is  made  at  the time properties  are  retired  or
otherwise  disposed of, except in the case of  significant  sales
of property where profit or loss is recognized.

The Company provides for depreciation on telephone plant over the
estimated  useful  lives  of the assets using  the  straight-line
method, based upon rates prescribed by the Federal Communications
Commission  (FCC)  and the Virginia State Corporation  Commission
(VSCC).   The  provisions for depreciation and amortization  were
equivalent  to composite annual rates of 6.6% and  6.2%  for  the
years 1993 and 1992, respectively.

Regulatory Accounting

The  Company  follows the accounting prescribed  by  the  Uniform
System  of  Accounts  of the FCC and the VSCC  and  Statement  of
Financial  Accounting Standards (SFAS) No. 71 ,  "Accounting  for
the  Effects  of  Certain Types of Regulation".  This  accounting
recognizes  the economic effects of rate regulation by  recording
costs  and  a return on investment as such amounts are  recovered
through  rates authorized by regulatory authorities.  The Company
annually reviews the continued applicability of SFAS No. 71 based
on the current regulatory and competitive environment.

                                8
Revenue Recognition

Revenues are recognized when earned.  This is generally based  on
usage  of  the  Company's local exchange networks or  facilities.
For  other  products  and services, revenue  is  recognized  when
products are delivered or services are rendered to customers.

Materials and Supplies

Materials and supplies are stated at the lower of cost or  market
value.

Employee Benefit Plans

Effective  January  1, 1993, the Company adopted  SFAS  No.  106,
"Employers'  Accounting for Postretirement  Benefits  Other  Than
Pensions."  The new standard requires that the expected costs  of
postretirement  benefits be charged to expense during  the  years
that  the employees render service.  The Company elected to adopt
this  new  accounting standard on the delayed recognition  method
and  commencing January 1, 1993, began amortizing  the  estimated
unrecorded  accumulated  postretirement benefit  obligation  over
twenty years.

The Company also adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" effective January 1, 1993.  SFAS No. 112
requires employers to accrue the future cost of benefits provided
to  former  or  inactive  employees and  their  dependents  after
employment but before retirement.  Previously, the cost of  these
benefits  was  charged to expense as paid.  The  impact  of  this
change  in accounting on the Company's results of operations  was
immaterial.

Income Taxes

Investment  tax credits were repealed by the Tax  Reform  Act  of
1986  (the  Act).  Those credits claimed prior to  the  Act  were
deferred and are being amortized over the lives of the properties
giving rise to the credits.

As  further  explained in Note 6, during the  fourth  quarter  of
1992,  the  Company adopted SFAS No. 109, "Accounting for  Income
Taxes", retroactive to January 1, 1992.  SFAS No. 109 changed the
method by which companies account for income taxes.  Among  other
things,  the  Statement requires that deferred  tax  balances  be
adjusted to reflect new tax rates when they are enacted into law.
The  impact of this change in accounting on the Company's results
of operations was immaterial.

Financial Instruments

The  fair  values of financial instruments other  than  long-term
debt,  closely approximate their carrying values.  The  estimated
fair value of long-term debt at December 31, 1993 and 1992, based
on  either reference to quoted market prices or an option pricing
model,   exceeded  the  carrying  value  by  approximately  $15.0
million and $10.2 million, respectively.

Prior Year's Financial Statements

Reclassifications  of  prior year data  have  been  made  in  the
financial statements to conform to the 1993 presentation.

                                9
2.  Restructuring Costs

Results  for 1993 include a one-time pretax restructuring  charge
of  $45.3  million  related to the Company's re-engineering  plan
over the next three years.  The re-engineering plan will redesign
and  streamline processes to improve customer-responsiveness  and
product  quality,  reduce  the time necessary  to  introduce  new
products  and  services  and  further  reduce  costs.   The   re-
engineering  plan  includes $18.6 million to upgrade  or  replace
existing customer service and administrative systems and  enhance
network  software, $21.0 million for employee separation benefits
associated  with workforce reductions and $5.7 million  primarily
for  the  consolidation of facilities and  operations  and  other
related costs.

3.  Common Stock

The  authorized common stock of the Company consists of 5,000,000
shares with a par value of $10 per share.  All outstanding shares
of common stock are held by the Parent Company.

There  were no shares of common stock held by or for the  account
of  the  Company  and no shares were reserved  for  officers  and
employees, or for options, warrants, conversions or other rights.

At  December 31, 1993, $107.2 million of reinvested earnings  was
restricted  as to the payment of cash dividends on  common  stock
under the most restrictive terms of the Company's indentures.

                               10
4.  Long-Term Debt

Long-term  debt outstanding, exclusive of current maturities,  is
as follows:

                                              December 31
                                            1993         1992
                                         (Thousands of Dollars)

Rural Electrification Administration

  2%, due 1998                           $   1,460    $   2,220

First Mortgage Bonds

  4.8% to 5.875%, through 1997               3,330        3,395
  6.25% to 7.375%, through 1996                 --          360
  8% to 9.875%, through 2009                58,862       73,444
  10.54% due 2008                           24,706       26,471
  12.5% due 1994                                --        3,500

Unsecured Note Payable

  8.25%, due 1997                              800          860

Unsecured Promissory Note Payable

  6.76%, due 1994                               --       50,000
  4.4925%, due 1995                         40,000           --

Capitalized Leases                             191          215

  Total long-term debt                   $ 129,349    $ 160,465

The  aggregate principal amount of bonds and debentures that  may
be  issued is subject to the restrictions and provisions  of  the
Company's indentures.

None  of the securities shown above were held in sinking or other
special funds of the Company or pledged by the Company.

Maturities,  installments and sinking fund requirements  for  the
five-year  period from January 1, 1994 are summarized  below  (in
thousands of dollars):

                 1994           $ 59,354
                 1995             46,402
                 1996              5,812
                 1997              9,007
                 1998              7,387

Substantially all of the Company's telephone plant is subject  to
the  liens  of the indentures under which the bonds listed  above
were issued.

                               11
5.  Notes Payable to Affiliates

The Company finances part of its construction program through the
use  of interim short-term notes payable to affiliates, which are
generally refinanced at a later date by the issuance of long-term
debt  or  equity.  During 1993 and 1992, the Company supplemented
its  internal  generation of cash with funds borrowed  from  GTE.
These  arrangements  require payment of  interest  based  on  GTE
Corporation's  daily intercompany interest rate (which  is  based
primarily on the costs associated with the issuance of commercial
paper).   In addition, a $2.3 billion line of credit is available
to   the  Company  through  shared  lines  with  GTE  and   other
affiliates.

                               12
6.  Income Taxes

The provision for income taxes is as follows:

                                          1993         1992
                                    (Thousands of Dollars)

Current
  Federal                              $  22,768    $   6,735
  State and local                          4,082        1,209
    Total                                 26,850        7,944

Deferred
  Federal                                (14,626)       7,199
  State and local                         (2,635)       1,581
    Total                                (17,261)       8,780

Amortization of deferred
 investment tax credits                   (1,946)      (2,307)

    Total                              $   7,643    $  14,417

The  components of deferred income tax (benefit) expense  are  as
follows:

                                          1993         1992
                                     (Thousands of Dollars)

  Depreciation and amortization        $  11,032    $   5,903
  Employee benefit obligations           (13,926)      (1,136)
  Restructuring cost                     (17,393)          --
  Other - net                              3,026        4,013

    Total                              $ (17,261)   $   8,780

                               13
A  reconciliation between the statutory Federal income  tax  rate
and the effective income tax rate is as follows:

                                             1993         1992

Statutory Federal income tax rate            35.0%        34.0%
  State and local income taxes, net of
    Federal income tax benefits               3.9          4.1
  Amortization of deferred investment
    tax credits                              (8.1)        (5.1)
  Depreciation of telephone plant
    construction costs previously
    deducted for tax purposes - net           1.6          1.2
  Rate differentials applied to
    reversing temporary differences          (3.1)        (2.0)
  Change in tax reserves                      2.4           --
  Other - net                                 0.1           --

Effective income tax rate                    31.8%        32.2%

As  a  result of implementing SFAS No. 109, the Company  recorded
additional  deferred income tax liabilities primarily related  to
temporary differences which had not previously been recognized in
accordance  with  established rate-making practices.   Since  the
manner in which income taxes are treated for rate-making has  not
changed,  pursuant  to  SFAS No. 71, a  corresponding  regulatory
asset  was also established.  In addition, deferred income  taxes
were  adjusted  and  a regulatory liability established  to  give
effect  to the current statutory Federal income tax rate and  for
unamortized   investment  tax  credits.   The   net   unamortized
regulatory  liability  balances at December  31,  1993  and  1992
amounted  to $15.7 million and $21.3 million, respectively.   The
regulatory liabilities are reflected as other deferred credits in
the   accompanying  Balance  Sheets.   These  amounts  are  being
amortized  over  the  lives  of the  related  depreciable  assets
concurrent  with  recovery in rates and in conformance  with  the
provisions  of  the  Internal  Revenue  Code.   The  assets   and
liabilities established in accordance with SFAS No. 71 have  been
increased for the tax effect of future revenue requirements.

The  tax  effects of all temporary differences that give rise  to
the deferred tax liability and deferred tax asset at December  31
are as follows:

                                             1993         1992
                                          (Thousands of Dollars)

  Depreciation and amortization           $  91,547    $  72,728
  Employee benefit obligations              (15,026)      (4,693)
  Restructuring cost                        (17,393)          --
  Other - net                                 3,063        3,630
    Total                                 $  62,191    $  71,665

                               14
7.  Employee Benefit Plans

The Company participates in the Parent Company's trusteed pension
plan  (the Plan), which covers substantially all employees.   The
benefits are based on an employee's years of service and  average
earnings   for  the  five  highest  consecutive  calendar   years
preceding  retirement.  The Company's policy is to  fund  pension
cost  in  accordance with applicable regulations.  Total  pension
(credits)  costs for 1993 and 1992 were $(3.3) million  and  $2.2
million, respectively.

The  net  assets  available for benefits are maintained  for  the
total Plan and amounted to $782.6 million.  The Plan's net assets
available for benefits exceeded projected benefit obligations  by
$534.7   million  as  computed  under  SFAS  No.  87  "Employers'
Accounting for Pensions" as of December 31, 1993.

As  described in Note 1, effective January 1, 1993,  the  Company
adopted  SFAS  No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions."

Substantially  all of the Company's employees are  covered  under
postretirement health care and life insurance benefit plans.  The
health care benefits paid under the plans are generally based  on
comprehensive hospital, medical and surgical benefit  provisions,
while  the life insurance benefits are currently based on  annual
earnings  at  the time of retirement.  The Company funds  amounts
for  postretirement benefits as deemed appropriate from  time  to
time.

The  postretirement benefit cost for 1993 includes the  following
components (in thousands of dollars):

                                                       1993
Service cost-benefits earned
  during the period                                 $   1,623
Interest cost on accumulated
  postretirement benefit obligation                     5,215
Amortization of transition obligation
  and prior service cost                                2,993
  Postretirement benefit cost                       $   9,831

During  1992,  the cost of postretirement health  care  and  life
insurance benefits on a pay-as-you-go basis was $2.0 million.

                               15
The  following table sets forth the plans' funded status and  the
accrued  obligation  as  of December 31, 1993  (in  thousands  of
dollars):

                                                       1993
Accumulated postretirement benefit
  obligation attributable to:
    Retirees                                        $  42,739
    Fully eligible active plan participants             4,302
    Other active plan participants                     19,642
Total accumulated postretirement benefit
  obligation                                           66,683
Fair value of plan assets                                  82
Excess of accumulated obligation over plan
  assets                                               66,601
Unrecognized transition obligation                    (44,668)
Unrecognized net loss                                  (7,012)
  Accrued postretirement benefit obligation         $  14,921

The  assumed  discount  rate  used  to  measure  the  accumulated
postretirement benefit obligation was 7.5% at December 31,  1993.
The  expected long-term rate of return on plan assets  was  8.25%
for  1993.  The assumed health care cost trend rate in  1993  was
13%  for pre-65 participants and 9.5% for post-65 retirees,  each
rate  declining on a graduated basis to an ultimate rate  in  the
year  2004 of 6%.  A one percentage point increase in the assumed
health  care  cost  trend rate for each future  year  would  have
increased   1993  costs  by  $1.1  million  and  the  accumulated
postretirement benefit obligation at December 31,  1993  by  $7.8
million.

During   1993,   the  Company  made  certain   changes   to   its
postretirement health care and life insurance benefits  for  non-
union  employees  that  are effective  January  1,  1995.   These
changes  include, among others, newly established limits  to  the
Company's annual contribution to postretirement medical costs and
a revised sharing schedule based on a retiree's years of service.
The  net  effect of these changes reduced the accumulated benefit
obligation at December 31, 1993 by $8.7 million.

                               16
8.  Commitments and Contingencies

The   Company's  anticipated  construction  costs  in  1994   are
approximately   $57.1  million,  for  which   the   Company   had
substantial purchase commitments as of December 31, 1993.

The  Company  has noncancelable lease contracts covering  certain
buildings,  office  space  and equipment.   The  lease  contracts
contain varying renewal options for terms up to 18 years.

Minimum  rental commitments for noncancelable leases for  periods
subsequent  to December 31, 1993 are as follows (in thousands  of
dollars):

           1994                  $   471
           1995                      358
           1996                      240
           1997                      223
           1998                      223
           Thereafter                  6,623

         Total minimum rental
           commitments                $ 8,138

The  total amounts of rents charged to expense were $3.7  million
and $4.5 million for the years 1993 and 1992, respectively.

9.  Property, Plant and Equipment

Telephone plant and equipment, including amounts for leases which
have been capitalized, consists of the following:

                                    1993        1992
                                 (Thousands of Dollars)

          Land and buildings         $  51,369    $  47,760
          Plant in service             840,377      781,388
          Plant under construction       6,402        6,565
          Other                          5,081        7,247
               Total telephone plant   903,229      842,960

          Accumulated depreciation    (307,690)    (263,217)

               Net telephone plant   $ 595,539    $ 579,743

                               17
10.  Regulatory Matters

The  Company  is subject to regulation by the FCC for  interstate
business and the VSCC for intrastate operations.

Intrastate Services

The  Company  provides long distance services  within  designated
geographic areas called Local Access and Transport Areas (LATAs).
For  intraLATA  network  access service,  the  VSCC  ordered  the
implementation    of   the   Originating   Responsibility    Toll
Compensation Plan.  Under this plan, the toll rate billed to  end
users  for  intraLATA  toll calls originating  in  the  Company's
service area are retained by the Company.  The Company, in  turn,
pays  access  charges to the carrier hauling and terminating  the
call  based  on  that  carrier's approved access  charge  tariff.
Likewise, the Company receives access charges for terminating any
intraLATA  toll call that originates outside of its service  area
based  on its approved access charge tariff.  The Company records
this revenue on a bill-and-keep basis.

Intrastate-interLATA network access service revenue is  recovered
through access charges paid by interexchange carriers for use  of
the   Company's   facilities  in  originating   and   terminating
intrastate toll messages between LATAs.  The Company records this
revenue on a bill-and-keep basis.

