8-K

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                 SECURITIES AND EXCHANGE COMMISSION


                        Washington, DC 20549


                              Form 8-K


                           CURRENT REPORT



                   Pursuant to Section 13 or 15(d)
               of the Securities Exchange Act of 1934


                  Date of Report: March 17, 2000



                             AT&T CORP.

 A New York                Commission File        I.R.S. Employer
Corporation                  No. 1-1105            No.13-4924710



     32 Avenue of the Americas, New York, New York 10013-3412


                   Telephone Number (212) 387-5400



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ITEM 5  OTHER EVENTS.

a) AT&T Corp. Consolidated financial information

AT&T  is making available its audited consolidated financial results and certain
other information for the year ended December 31, 1999. Filed as Exhibit
99 to this 8-K is the following information:

1.    Management's Discussion and Analysis.
2.    Six-Year Summary of Selected Financial Data.
3.    Report of Independent Accountants.
4.    Consolidated Statements of Income for the Years Ended December 31,
      1999, 1998 and 1997.
5.    Consolidated Balance Sheets at December 31, 1999 and 1998.
6.    Consolidated Statement of Changes in Shareowners' Equity for the
      Years Ended December 31, 1999, 1998 and 1997.
7.    Consolidated Statements of Cash Flows for the Years Ended December
      31, 1999, 1998 and 1997.
8.    Notes to the Consolidated Financial Statements.

b)    AT&T Wireless Group Combined financial information

AT&T is making available the audited combined financial results and certain
other information of the AT&T Wireless Group for the year ended December 31,
1999. Filed as Exhibit 99.1 to this 8-K is the following information:

1.    Management's Discussion and Analysis.
2.    Report of Independent Accountants.
3.    Combined Statements of Operations for the Years Ended December 31,
      1999, 1998 and 1997.
4.    Combined Balance Sheets at December 31, 1999 and 1998.
5.    Combined Statement of Changes in Shareowner's Equity for the Years
      Ended December 31, 1999, 1998 and 1997.
6.    Combined Statements of Cash Flows for the Years Ended December 31,
      1999, 1998 and 1997.
7.    Notes to the Combined Financial Statements.

ITEM 7 Financial Statements and Exhibits.

c)    Exhibits.

      Exhibit 23     Consent of PricewaterhouseCoopers LLP

      Exhibit 99     AT&T Corp. consolidated financial results and certain other
                     information for the year ended December 31, 1999.

      Exhibit 99.1   AT&T Wireless Group combined financial results and certain
                     other information for the year ended December 31, 1999.






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                               SIGNATURES


  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.

                               AT&T CORP.




                             /s/  N. S. Cyprus
                             ----------------------------------
                             By:  N. S. Cyprus
                                  Vice President and Controller

March 16, 2000

EX-23

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                                                                      Exhibit 23



                     CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the registration
statements on Form S-3 for the Shareowner Dividend Reinvestment and Stock
Purchase Plan (Registration No. 333-00573), Forms S-8 for the AT&T Long Term
Savings and Security Plan (Registration Nos. 333-47257 and 33-34265), Forms S-8
for the AT&T Long Term Savings Plan for Management Employees (Registration Nos.
33-34264, 33-29256 and 33-21937), Form S-8 for the AT&T Retirement Savings and
Profit Sharing Plan (Registration No. 33-39708), Forms S-8 for Shares Issuable
Under the Stock Option Plan of the AT&T 1987 Long Term Incentive Program
(Registration Nos. 333-47251 and 33-56643), Form S-8 for the AT&T of Puerto
Rico, Inc. Long Term Savings Plan for Management Employees (Registration No.
33-50819), Form S-8 for the AT&T of Puerto Rico, Inc. Long Term Savings and
Security Plan (Registration No. 33-50817), and Post-Effective Amendment No. 1 on
Form S-8 to Form S-8 Registration Statement (Registration No. 33-54797) for the
AT&T 1996 Employee Stock Purchase Plan, Form S-8 for the AT&T Shares for Growth
Program (Registration No. 333-47255), Form S-8 for the AT&T 1997 Long Term
Incentive Program (Registration No. 33-28665), Form S-4 for the AT&T 7,500,000
Common Shares (Registration No. 33-57745), and in Post-Effective Amendment Nos.
1, 2 and 3 on Form S-8 to Form S-4 Registration Statement (Registration No.
33-42150) for the NCR Corporation 1989 Stock Compensation Plan (Registration No.
33-42150-01), the NCR Corporation 1984 Stock Option Plan (Registration No.
33-42150-02) and the NCR Corporation 1976 Stock Option Plan (Registration No.
33-42150-03), respectively, and the Post-Effective Amendment Nos. 1, 2, 3 and 5
on Form S-8 to Form S-4 Registration Statement (Registration No. 33-52119) for
the McCaw Cellular Communications, Inc. 1983 Non-Qualified Stock Option Plan
(Registration No. 33-52119-01), the McCaw Cellular Communications, Inc. 1987
Stock Option Plan (Registration No. 33-52119-02), the McCaw Cellular
Communications, Inc. Equity Purchase Plan (Registration No. 33-52119-03) and the
McCaw Cellular Communications, Inc. Employee Stock Purchase Plan (Registration
No. 33-52119-05), respectively, and Post-Effective Amendment No. 1 on Form S-8
to Form S-4 Registration Statement (Registration No. 33-45302) for the Teradata
Corporation 1987 Incentive and Other Stock Option Plan (Registration No.
33-45302-01), Form S-8 for the AT&T Amended and Restated 1969 Stock Option Plan
for LIN Broadcasting Corp. (Registration No. 33-63195), and in Post Effective
Amendment Nos. 1, 2, 3, 4 and 5 on Form S-8 to Form S-4 Registration Statement
(Registration No. 333-49419) for the Teleport Communications Group Inc. 1993
Stock Option Plan (Registration No. 333-49419-01), Teleport Communications Group
Inc. 1996 Equity Incentive Plan (Registration No. 333-49419-02), ACC Corp.
Employee Long Term Incentive Plan (Registration No. 333-49419-03), ACC Corp.
Non-Employee Directors' Stock Option Plan (Registration No. 333-49419-04) and
ACC Corp. 1996 UK Sharesave Scheme (Registration No. 333-49419-05), and Form S-8
for AT&T Wireless Services, Inc. Employee Stock Purchase Plan (Registration No.
333-52757), and in Post-Effective Amendment Nos. 1 and 2 on Form S-8 and
Post-Effective Amendment No. 3 to Form S-4 Registration Statement (Registration
No. 333-70279) for the Tele-Communications, Inc. 1998 Incentive Plan, the
Tele-Communications, Inc. 1996 Incentive Plan (Amended and Restated), the
Tele-Communications, Inc. 1995 Employee Stock Incentive Plan (Amended and
Restated), the Tele-Communications, Inc. 1994 Stock Incentive Plan (Amended and
Restated), the Tele-Communications, Inc. 1994 Nonemployee Director Stock Option
Plan, the Tele-Communications International, Inc., the 1996 Nonemployee Director
Stock Option Plan, the Tele-Communications International, Inc. 1995 Stock
Incentive Plan (Registration No. 333-70279-01), the Liberty Media 401(K) Savings
Plan, the TCI 401(K) Stock Plan (Registration No. 333-70279-02), Form S-3 for
the $13,080,000 Debt Securities and Warrants to Purchase


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Debt Securities (Registration No. 333-71167) and Form S-4 for Vanguard Cellular
Systems, Inc. (Registration No. 333-75083) of AT&T Corp., and Form S-4 for Media
One Corp. (Registration No. 333-86019) of AT&T Corp., and Form S-4 for Four
Media Corp. (Registration No. 333-30250) of AT&T Corp., and Form S-8 for AT&T
Long Term Savings (Registration No. 333-87935) of AT&T Corp., of our reports
dated March 9, 2000 relating to the consolidated financial statements of AT&T
Corp. and its subsidiaries and March 17, 2000 relating to the combined financial
statements of the AT&T Wireless Group, which appear in the Current Report on
Form 8-K of AT&T Corp.


PricewaterhouseCoopers LLP


New York, New York
March 17, 2000

EX-99

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                                                                      Exhibit 99




MANAGEMENT'S DISCUSSION AND ANALYSIS

INTRODUCTION
In 1999, we made significant strides to transform AT&T and deliver growth. We
finalized many of the strategic acquisitions we announced in 1998 and made
additional investments to further support our facilities-based growth strategy.
We continued to maintain the execution-focused culture of the new AT&T.

One of the most dynamic areas in 1999 was our wireless business. Increasing
demand for wireless services and the continued appeal of our Digital One Rate
(sm) plans drove Wireless Services revenue to grow approximately 40% for the
year. Throughout 1999 we continued to expand our national footprint. In the
second quarter, we completed the acquisition of Vanguard Cellular Systems, which
was announced in 1998; in August we closed the acquisition of Honolulu Cellular;
and in October we announced the acquisition of American Cellular Corp. through a
newly created joint venture between AT&T and Dobson Communications. We capped
off the year by proposing the creation of a new class of tracking stock that
will reflect the economic performance of the AT&T Wireless Group. While the
Wireless Group will remain part of AT&T, the separate tracking stock will
provide current shareowners and future investors with a security tied directly
to the performance of this business.

As we worked to grow our wireless businesses in 1999, we also started putting
the bricks and mortar around our broadband plans - a key component of our
overall growth strategy. We completed our $52 billion merger with
Tele-Communications, Inc. (TCI) in March, and quickly accelerated the upgrade of
the TCI cable plant, which will enable us to develop additional revenue streams
from any-distance cable telephony, high-speed data, and digital video. By the
end of 1999, TCI, renamed AT&T Broadband, was offering cable telephony in 16
cities within nine pilot markets, digital-video subscribers totaled
approximately 1.8 million, and more than 200,000 customers had signed up for
high-speed data service. To expand our national cable network beyond AT&T
Broadband's systems, we announced in May the $57 billion merger with MediaOne.
When the merger is completed in 2000, we will significantly increase our
presence in major metropolitan markets across the country with owned and
operated cable systems passing more than 26 million homes.

In addition to the accomplishments in our domestic growth initiatives, we also
made significant progress in our global strategy. Most notably, we launched
Concert - a leading global telecommunications company created through AT&T's
joint venture with British Telecommunications plc (BT). Concert represents the
core of our global strategy and began serving multinational business customers,
international carriers and Internet service providers in January 2000. As part
of our relationship with Concert and BT, we also made several in-country
facility-based investments during 1999, including AT&T Canada Corp., Rogers
Cantel in Canada, and Japan Telecom. We also completed the purchase of IBM
Global Network Services and now provide data networking services to businesses
around the world as AT&T Global Network Services (AGNS).

[Included in the 1999 Annual Report are pie charts entitled "Revenue
Diversification by Product." These charts depict revenue by product for 1998 and
1999.]


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In addition to delivering on our domestic and global strategic objectives for
1999, we also achieved the aggressive financial targets we set for the year. We
delivered revenue growth of 6.2% on a pro forma basis for the acquisitions of
AT&T Broadband and AGNS, hitting our targeted range of 5% to 7%. The majority of
the increase came from our growth businesses, showing the success of our
investment strategy as it begins to shift our revenue base away from long
distance voice revenue. Just one year ago, long distance voice revenue was 75%
of our total revenue; in 1999 it dropped to 62%. While long distance is
increasingly becoming a commodity, as evidenced by the continued pricing
pressures in the industry, its current profitability supports investments in
growth businesses. These growth businesses in turn will support the long
distance business as we include long distance as a component of a bundle of
competitively priced services.

In order to become truly competitive, we must become the low-cost provider in
the industry, and therefore, we are continuing our efforts to reduce our cost
structure. A year ago, we committed to reducing our 1999 selling, general and
administrative (SG&A) expenses to 23% of revenue. We beat that target,
delivering an SG&A expense-to-revenue ratio of 21.7% for the year, which
translates into approximately $830 million of SG&A expense savings compared with
our targets. The fourth quarter came in at just 21.2%. That's a dramatic
improvement from 1997, when the SG&A expense-to-revenue ratio for the year was
27.9%. While we've been successful in driving costs out of the business, we
still have more to do. We will continue to attack costs and have committed to
cutting $2 billion in costs by the end of 2000 by continuing to streamline our
SG&A expenses and by lowering our network costs by moving more data, voice and
wireless traffic onto our expanding network of global facilities.

Not surprisingly, our success in growing revenue and shrinking costs allowed us
to deliver strong cash flow results in 1999, with cash from operations growing
to $11.6 billion - up 13.9% from 1998. In 1999, we generated $18.3 billion of
reported EBITDA [earnings, including other income (expense), before interest,
taxes, depreciation and amortization].

As anticipated, the positive impact of our revenue growth and cost controls on
earnings per share was more than offset by the impact of shares issued and the
franchise, goodwill and other purchased intangibles amortization associated with
our investments and acquisitions. As a result, earnings per diluted share were
10.3% below 1998. We undertook an aggressive stock buyback program to help
offset some of the dilutive impacts of these acquisitions, and since the second
half of 1998 we've repurchased nearly 220 million shares, at a cost of
approximately $10 billion. In 2000, we plan to repurchase another 50 million
shares from Cox Communications, Inc., in exchange for cable properties and cash.

We've come a long way in 1999. As the following pages present in further detail,
we've made solid progress in our strategy to transform AT&T, and we've delivered
on our commitments for growth and expense control. There is still much to be
done, but we finished 1999 with pride in our accomplishments and confidence in
our ability to sustain the momentum and further accelerate our growth in 2000.

OVERVIEW
AT&T is among the world's communications leaders, providing voice, data
and video telecommunications services to large and small businesses, consumers
and government agencies. We provide domestic and international long distance,
regional, local and wireless communications services, cable television and
Internet communication services. AT&T also provides billing, directory and
calling-card services to support our communications business.


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MERGER WITH TCI
We completed the merger with TCI, renamed AT&T Broadband (Broadband), on March
9, 1999, in an all-stock transaction valued at approximately $52 billion. We
issued approximately 664 million shares, of which 149 million were treasury
shares that were repurchased in anticipation of the Broadband merger.

The merger was recorded under the purchase method of accounting and,
accordingly, the results of Broadband have been included with the financial
results of AT&T since the date of acquisition. Periods prior to the merger were
not restated to include the results of Broadband.

In connection with this transaction, we also issued a separate tracking stock to
reflect the economic performance of Liberty Media Group (LMG), Broadband's
former programming and technology investment businesses. We issued 1,140 million
shares of Liberty Media Group Class A tracking stock (including 60 million
shares related to the conversion of convertible notes) and 110 million shares of
Liberty Media Group Class B tracking stock. We do not have a controlling
financial interest in Liberty Media Group for financial accounting purposes;
therefore, our ownership in LMG is reflected as an investment accounted for
under the equity method in the AT&T consolidated financial statements. The
amounts attributable to LMG are reflected as separate line items "Equity losses
from Liberty Media Group" and "Investment in Liberty Media Group and related
receivables, net" in the accompanying consolidated financial statements.

Broadband's cable and certain other operations, including its ownership interest
in At Home Corporation (Excite@Home) and Cablevision Systems Corp.
(Cablevision), but excluding LMG, were combined with the existing operations of
AT&T to form the AT&T Common Stock Group (AT&T Group), the economic performance
of which is represented by AT&T common stock. References to AT&T common stock do
not include the LMG tracking stock.

Ownership of shares of AT&T common stock or Liberty Media Class A or B tracking
stock does not represent a direct legal interest in the assets and liabilities
of either of the groups, but an ownership of AT&T in total. Each of these shares
represents an interest in the economic performance of the net assets of each of
these groups. Accordingly, the earnings and losses related to LMG are excluded
from earnings available to AT&T Group, and earnings and losses related to AT&T
Group are excluded from earnings available to LMG.

Because we account for LMG as an equity investment, revenue, operating expenses,
other income (expense), interest expense and provision for taxes for AT&T Group
are the same as consolidated AT&T.

The discussion and analysis that follows provides information management
believes is relevant to an assessment and understanding of AT&T's consolidated
results of operations for the years ended December 31, 1999, 1998 and 1997, and
financial condition as of December 31, 1999 and 1998.


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FORWARD-LOOKING STATEMENTS Except for the historical statements and discussions
contained herein, statements contained herein constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, including statements
concerning future operating performance, AT&T's share of new and existing
markets, AT&T's short- and long-term revenue and earnings growth rates, and
general industry growth rates and AT&T's performance relative thereto. These
forward-looking statements rely on a number of assumptions concerning future
events, including the adoption and implementation of balanced and effective
rules and regulations by the Federal Communications Commission (FCC) and the
state public regulatory agencies, and AT&T's ability to achieve a significant
market penetration in new markets. These forward-looking statements are subject
to a number of uncertainties and other factors, many of which are outside AT&T's
control, that could cause actual results to differ materially from such
statements. AT&T disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

CONSOLIDATED RESULTS OF OPERATIONS
For the Years Ended December 31,          1999      1998     1997
Dollars in millions
(except per share amounts)

Operating income                       $10,859    $7,487   $6,836

Operating income margin                   17.4%     14.1%   13.3%

Income from continuing operations       $3,428    $5,235   $4,249

Net income                              $3,428    $6,398   $4,415

Per AT&T Group common share - basic:
  Income from continuing operations     $ 1.77    $ 1.96   $ 1.59
  Income from discontinued operations        -         -     0.03
  Gains on sales of discontinued
   operations                                -      0.48     0.03
  Extraordinary loss                         -      0.05        -
  AT&T Group earnings                   $ 1.77    $ 2.39  $  1.65

Per AT&T Group common share - diluted:
  Income from continuing operations     $ 1.74    $ 1.94   $ 1.59
  Income from discontinued operations        -         -     0.03
  Gains on sales of discontinued
   operations                                -      0.48     0.03
  Extraordinary loss                         -      0.05        -
  AT&T Group earnings                   $ 1.74    $ 2.37   $ 1.65

Liberty Media Group loss per share:
  Basic and diluted                     $ 1.61    $    -    $   -



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Our results include certain items that affect comparability from year to year.
We quantify the impact of these items in order to explain our results on a
comparable basis. These items include the 1999 acquisitions of Broadband and
AT&T Global Network Services (AGNS), net restructuring and other charges,
significant gains on sales of businesses [discussed in other income (expense)
discussion] and the impact of a change in tax rules. The net restructuring and
other charges, gains on sales of businesses, change in tax rules and the impact
of our investments in Excite@Home and Cablevision are collectively referred to
as "restructuring and other charges, and certain gains and losses." We discuss
our results excluding the impact of our investments in Excite@Home and
Cablevision since these businesses have financial information publicly available
and their results can be reviewed independently of AT&T's results.

Following is a summary of the approximate diluted earnings per share (EPS)
impact of the above items for 1999 and 1998:
 ..Net restructuring and other charges of $0.37 in 1999 and $0.59 in 1998;
 ..Gains on sales of businesses of $0.07 in 1999 and $0.18 in 1998;
 ..A loss of $0.18 reflecting the earnings impact of our investments in
      Excite@Home and Cablevision in 1999; and
 ..A $0.02 benefit in 1999 from changes in tax rules with respect to the
      utilization of acquired net operating losses.

Operating income, on a reported basis, increased 45.0% in 1999 compared with
1998; excluding net restructuring and other charges, operating income increased
23.6%. Operating income margin (operating income as a percent of revenue) was
17.4% in 1999 compared with 14.1% in 1998. Operating income margin, excluding
net restructuring and other charges, was 19.8% in 1999 compared with 18.8% in
1998. These operational improvements were due to revenue growth and operating
expense efficiencies.

EPS from continuing operations attributable to AT&T Group on a diluted basis
declined 10.3% in 1999 to $1.74, compared with 1998. The decline was  primarily
due to the impact of the Broadband and AGNS acquisitions, including the impact
of shares issued and equity losses of Excite@Home and Cablevision. Partially
offsetting these declines was increased income from the remaining operations
due to revenue growth and operating expense efficiencies as well as lower net
restructuring and other charges. Excluding the restructuring and other charges,
and certain gains and losses, EPS was $2.20 per diluted share in 1999, a
decrease of 6.4%, or $0.15, over the prior year. The decrease in operational
earnings in 1999 was primarily due to the impacts of the acquisitions of
Broadband and AGNS.

Excluding the impacts of both Broadband and AGNS, operational EPS for 1999 was
$3.08, an increase of 31.1%, or $0.73, compared with 1998. The increase was
primarily due to higher revenue combined with improving margins resulting from
cost efficiencies.

Operating income, on a reported basis, increased 9.5% in 1998 compared with
1997; excluding net restructuring, exit and other charges, in 1998 and 1997,
operating income increased 42.2%.


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Results for 1997 include net restructuring and other charges, and a gain from a
sale of a business, which resulted in an approximate $0.01 EPS benefit on a
diluted basis. In addition, 1998 included a benefit from the 1998 adoption of a
new accounting standard related to the capitalization of internal-use software.
EPS from continuing operations was $1.94 per diluted share in 1998, an increase
of 22.0% from 1997. Excluding the impact of the 1998 and 1997 restructuring and
other charges, and certain gains and losses, EPS was $2.30 per diluted share in
1998, an increase of $0.72, or 45.6%, compared with 1997. Cost control
initiatives and higher revenue were the primary drivers of the operational
increases.


For the Years Ended December 31,              1999      1998      1997
Dollars in millions
REVENUE
Business Services                          $25,102   $23,611   $22,331
Consumer Services                           21,972    22,885    23,690
Wireless Services                            7,627     5,406     4,668
Broadband                                    4,871         -         -
Other and Corporate                          2,819     1,321       888
Total revenue                              $62,391   $53,223   $51,577

Total revenue increased 17.2%, or $9,168 million, in 1999 compared with the
prior year. Revenue for 1999 included Broadband and AGNS revenue from their
respective dates of acquisition. Excluding the impact of these acquisitions,
1999 revenue increased 5.8% to $56,307 million. This increase was fueled by
growth in wireless, business data, business domestic long distance voice and
outsourcing revenue, partially offset by the continued decline of consumer long
distance voice revenue. Adjusting 1999 and 1998 to reflect the revenue of
Broadband and AGNS for a full year in both periods, 1999 pro forma revenue
increased 6.2% to $64,141 million from $60,394 million in 1998.

Long distance voice revenue as a percent of total revenue declined to
approximately 62% in 1999, compared with approximately 75% and 79% in 1998 and
1997, respectively. We expect this percentage to continue to decline as data,
Internet, wireless and outsourcing revenue continue to grow and as long distance
prices continue to decrease, resulting in a more diversified portfolio.

Total revenue in 1998 increased $1,646 million, or 3.2%, compared with 1997, led
by business data, wireless and outsourcing revenue. Improvements in these areas
were partially offset by a decline in consumer long distance revenue and reduced
revenue due to the sale of AT&T Solutions Customer Care (ASCC) in 1998.

Revenue by segment is discussed in more detail in the segment results section.


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OPERATING EXPENSES
For the year, operating expenses totaled $51,532 million, an increase of 12.7%
from $45,736 million in 1998. In 1998, operating expenses increased 2.2% from
$44,741 million in 1997. Operating expenses for 1999 reflect Broadband and AGNS
expenses from their respective dates of acquisition. In addition, operating
expenses in 1999 and 1998 included $1,506 million and $2,514 million,
respectively, of net restructuring and other charges. Operating expenses in 1997
included a $160 million charge to exit the two-way messaging business and a $100
million benefit from the reversal of pre-1995 restructuring reserves. Excluding
the impact of the acquisitions of Broadband and AGNS and net restucturing and
other charges, 1999 operating expenses increased $198 million, or 0.5%, and 1998
operating expenses decreased 2.8%.

[Included in the 1999 Annual Report are pie charts entitled "Margin and Expenses
as a Percent of Revenue." These charts depict margin and expenses (excluding net
restructuring and other charges) as a percent of revenue for 1997 and 1999.]

For the Years Ended December 31,        1999      1998      1997
Dollars in millions
Access and other interconnection     $14,686   $15,328   $16,350

Access and other interconnection expenses are the charges we pay to connect
calls on the facilities of local exchange carriers and other domestic service
providers, and fees we pay foreign telephone companies (international
settlements) to connect calls made to foreign countries. These charges represent
payments to these carriers for shared and dedicated facilities and switching
equipment used to connect our network with their networks. These costs declined
$642 million, or 4.2%, in 1999 and $1,022 million, or 6.3%, in 1998 compared
with the prior year. These declines were primarily driven by mandated reductions
in per-minute access rates in 1999 and 1998 and lower international settlement
rates resulting from our negotiations with international carriers. Additionally,
we continue to manage these costs through more efficient network usage. These
reductions were partially offset by volume growth, increased per-line charges
(Primary Interexchange Carrier Charges) and Universal Service Fund
contributions. Since most of these charges are passed through to the customer,
the per-minute access-rate reductions and the increases in per-line charges and
the Universal Service Fund have generally resulted in an offsetting impact on
revenue. Broadband and AGNS do not have any access and other interconnection
expenses, therefore the results are the same excluding Broadband and AGNS.


   8


For the Years Ended December 31,          1999      1998      1997
Dollars in millions
Network and other costs of services    $14,385   $10,495   $10,038

Network and other costs of services expenses include the costs of operating and
maintaining our networks, costs to support our outsourcing contracts, fees paid
to other wireless carriers for the use of their networks (off-network roaming),
the provision for uncollectible receivables, programming and licensing costs for
cable services, costs of wireless handsets sold and other service-related costs.
These costs increased $3,890 million, or 37.1%, in 1999 compared with 1998,
largely due to the Broadband and AGNS acquisitions. Excluding these
acquisitions, network costs increased $428 million, or 4.1%, in 1999, a slight
improvement compared with the 4.5% increase in 1998. The growing wireless
subscriber base primarily drove the increase in both years, largely attributable
to the success of AT&T Digital One Rate service, which has resulted in higher
off-network roaming charges, costs of handsets and provision for uncollectible
receivables. The increase in costs of handsets reflects not only the higher
number of handsets sold, but the increased cost per unit as customers migrate or
sign up for digital service. Costs to support growth in outsourcing contracts
also contributed to the increase. Partially offsetting the 1999 increase were
network cost-control initiatives, lower per-call compensation expense due to a
favorable FCC ruling in 1999, lower provision for uncollectible receivables in
Consumer and Business Services and lower gross receipts and property taxes. The
1998 increase was partially offset by lower provision for uncollectible
receivables in Business Services, lower expenses as a result of the sale of ASCC
in the first quarter of 1998 and the impact of a 1997 charge to write-down the
two-way messaging business.

For the Years Ended December 31,           1999       1998      1997
Dollars in millions
Selling, general and administrative     $13,516    $12,770   $14,371

Selling, general and administrative (SG&A) expenses increased $746 million, or
5.8%, in 1999 compared with 1998. This increase was due to the Broadband and
AGNS acquisitions. Excluding these expenses, SG&A expenses declined $529
million, or 4.2%. Reductions in consumer long distance acquisition-program
spending resulted in lower marketing and sales expenses. In 1999 we continued
our efforts to achieve a best-in-class cost structure with companywide
cost-control initiatives, which yielded an improving cost structure. These
decreases were partially offset by increased costs in Wireless Services to
support the growing subscriber base. SG&A expenses as a percent of revenue were
21.7% in 1999, 24.0% in 1998 and 27.9% in 1997. We expect SG&A expenses as a
percent of revenue to continue to decline as we continue to focus on controlling
our expenses and prioritizing our spending. In addition, we expect to realize a
larger pension credit in 2000 resulting from a higher pension trust asset base
and an increase in the discount rate used to measure the pension and
postretirement obligations.

[Included in the 1999 Annual Report is a bar graph entitled "Cost Structure
Improvements - SG&A Expenses as a Percent of Revenue" showing SG&A expenses as a
percent of revenue for the eight quarters ended December 31, 1999.]

SG&A expenses declined $1,601 million, or 11.1%, in 1998 compared with 1997. The
decrease was primarily due to savings from cost-control initiatives, such as
headcount reductions and a $221 million SG&A expense benefit from the 1998
adoption of a new accounting pronouncement related to the capitalization of
internal-use software (Statement of Position 98-1). Also contributing to the
decrease in SG&A expenses was a decline in marketing and sales costs relating to
lower customer acquisition costs in Consumer Services. These declines were
partially offset by increases in wireless customer acquisition and migration
costs and increased costs associated with preparing our computer systems for
conversion of the calendar to the Year 2000 (Y2K project).


   9


Also included in SG&A expenses were $550 million, $513 million and $633 million
of research and development (R&D) expenses in 1999, 1998 and 1997, respectively.
R&D expenditures are mainly for work on advanced communications services and
projects aimed at Internet protocol (IP) services. The increase in R&D expenses
in 1999 was due to costs associated with launching Concert, the acquisition of
Broadband and development spending on business data services and IP. These
increases were largely offset by lower R&D spending on development projects for
consumer products. The decline in R&D expenses in 1998 was mainly due to the
redeployment of resources in support of the Y2K project.

For the Years Ended December 31,         1999       1998      1997
Dollars in millions
Depreciation and other amortization    $6,138     $4,378    $3,728

Depreciation and other amortization expenses increased $1,760 million, or 40.2%,
in 1999. Approximately one-half of the increase was due to the acquisitions of
Broadband and AGNS. Excluding these acquisitions, depreciation and other
amortization expenses increased $879 million, or 20.1%, in 1999. Depreciation
and other amortization expenses increased $650 million, or 17.4%, in 1998
compared with 1997. Growth in the depreciable asset base resulting from
continued infrastructure investment drove the increase in both years. Total
capital expenditures for 1999, 1998 and 1997 were $13.5 billion, $8.0 billion
and $7.7 billion, respectively. Approximately three-quarters of 1999 capital
expenditures focused on our growth businesses of broadband, data, wireless,
local and AT&T Solutions. More than half of the capital expenditures in 1998
were related to the long distance network, including the completion of the SONET
(Synchronous Optical Network) buildout. These expenditures expanded network
capacity, reliability and efficiency. In addition, in 1998 we invested in our
local network to expand our switching and transport capacity and invested to
expand our wireless footprint.

For the Years Ended December 31,                1999       1998      1997
Dollars in millions
Amortization of goodwill, franchise costs
and other purchased intangibles               $1,301     $  251    $  254

Amortization of goodwill, franchise costs and other purchased intangibles
increased $1,050 million in 1999 compared with 1998 primarily due to the
acquisition of Broadband and, to a lesser extent, AGNS. Franchise costs
represent the value attributable to the agreement with local authorities that
allow access to homes in Broadband's service areas. Other purchased intangibles
arising from business combinations primarily included customer lists and
licenses. In addition to the amortization of goodwill reflected here, we also
have amortization of goodwill associated with our nonconsolidated investments
recorded as a component of other income (expense). This amortization totaled
$495 million, $52 million and $66 million in 1999, 1998 and 1997, respectively.

Net Restructuring and Other Charges

During 1999, we recorded $1,506 million of net restructuring and other charges,
which had an approximate $0.37 impact on earnings per diluted share.


   10


A $594 million in-process research and development charge was recorded
reflecting the estimated fair value of research and development projects at
Broadband, as of the date of the acquisition, which had not yet reached
technological feasibility or that have no alternative future use. The projects
identified related to Broadband's efforts to offer voice over IP,
product-integration efforts for advanced set-top devices, cost-savings efforts
for cable telephony implementation and in-process research and development
related to Excite@Home. We estimated the fair value of in-process research and
development for each project using an income approach, which was adjusted to
allocate fair value based on the project's percentage of completion. Under this
approach, the present value of the anticipated future benefits of the projects
was determined using a discount rate of 17%. For each project, the resulting net
present value was multiplied by a percentage of completion based on effort
expended to date versus projected costs to complete.

The charge associated with voice over IP technology, which allows voice
telephony traffic to be digitized and transmitted in IP data packets, was $225
million as of the date of the acquisition. Current voice over IP equipment
does not yet support many of the features required to connect customer premises
equipment to traditional phone networks. Further technical development is also
needed to ensure voice quality that is comparable to conventional
circuit-switched telephony and to reduce the power consumption of the IP
telephony equipment. We anticipate that we will test IP telephony equipment for
field deployment in late 2000.

The charge associated with Broadband's product-integration efforts for advanced
set-top devices, which will enable us to offer next-generation digital services,
was $114 million as of the date of acquisition. The associated technology
consists of the development and integration work needed to provide a suite of
software tools to run on the digital set-top box hardware platform. It is
anticipated that field trials will begin in mid 2000 for next-generation digital
services.

The charge associated with Broadband's cost-savings efforts for cable telephony
implementation was $101 million as of the date of the acquisition. Telephony
cost reductions primarily consist of cost savings from the development of a
"line of power switch," which allows Broadband to cost effectively provide power
for customer telephony equipment through the cable plant. This device will allow
us to provide line-powered telephony without burying the cable line to each
house. The device currently requires further development in order to reach an
acceptable level of reliability. We expect to test and deploy devices by the end
of 2000.

Additionally, the in-process research and development charge related to
Excite@Home was valued at $154 million. During the second quarter of 1999, we
ceased to consolidate Excite@Home and began to account for our investment under
the equity method of accounting due to certain corporate governance changes,
which resulted in AT&T no longer holding a controlling financial interest.
Accordingly, we will no longer report on the in-process research and development
projects of Excite@Home.


   11


Although there are significant technological issues to overcome in order to
successfully complete the acquired in-process research and development, we
expect successful completion. We estimate the costs to complete the identified
projects will not have a material impact on our results of operations. If,
however, we are unable to establish technological feasibility and produce
commercially viable products/services, then anticipated incremental future cash
flows attributable to expected profits from such new products/services may not
be realized.

