The paper, publishing the results of a 10-month-long investigation, said the Irving, Texas-based phone giant provided freebies to, among others, director Steven Spielberg and his dream works SKG Movie Studio Creative Artists Agency, a leading Hollywood talent firm and the University of California at Los Angeles. Several other companies related to the entertainment industry also benefited from GTE's largess, the paper said.

Favouritism and freebies for key clients are common in many industries but are prohibited in California's regulated local phone markets, the newspaper said, adding that the state's Public Utilities Commission (PUC) was investigating.

A GTE spokesman was not immediately available for comment but the PUV said it might have a statement later on Thursday.

The Times said GTE was negotiating with the PUC and would likely be fined several million dollars.It quoted a GTE spokesman as acknowledging that the PUC had found "lots of breakdowns and blatant breakdowns in judgment'' at the company's Los Angeles-area offices.

But spokesman Peter Thonis was also quoted as saying the contracts in question covered only a tiny percentage of GTE's 3.5 billion of annual California revenues.

GTE is completing its merger with bell Atlantic Corp. The new company will be known as Verizon Communications.

The Los Angeles Times quoted unnamed GTE employees familiar with the case as saying about a dozen of the company's southern California workers, including two branch managers, lost their jobs last year because of contracting violations, and several dozen others were either demoted or reprimanded.

The newspaper said its own investigation, carried out over a period of 10 months, showed that GTE provided free videoconferencing and high-speed communications services for two years to the multimillion-dollar play a vista project, a 1,087-acre (440 hectare) project in West Los Angeles that was to have housed dream works' new studios before Spielberg and his partners, recording mogul David Geffen and movie mogul Jeffrey Katzenberg, opted out.

GTE also arranged to provide dream works with a high capacity link among its various offices that was worth hundreds of thousands of dollars, then paid that amount back to the studio in a ''promotional consideration'' fee that allowed GTE to use a photo of the three partners in a testimonial, the paper said.

It said GTE's entertainment team was anxious to land big Hollywood contracts because the company had invested heavily to build a high-speed, high-capacity video transmission network expressly to tap the booming entertainment business.

One of the guises under which GTE gave away freebies was "technical trial.''Creative artists received free high-speed connections from GET under this guise for two years, the Times said.