Interstate Services

For  the  provision of interstate services, the Company  operates
under  the  terms  of  the FCC's price cap incentive  plan.   The
"price  cap"  mechanism serves to limit the rates a  carrier  may
charge, rather than just regulating the rate of return which  may
be  achieved.   Under this approach, the maximum price  that  the
Local Exchange Carrier (LEC) may charge is increased or decreased
each  year  by  a  price  index  based  upon  inflation  less   a
predetermined  productivity  target.   LECs  may  within  certain
ranges price individual services above or below the overall cap.

As  a safeguard under its new price cap regulatory plan, the  FCC
has also adopted a productivity sharing feature.  Because of this
feature, under the minimum productivity-gain option, the  Company
must  share  equally with its ratepayers any realized  interstate
returns  above 12.25% up to 16.25%, and all returns  higher  than
16.25%, by temporarily lowering prospective prices. During  1994,
the  FCC  is  scheduled  to review the  LEC  price  cap  plan  to
determine whether it should be continued or modified.

                               18
Other Rate Matters

After  reviewing its experimental incentive regulation plan,  the
VSCC  ordered on December 17, 1993 that several modifications  to
the  plan should be made effective January 1, 1994.  The  Company
has  operated under the experimental plan since January 1,  1989.
These   modifications  include  a  lowering  of   the   Company's
authorized  Return  on Equity from the current  12-14%  range  to
10.55-12.55%  for  1994, with provisions for  annual  adjustments
beginning January 1, 1995.  The VSCC also ordered that 25% of the
Company's  yellow  page  advertising income  should  be  used  to
calculate its regulated earnings under the plan, but the  Company
may  file  to  restructure its rates on a revenue  neutral  basis
without filing a full rate case.  This new plan will be in  place
for  an  interim period, pending the completion of a  new  docket
commenced by the VSCC to investigate which changes should be made
on  a  permanent  basis.   The  Company  does  not  expect  these
proceedings  to  have  a  material  impact  on  its  results   of
operations.

Significant Customer

Revenues  received  from  AT&T  including  access,  billing   and
collection and interexchange leased facilities during  the  years
1993  and  1992  under  various arrangements  amounted  to  $65.5
million and $61.5 million, respectively.

                               19
11.  Supplemental Cash Flow Disclosures

Set forth below is information with respect to changes in current
assets  and  current liabilities, and cash paid for interest  and
income taxes:

                                              1993         1992
                                         (Thousands of Dollars)

(Increase) decrease in current assets:
    Accounts  receivable  -  net                 $  (27,519)    $
(15,210)
      Materials    and    supplies                          2,314
(1,415)
  Prepayments and other                       (7,681)       7,496

Increase (decrease) in current liabilities:
  Accounts payable                             1,008        9,503
     Due    to   affiliated   companies                     2,229
(3,409)
  Advanced billings and customer deposits     (1,243)       1,599
       Accrued     liabilities                             14,088
(4,482)
         Other                                              1,546
(12,005)
      Total                                    $   (15,258)     $
(17,923)

Cash paid during the year for:
  Interest                                 $  15,233    $  18,383
  Income taxes                                20,644        9,358

12.  Legal Entity Merger

On  October 15, 1993 the Company filed an application to  legally
merge  into  GTE South Incorporated, a subsidiary  of  GTE.   The
merger  of the Company into GTE South Incorporated will  simplify
the  corporate  structure and will provide greater efficiency  of
operations through consolidation of record keeping and control of
expenses.  The new Company will have an enhanced market  presence
both  in the providing of competitive telecommunications services
and  the  procurement of capital.  Pending regulatory  approvals,
the Company expects the merger to be completed by July 1, 1994.

                               20
                    CONTEL OF VIRGINIA, INC.
                                
               CONDENSED BALANCE SHEET (UNAUDITED)
                                
                             ASSETS

                                                       March 31,
                                                         1994
                                                     (Thousands
                                                     of Dollars)

CURRENT ASSETS:
 Cash                                                $     9,574
 Receivables, less allowance of $879                      98,444
 Materials and supplies, at average cost                   1,440
 Deferred income tax benefits                              4,834
 Prepayments and other                                       505
   Total current assets                                  114,797

PROPERTY, PLANT AND EQUIPMENT:
 Original cost                                           913,066
 Accumulated depreciation                               (318,311)
   Net property, plant and equipment                     594,755

OTHER ASSETS                                               1,335

   TOTAL ASSETS                                      $   710,887

  See Notes to Condensed Financial Statements.

                               21
                    CONTEL OF VIRGINIA, INC.
                                
               CONDENSED BALANCE SHEET (UNAUDITED)
                                
              LIABILITIES AND SHAREHOLDER'S EQUITY
                                
                                
                                                       March 31,
                                                         1994
                                                     (Thousands
                                                     of Dollars)

CURRENT LIABILITIES:
 Notes payable to affiliates                         $    29,121
 Current maturities of long-term debt                     99,355
 Accounts payable                                         40,858
 Accrued taxes                                            18,737
 Accrued interest                                          4,128
 Accrued payroll and vacations                             5,008
 Accrued restructuring costs and other                    27,021
   Total current liabilities                             224,228

LONG-TERM DEBT                                            89,125

DEFERRED CREDITS, primarily deferred
 income taxes and investment tax credits                 140,268

SHAREHOLDER'S EQUITY:
 Common stock                                             34,099
 Other capital                                            35,775
 Reinvested earnings                                     187,392
   Total shareholder's equity                            257,266

   TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY                  $
710,887

  See Notes to Condensed Financial Statements.

                               22
                    CONTEL OF VIRGINIA, INC.
                                
           CONDENSED STATEMENTS OF INCOME (UNAUDITED)

                                             Three Months Ended
                                                  March 31,
                                             1994        1993
                                            (Thousands of
Dollars)

OPERATING REVENUES:
 Local network services                  $    29,741 $    26,993
 Network access services                      34,649      32,913
 Long distance services                       14,423      12,480
 Equipment sales and services                  3,246       3,291
 Other                                         3,002       2,474
                                              85,061      78,151

OPERATING EXPENSES:
 Cost of sales and services                   19,659      18,704
 Depreciation and amortization                15,167      12,781
 Marketing, selling, general and
   administrative                             21,352      21,984
                                              56,178      53,469

 Net operating income                         28,883      24,682

OTHER (INCOME) DEDUCTIONS:
 Interest expense                              3,880       4,119
 Other - net                                    (117)
(17)

INCOME BEFORE INCOME TAXES                    25,120      20,580

INCOME TAXES                                   9,420       7,113

NET INCOME                               $    15,700 $    13,467

 Per share data is omitted since the Company's common stock is
100% owned by
 Contel Corporation (a wholly-owned subsidiary of GTE
Corporation).

 See Notes to Condensed Financial Statements.

                               23
                    CONTEL OF VIRGINIA, INC.
                                
         CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                             Three Months Ended
                                                  March 31,
                                            1994        1993
                                           (Thousands of Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                              $    15,700 $    13,467

 Adjustments to reconcile net income to
   net cash from operating activities:
     Depreciation and amortization            15,167      12,781
     Deferred income taxes and investment
       tax credits                             1,042         397
     Provision for uncollectible accounts                 709
830
     Changes in current assets and current
       liabilities                           (14,072)
(13,918)
     Other  - net                              5,738      11,348
     Net cash from operating activities       24,284      24,905

CASH FLOWS FROM INVESTING ACTIVITIES:
 Capital expenditures                        (13,567)
(9,587)
 Other - net                                     (58)
(1,320)
     Net cash used in investing activities            (13,625)
(10,907)

CASH FLOWS FROM FINANCING ACTIVITIES:
 Long-term debt retired                         (223)
(934)
 Dividends paid to shareholder               (10,000)
(1,700)
 Net change in affiliate notes                  (114)
(10,183)
     Net cash used in financing activities            (10,337)
(12,817)

Increase in cash                                 322       1,181

Cash at beginning of period                    9,252       1,940

Cash at end of period                    $     9,574 $     3,121

 See Notes to Condensed Financial Statements.

                               24
                    CONTEL OF VIRGINIA, INC.
                                
       NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(1)  The condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations  of the Securities and Exchange Commission.   Certain
information   and  footnote  disclosures  normally  included   in
financial   statements  prepared  in  accordance  with  generally
accepted  accounting  principles have been condensed  or  omitted
pursuant to such rules and regulations.  However, in the  opinion
of  management of the Company, the condensed financial statements
include  all adjustments, which consist only of normal  recurring
accruals,  necessary to present fairly the financial  information
for such periods.  These condensed financial statements should be
read  in conjunction with the financial statements and the  notes
thereto  included  in  the  Company's 1993  Financial  Statements
included in this Form 8-K filing.

(2)   On  April 13, 1994, the Virginia State Corporate Commission
approved  the  merger of the Company into GTE South  Incorporated
effective  on or after July 1, 1994.  The merger of  the  Company
into GTE South Incorporated will simplify the corporate structure
and   will  provide  greater  efficiency  of  operations  through
consolidation of record keeping and control of expenses.  The new
Company  will have enhanced market presence both in the providing
of competitive telecommunications services and the procurement of
capital.

                               25
                                
                                
                                
                                
                                
                                
            REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Contel of Kentucky, Inc.:

We have audited the accompanying balance sheets of Contel of
Kentucky, Inc. (a Kentucky corporation), d/b/a GTE Kentucky (the
Company), as of December 31, 1993 and 1992, and the related
statements of income, reinvested earnings and cash flows for the
years then ended.  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 audits.

We conducted our audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Contel of Kentucky, Inc. as of December 31, 1993 and 1992, and
the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting
principles.

As discussed in Note 1 to the financial statements, effective
January 1, 1993, the Company changed its method of accounting for
postretirement benefits other than pensions.  Also as discussed
in Note 1, effective January 1, 1992, the Company changed its
method of accounting for income taxes.

                                             ARTHUR ANDERSEN &
CO.

Dallas, Texas
January 28, 1994.

                               26
                           CONTEL OF KENTUCKY, INC.

                                BALANCE SHEETS

                                    ASSETS

                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Current assets:
       Cash                                       $     105   $
46
       Accounts receivable
          Customers (including unbilled revenues)     8,964
7,422
          Affiliated companies                          307
1,655
          Other                                       2,722
958
          Allowance for uncollectible accounts         (100)
(404)
       Materials and supplies, at average cost          313
106
       Prepayments and other                          1,697
466
                                                     14,008
10,249

    Property, plant and equipment:
       Original cost                                202,393
182,083
       Accumulated depreciation                     (72,818)
(67,685)
                                                    129,575
114,398

    Other assets                                      2,038
3,357

    Total assets                                  $ 145,621   $
128,004

                          See Notes to Financial Statements.

                               27
                           CONTEL OF KENTUCKY, INC.

                                BALANCE SHEETS

                     LIABILITIES AND SHAREHOLDER'S EQUITY

                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Current liabilities:
       Notes payable to affiliates                $  19,775   $
13,990
       Current maturities of long-term debt             935
734
       Accounts payable                               3,909
7,559
       Due to affiliated companies                    7,817
2,815
       Advanced billings and customer deposits        1,090
1,607
       Accrued interest                                 616
86
       Accrued payroll and vacations                    632
493
       Accrued dividends                              5,000
- - --
       Accrued restructuring costs and other          5,047
1,730
                                                     44,821
29,014

    Long-term debt                                   24,484
25,536

    Deferred credits:
       Deferred income taxes                         12,906
11,257
       Deferred investment tax credits                2,423
2,981
       Restructuring costs and other                 11,038
6,361
                                                     26,367
20,599

    Shareholder's equity:
       Common stock (266,124 shares outstanding)      1,331
1,331
       Other capital                                 13,547
13,547
       Reinvested earnings                           35,071
37,977
                                                     49,949
52,855

    Total liabilities and shareholder's equity    $ 145,621   $
128,004

                          See Notes to Financial Statements.

                               28
                         CONTEL OF KENTUCKY, INC.

                             STATEMENTS OF INCOME

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)
    Operating revenues:
       Local network services                     $  19,640   $
19,259
       Network access services                       32,223
24,899
       Long distance services                           722
497
       Equipment sales and services                   3,448
2,802
       Other                                          4,078
3,807
                                                     60,111
51,264

    Operating expenses:
       Cost of sales and services                     9,946
9,868
       Depreciation and amortization                 11,266
11,214
       Marketing, selling, general
         and administrative                          15,212
13,110
       Restructuring costs                            6,530
- - --
                                                     42,954
34,192

    Net operating income                             17,157
17,072

    Other deductions:
       Interest expense                               2,544
2,637
       Other - net                                      120
803

    Income before income taxes                       14,493
13,632

    Income taxes                                      5,399
4,665

    Net income                                    $   9,094   $
8,967

                        STATEMENTS OF REINVESTED EARNINGS

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Balance at beginning of year                  $  37,977   $
32,510
    Add -
       Net income                                     9,094
8,967
    Deduct -
       Cash dividends declared on common stock       12,000
3,500

    Balance at end of year                        $  35,071   $
37,977

                          See Notes to Financial Statements.

                               29
                           CONTEL OF KENTUCKY, INC.

                           STATEMENTS OF CASH FLOWS

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Cash flows from operating activities:
       Net income                                 $   9,094   $
8,967
       Adjustments to reconcile net income to
       net cash from operating activities:
          Depreciation and amortization              11,266
11,214
          Restructuring costs                         6,530
- - --
          Deferred income taxes and investment
            tax credits                              (1,166)
(242)
          Provision for uncollectible accounts          413
839
          Changes in current assets and current
            liabilities                                (866)
(805)
          Other - net                                 2,697
(2,095)
          Net cash from operating activities         27,968
17,878

    Cash flows from investing activities:
       Capital expenditures                         (25,102)
(20,998)
       Other - net                                     (741)
(216)
          Net cash used in investing activities     (25,843)
(21,214)

    Cash flows from financing activities:
       Long-term debt retired                          (851)
(2,802)
       Dividends paid to shareholder                 (7,000)
(3,500)
       Increase in notes payable to affiliates        5,785
9,038
          Net cash (used in) from financing
            activities                               (2,066)
2,736

    Increase (decrease) in cash                          59
(600)

    Cash:
          Beginning of year                              46
646

          End of year                             $     105   $
46

                          See Notes to Financial Statements.
                                
                                
                                
                                
                               30
                    CONTEL OF KENTUCKY, INC.
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                                
1.  Summary of Accounting Policies

Contel of Kentucky, Inc., d/b/a GTE Kentucky (the Company), is  a
wholly-owned  subsidiary  of  Contel  Corporation   (the   Parent
Company). The Parent Company is a wholly-owned subsidiary of  GTE
Corporation (GTE).

Transactions with Affiliates - Purchases

Certain  affiliated companies supply construction and maintenance
materials,   supplies  and  equipment  to  the  Company.    These
purchases amounted to approximately $9.3 million and $4.7 million
for  the  years 1993 and 1992, respectively.  Such purchases  are
recorded  in  the  accounts of the Company at cost,  including  a
normal return realized by the affiliates.

The  Company  is  also  billed for data processing  services  and
equipment rentals, and receives management, consulting,  research
and  development  and  pension  management  services  from  other
affiliated  companies.  These charges amounted to  $14.1  million
and $11.5 million for the years 1993 and 1992, respectively.  The
amounts  charged for these affiliated transactions are  based  on
management's  best  estimate  of a proportional  cost  allocation
method.