A $531 million asset impairment charge was primarily recorded in association
with the planned disposal of wireless network equipment resulting from a program
to increase capacity and operating efficiency of our wireless network. As part
of a multivendor program, contracts are being executed with certain vendors to
replace significant portions of our wireless infrastructure equipment in the
western United States and the metropolitan New York markets. The program will
provide Wireless Services with the newest technology available and allow us to
evolve to new, third-generation digital technology, with high-speed data
capabilities.

The planned disposal of the existing wireless infrastructure equipment required
an evaluation of asset impairment in accordance with Statement of Financial
Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" to write-down these assets
to their fair value, which was estimated by discounting the expected future cash
flows of these assets through the date of disposal. Since the assets will remain
in service from the date of the decision to dispose of these assets to the
disposal date, the remaining net book value of the assets will be depreciated
over this period.

A $145 million charge for restructuring and exit costs was recorded as part of
AT&T's initiative to reduce costs by $2 billion by the end of 2000. The
restructuring and exit plans primarily focus on the maximization of synergies
through headcount reductions in Business Services and network operations,
including the consolidation of customer-care and call centers.

Included in the exit costs was $142 million of cash termination benefits
associated with the separation of approximately 2,800 employees as part of
voluntary and involuntary termination plans. Approximately one-half of the
separations were management employees and one-half were nonmanagement employees.
Approximately 1,700 employee separations related to involuntary terminations and
approximately 1,100 related to voluntary terminations. Nearly 80% of the
affected employees have left their positions as of December 31, 1999, and the
remaining employees will leave the company in early 2000. Termination benefits
of $40 million were paid in the fourth quarter of 1999. This cash outlay was
primarily funded through cash from operations. The balance of the cash
termination payments are expected to be paid in the first quarter of 2000.


   12




The restructuring initiative is projected to yield cash savings of approximately
$250 million per year, as well as EBIT [earnings, including other
income (expense), before interest and taxes] savings of approximately $200
million in 2000 and nearly $400 million per year thereafter. We expect increased
spending in growth businesses will largely offset these cash and EBIT savings.
The EBIT savings, primarily attributable to reduced personnel-related expenses,
will be realized in SG&A expenses and network and other costs of services.
EBIT savings in 2000 are expected to be partially offset by accelerated
depreciation expense. However, depreciation expense in subsequent years will be
lower related to the 1999 write-off of Wireless Services' assets.

In addition, our continuing efforts to reduce costs by $2 billion by the end of
2000 and the planned merger with MediaOne may require further charges for exit
and separation plans, which we expect to have finalized in the first half of
2000.

We also recorded net losses of $307 million related to the government-mandated
disposition of certain international businesses that would have competed
directly with Concert, and $50 million related to a contribution agreement
Broadband entered into with Phoenixstar, Inc., that requires Broadband to
satisfy certain liabilities owed by Phoenixstar and its subsidiaries. The
remaining obligation under this contribution agreement is $26 million. In
addition, we recorded benefits of $121 million related to the settlement of
pension obligations for former employees who accepted AT&T's 1998 voluntary
retirement incentive program (VRIP) offer.

During 1998, we recorded $2,514 million of net restructuring and other charges,
which had an approximate $0.59 impact on earnings per diluted share. The bulk of
the charge was associated with a plan to reduce headcount by 15,000 to 18,000
over two years as part of our overall cost-reduction program. In connection with
this plan, the VRIP was offered to eligible management employees. Approximately
15,300 management employees accepted the VRIP offer. A restructuring charge of
$2,724 million was composed of $2,254 million and $169 million for pension and
postretirement special-termination benefits, respectively, $263 million of
curtailment losses and $38 million of other administrative costs. We also
recorded charges of $125 million for related facility costs and $150 million for
executive-separation costs. These charges were partially offset by benefits of
$940 million as we settled pension benefit obligations for 13,700 of the total
VRIP employees. In addition, the VRIP charges were partially offset by the
reversal of $256 million of 1995 business restructuring reserves primarily
resulting from the overlap of VRIP on certain 1995 projects.

Also included in the 1998 net restructuring and other charges were asset
impairment charges totaling $718 million, of which $633 million was related to
our decision not to pursue Total Service Resale (TSR) as a local service
strategy. We also recorded an $85 million asset impairment charge related to the
write-down of unrecoverable assets in certain international operations in which
the carrying value is no longer supported by future cash flows. This charge was
made in connection with the review of certain operations that would have
competed directly with Concert.


   13




Additionally, $85 million of merger-related expenses were recorded in 1998 in
connection with the Teleport Communications Group Inc. (TCG) merger, which was
accounted for as a pooling of interests. Partially offsetting these charges in
1998 was a $92 million reversal of the 1995 restructuring reserve. This reversal
reflects reserves that were no longer deemed necessary. The reversal primarily
included separation costs attributed to projects completed at a cost lower than
originally anticipated. Consistent with the three-year plan, the 1995
restructuring initiatives were substantially completed by the end of 1998.

For the Years Ended December 31,            1999      1998      1997
Dollars in millions
Other income (expense)                     $(501)   $1,247      $443

Other income (expense) was an expense of $501 million in 1999 compared with
income of $1,247 million in 1998. The significant decrease is due to higher net
losses from investments, largely due to Excite@Home and Cablevision, and lower
gains on sales. Gains on sales in 1999 included $153 million from Language Line
Services, $88 million from WOOD-TV and $110 million from the sale of a portion
of our ownership interest in AT&T Canada. Gains on sales in 1998 included $350
million from AT&T Solutions Customer Care, $317 million from LIN Television
Corp. (LIN-TV) and $103 million from SmarTone Telecommunications Holdings
Limited (SmarTone). Distributions on trust preferred securities in 1999 and
higher interest income in 1998 as a result of the proceeds received from the
sale of Universal Card Services (UCS) also contributed to the decrease.

Other income (expense) increased $804 million in 1998 due primarily to gains on
sales in 1998 as well as increased interest income on our higher cash balance.
These increases were partially offset by lower earnings from equity investments
and a gain in 1997 on the sale of AT&T Skynet Satellite Services (Skynet) of $97
million.

For the Years Ended December 31,         1999       1998        1997
Dollars in millions
EBIT                                  $10,358     $8,734      $7,279

EBIT increased $1,624 million, or 18.6%, in 1999. EBIT was impacted by
restructuring and other charges, and certain gains and losses, as well as the
acquisitions of Broadband and AGNS. Excluding these items, EBIT increased $2,805
million, or 26.8%, to $13,283 million in 1999. The improvement in EBIT was due
to increased revenue combined with an improving cost structure. EBIT for 1998
increased $1,455 million, or 20.0%. Excluding restructuring and other charges,
and certain gains and losses, EBIT increased $3,037 million, or 41.9%. This
increase in EBIT was driven by higher revenue, the benefit of our SG&A expense
cost-cutting initiatives and lower international settlement rates.



   14




For the Years Ended December 31,         1999       1998        1997
Dollars in millions
Interest expense                       $1,651       $427        $307

Interest expense increased $1,224 million in 1999 due to a higher average debt
balance associated with our acquisitions, including debt outstanding for
Broadband at the date of acquisition. Interest expense increased $120 million in
1998. After the sale of UCS on April 2, 1998, interest expense associated with
debt previously attributed to UCS was reclassified from discontinued operations
to continuing operations since we did not retire all of this debt. This
reclassification is the primary reason for the increase in 1998.

For the Years Ended December 31,         1999         1998        1997
Dollars in millions
Provision for income taxes             $3,257       $3,072      $2,723

The effective income tax rate is the provision for income taxes as a percent of
income from continuing operations before income taxes. The effective income tax
rate was 48.7% in 1999, 37.0% in 1998 and 39.0% in 1997. The effective income
tax rate for AT&T Group was 37.4% in 1999, 37.0% in 1998 and 39.0% in 1997. The
1999 effective tax rate for AT&T Group was impacted by the in-process research
and development charge, which was not tax deductible, and a change in the net
operating loss utilization tax rules that resulted in a $75 million reduction in
the valuation allowance and the income tax provision. In addition, the 1999
effective tax rate reflects tax benefits associated with investment
dispositions, legal entity restructurings and other tax planning strategies.
The effective tax rate for 1998 was impacted by the pooling of TCG's historical
results, which did not include tax benefits on preacquisition losses, and the
effects of certain foreign legal entity restructurings and investment
dispositions.

Discontinued Operations
Pursuant to Accounting Principles Board Opinion No. 30 "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the
consolidated financial statements of AT&T reflect the dispositions of UCS, which
was sold on April 2, 1998, and AT&T's submarine systems business (SSI), which
was sold on July 1, 1997, as discontinued operations. Accordingly, the revenue,
costs and expenses, and cash flows of these businesses have been excluded from
the respective captions in the Consolidated Statements of Income and
Consolidated Statements of Cash Flows, and have been reported through their
respective dates of disposition as "Income from discontinued operations," net of
applicable income taxes; and as "Net cash provided by (used in) discontinued
operations." As of December 31, 1998, all businesses previously reported as
discontinued operations have been disposed of; therefore, there was no impact to
the Consolidated Balance Sheets presented. Gains associated with these sales are
recorded as "Gains on sales of discontinued operations," net of applicable
taxes.



   15




Extraordinary Items
In August 1998, AT&T extinguished $1,046 million of TCG's debt. The $217 million
pretax loss on the early extinguishment of debt was recorded as an extraordinary
loss. The after-tax impact was $137 million, or $0.05 per diluted share.

[Included in the 1999 Annual Report is a bar graph entitled "Revenue by
Segment." The graph depicts revenue of  Business Services, Consumer Services,
Wireless Services, and Other and Corporate for the three-years ended December
31, 1999. It also depicts the revenue of Broadband for 1999.]

SEGMENT RESULTS

In support of the services we provide, we segment our results by the business
units that support our primary lines of business: Business Services, Consumer
Services, Wireless Services and Broadband. A fifth category, Other and
Corporate, comprises the results of all other units of AT&T Group, including
corporate staff functions. We supplementally discuss AT&T Solutions and
International Operations and Ventures, which are both included in the Other and
Corporate category. Although not a segment, we also discuss the results of LMG.

The discussion of segment results includes revenue; earnings, including other
income (expense), before interest and taxes (EBIT); earnings, including other
income (expense), before interest, taxes, depreciation and amortization
(EBITDA); total assets; and capital additions. The discussion of EBITDA for
Wireless Services and Broadband is modified to exclude other income (expense).
Total assets for each segment include all assets, except intercompany
receivables. Prepaid pension assets and corporate-owned or leased real estate
are generally held at the corporate level and therefore are included in the
Other and Corporate group. Shared network assets are allocated to the segments
and reallocated each January, based on two years of volumes. Capital additions
for each segment include capital expenditures for property, plant and equipment,
acquisitions of licenses, additions to nonconsolidated investments, increases in
franchise costs and additions to internal-use software.

EBIT is the primary measure used by AT&T's chief operating decision makers to
measure AT&T's operating results and to measure segment profitability and
performance. AT&T calculates EBIT as operating income plus other
income (expense). In addition, management also uses EBITDA as a measure of
segment profitability and performance, and is defined as EBIT plus depreciation
and amortization. Interest and taxes are not factored into the profitability
measure used by the chief operating decision makers; therefore, trends for these
items are discussed on a consolidated basis. Management believes EBIT is
meaningful to investors because it provides analysis of operating results using
the same measures used by AT&T's chief operating decision makers and provides a
return on total capitalization measure. We believe EBITDA is meaningful to
investors as a measure of each segment's liquidity consistent with the measure
utilized by our chief operating decision makers. In addition, we believe that
both EBIT and EBITDA allow investors a means to evaluate the financial results



   16

of each segment in relation to AT&T. Our calculation of EBIT and EBITDA may or
may not be consistent with the calculation of these measures by other public
companies. EBIT and EBITDA should not be viewed by investors as an alternative
to generally accepted accounting principles (GAAP) measures of income as a
measure of performance or to cash flows from operating, investing and financing
activities as a measure of liquidity. In addition, EBITDA does not take into
account changes in certain assets and liabilities that can affect cash flow.

Reflecting the dynamics of our business, we continually review our management
model and structure. In 2000, we anticipate changes to our segments as follows:
The Business Services segment will be expanded to include the results of AT&T
Solutions, and Broadband results will be expanded to include the operations of
MediaOne upon the completion of the merger. The Wireless Services segment will
be expanded to include fixed wireless technology and certain international
wireless investments.

BUSINESS SERVICES
Our Business Services segment offers a variety of global communications services
including long distance, local and data and IP networking to small and
medium-sized businesses, large domestic and multinational businesses and
government agencies. Business Services is also a provider of voice, data and IP
transport to service resellers (wholesale services).



For the Years Ended December 31,                        1999          1998     1997
Dollars in millions
                                                                   
External revenue                                     $23,540       $22,706  $21,520
Internal revenue                                       1,562           905      811
  Total revenue                                       25,102        23,611   22,331
EBIT                                                   6,131         5,007    4,047
EBITDA                                                 9,079         7,395    5,902
Capital additions                                      7,145         5,952    4,547

At December 31,                                         1999          1998
Total assets                                         $25,107       $21,415


REVENUE
In 1999, Business Services revenue grew $1,491 million, or 6.3%, driven by data
and IP services, domestic long distance voice services and local services. Total
calling volumes increased approximately 25% for the year. Revenue in 1998
increased $1,280 million, or 5.7%, led by growth in data services.

Data services, which is the transportation of data rather than voice along our
network, grew at a high-teens rate in 1999 and at a mid-teens rate for 1998.
Growth in each period was led by the continued strength of frame relay and
high-speed private line, both of which are high-speed data-transmission
services. On average in 1999, we added approximately 230 more net frame ports
per month as compared with 1998. Also contributing to the revenue increase in
1999 was significant growth in IP services, such as AT&T WorldNet Services and
virtual private network (VPN) services.



   17


Long distance voice revenue grew at a low single-digit rate in both 1999 and
1998. The continued strength of volumes, as evidenced by a high-teens growth
rate for 1999 and a near-teens growth rate for 1998, was largely mitigated by a
declining average price per minute. The average price per minute has declined
due to competitive forces within the industry that are expected to continue.
Also impacting the average price per minute was a change in product mix, which
in 1999 was largely attributable to an increase in our wholesale business sales,
which had a lower rate per minute. Revenue in 1998 was also impacted by
reductions in access costs that were passed on to customers in the form of lower
rates.

Local voice service revenue grew more than 50% in 1999. During 1999, AT&T added
more than 626,000 access lines, with the total reaching 1.3 million by the end
of the year. Access lines enable AT&T to provide local service to customers by
allowing direct connection from customer equipment to the AT&T network. AT&T
serves more than 36,000 buildings in 89 metropolitan statistical areas (MSAs),
with just over 5,800 of the buildings on-network (buildings where AT&T owns the
fiber that runs into the building). At the end of 1998, we served approximately
20,000 buildings in 83 MSAs, with about 5,200 buildings on-network.

[Included in the 1999 Annual Report is a bar graph entitled "Access Lines." The
graph depicts the number of access lines for the eight quarters ended December,
31 1999.]

Business Services internal revenue increased $657 million, or 72.5%, in 1999.
The increase is the result of greater sales of business long distance services
to other AT&T units, primarily AT&T Solutions (including the impact of AGNS) and
Wireless Services, which resell such services to their external customers.

EBIT/EBITDA
EBIT rose $1,124 million, or 22.5%, and EBITDA grew $1,684 million, or 22.8%, in
1999. Excluding 1999 restructuring and exit costs, EBIT increased 24.4% to
$6,226 million and EBITDA increased 24.1% to $9,174 million. These increases
were driven by revenue growth combined with margin improvement resulting from
ongoing cost-control initiatives. The increase in EBIT was offset somewhat by
increased depreciation and amortization expenses resulting from increased
capital expenditures aimed at data, IP and local services.

EBIT increased $960 million, or 23.7%, and EBITDA increased $1,493 million, or
25.3%, in 1998. The increases were driven by growth in revenue and the benefits
reaped from cost-cutting initiatives. Partly offsetting the increase in EBIT and
EBITDA in 1998 was the gain on the sale of Skynet, recorded in 1997. In
addition, the EBIT improvements were partially offset by increased depreciation
and amortization expenses correlated to the continued high levels of capital
expenditures.


   18



OTHER ITEMS
Capital additions increased $1,193 million and $1,405 million in 1999 and 1998,
respectively. Spending in all periods reflects Business Services' portion of
AT&T's investment to enhance our long distance network (including the data
network) and spending on AT&T's local network.

Total assets increased $3,692 million, or 17.2%, at December 31, 1999, compared
with December 31, 1998. The increase was primarily due to net increases in
property, plant and equipment as a result of capital additions.

CONSUMER SERVICES
Our Consumer Services segment provides to residential customers a variety of
any-distance communications services including long distance, local toll
(intrastate calls outside the immediate local area) and Internet access. In
addition, Consumer Services provides prepaid calling-card and operator-handled
calling services. Local phone service is also provided in certain areas. The
costs associated with the development of fixed wireless technology are included
in the Consumer Services segment results.



For the Years Ended December 31,                        1999         1998      1997
Dollars in millions
                                                                   
Revenue                                              $21,972      $22,885   $23,690
EBIT                                                   7,968        6,568     4,922
EBITDA                                                 8,845        7,298     5,694
Capital additions                                        859          526     1,010

At December 31,                                         1999         1998
Total assets                                         $ 6,823      $ 6,561


REVENUE
In 1999, Consumer Services revenue decreased $913 million, or 4.0%, on a mid
single-digit decline in volumes. Revenue in 1998 fell $805 million, or 3.4%, on
a low single-digit decline in volumes. Excluding AT&T WorldNet Services, revenue
decreased 4.4% for 1999 and was down 3.8% in 1998. The declines in both years
reflect the ongoing competitive nature of the consumer long distance industry,
which has resulted in pricing pressures and a loss of customers. Also negatively
impacting revenue growth was product substitution and market migration away from
direct dial and calling card to rapidly growing wireless services. The entry of
the Regional Bell Operating Companies (RBOCs) into the long distance market is
expected to increase competitive pressures in 2000.

Demonstrating our commitment to providing customers with choice, simplicity and
competitive rates, we introduced in August 1999 the AT&T One Rate(R) 7 cents
offer, a simple, convenient calling plan that allows customers to make long
distance calls 24 hours a day, seven days a week for 7 cents a minute. The offer
has been extremely well received. At the end of 1999, we had enrolled more than
5.0 million customers, with more than 60% of those customers electing to bundle
their 7-cent long distance with AT&T's local toll service. Approximately
one-third of the customers enrolled in the 7-cent plan were new AT&T long
distance customers.


   19

AT&T WorldNet Services revenue increased 41.2% to $301 million in 1999, and
78.9% to $213 million in 1998. AT&T WorldNet Services served 1.5 million
residential customers as of December 31, 1999, an increase of 29.5% over 1998.
At December 31, 1998, AT&T WorldNet Services served 1.1 million residential
customers, an increase of 22.3% over 1997.

EBIT/EBITDA
EBIT grew $1,400 million, or 21.3%, and EBITDA grew $1,547 million, or 21.2%,
in 1999. Adjusted to exclude the 1999 gain on the sale of the Language Line
Services business and 1999 restructuring and exit costs, EBIT increased 19.1%
to $7,823 million, and EBITDA increased 19.2% to $8,700 million. On this basis,
EBIT margin improved to 35.6% in 1999 from 28.7% in the prior year. The EBIT
and EBITDA growth for the year is reflective of ongoing cost-reduction efforts,
particularly in marketing spending, as well as lower negotiated settlement
rates.

For 1998, EBIT increased $1,646 million, or 33.4%, and EBITDA increased $1,604
million, or 28.2%. These increases were primarily driven by reduced SG&A
expenses, largely due to AT&T's focus on high-value customers, which has led to
lower spending on customer-acquisition and retention programs.

OTHER ITEMS
Capital additions increased $333 million, or 63.3%, in 1999, primarily due to
increased spending on internal-use software to add more functionality to our
services, in support of AT&T WorldNet Services subscriber growth and for fixed
wireless equipment. In 1998, capital additions declined $484 million, or 47.9%.
The decrease was primarily due to a decrease in the allocation of shared network
assets due to lower consumer volumes as a percent of total volumes.

Total assets grew $262 million, or 4.0%, during 1999. The increase in total
assets was primarily associated with the purchase of SmarTalk Tele-Services,
Inc., in 1999. Also contributing to the growth were capital additions, offset
somewhat by lower accounts receivable, as a result of lower revenue.

WIRELESS SERVICES
Our Wireless Services segment offers wireless voice and data services and
products to customers in our 850 megahertz (cellular) and 1900 megahertz
(Personal Communications Services, or PCS) markets. Wireless Services also
includes certain interests in partnerships and affiliates that provide wireless
services in the United States and internationally, aviation communications
services and the results of our messaging business through the October 2, 1998,
date of sale.



For the Years Ended December 31,                        1999          1998     1997
Dollars in millions
                                                                   
Revenue                                              $ 7,627       $ 5,406  $ 4,668
EBIT                                                    (474)          182      366
EBITDA excluding other income (expense)                  640           947      964
Capital additions                                      2,598         2,321    2,071

At December 31,                                         1999          1998
Total assets                                         $22,478       $19,115



   20


REVENUE
Wireless Services revenue grew $2,221 million, or 41.1%, in 1999 compared with
1998. Wireless Services' 1999 results include Vanguard Cellular Systems, Inc.
(Vanguard), since its acquisition in May 1999, and 1998 results include
Wireless' messaging business until its sale on October 2, 1998. Adjusted to
exclude both Vanguard and the messaging business, revenue grew to $7,304
million, up 39.0% for the year. The strength in revenue was driven by
consolidated subscriber growth and higher average monthly revenue per user
(ARPU), which demonstrates the continued successful execution of AT&T's wireless
strategy of targeting and retaining high-value subscribers, expanding our
national wireless footprint, focusing on digital service and offering simple
rate plans.

AT&T Digital One Rate service, the first national, one-rate wireless service
plan that eliminated separate roaming and long distance charges, significantly
contributed to the increases in both subscribers and ARPU. For 1999, ARPU was
approximately $66, an increase of 14.2% over 1998. Consolidated subscribers grew
33.4% to approximately 9.6 million at December 31, 1999. This included
approximately 700,000 subscribers from our acquisition of Vanguard and 125,000
subscribers from our August 1999 acquisition of Honolulu Cellular Telephone
Company (Honolulu). Total subscribers, including partnership markets in which
AT&T does not own a controlling interest, were nearly 12.2 million at the end of
1999. We continue to rapidly migrate customers to digital service, which we
believe improves capital efficiency, lowers network operating costs and allows
us to offer higher quality services. At the end of 1999, 79.2% of consolidated
subscribers were being provided digital service, compared with 60.7% at the end
of 1998. Including partnership markets, digital subscribers represented 77.1% of
customers, compared with 54.9% at the end of 1998.

[Included in the 1999 Annual Report is bar graph entitled "Average Monthly
Revenue per User (ARPU) and Consolidated Subscribers." The graph depicts ARPU
and consolidated subscribers for each quarter of 1998 and 1999.]

Wireless Services revenue grew $738 million, or 15.8%, in 1998. Adjusted to
exclude the messaging business, 1998 revenue increased 17.2% compared with 1997.
The increase was primarily driven by the strong response to AT&T Digital One
Rate service, which was rolled out in May 1998, and a full-year impact in 1998
of eight new 1900 megahertz markets that were launched in the second half of
1997.

As of December 31, 1998, we had 7.2 million consolidated subscribers, an
increase of 20.3% from December 31, 1997. Digital subscribers represented 60.7%
of the consolidated subscribers, up from 29.3% at December 31, 1997. Including
partnership markets, 54.9% of the 9.6 million total subscribers were being
provided digital service at December 31, 1998.


   21


EBIT/EBITDA
During 1999, EBIT decreased $656 million. Excluding a $529 million asset
impairment charge recorded in 1999, and the gain on the sale of SmarTone in
1998, EBIT decreased $24 million, or 31.4%, for the year. This decline was
primarily driven by higher network operations costs, principally off-network
roaming expenses as well as greater customer-acquisition and customer-care costs
associated with the rapid growth of subscribers. Higher depreciation and
amortization of a larger wireless asset base, coupled with lower earnings from
our equity investments, also contributed to the EBIT decline. These impacts to
EBIT were partly offset by revenue growth.

EBITDA, excluding other income (expense), decreased $307 million in 1999.
EBITDA, excluding other income (expense) and the asset impairment charge,
increased $222 million, or 23.4%. On this basis, EBITDA was favorably impacted
by revenue growth, partially offset by higher off-network roaming expenses, as
well as the rise in customer-acquisition and customer-care spending related to
subscriber growth.

Off-network roaming expenses continue to negatively impact AT&T Wireless
Services' results. However, compared with 1998, our average incollect rate per
minute has declined 18.2%. The decline in incollect rates is expected to
continue in 2000. Initiatives have been introduced to address off-network costs,
including aggressively capturing more minutes on the AT&T network through
capital expansion within existing and new markets, acquisitions and affiliate
launches. Intercarrier roaming rates have declined significantly as a result of
renegotiated roaming agreements and the deployment of Intelligent Roaming
Database (IRDB) technology, which assists in identifying favorable roaming
partners in areas not included in our wireless network.

In 1998, EBIT decreased 50.1%, and EBITDA, excluding other income (expense),
fell 1.8%. Adjusted to exclude the 1998 gain on the sale of SmarTone and a
charge in 1997 related to the write-down of our two-way messaging business, EBIT
fell $447 million, or 84.8%. The decline in EBIT was primarily attributable to
higher costs associated with a growing subscriber base, higher depreciation and
amortization expenses due to our growing asset base and lower earnings from our
equity investments. These declines were partially offset by growth in revenue.
EBITDA, excluding other income (expense) and the 1997 two-way messaging charge,
declined $97 million, or 9.3%, primarily due to greater costs associated with a
growing subscriber base partially offset by revenue growth.

OTHER ITEMS
Capital additions increased by $277 million in 1999 and $250 million in 1998.
The buildout of the 1900 megahertz markets was substantially completed in 1997.
Since then, spending has focused on increasing the capacity and quality of our
national wireless network in existing markets as well as the expansion of our
national footprint.

Total assets increased $3,363 million, or 17.6%, from December 31, 1998. This
increase was primarily due to increases in goodwill, licensing costs, and
property, plant and equipment associated with our acquisitions of Vanguard and
Honolulu. Capital expenditures and increased accounts receivable resulting from
the growth in revenue also contributed to the 1999 increase in total assets.


   22


BROADBAND
Our Broadband segment offers a variety of services through our cable broadband
network, including traditional analog video and new services such as digital
cable and AT&T@Home, our high-speed cable Internet access service. Also included
in this segment are the operations associated with developing and installing the
infrastructure that supports broadband telephony.

For the 10 Months Ended December 31,            1999
Dollars in millions
Revenue                                      $ 4,871
EBIT                                          (2,276)
EBITDA excluding other income (expense)          645
Capital additions                              4,759

At December 31,                                 1999
Total assets                                 $56,536

REVENUE
From the date of acquisition through December 31, 1999, Broadband revenue was
$4,871 million. Broadband ended the year with 11.4 million basic cable
customers, passing approximately 19.7 million homes, and had approximately 1.8
million digital-cable customers. Broadband's high-speed cable Internet service,
AT&T@Home, ended 1999 with approximately 207,000 customers.

Broadband's telephony pilot market initiatives are progressing on schedule. As
of the end of 1999, we had introduced broadband telephony service to customers
in 16 cities within nine pilot markets and had nearly 8,300 broadband telephony
customers. The markets include the California Bay Area (including Fremont),
Chicago, Dallas, Denver, Pittsburgh, Seattle, Salt Lake City, St. Louis and
Portland, Oregon.

EBIT/EBITDA
Since the date of acquisition, EBIT for 1999 was a deficit of $2,276 million and
EBITDA, excluding other income (expense), was $645 million. Included in
Broadband's results was a $594 million in-process research and development
charge and a $50 million charge relating to a contribution agreement entered
into by Broadband to satisfy certain liabilities of Phoenixstar. In addition,
our equity ownership in Excite@Home and Cablevision negatively impacted
Broadband's 1999 EBIT by $942 million.

OTHER ITEMS
Broadband's capital additions for 1999, since the date of acquisition, were
$4,759 million. In 1999, spending was largely directed toward cable-distribution
systems, focusing on the upgrade of cable plants. Capital additions also
included contributions to various nonconsolidated investments.


   23


OTHER AND CORPORATE
This group reflects the results of AT&T Solutions, our outsourcing and network
management business, International Operations and Ventures, other corporate
operations, corporate staff functions and elimination of transactions between
segments. Included in AT&T Solutions are the results of AGNS, which was acquired
for cash in phases throughout 1999.



For the Years Ended December 31,                         1999       1998      1997
Dollars in millions
                                                                  
Revenue                                               $ 2,819    $ 1,321   $   888
EBIT                                                     (991)    (3,023)   (2,056)
EBITDA                                                   (273)    (2,547)   (1,587)
Capital additions                                       1,798        779     1,055

At December 31,                                          1999       1998
Total assets                                          $20,002    $12,459


REVENUE
For 1999, revenue increased $1,498 million, or 113.4%. Excluding the results of
AGNS, the majority of which was acquired in April 1999, revenue for the year
increased $285 million, or 21.5%. The increase was primarily driven by the
continued strength of AT&T Solutions' outsourcing business, and growth in
International Operations and Ventures. These increases were partially offset by
the increase in the elimination of intercompany revenue and the sale of AT&T
Solutions Customer Care (ASCC) in 1998. The elimination of revenue and profit
generated by the sale of services between segments is primarily the result of
sales of business long distance services to other AT&T units. For the year,
intercompany revenue eliminated was $1,585 million, an increase of 62.5% from
1998. This increase can be attributed to the rise in Business Services' sales to
AT&T Solutions (including the impact of AGNS) and Wireless Services.

Revenue increased $433 million, or 48.8%, in 1998. This revenue growth was
primarily due to increases in International Operations and Ventures, and AT&T
Solutions, partially offset by revenue of ASCC, which we sold in 1998.

EBIT/EBITDA
EBIT and EBITDA deficits in 1999 improved $2,032 million, or 67.2%, and $2,274
million, or 89.3%, respectively. Adjusted to exclude the impacts of gains on
sales of AT&T Canada and WOOD-TV in 1999 and ASCC and LIN-TV in 1998, and net
restructuring and other charges in both 1999 and 1998, EBIT improved $217
million, or 18.6%, to a deficit of $959 million in 1999. On the same basis,
EBITDA improved $460 million, or 65.8%, to a deficit of $240 million. The
increases can be attributed to improvements in the operating performance of
International Operations and Ventures, benefits from ongoing cost-control
initiatives and the sales of miscellaneous investments. Negatively impacting the
improvements in EBIT and EBITDA was less interest income due to a lower cash
balance and distributions on trust preferred securities.


   24


In 1998, the EBIT and EBITDA deficits increased 47.1% and 60.8%, respectively,
over 1997. Adjusted to exclude restructuring and other charges recorded in 1998,
gains on the 1998 sales of ASCC and LIN-TV and the 1997 restructuring reserve
reversal, EBIT improved $980 million, or 45.4%, to a deficit of $1,176 million,
and EBITDA improved $987 million, or 58.4%, to a deficit of $700 million in
1998. This was primarily due to lower corporate overhead related to headcount
reductions and lower employee benefit costs, higher interest income associated
with a larger cash balance, and improvements in the operating performance of
AT&T Solutions and International Operations and Ventures.

OTHER ITEMS
Capital additions increased $1,019 million in 1999 and decreased $276 million in
1998. Additional spending in 1999 reflected increased international equity
investments that support our global strategy. The decrease in 1998 reflected
fewer international equity investments compared with 1997.

Total assets increased $7,543 million at December 31, 1999, primarily due to the
acquisition of AGNS.


SUPPLEMENTAL DISCLOSURES

AT&T SOLUTIONS
AT&T Solutions is composed of the Solutions outsourcing unit, the internal AT&T
Information Technology Services unit and the recently acquired AT&T Global
Network Services (AGNS). The results of AT&T Solutions are included in the Other
and Corporate group.

For the Years Ended December 31,                       1999      1998      1997
Dollars in millions
Revenue                                              $3,120    $1,098    $ 824
EBIT                                                    (12)       31     (151)
EBITDA                                                  482       307      135
Capital additions                                       384       280      289

At December 31,                                        1999      1998
Total assets                                         $7,064   $ 1,023


REVENUE
AT&T Solutions revenue for 1999 rose $2,022 million, or 184.1%. Adjusted to
exclude the impact of the acquisition of AGNS, revenue grew $531 million, or
48.3%, to $1,629 million. For 1998 revenue grew 33.2% to $1,098 million.
Throughout both 1999 and 1998, revenue strength was associated with the signing
of new contracts as well as the expansion of services provided to existing
clients.


   25

AT&T Solutions, with more than 30,000 clients, including IBM, CitiGroup, Bank
One, McGraw-Hill, United Health Group, Textron, JP Morgan, Merrill Lynch,
MasterCard International and the State of Texas General Services Commission, has
the potential for more than $11 billion in outsourcing revenue over the life of
signed contracts. During the fourth quarter of 1999, AT&T Solutions signed
multimillion dollar contracts with General Motors and Delphi Automotive Systems.
Also, in January 2000, AT&T Solutions signed a contract with Acer, the world's
third-largest manufacturer of personal computers, its first global agreement
with a non-U.S.-based multinational corporation.

EBIT/EBITDA
For 1999, EBIT declined $43 million and EBITDA improved $175 million. Adjusted
to exclude the impact of AGNS, EBIT improved $61 million, or 192.0%, and EBITDA
improved $85 million, or 27.4%. For 1998, EBIT improved $182 million, or 120.7%,
and EBITDA improved $172 million, or 127.7%. For both periods, revenue growth
combined with margin improvement resulting from ongoing cost-control initiatives
drove the EBIT and EBITDA improvements.

