SOUTHWESTERN BELL <SBC> SEES EARNINGS DILUTION Southwestern Bell Corp said that its planned acquisitions of cellular telephone and paging systems, including those of <Metromedia Inc>, will result in some initial earnings dilution and an increase in debt ratio. In a letter to shareholders in its 1986 annual report, the regional Bell company did not indicate the degree of earnings dilution it expects from the acquisitions, which total some 1.38 billion dlrs. However, the company said the rise in its debt ratio will be temporary and will leave its debt level within an acceptable range. In its 1986 yearend financial statement, Southwestern Bell listed a debt-to-equity ratio of 43.4 pct, down slightly from 43.7 pct in 1985. In 1986, the company earned 1.02 billion dlrs, or 10.26 dlrs a share, compared with 996.2 mln dlrs, or 10 dlrs a share in 1985. Revenues dipped to 7.90 billion dlrs from 7.93 billion dlrs. Southwestern Bell said it expects the new tax law to have a negative impact on its cash flow, due mainly to the loss of investment tax credits. By mid-year, however, the company said a reduced corporate tax rate should have a positive impact on its net income and cash flow. In addition, the company said it is projecting a 1.7 pct gain in customer telephone lines and a three to four pct increase in long distance calling volumes. Southwestern Bell said 1987 capital expenditures will be lower that the 1.97 billion dlrs spent in 1986, a year in which expenditures were held below budget.