Telephone Plant

Maintenance  and  repairs  are charged  to  income  as  incurred.
Additions  to, replacements and renewals of property are  charged
to telephone plant accounts.  Property retirements are charged in
total to the accumulated depreciation account.  No adjustment  to
depreciation  is  made  at  the time properties  are  retired  or
otherwise disposed of, except in the case of significant sales of
property where profit or loss is recognized.

The Company provides for depreciation on telephone plant over the
estimated  useful  lives  of the assets using  the  straight-line
method, based upon rates prescribed by the Federal Communications
Commission  (FCC)  and  the  Kentucky Public  Service  Commission
(KPSC).  The  provisions for depreciation and  amortization  were
equivalent  to composite annual rates of 5.9% and  6.5%  for  the
years 1993 and 1992, respectively.

Regulatory Accounting

The  Company  follows the accounting prescribed  by  the  Uniform
System  of  Accounts  of the FCC and the KPSC  and  Statement  of
Financial  Accounting Standards (SFAS) No. 71 ,  "Accounting  for
the  Effects  of  Certain Types of Regulation."  This  accounting
recognizes  the economic effects of rate regulation by  recording
costs  and  a return on investment as such amounts are  recovered
through  rates authorized by regulatory authorities.  The Company
annually reviews the continued applicability of SFAS No. 71 based
on the current regulatory and competitive environment.

                               31
Revenue Recognition

Revenues are recognized when earned.  This is generally based  on
usage  of  the  Company's local exchange networks or  facilities.
For  other  products  and services, revenue  is  recognized  when
products are delivered or services are rendered to customers.

Materials and Supplies

Materials and supplies are stated at the lower of cost or  market
value.

Employee Benefit Plans

Effective  January  1, 1993, the Company adopted  SFAS  No.  106,
"Employers'  Accounting for Postretirement  Benefits  Other  Than
Pensions."  The new standard requires that the expected costs  of
postretirement  benefits be charged to expense during  the  years
that  the employees render service.  The Company elected to adopt
this  new  accounting standard on the delayed recognition  method
and  commencing January 1, 1993, began amortizing  the  estimated
unrecorded  accumulated  postretirement benefit  obligation  over
twenty years.

The Company also adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" effective January 1, 1993.  SFAS No. 112
requires employers to accrue the future cost of benefits provided
to  former  or  inactive  employees and  their  dependents  after
employment but before retirement.  Previously, the cost of  these
benefits  was  charged to expense as paid.  The  impact  of  this
change  in accounting on the Company's results of operations  was
immaterial.

Income Taxes

Investment  tax credits were repealed by the Tax  Reform  Act  of
1986  (the  Act).  Those credits claimed prior to  the  Act  were
deferred and are being amortized over the lives of the properties
giving rise to the credits.

As  further  explained in Note 6, during the  fourth  quarter  of
1992,  the  Company adopted SFAS No. 109, "Accounting for  Income
Taxes", retroactive to January 1, 1992.  SFAS No. 109 changed the
method by which companies account for income taxes.  Among  other
things,  the  Statement requires that deferred  tax  balances  be
adjusted to reflect new tax rates when they are enacted into law.
The  impact of this change in accounting on the Company's results
of operations was immaterial.

Financial Instruments

The  fair  values of financial instruments other  than  long-term
debt,  closely approximate their carrying values.  The  estimated
fair value of long-term debt at December 31, 1993 and 1992, based
on  either reference to quoted market prices or an option pricing
model,  exceeded the carrying value by approximately $1.6 million
and $0.2 million, respectively.

Prior Year's Financial Statements

Reclassifications  of  prior year data  have  been  made  in  the
financial statements to conform to the 1993 presentation.

                               32
2.  Restructuring Costs

Results  for 1993 include a one-time pretax restructuring  charge
of $6.5 million related to the Company's re-engineering plan over
the  next three years.  The re-engineering plan will redesign and
streamline  processes  to  improve  customer-responsiveness   and
product  quality,  reduce  the time necessary  to  introduce  new
products  and  services  and  further  reduce  costs.   The   re-
engineering  plan  includes $2.7 million to  upgrade  or  replace
existing customer service and administrative systems and  enhance
network  software, $3.0 million for employee separation  benefits
associated  with workforce reductions and $0.8 million  primarily
for  the  consolidation of facilities and  operations  and  other
related costs.

3.  Common Stock

The  authorized common stock of the Company consists  of  300,000
shares  with a par value of $5 per share.  All outstanding shares
of common stock are held by the Parent Company.

There  were no shares of common stock held by or for the  account
of  the  Company  and no shares were reserved  for  officers  and
employees, or for options, warrants, conversions or other rights.

At  December  31, 1993, $20.9 million of reinvested earnings  was
restricted  as to the payment of cash dividends on  common  stock
under the most restrictive terms of the Company's indentures.

                               33
4.  Long-Term Debt

Long-term  debt outstanding, exclusive of current maturities,  is
as follows:

                                              December 31
                                            1993         1992
                                         (Thousands of Dollars)

Rural Electrification Administration

  2%, due 2009                            $  2,192    $  2,594

Federal Financing Bank

  7.391% to 10.910%, through 2022           22,292      22,942

  Total long-term debt                    $ 24,484    $ 25,536

The  aggregate principal amount of bonds and debentures that  may
be  issued is subject to the restrictions and provisions  of  the
Company's indentures.

None  of the securities shown above were held in sinking or other
special funds of the Company or pledged by the Company.

Maturities,  installments and sinking fund requirements  for  the
five-year  period from January 1, 1994 are summarized  below  (in
thousands of dollars):

                 1994            $  935
                 1995               916
                 1996             1,334
                 1997             1,038
                 1998             1,083

Substantially all of the Company's telephone plant is subject  to
the  liens  of the indentures under which the bonds listed  above
were issued.

                               34
5.  Notes Payable to Affiliates

The Company finances part of its construction program through the
use  of interim short-term notes payable to affiliates, which are
generally refinanced at a later date by the issuance of long-term
debt  or  equity.  During 1993 and 1992, the Company supplemented
its  internal  generation of cash with funds borrowed  from  GTE.
These  arrangements  require payment of  interest  based  on  GTE
Corporation's  daily intercompany interest rate (which  is  based
primarily on the costs associated with the issuance of commercial
paper).   In addition, a $2.3 billion line of credit is available
to   the  Company  through  shared  lines  with  GTE  and   other
affiliates.

                               35
6.  Income Taxes

The provision for income taxes is as follows:

                                          1993         1992
                                     (Thousands of Dollars)

Current
  Federal                              $   5,142    $   3,893
  State and local                          1,423        1,014
    Total                                  6,565        4,907

Deferred
  Federal                                   (402)         247
  State and local                           (206)         142
    Total                                   (608)         389

Amortization of deferred
 investment tax credits                     (558)        (631)

    Total                              $   5,399    $   4,665

The  components of deferred income tax expense (benefit)  are  as
follows:

                                          1993         1992
                                     (Thousands of Dollars)

  Depreciation and amortization        $   3,211    $     (47)
  Employee benefit obligations            (2,025)        (156)
  Restructuring cost                      (2,506)          --
  Other-net                                  712          592

    Total                              $    (608)   $     389

                               36
A  reconciliation between the statutory Federal income  tax  rate
and the effective income tax rate is as follows:

                                             1993         1992

Statutory Federal income tax rate            35.0%        34.0%
  State and local income taxes, net of
    Federal income tax benefits               5.5          5.6
  Amortization of deferred investment
    tax credits                              (3.9)        (4.6)
  Depreciation of telephone plant
    construction costs previously
    deducted for tax purposes - net           0.6          0.9
  Rate differentials applied to
    reversing temporary differences          (0.9)        (1.7)
  Other - net                                 1.0           --

Effective income tax rate                    37.3%        34.2%

As  a  result of implementing SFAS No. 109, the Company  recorded
additional  deferred income tax liabilities primarily related  to
temporary differences which had not previously been recognized in
accordance  with  established rate-making practices.   Since  the
manner in which income taxes are treated for rate-making has  not
changed,  pursuant  to  SFAS No. 71, a  corresponding  regulatory
asset  was also established.  In addition, deferred income  taxes
were  adjusted  and  a regulatory liability established  to  give
effect to the  current statutory Federal income tax rate and  for
unamortized   investment  tax  credits.   The   net   unamortized
regulatory  liability  balances at December  31,  1993  and  1992
amounted  to  $2.9  million and $3.8 million, respectively.   The
regulatory liabilities are reflected as other deferred credits in
the   accompanying  Balance  Sheets.   These  amounts  are  being
amortized  over  the  lives  of the  related  depreciable  assets
concurrent  with  recovery in rates and in conformance  with  the
provisions  of  the  Internal  Revenue  Code.   The  assets   and
liabilities established in accordance with SFAS No. 71 have  been
increased for the tax effect of future revenue requirements.

The  tax  effects of all temporary differences that give rise  to
the deferred tax liability and deferred tax asset at December  31
are as follows:

                                          1993         1992
                                       (Thousands of Dollars)

  Depreciation and amortization        $  15,468    $  11,146
  Employee benefit obligations            (1,548)      (1,130)
  Restructuring cost                      (2,506)          --
  Other - net                                558        1,454
    Total                              $  11,972    $  11,470

                                
                                
                                
                                
                                
                                
                               37
7. Employee Benefit Plans

The Company participates in the Parent Company's trusteed pension
plan  (the Plan), which covers substantially all employees.   The
benefits are based on an employee's years of service and  average
earnings   for  the  five  highest  consecutive  calendar   years
preceding  retirement.  The Company's policy is to  fund  pension
cost  in  accordance with applicable regulations.  Total  pension
(credits)  costs for 1993 and 1992 were $(477,000) and  $267,000,
respectively.

The  net  assets  available for benefits are maintained  for  the
total Plan and amounted to $632.9 million.  The Plan's net assets
available for benefits exceeded projected benefit obligations  by
$433.6   million  as  computed  under  SFAS  No.  87  "Employers'
Accounting for Pensions" as of December 31, 1993.

As  described in Note 1, effective January 1, 1993,  the  Company
adopted  SFAS  No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions."

Substantially  all of the Company's employees are  covered  under
postretirement health care and life insurance benefit plans.  The
health care benefits paid under the plans are generally based  on
comprehensive hospital, medical and surgical benefit  provisions,
while  the life insurance benefits are currently based on  annual
earnings  at  the time of retirement.  The Company funds  amounts
for  postretirement benefits as deemed appropriate from  time  to
time.

The  postretirement benefit cost for 1993 includes the  following
components (in thousands of dollars):

                                                       1993
Service cost-benefits earned
  during the period                                 $     195
Interest cost on accumulated
  postretirement benefit obligation                       875
Amortization of transition obligation
  and prior service cost                                  491
  Postretirement benefit cost                       $   1,561

During  1992,  the cost of postretirement health  care  and  life
insurance benefits on a pay-as-you-go basis was $365,000.

                               38
The  following table sets forth the plans' funded status and  the
accrued  obligation  as  of December 31, 1993  (in  thousands  of
dollars):

                                                      1993
Accumulated postretirement benefit
  obligation attributable to:
    Retirees                                       $   7,129
    Fully eligible active plan participants              323
    Other active plan participants                     1,771
Total accumulated postretirement benefit
  obligation                                           9,223
Fair value of plan assets                                 --
Excess of accumulated obligation over plan
  assets                                               9,223
Unrecognized transition obligation                    (6,163)
Unrecognized net loss                                   (873)
  Accrued postretirement benefit obligation        $   2,187

The  assumed  discount  rate  used  to  measure  the  accumulated
postretirement benefit obligation was 7.5% at December 31,  1993.
The  assumed health care cost trend rate in 1993 was 13% for pre-
65   participants  and  9.5%  for  post-65  retirees,  each  rate
declining  on a graduated basis to an ultimate rate in  the  year
2004  of  6%.   A  one percentage point increase in  the  assumed
health  care  cost  trend rate for each future  year  would  have
increased   1993   costs   by  $178,000   and   the   accumulated
postretirement  benefit  obligation  at  December  31,  1993   by
$677,000.

During   1993,   the  Company  made  certain   changes   to   its
postretirement health care and life insurance benefits  for  non-
union  employees  that  are effective  January  1,  1995.   These
changes  include, among others, newly established limits  to  the
Company's annual contribution to postretirement medical costs and
a revised sharing schedule based on a retiree's years of service.
The  net  effect of these changes reduced the accumulated benefit
obligation at December 31, 1993 by $4.0 million.

                               39
8.  Commitments and Contingencies

The   Company's  anticipated  construction  costs  for  1994  are
approximately   $13.8  million,  for  which   the   Company   had
substantial purchase commitments as of December 31, 1993.

The  Company  has noncancelable lease contracts covering  certain
buildings,  office  space  and equipment.   The  lease  contracts
contain varying renewal options for terms up to 8 years.

Minimum  rental commitments for noncancelable leases for  periods
subsequent  to December 31, 1993 are as follows (in thousands  of
dollars):

             1994                  $  30
             1995                     18
             1996                     11
             1997                     10
             1998                     10
             Thereafter               31

          Total minimum rental
          commitments              $ 110

The  total amounts of rents charged to expense were $0.6  million
for 1993 and 1992.

9.  Property, Plant and Equipment

Telephone plant and equipment consists of the following:

                                       1993         1992
                                    (Thousands of Dollars)

     Land and buildings             $   7,275    $   8,096
     Plant in service                 185,751      171,674
     Plant under construction           9,013        1,690
     Other                                354          623
          Total telephone plant       202,393      182,083

     Accumulated depreciation         (72,818)     (67,685)

          Net telephone plant       $ 129,575    $ 114,398

                               40
10.  Regulatory Matters

The  Company  is subject to regulation by the FCC for  interstate
business and the KPSC for intrastate operations.

Intrastate Services

The  Company  provides long distance services  within  designated
geographic areas called Local Access and Transport Areas (LATAs).
The  Company  receives  access revenues  from  the  primary  toll
carrier within the LATA.

Intrastate-interLATA   network  access   service   revenues   are
recovered  through access charges paid by interexchange  carriers
for   use   of  the  Company's  facilities  in  originating   and
terminating intrastate toll messages between LATAs.  The  Company
records this revenue on a bill-and-keep basis.

On  December 15, 1993, the KPSC approved the Company's request to
become a primary toll carrier under an Originating Responsibility
Plan,  effective March 1, 1994.  Under this type of  arrangement,
the  toll  rates  billed to end users for  intraLATA  toll  calls
originating in the Company's service area will be retained by the
Company on a bill-and-keep basis.  The Company, in turn, will pay
access  charges to the carrier hauling and terminating  the  call
based on that carrier's approved access charge tariff.  Likewise,
the  Company  will  receive access charges  for  terminating  any
intraLATA  toll call that originates outside of its service  area
based  on  its  approved access charge tariff.  The Company  will
receive  transitional  support  payments  for  any  revenue  loss
created  by  this  change in compensation arrangement  under  the
terms of an industry agreement.

Interstate Services

For  the  provision of interstate services, the Company  operates
under  the  terms  of  the FCC's price cap incentive  plan.   The
"price  cap"  mechanism serves to limit the rates a  carrier  may
charge, rather than just regulating the rate of return which  may
be  achieved.   Under this approach, the maximum price  that  the
Local Exchange Carrier (LEC) may charge is increased or decreased
each  year  by  a  price  index  based  upon  inflation  less   a
predetermined  productivity  target.   LECs  may  within  certain
ranges price individual services above or below the overall cap.