OTHER ITEMS
Capital additions increased $104 million in 1999 and declined slightly in 1998.
Increased spending in 1999 related to AGNS' purchases of client-support
equipment. Spending in 1998 and 1997 was directed primarily toward the AT&T
information-technology infrastructure.

Total assets increased $6,041 million, or 590.4%, at December 31, 1999,
primarily due to goodwill and other intangible assets associated with the
purchase of AGNS and increased accounts receivable.

INTERNATIONAL OPERATIONS AND VENTURES
International Operations and Ventures includes AT&T's consolidated foreign
operations such as frame relay services in the United Kingdom, international
carrier services and international online services. However, bilateral
international long distance traffic is not included here; it is included in
our Business and Consumer Services segments. The earnings or losses of AT&T's
nonconsolidated international joint ventures and alliances, such as Alestra in
Mexico, AT&T Canada Corp., Rogers Cantel in Canada and Japan Telecom, are also
included. The results of International Operations and Ventures are included in
the Other and Corporate group.



For the Years Ended December 31,                       1999       1998      1997
Dollars in millions
                                                                  
Revenue                                              $1,228     $1,083     $ 712
EBIT                                                   (316)      (333)     (399)
EBITDA                                                 (252)      (264)     (338)
Capital additions                                     1,095        155       496

At December 31,                                        1999       1998
Total assets                                         $2,777     $1,915



   26

REVENUE
International Operations and Ventures revenue grew $145 million, or 13.5%,
during 1999 and $371 million, or 52.1%, in 1998. International carrier services
and frame relay services volume increases drove revenue growth in both years. In
addition, nearly one-half of the revenue growth in 1998 can be attributed to the
1998 purchase of ACC Corp. During 1998, we streamlined our operations by
divesting certain nonstrategic businesses. Such streamlining, which continued in
1999, along with the exit from additional businesses that would have competed
directly with Concert, negatively impacted our revenue growth in 1999.

EBIT/EBITDA
EBIT and EBITDA improved $17 million and $12 million, respectively, during 1999.
Excluding restructuring and other charges, and certain gains and losses in 1999
and 1998, EBIT improved $131 million, or 52.9%, to a deficit of $117 million,
and EBITDA improved $126 million, or 70.5%, to a deficit of $53 million, for the
year. Such improvements can be attributed to the continued restructuring of
international operations, which included the disposition of certain nonstrategic
investments. Also contributing to the growth was the improving financial
performance in other ventures and alliances, international carrier services and
frame relay services. Negatively impacting EBIT and EBITDA were costs incurred
during 1999 related to the launch of Concert.

EBIT improved $66 million and EBITDA improved $74 million in 1998 compared with
1997. Excluding an asset impairment charge recorded in 1998, EBIT improved $151
million, or 38.0%, to a deficit of $248 million, and EBITDA improved $159
million, or 47.1%, to a deficit of $179 million, compared with 1997. The EBIT
and EBITDA improvements were primarily due to revenue increases and AT&T's
efforts to streamline its international operations and exit nonstrategic and
unprofitable businesses.

OTHER ITEMS
Capital additions in 1999 increased $940 million over 1998, to $1,095 million,
driven by increased investments in nonconsolidated subsidiaries, such as AT&T
Canada and Japan Telecom. Capital additions decreased $341 million in 1998
compared with 1997. The decrease was primarily due to the high level of spending
in 1997, which was directed toward the funding of start-up ventures.

Total assets were $2,777 million at December 31, 1999, compared with $1,915
million at December 31, 1998. The increase was primarily due to investments in
nonconsolidated subsidiaries, partially offset by the divestment of certain
nonstrategic businesses.

LIBERTY MEDIA GROUP
Liberty Media Group (LMG) produces, acquires and distributes entertainment,
educational and informational programming services through all available formats
and media. LMG is also engaged in electronic retailing services, direct
marketing services, advertising sales relating to programming services,
infomercials and transaction processing. Losses from LMG were $2,022 million
from the date of acquisition through December 31, 1999.


   27

LIQUIDITY
For the Years Ended December 31,                1999      1998       1997
Dollars in millions
CASH FLOW OF CONTINUING OPERATIONS:
  Provided by operating activities           $11,635   $10,217    $ 8,501
  (Used in) provided by investing activities (27,043)    3,582     (6,755)
  Provided by (used in) financing activities  13,272   (11,049)    (1,540)

EBITDA                                       $18,292   $13,415    $11,327

In 1999, net cash provided by operating activities of continuing operations
increased $1,418 million. The increase was primarily driven by an increase in
net income excluding the noncash impact of depreciation and amortization,
restructuring and other charges, and the impact of losses from our equity
investments. Partially offsetting this source was an increase in accounts
receivable, driven by higher revenue, and an increase in our 1999 tax payments
primarily related to the 1998 gain on the sale of UCS. The increase in net cash
provided by operating activities in 1998 was primarily due to an increase in
operational net income from continuing operations.

AT&T's investing activities resulted in a net use of cash of $27,043 million for
1999, compared with a net source of cash of $3,582 million for 1998. During
1999, AT&T used $14.3 billion for capital expenditures and other additions,
contributed $5.5 billion of cash to LMG, purchased AGNS for $4.9 billion and
loaned $1.5 billion to MediaOne to pay termination fees to Comcast Corporation
(Comcast). During 1998, we received $5.7 billion as settlement of a receivable
in conjunction with the sale of UCS as well as $3.5 billion in proceeds from the
sale. Also in 1998, we received a total of $1.6 billion in proceeds from the
sales of LIN-TV, ASCC and SmarTone. Our capital spending of $7.8 billion
partially offset these 1998 sources of cash. During 1997, the primary use of
cash was in connection with capital spending of $7.6 billion.

During 1999, net cash provided by financing activities was $13,272 million
compared with cash used in financing activities of $11,049 million for 1998.
During 1999, AT&T received $8.4 billion in cash from 1999 bond issuances, $10.2
billion from the issuance of commercial paper and short-term debt, and $5.0
billion from the issuance of convertible securities and warrants to Microsoft
Corporation (Microsoft). Significant uses of cash were $3.9 billion for the
repurchase of AT&T common stock, $2.8 billion to retire long-term debt, and $2.7
billion to pay dividends on common stock. In 1998, cash used in financing
activities was largely attributable to the pay down of commercial paper and
debt, and the repurchase of approximately $3 billion of AT&T common stock. The
AT&T common stock repurchased in 1998 and 1999 was reissued in connection with
the Broadband acquisition. Cash used in financing activities in 1997 was
primarily for the payment of dividends on common stock.


   28

AT&T has $4.6 billion of registered notes and warrants to purchase
notes available for public sale under a registration statement filed with the
Securities and Exchange Commission. AT&T may sell notes under this registration
statement based on market conditions. The board of directors recently authorized
us to increase our long-term borrowing capacity by $10 billion. This would bring
total notes available for public or private sale to $14.6 billion. Proceeds from
the potential sale of private or publicly-placed notes and warrants will be used
for funding investments in subsidiary companies, acquisitions of licenses,
assets or businesses and general corporate purposes. In addition, we will
receive funds from the initial public offering of AT&T Wireless tracking stock,
which is expected to take place in the first half of 2000.

In 2000, we expect cash generated from operations to be the primary source of
funding for our dividend requirements and capital expenditures. Since the
majority of debt maturing within one year is commercial paper and debt with an
original maturity of one year or less, we expect to fund repayments of these
with other short-term borrowings.

At December 31, 1999, we had a 364-day, $7 billion revolving-credit facility
with a consortium of 42 lenders. We also had additional 364-day, revolving-
credit facilities of $3 billion. These lines were for commercial paper back-up
and were unused at December 31, 1999. In addition, we had a $20 billion
commitment from multiple lenders with credit agreements to be finalized upon
consummation of the proposed merger with MediaOne. In February 2000, we
negotiated the syndication of a new 364-day, $10 billion facility. As a result,
the $3 billion credit facilities and the commitments associated with the $20
billion syndication terminated. Also in February 2000, the $7 billion
revolving-credit facility expired.

[Included in the 1999 Annual Report is a chart entitled "EBITDA." The chart
depicts EBITDA on an as reported basis and an operational basis, which
excludes restructuring and other charges, and certain gains and losses,
over the eight quarters ended December 31, 1999.]

EBITDA [earnings, including other income (expense), before interest, taxes,
depreciation and amortization] is a measure of our ability to generate cash flow
and should be considered in addition to, but not as a substitute for, other
measures of financial performance reported in accordance with generally accepted
accounting principles. EBITDA increased $4,877 million, or 36.4%, to $18,292
million in 1999 compared with 1998. EBITDA increased $2,088 million, or 18.4%,
to $13,415 million in 1998 compared with 1997. Excluding Broadband, AGNS,
restructuring and other charges, and certain gains and losses, EBITDA increased
24.5% to $18,873 million in 1999 from $15,159 million in 1998. The increase was
primarily due to increased revenue and an improving cost structure. Excluding
restructuring and other charges, and certain gains and losses, EBITDA increased
33.2% in 1998 compared with 1997, primarily as a result of our cost-reduction
efforts coupled with higher revenue.


   29

RISK MANAGEMENT
We are exposed to market risk from changes in interest and foreign exchange
rates, as well as changes in equity prices associated with affiliate companies.
On a limited basis, we use certain derivative financial instruments, including
interest rate swaps, options, forwards, equity hedges and other derivative
contracts, to manage these risks. We do not use financial instruments for
trading or speculative purposes. All financial instruments are used in
accordance with board-approved policies.

We use interest rate swaps to manage the impact of interest rate changes on
earnings and cash flows and also to lower our overall borrowing costs. We
monitor our interest rate risk on the basis of changes in fair value. Assuming a
10% downward shift in interest rates at December 31, 1999 and 1998, the fair
value of interest rate swaps and the underlying hedged debt would have changed
by $3 million in both periods. Assuming a 10% downward shift in interest rates
at December 31, 1999 and 1998, the fair value of unhedged debt would have
increased by $938 million and $290 million, respectively.

We use forward and option contracts to reduce our exposure to the risk of
adverse changes in currency exchange rates. We are subject to foreign exchange
risk related to reimbursements to foreign telephone companies for their portion
of the revenue billed by AT&T for calls placed in the United States to a foreign
country. In addition, we are also subject to foreign exchange risk related to
other foreign-currency-denominated transactions. As of December 31, 1999, we had
a net unrealized loss on forward contracts of $27 million. As of December 31,
1998, we had a net unrealized gain on forward contracts of $9 million.
Unrealized gains and losses are calculated based on the difference between the
contract rate and the rate available to terminate the contracts. We monitor our
foreign exchange rate risk on the basis of changes in fair value. Assuming a 10%
appreciation in the U.S. dollar at December 31, 1999 and 1998, the fair value of
these contracts would have resulted in additional unrealized losses of $29
million and $20 million, respectively. Because these contracts are entered into
for hedging purposes, we believe that these losses would be largely offset by
gains on the underlying firmly committed or anticipated transactions.

We use equity hedges to manage our exposure to changes in equity prices
associated with stock appreciation rights of affiliated companies. Assuming a
10% decrease in equity prices of affiliated companies, the fair value of the
equity hedge would have decreased by $81 million. Because these contracts are
entered into for hedging purposes, we believe that the decrease in fair value
would be largely offset by gains on the underlying transaction.

The changes in fair value, as discussed above, assume the occurrence of certain
adverse market conditions. They do not consider the potential effect of
favorable changes in market factors and do not represent projected losses in
fair value that we expect to incur. Future impacts would be based on actual
developments in global financial markets. We do not foresee any significant
changes in the strategies used to manage interest rate risk, foreign currency
rate risk or equity price risk in the near future.


   30

EURO CONVERSION
On January 1, 1999, certain members of the European Union established fixed
conversion rates between their existing currencies and the European Union's
currency (Euro). The transition period is anticipated to extend through July 1,
2002. We have assessed the impact of the conversion on information- technology
systems, currency exchange rate risk, derivatives and other financial
instruments, continuity of material contracts as well as income tax and
accounting issues. To date, the conversion has not had, nor do we expect the
conversion during the transition period to have, a material effect on our
consolidated financial statements.

FINANCIAL CONDITION
At December 31,                              1999         1998
Dollars in millions
Total assets                              $169,406     $59,550
Total liabilities                           81,762      33,919
Total shareowners' equity                   78,927      25,522

Total assets increased $109,856 million, or 184.5%, at December 31, 1999,
primarily due to the impact of the Broadband acquisition, which resulted in
franchise costs; increased other investments including Cablevision, Excite@Home
and Lenfest Communications, Inc.; and the addition of property, plant and
equipment. Property, plant and equipment also increased due to capital
expenditures made during the year. In addition, assets increased due to Liberty
Media Group, which is recorded as an equity investment, and the AGNS
acquisition, which resulted in increased goodwill. These increases were
partially offset by a net decrease in cash, which was used to partially fund
capital expenditures, the common stock repurchases and the purchase of AGNS.

[Included in the 1999 Annual Report is a bar graph entitled "Capital Investments
Support Growth Opportunities." The graph depicts our capital investments for
1998 and 1999 for data/IP, wireless, broadband, local and long distance.]

Total liabilities at December 31, 1999, increased $47,843 million, or 141.0%,
primarily due to the impact of the Broadband acquisition, particularly debt and
deferred income taxes. In addition, we issued $8.5 billion of long-term debt and
$10.2 billion of short-term debt to fund acquisitions, capital expenditures and
the common stock repurchases. These increases were partially offset by the
retirement of $2.8 billion of long-term debt.

At the time of the acquisition, TCI had mandatorily redeemable preferred
securities that were issued through a subsidiary trust and preferred stock
outstanding. In June 1999, Microsoft Corporation purchased $5.0 billion of
quarterly convertible income preferred securities, which AT&T issued through a
subsidiary trust. These securities are reflected between liabilities and
shareowners' equity in the balance sheet. The preferred stock is recorded within
minority interest in equity of consolidated subsidiaries.



   31

Total shareowners' equity was $78,927 million at December 31, 1999. Total
shareowners' equity includes the equity attributable to both AT&T common stock
and Liberty Media tracking stock. The AT&T common stock equity at December 31,
1999, was $40,406 million, an increase of 58.3% from $25,522 million at December
31, 1998. This increase was primarily due to the issuance of shares related to
Broadband, partially offset by shares repurchased. Liberty Media Group equity at
December 31, 1999, was $38,521 million.

The ratio of total debt to total AT&T Group capital (debt divided by debt plus
equity of AT&T Group) at December 31, 1999, was 44.3% compared with 20.9% at
December 31, 1998. For purposes of this calculation, debt included $1.6 billion
of redeemable preferred securities issued through a subsidiary trust of TCI, and
equity included $5.0 billion of convertible preferred securities issued through
a subsidiary trust of AT&T. The increase was primarily due to higher debt
partially offset by a higher equity base.

NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Among other provisions, it requires that
entities recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
Gains and losses resulting from changes in the fair values of those derivatives
would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. The effective date for this standard was delayed
via the issuance of SFAS No. 137. The effective date for SFAS No. 133 is now for
fiscal years beginning after June 15, 2000, though earlier adoption is
encouraged and retroactive application is prohibited. For AT&T, this means that
the standard must be adopted no later than January 1, 2001. Based on the types
of derivatives we currently have, we do not expect the adoption of this standard
will have a material impact on AT&T's results of operations, financial position
or cash flows.

In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements," which must be adopted by March
31, 2000. We are currently assessing the impact of SAB 101 on our results of
operations.

YEAR 2000
AT&T's Year 2000 (Y2K) program addressed the use of two-digit, instead
of four-digit, year fields in computer systems. If computer systems could not
distinguish between the year 1900 and the year 2000, system failures or other
computer errors could have resulted. The potential for failures and errors
spanned all aspects of our business, including computer systems, voice and data
networks, and building infrastructures. We also needed to address our
interdependencies with our suppliers, connecting carriers and major customers,
all of whom faced the same concern. All computer systems were tested and
repaired as of December 31, 1999, and no major Y2K-related problems were


   32

reported as the calendars rolled to January 1, 2000. The cost of AT&T's Y2K
program was $725 million since inception in 1997. Total costs for 1999 were $275
million, of which approximately $45 million represented capital spending for
upgrading and replacing noncompliant computer systems. Less than half of the
1999 costs represent internal information technology resources that were
redeployed from other projects and are expected to return to these projects in
2000.

SUBSEQUENT EVENTS
On January 5, 2000, AT&T and British Telecommunications plc (BT) announced
financial closure of Concert. Concert began operations in 2000 as the leading
global telecommunications company serving multinational business customers,
international carriers and Internet service providers worldwide.

On January 18, 2000, we sold our ownership in Lenfest Communications, Inc.
(Lenfest), to a subsidiary of Comcast. In connection with the sale, we received
48,555,280 shares of Comcast Class Special A common stock, which had a value of
$2,510 million at the date of disposition.

On February 3, 2000, a registration statement was filed with the SEC for an
initial public offering of AT&T Wireless Group tracking stock. The new tracking
stock will provide current shareowners and future investors with a security tied
directly to the economic performance of AT&T's Wireless business. AT&T Wireless
Group will include voice and data mobility, fixed wireless and certain
international wireless investments. At a special shareowner meeting in March, a
proposal to create the tracking stock was approved. We intend to conduct an
initial public offering of AT&T Wireless Group tracking stock in the second
quarter. A distribution, which may be in the form of a dividend, exchange offer,
or a combination of these, of the AT&T Wireless Group tracking stock is intended
to be made to shareowners of AT&T common stock sometime thereafter. Holders of
Liberty Media Group tracking stock will not be entitled to this distribution.

In February 2000, AT&T entered into an agreement with TeleCorp PCS, Inc., to
swap certain licenses that we currently own in the midwestern United States as
well as cash of approximately $100 million in exchange for licenses in several
New England markets. The transaction is expected to close in the fourth quarter
of 2000.

LEGISLATIVE AND REGULATORY DEVELOPMENTS
The Telecommunications Act of 1996 was designed to foster local exchange
competition by establishing a regulatory framework to govern new competitive
entry in local and long distance telecommunications services. The
Telecommunications Act also permits Regional Bell Operating Companies (RBOCs) to
provide interexchange services originating in any state in its region after
demonstrating to the FCC that such provision is in the public interest and
satisfying the conditions for developing local competition established by the
Telecommunications Act.


   33

A number of court decisions in 1997 severely restricted implementation of the
Telecommunications Act and delayed local service competition. Recent rulings,
however, have upheld the Telecommunications Act. Despite these
favorable rulings, there can be no assurance that the prices and other
conditions established in each state will provide for effective local service
entry and competition or provide AT&T with new market opportunities.

In July 1997, the United States Court of Appeals for the Eighth Circuit vacated
the pricing rules that the FCC had adopted to implement the sections of the
local competition provisions of the Telecommunications Act applicable to
interconnection with local exchange carrier (LEC) networks and the purchase of
unbundled network elements and wholesale services from LECs. In October 1997,
the Eighth Circuit vacated an FCC Rule that had prohibited incumbent LECs from
separating network elements that are combined in the LECs' network, except at
the request of the competitor purchasing the elements. These decisions increased
the difficulty and costs of providing competitive local service through the use
of unbundled network elements purchased from the incumbent LECs.

On December 31, 1997, the U.S. District Court for the Northern District of Texas
issued a memorandum opinion and order holding that the Telecommunications Act's
restrictions on the provision of in-region, interLATA service by the RBOCs are
unconstitutional. AT&T and other carriers (collectively, "intervenors") filed an
appeal with the United States Court of Appeals for the Fifth Circuit. On
February 11, 1998, the District Court suspended the effectiveness of its
December 31 memorandum opinion and order pending appeal.

On September 4, 1998, the United States Court of Appeals for the Fifth Circuit
rejected arguments that the Telecommunications Act is unconstitutional, and
reversed the district court's contrary opinion. On December 22, 1998, the United
States Court of Appeals for the District of Columbia Circuit rejected a similar
challenge to the constitutionality of the Telecommunications Act. On January 19,
1999, the United States Supreme Court denied petitions filed by the RBOCs to
review the decision of the Fifth Circuit Court of Appeals.

On January 25, 1999, the United States Supreme Court issued a decision reversing
the Eighth Circuit Court of Appeals' holding that the FCC lacks jurisdiction to
establish pricing rules applicable to interconnection and the purchase of
unbundled network elements, and the Court of Appeals' decision to vacate the
FCC's rule prohibiting incumbent LECs from separating network elements that are
combined in the LECs' networks. The effect of the Supreme Court's decision is to
reinstate the FCC's rules governing pricing and the separation of unbundled
network elements. The Eighth Circuit Court of Appeals will now consider the
incumbent LECs' claims that although the FCC has jurisdiction to adopt pricing
rules, the rules it adopted are not consistent with the applicable provisions of
the Act. The Supreme Court also vacated the FCC's rule identifying and defining
the unbundled network elements that incumbent LECs are required to make
available to new entrants, and directed the FCC to re-examine this issue in
light of the standards mandated by the Telecommunications Act.


   34




In response to the Supreme Court's decision, the FCC completed its
re-examination and released an order identifying and defining the unbundled
network elements that incumbent LECs are required to make available to new
entrants. That order readopted the original list of elements, with certain
exceptions. An association of incumbent LECs has appealed the FCC's order to the
United States Court of Appeals for the District of Columbia Circuit, and asked
the Court to hear the appeal on an expedited basis. A number of parties,
including AT&T and other incumbent LECs, have petitioned the FCC to reconsider
and/or clarify its order. The FCC has moved to hold the appeal in abeyance
pending its disposition of the reconsideration petitions.

In view of the proceedings pending before the Eighth Circuit, D.C. Circuit, FCC
and state public utility commissions, there can be no assurance that the prices
and other conditions established in each state will provide for effective local
service entry and competition or provide AT&T with new market opportunities.

In December 1999, Bell Atlantic obtained approval to offer long distance
telecommunications service in New York State, the first time an RBOC had
received this approval under the Telecommunications Act. Bell Atlantic began
offering combined local and long distance service in January 2000.

In January 2000, SBC Communications, Inc., filed with the FCC an application for
authorization to offer long distance telecommunications service in Texas. Under
the Telecommunications Act, the FCC is required to issue a decision on the
application by April 2000.

COMPETITION
AT&T currently faces significant competition and expects that the level of
competition will continue to increase. The Telecommunications Act permits RBOCs
to provide interLATA interexchange services after demonstrating to the FCC that
such provision is in the public interest and satisfying the conditions for
developing local competition established by the Telecommunications Act. The
RBOCs have petitioned the FCC for permission to provide interLATA interexchange
services in one or more states within their home markets; to date the FCC has
granted only one petition. In December 1999, Bell Atlantic became the first RBOC
to obtain FCC approval to provide long distance in a state within its home
territory, in New York. In January 2000, SBC Communications, Inc., applied to
the FCC for authorization to provide long distance service in Texas; by law, the
FCC is required to rule on the application in April 2000.

To the extent that the RBOCs obtain in-region interLATA authority before the
Telecommunications Act's checklist of conditions has been fully or
satisfactorily implemented and adequate facilities-based local exchange
competition exists, there is a substantial risk that AT&T and other
interexchange service providers would be at a disadvantage to the RBOCs in
providing both local service and combined service packages. Because it is widely
anticipated that substantial numbers of long distance customers will seek to
purchase local, interexchange and other services from a single carrier as part
of a combined-or full-service package, any competitive disadvantage, inability
to profitably provide local service at competitive rates, or delays or
limitations in providing local service or combined-service packages is likely to
adversely affect AT&T's future revenue and earnings. In addition, the
simultaneous entrance of numerous new competitors for interexchange and
combined-service packages is likely to adversely affect AT&T's long distance
revenue and could adversely affect earnings.





   35




SIX-YEAR SUMMARY OF SELECTED FINANCIAL DATA (UNAUDITED)
AT&T Corp. and Subsidiaries
Dollars in millions (except per share amounts)



                                                 1999(1),(2)   1998(2)        1997          1996           1995(2)         1994
                                                                                                       
RESULTS OF OPERATIONS
Revenue                                          $62,391       $53,223       $51,577       $50,688        $48,449        $46,063
Operating income                                  10,859         7,487         6,836         8,709          5,169          7,393
Income from continuing operations                  3,428         5,235         4,249         5,458          2,981          4,230

EARNINGS PER COMMON SHARE
  AT&T Group income
  from continuing operations:
  Basic(2)                                       $  1.77       $  1.96       $  1.59        $ 2.07        $  1.15        $  1.65
  Diluted(2)                                        1.74          1.94          1.59          2.07           1.14           1.64
Dividends declared per AT&T Group
  common share                                      0.88          0.88          0.88          0.88           0.88           0.88
Liberty Media Group loss(3):
  Basic and diluted                                 1.61             -             -             -              -              -

ASSETS AND CAPITAL
Property, plant and equipment, net               $39,618       $26,903       $24,203        $20,803       $16,453        $14,721
Total assets-continuing operations               169,406        59,550        59,994         55,838        54,365         47,926
Total assets                                     169,406        59,550        61,095         57,348        62,864         57,817
Long-term debt                                    21,591         5,556         7,857          8,878         8,913          9,138
Total debt                                        34,224         6,727        11,942         11,351        21,081         18,720
Mandatorily redeemable preferred securities        1,626             -             -              -             -              -
Shareowners' equity                               78,927        25,522        23,678         21,092        17,400         18,100
AT&T Group book value per common share             12.64          9.70          8.82           7.92          6.64           7.02
AT&T Group debt ratio(4)                           44.3%         20.9%         33.5%          35.0%         54.8%          50.8%
Gross capital expenditures                        13,511         7,981         7,714          7,084         4,659          3,504

OTHER INFORMATION
Operating income as a percent of revenue            17.4%         14.1%         13.3%         17.2%         10.7%          16.1%
Income from continuing operations
  attributable to AT&T Group as a
  percent of revenue                                 8.7%          9.8%          8.2%         10.8%          6.2%           9.2%
Return on average common equity-AT&T Group          15.2%         25.3%         19.7%         27.1%          0.4%          29.5%
EBIT(5)                                           $10,358        $8,734        $7,279        $9,114        $5,439         $7,450
EBITDA(5)                                          18,292        13,415        11,327        11,995         8,112          9,914
Employees-AT&T Group continuing operations        147,800       107,800       130,800       128,700       126,100        116,400
Data at year-end:
  AT&T stock price per share(6)                     50.81         50.50         40.87         27.54         29.60          22.97
  Liberty Media Group A stock price per share       56.81             -             -             -             -             -
  Liberty Media Group B stock price per share       68.75             -             -             -             -             -


1. In connection with the Tele-Communications, Inc. merger, which was completed
   March 9, 1999, AT&T issued separate tracking stock for Liberty Media Group
   (LMG). LMG is accounted for as an equity investment. AT&T Group refers to
   results excluding LMG.
2. Income from continuing operations attributable to AT&T Group included a net
   expense consisting of restructuring and other charges, and certain gains and
   losses of $1.5 billion, $1.1 billion and $2.0 billion in 1999, 1998 and 1995,
   respectively.
3. No dividends have been declared for LMG tracking stock.
4. Debt ratio reflects debt as a percent of total capital (debt plus equity). In
   1999 debt included $1.6 billion of mandatorily redeemable preferred
   securities and equity included $5.0 billion of convertible securities.
5. EBIT [earnings, including other income (expense), before interest and taxes]
   and EBITDA (EBIT plus depreciation and amortization) for 1999 included $2.1
   billion and $1.7 billion, respectively, of a net expense consisting of
   restructuring and other charges, and certain gains and losses. EBIT and
   EBITDA included $1.7 billion and $3.0 billion of a net expense consisting of
   restructuring and other charges, and certain gains and losses for 1998 and
   1995, respectively.
6. AT&T Group earnings per share amounts and stock prices have been restated to
   reflect the April 1999 three-for-two stock split.



   36






REPORT OF MANAGEMENT
Management is responsible for the preparation, integrity and objectivity of the
consolidated financial statements and all other financial information included
in this report. Management is also responsible for maintaining a system of
internal controls as a fundamental requirement for the operational and financial
integrity of results. The financial statements, which reflect the consolidated
accounts of AT&T Corp. and subsidiaries (AT&T) and other financial information
shown, were prepared in conformity with generally accepted accounting
principles. Estimates included in the financial statements were based on
judgments of qualified personnel. To maintain its system of internal controls,
management carefully selects key personnel and establishes the organizational
structure to provide an appropriate division of responsibility. We believe it is
essential to conduct business affairs in accordance with the highest ethical
standards as set forth in the AT&T Code of Conduct. These guidelines and other
informational programs are designed and used to ensure that policies, standards
and managerial authorities are understood throughout the organization. Our
internal auditors monitor compliance with the system of internal controls by
means of an annual plan of internal audits. On an ongoing basis, the system of
internal controls is reviewed, evaluated and revised as necessary in light of
the results of constant management oversight, internal and independent audits,
changes in AT&T's business and other conditions. Management believes that the
system of internal controls, taken as a whole, provides reasonable assurance
that (1) financial records are adequate and can be relied upon to permit the
preparation of financial statements in conformity with generally accepted
accounting principles, and (2) access to assets occurs only in accordance with
management's authorizations.
  The Audit Committee of the Board of Directors, which is composed of directors
who are not employees, meets periodically with management, the internal auditors
and the independent accountants to review the manner in which these groups of
individuals are performing their responsibilities and to carry out the Audit
Committee's oversight role with respect to auditing, internal controls and
financial reporting matters. Periodically, both the internal auditors and the
independent accountants meet privately with the Audit Committee and have access
to its individual members at any time.
  The consolidated financial statements in this annual report have been audited
by PricewaterhouseCoopers LLP, Independent Accountants. Their audits were
conducted in accordance with generally accepted auditing standards and include
an assessment of the internal control structure and selective tests of
transactions. Their report follows.



C. Michael Armstrong                      Charles H. Noski
Chairman of the Board,                    Senior Executive Vice President,
Chief Executive Officer                   Chief Financial Officer



   37




REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareowners of AT&T Corp.:
In our opinion, based on our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of income, changes in shareowners' equity and of cash flows present fairly, in
all material respects, the financial position of AT&T Corp. and its subsidiaries
(AT&T) at December 31, 1999 and 1998, and the results of their operations and
their cash flows for each of the three years ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of AT&T's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of Liberty Media Group, an
equity method investee, which was acquired by AT&T on March 9, 1999. AT&T's
financial statements include an investment of $38,460 million as of December 31,
1999, and an equity method loss of $2,022 million, for the year ended December
31, 1999. Those statements were audited by other auditors whose report thereon
has been furnished to us, and our opinion expressed herein, insofar as it
relates to the amounts included for Liberty Media Group, as of and for the year
ended December 31, 1999, is based solely on the report of the other auditors. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits and the report of other auditors provide a reasonable
basis for the opinion expressed above.


PricewaterhouseCoopers LLP
March 9, 2000

   38



CONSOLIDATED STATEMENTS OF INCOME                   AT&T CORP. AND SUBSIDIARIES


                                                 For the Years Ended December 31,
Dollars in millions (except per share amounts)    1999          1998          1997
                                                                  
Revenue                                        $62,391       $53,223       $51,577

Operating Expenses
Access and other interconnection                14,686        15,328        16,350
Network and other costs of services             14,385        10,495        10,038
Selling, general and administrative             13,516        12,770        14,371
Depreciation and other amortization              6,138         4,378         3,728
Amortization of goodwill, franchise costs
 and other purchased intangibles                 1,301           251           254
Net restructuring and other charges              1,506         2,514             -
Total operating expenses                        51,532        45,736        44,741

Operating income                                10,859         7,487         6,836

Equity losses from Liberty Media Group           2,022             -             -
Other income(expense)                             (501)        1,247           443
Interest expense                                 1,651           427           307
Income from continuing operations before
  income taxes                                   6,685         8,307         6,972
Provision for income taxes                       3,257         3,072         2,723
Income from continuing operations                3,428         5,235         4,249

Discontinued Operations
Income from discontinued operations
  (net of taxes of $6 and $50)                       -            10           100
Gains on sales of discontinued operations
  (net of taxes of $799 and $43)                     -         1,290            66
Income before extraordinary loss                 3,428         6,535         4,415

Extraordinary loss (net of taxes of $80)             -           137             -

Net income                                     $ 3,428       $ 6,398       $ 4,415

Per AT&T common share - basic:
Income from continuing operations              $  1.77       $  1.96       $  1.59
Income from discontinued operations                  -             -          0.03
Gains on sales of discontinued operations            -          0.48          0.03
Extraordinary loss                                   -          0.05             -
AT&T Group earnings                            $  1.77       $  2.39       $  1.65

Per AT&T common share - diluted:
Income from continuing operations              $  1.74       $  1.94       $  1.59
Income from discontinued operations                  -             -          0.03
Gains on sales of discontinued operations            -          0.48          0.03
Extraordinary loss                                   -          0.05             -
AT&T Group earnings                            $  1.74       $  2.37       $  1.65

Liberty Media Group loss per share:
 Basic and diluted                             $  1.61       $     -       $     -



The notes are an integral part of the consolidated financial statements.


