Charles Wohlstetter, who developed small rural telephone companies and combined them into a $3 billion business before selling it to the GTE Corporation, died yesterday at his home in New York City. He was 85.

Mr. Wohlstetter, who was born and educated in New York City, entered the telephone business when he was 50, after a long and varied career.

In 1929, at age 18, he graduated from what was then City College of New York and got a job as a runner at a small stock brokerage firm, where he quickly advanced to become a small-scale money manager. He survived the stock market crash that year and set up a brokerage house with a partner.

He was successful but restless. In 1938, he moved to Los Angeles to write screenplays. During the year he spent in Hollywood, he sold three, one of which was made into a low-budget film called "What Millionaire Playboy."

Although many writers go for years without having a film produced, Mr. Wohlstetter was dissatisfied and returned in 1939 to New York, where he organized a company to make aircraft parts for the Army. World War II brought the company plenty of business, and with the profits Mr. Wohlstetter opened an investment banking company.

A $1.5 million investment in a small telephone company in Alaska got him interested in the thousands of independent companies scattered across the country. He formed the Continental Telephone Company with two partners in 1961 and acquired hundreds of independents.

The company, later known as Contel, pushed into new technologies, not always successfully, and in 1990, it paid $1.3 billion to acquire rights to 6.1 million potential cellular telephone customers in Kentucky, Alabama and Tennessee.

Mr. Wohlstetter had hoped to pay for the acquisition with a public offering of stock, but by the time he was ready, telephone stocks had lost favor and he could not get the price he wanted. The company then agreed to be acquired by GTE, a combination that created the country's largest local telephone company. Mr. Wohlstetter, then 80, joined GTE as vice chairman of the board, a position he held to his death.

At the time of the merger, Contel had grown to having $6 billion in assets, $3 billion in annual revenues and operations in 32 states, South America, Asia, Europe and the Middle East.

Mr. Wohlstetter enjoyed his wealth, collecting art, which is displayed at his home and office, and investing in a vineyard and winery in Bordeaux, France. He was also chairman of the Billy Rose Foundation, vice chairman of the board of trustees for the National Symphony in Washington and a trustee of the Foundation for Research in Medicine and Biology.

He is survived by his wife, Rose, of New York City; three sons, Philip, of Seattle, [John Charles Wohlstetter (born 1947)], of Washington, and Rand, of New York City; a brother, Albert, of Los Angeles, and two grandchildren.