As  a safeguard under its new price cap regulatory plan, the  FCC
has also adopted a productivity sharing feature.  Because of this
feature, under the minimum productivity-gain option, the  Company
must  share  equally with its ratepayers any realized  interstate
returns  above 12.25% up to 16.25%, and all returns  higher  than
16.25%, by temporarily lowering prospective prices. During  1994,
the  FCC  is  scheduled  to review the  LEC  price  cap  plan  to
determine whether it should be continued or modified.

                               41
Other Rate Matters

On  August  1, 1993, the KPSC approved the Company's  request  to
reduce  its  local service revenue by $2.1 million to  bring  the
Company's  tariffed rates to the same rate levels as  GTE  South.
This  rate reduction was required by the KPSC as a condition  for
approval  of  the planned merger of the Company  into  GTE  South
Incorporated.

Significant Customer

Revenues  received  from  AT&T  including  access,  billing   and
collection and interexchange leased facilities during  the  years
1993 and 1992 under various arrangements amounted to $7.1 million
and $6.6 million, respectively.

                               42
11.  Supplemental Cash Flow Disclosures

Set forth below is information with respect to changes in current
assets  and  current liabilities, and cash paid for interest  and
income taxes:

                                              1993         1992
                                           (Thousands of Dollars)

(Increase) decrease in current assets:
    Accounts  receivable  -  net                 $   (2,675)    $
(3,394)
  Materials and supplies                        (207)         342
     Prepayments    and    other                          (1,231)
(316)

Increase (decrease) in current liabilities:
  Accounts payable                            (3,650)       4,034
  Due to affiliated companies                  5,002          353
  Advanced billings and customer deposits       (517)         819
       Accrued     liabilities                              2,345
(2,310)
         Other                                                 67
(333)
      Total                                    $      (866)     $
(805)

Cash paid during the year for:
  Interest                                 $   3,030    $   2,110
  Income taxes                                 8,201        5,322

12. Legal Entity Merger

On September 27, 1993 the Company filed an application to legally
merge  into  GTE South Incorporated, a subsidiary  of  GTE.   The
merger  of the Company into GTE South Incorporated will  simplify
the  corporate  structure and will provide greater efficiency  of
operations through consolidation of record keeping and control of
expenses.  The new Company will have an enhanced market  presence
both  in the providing of competitive telecommunications services
and  the  procurement of capital.  Pending regulatory  approvals,
the Company expects the merger to be completed by July 1, 1994.

                               43
                    CONTEL OF KENTUCKY, INC.
                                
               CONDENSED BALANCE SHEET (UNAUDITED)
                                
                             ASSETS

                                                       March 31,
                                                         1994
                                                     (Thousands
                                                     of Dollars)

CURRENT ASSETS:
 Cash                                                $        58
 Receivables, less allowances of $367                     12,510
 Materials and supplies, at average cost                     356
 Deferred income tax benefits                                943
 Prepayments and other                                        11
   Total current assets                                   13,878

PROPERTY, PLANT AND EQUIPMENT:
 Original cost                                           206,128
 Accumulated depreciation                                (75,091)
   Net property, plant and equipment                     131,037

OTHER ASSETS                                               1,319

   TOTAL ASSETS                                      $   146,234

  See Notes to Condensed Financial Statements.

                               44
                    CONTEL OF KENTUCKY, INC.
                                
               CONDENSED BALANCE SHEET (UNAUDITED)
                                
              LIABILITIES AND SHAREHOLDER'S EQUITY
                                
                                
                                                       March 31,
                                                         1994
                                                     (Thousands
                                                     of Dollars)

CURRENT LIABILITIES:
 Notes payable to affiliates                         $    29,764
 Accounts payable                                          8,032
 Accrued dividends                                         2,526
 Accrued restructuring costs and other                     6,335
   Total current liabilities                              46,657

LONG-TERM DEBT                                            24,123

DEFERRED CREDITS, primarily deferred
 income taxes and investment tax credits                  26,206

SHAREHOLDER'S EQUITY:
 Common stock                                              1,331
 Other capital                                            13,547
 Reinvested earnings                                      34,370
   Total shareholder's equity                             49,248

   TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY                  $
146,234

  See Notes to Condensed Financial Statements.

                               45
                    CONTEL OF KENTUCKY, INC.
                                
           CONDENSED STATEMENTS OF INCOME (UNAUDITED)

                                             Three Months Ended
                                                  March 31,
                                             1994        1993
                                            (Thousands of
Dollars)

OPERATING REVENUES:
 Local network services                  $     4,723 $     4,965
 Network access services                       6,731       6,896
 Long distance services                          147         178
 Equipment sales and services                    936         791
 Other                                           923       1,225
                                              13,460      14,055

OPERATING EXPENSES:
 Cost of sales and services                    3,194       2,373
 Depreciation and amortization                 3,496       2,750
 Marketing, selling, general and
   administrative                              3,104       3,583
                                               9,794       8,706

 Net operating income                          3,666       5,349

OTHER (INCOME) DEDUCTIONS:
 Interest expense                                753         612
 Other - net                                      (9)
(6)

INCOME BEFORE INCOME TAXES                     2,922       4,743

INCOME TAXES                                   1,096       1,639

NET INCOME                               $     1,826 $     3,104

 Per share data is omitted since the Company's common stock is
100% owned by
 Contel Corporation (a wholly-owned subsidiary of GTE
Corporation).

 See Notes to Condensed Financial Statements.

                               46
                    CONTEL OF KENTUCKY, INC.
                                
         CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                             Three Months Ended
                                                  March 31,
                                            1994        1993
                                           (Thousands of Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                              $     1,826 $     3,104

 Adjustments to reconcile net income to
   net cash from operating activities:
     Depreciation and amortization             3,496       2,750
     Deferred income taxes and investment
       tax credits                               288        (524)
     Provision for uncollectible accounts                  76
56
     Changes in current assets and current
       liabilities                            (4,736)
1,294
     Other  - net                               (807)
3,243
     Net cash from operating activities          143       9,923

CASH FLOWS FROM INVESTING ACTIVITIES:
 Capital expenditures                         (4,932)
(5,401)
 Other - net                                     108        (120)
     Net cash used in investing activities             (4,824)
(5,521)

CASH FLOWS FROM FINANCING ACTIVITIES:
 Long-term debt retired                         (355)
(240)
 Dividends paid to shareholder                (5,000)
- - --
 Net change in affiliate notes                 9,989      (4,158)
     Net cash from (used in) financing
       activities                              4,634      (4,398)

Increase (decrease) in cash                      (47)
4

Cash at beginning of period                      105          46

Cash at end of period                    $        58 $        50

 See Notes to Condensed Financial Statements.

                               47
                    CONTEL OF KENTUCKY, INC.
                                
       NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(1)  The condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations  of the Securities and Exchange Commission.   Certain
information   and  footnote  disclosures  normally  included   in
financial   statements  prepared  in  accordance  with  generally
accepted  accounting  principles have been condensed  or  omitted
pursuant to such rules and regulations.  However, in the  opinion
of  management of the Company, the condensed financial statements
include  all adjustments, which consist only of normal  recurring
accruals,  necessary to present fairly the financial  information
for such periods.  These condensed financial statements should be
read  in conjunction with the financial statements and the  notes
thereto  included  in  the  Company's 1993  Financial  Statements
included in this Form 8-K filing.

(2)   On  September 27, 1993 the Company filed an application  to
legally  merge into GTE South Incorporated, a subsidiary of  GTE.
The  merger  of  the  Company into GTE  South  Incorporated  will
simplify  the  corporate  structure  and  will  provide   greater
efficiency of operations through consolidation of record  keeping
and  control of expenses.  The new Company will have an  enhanced
market   presence   both   in   the  providing   of   competitive
telecommunications  services  and  the  procurement  of  capital.
Approval  for  the  merger by the KPSC (Kentucky  Public  Service
Commission) was obtained on March 28, 1994 effective on or  after
July 1, 1994.

                               48
                                
                                
                                
                                
                                
                                
            REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Contel of North Carolina, Inc.:

We have audited the accompanying balance sheets of Contel of
North Carolina, Inc. (a North Carolina corporation), d/b/a GTE
North Carolina (the Company), as of December 31, 1993 and 1992,
and the related statements of income, reinvested earnings and
cash flows for the years then ended.  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 audits.

We conducted our audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Contel of North Carolina, Inc. as of December 31, 1993 and
1992, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted
accounting principles.

As discussed in Note 1 to the financial statements, effective
January 1, 1993, the Company changed its method of accounting for
postretirement benefits other than pensions.  Also as discussed
in Note 1, effective January 1, 1992, the Company changed its
method of accounting for income taxes.

                                             ARTHUR ANDERSEN &
CO.

Dallas, Texas
January 28, 1994.

                               49
                        CONTEL OF NORTH CAROLINA, INC.

                                BALANCE SHEETS

                                    ASSETS

                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Current assets:
       Cash                                       $     465   $
259
       Accounts receivable
          Customers (including unbilled revenues)    11,167
8,519
          Affiliated companies                          171
1,036
          Other                                       5,260
2,220
          Allowance for uncollectible accounts         (448)
(225)
       Notes receivable from affiliate                   --
12,645
       Prepayments                                    1,635
125
       Materials and supplies and other                 490
609
                                                     18,740
25,188

    Property, plant and equipment:
       Original cost                                227,277
218,114
       Accumulated depreciation                     (91,536)
(82,796)
                                                    135,741
135,318

    Other assets                                      2,442
4,410

    Total assets                                  $ 156,923   $
164,916

                         See Notes to Financial Statements.

                               50

                        CONTEL OF NORTH CAROLINA, INC.

                                BALANCE SHEETS

                     LIABILITIES AND SHAREHOLDER'S EQUITY

                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Current liabilities:
       Notes payable to affiliates                $   5,727   $
- - --
       Current maturities of long-term debt          10,084
1,208
       Accounts payable                               8,650
5,727
       Due to affiliated companies                    4,026
3,090
       Advanced billings and customer deposits        2,107
2,048
       Accrued taxes                                    952
6,776
       Accrued payroll and vacations                  1,022
634
       Accrued rent                                   1,169
473
       Accrued dividends                                 --
14,000
       Accrued restructuring costs and other          5,198
1,553
                                                     38,935
35,509

    Long-term debt                                   29,465
39,519

    Deferred credits:
       Deferred income taxes                         18,596
15,440
       Deferred investment tax credits                2,588
3,302
       Restructuring costs and other                 15,710
10,605
                                                     36,894
29,347

    Shareholder's equity:
       Common stock (1,350,637 shares outstanding)    6,753
6,753
       Other capital                                 15,709
15,709
       Reinvested earnings                           29,167
38,079
                                                     51,629
60,541

    Total liabilities and shareholder's equity    $ 156,923   $
164,916

                         See Notes to Financial Statements.

                               51

                        CONTEL OF NORTH CAROLINA, INC.

                             STATEMENTS OF INCOME

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)
    Operating revenues:
       Local network services                     $  28,763   $
27,444
       Network access services                       46,400
44,583
       Equipment sales and services                   4,322
3,278
       Other                                          1,076
1,666
                                                     80,561
76,971

    Operating expenses:
       Cost of sales and services                    14,086
13,098
       Depreciation and amortization                 13,530
14,571
       Marketing, selling, general
         and administrative                          20,582
19,703
       Restructuring costs                            9,860
- - --
                                                     58,058
47,372

    Net operating income                             22,503
29,599

    Other deductions:
       Interest expense                               4,292
4,140
       Other - net                                      267
696

    Income before income taxes                       17,944
24,763

    Income taxes                                      6,456
8,768

    Net income                                    $  11,488   $
15,995

                        STATEMENTS OF REINVESTED EARNINGS

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Balance at beginning of year                  $  38,079   $
41,984
    Add -
       Net income                                    11,488
15,995
    Deduct -
       Cash dividends declared on common stock       20,400
19,900

    Balance at end of year                        $  29,167   $
38,079

                         See Notes to Financial Statements.

                               52

                         CONTEL OF NORTH CAROLINA, INC.

                           STATEMENTS OF CASH FLOWS

                                                       Years
ended
                                                       December
31,
                                                     1993
1992
                                                  (Thousands of
Dollars)

    Cash flows from operating activities:
       Net income                                 $  11,488   $
15,995
       Adjustments to reconcile net income to
       net cash from operating activities:
          Depreciation and amortization              13,530
14,571
          Restructuring costs                         9,860
- - --
          Deferred income taxes and investment
            tax credits                              (2,470)
(2,961)
          Provision for uncollectible accounts          986
505
          Changes in current assets and current
            liabilities                              (6,815)
1,699
          Other - net                                 4,023
(911)
          Net cash from operating activities         30,602
28,898

    Cash flows from investing activities:
       Capital expenditures                         (12,905)
(11,273)
       Other - net                                     (285)
(264)
          Net cash used in investing activities     (13,190)
(11,537)

    Cash flows from financing activities:
       Long-term debt retired                        (1,178)
(1,189)
       Dividends paid to shareholder                (34,400)
(5,900)
       Net change in affiliate notes                 18,372
(11,074)
          Net cash used in financing activities     (17,206)
(18,163)

    Increase (decrease) in cash                         206
(802)

    Cash:
          Beginning of year                             259
1,061

          End of year                             $     465   $
259

                         See Notes to Financial Statements.

                               53
                 CONTEL OF NORTH CAROLINA, INC.
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                                
1.  Summary of Accounting Policies

Contel  of  North Carolina, Inc., d/b/a GTE North  Carolina  (the
Company), is a wholly-owned subsidiary of Contel Corporation (the
Parent Company).  The Parent Company is a wholly-owned subsidiary
of GTE Corporation (GTE).

Transactions with Affiliates - Purchases

Certain  affiliated companies supply construction and maintenance
materials,   supplies  and  equipment  to  the  Company.    These
purchases amounted to approximately $3.3 million and $3.9 million
for  the  years 1993 and 1992, respectively.  Such purchases  are
recorded  in  the  accounts of the Company at cost,  including  a
normal return realized by the affiliates.

The  Company  is  also  billed for data processing  services  and
equipment rentals, and receives management, consulting,  research
and  development  and  pension  management  services  from  other
affiliated  companies.  These charges amounted to  $17.7  million
and $14.1 million for the years 1993 and 1992, respectively.  The
amounts  charged for these affiliated transactions are  based  on
management's  best  estimate  of a proportional  cost  allocation
method.

Telephone Plant

Maintenance  and  repairs  are charged  to  income  as  incurred.
Additions  to, replacements and renewals of property are  charged
to telephone plant accounts.  Property retirements are charged in
total to the accumulated depreciation account.  No adjustment  to
depreciation  is  made  at  the time properties  are  retired  or
otherwise disposed of, except in the case of significant sales of
property where profit or loss is recognized.

The Company provides for depreciation on telephone plant over the
estimated  useful  lives  of the assets using  the  straight-line
method, based upon rates prescribed by the Federal Communications
Commission   (FCC)  and  the  North  Carolina  Public   Utilities
Commission   (NCPUC).   The  provisions  for   depreciation   and
amortization  were equivalent to composite annual rates  of  6.1%
and 6.7% for the years 1993 and 1992, respectively.