   39




CONSOLIDATED BALANCE SHEETS                          AT&T CORP. AND SUBSIDIARIES
                                                            At December 31,
Dollars in millions                                         1999      1998

ASSETS
Cash and cash equivalents                               $  1,024   $ 3,160

Receivables, less allowances of $1,507 and $1,060         10,453     9,055

Deferred income taxes                                      1,287     1,310

Other current assets                                       1,120       593

TOTAL CURRENT ASSETS                                      13,884    14,118

Property, plant and equipment, net                        39,618    26,903

Franchise costs, net of accumulated
  amortization of $697                                    32,693         -

Licensing costs, net of accumulated
  amortization of $1,491 and $1,266                        8,548     7,948

Goodwill, net of accumulated amortization
  of $363 and $226                                         7,445     2,205

Investment in Liberty Media Group and related
 receivables, net                                         38,460         -

Other investments                                         19,366     4,434

Prepaid pension costs                                      2,464     2,074

Other assets                                               6,928     1,868

TOTAL ASSETS                                            $169,406   $59,550

                                   (CONTINUED)


   40




CONSOLIDATED BALANCE SHEETS (CONTINUED)              AT&T CORP. AND SUBSIDIARIES
                                                            At December 31,
Dollars in millions                                         1999      1998

LIABILITIES
Accounts payable                                         $ 6,771   $ 6,226
Payroll and benefit-related liabilities                    2,651     1,986
Debt maturing within one year                             12,633     1,171
Dividends payable                                            703       581
Other current liabilities                                  5,449     5,478

TOTAL CURRENT LIABILITIES                                 28,207    15,442

Long-term debt                                            21,591     5,556
Long-term benefit-related liabilities                      3,964     4,255
Deferred income taxes                                     24,199     5,453
Other long-term liabilities and deferred credits           3,801     3,213

TOTAL LIABILITIES                                         81,762    33,919

Minority Interest in Equity of Consolidated
  Subsidiaries                                             2,391       109
Company-Obligated Convertible Quarterly Income
  Preferred Securities of Subsidiary Trust Holding
  Solely Subordinated Debt Securities of AT&T              4,700         -
Subsidiary-Obligated Mandatorily Redeemable Preferred
  Securities of Subsidiary Trusts Holding Solely
  Subordinated Debt Securities of an AT&T
  Subsidiary                                               1,626         -

SHAREOWNERS' EQUITY Common Stock:
 AT&T Common Stock, $1 par value, authorized
   6,000,000,000 shares; issued and outstanding
   3,196,436,757 shares (net of 287,866,419 treasury
   shares) at December 31, 1999, and 2,630,391,784
   shares (net of 80,222,341 treasury shares) at
   December 31, 1998                                       3,196     2,630
 Liberty Media Group Class A Tracking Stock, $1 par
   value, authorized 2,500,000,000 shares; issued
   and outstanding 1,156,778,730 shares at
   December 31, 1999                                      1,157         -
 Liberty Media Group Class B Tracking Stock, $1 par
   value, authorized 250,000,000 shares; issued
   and outstanding 108,421,114 shares at
   December 31, 1999                                        108         -
Additional paid-in capital                               60,792    15,195
Guaranteed ESOP obligation                                  (17)      (44)
Retained earnings                                         6,712     7,800
Accumulated other comprehensive income                    6,979       (59)

TOTAL SHAREOWNERS' EQUITY                                78,927    25,522

TOTAL LIABILITIES AND SHAREOWNERS' EQUITY              $169,406   $59,550


The notes are an integral part of the consolidated financial statements.



   41




CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
                                                    AT&T CORP. AND SUBSIDIARIES


                                                  For the Years Ended December 31,
Dollars in millions                           1999              1998                1997
                                                                       
AT&T Common Shares
  Balance at beginning of year              $2,630          $  2,684            $  2,662
  Shares issued (acquired), net:
    Under employee plans                         -                 2                   2
    For acquisitions                           566               (56)                 19
    Other                                        -                 -                   1
Balance at end of year                       3,196             2,630               2,684

Liberty Media Group Class A Tracking Stock
  Balance at beginning of year                   -                 -                   -
  Shares issued, net:
    For acquisitions                         1,140                 -                   -
    Other                                       17                 -                   -
Balance at end of year                       1,157                 -                   -

Liberty Media Group Class B Tracking Stock
  Balance at beginning of year                   -                 -                   -
  Shares issued (acquired), net:
    For acquisitions                           110                 -                   -
    Other                                       (2)                -                   -
Balance at end of year                         108                 -                   -

Additional Paid-In Capital
  Balance at beginning of year              15,195            17,121              16,624
  Shares issued (acquired), net:
    Under employee plans                       431                67                  (8)
    Under shareowner plans                       -                 -                   9
    For acquisitions                        43,675            (2,105)                117
    Other                                      339               112                 379
  Common stock warrants issued                 306                 -                   -
  Gain on issuance of common stock
    by affiliates                              667                 -                   -
  Other                                        179                 -                   -
Balance at end of year                      60,792            15,195              17,121

Guaranteed ESOP Obligation
  Balance at beginning of year                 (44)              (70)                (96)
  Amortization                                  27                26                  26
Balance at end of year                         (17)              (44)                (70)

Retained Earnings
  Balance at beginning of year               7,800             3,981               1,902
  Net income                                 3,428             6,398               4,415
  Dividends declared                        (2,807)           (2,230)             (2,145)
  Treasury shares issued at less
    than cost                               (1,709)             (370)               (187)
  Other changes                                  -                21                  (4)
Balance at end of year                       6,712             7,800               3,981



                                   (CONTINUED)


   42





CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY (CONTINUED)
                                                    AT&T CORP. AND SUBSIDIARIES


                                                  For the Years Ended December 31,
Dollars in millions                           1999              1998                1997
                                                                        
Accumulated Comprehensive Income
  Balance at beginning of year                 (59)              (38)                  -
  Other comprehensive income                 7,038               (21)                (38)
Balance at end of year                       6,979               (59)                (38)
Total Shareowners' Equity                  $78,927           $25,522             $23,678

Summary of Total Comprehensive Income:
Net income                                 $ 3,428            $6,398              $4,415
Other comprehensive income [net of
  taxes of $4,600, $(53) and $(24)]          7,038               (21)                (38)
Comprehensive Income                       $10,466            $6,377              $4,377


  AT&T accounts for treasury stock as retired stock, and as of December 31,
1999, had 288 million treasury shares of which 216 million shares were owned by
Tele-Communications, Inc., subsidiaries and 70 million shares related to the
purchase of AT&T shares previously owned by Liberty Media Group. We have 100
million authorized shares of preferred stock at $1 par value. No preferred stock
is currently issued or outstanding.

The notes are an integral part of the consolidated financial statements.


   43




CONSOLIDATED STATEMENTS OF CASH FLOWS                AT&T CORP. AND SUBSIDIARIES


                                                    For the Years Ended December 31,
Dollars in millions                                     1999       1998      1997
                                                                 
OPERATING ACTIVITIES
Net income                                          $  3,428   $  6,398   $ 4,415
Deduct: Income from discontinued operations                -         10       100
        Gains on sales of discontinued operations          -      1,290        66
Add:    Extraordinary loss on retirement of debt           -        137         -
Income from continuing operations                      3,428      5,235     4,249
Adjustments to reconcile net income to net cash
  provided by operating activities of continuing
  operations:
    Gains on sales of businesses and investments        (682)      (959)     (208)
    Net restructuring and other charges                1,209      2,362         -
    Depreciation and amortization                      7,439      4,629     3,982
    Provision for uncollectibles                       1,416      1,389     1,522
    Equity losses from Liberty Media Group             2,022          -         -
    Net losses (earnings) from other equity
      investments                                      1,155         68       (31)
    Increase in accounts receivable                   (2,891)    (1,577)   (1,034)
    Increase (decrease) in accounts payable              116       (467)      125
    Net change in other operating assets and
      liabilities                                     (1,180)         5      (832)
    Other adjustments for noncash items, net            (397)      (468)      728
NET CASH PROVIDED BY OPERATING ACTIVITIES OF
  CONTINUING OPERATIONS                               11,635     10,217     8,501

INVESTING ACTIVITIES
Capital expenditures and other additions             (14,306)    (7,817)   (7,604)
Proceeds from sale or disposal of property, plant
  and equipment                                          286        104       169
Decrease (increase) in other receivables                  17      6,403      (465)
Net acquisitions of licenses                              (6)       (97)     (435)
Sales of marketable securities                             -      2,003       479
Purchases of marketable securities                         -     (1,696)     (345)
Equity investment distributions and sales              1,875      1,516       583
Equity investment contributions and purchases         (8,121)    (1,281)     (484)
(Aquisitions) dispositions of businesses
  including cash acquired in acquisitions             (6,711)     4,507     1,507
Other investing activities, net                          (77)       (60)     (160)
NET CASH (USED IN) PROVIDED BY INVESTING
 ACTIVITIES OF CONTINUING OPERATIONS                 (27,043)     3,582    (6,755)


                                   (CONTINUED)


   44




CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)    AT&T CORP. AND SUBSIDIARIES


                                                    For the Years Ended December 31,
Dollars in millions                                     1999       1998      1997
                                                                 
FINANCING ACTIVITIES
Proceeds from long-term debt issuances                 8,396         17         -
Retirements of long-term debt                         (2,774)    (2,610)     (737)
Issuance of convertible securities                     4,638          -         -
Issuance of common shares                                  -         32       240
Net acquisition of treasury shares                    (4,624)    (3,321)      (69)
Dividends paid on common stock                        (2,712)    (2,187)   (2,142)
Distributions on trust preferred securities             (254)         -         -
Increase (decrease) in short-term borrowings, net     10,238     (3,033)    1,114
Other financing activities, net                          364         53        54
NET CASH PROVIDED BY (USED IN) FINANCING
  ACTIVITIES OF CONTINUING OPERATIONS                 13,272    (11,049)   (1,540)

Net cash provided by (used in) discontinued
  operations                                               -         92       (84)
Net (decrease) increase in cash and cash
  equivalents                                         (2,136)     2,842       122
Cash and cash equivalents at beginning of year         3,160        318       196
Cash and cash equivalents at end of year            $  1,024   $  3,160   $   318


The notes are an integral part of the consolidated financial statements.


   45




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AT&T CORP. AND SUBSIDIARIES (AT&T)
Dollars in millions unless otherwise noted (except per share amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION
The consolidated financial statements include all majority-owned and controlled
subsidiaries. Investments in majority-owned subsidiaries where control does not
exist and investments in which we exercise significant influence but do
not control (generally a 20% to 50% ownership interest) are accounted for under
the equity method of accounting. This represents the majority of our
investments. Investments in which we have less than a 20% ownership interest and
in which there is no significant influence are accounted for under the cost
method of accounting.

FOREIGN CURRENCY TRANSLATION
For operations outside the United States that prepare financial statements in
currencies other than the U.S. dollar, we translate income statement amounts at
average exchange rates for the year, and we translate assets and liabilities at
year-end exchange rates. We present these translation adjustments as a component
of accumulated other comprehensive income within shareowners' equity. Gains and
losses from foreign currency transactions are included in results of operations.

REVENUE RECOGNITION
We recognize long distance, local and wireless services revenue based upon
minutes of traffic processed or contracted fee schedules. Cable installation
revenue is recognized in the period the installation services are provided to
the extent of direct selling costs. Any remaining amount is deferred and
recognized over the estimated average period that customers are expected to
remain connected to the cable distribution systems. We recognize products and
other services revenue when the products are delivered and accepted by customers
and when services are provided in accordance with contract terms.

ADVERTISING AND PROMOTIONAL COSTS
We expense costs of advertising and promotions, including cash incentives used
to acquire customers, as incurred. Advertising and promotional expenses were
$1,804, $1,920 and $1,995 in 1999, 1998 and 1997, respectively.

INVESTMENT TAX CREDITS
We amortize investment tax credits as a reduction to the provision for income
taxes over the useful lives of the assets that produced the credits.

CASH EQUIVALENTS
We consider all highly liquid investments with original maturities of generally
three months or less to be cash equivalents.


   46




PROPERTY, PLANT AND EQUIPMENT
We state property, plant and equipment at cost and determine depreciation based
upon the assets' estimated useful lives using either the group or unit method.
The useful lives of communications and network equipment range from three to 15
years. The useful lives of other equipment ranges from three to seven years. The
useful lives of buildings and improvements range from 10 to 40 years. The group
method is used for most depreciable assets, including the majority of the
communications and network equipment. When we sell or retire assets depreciated
using the group method, the cost is deducted from property, plant and equipment
and charged to accumulated depreciation, without recognition of a gain or loss.
The unit method is primarily used for large computer systems and support assets.
When we sell assets that were depreciated using the unit method, we include the
related gains or losses in other income(expense).
  We use accelerated depreciation methods primarily for certain high-technology
computer-processing equipment and digital equipment used in the
telecommunications network, except for switching equipment placed in service
before 1989, where a straight-line method is used. All other plant and
equipment, including capitalized software, is depreciated on a straight-line
basis.

LICENSING COSTS
Licensing costs are costs incurred to develop or acquire cellular and personal
communications services (PCS) licenses. Generally, amortization begins with the
commencement of service to customers and is computed using the straight-line
method over periods of 35 or 40 years.

FRANCHISE COSTS
Franchise costs include the value attributed to agreements with local
authorities that allow access to homes in cable service areas acquired in
connection with a business combination. Such amounts are amortized on a
straight-line basis over 40 years.

GOODWILL
Goodwill is the excess of the purchase price over the fair value of net assets
acquired in business combinations accounted for as purchases. We amortize
goodwill on a straight-line basis over the periods benefited, ranging from five
to 40 years.

SOFTWARE CAPITALIZATION
In 1998, AT&T adopted Statement of Position (SOP) 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." In
accordance with this standard, certain direct development costs associated with
internal-use software are capitalized, including external direct costs of
material and services, and payroll costs for employees devoting time to the
software projects. These costs are included within other assets and are
amortized over a period not to exceed five years beginning when the asset is
substantially ready for use. Costs incurred during the preliminary project
stage, as well as maintenance and training costs, are expensed as incurred. AT&T
also capitalizes initial operating-system software costs and amortizes them over
the life of the associated hardware.
  AT&T also capitalizes costs associated with the development of application
software incurred from the time technological feasibility is established until
the software is ready to provide service to customers. These capitalized costs
are included in property, plant and equipment and are amortized over a useful
life not to exceed five years.


   47



VALUATION OF LONG-LIVED ASSETS
Long-lived assets such as property, plant and equipment, licensing costs,
franchise costs, goodwill, investments and software are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. If the total of the expected future undiscounted cash
flows is less than the carrying amount of the asset, a loss is recognized for
the difference between the fair value and carrying value of the asset.

DERIVATIVE FINANCIAL INSTRUMENTS
We use various financial instruments, including derivative financial
instruments, for purposes other than trading. We do not use derivative financial
instruments for speculative purposes. Derivatives, used as part of our risk-
management strategy, must be designated at inception as a hedge and measured for
effectiveness both at inception and on an ongoing basis. Gains and losses
related to qualifying hedges of foreign currency firm commitments are deferred
in current assets or liabilities and recognized as part of the underlying
transactions as they occur. All other foreign exchange contracts are marked to
market on a current basis and the respective gains or losses are recognized in
other income(expense). Interest rate differentials associated with interest rate
swaps used to hedge AT&T's debt obligations are recorded as an adjustment to
interest payable or receivable with the offset to interest expense over the life
of the swaps. If we terminate an interest rate swap agreement, the gain or loss
is deferred and amortized over the remaining life of the liability. Cash flows
from financial instruments are classified in the Consolidated Statements of Cash
Flows under the same categories as the cash flows from the related assets,
liabilities or anticipated transactions.

USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
revenue and expenses during the period reported. Actual results could differ
from those estimates. Estimates are used when accounting for certain items such
as long-term contracts, allowance for doubtful accounts, depreciation and
amortization, employee benefit plans, taxes, restructuring reserves and
contingencies.

CONCENTRATIONS
As of December 31, 1999, we do not have any significant concentration of
business transacted with a particular customer, supplier or lender that could,
if suddenly eliminated, severely impact our operations. We also do not have a
concentration of available sources of labor, services, franchises, or licenses
or other rights that could, if suddenly eliminated, severely impact our
operations. We invest our cash with several high-quality credit institutions.

ISSUANCE OF COMMON STOCK BY AFFILIATES
Changes in our proportionate share of the underlying equity of a subsidiary or
equity method investee, which result from the issuance of additional equity
securities by such entity, are recognized as increases or decreases to
additional paid-in capital in the Consolidated Statements of Shareowners'
Equity.

RECLASSIFICATIONS AND RESTATEMENTS
We reclassified certain amounts for previous years to conform to the 1999
presentation. In addition, we restated prior years' share and per share amounts
to reflect the April 1999 three-for-two split of AT&T's common stock.



   48



2. SUPPLEMENTARY FINANCIAL INFORMATION

SUPPLEMENTARY INCOME STATEMENT INFORMATION
For the Years Ended December 31,                 1999     1998     1997
INCLUDED IN SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
Research and development expenses            $    550  $   513   $  633

OTHER INCOME (EXPENSE)
Interest income                              $    147  $   322   $   59
Minority interests in earnings (losses) of
  subsidiaries                                    (23)      34      (12)
Distributions on trust preferred securities      (254)       -        -
Net (earnings) losses from equity              (1,155)     (68)      31
investments
Officers' life insurance                           71       63       68
Gains on sales of businesses and investments      682      959      208
Miscellaneous, net                                 31      (63)      89
Total other income (expense)                 $   (501) $ 1,247   $  443

DEDUCTED FROM INTEREST EXPENSE
Capitalized interest                         $    143  $   197   $  254

SUPPLEMENTARY BALANCE SHEET INFORMATION
At December 31,                                  1999     1998
PROPERTY, PLANT AND EQUIPMENT
Communications, network and other equipment  $ 60,985 $ 44,806
Buildings and improvements                      8,104    7,098
Land and improvements                             586      373
Total property, plant and equipment            69,675   52,277
Accumulated depreciation                      (30,057) (25,374)
Property, plant and equipment, net           $ 39,618 $ 26,903

SUPPLEMENTARY SHAREOWNERS' EQUITY INFORMATION
For the Years Ended December 31,                 1999     1998     1997
Net foreign currency translation adjustment
  [net of taxes of $87, $(3),$(18)]            $  148  $    (5)  $  (20)
Net revaluation of investments [net of
  taxes of $4,506, $(35), $(6)]                 6,878      (25)      (4)
Net minimum pension liability adjustment
  [net of taxes of $7, $(15), $0]                  12        9      (14)
Other comprehensive income                   $  7,038  $   (21)  $  (38)

In 1999, other comprehensive income included Liberty Media Group's foreign
currency translation adjustments totaling $60, net of applicable taxes, and
revaluation of Liberty Media Group's available-for-sale securities totaling
$6,497, net of applicable taxes.

SUPPLEMENTARY CASH FLOW INFORMATION
For the Years Ended December 31,                 1999     1998     1997
Interest payments net of
  amounts capitalized                        $  1,311  $   422   $  250
Income tax payments                             3,906    2,881    2,416



   49



3. MERGER WITH TELE-COMMUNICATIONS, INC. (TCI)

  The merger with TCI, renamed AT&T Broadband (Broadband), was completed on
March 9, 1999, in an all-stock transaction valued at approximately $52 billion.
Each share of TCI Group Series A common stock was converted into 1.16355 shares
of AT&T common stock, and each share of TCI Group Series B common stock was
converted into 1.27995 shares of AT&T common stock. AT&T issued approximately
664 million shares of AT&T common stock in the transaction, of which
approximately 149 million were treasury shares. The total shares had an
aggregate market value of approximately $27 billion. Certain subsidiaries of TCI
held TCI Group Series A common stock, which was converted into 216 million
shares of AT&T common stock. These subsidiaries continue to hold these shares,
which are reflected as treasury stock in the accompanying Consolidated Balance
Sheet at December 31, 1999. In addition, TCI simultaneously combined its Liberty
Media Group programming business with its TCI Ventures Group technology
investments business, forming Liberty Media Group (LMG). In connection with the
closing, AT&T issued a separate tracking stock in exchange for the TCI Liberty
Media Group and TCI Ventures Group tracking shares previously outstanding. We
issued 1,140 million shares of Liberty Media Group Class A tracking stock
(including 60 million shares related to the conversion of convertible notes) and
110 million shares of Liberty Media Group Class B tracking stock. The aggregate
market value of shares issued in conjunction with the merger was approximately
$23 billion. The tracking stock is designed to reflect the separate economic
performance of LMG. AT&T does not have a controlling financial interest for
financial accounting purposes in LMG; therefore, our investment in LMG has been
reflected as an investment accounted for under the equity method in the
accompanying consolidated financial statements. The amounts attributable to LMG
are reflected as separate line items "Equity losses from Liberty Media Group"
and "Investment in Liberty Media Group and related receivables, net," in the
accompanying consolidated financial statements. As a separate tracking stock,
all of the earnings or losses related to LMG are excluded from the earnings
available to the holders of AT&T common stock, referred to as AT&T Group.
  In general, the holders of shares of Liberty Media Group Class A common stock
and Liberty Media Group Class B common stock will vote together as a single
class with the holders of shares of AT&T common stock on all matters presented
to such stockholders. Each share of Liberty Media Group Class A common stock is
entitled to three-fortieths of a vote, and each share of Liberty Media
Group Class B common stock is entitled to three-fourths of a vote. The AT&T
common stock continues to have one vote per share.
  The merger was accounted for under the purchase method of accounting and,
accordingly, the results of Broadband have been included with the financial
results of AT&T since the date of acquisition. The operating results of
Broadband have been included in the accompanying consolidated financial
statements at their preliminary fair value since March 1, 1999, the deemed
effective date of acquisition for accounting purposes. The impact of the results
from March 1, - March 9, 1999, were deemed immaterial to our consolidated
results. Periods prior to the merger were not restated to include the results of
Broadband. The $52 billion aggregate value assigned to Broadband's net assets
was composed of AT&T common stock of approximately $27 billion, Liberty Media
Group tracking stock of approximately $23 billion, and assumption of convertible
notes and preferred stock of approximately $2 billion.



   50



  Approximately $19 billion of the purchase price of $52 billion was attributed
to franchise costs and is being amortized on a straight-line basis over 40
years. Franchise costs represent the value attributable to the agreements with
local franchise authorities that allow access to homes in our broadband service
areas. Pursuant to Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes," AT&T recorded an approximate $12 billion deferred
tax liability in connection with this franchise intangible, which is also
included in franchise costs. We do not expect that this deferred tax liability
will ever be paid. This deferred tax liability is being amortized on a
straight-line basis over 40 years and is included in the provision for income
taxes. Also included in the $52 billion purchase price was approximately $11
billion related to nonconsolidated investments, approximately $5 billion related
to property, plant and equipment and approximately $11 billion of Broadband
long-term debt. In addition, our investment in LMG was recorded at approximately
$34 billion, including approximately $11 billion of goodwill that is being
amortized on a straight-line basis over 20 years as a component of "Equity
losses from Liberty Media Group."
  We may make additional refinements to the allocation of the purchase price in
the first quarter of 2000 as the related appraisals of certain assets and
liabilities are finalized.

  Following is a summary of the pro forma results of AT&T as if the merger had
closed effective January 1, 1998:
                                             (Unaudited)
Shares in millions
For the Years Ended December 31,             1999      1998
Revenue                                   $63,332   $59,426
Income from continuing operations           2,856     3,829
Net income                                  2,856     4,992
Weighted-average AT&T Group common shares   3,181     3,146
Weighted-average AT&T Group common shares
  and potential common shares               3,299     3,251
Weighted-average Liberty Media Group
 Shares                                     1,259     1,190
Basic earnings per AT&T common share:
  Income from continuing operations       $  1.60   $  1.31
  AT&T Group earnings                     $  1.60   $  1.68
Diluted earnings per AT&T common share:
  Income from continuing operations       $  1.55   $  1.27
  AT&T Group earnings                     $  1.55   $  1.63
Liberty Media Group loss per share:
  Basic and diluted                       $  1.78   $  0.25

Pro forma data may not be indicative of the results that would have been
obtained had these events actually occurred at the beginning of the periods
presented, nor does it intend to be a projection of future results.



   51



4. OTHER MERGERS, ACQUISITIONS, VENTURES, DISPOSITIONS AND DISCONTINUED
   OPERATIONS

ACC EUROPE
On November 5, 1999, AT&T sold ACC Corp. (ACC) in Europe, including ACC's
principal operations in the United Kingdom as well as ACC's operating companies
in France, Germany and Italy, to WORLDxCHANGE Communications. We were required
to dispose of this investment pursuant to a government mandate since it would
have competed directly with Concert, our global venture with British
Telecommunications plc (BT). The transaction resulted in a pretax loss of $179.

MEDIAONE GROUP, INC.
On October 21, 1999, shareholders of MediaOne Group, Inc. (MediaOne), voted in
favor of the proposed merger between AT&T and MediaOne, pursuant to a definitive
merger agreement entered into on May 6, 1999. Under the agreement, each MediaOne
shareholder is entitled to elect to receive either cash or AT&T stock in
exchange for their MediaOne shares, subject to the limitation that the aggregate
consideration will consist of $30.85 per share in cash plus 0.95 of a share of
AT&T stock for every MediaOne share. In addition, the cash portion of the AT&T
offer will be increased to offset up to a 10% decline in AT&T's closing stock
price of $57 per share on April 21, 1999, the date the offer was extended. This
will maintain a value of $85 per share for every MediaOne share, provided AT&T's
stock trades between $57 per share and $51.30 per share. The additional amount
of cash that may be received is limited to $5.42 per share. AT&T estimates that
we will issue approximately 600 million shares in the transaction. The merger,
which remains subject to regulatory and other approvals, is expected to close in
the second quarter of 2000. Comcast Corporation (Comcast) received a $1.5
billion breakup fee in conjunction with the termination of MediaOne's previous
merger agreement with Comcast. MediaOne received the funds to pay the break-up
fee in the form of a note payable to AT&T.

COX COMMUNICATIONS, INC.
On July 6, 1999, AT&T and Cox Communications, Inc. (Cox), signed an agreement
whereby AT&T would redeem approximately 50.3 million shares of AT&T common stock
held by Cox in exchange for cable television systems serving approximately
312,000 customers, our interest in certain investments and approximately $750 in
other consideration, including cash. Based on the closing price of AT&T's stock
on July 6, 1999, the transaction is valued at approximately $2.8 billion. The
transaction is subject to receipt of necessary government and regulatory
approvals and is expected to close by the end of the first quarter of 2000.

COMCAST CORPORATION
On May 4, 1999, AT&T and Comcast announced an agreement to exchange various
cable systems to improve each company's geographic coverage by better clustering
its systems. The agreement will result in a net addition to Comcast of
approximately 750,000 subscribers. Because Comcast will receive more subscribers
than it is contributing in the exchange, it will pay AT&T consideration having a
value of approximately $4,500 per added subscriber for a total value of $3.0
billion to $3.5 billion. Also, Comcast has agreed to offer AT&T-branded
telephony in all of its markets, subject to certain conditions. The foregoing
agreements are subject to completion of the proposed AT&T/MediaOne merger and
other regulatory and legal approvals.


   52



IBM GLOBAL NETWORK
On April 30, 1999, AT&T completed its acquisition of the IBM Global Network
business (renamed AT&T Global Network Services or AGNS) and its assets in the
United States. The non-U.S. acquisitions occurred in phases throughout 1999 as
legal and regulatory requirements were met in each of the countries in which the
business operates. Under the terms of the agreement, AT&T acquired the global
network of IBM, and the two companies entered into outsourcing agreements with
each other. IBM is outsourcing a significant portion of its global networking
needs to AT&T, and AT&T is outsourcing certain applications-processing and
data-center-management operations to IBM. As of December 31, 1999, a total of 71
countries have been transferred from IBM to AT&T, representing more than 99% of
the contract revenue. We are awaiting regulatory approval in the remaining
countries and expect to be providing service in a total of 81 countries by the
end of the first quarter of 2000. The acquisition has been accounted for as a
purchase. Accordingly, the operating results of AGNS have been included in the
accompanying consolidated financial statements since the date of acquisition.
The pro forma impact of AGNS on historical AT&T results is not material.

TELEPORT COMMUNICATIONS GROUP INC.
On July 23, 1998, AT&T completed the merger with Teleport Communications Group
Inc. (TCG) pursuant to an agreement and plan of merger dated January 8, 1998.
Each share of TCG common stock was exchanged for 1.4145 shares of AT&T common
stock, resulting in the issuance of 272.4 million shares in the transaction. The
merger was accounted for as a pooling of interests, and accordingly, AT&T's
results of operations, financial position and cash flows were restated to
reflect the merger. In 1998, we recognized $85 of merger-related expenses.
Premerger TCG revenue was $455 and $494, and net losses were $118 and $223, for
the six months ended June 30, 1998, and for the year ended December 31, 1997,
respectively. Elimination entries between AT&T and TCG were not material. On
April 22, 1998, TCG purchased ACC for an aggregate value of approximately
$1,100, including approximately $700 in goodwill.

OTHER DISPOSITIONS
On March 3, 1998, AT&T sold its 45% common share interest in LIN Television
Corp., a subsidiary of LIN Broadcasting Company, for $742 to Hicks, Muse, Tate
and Furst Inc. We recognized a pretax gain of $317. Also on March 3, 1998, AT&T
sold AT&T Solutions Customer Care to MATRIXX Marketing Inc., a teleservices unit
of Cincinnati Bell, for $625. AT&T recognized a pretax gain of $350 in 1998 on
the sale.

DISCONTINUED OPERATIONS
On July 1, 1997, AT&T sold its submarine systems business (SSI) to Tyco
International Ltd. for $850, resulting in an after-tax gain of $66, or $0.03 per
diluted share.
  On April 2, 1998, AT&T sold AT&T Universal Card Services Inc. (UCS) for $3,500
to Citigroup, Inc. The after-tax gain resulting from the disposal of UCS was
$1,290, or $0.48 per diluted share. Included in the transaction was a cobranding
and joint-marketing agreement. In addition, we received $5,722 in settlement of
receivables from UCS.
  The consolidated financial statements of AT&T have been restated to reflect
the dispositions of SSI and UCS. Accordingly, the revenue, costs and expenses,
and cash flows of these businesses have been excluded from the respective
captions in the Consolidated Statements of Income and Consolidated Statements of
Cash Flows, and have been reported through the dates of disposition as "Income
from discontinued operations," net of applicable income taxes, and as "Net cash
provided by (used in) discontinued operations" for all periods presented. As of
December 31, 1998, all businesses previously reported as discontinued operations
have been disposed of; therefore, there was no impact to the Consolidated
Balance Sheets presented. Gains associated with these sales are reflected as
"Gains on sales of discontinued operations," net of applicable income taxes.


   53



 Summarized financial information for discontinued operations was as follows:

          For the Years Ended December 31, 1998       1997
            Revenue                        $365     $1,942
            Income before income taxes       16        150
            Net income                       10        100

  No interest expense was allocated to discontinued operations in 1998 or 1997
due to the immateriality of the amounts; however, UCS recorded direct interest
expense of $85 and $297 in 1998 and 1997, respectively, primarily related to
amounts payable to AT&T.


5. EARNINGS PER COMMON SHARE AND POTENTIAL COMMON SHARE

Basic earnings per share (EPS) for AT&T Group for the years 1999, 1998 and 1997
were computed by dividing earnings available to AT&T Group common shareowners by
the weighted-average number of common shares outstanding of AT&T Group during
the period. In March 1999, our board of directors declared a three-for-two split
of AT&T common stock, paid on April 15, 1999, to shareowners of record on March
31, 1999. Share (except shares authorized) and per share amounts were restated
to reflect the stock split on a retroactive basis.
  Diluted EPS for AT&T Group was computed by dividing earnings available to AT&T
Group common shareowners, adjusted for the conversion of securities, by the
weighted-average number of common shares and dilutive potential common shares
outstanding of AT&T Group during the period, assuming conversion of the
potential common shares at the beginning of the periods presented. Shares
issuable upon conversion of preferred stock of subsidiaries, convertible debt
securities of subsidiary, stock options and other performance awards have been
included in the diluted calculation of weighted-average shares to the extent
that the assumed issuance of such shares would have been dilutive, as
illustrated below. The quarterly income preferred securities were antidilutive
and were excluded from the computation of diluted EPS. Computed on a yearly
basis, the dividends would have had an after-tax impact to earnings of
approximately $160. Assuming the conversion of the securities, the dividends
would no longer be included in other income (expense) and the securities would
convert into 66.667 million shares of AT&T common stock.
  Income from continuing operations for 1999 of $3,428 included income from
continuing operations attributable to AT&T Group of $5,450 as well as losses
from LMG of $2,022.
  A reconciliation of the income and share components for the basic and diluted
EPS calculations with respect to AT&T Group continuing operations is as follows:

Shares in millions
For the Years Ended December 31,          1999       1998       1997
Income from continuing operations
 attributable to AT&T Group             $5,450     $5,235     $4,249
Income impact of assumed conversion of
 preferred stock of subsidiary              26          -          -
Income from continuing operations
 attributable to AT&T Group adjusted
 for conversion of securities           $5,476     $5,235     $4,249
AT&T Group weighted-average common
 shares                                  3,082      2,676      2,671
Stock options                               35         24         12
Preferred stock of subsidiary               33          -          -
Convertible debt securities of
 subsidiary                                  2          -          -
AT&T Group weighted-average common
 shares and potential common
 shares                                  3,152      2,700      2,683


   54



  Basic EPS for LMG from the date of acquisition through December 31, 1999, was
computed by dividing the loss available to LMG shareowners by the
weighted-average number of shares outstanding of LMG of 1.259 billion. Since LMG
had a loss, the impact of any potential shares would have been antidilutive, and
therefore are not factored into the diluted calculations. There were 48 million
potentially dilutive LMG securities outstanding at December 31, 1999.
  On September 27, 1999, LMG announced that the board of directors of AT&T
approved the repurchase from time to time of up to 135 million shares of Liberty
Media Group Class A or Class B tracking stock.


6. NET RESTRUCTURING AND OTHER CHARGES

During 1999, we recorded $1,506 of net restructuring and other charges.
  A $594 in-process research and development charge was recorded reflecting the
estimated fair value of research and development projects at Broadband, as of
the date of acquisition, which have not yet reached technological feasibility or
that have no alternative future use. The projects identified related to
Broadband's efforts to offer voice over Internet protocol (IP),
product-integration efforts for advanced set-top devices that would enable
Broadband to offer next-generation digital services, cost-savings efforts for
cable telephony implementation and in-process research and development related
to Excite@Home. Although there are significant technological issues to overcome
to successfully complete the acquired in-process research and development, AT&T
expects successful completion. We currently anticipate that (i) we will test IP
telephony equipment for field deployment in late 2000, (ii) field trials will
begin in mid 2000 for next-generation digital services, and (iii) testing and
deployment devices with respect to AT&T's cost-savings efforts for cable
telephony implementation will occur by the end of 2000. If, however, AT&T is
unable to establish technological feasibility and produce commercially viable
products/services, then anticipated incremental future cash flows attributable
to expected profits from such new products/services may not be realized.
  A $531 asset impairment charge was recorded primarily associated with the
planned disposal of wireless network equipment resulting from a program to
increase capacity and operating efficiency of our wireless network. As part of a
multivendor program, contracts are being executed with certain vendors to
replace significant portions of our wireless infrastructure equipment in the
western United States and the metropolitan New York markets. The program will
provide Wireless Services with the newest technology available and allow it to
evolve to new, third-generation digital technology, which will provide
high-speed data capabilities.
  The planned disposal of the existing wireless infrastructure equipment
required an evaluation of asset impairment in accordance with SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" to write-down these assets to their fair value, which was
estimated by discounting the expected future cash flows of these assets through
the date of disposal. Since the assets will remain in service from the date of
the decision to dispose of these assets to the disposal date, the remaining net
book value of the assets will be depreciated over this period.
  A $145 charge for restructuring and exit costs was recorded as part of AT&T's
initiative to reduce costs by $2 billion by the end of 2000. The restructuring
and exit plans primarily focus on the maximization of synergies through
headcount reductions in Business Services and network operations, including the
consolidation of customer-care and call centers.


   55



  Included in the exit costs was $142 of cash termination benefits associated
with the separation of approximately 2,800 employees as part of voluntary and
involuntary termination plans. Approximately one-half of the separations were
management employees and one-half were nonmanagement employees. Approximately
1,700 employee separations related to involuntary terminations and approximately
1,100 related to voluntary terminations. Nearly 80% of the affected employees
have left their positions as of December 31, 1999, and the remaining employees
will leave the company in early 2000. Termination benefits of $40 were paid in
the fourth quarter of 1999. This cash outlay was funded primarily through cash
from operations. The balance of the cash termination payments is expected to be
paid in the first quarter of 2000.
 In addition, our continuing efforts to reduce costs by $2 billion by the end of
2000 and the planned merger with MediaOne may require further charges for exit
and separation plans, which we expect to have finalized in the first half of
2000.
   The following table displays the activity and balances of the restructuring
reserve account from January 1, 1998, to December 31, 1999:

                        Jan. 1,                      Dec. 31,
                        1998          1998            1998
Type of Cost          Balance Additions  Deductions  Balance
Employee separations    $413    $150       $(445)      $118
Facility closings        434     125        (190)       369
Other                     60       -         (30)        30
Total                   $907    $275       $(665)      $517


                        Jan. 1,                      Dec. 31,
                        1999          1999            1999
Type of Cost          Balance Additions  Deductions  Balance
Employee separations    $118    $142       $(110)      $150
Facility closings        369       -        (130)       239
Other                     30       3         (12)        21
Total                   $517    $145       $(252)      $410

Deductions reflect cash payments of $209 and $245 and noncash utilization of $43
and $420 for 1999 and 1998, respectively. Noncash utilization included a
reversal in 1998 of $348 related to the 1995 restructuring plan. Other noncash
utilization included deferred severance payments primarily related to
executives.

We also recorded net losses of $307 related to the government-mandated
disposition of certain international businesses that would have competed
directly with Concert and $50 related to a contribution agreement Broadband
entered into with Phoenixstar, Inc., that requires Broadband to satisfy certain
liabilities owed by Phoenixstar and its subsidiaries. The remaining obligation
under this contribution agreement is $26. In addition, we recorded benefits of
$121 related to the settlement of pension obligations for former employees who
accepted AT&T's 1998 voluntary retirement incentive program (VRIP) offer.
  During 1998, we recorded $2,514 of net restructuring and other charges. The
bulk of the charge was associated with a plan to reduce headcount by 15,000 to
18,000 over two years as part of our overall cost-reduction program. In
connection with this plan, the VRIP was offered to eligible management
employees. Approximately 15,300 management employees accepted the VRIP offer. A
restructuring charge of $2,724 was composed of $2,254 and $169 for pension and
postretirement special-termination benefits, respectively, $263 of curtailment
losses and $38 of other administrative costs. We also recorded charges of $125
for related facility costs and $150 for executive-separation costs. These
charges were partially offset by benefits of $940 as we settled pension benefit
obligations of 13,700 of the total VRIP employees. In addition, the VRIP charges
were partially offset by the reversal of $256 of 1995 business restructuring
reserves primarily resulting from the overlap of VRIP with certain 1995
restructuring initiatives.



   56



  Also included in the 1998 net restructuring and other charges were asset
impairment charges totaling $718, of which $633 was related to our decision not
to pursue Total Service Resale (TSR) as a local service strategy. We also
recorded an $85 asset impairment charge related to the write-down of
unrecoverable assets in certain international operations in which the carrying
value is no longer supported by future cash flows. This charge was made in
connection with an ongoing review associated with certain operations that would
have competed directly with Concert.
  Additionally, $85 of merger-related expenses was recorded in 1998 in
connection with the TCG merger which was accounted for as a pooling of
interests. Partially offsetting these charges was a $92 reversal of the 1995
restructuring reserve. This reversal reflects reserves that were no longer
deemed necessary. The reversal primarily included separation costs attributed to
projects completed at a cost lower than originally anticipated. Consistent with
the three-year plan, the 1995 restructuring initiatives were substantially
completed at the end of 1998.


7. INVESTMENT IN LIBERTY MEDIA GROUP

As a result of the acquisition of Broadband, we acquired Liberty Media Group, a
wholly-owned investment accounted for under the equity method (see Note 3).
Summarized results of operations for Liberty Media Group were as follows:

For the 10 Months Ended December 31,     1999
Revenue                              $    729
Operating loss                          2,214
Net loss                                2,022

At December 31,                          1999
Current assets                       $  3,387
Noncurrent assets                      55,297
Current liabilities                     3,370
Noncurrent liabilities                 16,853
Minority interests                          1


8. OTHER INVESTMENTS

We have investments in various companies and partnerships that are accounted for
under the equity method and included within "Other investments" in the
accompanying Consolidated Balance Sheets. Under the equity method, investments
are stated at initial cost and are adjusted for subsequent contributions and our
share of earnings, losses and distributions. At December 31, 1999 and 1998, we
had equity investments (other than LMG) of $18,454 and $4,257, respectively. The
carrying value of these investments exceeded our share of the underlying
reported net assets by approximately $12,530 and $564, at December 31, 1999 and
1998, respectively. The goodwill is being amortized over periods ranging from
seven to 40 years. Amortization of goodwill of $495, $52 and $66 in 1999, 1998
and 1997, respectively, was reflected as a component of other income(expense) in
the accompanying Consolidated Statements of Income.



   57



  Ownership of significant equity investments was as follows:

At December 31,                                 1999         1998
AB Cellular                                    55.62%(a)    55.62%
Cablevision Systems Corporation                32.04%(b)        -
At Home Corporation                            25.00%(c)        -
Lenfest Communications, Inc.                   50.00%(d)        -
Time Warner Texas                              50.00%           -
Bresnan Communications Group LLC               50.00%           -
Insight Midwest LP                             50.00%           -
Rogers Cantel Mobile Communications, Inc.      16.65%(e)        -
Century-TCI California, LP                     25.00%           -
Kansas City Cable Partners                     50.00%           -
Parnassos, LP                                  33.33%           -

(a) Voting interest in AB Cellular was 50% at December 31, 1999 and 1998.
(b) At December 31, 1999, we owned 48,942,172 shares of Cablevision Systems
Corporation Class A common stock, which had a closing market price of $75.50 per
share on that date.
(c) During 1999, At Home Corporation issued shares of its common stock for
various acquisitions, including Excite, Inc. (Excite). As a result of these
transactions, AT&T's economic interest in At Home Corporation (Exite@Home)
decreased from 38% to 25% following these mergers. Due to the resulting increase
in Excite@Home's equity, net of the dilution of AT&T's ownership interest in
Excite@Home, AT&T recorded an increase to additional paid-in capital of $527 in
1999. At December 31, 1999, we owned 63,720,000 shares of Excite@Home Class A
common stock, which had a closing market price of $42.875 per share on that
date.
(d) In the first quarter of 2000, we sold our interest in Lenfest
Communications, Inc., to Comcast (see Note 20).
(e) This investment is accounted for under the equity method because of our
ability to elect certain members of the board of directors of this entity, which
we believe provides us with significant influence.

Summarized unaudited combined financial information for investments accounted
for under the equity method was as follows:

For the Years Ended December 31,        1999       1998       1997
Revenue                              $10,433     $4,144     $4,132
Operating income (loss)               (1,542)       268        121
Income (loss) from continuing operations
 before extraordinary items and
 cumulative effect of a change in
 accounting principle                 (2,771)       156         68
Net income (loss)                     (3,005)        65         24

At December 31,                         1999       1998
Current assets                       $ 5,160     $2,610
Noncurrent assets                     21,066      7,345
Current liabilities                    4,554      1,674
Noncurrent liabilities                17,896      1,435
Redeemable preferred stock             1,095        595
Minority interests                     1,824          3


   58



We also have investments accounted for under the cost method of accounting.
Under this method, investments are stated at cost, and earnings are recognized
to the extent distributions are received from the accumulated earnings of the
investee. Distributions received in excess of accumulated earnings are
recognized as a reduction of our investment balance. These investments, which
are covered under the scope of SFAS No. 115 "Accounting for Certain Investments
in Debt and Equity Securities," are classified as "available-for-sale" and are
carried at fair value with any unrealized gain or loss, net of tax, being
included within other comprehensive income as a component of shareowners'
equity.

9. DEBT OBLIGATIONS

DEBT MATURING WITHIN ONE YEAR
At December 31,                               1999        1998
Commercial paper                            $5,974      $    -
Short-term notes                             5,000           -
Currently maturing long-term debt            1,355       1,083
Other                                          304          88
Total debt maturing within one year        $12,633      $1,171
Weighted-average interest rate of
  short-term debt                              5.3%        5.6%

At December 31, 1999, we had a 364-day, $7 billion revolving-credit facility
with a consortium of 42 lenders. We also had additional 364-day,
revolving-credit facilities of $3 billion. These lines were for commercial paper
back-up and were unused at December 31, 1999. In addition, we had a $20 billion
commitment from multiple lenders with credit agreements to be finalized upon
consummation of the proposed merger with MediaOne. In February 2000, we
negotiated the syndication of a new 364-day, $10 billion facility. As a result,
the existing $3 billion credit facilities and the commitments associated with
the $20 billion syndication terminated. Also in February 2000, the $7 billion
revolving-credit facility expired.

LONG-TERM OBLIGATIONS
At December 31,                               1999        1998
DEBENTURES AND NOTES (a)(b)
Interest Rates (c)      Maturities
4.38% - 6.00%           2001-2014          $ 5,251     $   900
6.34% - 7.50%           2000-2029            8,068       2,234
7.53% - 8.50%           2000-2026            4,762       2,583
8.60% - 11.13%          2000-2031            3,763         748
Variable rate           2000-2054              867          98
Total debentures and notes                  22,711       6,563
Other                                          362          94
Unamortized discount, net                     (127)        (18)
Total long-term obligations                 22,946       6,639
Less: Currently maturing long-term debt      1,355       1,083
Net long-term obligations                  $21,591      $5,556

(a) In August 1998, AT&T extinguished $1,046 of TCG debt resulting in a loss of
$217, which was recorded as an extraordinary loss. The after-tax impact was
$137, or $0.05 per diluted share.

(b) Included in these balances was $815 representing the remaining excess of the
fair value over the recorded value of debt in connection with the Broadband
acquisition. The excess is being amortized over the remaining lives of the
underlying debt obligations.

(c) The actual interest paid on our debt obligations may have differed from the
stated amount due to our entering into interest rate swap contracts to manage
our exposure to interest rate risk and our strategy to reduce finance costs (see
Note 11).


   59




  On January 26, 1999, AT&T filed a registration statement with the Securities
and Exchange Commission (SEC) for the offering and sale of up to $10 billion of
notes and warrants to purchase notes, resulting in a total available shelf
registration of $13.1 billion. On March 26, 1999, AT&T issued $8 billion in
notes. We received net proceeds of approximately $7.9 billion from the sale of
the notes. The proceeds were utilized to repay commercial paper issued in
connection with the Broadband merger and toward funding the share repurchase
program. On September 14, 1999, AT&T completed a $450 bond offering in
connection with the same registration statement. The proceeds from the issuance
were utilized for general corporate purposes.
  This table shows the maturities at December 31, 1999, of the $22,946 in total
long-term obligations:

        2000     2001     2002     2003     2004     Later Years
      $1,355   $1,158   $1,574   $1,616   $2,815         $14,428

10. OTHER SECURITIES

PREFERRED STOCK OF SUBSIDIARIES
Prior to the Broadband merger, TCI issued Class B 6% Cumulative Redeemable
Exchangeable Junior preferred stock (Class B preferred stock). There were 1.6
million shares outstanding as of December 31, 1999, net of shares held by a
subsidiary, out of an authorized 1.7 million shares.
  Dividends accrue cumulatively (but without compounding) at an annual rate of
6% of the stated liquidation value of $100 per share, whether or not such
dividends are declared or funds are legally available for payment of dividends.
Accrued dividends are payable annually on March 1 of each year in cash or AT&T
stock, or any combination of the foregoing, at the sole discretion of the TCI
board of directors. Dividends accrued on shares of Class B preferred stock
aggregated approximately $8 at December 31, 1999.
  Class B preferred stock and accumulated dividends are reflected within
"Minority Interest in Equity of Consolidated Subsidiaries" in the accompanying
Consolidated Balance Sheets and aggregated $152 at December 31, 1999.
  Subsequent to December 31, 1999, the TCI board of directors approved the
redemption of Class B preferred stock. On February 22, 2000, all outstanding
shares of Class B preferred stock were redeemed at $105.88 per share.
  Prior to the Broadband merger, TCI Pacific Communications Inc. (Pacific)
issued 5% Class A Senior Cumulative Exchangeable preferred stock, which remains
outstanding. There were 6.3 million shares authorized and outstanding at
December 31, 1999. Each share is exchangeable, from and after August 1, 2001,
for approximately 6.3 shares of AT&T common stock, subject to certain
antidilution adjustments. Additionally, Pacific may elect to make any dividend,
redemption or liquidation payment in cash, shares of AT&T common stock or by a
combination of the foregoing. The Pacific preferred stock is reflected within
"Minority Interest in Equity of Consolidated Subsidiaries" in the accompanying
Consolidated Balance Sheets and aggregated $2.1 billion at December 31, 1999.
There were no accrued dividends on shares of Pacific preferred stock as of
December 31, 1999.

COMPANY-OBLIGATED CONVERTIBLE QUARTERLY INCOME PREFERRED SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY SUBORDINATED DEBT SECURITIES OF AT&T AND RELATED
WARRANTS
  On June 16, 1999, AT&T Finance Trust I (AT&T Trust), a wholly-owned subsidiary
of AT&T, completed the private sale of 100 million shares of 5.0% cumulative
quarterly income preferred securities (the quarterly preferred securities) to
Microsoft Corporation (Microsoft). Proceeds of the issuance were invested by the
AT&T Trust in Junior Subordinated Debentures (the Debentures) issued by AT&T due
2029, which represent the sole assets of the AT&T Trust.



   60




  The quarterly preferred securities pay dividends at an annual rate of 5.0% of
the liquidation preference of $50 per security and are convertible at any time
prior to maturity into 66.667 million shares of AT&T common stock and are
subject to mandatory redemption upon repayment of the Debentures at maturity or
their earlier redemption. The conversion feature can be terminated, under
certain conditions, after three years.
  The Debentures will make a quarterly payment in arrears of 62.5 cents per
security on the last day of March, June, September and December of each year.
AT&T has the right to defer such interest payments up to 20 consecutive
quarters; as a consequence, quarterly dividend payments on the quarterly
preferred securities can be deferred by the AT&T Trust during any such interest-
payment period. If AT&T defers any interest payments, we may not, among other
things, pay any dividends on our common stock until all interest in arrears is
paid to the AT&T Trust.
  Dividends on the quarterly preferred securities were $140 for the period ended
December 31, 1999, and are reported within other income(expense) in the
accompanying Consolidated Statements of Income.
  On June 16, 1999, AT&T also issued to Microsoft 40 million warrants, each to
purchase one share of AT&T common stock at a price of $75 per share at the end
of three years. Alternatively, the warrants are exercisable on a cashless basis.
If the warrants are not exercised on the three-year anniversary of the closing
date, the warrants expire.
  A discount on the quarterly preferred securities equal to the value of the
warrants of $306 was recognized and is being amortized over the 30-year life of
the quarterly preferred securities as a component of other income(expense) in
the accompanying Consolidated Statements of Income.

SUBSIDIARY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY
TRUSTS HOLDING SOLELY SUBORDINATED DEBT SECURITIES OF AN AT&T SUBSIDIARY
  Certain subsidiary trusts of TCI (TCI Trusts) had preferred securities
outstanding at December 31, 1999, as follows:

                                  Interest    Maturity    Current
Subsidiary Trust                    Rate        Date      Balance*
TCI Communications Financing I      8.72%       2045      $  528
TCI Communications Financing II    10.00%       2045         521
TCI Communications Financing III    9.65%       2027         360
TCI Communications Financing IV     9.72%       2036         217
Total                                                     $1,626

* In connection with the acquisition of Broadband, approximately $160 was
allocated to the Trust Preferred Securities representing the excess of the fair
market value over the recorded value at the date of acquisition. The excess is
being amortized over the remaining life of the Trust Preferred Securities, 28 to
46 years, and was $154 at December 31, 1999.

  The TCI Trusts were created for the exclusive purpose of issuing the Trust
Preferred Securities and investing the proceeds thereof into Subordinated
Deferrable Interest Notes (the Subordinated Debt Securities) of TCI.
Subordinated Debt Securities have interest rates equal to the interest rate of
the corresponding Trust Preferred Securities and have maturity dates ranging
from 30 to 49 years from the date of issuance. The preferred securities are
mandatorily redeemable upon repayment of the Subordinated Debt Securities and
are callable by AT&T. The Financing I and II



   61




Trust Preferred Securities are callable at face value beginning in January and
May 2001, respectively. Financing III Trust Preferred Securities are callable at
104.825% of face value beginning in March 2007. Financing IV Trust Preferred
Securities are callable at face value beginning in March 2002. Upon redemption
of the Subordinated Debt Securities, the Trust Preferred Securities will be
mandatorily redeemable. TCI effectively provides a full and unconditional
guarantee of the TCI Trusts' obligations under the Trust Preferred Securities.
Subsequent to December 31, 1999, AT&T expects to provide a full and
unconditional guarantee of TCI's Trust Preferred Securities for TCI
Communications Financing I, II and IV subsidiary trusts (see Note 12).


  Dividends accrued and paid on the Trust Preferred Securities aggregated $114
for the period from completion of the merger with TCI through December 31, 1999,
and are recorded within other income(expense) in the accompanying Consolidated
Statements of Income. AT&T has the right to defer interest payments up to 20
consecutive quarters; as a consequence, dividend payments on the Trust Preferred
Securities can be deferred by the TCI Trust during any such interest-payment
period. If AT&T defers any interest payments, we may not, among other things,
pay any dividends on our common stock until all interest in arrears is paid to
the TCI Trusts.


11. FINANCIAL INSTRUMENTS

In the normal course of business, we use various financial instruments,
including derivative financial instruments, for purposes other than trading. We
do not use derivative financial instruments for speculative purposes. These
instruments include letters of credit, guarantees of debt, interest rate swap
agreements, foreign currency exchange contracts and equity hedges. Interest rate
swap agreements and foreign currency exchange contracts are used to mitigate
interest rate and foreign currency exposures. Equity hedges are used to mitigate
exposure to stock appreciation of affiliated companies. Collateral is generally
not required for these types of instruments.

By their nature, all such instruments involve risk, including the credit risk of
nonperformance by counterparties, and our maximum potential loss may exceed the
amount recognized in our balance sheet. However, at December 31, 1999 and 1998,
in management's opinion there was no significant risk of loss in the event of
nonperformance of the counterparties to these financial instruments. We control
our exposure to credit risk through credit approvals, credit limits and
monitoring procedures. We do not have any significant exposure to any individual
customer or counterparty, nor do we have any major concentration of credit risk
related to any financial instruments.

LETTERS OF CREDIT
Letters of credit are purchased guarantees that ensure our performance or
payment to third parties in accordance with specified terms and conditions and
do not create any additional risk to AT&T.

GUARANTEES OF DEBT
From time to time, we guarantee the debt of our subsidiaries and certain
unconsolidated joint ventures. Prior to the merger, Broadband had agreed to take
certain steps to support debt compliance with respect to obligations aggregating
$1,720 of certain cable television partnerships in which Broadband has a
noncontrolling ownership interest. Although there can be no assurance,
management believes that it will not be required to meet its obligations under
such guarantees. Additionally, in connection with the restructuring of AT&T in
1996, we issued guarantees for certain debt obligations of AT&T Capital Corp.
and NCR. The amount of guaranteed debt associated with our former subsidiaries,
AT&T Capital Corp. and NCR, was $56 and $108 at December 31, 1999 and 1998,
respectively.

   62




INTEREST RATE SWAP AGREEMENTS
We enter into interest rate swaps to manage our exposure to changes in interest
rates and to lower our overall costs of financing. We enter into swap agreements
to manage the fixed/floating mix of our debt portfolio in order to reduce
aggregate risk to interest rate movements. Interest rate swaps also allow us to
raise funds at floating rates and effectively swap them into fixed rates that
are lower than those available to us if fixed-rate borrowings were made
directly. These agreements involve the exchange of floating-rate for fixed-rate
payments, fixed-rate for floating-rate payments or floating-rate for other
floating-rate payments without the exchange of the underlying principal amount.
Fixed interest rate payments at December 31, 1999, were at rates ranging from
6.05% to 9.47%. Floating-rate payments are based on rates tied to London
Inter-Bank Offered Rate (LIBOR).
  The following table indicates the types of swaps in use at December 31, 1999
and 1998, and their weighted-average interest rates. Average variable rates are
those in effect at the reporting date and may change significantly over the
lives of the contracts.

                                               1999      1998
Fixed to variable swaps - notional amount    $1,800     $ 461
  Average receive rate                         6.89%     6.33%
  Average pay rate                             6.67%     5.31%

Variable to fixed swaps - notional amount    $  229     $ 241
  Average receive rate                         6.30%     4.92%
  Average pay rate                             6.77%     7.68%

Variable to variable swaps - notional amount $  495     $   -
  Average receive rate                         6.63%        -
  Average pay rate                             6.53%        -

  The weighted-average remaining terms of the swap contracts were seven and two
years at December 31, 1999 and 1998, respectively.

FOREIGN EXCHANGE
We enter into foreign currency exchange contracts, including forward and option
contracts, to manage our exposure to changes in currency exchange rates,
principally European Union's currency (Euro), British pounds sterling and
Japanese yen. The use of these derivative financial instruments allows us to
reduce our exposure to the risk of adverse changes in exchange rates on the
reimbursement to foreign telephone companies for their portion of the revenue
billed by AT&T for calls placed in the United States to a foreign country and
other foreign currency payables and receivables. These transactions are
generally expected to occur in less than one year. In addition, we are subject
to foreign exchange risk related to other foreign-currency-denominated
transactions.

EQUITY HEDGES
We enter into equity hedges to manage our exposure to changes in equity prices
associated with stock appreciation rights of affiliated companies.

FAIR VALUES OF FINANCIAL INSTRUMENTS INCLUDING DERIVATIVE FINANCIAL INSTRUMENTS
The following table summarizes the notional amounts of material financial
instruments. The notional amounts represent agreed-upon amounts on which
calculations of dollars to be exchanged are based. They do not represent amounts
exchanged by the parties and, therefore, are not a measure of our exposure. Our
exposure is limited to the fair value of the contracts with a positive fair
value plus interest receivable, if any, at the reporting date.


   63




DERIVATIVES AND OFF BALANCE SHEET INSTRUMENTS

                                       1999          1998
                                     Contract/     Contract/
                                     Notional      Notional
                                      Amount        Amount
Interest rate swap agreements        $2,524          $702
Foreign exchange forward contracts    1,881           244
Equity hedges                           495             -
Letters of credit                       243           184
Guarantees of debt                    1,848           237

  The following tables show the valuation methods, the carrying amounts and
estimated fair values of material financial instruments.

FINANCIAL INSTRUMENT                  VALUATION METHOD
Debt excluding capital leases         Market quotes or rates available
                                        to us for debt with similar
                                        terms and maturities
Letters of credit                     Fees paid to obtain the
                                        obligations
Guarantees of debt                    There are no quoted market prices
                                        for similar agreements available
Interest rate swap agreements         Market quotes obtained from dealers
Foreign exchange contracts            Market quotes
Equity hedges                         Market quotes
Preferred securities                  Market quotes*

*It is not practicable to estimate the fair market value of our $4,700 quarterly
preferred securities. There are no current market quotes available on this
private placement.




                                       1999                           1998
                             Carrying         Fair          Carrying         Fair
                             Amount           Value         Amount           Value
                                                                
Debt excluding
  capital leases             $33,881         $32,565          $6,691        $7,136
Pacific preferred stock        2,121           1,929               -             -
Subsidiary-obligated
  mandatorily redeemable
  preferred securities         1,626           1,527               -             -






                                  1999                            1998
                        Carrying          Fair           Carrying       Fair
                        Amount            Value          Amount         Value
                      Asset   Liab.   Asset  Liab.     Asset  Liab.   Asset  Liab.
                                                     
Interest rate
  swap agreements      $ 28    $27     $  6   $29          $5    $13   $ -    $19
Foreign exchange
  forward contracts       -     26        1    28           7      7    13      4
Equity hedges           313      2      313     -           -      -     -      -




   64

12. GUARANTEE OF PREFERRED SECURITIES

Prior to the consummation of the Broadband merger, TCI issued mandatorily
redeemable preferred securities through subsidiary trusts that held subordinated
debt securities of TCI. Subsequent to December 31, 1999, AT&T expects to provide
a full and unconditional guarantee on the outstanding securities issued by TCI
Communications Financing I, II and IV (see Note 10). At December 31, 1999,
$1,266 of the guaranteed redeemable preferred securities remained outstanding.
Following is a summary of the results of TCI which have been included in the
financial results of AT&T since the date of acquisition. The summarized
financial information included transactions with AT&T that were eliminated in
consolidation.

For the 10 months ended    December 31, 1999
Revenue                               $4,870
Operating loss                         1,071
Loss before extraordinary items        4,211
Net loss                               4,220

At December 31,                         1999
Current assets                       $   468
Noncurrent assets                     93,798
Current liabilities                    2,814
Noncurrent liabilities                36,227
Minority interests                     2,175


13. PENSION, POSTRETIREMENT AND OTHER EMPLOYEE BENEFIT PLANS

We sponsor noncontributory defined benefit pension plans covering the majority
of our employees. Pension benefits for management employees are principally
based on career-average pay. Pension benefits for occupational employees are not
directly related to pay. Pension trust contributions are made to trust funds
held for the sole benefit of plan participants. Our benefit plans for current
and future retirees include health-care benefits, life insurance coverage and
telephone concessions.

  The following table shows the components of the net periodic benefit costs
included in our Consolidated Statements of Income:

                                                             Postretirement
                                   Pension Benefits             Benefits

For the Years Ended              1999    1998     1997     1999   1998    1997
December 31,

Service cost benefits earned
 during the period             $  247   $  275    $ 305    $ 54   $  56    $ 56
Interest cost on benefit
 obligations                      919      940      946     324     322     278
Amortization of unrecognized
 prior service cost               159      135      114      13      (2)     39
Credit for expected return
 on plan assets                (1,458)  (1,570)  (1,371)   (200)   (173)   (120)
Amortization of transition
 asset                           (158)    (175)    (181)      -       -       -
Amortization of gains             (10)       -        -      (1)      -       -
Charges for special termination
 benefits                           -    2,254        -       5     169       -
Net curtailment losses              -      140        -       -     141       -
Net settlement (gains) losses    (121)    (921)       5       -       -       -
Net periodic benefit cost
 (credit)                      $ (422)  $1,078   $ (182)   $195   $ 513    $253



   65

  On January 26, 1998, we offered a voluntary retirement incentive program
(VRIP) to employees who were eligible participants in the AT&T Management
Pension Plan. Approximately 15,300 management employees accepted the VRIP offer.
In connection with the VRIP, we recorded pretax charges in 1998 for pension and
postretirement plan special-termination benefits of $2,254 and $169,
respectively. We also recorded pension and postretirement plan pretax charges of
$120 and $143, respectively, which are included within net curtailment losses in
1998. The special-termination benefits reflect the value of pension benefit
improvements and expanded eligibility for postretirement benefits. The VRIP also
permitted employees to choose either a total lump-sum distribution of their
pension benefits or periodic future annuity payments.
  As of December 31, 1999, all 15,300 employees had terminated employment under
the VRIP. AT&T has settled the pension obligations covering about 15,000 of
these employees, the remainder of which either chose to defer commencing their
pension benefits or elected to receive an annuity distribution. Lump-sum pension
settlements totaling $5.2 billion, including a portion of the special-pension
termination benefits referred to above, resulted in settlement gains of $121 and
$940 recorded in 1999 and 1998, respectively.

  The following tables provide a reconciliation of the changes in the plans'
benefit obligations and fair value of assets for the years ended December 31,
1999 and 1998, and a statement of the funded status at December 31, 1999 and
1998, respectively:



                                             Pension Benefits      Postretirement Benefits
                                            1999          1998        1999          1998
                                                                      
Change in benefit obligations:
Benefit obligation, beginning of year    $14,443       $14,481      $5,168        $4,356
Service cost                                 247           275          54            56
Interest cost                                919           940         324           322
Plan amendments                              558           324           4           (95)
Actuarial (gains) losses                  (1,683)        1,609        (579)          258
Benefit payments                          (1,062)         (770)       (334)         (227)
Special termination benefits                   -         2,254           5           169
Settlements                                 (554)       (4,676)          -             -
Curtailment losses                             -             6           -           329
Benefit obligation, end of year          $12,868       $14,443     $ 4,642       $ 5,168

Change in fair value of plan assets:
Fair value of plan assets, beginning
  of year                                $18,567       $20,513     $ 2,476       $ 1,969
Actual return on plan assets               4,133         3,375         385           437
Employer contributions                        48           125         325           297
Benefit payments                          (1,062)         (770)       (334)         (227)
Settlements                                 (554)       (4,676)          -             -
Fair value of plan assets, end of year   $21,132       $18,567     $ 2,852       $ 2,476

At December 31,
Funded (unfunded) benefit obligation     $ 8,264       $ 4,124     $(1,790)      $(2,692)
Unrecognized net gain                     (7,735)       (3,495)       (800)          (36)
Unrecognized transition asset               (279)         (445)          -             -
Unrecognized prior service cost            1,362           960          55            63
Net amount recorded                      $ 1,612       $ 1,144     $(2,535)      $(2,665)


  Our pension plan assets include $82 and $85 of AT&T common stock at December
31, 1999 and 1998, respectively.



   66

  The following table provides the amounts recorded in our Consolidated Balance
Sheets:



                                             Pension Benefits      Postretirement Benefits
At December 31,                             1999          1998        1999          1998
                                                                     
Prepaid pension cost                     $ 2,464       $ 2,074     $     -       $     -
Benefit related liabilities                 (918)       (1,016)     (2,535)       (2,665)
Intangible asset                              46            47           -             -
Accumulated other comprehensive income        20            39           -             -
Net amount recorded                      $ 1,612       $ 1,144     $(2,535)      $(2,665)


  Our nonqualified pension plan had an unfunded accumulated benefit obligation
of $118 and $135 at December 31, 1999 and 1998, respectively. Our postretirement
health and telephone concession benefit plans had accumulated postretirement
benefit obligations of $4,021 and $4,461 at December 31, 1999 and 1998,
respectively, which were in excess of plan assets of $1,635 and $1,408 at
December 31, 1999 and 1998, respectively.
  The assumptions used in the measurement of the pension and postretirement
benefit obligations are shown in the following table:

At December 31,                     1999    1998    1997
Weighted-average assumptions:
Discount rate                      7.75%    6.5%    7.0%
Expected return on plan assets      9.5%    9.5%    9.0%
Rate of compensation increase       4.5%    4.5%    4.5%

  We assumed a rate of increase in the per capita cost of covered health-care
benefits (the health-care cost trend rate) of 6.6%. This rate was assumed to
gradually decline after 1999 to 4.6% by 2009 and then remain level. Assumed
health-care cost trend rates have a significant effect on the amounts reported
for the health-care plans. A one percentage point increase or decrease in the
assumed health-care cost trend rate would increase or decrease the total of the
service and interest-cost components of net periodic postretirement health-care
benefit cost by $11 and $9, respectively, and would increase or decrease the
health-care component of the accumulated postretirement benefit obligation by
$137 and $110, respectively.
  We also sponsor savings plans for the majority of our employees. The plans
allow employees to contribute a portion of their pretax and/or after-tax income
in accordance with specified guidelines. We match a percentage of the employee
contributions up to certain limits. Our contributions amounted to $234 in 1999,
$204 in 1998 and $201 in 1997.