Regulatory Accounting

The  Company  follows the accounting prescribed  by  the  Uniform
System  of  Accounts of the FCC and the NCPUC  and  Statement  of
Financial  Accounting Standards (SFAS) No. 71 ,  "Accounting  for
the  Effects  of  Certain Types of Regulation."  This  accounting
recognizes  the economic effects of rate regulation by  recording
costs  and  a return on investment as such amounts are  recovered
through  rates authorized by regulatory authorities.  The Company
annually reviews the continued applicability of SFAS No. 71 based
on the current regulatory and competitive environment.

                               54
Revenue Recognition

Revenues are recognized when earned.  This is generally based  on
usage  of  the  Company's local exchange networks or  facilities.
For  other  products  and services, revenue  is  recognized  when
products are delivered or services are rendered to customers.

Materials and Supplies

Materials and supplies are stated at the lower of cost or  market
value.   Cost  of  materials and supplies is  determined  by  the
average cost method of inventory valuation.

Employee Benefit Plans

Effective  January  1, 1993, the Company adopted  SFAS  No.  106,
"Employers'  Accounting for Postretirement  Benefits  Other  Than
Pensions."  The new standard requires that the expected costs  of
postretirement  benefits be charged to expense during  the  years
that  the employees render service.  The Company elected to adopt
this  new  accounting standard on the delayed recognition  method
and  commencing January 1, 1993, began amortizing  the  estimated
unrecorded  accumulated  postretirement benefit  obligation  over
twenty years.

The Company also adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" effective January 1, 1993.  SFAS No. 112
requires employers to accrue the future cost of benefits provided
to  former  or  inactive  employees and  their  dependents  after
employment but before retirement.  Previously, the cost of  these
benefits  was  charged to expense as paid.  The  impact  of  this
change  in accounting on the Company's results of operations  was
immaterial.

Income Taxes

Investment  tax credits were repealed by the Tax  Reform  Act  of
1986  (the  Act).  Those credits claimed prior to  the  Act  were
deferred and are being amortized over the lives of the properties
giving rise to the credits.

As  further  explained in Note 6, during the  fourth  quarter  of
1992,  the  Company adopted SFAS No. 109, "Accounting for  Income
Taxes", retroactive to January 1, 1992.  SFAS No. 109 changed the
method by which companies account for income taxes.  Among  other
things,  the  Statement requires that deferred  tax  balances  be
adjusted to reflect new tax rates when they are enacted into law.
The  impact of this change in accounting on the Company's results
of operations was immaterial.

                               55
Financial Instruments

The  fair  values of financial instruments other  than  long-term
debt,  closely approximate their carrying values.  The  estimated
fair value of long-term debt at December 31, 1993 and 1992, based
on  either reference to quoted market prices or an option pricing
model,  exceeded the carrying value by approximately $2.3 million
and $2.6 million, respectively.

Prior Year's Financial Statements

Reclassifications  of  prior year data  have  been  made  in  the
financial statements to conform to the 1993 presentation.

2.  Restructuring Costs

Results  for 1993 include a one-time pretax restructuring  charge
of $9.9 million related to the Company's re-engineering plan over
the  next three years.  The re-engineering plan will redesign and
streamline  processes  to  improve  customer-responsiveness   and
product  quality,  reduce  the time necessary  to  introduce  new
products  and  services  and  further  reduce  costs.   The   re-
engineering  plan  includes $4.0 million to  upgrade  or  replace
existing customer service and administrative systems and  enhance
network  software, $4.6 million for employee separation  benefits
associated  with workforce reductions and $1.3 million  primarily
for  the  consolidation of facilities and  operations  and  other
related costs.

3.  Common Stock

The  authorized common stock of the Company consists of 2,000,000
shares  with a par value of $5 per share.  All outstanding shares
of common stock are held by the Parent Company.

There  were no shares of common stock held by or for the  account
of  the  Company  and no shares were reserved  for  officers  and
employees, or for options, warrants, conversions or other rights.

At  December  31, 1993, $16.1 million of reinvested earnings  was
restricted  as to the payment of cash dividends on  common  stock
under the most restrictive terms of the Company's indentures.

                               56
4.  Long-Term Debt

Long-term  debt outstanding, exclusive of current maturities,  is
as follows:

                                              December 31
                                            1993         1992
                                         (Thousands of Dollars)

Rural Electrification Administration

  2%, due 1997                           $     981    $  1,299

Rural Telephone Bank

  7.5% to 9.5%, through 2011                17,083      17,173

Federal Financing Bank

  8.686% to 12.201%, through 2014            7,786       7,908

First Mortgage Bonds

  8.25% to 9.5%, through 2002                2,725       4,598
  10% to 10.25%, due 1996                      890       1,035
  12.5%, due 1994                               --       7,500

Capitalized Leases                              --           6

  Total long-term debt                    $ 29,465    $ 39,519

The  aggregate principal amount of bonds and debentures that  may
be  issued is subject to the restrictions and provisions  of  the
Company's indentures.

None  of the securities shown above were held in sinking or other
special funds of the Company or pledged by the Company.

Maturities,  installments and sinking fund requirements  for  the
five-year  period from January 1, 1994 are summarized  below  (in
thousands of dollars):

                 1994           $ 10,084
                 1995              1,589
                 1996              2,053
                 1997              1,295
                 1998                488

Substantially all of the Company's telephone plant is subject  to
the  liens  of the indentures under which the bonds listed  above
were issued.

                               57
5.  Notes Payable to Affiliates

The Company finances part of its construction program through the
use  of interim short-term notes payable to affiliates, which are
generally refinanced at a later date by the issuance of long-term
debt  or  equity.  During 1993 and 1992, the Company supplemented
its  internal  generation of cash with funds borrowed  from  GTE.
These  arrangements  require payment of  interest  based  on  GTE
Corporation's  daily intercompany interest rate (which  is  based
primarily on the costs associated with the issuance of commercial
paper).   In addition, a $2.3 billion line of credit is available
to   the  Company  through  shared  lines  with  GTE  and   other
affiliates.

                               58
6.  Income Taxes

The provision for income taxes is as follows:

                                          1993         1992
                                    (Thousands of Dollars)

Current
  Federal                              $   7,636    $   9,354
  State and local                          1,290        2,375
    Total                                  8,926       11,729

Deferred
  Federal                                 (1,857)      (1,796)
  State and local                             99         (374)
    Total                                 (1,758)      (2,170)

Amortization of deferred
 investment tax credits                     (712)        (791)

    Total                              $   6,456    $   8,768

The components of deferred income tax benefit are as follows:

                                          1993         1992
                                     (Thousands of Dollars)

  Depreciation and amortization        $   3,026    $  (2,695)
  Employee benefit obligations            (2,185)         113
  Restructuring cost                      (3,787)          --
  Other-net                                1,188          412

    Total                              $  (1,758)   $  (2,170)

                               59
A  reconciliation between the statutory Federal income  tax  rate
and the effective income tax rate is as follows:

                                             1993         1992

Statutory Federal income tax rate            35.0%        34.0%
  State and local income taxes, net of
    Federal income tax benefits               5.0          5.3
  Amortization of deferred investment
    tax credits                              (4.0)        (3.2)
  Depreciation of telephone plant
    construction costs previously
    deducted for tax purposes - net           0.3          0.4
  Rate differentials applied to
    reversing temporary differences          (1.4)        (1.1)
  Other - net                                 1.1           --

Effective income tax rate                    36.0%        35.4%

As  a  result of implementing SFAS No. 109, the Company  recorded
additional  deferred income tax liabilities primarily related  to
temporary differences which had not previously been recognized in
accordance  with  established rate-making practices.   Since  the
manner in which income taxes are treated for rate-making has  not
changed,  pursuant  to  SFAS No. 71, a  corresponding  regulatory
asset  was also established.  In addition, deferred income  taxes
were  adjusted  and  a regulatory liability established  to  give
effect  to the current statutory Federal income tax rate and  for
unamortized   investment  tax  credits.   The   net   unamortized
regulatory  liability  balances at December  31,  1993  and  1992
amounted  to  $5.9  million and $8.7 million, respectively.   The
regulatory liabilities are reflected as other deferred credits in
the   accompanying  Balance  Sheets.   These  amounts  are  being
amortized  over  the  lives  of the  related  depreciable  assets
concurrent  with  recovery in rates and in conformance  with  the
provisions  of  the  Internal  Revenue  Code.   The  assets   and
liabilities established in accordance with SFAS No. 71 have  been
increased for the tax effect of future revenue requirements.

The  tax  effects of all temporary differences that give rise  to
the deferred tax liability and deferred tax asset at December  31
are as follows:

                                             1993         1992
                                          (Thousands of Dollars)

  Depreciation and amortization           $  21,493    $  14,998
  Employee benefit obligations               (1,262)        (809)
  Restructuring cost                         (3,787)          --
  Other - net                                   917        1,461

    Total                                 $  17,361    $  15,650

                               60
7.  Employee Benefit Plans

The Company participates in the Parent Company's trusteed pension
plan  (the Plan), which covers substantially all employees.   The
benefits are based on an employee's years of service and  average
earnings   for  the  five  highest  consecutive  calendar   years
preceding  retirement.  The Company's policy is to  fund  pension
cost  in  accordance with applicable regulations.  Total  pension
(credits)  costs for 1993 and 1992 were $(0.4) million  and  $0.4
million, respectively.

The  net  assets  available for benefits are maintained  for  the
total Plan and amounted to $782.6 million.  The Plan's net assets
available for benefits exceeded projected benefit obligations  by
$534.7   million  as  computed  under  SFAS  No.  87  "Employers'
Accounting for Pensions" as of December 31, 1993.

As  described in Note 1, effective January 1, 1993,  the  Company
adopted  SFAS  No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions."

Substantially  all of the Company's employees are  covered  under
postretirement health care and life insurance benefit plans.  The
health care benefits paid under the plans are generally based  on
comprehensive hospital, medical and surgical benefit  provisions,
while  the life insurance benefits are currently based on  annual
earnings  at  the time of retirement.  The Company funds  amounts
for  postretirement benefits as deemed appropriate from  time  to
time.

The  postretirement benefit cost for 1993 includes the  following
components (in thousands of dollars):

                                                       1993
Service cost-benefits earned
  during the period                                 $     268
Interest cost on accumulated
  postretirement benefit obligation                     1,106
Actual return on plan assets                              (57)
Amortization of transition obligation
  and prior service cost                                  763
  Postretirement benefit cost                       $   2,080

During  1992,  the cost of postretirement health  care  and  life
insurance benefits on a pay-as-you-go basis was $0.4 million.

                               61
The  following table sets forth the plans' funded status and  the
accrued  obligation  as  of December 31, 1993  (in  thousands  of
dollars):

                                                       1993
Accumulated postretirement benefit
  obligation attributable to:
    Retirees                                        $   7,501
    Fully eligible active plan participants             1,439
    Other active plan participants                      4,638
Total accumulated postretirement benefit
  obligation                                           13,578
Fair value of plan assets                                 709
Excess of accumulated obligation over plan
  assets                                               12,869
Unrecognized transition obligation                     (9,168)
Unrecognized net loss                                  (1,620)
  Accrued postretirement benefit obligation         $   2,081

The  assumed  discount  rate  used  to  measure  the  accumulated
postretirement benefit obligation was 7.5% at December 31,  1993.
The  expected long-term rate of return on plan assets  was  8.25%
for  1993.  The assumed health care cost trend rate in  1993  was
13%  for pre-65 participants and 9.5% for post-65 retirees,  each
rate  declining on a graduated basis to an ultimate rate  in  the
year  2004 of 6%.  A one percentage point increase in the assumed
health  care  cost  trend rate for each future  year  would  have
increased   1993  costs  by  $0.2  million  and  the  accumulated
postretirement benefit obligation at December 31,  1993  by  $1.9
million.

During   1993,   the  Company  made  certain   changes   to   its
postretirement health care and life insurance benefits  for  non-
union  employees  that  are effective  January  1,  1995.   These
changes  include, among others, newly established limits  to  the
Company's annual contribution to postretirement medical costs and
a revised sharing schedule based on a retiree's years of service.
The  net  effect of these changes reduced the accumulated benefit
obligation at December 31, 1993 by $1.9 million.

                               62
8.  Commitments and Contingencies

The   Company's  anticipated  construction  costs  for  1994  are
approximately   $21.1  million,  for  which   the   Company   had
substantial purchase commitments as of December 31, 1993.

The  Company  has noncancelable lease contracts covering  certain
buildings,  office  space  and equipment.   The  lease  contracts
contain varying renewal options for terms up to 97 years.

Minimum  rental commitments for noncancelable leases for  periods
subsequent  to December 31, 1993 are as follows (in thousands  of
dollars):

              1994                  $    45
              1995                       44
              1996                       84
              1997                       84
              1998                       84
              Thereafter              2,928

         Total minimum rental
           commitments              $ 3,269

The  total amounts of rents charged to expense were $1.2  million
and $1.5 million for the years 1993 and 1992, respectively.

9.  Property, Plant and Equipment

Telephone plant and equipment, including amounts for leases which
have been capitalized, consists of the following:

                                      1993         1992
                                   (Thousands of Dollars)

  Land and buildings                $   9,810    $   8,911
  Plant in service                    213,694      207,806
  Plant under construction              3,258          611
  Other                                   515          786
       Total telephone plant          227,277      218,114

  Accumulated depreciation            (91,536)     (82,796)

       Net telephone plant          $ 135,741    $ 135,318

                               63
10.  Regulatory Matters

The  Company  is subject to regulation by the FCC for  interstate
business and the NCPUC for intrastate operations.

Intrastate Services

The  Company  provides long distance services  within  designated
geographic areas called Local Access and Transport Areas (LATAs).
The  Company receives intrastate-intraLATA network access service
revenue  through  participation in an access charge  based  pool.
The  Company remits intraLATA end user toll billings to the pool,
and bills the pool access charges.

Intrastate-interLATA network access service revenue is  recovered
through access charges paid by interexchange carriers for use  of
the   Company's   facilities  in  originating   and   terminating
intrastate toll messages between LATAs.  The Company records this
revenue on a bill-and-keep basis.

Effective January 1, 1994, the Company will implement and receive
intraLATA compensation through an Originating Responsibility Plan
(ORP).   Under this plan, the toll rates billed to end users  for
intraLATA  toll calls originating in the Company's  service  area
will be retained by the Company.  The Company, in turn, will  pay
access  charges to the carrier hauling and terminating  the  call
based  on that carrier's approved access charge tariff.  Likewise
the  Company  will  receive access charges  for  terminating  any
intraLATA  toll call that originates outside of its service  area
based  on  its  approved access charge tariff. The  Company  will
record  this  revenue on a bill-and-keep basis and  will  receive
transitional  support payments for any revenue  loss  created  by
this  change  in compensation arrangement under the terms  of  an
industry agreement.

Interstate Services

For  the  provision of interstate services, the Company  operates
under  the  terms  of  the FCC's price cap incentive  plan.   The
"price  cap"  mechanism serves to limit the rates a  carrier  may
charge, rather than just regulating the rate of return which  may
be  achieved.   Under this approach, the maximum price  that  the
Local Exchange Carrier (LEC) may charge is increased or decreased
each  year  by  a  price  index  based  upon  inflation  less   a
predetermined  productivity  target.   LECs  may  within  certain
ranges price individual services above or below the overall cap.