14. STOCK-BASED COMPENSATION PLANS

Under the 1997 Long-term Incentive Program (Program), which was effective June
1, 1997, and amended on May 19, 1999, we grant stock options, performance
shares, restricted stock and other awards. Under the Program, there were 150
million shares of common stock available for grant with a maximum of 22.5
million common shares that could be used for awards other than stock options.
From the time the Program became effective to the period ended December 31,
1999, there were approximately 109 million shares granted and approximately 41
million shares that remained available for grant. Beginning with January 1,
2000, the remaining shares available for grant at December 31 of the prior year,
plus 1.75% of the shares of AT&T common stock outstanding on January 1 of each
year, become available for grant. There is a maximum of 37.5 million shares that
may be used for awards other than stock options. The exercise price of any stock
option is equal to the stock price when the option is granted. Generally, the
options vest over three years and are exercisable up to 10 years from the date
of grant. Under the 1987 Long-term Incentive



   67

Program, which expired in April 1997, we granted the same awards, and on January
1 of each year, 0.6% of the outstanding shares of our common stock became
available for grant.
  Under the Program, performance share units are awarded to key employees in the
form of either common stock or cash at the end of a three-year period, based on
AT&T's total shareholder return and certain financial-performance targets. Under
the 1987 Long-term Incentive Program, performance share units with the same
terms were also awarded to key employees based on AT&T's return-to-equity
performance compared with a target.
  On August 1, 1997, substantially all employees were granted a stock option
award to purchase 150 shares representing a total of 18.75 million shares of
AT&T common stock. The options vest after three years and are exercisable up to
10 years from the grant date.
  Under the AT&T 1996 Employee Stock Purchase Plan (Plan), which was effective
July 1, 1996, we are authorized to sell up to 75 million shares of common stock
to our eligible employees. Under the terms of the Plan, employees may have up to
10% of their earnings withheld to purchase AT&T's common stock. The purchase
price of the stock on the date of exercise is 85% of the average high and low
sale prices of shares on the New York Stock Exchange for that day. Under the
Plan, we sold approximately 3 million shares to employees in both 1999 and 1998
and 6 million shares in 1997.
  We apply Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting for our plans.
Accordingly, no compensation expense has been recognized for our stock-based
compensation plans other than for our performance-based and restricted stock
awards and stock appreciation rights (SARs). Compensation costs charged against
income were $462, $157 and $110 in 1999, 1998 and 1997, respectively. In 1999,
costs included $382 related to grants of SARs of affiliated companies held by
certain employees subsequent to the Broadband merger. We also entered into an
equity hedge in 1999 to offset potential future compensation costs associated
with these SARs. The 1999 income related to this hedge was $247.

A summary of option transactions is shown below:





                            Weighted-           Weighted-         Weighted-
                             Average             Average           Average
                            Exercise            Exercise           Exercise

Shares in Thousands      1999     Price     1998     Price      1997     Price

Outstanding at
 January 1,            131,904   $30.41    110,972   $24.77    76,466    $21.59

Options assumed in
 Broadband merger       11,770   $14.79          -        -         -         -

Options granted         47,927   $57.13     46,148   $41.69    57,465    $25.98

Options and SARs
 exercised             (17,858)  $22.87    (18,894)  $21.95   (16,652)   $16.34

Options canceled or
 forfeited              (4,980)  $42.44     (6,322)  $31.64    (6,307)   $26.73

At December 31:
Options outstanding    168,763   $37.42    131,904   $30.41   110,972    $24.77

Options exercisable     57,894   $28.21     35,472   $23.13    34,472    $22.17

Shares available for
 grant                  41,347              91,838            135,518





   68



All of the 11.8 million stock options assumed in connection with the Broadband
merger were in tandem with SARs. These SARs were subsequently canceled on April
30, 1999. During 1999, 386,000 SARs (including 137,000 for Broadband) were
exercised. At December 31, 1999, there were no AT&T SARs outstanding.

The following table summarizes information about stock options outstanding at
December 31, 1999:


                    Options Outstanding                    Options Exercisable

                    Number      Weighted-    Weighted-     Number      Weighted-
                  Outstanding    average      average    Exercisable    average
Range of          at Dec. 31,   Remaining    Exercise    at Dec. 31,    Exercise
Exercise Prices   1999 (in     Contractual     Price      1999 (in        Price
                  thousands)      Life                   thousands)

$ 4.36 - $18.08     14,316         5.2        $13.93        8,919        $14.54
$18.15 - $24.49     10,453         4.9        $23.21        9,240        $23.31
$24.50              16,388         7.6        $24.50           58        $24.50
$24.51 - $26.18      3,895         4.7        $24.90        3,534        $24.83
$26.21              19,398         7.1        $26.21       11,393        $26.21
$26.33 - $31.58     14,619         6.2        $29.89       11,473        $30.05
$32.19 - $42.04     12,247         8.4        $38.27        3,056        $37.77
$42.10              29,255         8.1        $42.10        9,026        $42.10
$42.19 - $59.75     18,967         9.5        $51.59        1,091        $49.66
$59.88              29,122         9.1        $59.88          104        $59.88
$61.03 - $62.13        103         9.1        $62.06            -        $62.06
                   168,763         7.6        $37.42       57,894        $28.21

AT&T has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation." If AT&T had elected to recognize compensation costs
based on the fair value at the date of grant for awards in 1999, 1998 and 1997,
consistent with the provisions of SFAS No. 123, AT&T's net income and earnings
per AT&T common share would have been reduced to the following pro forma
amounts:


For the Years Ended December 31,                      1999       1998       1997

Income from continuing operations                   $3,171     $5,078     $4,158
Income from discontinued operations                      -          7         99
Gains on sales of discontinued operations                -      1,290         66
Extraordinary loss                                       -        137          -
Net income                                          $3,171     $6,238     $4,323

Earnings per AT&T Group common share - basic:
Continuing operations                               $ 1.68     $ 1.90     $ 1.56
Discontinued operations                                  -          -       0.03
Gains on sales of discontinued operations                -       0.48       0.03
Extraordinary loss                                       -       0.05          -
AT&T Group earnings                                 $ 1.68     $ 2.33     $ 1.62

Earnings per AT&T Group common share - diluted:
Continuing operations                               $ 1.65     $ 1.88     $ 1.55
Discontinued operations                                  -          -       0.03
Gains on sales of discontinued operations                -       0.48       0.03
Extraordinary loss                                       -       0.05          -
AT&T Group earnings                                 $ 1.65     $ 2.31     $ 1.61






   69



The pro forma effect on net income for 1999, 1998 and 1997 may not be
representative of the pro forma effect on net income of future years because the
SFAS No. 123 method of accounting for pro forma compensation expense has not
been applied to options granted prior to January 1, 1995.
  The weighted-average fair values at date of grant for options granted during
1999, 1998 and 1997 were $15.64, $9.75 and $6.06, respectively, and were
estimated using the Black-Scholes option-pricing model. The weighted-average
risk-free interest rates applied for 1999, 1998 and 1997 were 5.10%, 5.33% and
6.16%, respectively. The following assumptions were applied for 1999, 1998 and
1997, respectively: (i) expected dividend yields of 1.7%, 2.1% and 2.2%, (ii)
expected volatility rates of 28.3%, 23.8% and 21.8% and (iii) expected lives of
4.5 years.


15. INCOME TAXES

The following table shows the principal reasons for the difference between the
effective income tax rate and the U.S. federal statutory income tax rate:

For the Years Ended December 31,             1999     1998     1997
U.S. federal statutory income tax rate         35%      35%      35%
Federal income tax at statutory rate       $2,340   $2,908   $2,440
Amortization of investment tax credits        (10)     (14)     (16)
State and local income taxes, net of
  federal income tax effect                   210      201      183
Liberty Media Group losses                    708        -        -
In-process research and development
  write-off                                   208        -        -

Foreign rate differential                      90       63      117
Amortization of intangibles                    43       28       23
Taxes on repatriated and accumulated
  foreign income, net of tax credits          (45)     (36)     (32)
Research and other credits                    (64)     (91)     (86)
Valuation allowance                           (78)      37       77
Investment dispositions, acquisitions
  and legal entity restructuring              (94)    (153)      25
Other differences, net                        (51)     129       (8)
Provision for income taxes                 $3,257   $3,072   $2,723
Effective income tax rate                    48.7%*   37.0%    39.0%

*Includes the impact of LMG's losses, net of taxes, reported as a separate line
item in AT&T's Consolidated Statements of Income. AT&T Group's effective tax
rate was 37.4%.

  The U.S. and foreign components of income from continuing operations before
income taxes and the provision for income taxes are presented in this table:

For the Years Ended December 31,             1999     1998     1997
INCOME FROM CONTINUING OPERATIONS
  BEFORE INCOME TAXES
United States                              $6,467   $8,318   $7,090
Foreign                                       218      (11)    (118)
Total                                      $6,685   $8,307   $6,972



   70



PROVISION FOR INCOME TAXES
CURRENT
  Federal                                  $2,609   $2,908   $1,561
  State and local                             403      251      194
  Foreign                                     100       41       49
                                           $3,112   $3,200   $1,804
DEFERRED
  Federal                                  $  228  $ (172)   $  851
  State and local                             (81)     58        89
  Foreign                                       8        -       (5)
                                           $  155  $ (114)   $  935
Deferred investment tax credits               (10)    (14)      (16)
Provision for income taxes                 $3,257  $3,072    $2,723

  The current income taxes payable balance was $427 and $1,393 at December 31,
1999 and 1998, respectively. The decrease in the 1999 balance was primarily due
to income taxes accrued in 1998 and paid in 1999 related to the sale of UCS.
  Deferred income tax liabilities are taxes we expect to pay in future periods.
Similarly, deferred income tax assets are recorded for expected reductions in
taxes payable in future periods. Deferred income taxes arise because of
differences in the book and tax bases of certain assets and liabilities.

  Deferred income tax liabilities and assets consist of the following:

At December 31,                                       1999     1998
LONG-TERM DEFERRED INCOME TAX LIABILITIES
  Property, plant and equipment                     $7,678   $7,324
  Investments                                        7,304        -
  Franchise costs                                   11,998        -
  Other                                              1,156      776
Total long-term deferred income tax liabilities    $28,136   $8,100

LONG-TERM DEFERRED INCOME TAX ASSETS
  Business restructuring                            $  120   $  134
  Net operating loss/credit carryforwards              710      495
  Employee pensions and other benefits, net          1,359    1,557
  Reserves and allowances                              376      126
  Investments                                            -       39
  Other                                              1,603      556
  Valuation allowance                                 (231)    (260)

Total net long-term deferred income tax assets      $3,937   $2,647
Net long-term deferred income tax liabilities      $24,199   $5,453

CURRENT DEFERRED INCOME TAX LIABILITIES
Total current deferred income tax liabilities       $  427   $  408

CURRENT DEFERRED INCOME TAX ASSETS
  Business restructuring                            $   47   $   79
  Employee pensions and other benefits                 562      346
  Reserves and allowances                              682      896
  Other                                                423      397

Total current deferred income tax assets            $1,714   $1,718
Net current deferred income tax assets              $1,287   $1,310


   71



  At December 31, 1999, we had net operating loss carryforwards (tax-effected)
for federal and state income tax purposes of $156 and $187, respectively,
expiring through 2014. We also had foreign net operating loss carryforwards
(tax-effected) of $78, which have no expiration date. In addition, we had
federal tax credit carryforwards of $257, of which $183 have no expiration date
and $74 expiring through 2005. We had state tax credit carryforwards
(tax-effected) of $32 expiring through 2003.
  In connection with the Broadband merger, we acquired certain federal and state
net operating loss carryforwards subject to a valuation allowance of $124. If,
in the future, the realization of these acquired deferred tax assets becomes
more likely than not, any reduction of the associated valuation allowance will
be allocated to reduce franchise costs and other purchased intangibles.


16. COMMITMENTS AND CONTINGENCIES

In the normal course of business we are subject to proceedings, lawsuits and
other claims, including proceedings under laws and regulations related to
environmental and other matters. Such matters are subject to many uncertainties,
and outcomes are not predictable with assurance. Consequently, we are unable to
ascertain the ultimate aggregate amount of monetary liability or financial
impact with respect to these matters at December 31, 1999. These matters could
affect the operating results of any one quarter when resolved in future periods.
However, we believe that after final disposition, any monetary liability or
financial impact to us beyond that provided for at year-end would not be
material to our annual consolidated financial statements.
  We lease land, buildings and equipment through contracts that expire in
various years through 2047. Our rental expense under operating leases was $827
in 1999, $742 in 1998 and $853 in 1997. The following table shows our future
minimum lease payments due under noncancelable operating leases at December 31,
1999. Such payments total $3,284. The total of minimum rentals to be received in
the future under noncancelable subleases as of December 31, 1999, was $285.

               2000     2001     2002     2003    2004    Later Years
              $ 675     $562     $445     $372    $302           $928

  We have an agreement with General Instrument Corporation to purchase a minimum
of 2.5 million set-top devices in 2000 at an average price of $318 per unit.
  Through a joint venture (70% owned by AT&T and 30% owned by BT), AT&T and BT
have a 31% ownership of AT&T Canada Corp. as a result of the merger between AT&T
Canada Corp. and MetroNet Communications, Corp. In connection with this merger,
the AT&T and BT joint venture has the right to call, or arrange for another
entity to call, the remaining 69% of AT&T Canada for the greater of Cdn$37.50
per share (accreting 4% each quarter beginning June 30, 2000) or the
then-appraised fair market value. If we do not exercise our call rights by June
30, 2003, the shares would be put up for auction, and the AT&T and BT joint
venture would have to make the shareholders whole for the difference between the
proceeds received in auction and the greater of the fair market value or the
accreted value. The exact timing of any purchase will likely be partially
dependent upon the future status of federal foreign ownership regulations.



   72




17. SEGMENT REPORTING

AT&T's results are segmented according to the way we manage our business:
Business Services, Consumer Services, Wireless Services and Broadband. Our
Business Services segment offers a variety of global communications services
including long distance, local, and data and Internet protocol (IP) networking
to small and medium-sized businesses, large domestic and multinational
businesses and government agencies. Business Services is also a provider of
voice, data and IP transport to service resellers (wholesale services). Our
Consumer Services segment provides to residential customers a variety of
any-distance communications services including long distance, local toll
(intrastate calls outside the immediate local area) and Internet access. In
addition, Consumer Services provides prepaid calling-card and operator-handled
calling services. Local phone service is also provided in certain areas. The
costs associated with the development of fixed wireless technology are included
in the Consumer Services segment results. Our Wireless Services segment offers
wireless voice and data services and products to customers in our 850 megahertz
(cellular) and 1900 megahertz (Personal Communications Services, or PCS)
markets. Wireless Services includes certain interests in partnerships and
affiliates that provide wireless services in the United States and
internationally, aviation communications services and the results of our
messaging business through the October 2, 1998, date of sale. Our Broadband
segment offers a variety of services through our cable broadband network,
including traditional analog video and new services such as digital cable and
AT&T@Home, our high-speed cable Internet access service. Also included in this
segment are the operations associated with developing and installing the
infrastructure that supports broadband telephony. The balance of AT&T Group's
operations is included in an "Other and Corporate" category. This category
reflects the results of AT&T Solutions, our outsourcing and network management
business, International Operations and Ventures, other corporate operations,
corporate staff functions and elimination of transactions between segments.
Included in AT&T Solutions are the results of the IBM Global Network (renamed
AT&T Global Network Services, or AGNS), which was acquired for cash in phases
throughout 1999. Liberty Media Group (LMG) is then added to AT&T Group, as
appropriate, to reconcile segment results to consolidated AT&T. LMG is not an
operating segment of AT&T because AT&T does not have a controlling financial
interest in LMG for financial accounting purposes therefore, we account for this
investment under the equity method. Additionally, LMG's results are not reviewed
by the chief operating decision-makers for purposes of determining resources to
be allocated. Total assets for our reportable segments include all external
assets for each segment. Prepaid pension assets and corporate-owned or leased
real estate are generally held at the corporate level. Shared network assets are
allocated to the segments and reallocated each January based on two years of
volumes. The accounting policies of the segments are the same as those described
in the summary of significant accounting policies (see Note 1). AT&T evaluates
performance based on several factors, of which the primary financial measure is
earnings, including other income(expense), before interest and taxes (EBIT).
Generally, AT&T accounts for Business Services' intersegment telecommunications
transactions at market prices.


   73




REVENUE
For the Years Ended December 31,          1999        1998         1997
Business Services external revenue     $23,540     $22,706      $21,520
Business Services internal revenue       1,562         905          811
Total Business Services revenue         25,102      23,611       22,331
Consumer Services external revenue      21,972      22,885       23,690
Wireless Services external revenue       7,627       5,406        4,668
Broadband external revenue               4,871           -            -
  Total reportable segments             59,572      51,902       50,689
Other and Corporate                      2,819       1,321          888
Total revenue                          $62,391     $53,223      $51,577

DEPRECIATION AND AMORTIZATION*
For the Years Ended December 31,          1999        1998         1997
Business Services                      $ 2,948     $ 2,388      $ 1,855
Consumer Services                          877         730          772
Wireless Services                        1,223       1,036          886
Broadband                                1,674           -            -
  Total reportable segments              6,722       4,154        3,513
Other and Corporate                        717         475          469
Total depreciation and amortization    $ 7,439     $ 4,629      $ 3,982

* Includes the amortization of goodwill, franchise costs and other purchased
intangibles.

EQUITY EARNINGS (LOSSES)
For the Years Ended December 31,          1999        1998         1997
Wireless Services                      $    74     $   108       $  222
Broadband                               (1,145)          -            -
  Total reportable segments             (1,071)        108          222
Other and Corporate                        (84)       (176)        (191)
Liberty Media Group                     (2,022)          -            -
Total equity earnings (losses)         $(3,177)    $   (68)      $   31

RECONCILIATION OF EARNINGS BEFORE INTEREST AND TAXES (EBIT) TO INCOME BEFORE
INCOME TAXES
For the Years Ended December 31,          1999        1998         1997
Business Services                      $ 6,131     $ 5,007      $ 4,047
Consumer Services                        7,968       6,568        4,922
Wireless Services                         (474)        182          366
Broadband                               (2,276)          -            -
  Total reportable segments' EBIT       11,349      11,757        9,335
Other and Corporate EBIT                  (991)     (3,023)      (2,056)
Liberty Media Group equity losses        2,022           -            -
Interest expense                         1,651         427          307
Total income before income taxes       $ 6,685     $ 8,307      $ 6,972


   74




ASSETS
At December 31,                           1999        1998         1997
Business Services                      $25,107     $21,415      $16,918
Consumer Services                        6,823       6,561        8,156
Wireless Services                       22,478      19,115       18,639
Broadband                               56,536           -            -
  Total reportable segments            110,944      47,091       43,713
Other and Corporate assets:
  Other segments                        11,045       4,165        4,336
  Prepaid pension costs                  2,464       2,074        2,156
  Deferred taxes                           899       1,156        1,106
  Net assets of discontinued operations      -           -        1,101
  Other corporate assets                 5,594       5,064        8,683
Investment in Liberty Media Group
  and related receivables, net          38,460           -            -
Total assets                          $169,406     $59,550      $61,095

EQUITY INVESTMENTS
At December 31,                           1999        1998         1997
Wireless Services                       $3,850     $ 3,735      $ 3,128
Broadband                               13,052           -            -
  Total reportable segments             16,902       3,735        3,128
Other and Corporate                      1,552         522          555
Liberty Media Group                     38,460           -            -
Total equity investments               $56,914     $ 4,257      $ 3,683

CAPITAL ADDITIONS
For the Years Ended December 31,          1999        1998         1997
Business Services                      $ 7,145     $ 5,952      $ 4,547
Consumer Services                          859         526        1,010
Wireless Services                        2,598       2,321        2,071
Broadband                                4,759           -            -
  Total reportable segments             15,361       8,799        7,628
Other and Corporate                      1,798         779        1,055
Total capital additions                $17,159     $ 9,578      $ 8,683

Geographic information is not presented due to the immateriality of revenue
attributable to international customers.

Reflecting the dynamics of our business, we continually review our management
model and structure. In 2000, we anticipate changes to our segments as follows:
The Business Services segment will be expanded to include the results of AT&T
Solutions, and Broadband results will be expanded to include the operations of
MediaOne upon the completion of the merger. The Wireless Services segment will
be expanded to include fixed wireless technology and certain international
wireless investments.



   75




18. QUARTERLY INFORMATION (UNAUDITED)



1999                                        First     Second       Third       Fourth
                                                                  
Revenue                                   $14,096    $15,691     $16,270      $16,334
Operating income                            2,116      2,913       3,389        2,441
Income from continuing operations(1)        1,018      1,045       1,416          (51)
Net income                                $ 1,018    $ 1,045     $ 1,416        $ (51)

Per AT&T Group common share-basic(2):
Income from continuing
  operations                              $   .39    $   .50     $   .51      $   .36
AT&T Group earnings                           .39        .50         .51          .36

Per AT&T Group common share-diluted(2):
Income from continuing
  operations                              $   .38    $   .49     $   .50      $   .36
AT&T Group earnings                           .38        .49         .50          .36

Dividends declared per AT&T common
  shares                                  $   .22    $   .22     $   .22      $   .22

Liberty Media Group loss per share(3):
  Basic and diluted2                      $   .05    $   .43     $   .17      $   .95

Stock price(2),(6):
AT&T common stock
  High                                    $ 64.08    $ 63.00     $ 59.00      $ 61.00
  Low                                       50.58      50.06       41.81        41.50
  Quarter-end close                         53.20      55.81       43.50        50.81
Liberty Media Group Class A
  tracking stock
  High                                      29.06      37.03       39.69        56.81
  Low                                       25.88      26.25       30.88        35.88
  Quarter-end close                         26.30      36.75       37.31        56.81
Liberty Media Group Class B
  tracking stock
  High                                      29.13      37.25       39.75        68.75
  Low                                       26.13      27.38       32.00        38.63
  Quarter-end close                         26.88      37.25       39.75        68.75





   76






1998                                        First(4)  Second(5)    Third       Fourth
                                                                  
Revenue                                   $12,831    $13,211     $13,653      $13,528
Operating income (loss)                     1,404       (459)      3,356        3,186
Income (loss) from continuing
  operations                                1,285       (161)      2,123        1,988
Income before extraordinary loss            1,295      1,129       2,123        1,988
Extraordinary loss                              -          -         137            -
Net income                                $ 1,295    $ 1,129     $ 1,986      $ 1,988

Per AT&T common share-basic:
Income (loss) from continuing
  operations                              $   .48    $  (.06)    $   .79      $   .76
Extraordinary loss                              -          -         .05            -
Net income                                    .48        .42         .74          .76

Per AT&T common share-diluted:
Income (loss) from continuing
  operations                              $   .48    $  (.06)    $   .78      $   .75
Extraordinary loss                              -          -         .05            -
Net income                                    .48        .42         .73          .75

Dividends declared                        $   .22    $   .22     $   .22      $   .22

AT&T Stock price(6):
  High                                    $ 45.67    $ 44.92     $ 40.92      $ 52.67
  Low                                       38.25      37.42       32.25        37.46
  Quarter-end close                         43.83      38.08       38.95        50.50



1. First and second quarter 1999 amounts were restated to reflect changes
   resulting from the appraisal of Broadband. The restatement had no impact on
   net income or earnings per share.

2. Amounts have been restated to reflect the April 1999 three-for-two split of
   AT&T's common stock and the June 1999 two-for-one stock split of the Liberty
   Media Group tracking stock.

3. No dividends have been declared for Liberty Media Group.

4. First quarter 1998 included $10 of income from discontinued operations. This
   income had no material impact on earnings per share.

5. Second quarter 1998 included a gain on sale of discontinued operations of
   $1,290, for an earnings per share impact of $0.48.

6. Stock prices obtained from the New York Stock Exchange Composite Tape.




   77




19. NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." Among other
provisions, it requires that entities recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. Gains and losses resulting from changes in the fair
values of those derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. The effective date of
this standard was delayed via the issuance of SFAS No. 137. The effective date
for SFAS No. 133 is now for fiscal years beginning after June 15, 2000, though
earlier adoption is encouraged and retroactive application is prohibited. For
AT&T this means that the standard must be adopted no later than January 1, 2001.
Based on the types of derivatives we currently have, we do not expect the
adoption of this standard will have a material impact on AT&T's results of
operations, financial position or cash flows.

In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements," which must be adopted by March
31, 2000. We are currently assessing the impact of SAB 101 on our results of
operations.


20. SUBSEQUENT EVENTS

On January 5, 2000, AT&T and BT announced financial closure of Concert. Concert
began operations in 2000 as the leading global telecommunications company
serving multinational business customers, international carriers and Internet
service providers worldwide.

On January 18, 2000, we sold our ownership in Lenfest Communications, Inc.
(Lenfest), to a subsidiary of Comcast. In connection with the sale, we received
48,555,280 shares of Comcast Class Special A common stock, which had a value of
$2,510 at the date of disposition.

On February 3, 2000, a registration statement was filed with the SEC for an
initial public offering of AT&T Wireless Group tracking stock. The new tracking
stock will provide current shareowners and future investors with a security tied
directly to the economic performance of AT&T's Wireless business. AT&T Wireless
Group will include voice and data mobility, fixed wireless and certain
international wireless investments. At a special shareowner meeting held in
March, a proposal to create the tracking stock was approved. We intend to
conduct an initial public offering of AT&T Wireless Group tracking stock in the
second quarter. A distribution, which may be in the form of a dividend, exchange
offer, or a combination of these, of the AT&T Wireless Group tracking stock is
intended to be made to shareowners of AT&T common stock sometime thereafter.
Holders of Liberty Media Group tracking stock will not be entitled to this
distribution.

In February 2000, AT&T entered into an agreement with TeleCorp PCS, Inc., to
swap certain licenses that we currently own in the midwestern United States as
well as cash of approximately $100 in exchange for licenses in several New
England markets. The transaction is expected to close in the fourth quarter of
2000.

EX-99.1

   1
                                                                   EXHIBIT 99.1


                              AT&T WIRELESS GROUP
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

     The AT&T Wireless Group is one of the largest wireless service providers in
the United States, based on $7.6 billion in revenues for the year ended December
31, 1999. Including its partnership markets, the AT&T Wireless Group had over 12
million total subscribers as of December 31, 1999. The AT&T Wireless Group
focuses on revenue growth through the retention and expansion of its subscriber
base. The AT&T Wireless Group seeks to do this by providing new and innovative
services that distinguish it from its competitors. Examples include pricing
plans that simplify customer choice, such as AT&T Digital One Rate service, and
bundled offerings of communications products and services that target specific
customer groups.

     The AT&T Wireless Group operates one of the largest U.S. digital wireless
networks. The AT&T Wireless Group, including its partnership and affiliate
markets, currently holds 850 megahertz and 1900 megahertz licenses to provide
wireless services covering 94% of the U.S. population, with approximately 81% of
the U.S. population covered by at least 30 megahertz of wireless spectrum as of
December 31, 1999. As of December 31, 1999, the AT&T Wireless Group's built
network, including partnership and affiliate markets, covered 65% of the U.S.
population. This includes operations in 42 of the 50 largest U.S. metropolitan
areas. By the end of 2000, the AT&T Wireless Group expects that its built
network, including partnership and affiliate markets, will cover over 70% of the
U.S. population. The AT&T Wireless Group supplements its own operations with
roaming agreements that allow its subscribers to use other providers' wireless
services in regions where the AT&T Wireless Group does not have operations.
Through these roaming agreements, the AT&T Wireless Group is able to offer its
customers wireless services covering over 95% of the U.S. population. The AT&T
Wireless Group plans to continue to increase its coverage and the quality of its
services by expanding the footprint and capacity of its network at an increased
pace and by acquiring or partnering with other wireless providers.

     The AT&T Wireless Group provides its wireless voice and data services using
time division multiple access (TDMA), analog and cellular digital packet data
(CDPD) technologies. The AT&T Wireless Group has focused on building out its
digital network, including upgrading its analog systems to digital in its 850
megahertz markets, and on migrating its customers from analog to digital
service. The AT&T Wireless Group believes that digitalization improves capital
efficiency, lowers network operating costs and allows it to offer higher quality
services. As of December 31, 1999, the AT&T Wireless Group had upgraded 98% of
its 850 megahertz markets to digital based systems and all of its 1900 megahertz
markets are digital based. As of December 31, 1999, over 79% of the AT&T
Wireless Group's consolidated subscribers use digital services, accounting for
over 85% of its traffic. The AT&T Wireless Group believes that these percentages
are substantially greater than the industry average, excluding the AT&T Wireless
Group.

     The AT&T Wireless Group markets its products and services primarily under
the AT&T brand name. The AT&T Wireless Group believes that AT&T's widely
recognized brand increases consumer awareness of, and confidence in, the AT&T
Wireless Group's products and services. The AT&T Wireless Group also believes
that its relationship with AT&T will provide it with other competitive
advantages. For example, the AT&T Wireless Group and the AT&T Common Stock
Group (which consists of the operations of AT&T other than those attributed to
AT&T tracking stocks) plan to offer their products and services together in
bundled offerings, which may combine wireless services with long distance and
local communications services, broadband services and Internet services. In
addition, each group will be able to take advantage of the other group's
marketing and sales efforts and network capabilities.


   2

     The digitalization of the network and subscriber base has had a significant
impact on the AT&T Wireless Group's financial results over the past several
years. Digital service has helped to increase growth in subscribers, especially
from AT&T Digital One Rate service. The usage patterns of AT&T Digital One Rate
service and other digital customers, coupled with the increase in enhanced
service features, have contributed to an increase in average monthly revenues
per user (ARPU). Digital customers also have demonstrated reduced churn compared
with analog customers. While enhanced network efficiency resulting from
digitalization contributes to reducing costs, upgrading the network to digital
has caused an increase in capital expenditures and network and other costs of
services over the past several years. In addition, the increase in the number of
digital subscribers has resulted in additional customer migration costs,
including handset subsidies, and AT&T Digital One Rate service and other similar
expanded area plans have resulted in increased roaming expenses.

     The AT&T Wireless Group's results include domestic voice and data services,
their aviation communications business, earnings or losses associated with
equity interests in wireless communications ventures and partnerships both in
the United States and internationally, and the costs associated with the
development of fixed wireless technology. The results of the messaging services
business are included through October 2, 1998 (date of sale). The AT&T Wireless
Group provides its mobile voice services using both 850 megahertz cellular and
1900 megahertz PCS licenses. The AT&T Wireless Group does not manage its
business for these spectrums separately. Rather, the AT&T Wireless Group manages
its business to provide virtually seamless network coverage irrespective of the
spectrum. From a marketing and operational perspective, the AT&T Wireless Group
defines and manages its markets geographically, usually around an urban area or
other geographic region. These geographic markets may use either 850 megahertz
or 1900 megahertz spectrum or both. Geographic markets that use predominantly
850 megahertz spectrum have been in operation longer and therefore are more
mature than those markets that exclusively use 1900 megahertz spectrum. As a
result, the financial results of these two types of markets currently differ
significantly.

     Since the AT&T Wireless Group does not manage the business along spectrum
divisions, it does not provide separate 850 megahertz and 1900 megahertz
financial statements in the normal course of operations. As supplemental
information, however, we have set out in the table below information on 850
megahertz markets and 1900 megahertz markets to demonstrate the estimated
financial performance of these different types of markets. The supplemental
financial information contains a number of allocations and attributions,
including corporate and general administrative expenses, between the markets,
based on management's judgment. There can be no assurance that the financial
results provided below would have been obtained were these markets actually
managed separately. In addition, mixed markets possessing both 850 megahertz and
1900 megahertz systems in operation are categorized as 850 megahertz markets. In
the discussion and analysis below, we draw assumed distinctions as to the
results of the 850 megahertz and 1900 megahertz markets where it may help to
better evaluate performance of these markets and the business as a whole. When
the 1900 megahertz markets mature to the point that the distinction between
these markets and the more mature 850 megahertz markets are no longer
meaningful, we will discontinue this supplemental reporting.

   3

     The AT&T Wireless Group's results below do not include aviation
communications, earnings or losses associated with equity interests in wireless
communications ventures and partnerships both in the United States and
internationally, or costs associated with the development of fixed wireless
technology.



                                                         YEAR ENDED
                                                     DECEMBER 31, 1999
                                                  ------------------------
                                                     850           1900
                                                  MEGAHERTZ      MEGAHERTZ
                                                  ---------      ---------
                                                   (AMOUNTS IN MILLIONS,
                                                    EXCEPT WHERE NOTED)
                                                           
Revenues:
  Services......................................   $5,586         $1,151
  Equipment.....................................      647            143
                                                   ------         ------
Total Revenues..................................    6,233          1,294
EBITDA*.........................................      847           (191)
EBITDA (excluding asset impairment and
  restructuring charges)........................    1,356           (171)
Capital Expenditures............................    1,453            880
Subscribers.....................................      8.2            1.4
ARPU (in dollars)...............................   $ 61.9         $ 94.1
Licensed POPs...................................     75.3          104.9


- ---------------
* EBITDA is defined as earnings before interest and taxes, excluding other
  income, net, plus depreciation and amortization.

     The AT&T Wireless Group seeks to establish local market partnerships with
other wireless providers in order to accelerate the build out of its TDMA
systems. In addition to partnership arrangements for its 850 megahertz markets,
the AT&T Wireless Group has entered into a number of joint ventures and
affiliations to expand its 1900 megahertz digital coverage.

     The AT&T Wireless Group's proportionate share of EBITDA for these key
domestic partnerships and affiliates was $350 million for the year ended
December 31, 1999 and $354 million for the year ended December 31, 1998.

     The AT&T Wireless Group's proportionate share of debt for these key
domestic partnerships and affiliates was $339 million at December 31, 1999 and
$145 million at December 31, 1998.

     In August 1999, the AT&T Wireless Group completed its acquisition of
Honolulu Cellular Telephone Company, adding approximately 125,000 subscribers
and providing the AT&T Wireless Group's mainland customers with wireless
services in Oahu, Hawaii. In May 1999, the AT&T Wireless Group completed its
acquisition of Vanguard Cellular Systems, Inc., adding approximately 700,000
subscribers and increasing the AT&T Wireless Group's coverage in suburban and
rural markets in the Ohio Valley and Northeastern United States. In April 1999,
the AT&T Wireless Group completed its acquisition of Bakersfield Cellular
Telephone Company, adding approximately 45,000 subscribers.

OPERATING RESULTS

     YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998

     Revenues.  Total revenues include wireless voice and data services, the
sale of handsets and accessories, messaging and aviation communications. The
AT&T Wireless Group records revenues as services are provided. These services
revenues include monthly recurring charges, airtime and toll usage charges, and
roaming charges billed to subscribers for usage outside of the AT&T Wireless
Group network as well as charges billed to other wireless providers for roaming
on the AT&T Wireless Group network.
   4


     Total revenues for the year ended December 31, 1999 were $7,627 million, an
increase of $2,221 million, or 41.1%, compared with 1998. The AT&T Wireless
Group's 1999 results include Vanguard since its acquisition on May 3, 1999, and
1998 results include its messaging business until its sale on October 2, 1998.
Adjusted to exclude both Vanguard and its messaging business, total revenues for
the AT&T Wireless Group increased by 39.0% compared with 1998.

     Total revenues for the year ended December 31, 1999 within the 850
megahertz markets were $6,233 million, an increase of $1,486 million, or 31.3%,
compared with 1998. Total revenues for the year ended December 31, 1999 within
the 1900 megahertz markets were $1,294 million, an increase of $910 million, or
237.0%, compared with 1998.

     The revenue increases in both the 850 megahertz and 1900 megahertz markets
were driven primarily by consolidated subscriber growth and rising ARPU. As of
December 31, 1999, ending subscribers within the 850 megahertz markets increased
by 24.4% compared with 1998, while ending subscribers within 1900 megahertz
markets increased by 128.4% compared with 1998. AT&T Digital One Rate service
significantly contributed to the increase in ARPU and subscribers by acquiring
and retaining high value customers, who have a significantly higher ARPU than an
average subscriber. As of December 31, 1999, the number of subscribers using
AT&T Digital One Rate service was 1.8 million, an increase of 1.0 million, or
114.6%, compared with December 31, 1998, of which over 80% were new subscribers
to the AT&T Wireless Group.

     Services revenues for the year ended December 31, 1999 were $6,823 million,
an increase of $2,044 million, or 42.8%, compared with 1998. Services revenues
within the 850 megahertz markets were $5,586 million in 1999, an increase of
$1,346 million, or 31.7%, compared with 1998. Services revenues within the 1900
megahertz markets were $1,151 million in 1999 compared with $284 million in
1998. These increases were driven primarily by consolidated subscriber growth
and rising ARPU.

     As of December 31, 1999, the AT&T Wireless Group had 9.6 million
consolidated subscribers, an increase of 33.4% compared with the prior year, of
which 79.2% were digital subscribers, up from 60.7% as of December 31, 1998.
Included in these figures were approximately 700,000 subscribers from our
acquisition of Vanguard in May 1999, approximately 125,000 subscribers from our
acquisition of Honolulu Cellular in August 1999 and approximately 45,000
subscribers from our acquisition of Bakersfield Cellular in April 1999.
Including the AT&T Wireless Group's partnership markets, approximately 9.4
million of the 12.2 million total subscribers were digital subscribers as of
December 31, 1999. Segmented by market, as of December 31, 1999, 8.2 million of
the consolidated subscribers were within the 850 megahertz markets, of which
75.6% were digital subscribers, and 1.4 million of the consolidated subscribers
were within the 1900 megahertz markets. As of December 31, 1999, penetration in
the 850 megahertz markets was 10.8% compared with 9.7% as of December 31, 1998,
based on licensed POPs. As of December 31, 1999, penetration in the 1900
megahertz markets was 2.0% compared with 0.9% as of December 31, 1998, based on
licensed POPs.

     The AT&T Wireless Group's ARPU in the 850 megahertz markets for the year
ended December 31, 1999 was $61.9, an increase of $5.2, or 9.2%, compared with
1998. The AT&T Wireless Group's ARPU in the 1900 megahertz markets for the year
ended December 31, 1999 was $94.1, an increase of $18.0, or 23.7%, compared with
1998. These increases were primarily due to increased minutes of use per
subscriber, driven in part by the success of AT&T Digital One Rate service. The
AT&T Wireless Group's ARPU remained significantly higher than the wireless
industry average during 1999, excluding the AT&T Wireless Group.

   5

     Equipment revenues for the year ended December 31, 1999 were $804 million,
an increase of $177 million, or 28.2%, compared with 1998. Equipment revenues
within the 850 megahertz markets were $647 million for the year ended December
31, 1999, an increase of $140 million, or 27.6%, compared with 1998. Equipment
revenues within the 1900 megahertz markets were $143 million compared with $100
million in 1998. These increases were primarily due to a 25.1% increase in gross
consolidated subscriber additions in 1999 compared with 1998. As an integral
part of the wireless service offering, the AT&T Wireless Group supplies to its
new subscribers a selection of handsets at competitive prices, which are
generally offered at or below cost.

     Network and other costs of services.  Network and other costs of services
expenses include the costs to place calls over the network (including the costs
to operate and maintain the AT&T Wireless Group's network as well as roaming
costs paid to other wireless providers), the costs of handsets and accessories
provided to the AT&T Wireless Group's customers and the charges paid to connect
calls on other networks, including those of the AT&T Common Stock Group.

     Network and other costs of services expenses for the year ended December
31, 1999 were $3,846 million. This was an increase of $1,418 million, or 58.4%,
compared with 1998. The increase was due primarily to roaming expenses
associated with the success of AT&T Digital One Rate service as off-network
roaming minutes of use increased by 194.7% for the year ended December 31, 1999,
compared with 1998, coupled with the increased costs of handsets provided to
subscribers.

     Although roaming expenses continued to impact results for the year ended
December 31, 1999, the rate of roaming expense growth declined significantly
during the latter half of 1999, as the AT&T Wireless Group introduced
initiatives to aggressively migrate more minutes onto the AT&T Wireless Group
network as well as reduce intercarrier roaming rates. The AT&T Wireless Group
continues to seek to decrease roaming expenses through capital spending for
network expansion, acquisitions and affiliate launches. Roaming rates also have
declined significantly as a result of renegotiated roaming agreements and the
deployment of IRDB technology, which assists in identifying favorable roaming
partners in areas not included in the AT&T Wireless Group's network. All of
these efforts have resulted in a reduction of approximately 18% in the average
roaming rate per minute paid to other carriers for the year ended December 31,
1999, compared with 1998.

     Depreciation and amortization.  Depreciation and amortization expenses for
the year ended December 31, 1999 were $1,253 million, an increase of $174
million, or 16.1%. This increase primarily resulted from a larger asset base and
additional amortization of goodwill and other purchased intangibles associated
with the acquisition of Vanguard.

     Selling, general and administrative.  Selling, general and administrative
(SG&A) expenses for the year ended December 31, 1999 were $2,663 million
compared with $2,122 million for the year ended December 31, 1998. This increase
was due to higher marketing and selling costs associated with the increase in
consolidated gross subscriber additions in 1999 compared with 1998, as well as
the growth in customer care expenses associated with the larger consolidated
subscriber base.

     For the year ended December 31, 1999, SG&A expenses as a percent of total
revenues were 34.9%, a 4.4 point improvement compared with the same period in
the prior year. This improvement was due to expense leveraging primarily within
general and administrative expenses.

     Asset impairment and restructuring charges.  During the fourth quarter of
1999, the AT&T Wireless Group recorded a $531 million asset impairment charge
primarily associated with the planned disposal of wireless communications
equipment resulting from a program to increase capacity and operating efficiency
of the wireless network. Asset impairment and restructuring charges for the


   6

year ended December 31, 1998 were $120 million, which represented the write-down
of unrecoverable assets associated with nonstrategic businesses.

     Other income, net.  Other income, net includes gains or losses on sales or
exchanges of assets, net equity earnings of investments, minority interests in
earnings or losses of subsidiaries, and other miscellaneous items. Other income,
net for the year ended December 31, 1999 was $176 million. Other income, net for
the year ended December 31, 1998 was $764 million. The decrease was due
primarily to the pretax gains on sales in 1998 of LIN Television Corporation of
$342 million, SmarTone Telecommunications Holdings Limited of $128 million and
PriceCellular of $67 million. Net equity earnings decreased in 1999 primarily as
a result of increased losses associated with affiliate investments.
Additionally, equity losses increased in 1999 compared with 1998 by $82 million
for losses associated with financial commitments related to certain investments.

     Interest expense.  Interest expense consists primarily of interest on
intercompany debt due to the AT&T Common Stock Group. Interest was charged at
7.25% per annum for the year ended December 31, 1999 and 7.75% per annum for the
year ended December 31, 1998. Interest expense for the year ended December 31,
1999 was $136 million, an increase of $16 million, or 13.3%, compared with 1998.
The increase was due to a higher level of average debt outstanding, partially
offset by the impact of the lower rate charged by the AT&T Common Stock Group in
1999.

     (Benefit) provision for income taxes.  The benefit for income taxes for the
year ended December 31, 1999 was $221 million, compared with a tax provision of
$137 million for the year ended December 31, 1998. The benefit for income taxes
in 1999 was primarily due to the loss for the period coupled with changes in the
valuation allowance and other estimates. The effective income tax rates for the
years ended December 31, 1999 and 1998, were 35.3% and 45.5%, respectively. The
effective income tax rate for 1999 approximated the federal statutory rate due
to the benefit from the change in the valuation allowance and other estimates,
offset by unutilized foreign equity losses and amortization of intangibles. The
effective income tax rate for 1998 was higher than the federal statutory rate
primarily due to the effects of state taxes, net of federal benefit, unutilized
foreign equity losses, and the amortization of intangibles, partially offset by
the effects of changes in valuation allowance and other estimates.

     Dividend requirements on preferred stock.  The AT&T Wireless Group has $1.0
billion of preferred stock held by the AT&T Common Stock Group that pays
dividends at 9% per annum. Dividend requirements on this preferred stock for the
years ended December 31, 1999 and 1998 were $56 million, net of amounts recorded
in accordance with the tax sharing agreement described in Note 1 to the
historical combined financial statements.

     YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997

     Revenues.  Total revenues for the year ended December 31, 1998 were $5,406
million, an increase of $738 million, or 15.8%, compared with 1997. Adjusting
for the October 2, 1998 sale of the messaging business, total revenues for the
year ended December 31, 1998 increased 17.2% compared with 1997. Total revenues
for the year ended December 31, 1998 within the 850 megahertz markets were
$4,747 million, an increase of $373 million, or 8.5%, compared with 1997. The
rate of growth slowed in the 850 megahertz markets due to increased competition
from new PCS competitors. This was somewhat offset by the success of the AT&T
Digital One Rate service launched in May 1998. Total revenues for the year ended
December 31, 1998 within the 1900 megahertz markets were $384 million, an
increase of $367 million compared with 1997. The year-over-year growth in 1900
megahertz market revenues was primarily due to revenues generated from the 1900
megahertz markets launched by the AT&T Wireless Group during 1997, many in the
latter part of that year.

   7

     Services revenues for the year ended December 31, 1998 were $4,779 million,
an increase of $530 million, or 12.5%, compared with 1997. The increase in
services revenues was driven primarily by an increase in consolidated
subscribers of 20.3%, due in large part to the success of AT&T Digital One Rate
service and the full-year impact in 1998 of the nine 1900 megahertz markets that
were launched in 1997. This was partially offset by a decline in ARPU. AT&T
Digital One Rate service, was first introduced in May 1998. In 1998, 856,000
customers signed on to AT&T Digital One Rate service, 74% of which were new
customers to the AT&T Wireless Group. Services revenues within the 850 megahertz
markets were $4,240 million in 1998, an increase of $246 million, or 6.2%,
compared with 1997. Services revenues within the 1900 megahertz markets were
$284 million in 1998 compared with $5 million in 1997.

     As of December 31, 1998, the AT&T Wireless Group had 7.2 million
consolidated subscribers, of which 60.7% were digital subscribers, up from 29.3%
in 1997. Including AT&T Wireless Group's partnership markets, 5.3 million of the
total 9.6 million subscribers were digital subscribers as of December 31, 1998.
Segmented by market as of December 31, 1998, 6.6 million of the consolidated
subscribers were within the 850 megahertz markets, of which 57.0% were digital
subscribers, and 0.6 million of the consolidated subscribers were within the
1900 megahertz markets. As of December 31, 1998, penetration was 9.7% and 0.9%
in the 850 megahertz and 1900 megahertz markets, respectively, based on licensed
POPs. This compares with a penetration of 8.9% in the 850 megahertz markets as
of December 31, 1997, based on licensed POPs. Penetration statistics for the
1900 megahertz markets as of December 31, 1997 are not meaningful due to the
launch of these markets in the latter half of that year.

     The AT&T Wireless Group's ARPU in the 850 megahertz markets for the year
ended December 31, 1998 was $56.7, a decrease of $3.0, or 5.0%, compared with
1997. In the fourth quarter of 1998, however, ARPU increased 1.6% over the prior
year's quarter compared with quarter-over-quarter declines of 10.8%, 7.4% and
3.7% in the first, second, and third quarters of 1998, respectively. AT&T
Digital One Rate service was responsible primarily for the increase in ARPU in
the fourth quarter, and the slowdown in the ARPU decline in the second and third
quarters of 1998. ARPU in the 1900 megahertz markets was $76.1 in 1998. The AT&T
Wireless Group's ARPU remained significantly higher than the wireless industry
average during 1998, excluding the AT&T Wireless Group.

     Equipment revenues for the year ended December 31, 1998 were $627 million,
an increase of $208 million, or 49.6%, compared with 1997. This increase was
primarily due to the increase in gross consolidated subscriber additions
substantially attributable to the success of AT&T Digital One Rate service, as
well as increased migration of subscribers from analog to digital service.
Equipment revenues within the 850 megahertz markets were $507 million in 1998,
an increase of $127 million, or 33.4%, compared with 1997. Equipment revenues
within the 1900 megahertz markets were $100 million in 1998 compared with $12
million in 1997.

     Network and other costs of services.  Network and other costs of services
expenses for the year ended December 31, 1998 were $2,428 million, an increase
of $658 million, or 37.2%, compared with 1997. This increase was due primarily
to higher roaming costs paid to other wireless providers reflecting increased
calling volumes due in part to the introduction of AT&T Digital One Rate
service, and the costs associated with increased handset sales.

     The AT&T Wireless Group has taken a number of steps to control increases in
roaming expenses, including expansion of its network coverage, acceleration of
digital build outs and acquisitions of and partnering with other wireless
providers. In addition, the AT&T Wireless Group has been aggressively
negotiating lower roaming rates with other wireless providers and maximizing
roaming activity with its partners. The AT&T Wireless Group expects that
technological developments, including handsets that can more easily be
programmed with preferred roaming providers and tri-mode handsets that will
allow roaming between its networks, will help to manage its roaming costs.

   8


     Depreciation and amortization.  Depreciation and amortization expenses for
the year ended December 31, 1998 were $1,079 million, an increase of $253
million, or 30.6%, compared with 1997. This increase reflects a full year of
depreciation expense on assets related to the launch of the new 1900 megahertz
markets during the latter half of 1997.

     During 1998, the AT&T Wireless Group completed a review of the estimated
service lives of some of its wireless communications equipment. As a result,
effective January 1, 1998, the estimated service lives of this equipment were
changed from 12 years to varying periods primarily ranging from seven to 10
years, with certain assets being changed to 15 years, depending on the nature of
the equipment. These changes resulted in an annual increase in depreciation
expense of $42 million in 1998.

     Selling, general and administrative.  SG&A expenses for the year ended
December 31, 1998 were $2,122 million, an increase of $140 million, or 7.1%,
compared with 1997. This increase resulted primarily from increased advertising
and other marketing costs to aggressively launch and support the new 1900
megahertz market launches. SG&A remained essentially flat in the 850 megahertz
markets despite increases in revenues and subscribers, reflecting a decrease in
selling and marketing costs associated with customer acquisitions in these
markets and a reduction in headcount in other general and administrative
functions. SG&A associated with the 1900 megahertz markets increased $141
million, or 82.0%, compared with 1997, driven by subscriber growth within those
markets.

     For the year ended December 31, 1998, SG&A expenses as a percent of total
revenue were 39.3%, a 3.2 point reduction compared with 1997, due to expense
leveraging, primarily within general and administrative expenses.

     Asset impairment and restructuring charges.  During 1998, the AT&T Wireless
Group recorded a pretax asset impairment charge of $120 million, which
represented the write-down of unrecoverable assets associated with nonstrategic
businesses. During 1997, the AT&T Wireless Group recorded a pretax charge of
$160 million related to the decision to no longer pursue a two-way messaging
business. This charge included costs associated with the write-down of
unrecoverable assets, as well as costs related to contractual obligations and
termination penalties.

     Other income, net.  Other income, net includes gains or losses on sales or
exchanges of assets, net equity earnings of investments, minority interests in
earnings or losses of subsidiaries, and other miscellaneous items. Other income,
net for the year ended December 31, 1998 was $764 million, an increase of $476
million, or 165.3%, compared with 1997. The increase primarily was due to 1998
pretax gains on the sales of LIN-TV of $342 million, SmarTone of $128 million
and PriceCellular of $67 million. These gains were slightly offset by a decline
in net equity earnings resulting primarily from international investments
compared with 1997.

     Interest expense.  Interest expense consists primarily of interest on the
intercompany debt due to the AT&T Common Stock Group. Interest was charged at
7.75% per annum. Interest expense for the year ended December 31, 1998 was $120
million, compared with no interest expense in 1997. In 1997, all of the interest
expense was capitalized as the AT&T Wireless Group continued to build out its
network. In 1998, its build out was complete in certain markets and therefore,
it was no longer appropriate to capitalize interest associated with certain of
these assets.

     (Benefit) provision for income taxes.  The provision for income taxes for
the year ended December 31, 1998 was $137 million, an increase of $44 million,
or 47.3%, compared with 1997 due to higher levels of pretax income in 1998. The
effective tax rate was 45.5% and 42.7% for the years ended December 31, 1998 and
1997, respectively. The increase in the effective tax rate was driven primarily
by increased unutilized foreign equity losses in 1998 compared with 1997.

   9

     Dividend requirements on preferred stock.  The AT&T Wireless Group has $1.0
billion of preferred stock held by the AT&T Common Stock Group that pays
dividends at 9% per annum. Dividend requirements on this preferred stock for the
year ended December 31, 1998 and 1997 were $56 million in each year, net of
amounts recorded in accordance with the methodology of the tax sharing agreement
described in Note 1 to the historical combined financial statements.

LIQUIDITY AND CAPITAL RESOURCES

     The continued expansion of the AT&T Wireless Group's network and the
marketing and distribution of its products and services will continue to require
substantial capital. The AT&T Wireless Group has funded its operations by
internally generated funds, intercompany borrowings from the AT&T Common Stock
Group and capital contributions from the AT&T Common Stock Group. Capital
contributions from the AT&T Common Stock Group include acquisitions made by the
AT&T Common Stock Group that have been attributed to the AT&T Wireless Group.
Noncash capital contributions from the AT&T Common Stock Group to the AT&T
Wireless Group totaled $2,553 million, $982 million, and $26 million, in 1999,
1998 and 1997, respectively, related to the level of acquisitions and initial
investments funded by the AT&T Common Stock Group. The AT&T Common Stock Group
has provided financing at interest rates and on terms and conditions that are
consistent with those the AT&T Wireless Group would receive as a stand-alone
entity. Sources for the AT&T Wireless Group's future financing requirements may
include the issuance of additional AT&T Wireless Group tracking stock and the
borrowing of funds.

     Net cash provided by operating activities for the year ended December 31,
1999 was $1,024 million compared with $414 million of cash provided by operating
activities in 1998 primarily due to increased EBITDA excluding asset impairment
and restructuring charges and larger increases in operating accruals and
accounts payable. These increases were offset by a higher increase in accounts
receivable driven by strong revenue growth. Net cash used in investing
activities for the year ended December 31, 1999 was $2,280 million, compared
with $238 million of cash provided by investing activities in 1998. The
difference was due primarily to higher capital expenditures to upgrade and
increase capacity in existing markets as well as to expand the national
footprint, and lower cash proceeds associated with the sales of equity
investments. Net cash provided by financing activities for the year ended
December 31, 1999 was $1,234 million compared with $631 million of cash used in
financing activities in 1998 due to increased transfers and debt financing from
the AT&T Common Stock Group to fund the higher capital expenditures during 1999.

     Net cash provided by operating activities for the year ended December 31,
1998 was $414 million, a decrease of $924 million compared with $1,338 million
of cash provided by operating activities in 1997 primarily due to increased
EBITDA excluding asset impairment and restructuring charges, increased accounts
receivable largely driven by higher revenues, as well as a net increase in other
operating assets and liabilities. Net cash provided by investing activities for
the year ended December 31, 1998 was $238 million, compared with a $2,164
million use of cash in 1997 for investing activities primarily due to higher
sales of equity investments and consolidated business and lower capital
expenditures in 1998. The net use of cash in 1997 was due primarily to spending
associated with the new 1900 megahertz market launches. Net cash used in
financing activities for the year ended December 31, 1998 was $631 million
compared with net cash provided by financing activities of $742 million in 1997
primarily due to higher transfers to the AT&T Common Stock Group resulting from
the additional sales of equity investments and consolidated businesses in 1998
as stated above. The net cash provided by financing activities in 1997 was due
primarily to transfers from the AT&T Common Stock Group in order to fund the
investing activities for that year.

   10

     EBITDA is a measure used by the chief operating decision-makers to measure
our ability to generate cash flow. EBITDA may or may not be consistent with the
calculation of EBITDA for other public companies and should not be viewed by
investors as an alternative to generally accepted accounting principles,
measures of performance or to cash flows from operating, investing and financing
activities as a measure of liquidity. EBITDA margins (defined as EBITDA as a
percentage of total revenues) as calculated by the AT&T Wireless Group may not
be comparable to similar measures reported by other wireless providers. The AT&T
Wireless Group records within services revenue roaming activity which is billed
to subscribers for usage outside of the AT&T Wireless Group network.
Concurrently, the AT&T Wireless Group records roaming charges paid to other
providers as network and other costs of services.

     In each of the periods presented, EBITDA and EBITDA margins were favorably
impacted by revenue growth. In particular, AT&T Digital One Rate contributed to
revenue growth in 1999 and 1998. EBITDA and EBITDA margins were also favorably
impacted for the year ended December 31, 1999 as fixed and variable operating
expenses were covered over a growing subscriber base, particularly for the 1900
megahertz markets. The build out and launch of services in new 1900 megahertz
markets, sales and marketing costs (including handset subsidies) of acquiring
new customers, aggressive migration of customers to digital service, the higher
roaming expenses associated with the increasing number of AT&T Digital One Rate
and other expanded area plan subscribers, along with subsequent operational
growth, all negatively impacted EBITDA and EBITDA margins during these periods.

     EBITDA for the year ended December 31, 1999 was $587 million compared with
$736 million for the year ended December 31, 1998. Excluding pretax asset
impairment and restructuring charges of $531 million in 1999 and $120 million in
1998, EBITDA was $1,118 million for 1999, which represents an increase of $262
million, or 30.6%, compared with 1998. This increase was attributable to
increases in total revenues and an improving margin as SG&A expenses declined as
a percentage of revenues.

     Within the 850 megahertz markets, EBITDA for the year ended December 31,
1999 was $847 million compared with $1,261 million in 1998. Excluding the 1999
pretax asset impairment and restructuring charges, EBITDA within the 850
megahertz markets was $1,356 million in 1999, an increase of $95 million, or
7.5%, compared with 1998.

     Within the 1900 megahertz markets, EBITDA for the year ended December 31,
1999 was $(191) million compared with $(373) million in 1998. Excluding the 1999
pretax asset impairment and restructuring charge, EBITDA within the 1900
megahertz markets increased $202 million.

     Excluding the aforementioned pretax asset impairment and restructuring
charges in 1999 and 1998, EBITDA margins were 14.7% for the year ended December
31, 1999, compared with 15.8% in 1998. The decline in EBITDA margins in 1999
compared with 1998 was driven primarily by increased roaming expenses, as well
as increased sales and marketing expenses associated with a 25.1% increase in
gross consolidated subscriber additions in 1999 compared with 1998. EBITDA
margins excluding the 1999 asset impairment and restructuring charges within the
850 megahertz markets were 21.7% for the year ended December 31, 1999, compared
with 26.6% for the year ended December 31, 1998. EBITDA margins within the 1900
megahertz markets are not considered meaningful due to the immaturity of the
markets.

     EBITDA for the year ended December 31, 1998 was $856 million compared with
$916 million in 1997, excluding the pretax asset impairment and restructuring
charges of $120 million in 1998 and $160 million in 1997.

     EBITDA for the year ended December 31, 1998 within the 850 megahertz
markets was $1,261 million, an increase of $82 million, or 7.0%, compared with
1997. Within the 1900 megahertz markets, EBITDA was ($373) million in 1998,
compared with ($212) million in 1997.


   11

     Excluding the pretax asset impairment and restructuring charge of $120
million in 1998 and $160 million in 1997, EBITDA margins were 15.8% in 1998,
compared with 19.6% in 1997. EBITDA margins within the 850 megahertz markets
were 26.6% in 1998, compared with 27.0% in 1997.

     Capital expenditures for the year ended December 31, 1999 were $2,476
million. This represented an increase of $1,340 million, or 118.0%, compared
with 1998. Capital expenditures within the 850 megahertz markets, including
spending associated with administrative functions, totaled $1,453 million, an
increase of 125.3%, compared with 1998. Network capital expenditures within the
1900 megahertz markets totaled $880 million for the year ended December 31,
1999, an increase of 129.2%, compared with 1998.

     Capital expenditures for the year ended December 31, 1998 were $1,136
million, a decrease of $514 million, or 31.2%, compared with 1997. This decrease
resulted from significant spending in 1997 associated with the 1900 megahertz
market launches. Capital expenditures were $645 million in the 850 megahertz
markets, including spending associated with administrative functions, a decrease
of $57 million, or 8.1%, compared with 1997. Network capital expenditures were
$384 million in the 1900 megahertz markets during 1998, a reduction of $428
million, or 52.7%, compared with 1997.

     Financing activities for the AT&T Wireless Group will be managed by AT&T on
a centralized basis and subject to the review of the AT&T Wireless Group capital
stock committee. Loans from AT&T or any member of the AT&T Common Stock Group to
any member of the AT&T Wireless Group will be made at interest rates and on
other terms and conditions designed to be substantially equivalent to the
interest rates and other terms and conditions that the AT&T Wireless Group would
be able to obtain from third parties, including the public markets, as a
nonaffiliate of AT&T without the benefit of any guaranty by AT&T or any member
of the AT&T Common Stock Group. This policy contemplates that these loans will
be made on the basis set forth above regardless of the interest rates and other
terms and conditions on which AT&T or members of the AT&T Common Stock Group may
have acquired the funds. If, however, AT&T incurs any fees or charges in order
to keep available funds for use by the AT&T Wireless Group, those fees or
charges will be allocated to the AT&T Wireless Group. In addition, any
difference between AT&T's borrowing rates and the rates charged to the AT&T
Wireless Group, which we expect will be higher, will be reflected in the
financial statements of the AT&T Common Stock Group.

     In determining the initial capitalization of the AT&T Wireless Group, a
number of factors were considered. These factors included the prospective
financing requirements, the desired stand-alone credit rating, working capital
and capital expenditure requirements, and the initial ratio of total debt and
preferred stock to EBITDA as compared to other companies in its industry.

FINANCIAL CONDITION

     Total assets were $23,512 million as of December 31, 1999, an increase of
$4,052 million, or 20.8%, compared with December 31, 1998. The increase was due
to increases in goodwill and licenses associated with the acquisitions of
Vanguard, Honolulu Cellular and Bakersfield Cellular and increased property,
plant and equipment as a result of significant capital spending in 1999.
Additionally, nonconsolidated investments increased as a result of the
investment in Rogers Cantel during 1999.

     Total liabilities were $9,495 million as of December 31, 1999, an increase
of $1,672 million, or 21.4%, compared with December 31, 1998 primarily as a
result of increased intercompany debt due to the AT&T Common Stock Group, and
increases in accounts payable and other operating accruals.

     Total preferred stock held by AT&T was $1.0 billion at both December 31,
1999, and December 31, 1998. Dividends payable on the preferred stock were paid
at 9% per annum.

   12

     Total shareowner's equity was $13,997 million as of December 31, 1999, an
increase of $2,465 million, or 21.4%, compared with December 31, 1998, due
primarily to increased transfers from the AT&T Common Stock Group.

RECENT ACCOUNTING PRONOUNCEMENTS

     In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements," which must be adopted by March 31, 2000. SAB 101 provides
additional guidance on revenue recognition as well as criteria for when revenue
is generally realized and earned, and also requires the deferral of incremental
direct customer acquisition costs. Management is currently assessing the impact
of SAB 101 on the results of operations and financial position of the AT&T
Wireless Group.

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Among other provisions, it requires that
entities recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. Gains and losses
resulting from changes in the fair values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The effective date of this standard was delayed via the
issuance of SFAS No. 137. The effective date for SFAS No. 133 is now for fiscal
years beginning after June 15, 2000, though earlier adoption is encouraged and
retroactive application is prohibited. For the AT&T Wireless Group this means
that the standard must be adopted no later than January 1, 2001. Management does
not expect the adoption of this standard will have a material impact on the AT&T
Wireless Group's results of operations, financial position or cash flows.

YEAR 2000

     The AT&T Wireless Group prepared its systems and applications for the year
2000 (Y2K) through its involvement and participation in AT&T's company wide Y2K
program which addressed the use of the two-digit instead of four-digit year
fields in computer systems. If computer systems could not distinguish between
the year 1900 and the year 2000, system failures or other computer errors could
have resulted. The potential for failures and errors spanned all aspects of our
business, including computer systems, voice and data networks, and building
infrastructures. We also needed to address our interdependencies with our
suppliers and connecting carriers and our major customers, all of who faced the
same concern. All computer systems were tested and repaired as of December 31,
1999 and no major Y2K-related problems were reported as the calendars rolled to
January 1, 2000. The cost of AT&T's Y2K program was $725 million since inception
in 1997, of which $67 million represented the AT&T Wireless Group's portion of
those costs. This figure includes $275 million of costs for all of AT&T incurred
during 1999, of which $41 million pertained to the AT&T Wireless Group. Of the
total AT&T 1999 costs, approximately $45 million represented capital spending
for upgrading and replacing noncompliant computer systems. Less than half of the
1999 costs represent internal information technology resources that were
redeployed from other projects and are expected to return to these projects in
2000.

SUBSEQUENT EVENTS

     In February 2000, AT&T and Dobson Communications Corporation, through a
joint venture, acquired American Cellular Corporation for approximately $2.4
billion. AT&T contributed its interest in the joint venture to the AT&T Wireless
Group as of the date of the acquisition. The acquisition was funded with
non-recourse bank debt by the joint venture and cash equity contributions of

   13

approximately $400 million from each of the two partners. Dobson will be
responsible for day-to-day management of the joint venture, which will be
equally owned and jointly controlled by Dobson and the AT&T Wireless Group.

     In February 2000, certain Dobson securities held by the AT&T Wireless Group
were redeemed, resulting in a net pretax gain of approximately $21 million.

     In February 2000, TeleCorp PCS, Inc. announced that it will acquire Tritel,
Inc. for approximately $5.3 billion in stock. The AT&T Wireless Group currently
holds equity interests in each of these affiliates. Upon completion of the
transaction, the AT&T Wireless Group will own approximately 23% of the combined
entity. Additionally, in a separate transaction, the AT&T Wireless Group agreed
to exchange certain wireless licenses, rights and commitments in the Midwestern
United States, plus cash of approximately $100 million for licenses owned by
TeleCorp in several New England markets. The boards of directors of AT&T and
TeleCorp have approved the transactions. The transactions are subject to certain
federal regulatory approvals and are expected to close in the fourth quarter of
2000.

     In February 2000, AT&T announced the signing of an agreement to purchase
the assets of Wireless One Network, L.P., for cash of approximately $850
million. AT&T will attribute its interest in Wireless One to the AT&T Wireless
Group as of the acquisition date. The transaction has been approved by the
boards of directors of AT&T and Wireless One, however is subject to the approval
of certain federal regulatory agencies. The transaction is anticipated to close
in June of 2000.

     The AT&T Wireless Group has a signed agreement to sell one of its equity
investments which is expected to close by the end of the first quarter of 2000.

     On February 3, 2000, a registration statement was filed with the SEC for an
initial public offering of AT&T Wireless Group tracking stock. The new tracking
stock will provide current AT&T shareowners and future investors with a security
tied directly to the economic performance of the AT&T Wireless Group. A special
AT&T shareowner meeting was held in March, voting in favor of the tracking stock
proposal. Holders of AT&T common stock and Liberty Media Group tracking stock
were entitled to vote at the special meeting. AT&T intends to conduct an initial
public offering of AT&T Wireless Group tracking stock in the second quarter of
2000. A distribution, which may be in the form of a dividend, exchange offer, or
a combination of these, of the AT&T Wireless Group tracking stock is intended to
be made to shareowners of AT&T common stock sometime thereafter. Holders of
Liberty Media Group tracking stock will not be entitled to this distribution.