As  a safeguard under its new price cap regulatory plan, the  FCC
has also adopted a productivity sharing feature.  Because of this
feature, under the minimum productivity-gain option, the  Company
must  share  equally with its ratepayers any realized  interstate
return  above  12.25% up to 16.25%, and all returns  higher  than
16.25%, by temporarily lowering prospective prices. During  1994,
the  FCC  is  scheduled  to review the  LEC  price  cap  plan  to
determine whether it should be continued or modified.

                               64
Other Rate Matters

In 1994, the NCPUC approved the Company's request to reduce local
basic  service rates by $4.6 million on an annual basis. The  new
rates are effective June 1, 1994.

Significant Customer

Revenues  received  from  AT&T  including  access,  billing   and
collection and interexchange leased facilities during  the  years
1993  and  1992  under  various arrangements  amounted  to  $16.2
million and $12.7 million, respectively.

                               65
11.  Notes Receivable from Affiliate

During  1993 and 1992, the Company provided excess funds  to  GTE
Corporation.  These funds were available on demand and treated as
cash  investments.  The investments earn interest  based  on  GTE
Corporation's  daily intercompany interest rate (which  is  based
primarily on the costs associated with issuing commercial  paper)
and  are  reported  by  the  Company  as  Notes  receivable  from
affiliate.

12.  Supplemental Cash Flow Disclosures

Set forth below is information with respect to changes in current
assets  and  current liabilities, and cash paid for interest  and
income taxes:

                                              1993         1992
                                           (Thousands of Dollars)

(Increase) decrease in current assets:
    Accounts  receivable  -  net                 $   (5,586)    $
(3,514)
  Materials and supplies, prepayments
       and     other                                      (1,391)
(310)

Increase (decrease) in current liabilities:
  Accounts payable                             2,923        2,417
  Due to affiliated companies                    936          235
  Advanced billings and customer deposits         59          307
  Accrued liabilities                         (3,638)       3,556
        Other                                               (118)
(992)
    Total                                  $  (6,815)   $   1,699

Cash paid during the year for:
  Interest                                 $   4,245    $   4,207
  Income taxes                                14,507        7,090

13.  Legal Entity Merger

On  October  1, 1993 the Company filed an application to  legally
merge  into  GTE South Incorporated, a subsidiary  of  GTE.   The
merger  of the Company into GTE South Incorporated will  simplify
the  corporate  structure and will provide greater efficiency  of
operations through consolidation of record keeping and control of
expenses.  The new Company will have an enhanced market  presence
both  in the providing of competitive telecommunications services
and  the  procurement of capital.  Pending regulatory  approvals,
the Company expects the merger to be completed by July 1, 1994.

                               66
                 CONTEL OF NORTH CAROLINA, INC.
                                
               CONDENSED BALANCE SHEET (UNAUDITED)
                                
                             ASSETS

                                                       March 31,
                                                         1994
                                                     (Thousands
                                                     of Dollars)

CURRENT ASSETS:
 Cash                                                $       225
 Receivables, less allowances of $551                     15,655
 Materials and supplies, at average cost                     225
 Deferred income tax benefits                              1,263
 Prepayments and other                                        55
   Total current assets                                   17,423

PROPERTY, PLANT AND EQUIPMENT:
 Original cost                                           228,812
 Accumulated depreciation                                (93,881)
   Net property, plant and equipment                     134,931

OTHER ASSETS                                               2,137

   TOTAL ASSETS                                      $   154,491

  See Notes to Condensed Financial Statements.

                               67
                 CONTEL OF NORTH CAROLINA, INC.
                                
               CONDENSED BALANCE SHEET (UNAUDITED)
                                
              LIABILITIES AND SHAREHOLDER'S EQUITY
                                
                                
                                                       March 31,
                                                         1994
                                                     (Thousands
                                                     of Dollars)

CURRENT LIABILITIES:
 Notes payable to affiliates                         $     4,715
 Current maturities of long-term debt                     10,094
 Accounts payable                                          7,030
 Accrued taxes                                             2,578
 Accrued interest                                            427
 Accrued payroll and vacations                               862
 Accrued restructuring costs and other                     7,607
   Total current liabilities                              33,313

LONG-TERM DEBT                                            29,281

DEFERRED CREDITS, primarily deferred
 income taxes and investment tax credits                  36,579

SHAREHOLDER'S EQUITY:
 Common stock                                              6,753
 Other capital                                            15,709
 Reinvested earnings                                      32,856
   Total shareholder's equity                             55,318

   TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY                  $
154,491

  See Notes to Condensed Financial Statements.

                               68
                 CONTEL OF NORTH CAROLINA, INC.
                                
           CONDENSED STATEMENTS OF INCOME (UNAUDITED)

                                             Three Months Ended
                                                  March 31,
                                             1994        1993
                                            (Thousands of
Dollars)

OPERATING REVENUES:
 Local network services                  $     7,289 $     6,950
 Network access services                       8,699      12,106
 Long distance services                        1,797         251
 Equipment sales and services                    872         849
 Other                                           251         429
                                              18,908      20,585

OPERATING EXPENSES:
 Cost of sales and services                    3,897       3,026
 Depreciation and amortization                 3,540       3,379
 Marketing, selling, general and
   administrative                              4,528       4,331
                                              11,965      10,736

 Net operating income                          6,943       9,849

OTHER (INCOME) DEDUCTIONS:
 Interest expense                              1,047       1,060
 Other - net                                      (3)
(37)

INCOME BEFORE INCOME TAXES                     5,899       8,826

INCOME TAXES                                   2,211       3,051

NET INCOME                               $     3,688 $     5,775

 Per share data is omitted since the Company's common stock is
100% owned by
 Contel Corporation (a wholly-owned subsidiary of GTE
Corporation).

 See Notes to Condensed Financial Statements.

                               69
                 CONTEL OF NORTH CAROLINA, INC.
                                
         CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                             Three Months Ended
                                                  March 31,
                                            1994        1993
                                           (Thousands of Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                              $     3,688 $     5,775

 Adjustments to reconcile net income to
   net cash from operating activities:
     Depreciation and amortization             3,540       3,379
     Deferred income taxes and investment
       tax credits                                21        (529)
     Provision for uncollectible accounts                 237
108
     Changes in current assets and current
       liabilities                            (3,780)
(3,762)
     Other  - net                               (176)
2,223
     Net cash from operating activities        3,530       7,194

CASH FLOWS FROM INVESTING ACTIVITIES:
 Capital expenditures                         (2,595)
(1,351)
 Other - net                                      11        (353)
     Net cash used in investing activities             (2,584)
(1,704)

CASH FLOWS FROM FINANCING ACTIVITIES:
 Long-term debt retired                         (174)
(221)
 Dividends paid to shareholders                   --     (14,000)
 Net change in affiliate notes                (1,012)
8,642
     Net cash used in financing activities             (1,186)
(5,579)

Decrease in cash                                (240)
(89)

Cash at beginning of period                      465         259

Cash at end of period                    $       225 $       170

 See Notes to Condensed Financial Statements.

                               70
                 CONTEL OF NORTH CAROLINA, INC.
                                
       NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(1)  The condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations  of the Securities and Exchange Commission.   Certain
information   and  footnote  disclosures  normally  included   in
financial   statements  prepared  in  accordance  with  generally
accepted  accounting  principles have been condensed  or  omitted
pursuant to such rules and regulations.  However, in the  opinion
of  management of the Company, the condensed financial statements
include  all adjustments, which consist only of normal  recurring
accruals,  necessary to present fairly the financial  information
for such periods.  These condensed financial statements should be
read  in conjunction with the financial statements and the  notes
thereto  included  in  the  Company's 1993  Financial  Statements
included in this Form 8-K filing.

(2)   On  April  25, 1994, the North Carolina Utility  Commission
(NCUC)  approved  the  merger  of  the  Company  into  GTE  South
Incorporated effective on or after July 1, 1994.  The  merger  of
the  Company  into  GTE  South  Incorporated  will  simplify  the
corporate  structure  and  will  provide  greater  efficiency  of
operations through consolidation of record keeping and control of
expenses.   The  new Company will have enhanced  market  presence
both  in the providing of competitive telecommunications services
and  the  procurement of capital.  In addition, tariff  revisions
were  filed with the NCUC on February 25, 1994 to reduce  revenue
by $6.6 million, effective June 1, 1994.

                               71
         GTE SOUTH INCORPORATED AND CONTEL SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
                                
                                
The following Unaudited Pro Forma Condensed Consolidating Balance
Sheet  at March 31, 1994, gives effect to the proposed Merger  as
if  it  had occurred as of the balance sheet date.  The following
Unaudited Pro Forma Condensed Consolidating Statements of  Income
for the three month periods ended March 31, 1994 and 1993 and for
the  years ended December 31, 1993, 1992 and 1991 give effect  to
the  proposed  Merger as if it had occurred at the  beginning  of
each   of  the  respective  periods  presented.   The  pro  forma
consolidating financial statements give effect to the Merger as a
"pooling of interests" for accounting purposes and should be read
in   conjunction  with  the  historical  consolidated   financial
statements  and  the related notes contained  in  the  GTE  South
Incorporated  Annual  Reports on Form 10-K  for  the  year  ended
December 31, 1993 and subsequent filings with the SEC.

The  pro forma data are presented for informational purposes only
and  are  not necessarily indicative of the operating results  or
financial  position that would have occurred had the Merger  been
consummated  at  the  dates indicated, nor are  they  necessarily
indicative of future operating results or financial position.

                               72

PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
        PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEETS
                      As of March 31, 1994
                      (Thousand of Dollars)
Contel      Contel
                                    GTE         Contel       Contel       North       South
Surviving
                                   South       Virginia     Kentucky     Carolina    Carolina
Eliminations(a) Corporation
                                 ----------   ----------   ----------   ----------   ---------
- - ----------     -----------
Accounts Receivable - Net        $  145,012   $   98,444   $   12,510   $   15,655   $   3,173    $
(3,655)    $  271,139
Other Current Assets                 71,163       16,353        1,368        1,768         333
90,985
Property, Plant & Equipment       2,387,635      913,066      206,128      228,812      31,620
3,767,261
Less: Accumulated Depreciation
  and Amortization                 (901,281)    (318,311)     (75,091)     (93,881)     (8,073)
(1,396,637)
Other Assets                         99,647        1,335        1,319        2,137         131
104,569
                                 ----------   ----------   ----------   ----------   ---------    -----
- - ----     ----------
  Total Assets                   $1,802,176   $  710,887   $  146,234   $  154,491   $  27,184    $
(3,655)    $2,837,317
                                 ==========   ==========   ==========   ==========   =========
=========     ==========

Accounts Payable                 $   46,636   $   40,858   $    8,032   $    7,030   $   3,090    $
(3,655)    $  101,991
Other Current Liabilities           371,518      183,370       38,625       26,283       4,588
624,384
Long-Term Borrowings                366,381       89,125       24,123       29,281       6,261
515,171
Deferred Taxes & Credits            377,775      140,268       26,206       36,579       5,027
585,855
Preferred Stock Subject to
  Mandatory Redemption                3,135           --           --           --          --
3,135
Shareholders' Equity:
  Common Shareholder's Equity       636,319      257,266       49,248       55,318       8,218
1,006,369
  Preferred Stock                       412           --           --           --          --
412
                                 ----------   ----------   ----------   ----------    --------
- - ---------     ----------
  Total Shareholders' Equity        636,731      257,266       49,248       55,318       8,218
- - --      1,006,781
                                 ----------   ----------   ----------   ----------    --------
- - ---------     ----------
  Total Liabilities and
    Shareholders' Equity         $1,802,176   $  710,887   $  146,234   $  154,491   $  27,184    $
(3,655)    $2,837,317
                                 ==========   ==========   ==========   ==========   =========
=========     ==========
(a) Elimination of Intercompany receivables and payables.

The accompanying notes are an integral part of these pro forma statements.
73

PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
     PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF INCOME
                Three Months Ended March 31, 1994
                      (Thousand of Dollars)
Contel      Contel
                                    GTE         Contel       Contel       North       South
Surviving
                                   South       Virginia     Kentucky     Carolina    Carolina
Corporation
                                 ----------   ----------   ----------   ----------   ---------   ------
- - -----
OPERATING REVENUES:
  Local network services         $   72,053   $   29,741   $    4,723   $    7,289   $   1,358   $
115,164
  Network access services            73,206       34,649        6,731        8,699       1,145
124,430
  Long distance services              6,426       14,423          147        1,797          62
22,855
  Equipment sales and services       12,367        3,246          936          872         174
17,595
  Other                              26,907        3,002          923          251          34
31,117
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
                                    190,959       85,061       13,460       18,908       2,773
311,161
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
OPERATING EXPENSES:
  Cost of sales and services         47,663       19,659        3,194        3,897       1,031
75,444
  Depreciation and amortization      42,590       15,167        3,496        3,540         534
65,327
  Marketing, selling, general
    and administrative               58,396       21,352        3,104        4,528         841
88,221
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
                                    148,649       56,178        9,794       11,965       2,406
228,992
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
NET OPERATING INCOME                 42,310       28,883        3,666        6,943         367
82,169
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
OTHER (INCOME) DEDUCTIONS:
  Interest expense                    8,625        3,880          753        1,047         145
14,450
  Other-net                           3,818         (117)          (9)          (3)         (2)
3,687
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
INCOME BEFORE INCOME TAXES           29,867       25,120        2,922        5,899         224
64,032

INCOME TAXES                         11,238        9,420        1,096        2,211          84
24,049
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
NET INCOME                       $   18,629   $   15,700   $    1,826   $    3,688   $     140   $
39,983
                                 ==========   ==========   ==========   ==========   =========
===========
The accompanying notes are an integral part of these pro forma statements.
74

PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
     PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF INCOME
                Three Months Ended March 31, 1993
                      (Thousand of Dollars)
Contel      Contel
                                    GTE         Contel       Contel       North       South
Surviving
                                   South       Virginia     Kentucky     Carolina    Carolina
Corporation
                                 ----------   ----------   ----------   ----------   ---------   ------
- - -----
OPERATING REVENUES:
  Local network services         $   94,655   $   26,993   $    4,965   $    6,950   $   1,389   $
134,952
  Network access services           100,591       32,913        6,896       12,106       1,223
153,729
  Long distance services              8,396       12,480          178          251         388
21,693
  Equipment sales and services       16,957        3,291          791          849         159
22,047
  Other                              25,334        2,474        1,225          429          76
29,538
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
                                    245,933       78,151       14,055       20,585       3,235
361,959
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
OPERATING EXPENSES:
  Cost of sales and services         51,007       18,704        2,373        3,026         545
75,655
  Depreciation and amortization      52,811       12,781        2,750        3,379         573
72,294
  Marketing, selling, general
    and administrative               72,589       21,984        3,583        4,331         827
103,314
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
                                    176,407       53,469        8,706       10,736       1,945
251,263
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
NET OPERATING INCOME                 69,526       24,682        5,349        9,849       1,290
110,696
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
OTHER (INCOME) DEDUCTIONS:
  Interest expense                   17,497        4,119          612        1,060         138
23,426
  Other-net                            (607)         (17)          (6)         (37)         (2)
(669)
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
INCOME BEFORE INCOME TAXES           52,636       20,580        4,743        8,826       1,154
87,939

INCOME TAXES                         19,490        7,113        1,639        3,051         398
31,691
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
NET INCOME                       $   33,146   $   13,467   $    3,104   $    5,775   $     756   $
56,248
                                 ==========   ==========   ==========   ==========   =========
===========
The accompanying notes are an integral part of these pro forma statements.
75

PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
     PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF INCOME
                  Year Ended December 31, 1993
                      (Thousand of Dollars)
Contel      Contel
                                    GTE         Contel       Contel       North       South
Surviving
                                   South       Virginia     Kentucky     Carolina    Carolina
Corporation
                                 ----------   ----------   ----------   ----------   ---------   ------
- - -----
OPERATING REVENUES:
  Local network services         $  379,533   $  108,008   $   19,640   $   28,763   $   5,337   $
541,281
  Network access services           395,480      120,937       32,223       46,400       4,736
599,776
  Long distance services             28,783       51,632          722           --       1,752
82,889
  Equipment sales and services       75,141       12,442        3,448        4,322         598
95,951
  Other                              74,360       19,834        4,078        1,076         175
99,523
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
                                    953,297      312,853       60,111       80,561      12,598
1,419,420
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
OPERATING EXPENSES:
  Cost of sales and services        207,570       77,745        9,946       14,086       2,585
311,932
  Depreciation and amortization     207,324       57,454       11,266       13,530       2,193
291,767
  Marketing, selling, general
    and administrative              305,968       91,708       15,212       20,582       3,415
436,885
  Restructuring costs (a)            99,583       45,290        6,530        9,860       1,730
162,993
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
                                    820,445      272,197       42,954       58,058       9,923
1,203,577
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
NET OPERATING INCOME                132,852       40,656       17,157       22,503       2,675
215,843
                                 ----------   ----------   ----------   ----------   ---------
- - -----------
OTHER (INCOME) DEDUCTIONS:
  Interest expense                   69,519       15,920        2,544        4,292         547
92,822
  Gain on disposition of assets (b) (63,112)          --           --           --          --
(63,112)
  Other-net                            (414)         678          120          267          35
686
                                  ---------   ----------   ----------   ----------   ---------
- - -----------
INCOME BEFORE INCOME TAXES          126,859       24,058       14,493       17,944       2,093
185,447

INCOME TAXES                         65,513        7,643        5,399        6,456         701
85,712
                                  ---------   ----------   ----------   ----------   ---------
- - -----------
NET INCOME                        $  61,346   $   16,415   $    9,094   $   11,488   $   1,392   $
99,735
                                  =========   ==========   ==========   ==========   =========
===========
(a) Reflects expenses related to a one-time restructuring charge for the implementation of a re-
engineering
    plan.
(b) Reflects the pre-tax gain on the disposition of properties in Georgia, Tennessee and West Virginia
representing
    367,000 access lines.  See Note 2 to the pro forma financial statements.

The accompanying notes are an integral part of these pro forma statements.
76

PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
     PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF INCOME
                  Year Ended December 31, 1992
                      (Thousand of Dollars)
Contel      Contel
                                    GTE         Contel       Contel       North       South
Surviving
                                   South       Virginia     Kentucky     Carolina    Carolina
Corporation
                                 ----------   ----------   ----------   ----------   ---------   ------
- - -----
OPERATING REVENUES:
  Local network services         $  371,535   $  110,182   $   19,259   $   27,444   $    5,258  $
533,678
  Network access services           412,604      103,085       24,899       44,583        3,673
588,844
  Long distance services             47,947       48,042          497           --        2,538
99,024
  Equipment sales and services       79,431       10,201        2,802        3,278          529
96,241
  Other                              63,451       15,366        3,807        1,666          211
84,501
                                 ----------   ----------   ----------   ----------   ----------
- - ----------
                                    974,968      286,876       51,264       76,971       12,209
1,402,288
                                 ----------   ----------   ----------   ----------   ----------
- - ----------
OPERATING EXPENSES:
  Cost of sales and services        204,825       77,704        9,868       13,098        2,232
307,727
  Depreciation and amortization     206,905       49,596       11,214       14,571        2,322
284,608
  Marketing, selling, general
    and administrative              279,689       89,170       13,110       19,703        3,166
404,838
                                 ----------   ----------   -----------   ---------   ----------
- - ----------
                                    691,419      216,470       34,192       47,372        7,720
997,173
                                 ----------   ----------   ----------   ----------   ----------
- - ----------
NET OPERATING INCOME                283,549       70,406       17,072       29,599        4,489
405,115
                                 ----------   ----------   ----------   ----------   ----------
- - ----------
OTHER (INCOME) DEDUCTIONS:
  Interest expense                   67,778       18,637        2,637        4,140          539
93,731
  Other-net                          (1,174)       6,973          803          696          127
7,425
                                 ----------   ----------   ----------   ----------   ----------
- - ----------
INCOME BEFORE INCOME TAXES          216,945       44,796       13,632       24,763        3,823
303,959

INCOME TAXES                         79,691       14,417        4,665        8,768        1,328
108,869
                                 ----------   ----------   ----------   ----------   ----------
- - ----------
NET INCOME                       $  137,254   $   30,379   $    8,967   $   15,995   $    2,495   $
195,090
                                 ==========   ==========   ==========   ==========   ==========
==========
The accompanying notes are an integral part of these pro forma statements.
77

PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
     PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF INCOME
                  Year Ended December 31, 1991
                      (Thousand of Dollars)
Contel      Contel
                                    GTE         Contel       Contel       North       South
Surviving
                                   South       Virginia     Kentucky     Carolina    Carolina
Corporation
                                 ----------   ----------   ----------   ----------   ---------   ------
- - -----
OPERATING REVENUES:
  Local network services         $  359,419   $  105,214   $    18,581  $   26,111   $   4,975   $
514,300
  Network access services           340,539       99,256        24,114      34,035       3,813
501,757
  Long distance services            138,249       48,019           232      11,936       1,739
200,175
  Equipment sales and services       79,857        9,391         2,403       2,681         663
94,995
  Other                              45,359       17,956         5,869       3,159         475
72,818
                                 ----------   ----------   -----------   ---------   ---------
- - -----------
                                    963,423      279,836        51,199      77,922      11,665
1,384,045
                                 ----------   ----------   -----------   ---------   ---------
- - -----------
OPERATING EXPENSES:
  Cost of sales and services        220,457      100,381        10,664      13,413       2,468
347,383
  Depreciation and amortization     203,108       44,432        10,502      16,596       2,175
276,813
  Marketing, selling, general
    and administrative              301,943       86,335        14,923      21,401       3,811
428,413
                                 ----------   ----------   -----------   ---------   ---------
- - -----------
                                    725,508      231,148        36,089      51,410       8,454
1,052,609
                                 ----------   ----------   -----------   ---------   ---------
- - -----------
NET OPERATING INCOME                237,915       48,688        15,110      26,512       3,211
331,436
                                 ----------   ----------   -----------   ---------   ---------
- - -----------
OTHER (INCOME) DEDUCTIONS:
  Interest expense                   69,648       17,649         2,496       4,309         540
94,642
  Other-net                          (2,293)        (108)           10        (334)        (56)
(2,781)
                                 ----------   ----------   -----------   ---------   ---------
- - -----------
INCOME BEFORE INCOME TAXES          170,560       31,147        12,604      22,537       2,727
239,575

INCOME TAXES                         56,388        7,900         4,158       7,434         838
76,718
                                 ----------   ----------   -----------   ---------   ---------
- - -----------
NET INCOME                       $  114,172   $   23,247   $     8,446   $  15,103   $   1,889   $
162,857
                                 ==========   ==========   ===========   =========   =========
===========
The accompanying notes are an integral part of these pro forma statements.
78
         GTE SOUTH INCORPORATED AND CONTEL SUBSIDIARIES
 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL
                           STATEMENTS
                                
1.  Basis of Presentation

The  pro forma condensed consolidating financial statements  give
effect to the Merger as a "pooling of interests" and are based on
historical  amounts.  All material intercompany items  have  been
eliminated in the pro forma statements.

The  pro  forma balance sheets have been prepared as  though  the
Merger  occurred  as of the balance sheet date.   The  pro  forma
income  statements  have  been  prepared  as  though  the  Merger
occurred  as of the beginning of the period presented.   The  pro
forma results do not give effect to any synergies that might have
occurred  had the Merger been consummated at the dates indicated,
nor  are  they necessarily indicative of future operating results
or financial position.

Organizational and other costs to be incurred in connection  with
the Merger are not expected to be material.

2.  Acquisition and Disposition of Assets

On November 1, 1993, GTE South Incorporated (the "Company") in  a
series  of  transactions  with ALLTEL Corporation  exchanged  its
telephone  plant in service, materials and supplies and customers
(representing 244,000 access lines) in the State of  Georgia  for
similar  assets (including 38,000 access lines) in  Illinois  and
$446  million in cash (the ALLTEL transaction).  This transaction
was accounted for as a sale and a gain was recognized.

On  December  31, 1993, the Company sold its telephone  plant  in
service,  materials  and  supplies  and  customers  (representing
123,000  access  lines)  in  the  states  of  West  Virginia  and
Tennessee to Citizens Utilities Company for $291 million in  cash
(the  Citizens transaction).  This transaction was accounted  for
as a sale and a gain was recognized.

The  proceeds from these transactions were used to pay down  $402
million  of  debt  and  pay  $281 million  of  dividends  to  GTE
Corporation  (GTE),  the  Company's parent.   The  remainder  was
advanced to GTE in the form of an interest bearing loan.

The  accompanying  pro forma condensed income statements  include
the operating results of the properties sold through the date  of
sale.  For comparability, the table below includes adjustments to
remove  the operating results of those properties and to  include
the operating results of properties acquired, including interest,
as  if  the ALLTEL and Citizens transactions occurred as  of  the
beginning  of  each period presented.  Net income  in  1993  also
excludes  after-tax gains of $25,999 related to  the  ALLTEL  and
Citizens transactions.

                           Three           Months           Ended
Year Ended
                                           (Thousands of Dollars)
                                 3/31/94                  3/31/93
12/31/93     12/31/92    12/31/91
Operating Revenues    $311,161  $300,065     $1,181,562
$1,147,729  $1,130,476
Net Operating Income    82,169    90,022        160,068(a)
340,520     278,654
Net Income         39,983    54,276         73,035(a)   195,878
168,565

(a) Net operating income and net income in 1993 includes one-time
restructuring costs of $162,993 ($100,411 after tax).
                               79
                            SIGNATURE

Pursuant  to the requirements 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.

                                           GTE SOUTH INCORPORATED
                                               (Registrant)

Date:  June 10, 1994                        WILLIAM M. EDWARDS,
III
                                            WILLIAM M. EDWARDS,
III
                                                  Controller
                                           (Chief Accounting
Officer)

                               80
                                                       Exhibit
2.1

                       AGREEMENT OF MERGER

      THIS  AGREEMENT  OF MERGER dated as of  this  31st  day  of
December, 1993, is entered into between GTE SOUTH INCORPORATED, a
Virginia corporation ("GTE South"), CONTEL OF KENTUCKY,  INC.,  a
Kentucky   corporation  ("Contel  Kentucky"),  CONTEL  OF   NORTH
CAROLINA,  INC.,  a  North  Carolina corporation  ("Contel  North
Carolina"),  CONTEL  OF SOUTH CAROLINA, INC.,  a  South  Carolina
corporation  ("Contel South Carolina"), and CONTEL  OF  VIRGINIA,
INC., a Virginia corporation ("Contel Virginia").

                          I.  RECITALS
                                
      A.   GTE  Corporation, a New York corporation ("GTE"),  now
owns  or  will  own at all times pertinent hereto, including  the
Effective  Date  of the merger, all of the common  stock  of  GTE
South,  Contel  Kentucky,  Contel North  Carolina,  Contel  South
Carolina and Contel Virginia.

      B.   GTE  South,  Contel Kentucky, Contel  North  Carolina,
Contel  South Carolina and Contel Virginia desire that GTE South,
Contel Kentucky, Contel North Carolina, Contel South Carolina and
Contel  Virginia be merged into GTE South and that GTE  South  be
the  surviving corporation.  The laws of the states of  Virginia,
Kentucky, North Carolina and South Carolina permit this merger.

      C.  The outstanding capital stock of GTE South consists  of
18,936,000 shares of common stock.

      D.   The  outstanding  capital  stock  of  Contel  Kentucky
consists of 266,124 shares of common stock.

      E.   The outstanding capital stock of Contel North Carolina
consists of 1,350,637 shares of common stock.

      F.   The outstanding capital stock of Contel South Carolina
consists of 6,212 shares of common stock.

      G.   The  outstanding  capital  stock  of  Contel  Virginia
consists of 3,409,944 shares of common stock.

                           II.  MERGER

      A.   The  manner of converting the shares of  each  of  the
constituent corporations into shares of the surviving corporation
and such other provisions as are deemed necessary or desirable to
accomplish the merger are appended hereto as the Plan  of  Merger
contained in Exhibit 1.

      B.   On  the  Effective  Date of  the  merger,  as  defined
hereafter  in  paragraph C., the assets and  liabilities  of  GTE
South,  Contel  Kentucky,  Contel North  Carolina,  Contel  South
Carolina and Contel Virginia shall be carried on the books of the
surviving  corporation at the amounts at which they  respectively
were  carried  on  such date on the books of  GTE  South,  Contel
Kentucky, Contel North Carolina, Contel South Carolina and Contel
Virginia.   The  capital  surplus  and  earned  surplus  of   the
surviving corporation shall be the sum of the respective  capital
surpluses  and  earned surpluses of GTE South,  Contel  Kentucky,
Contel  North Carolina, Contel South Carolina and Contel Virginia
subject  in  each  case  to  such  adjustment,  eliminations   or
transfers  as  may  be  required to give effect  to  the  merger.
Except as from time to time restricted by contract or by statute,
the  aggregate  amount  of the net assets of  GTE  South,  Contel
Kentucky, Contel North Carolina, Contel South Carolina and Contel
Virginia which was legally available for the payment of dividends
immediately  prior  to the merger shall continue  to  be  legally
available   for  the  payment  of  dividends  by  the   surviving
corporation.

      C.   This  merger shall become effective upon the  date  of
issuance of a Certificate of Merger by the Corporation Commission
of  the Commonwealth of Virginia, where the surviving corporation
is domiciled, which date is herein called the "Effective Date."

      D.   The merger may be abandoned and terminated at any time
by  mutual  agreement of the Boards of Directors of  the  merging
companies.

      E.   This  Agreement  embodies  the  entire  agreement  and
understanding of the parties relating to its subject  matter  and
supersedes  any  prior  agreements  and  understandings  relating
thereto.

      F.   For the convenience of the parties, this Agreement may
be  executed in one or more counterparts, each of which shall  be
deemed  an  original, but all of which together shall  constitute
one and the same document.

     IN WITNESS WHEREOF, this Agreement of Merger has been signed
by  the  President or a Vice President and the  Secretary  or  an
Assistant Secretary of each of the corporations and each  of  the
corporations  has  caused  the  corporate  seal  to  be  hereunto
affixed, all as of the day first above written, pursuant  to  the
approval and authority duly given by resolutions adopted by their
respective boards of directors.

                                   GTE SOUTH INCORPORATED,
ATTEST:                            a Virginia corporation

      J. WILMA ALY               By:   GERALD K. DINSMORE
__________________________
___________________________
Assistant Secretary                   Gerald K. Dinsmore
                                      President

                                   CONTEL OF KENTUCKY, INC.,
ATTEST:                            a Kentucky corporation

      J. WILMA ALY               By:   GERALD K. DINSMORE
__________________________
___________________________
Assistant Secretary                   Gerald K. Dinsmore
                                      President

                                     CONTEL  OF  NORTH  CAROLINA,
INC.,
ATTEST:                            a North Carolina corporation

      J. WILMA ALY               By:   GERALD K. DINSMORE
__________________________
___________________________
Assistant Secretary                   Gerald K. Dinsmore
                                      President

                                     CONTEL  OF  SOUTH  CAROLINA,
INC.,
ATTEST:                            a South Carolina corporation

      J. WILMA ALY               By:   GERALD K. DINSMORE
__________________________
___________________________
Assistant Secretary                   Gerald K. Dinsmore
                                      President

                                   CONTEL OF VIRGINIA, INC.,
ATTEST:                            a Virginia corporation

      J. WILMA ALY               By:   GERALD K. DINSMORE
__________________________
___________________________
Assistant Secretary                   Gerald K. Dinsmore
                                      President
                                PLAN OF MERGER         EXHIBIT 1

                               OF

                    CONTEL OF KENTUCKY, INC.,
                 CONTEL OF NORTH CAROLINA, INC.,
               CONTEL OF SOUTH CAROLINA, INC., AND
                    CONTEL OF VIRGINIA, INC.

                              INTO

                     GTE SOUTH INCORPORATED
                                
                               I.
The Corporations Proposing to Merge
     Contel of Kentucky, Inc. (hereinafter referred to as "Contel
Kentucky"),  a  Kentucky corporation, Contel of  North  Carolina,
Inc.  (hereinafter  referred to as "Contel  North  Carolina"),  a
North  Carolina  corporation,  Contel  of  South  Carolina,  Inc.
(hereinafter  referred to as "Contel South  Carolina"),  a  South
Carolina  corporation, and Contel of Virginia, Inc.  (hereinafter
referred  to as "Contel Virginia"), a Virginia corporation,  will
be merged into GTE South Incorporated (hereinafter referred to as
"GTE  South"),  a  Virginia corporation,  the  latter  being  the
surviving  corporation  which is already  qualified  to  transact
business  as  a  foreign corporation in the States  of  Kentucky,
North Carolina and South Carolina.

       The   foregoing  corporations  are  hereinafter  sometimes
referred to collectively as the "constituent corporations."

                               II.
Terms and Conditions of the Merger
     The terms and conditions of the merger are as follows:

      (a)   Prior to the effective date, Contel Corporation  will
distribute  one  hundred percent (100%) of the shares  of  Contel
Kentucky, Contel North Carolina, Contel South Carolina and Contel
Virginia to GTE Corporation.

      (b)   On the effective date, Contel Kentucky, Contel  North
Carolina,  Contel  South  Carolina and Contel  Virginia  will  be
merged  into  GTE  South, and GTE South will  exchange  2,064,000
shares  of its common stock with GTE Corporation for all  of  the
outstanding  shares of common stock of Contel  Kentucky  (266,124
shares),  Contel North Carolina (1,350,637 shares), Contel  South
Carolina (6,212 shares), and Contel Virginia (3,409,944 shares).

      (c)   No  later  than  the effective  date,  the  following
securities  of  Contel  Kentucky, Contel North  Carolina,  Contel
South Carolina and Contel Virginia will be assumed by GTE South:

      Description  of  the Security                   Outstanding
Amount
                                             as of June 30, 1993
Contel Kentucky

2% REA Deferred Interest                           $     300
2% REA Note Due 03/31/2004                         2,902,720
7.391% FFB Note Due 12/31/20                       3,489,863
7.739% FFB Note Due 12/31/18                       1,959,082
7.927% FFB Note Due 12/31/16                       1,329,134
7.975% FFB Note Due 12/31/14                       2,751,424
8.331% FFB Note Due 12/31/12                       2,218,856
8.541% FFB Note Due 12/31/12                         892,860
9.209% FFB Note Due 12/31/2017                     2,433,954
9.406% FFB Note Due 12/31/2022                     2,500,000
9.994% FFB Note Due 06/30/15                       1,414,494
10.209% FFB Note Due 12/31/13                      1,399,515
10.910% FFB Note Due 12/31/13                      2,493,451

Contel North Carolina

2% A REA Bond Due 11/30/97                         $1,451,180
7.5% B RTB Bond Due 04/19/2008                       275,416
8.686% C-1 FFB Bond Due 03/31/2013                 1,794,189
10.734% C-4 FFB Bond Due 12/31/14                  1,424,040
10.910% C-2 FFB Bond Due 12/31/13                  2,805,970
10.910% C-3 FFB Bond Due 12/31/14                    947,195
12.201% C-5 FFB Bond Due 12/31/14                    960,849
9.5% I Mortgage Bond Due 06/01/95                    637,500
9.25% J Mortgage Bond Due 04/01/96                   575,500
8.25% K Mortgage Bond Due 10/01/97                   930,000
8.75% L Mortgage Bond Due 05/31/94                 1,480,000
10.25% M Mortgage Bond Due 06/01/96                  810,000
8.625% N Mortgage Bond Due 12/01/20                1,200,000
10.0% Q Mortgage Bond Due 06/01/96                   225,000
12.5% T Mortgage Bond Due 12/31/94                 7,500,000
9.5% U-1 RTB Bond Due 3/18/2023                    10,769,573
9.5% U-2 RTB Bond Due 3/18/2023                    6,216,627

Contel South Carolina

2% REA Note Due 02/19/2006                         $ 906,935
2% REA Deferred Interest                                 427
7% RTB Note Due 02/08/2012                           745,767
7% RTB Note Due 02/28/2012                         1,668,250
7% RTB Note Due 02/28/2018                           595,732
9.50% Unsecured Note Due 3/01/2010                 3,000,000

Contel Virginia

6.76% Promissory Note (GTE) Due 12/06/94           $50,000,000
8.25% Unsecured Note Due 01/15/97                    860,000
2% A REA Bond Due 12/31/98                         2,220,000
5.875% K Mortgage Bond Due 07/15/97                  770,000
4.8% Q Mortgage Bond Due 09/01/95                    690,000
8.5% U Mortgage Bond Due 06/01/2001                1,462,000
8.0% V Mortgage Bond Due 04/01/2003                2,200,000
5.875% EE Mortgage Bond Due 06/30/97               1,975,000
8.0% FF Mortgage Bond Due 06/30/99                 1,975,000
8.375% GG Mortgage Bond Due 12/30/2001             1,600,000
8.0% II Mortgage Bond Due 09/30/98                 3,010,000
8.375% JJ Mortgage Bond Due 02/15/2004             2,150,000
8.625% OO Mortgage Bond Due 12/15/2002             4,000,000
9.875% PP Mortgage Bond Due 09/30/2009             9,100,000
12.5% TT Mortgage Bond Due 12/31/94                6,800,000
10.54% VV Mortgage Bond Due 11/30/2008             28,235,294
8.88% WW Mortgage Bond Due 11/30/2009              40,000,000

                              III.
Articles of Incorporation and Surviving Corporation
      The  Articles of Incorporation of the surviving corporation
will not be affected by the merger.

                               IV.
Bylaws of Surviving Corporation
     The Bylaws of the surviving corporation will not be affected
by this merger.

                               V.
Additional Description of Surviving Corporation
     On the Effective Date, the directors of GTE South shall
become the directors of the surviving corporation.

                               VI.
Approval of the Plan
     This Plan will be submitted for consideration to the Board
of Directors of each of the constituent corporations.  If the
Plan is duly approved by resolution of the Board of Directors of
each of the constituent corporations, then the Plan will be
submitted for approval by the respective stockholders in the
manner required by the laws of the respective states of
incorporation.  In the event the Plan is duly approved by the
stockholders, the Plan, together with other appropriate
documentation, will be filed, and the merger will become
effective, in accordance with the laws of the state of Virginia.

THE STATE OF TEXAS  )
                    )    ss.
COUNTY OF DALLAS         )

     BE IT REMEMBERED that on this 31st day of December, 1993,
personally came before me, a Notary Public in and for the State
of Texas, Gerald K. Dinsmore and J. Wilma Aly, President and
Assistant Secretary, respectively, of GTE SOUTH INCORPORATED, a
corporation of the State of Virginia, the corporation described
in and which executed the foregoing Agreement of Merger and Plan
of Merger, known to me to personally be such, and they, and each
of them, duly executed said Agreement of Merger and Plan of
Merger before me and acknowledged the said Agreement of Merger
and Plan of Merger to be their act and deed and the act and deed
of the corporation; that the signatures of the said President and
Assistant Secretary of the corporation to the foregoing Agreement
of Merger and Plan of Merger are in the handwriting of the said
President and Assistant Secretary of said corporation,
respectively, and that the seal affixed to said Agreement of
Merger and Plan of Merger is the corporate seal of the
corporation, and that the facts stated therein are true.

     IN WITNESS WHEREOF, I have hereunto set my hand and seal the
day and year aforesaid.

                                   C. K. RUDOLPH-FEASLEY
                                   ______________________________
                                   C. K. Rudolph-Feasley
                                   Notary Public, State of Texas

My Commission Expires:
November 14, 1997.
_____________________

THE STATE OF TEXAS  )
                    )    ss.
COUNTY OF DALLAS         )

     BE IT REMEMBERED that on this 31st day of December, 1993,
personally came before me, a Notary Public in and for the State
of Texas, Gerald K. Dinsmore and J. Wilma Aly, President and
Assistant Secretary, respectively, of CONTEL OF KENTUCKY, INC., a
corporation of the State of Kentucky, the corporation described
in and which executed the foregoing Agreement of Merger and Plan
of Merger, known to me to personally be such, and they, and each
of them, duly executed said Agreement of Merger and Plan of
Merger before me and acknowledged the said Agreement of Merger
and Plan of Merger to be their act and deed and the act and deed
of the corporation; that the signatures of the said President and
Assistant Secretary of the corporation to the foregoing Agreement
of Merger and Plan of Merger are in the handwriting of the said
President and Assistant Secretary of said corporation,
respectively, and that the seal affixed to said Agreement of
Merger and Plan of Merger is the corporate seal of the
corporation, and that the facts stated therein are true.

     IN WITNESS WHEREOF, I have hereunto set my hand and seal the
day and year aforesaid.

                                   C. K. RUDOLPH-FEASLEY
                                   ______________________________
                                   C. K. Rudolph-Feasley
                                   Notary Public, State of Texas

My Commission Expires:
November 14, 1997.
_____________________

THE STATE OF TEXAS  )
                    )    ss.
COUNTY OF DALLAS         )

     BE IT REMEMBERED that on this 31st day of December, 1993,
personally came before me, a Notary Public in and for the State
of Texas, Gerald K. Dinsmore and J. Wilma Aly, President and
Assistant Secretary, respectively, of CONTEL OF NORTH CAROLINA,
INC., a corporation of the State of North Carolina, the
corporation described in and which executed the foregoing
Agreement of Merger and Plan of Merger, known to me to personally
be such, and they, and each of them, duly executed said Agreement
of Merger and Plan of Merger before me and acknowledged the said
Agreement of Merger and Plan of Merger to be their act and deed
and the act and deed of the corporation; that the signatures of
the said President and Assistant Secretary of the corporation to
the foregoing Agreement of Merger and Plan of Merger are in the
handwriting of the said President and Assistant Secretary of said
corporation, respectively, and that the seal affixed to said
Agreement of Merger and Plan of Merger is the corporate seal of
the corporation, and that the facts stated therein are true.

     IN WITNESS WHEREOF, I have hereunto set my hand and seal the
day and year aforesaid.

                                   C. K. RUDOLPH-FEASLEY
                                   ______________________________
                                   C. K. Rudolph-Feasley
                                   Notary Public, State of Texas

My Commission Expires:
November 14, 1997.
_____________________

THE STATE OF TEXAS  )
                    )    ss.
COUNTY OF DALLAS         )

     BE IT REMEMBERED that on this 31st day of December, 1993,
personally came before me, a Notary Public in and for the State
of Texas, Gerald K. Dinsmore and J. Wilma Aly, President and
Assistant Secretary, respectively, of CONTEL OF SOUTH CAROLINA,
INC., a corporation of the State of South Carolina, the
corporation described in and which executed the foregoing
Agreement of Merger and Plan of Merger, known to me to personally
be such, and they, and each of them, duly executed said Agreement
of Merger and Plan of Merger before me and acknowledged the said
Agreement of Merger and Plan of Merger to be their act and deed
and the act and deed of the corporation; that the signatures of
the said President and Assistant Secretary of the corporation to
the foregoing Agreement of Merger and Plan of Merger are in the
handwriting of the said President and Assistant Secretary of said
corporation, respectively, and that the seal affixed to said
Agreement of Merger and Plan of Merger is the corporate seal of
the corporation, and that the facts stated therein are true.

     IN WITNESS WHEREOF, I have hereunto set my hand and seal the
day and year aforesaid.

                                   C. K. RUDOLPH-FEASLEY
                                   ______________________________
                                   C. K. Rudolph-Feasley
                                   Notary Public, State of Texas

My Commission Expires:
November 14, 1997.
_____________________

THE STATE OF TEXAS  )
                    )    ss.
COUNTY OF DALLAS         )

     BE IT REMEMBERED that on this 31st day of December, 1993,
personally came before me, a Notary Public in and for the State
of Texas, Gerald K. Dinsmore and J. Wilma Aly, President and
Assistant Secretary, respectively, of CONTEL OF VIRGINIA, INC., a
corporation of the State of Virginia, the corporation described
in and which executed the foregoing Agreement of Merger and Plan
of Merger, known to me to personally be such, and they, and each
of them, duly executed said Agreement of Merger and Plan of
Merger before me and acknowledged the said Agreement of Merger
and Plan of Merger to be their act and deed and the act and deed
of the corporation; that the signatures of the said President and
Assistant Secretary of the corporation to the foregoing Agreement
of Merger and Plan of Merger are in the handwriting of the said
President and Assistant Secretary of said corporation,
respectively, and that the seal affixed to said Agreement of
Merger and Plan of Merger is the corporate seal of the
corporation, and that the facts stated therein are true.

     IN WITNESS WHEREOF, I have hereunto set my hand and seal the
day and year aforesaid.

                                   C. K. RUDOLPH-FEASLEY
                                   ______________________________
                                   C. K. Rudolph-Feasley
                                   Notary Public, State of Texas

My Commission Expires:
November 14, 1997.
_____________________

                                                     Exhibit 23.1
                                                                 

            CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use
in this Form 8-K of our reports dated January 28, 1994, related
to the December 31, 1992 and 1993 financial statements of Contel
of Virginia, Inc., Contel of Kentucky, Inc. and Contel of North
Carolina, Inc.  It should be noted that we have not audited any
financial statements of these companies subsequent to December
31, 1993 or performed any audit procedures subsequent to the date
of our reports.

                                             ARTHUR ANDERSEN &
CO.

Dallas, Texas,
June 10, 1994.