   14

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareowner of the AT&T Wireless Group:

     In our opinion, the accompanying combined balance sheets and the related
combined statements of operations and changes in shareowner's equity and of cash
flows present fairly, in all material respects, the financial position of the
AT&T Wireless Group at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
AT&T Wireless Group's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

     The AT&T Wireless Group is a fully integrated business unit of AT&T Corp.;
consequently, as indicated in Note 1, these combined financial statements have
been derived from the consolidated financial statements and accounting records
of AT&T Corp. and reflect certain assumptions and allocations. Moreover, as
indicated in Note 1, the AT&T Wireless Group relies on AT&T Corp. for
administrative, management and other services. The financial position, results
of operations and cash flows of the AT&T Wireless Group could differ from those
that would have resulted had the AT&T Wireless Group operated autonomously or as
an entity independent of AT&T Corp. As more fully discussed in Note 1, the
combined financial statements of the AT&T Wireless Group should be read in
conjunction with the audited consolidated financial statements of AT&T Corp.

                                          PRICEWATERHOUSECOOPERS LLP

March 17, 2000


   15

                              AT&T WIRELESS GROUP

                       COMBINED STATEMENTS OF OPERATIONS



                                                                 FOR THE YEARS ENDED
                                                                     DECEMBER 31,
                                                              --------------------------
                                                               1999      1998      1997
                                                              ------    ------    ------
                                                                 DOLLARS IN MILLIONS
                                                                         
REVENUES
Services revenues...........................................  $6,823    $4,779    $4,249
Equipment revenues..........................................     804       627       419
Total revenues..............................................   7,627     5,406     4,668
OPERATING EXPENSES
Network and other costs of services.........................   3,846     2,428     1,770
Depreciation and amortization...............................   1,253     1,079       826
Selling, general and administrative.........................   2,663     2,122     1,982
Asset impairment and restructuring charges..................     531       120       160
Total operating expenses....................................   8,293     5,749     4,738
OPERATING LOSS..............................................    (666)     (343)      (70)
Other income, net...........................................     176       764       288
Interest expense............................................     136       120        --
(Loss) income before income taxes...........................    (626)      301       218
(Benefit) provision for income taxes........................    (221)      137        93
NET (LOSS) INCOME...........................................    (405)      164       125
Dividend requirements on preferred stock held by AT&T,
  net.......................................................      56        56        56
NET (LOSS) INCOME ATTRIBUTABLE TO AT&T'S RESIDUAL
  INTEREST..................................................  $ (461)   $  108    $   69



     The notes are an integral part of these combined financial statements.

   16

                              AT&T WIRELESS GROUP

                            COMBINED BALANCE SHEETS



                                                                AT DECEMBER 31,
                                                              --------------------
                                                                1999        1998
                                                              --------    --------
                                                              DOLLARS IN MILLIONS
                                                                    
ASSETS
Cash and cash equivalents...................................  $     5     $    27
Accounts receivable, less allowances of $130 and $74........    1,300         885
Inventories.................................................      162         206
Deferred income taxes.......................................      127          91
Prepaid expenses and other current assets...................       34          29
TOTAL CURRENT ASSETS........................................    1,628       1,238
Property, plant and equipment, net..........................    6,349       5,182
Licensing costs, net of accumulated amortization of $1,519
  and $1,290................................................    8,571       7,928
Investments.................................................    4,502       3,795
Goodwill, net and other assets..............................    2,462       1,317
TOTAL ASSETS................................................  $23,512     $19,460
LIABILITIES
Accounts payable............................................  $   921     $   628
Payroll and benefit-related liabilities.....................      291         202
Debt maturing within one year...............................      154          89
Other current liabilities...................................      931         707
TOTAL CURRENT LIABILITIES...................................    2,297       1,626
Long-term debt due to AT&T..................................    3,400       2,500
Deferred income taxes.......................................    3,750       3,662
Other long-term liabilities.................................       48          35
TOTAL LIABILITIES...........................................    9,495       7,823
MINORITY INTEREST...........................................       20         105
SHAREOWNER'S EQUITY
Preferred stock held by AT&T................................    1,000       1,000
AT&T's residual interest....................................   12,971      10,535
Accumulated other comprehensive income......................       26          (3)
TOTAL SHAREOWNER'S EQUITY...................................   13,997      11,532
TOTAL LIABILITIES AND SHAREOWNER'S EQUITY...................  $23,512     $19,460


     The notes are an integral part of these combined financial statements.

   17

                              AT&T WIRELESS GROUP

             COMBINED STATEMENTS OF CHANGES IN SHAREOWNER'S EQUITY



                                                               FOR THE YEARS ENDED DECEMBER
                                                                           31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                   DOLLARS IN MILLIONS
                                                                           
PREFERRED STOCK HELD BY AT&T................................  $ 1,000    $ 1,000    $ 1,000
AT&T'S RESIDUAL INTEREST
  Balance at beginning of year..............................   10,535     10,139      9,433
  Net (loss) income attributable to AT&T's residual
     interest...............................................     (461)       108         69
  Transfers from parent, net................................    2,897        288        637
                                                              -------    -------    -------
Balance at end of year......................................   12,971     10,535     10,139
ACCUMULATED OTHER COMPREHENSIVE INCOME
  Balance at beginning of year..............................       (3)        48         64
  Other comprehensive income (net of taxes of $18, $(31),
     $(10)).................................................       29        (51)       (16)
                                                              -------    -------    -------
Balance at end of year......................................       26         (3)        48
                                                              -------    -------    -------
TOTAL SHAREOWNER'S EQUITY...................................  $13,997    $11,532    $11,187
                                                              =======    =======    =======
SUMMARY OF TOTAL COMPREHENSIVE INCOME:
  Net (loss) income attributable to AT&T's residual
     interest...............................................  $  (461)   $   108    $    69
  Dividend requirements on preferred stock held by AT&T,
     net....................................................       56         56         56
                                                              -------    -------    -------
  Net (loss) income.........................................     (405)       164        125
  Other comprehensive income................................       29        (51)       (16)
                                                              -------    -------    -------
TOTAL COMPREHENSIVE INCOME..................................  $  (376)   $   113    $   109
                                                              =======    =======    =======


     The notes are an integral part of these combined financial statements.

   18

                              AT&T WIRELESS GROUP

                       COMBINED STATEMENTS OF CASH FLOWS



                                                            FOR THE YEARS ENDED DECEMBER 31,
                                                            --------------------------------
                                                              1999        1998        1997
                                                            --------    --------    --------
                                                                  DOLLARS IN MILLIONS
                                                                           
OPERATING ACTIVITIES
Net (loss) income.........................................  $  (405)    $   164     $   125
Adjustments to reconcile net (loss) income to net cash
  provided by operating activities:
  Gains on sale/exchange of investments...................      (99)       (600)        (57)
  Asset impairment and restructuring charges..............      531         120          80
  Depreciation and amortization...........................    1,253       1,079         826
  Deferred income taxes...................................     (180)        (40)        254
  Net equity earnings from investments....................      (54)       (114)       (222)
  Minority interests in consolidated subsidiaries.........      (17)        (35)         11
  Provision for uncollectibles............................      200          99         116
  Increase in accounts receivable.........................     (514)       (307)        (90)
  Increase in accounts payable............................      221         174         152
  Net decrease (increase) in other operating assets and
     liabilities..........................................       88        (126)        143
NET CASH PROVIDED BY OPERATING ACTIVITIES.................    1,024         414       1,338
INVESTING ACTIVITIES
Capital expenditures and other additions..................   (2,429)     (1,219)     (1,931)
Net acquisitions of licenses..............................      (47)        (65)       (443)
Equity investment distributions and sales.................      236       1,354         294
Equity investment contributions and purchases.............     (284)       (156)        (84)
Net dispositions of businesses............................      244         324          --
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES.......   (2,280)        238      (2,164)
FINANCING ACTIVITIES
Increase in short-term borrowings.........................       65          43          --
Increase in long-term debt due to AT&T....................      900         100         200
Dividend requirements on preferred stock, net.............      (56)        (56)        (56)
Transfers from (to) parent, net...........................      344        (694)        611
Other financing activities, net...........................      (19)        (24)        (13)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.......    1,234        (631)        742
Net (decrease) increase in cash and cash equivalents......      (22)         21         (84)
Cash and cash equivalents at beginning of year............       27           6          90
Cash and cash equivalents at end of year..................  $     5     $    27     $     6


     The notes are an integral part of these combined financial statements.

   19

                              AT&T WIRELESS GROUP

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                  (DOLLARS IN MILLIONS UNLESS OTHERWISE NOTED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

     The AT&T Wireless Group is a fully integrated business unit of AT&T Corp.
The AT&T Wireless Group provides domestic wireless voice and data services in
the 850 megahertz cellular markets and 1900 megahertz Personal Communications
Services (PCS) markets. The AT&T Wireless Group also sells handsets and
accessories to its customers, which generally result in a loss. In addition, the
AT&T Wireless Group results include their aviation communications business,
earnings or losses associated with equity interests in wireless communications
ventures and partnerships, both in the United States and internationally, and
the costs associated with the development of fixed wireless technology. The
results of the messaging services business are included through October 2, 1998
(date of sale). The combined financial statements reflect the results of
operations, financial position, changes in shareowner's equity and cash flows of
these businesses of AT&T as if these combined businesses were a separate entity
for all periods presented. The financial information included herein may not
necessarily reflect the combined results of operations, financial position,
changes in shareowner's equity and cash flows of the AT&T Wireless Group had it
been a separate, stand-alone entity during the periods presented. The combined
financial statements of the AT&T Wireless Group should be read in conjunction
with the audited consolidated financial statements of AT&T.

     As an integrated business unit of AT&T, the AT&T Wireless Group does not
prepare separate financial statements in accordance with generally accepted
accounting principles (GAAP) in the normal course of operations. However, these
combined financial statements were prepared in accordance with GAAP for purposes
of this filing in connection with AT&T's plan to issue a tracking stock which
reflects the economic performance of the AT&T Wireless Group. The combined
financial statements of the AT&T Wireless Group reflect the assets, liabilities,
revenues and expenses directly attributable to the AT&T Wireless Group, as well
as allocations deemed reasonable by management, to present the results of
operations, financial position and cash flows of the AT&T Wireless Group on a
stand-alone basis. The allocation methodologies have been described within the
notes to the combined financial statements where appropriate, and management
considers the allocations to be reasonable. Changes in AT&T's residual interest
represent net transfers to or from AT&T, after giving effect to the net income
or loss attributable to AT&T's residual interest in the AT&T Wireless Group
during the period and are assumed to be settled in cash. AT&T's capital
contributions for purchase business combinations and initial investments in
joint ventures and partnerships which AT&T attributed to the AT&T Wireless Group
have been treated as noncash transactions. Earnings per share disclosure has not
been presented as the AT&T Wireless Group is a business unit of AT&T and
earnings per share data is not considered meaningful.

     The capital structure of the AT&T Wireless Group has been assumed based
upon AT&T's historical capital ratio adjusted for certain items. This has
resulted in $3,400, $2,500 and $2,400 in intercompany indebtedness at December
31, 1999, 1998 and 1997, respectively, paying annual interest at 7.25% for the
year ended December 31, 1999 and 7.75% for the years ended December 31, 1998 and
1997. The interest rate charged is designed to be substantially equivalent to
the interest rates that the AT&T Wireless Group would be able to obtain from
third parties, including the public markets, as a nonaffiliate of AT&T without
the benefit of any guaranty by AT&T. In addition, the AT&T Wireless Group has
issued to AT&T $1 billion of 9% cumulative preferred stock that, subject to the


   20
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

approval of the AT&T Wireless Group capital stock committee, is redeemable at
the option of AT&T. At the time of the initial public offering, $2 billion of
the intercompany indebtedness is anticipated to be converted into an additional
$2 billion of 9% cumulative preferred stock. Interest expense presented is net
of $88, $75 and $178 amounts capitalized for the years ended December 31, 1999,
1998 and 1997, respectively.

     General corporate overhead related to AT&T's corporate headquarters and
common support divisions has been allocated to the AT&T Wireless Group based on
the ratio of the AT&T Wireless Group's external costs and expenses to AT&T's
consolidated external costs and expenses, adjusted for any functions that the
AT&T Wireless Group performs on its own. However, the costs of these services
charged to the AT&T Wireless Group are not necessarily indicative of the costs
that would have been incurred if the AT&T Wireless Group had performed these
functions entirely as a stand-alone entity, nor are they indicative of costs
that will be charged in the future.

     Consolidated income tax provisions, related tax payments or refunds, and
deferred tax balances of AT&T have been allocated to the AT&T Wireless Group
based principally on the taxable income and tax credits directly attributable to
the AT&T Wireless Group. These allocations reflect the AT&T Wireless Group's
contribution to AT&T's consolidated taxable income and the consolidated tax
liability and tax credit position. Prior to the issuance of any shares of the
AT&T Wireless Group tracking stock, the AT&T Common Stock Group (which consists
of the operations of AT&T other than those attributed to AT&T tracking stocks)
and the AT&T Wireless Group have agreed to enter into a tax sharing agreement
that will provide for tax sharing payments based on the taxes or tax benefits of
a hypothetical affiliated group consisting of the AT&T Common Stock Group and
the AT&T Wireless Group. Based on this agreement, the consolidated tax liability
before credits will be allocated between the groups, based on each group's
contribution to consolidated taxable income of the hypothetical group. For
purposes of the tax sharing agreement, the 9% cumulative preferred stock held by
AT&T will be treated as if it were an intercompany debt instrument and,
accordingly, tax sharing payments will be calculated by treating coupon payments
on the preferred stock as interest expense to the AT&T Wireless Group and
interest income to the AT&T Common Stock Group. The preferred stock dividends,
net of the amounts recorded in accordance with the methodology contained in the
tax sharing agreement, have been recorded in AT&T Wireless Group's equity.
Consolidated tax credits of the hypothetical group will be allocated between
groups based on each group's contribution to each tax credit.

CASH EQUIVALENTS

     All highly liquid investments with original maturities of generally three
months or less are considered to be cash equivalents.

CASH FLOWS

     For purposes of the combined statements of cash flows, all transactions
between the AT&T Wireless Group and AT&T, except for purchase business
combinations and initial investments in joint ventures and partnerships which
were funded by AT&T and contributed by AT&T to the AT&T Wireless Group, have
been accounted for as having been settled in cash at the time the transaction
was recorded by the AT&T Wireless Group.


   21
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

INVENTORIES

     Inventories, which consist principally of handsets and accessories, are
recorded at the lower of cost or market. Cost is principally determined by the
first-in, first-out (FIFO) method.

PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment are recorded at cost, unless impaired, and
depreciation is determined based upon the assets' estimated useful lives.
Depreciation is calculated on a straight-line basis according to the following
useful lives:

                                                           
Wireless communications systems and other equipment           3-15 years
Building and improvements                                     5-20 years



     When the AT&T Wireless Group sells, disposes or retires assets, the related
gains or losses are included in operating results.

     During 1998, the AT&T Wireless Group completed a review of the estimated
service lives of certain wireless communications equipment. As a result,
effective January 1, 1998, the estimated service lives of such equipment were
changed from 12 years to varying periods ranging primarily from seven to ten
years, with certain assets being changed to 15 years, depending on the nature of
the equipment. The net impact of these changes to 1998 results was an annual
increase in depreciation expense of approximately $42 and an annual reduction in
net income of approximately $26.

SOFTWARE CAPITALIZATION

     In 1998, the AT&T Wireless Group adopted Statement of Position (SOP) 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." In accordance with this standard, certain direct development
costs associated with internal-use software are capitalized, including external
direct costs of materials and services, and payroll costs for employees devoting
time to the software projects. These costs are included within other assets and
are amortized over a period not to exceed five years beginning when the asset is
substantially ready for use. Costs incurred during the preliminary project
stage, as well as maintenance and training costs, are expensed as incurred. The
AT&T Wireless Group also capitalizes initial operating-system software costs and
amortizes them over the life of the associated hardware. The annual impact of
adoption of SOP 98-1 was a reduction of approximately $12 is selling, general
and administrative expenses and an annual increase in net income of
approximately $7 for the year ended December 31, 1998.

     The AT&T Wireless Group also capitalizes costs associated with the
development of application software incurred from the time technological
feasibility is established until the software is ready to provide service to
customers. These capitalized costs are included in property, plant and equipment
and are amortized over a useful life not to exceed five years.

LICENSING COSTS

     Licensing costs are primarily incurred to develop or acquire cellular (850
megahertz) and PCS (1900 megahertz) licenses. In addition, licensing costs
include costs incurred to develop or acquire 38 gigahertz licenses. Amortization
begins with the commencement of service to customers and is computed using the
straight-line method over periods not exceeding 40 years.


   22
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

CAPITALIZED INTEREST

     The AT&T Wireless Group capitalizes interest which is applicable to the
construction of significant additions to property, plant, and equipment and the
acquisitions of licenses until the assets are placed into service. These costs
are amortized over the related assets' estimated useful lives.

INVESTMENTS

     Investments in which the AT&T Wireless Group exercises significant
influence but which the AT&T Wireless Group does not control are accounted for
under the equity method of accounting. Investments in which the AT&T Wireless
Group has no significant influence over the investee are accounted for under the
cost method of accounting. Under the equity method, investments are stated at
initial cost and are adjusted for AT&T Wireless Group's subsequent contributions
and its share of earnings or losses, and distributions. The excess of the
investment over the underlying book value of the investees' net assets is being
amortized over periods not exceeding 40 years.

     Investments covered under the scope of Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," are classified as "available for sale" and are carried at fair
value. Unrealized gain or loss, net of tax, are included as a component of
accumulated other comprehensive income within shareowner's equity.

GOODWILL

     Goodwill is the excess of the purchase price over the fair value of net
assets acquired in business combinations accounted for as purchases. Goodwill is
amortized on a straight-line basis over periods not exceeding 40 years.

VALUATION OF LONG-LIVED ASSETS

     Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. It is
reasonably possible that these assets could become impaired as a result of
technological or other industry changes. For assets the AT&T Wireless Group
intends to hold for use, if the total of the expected future undiscounted cash
flows is less than the carrying amount of the asset, a loss is recognized for
the difference between the fair value and carrying value of the asset. For
assets the AT&T Wireless Group intends to dispose of, a loss is recognized for
the amount that the estimated fair value, less costs to sell, is less than the
carrying value of the assets.

REVENUE RECOGNITION

     Wireless services revenues are recognized based upon minutes of traffic
processed and contracted fees. Equipment and other services revenues are
recognized when the products are delivered and accepted by customers and when
services are provided in accordance with contract terms.

ADVERTISING AND PROMOTIONAL COSTS

     Costs of advertising and promotions are expensed as incurred. Advertising
and promotional expenses were $386, $344, and $305 in 1999, 1998, and 1997,
respectively.


   23
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

INCOME TAXES

     The AT&T Wireless Group is not a separate taxable entity for federal and
state income tax purposes and its results of operations are included in the
consolidated federal and state income tax returns of AT&T and its affiliates.
The AT&T Wireless Group's provision or benefit for income taxes is based upon
its contribution to the overall income tax liability of AT&T and its affiliates.

ISSUANCE OF COMMON STOCK BY AFFILIATES

     Changes in our proportionate share of the underlying equity of a subsidiary
or equity method investee, which result from the issuance of additional equity
securities by such entity, are recognized as increases or decreases in
shareowner's equity.

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and revenues and expenses during the period reported. Actual results
could differ from those estimates. Estimates are used when accounting for
certain items such as the allowance for doubtful accounts, depreciation and
amortization, taxes, valuation of equity investments and asset impairment and
restructuring charges. Additionally, the AT&T Wireless Group evaluates the
useful lives of its wireless communications systems and other equipment based on
changes in technological and industry conditions.

CONCENTRATIONS

     The AT&T Wireless Group purchases a substantial portion of its wireless
infrastructure equipment from three major suppliers. Additionally, three primary
vendors provide the multi-network handsets. Further, the AT&T Wireless Group
relies on one vendor to provide substantially all of its billing services. Loss
of any of these suppliers could adversely impact operations temporarily until a
comparable substitute could be found. The AT&T Wireless Group does not have a
concentration of available sources of labor or services, nor does the AT&T
Wireless Group have any significant concentration of business transacted with a
particular customer, that could, if suddenly eliminated, severely impact
operations.

2. RECENT ACCOUNTING PRONOUNCEMENTS

     In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements," which must be adopted by March 31, 2000. SAB 101 provides
additional guidance on revenue recognition as well as criteria for when revenue
is generally realized and earned, and also requires the deferral of incremental
direct customer acquisition costs. Management is currently assessing the impact
of SAB 101 on the results of operations and financial position of the AT&T
Wireless Group.

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." Among other
provisions, it requires that entities recognize all derivatives as either assets
or liabilities in the balance sheet and measure those instruments at fair value.
Gains and losses resulting from changes in the fair values of those derivatives
would be accounted for depending on the use of the derivative and whether it



   24
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

qualifies for hedge accounting. The effective date of this standard was delayed
via the issuance of SFAS No. 137. The effective date for SFAS No. 133 is now
for fiscal years beginning after June 15, 2000, though earlier adoption is
encouraged and retroactive application is prohibited. For the AT&T Wireless
Group this means that the standard must be adopted no later than January 1,
2001. Management does not expect the adoption of this standard will have a
material impact on the AT&T Wireless Group's results of operations, financial
position or cash flows.

3. ACQUISITIONS AND DIVESTITURES

     During 1999, 1998 and 1997, the AT&T Wireless Group completed certain
transactions as part of its overall strategy to expand its wireless footprint
and divest itself of non core interests. The net pretax gains recognized were
$99, $600 and $57 in 1999, 1998, and 1997, respectively. The pretax gains and
losses from the sale and exchange transactions are included in other income, net
in the accompanying combined statements of operations. A summary of the
significant transactions follows:

     On August 2, 1999, AT&T completed its acquisition of Honolulu Cellular
Telephone Company for cash. AT&T contributed its interest in Honolulu Cellular
to the AT&T Wireless Group as of the acquisition date. This transaction was
accounted for as a purchase.

     On May 3, 1999, AT&T acquired Vanguard Cellular Systems, Inc. and has
contributed its interest in Vanguard to the AT&T Wireless Group as of the date
of acquisition. Under the agreement, each Vanguard shareholder was entitled to
elect to receive either cash or AT&T stock in exchange for their Vanguard shares
subject to the limitation that the overall consideration would consist of 50%
AT&T stock and 50% cash. Consummation of the merger resulted in the issuance of
approximately 12.6 million AT&T shares and payment of $485 in cash. In addition,
Vanguard had approximately $550 in debt, which has subsequently been repaid by
AT&T.

     The merger with Vanguard was recorded as a purchase. Accordingly the
operating results of Vanguard have been included in the accompanying combined
financial statements since the date of acquisition. The excess of aggregate
purchase price over the fair market value of net assets acquired has been
assigned to licenses, goodwill and other intangible assets and is being
amortized over periods of ten to 40 years.

     The following unaudited pro forma consolidated results of operations for
the years ended December 31, 1999 and 1998 assume the Vanguard acquisition
occurred as of January 1, 1998:



                                                                  FOR THE
                                                                YEARS ENDED
                                                                DECEMBER 31,
                                                              ----------------
                                                               1999      1998
                                                              ------    ------
                                                                  
Revenues....................................................  $7,784    $5,868
Net (loss) income...........................................    (435)      254
Capital expenditures........................................   2,492     1,223


     Pro forma data may not be indicative of the results that would have been
obtained had these events actually occurred at the beginning of the periods
presented, nor does it intend to be a projection of future results.


   25
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     In April 1999, the AT&T Wireless Group acquired Bakersfield Cellular
Telephone Company in exchange for several cellular markets in Texas and cash.
The acquisition of Bakersfield Cellular was accounted for as a purchase.

     In addition to the acquisitions of Vanguard, Honolulu Cellular and
Bakersfield Cellular, the AT&T Wireless Group acquired other cellular markets in
Utah, Oregon, California, Idaho, and Louisiana. All of the above acquisitions
were accounted for under the purchase method. The pro forma operating results of
these acquisitions other than Vanguard have not been presented as they are not
material to the overall operating results of the AT&T Wireless Group.

     During 1999, the AT&T Wireless Group purchased minority interests in
several of the markets that they did not wholly own. The total of these
purchases, including both cash paid and stock issued by AT&T on the AT&T
Wireless Group's behalf totaled $87.

     The following is a summary of all consideration paid for the completed
acquisitions through December 31, 1999, including the acquisition of Vanguard:

                                                           
Fair value of AT&T stock issued.............................  $  531
Cash paid by AT&T...........................................     986
Liabilities assumed.........................................     555
Fair value of cellular markets exchanged....................      51
Total purchase price........................................  $2,123



     The assets and liabilities of the acquired entities were recorded at their
fair market values at the dates of acquisition. The allocations were as follows:

                                                           
License costs...............................................  $  915
Goodwill....................................................     994
Other intangibles...........................................     100
Property, plant and equipment...............................     365
Net current assets..........................................       5
Deferred tax liabilities....................................    (256)
Total purchase price........................................  $2,123



     In June 1999, the AT&T Wireless Group sold its interest in WOOD-TV for cash
resulting in a pretax gain of $88.

     In May 1999, the AT&T Wireless Group sold its net assets in the geographic
area of San Juan, Puerto Rico, including a portion of the PCS license, to
TeleCorp PCS, Inc. for cash and preferred stock of TeleCorp resulting in a
pretax gain of $11.

     In the fourth quarter of 1998, the AT&T Wireless Group sold its net assets
in the geographic area of Norfolk, Virginia, including a portion of the PCS
license, to Triton PCS Holdings, Inc. for cash and preferred stock of Triton
resulting in a pretax gain of $29.


   26
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     Also in the fourth quarter of 1998, the AT&T Wireless Group sold a portion
of its net assets in the geographic areas of Cincinnati and Dayton, Ohio,
including portions of the PCS licenses, to Cincinnati Bell Wireless, LLC for
cash and an ownership interest. A pretax gain of $24 was recognized on this
transaction.

     On October 2, 1998, the AT&T Wireless Group sold its one-way messaging
services business and a narrowband PCS license to Metrocall, Inc. in exchange
for cash and preferred stock of Metrocall. A pretax loss of $5 was recognized on
this transaction. The AT&T Wireless Group subsequently contributed its
investment in the preferred stock of Metrocall to AT&T.

     In the second quarter of 1998, the AT&T Wireless Group sold for cash its
interest in PriceCellular Corp. and recognized a pretax gain of $67.

     In the second quarter of 1998, the AT&T Wireless Group sold for cash its
remaining equity interest in SmarTone Telecommunications Holdings Limited for a
pretax gain of $128.

     In the first quarter of 1998, the AT&T Wireless Group sold for cash its
equity interest in LIN Television Corp. and recognized a pretax gain of $342.

     In the fourth quarter of 1997, the AT&T Wireless Group sold for cash a
portion of its equity interest in SmarTone and recognized a pretax gain of $45.

4. ASSET IMPAIRMENT AND RESTRUCTURING CHARGES

     During the fourth quarter of 1999, the AT&T Wireless Group recorded a $531
asset impairment charge primarily associated with the planned disposal of
certain wireless communications equipment resulting from a program to increase
capacity and operating efficiency of the wireless network. As part of a
multi-vendor program, contracts are being executed with certain vendors to
replace significant portions of the wireless infrastructure equipment in the
Western United States and the metropolitan New York markets. The program will
provide the AT&T Wireless Group with the newest technology available and allow
it to evolve to new third-generation digital technology, which will provide
high-speed data capabilities.

     The planned disposal of the existing wireless infrastructure equipment
required an evaluation of asset impairment in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," to write-down these assets to their fair value, which was
estimated by discounting the expected future cash flows of these assets through
the date of disposal. Since the assets will remain in service from the date of
the decision to dispose of these assets to the disposal date, the impairment has
been recorded as accumulated depreciation and the remaining net book value of
the assets will be depreciated over this shortened period.

     During 1998, the AT&T Wireless Group recorded a pretax asset impairment
charge of $120, which represented the write-down of unrecoverable assets
associated with nonstrategic businesses.

     During 1997, the AT&T Wireless Group recorded a pretax charge of $160
related to the decision to no longer pursue a two-way messaging business. This
charge included costs associated with the write-down of unrecoverable assets, as
well as costs related to contractual obligations and termination penalties.


   27
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. SUPPLEMENTARY FINANCIAL INFORMATION

SUPPLEMENTARY INCOME STATEMENT INFORMATION



                                                              FOR THE YEARS ENDED
                                                                  DECEMBER 31,
                                                              --------------------
                                                              1999    1998    1997
                                                              ----    ----    ----
                                                                     
INCLUDED IN DEPRECIATION AND AMORTIZATION
Amortization of licensing costs.............................  $231    $210    $184
Amortization of goodwill....................................    50      33      33
OTHER INCOME, NET
Interest income.............................................  $  4    $ 15    $  9
Minority interests in consolidated subsidiaries.............    17      35     (11)
Net equity earnings from investments........................    54     114     222
Gains on sale/exchange of investments.......................    99     600      57
Miscellaneous, net..........................................     2      --      11
Total other income, net.....................................  $176    $764    $288


SUPPLEMENTARY BALANCE SHEET INFORMATION



                                                               AT DECEMBER 31,
                                                              ------------------
                                                               1999       1998
                                                              -------    -------
                                                                   
PROPERTY, PLANT AND EQUIPMENT, NET
Wireless communications systems and other equipment.........  $10,127    $ 7,658
Land, buildings and improvements............................      255        222
Total property, plant and equipment.........................   10,382      7,880
Accumulated depreciation....................................   (4,033)    (2,698)
Property, plant and equipment, net..........................  $ 6,349    $ 5,182
GOODWILL, NET AND OTHER ASSETS
Goodwill....................................................  $ 2,303    $ 1,312
Accumulated amortization....................................     (168)      (118)
Goodwill, net...............................................  $ 2,135    $ 1,194
Other assets................................................      327        123
Goodwill, net and other assets..............................  $ 2,462    $ 1,317
INCLUDED IN OTHER CURRENT LIABILITIES
Advertising and promotion accruals..........................  $   162    $    94
Business tax accruals.......................................      139        127


SUPPLEMENTARY CASH FLOW INFORMATION



                                                               FOR THE YEARS ENDED
                                                                   DECEMBER 31,
                                                              ----------------------
                                                              1999    1998     1997
                                                              ----    -----    -----
                                                                      
Interest payments, net of amounts capitalized...............  $136    $ 120    $  --
Income tax (refunds) payments...............................   (41)     177     (161)



   28
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

6. INVESTMENTS

     The AT&T Wireless Group holds investments in ventures and partnerships that
gain the AT&T Wireless Group access to additional domestic and international
wireless markets. Substantially all of these investments are accounted for under
the equity method.

     At December 31, 1999 and 1998, the AT&T Wireless Group had equity method
investments of $4,409 and $3,766, respectively. Amortization of excess carrying
value of $19, $52, and $66 in 1999, 1998 and 1997, respectively, is reflected as
a component of other income, net in the accompanying combined statements of
operations. At December 31, 1999 and 1998, the carrying value of investments
accounted for under the equity method exceeded our share of the underlying
reported net assets by approximately $551 and $511, respectively.

     Ownership of significant equity investments is as follows:



                                                             AT DECEMBER 31,
                                                          ----------------------
                                                            1999         1998
                                                          ---------    ---------
                                                                 
AB Cellular.............................................     55.62%(1)    55.62%(1)
CMT Partners............................................     50.00%(2)    50.00%(2)
Triton PCS Holdings, Inc................................     16.80%(3)    18.66%(3)
TeleCorp PCS, Inc.......................................     15.67%(4)    17.28%(4)
Tritel, Inc.............................................     21.64%(5)       N/A
Cincinnati Bell Wireless, LLC...........................     19.90%(6)    19.90%(6)
Rogers Cantel Mobile Communications, Inc................     16.65%(7)       N/A


- -------------------------

(1) On November 13, 1998, the AT&T Wireless Group and BellSouth Corp. combined
    their jointly owned cellular properties in Los Angeles Cellular Telephone
    Company, Houston Cellular Telephone Company and Galveston Cellular Telephone
    Company. Under the terms of the agreement, the ownership interests of the
    AT&T Wireless Group and BellSouth in LA Cellular, Houston Cellular and
    Galveston Cellular were folded into a single company, AB Cellular, which
    continues to own, control and supervise all three properties. AT&T
    contributed cash of approximately $1 billion to the new jointly controlled
    company and subsequently contributed this interest to the AT&T Wireless
    Group which now has an overall ownership interest of 55.62%. The AT&T
    Wireless Group's voting interest in AB Cellular, however, is 50% and
    therefore this investment is accounted for under the equity method. The
    AT&T Wireless Group has a management agreement with the LA division of AB
    Cellular to manage and supervise its operations. As manager, the AT&T
    Wireless Group is committed to meet certain financial targets for the LA
    division. The AT&T Wireless Group makes payments to AB Cellular for any
    significant target  deficiency and receives payments for any significant
    target excess.

(2) Ownership percentages reflect voting and equity interests in a partnership
    which owned and operated several licenses in Northern California, including
    San Francisco/San Jose, and Kansas City, Missouri, and also a minority
    interest in Dallas, Texas as of December 31, 1998. On October 1, 1999, CMT
    Partners distributed certain assets including its ownership interest in
    licenses in Kansas City, Missouri and Dallas, Texas to its partners. Through
    this distribution, the AT&T Wireless Group received CMT Partners'



   29
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

    ownership interest in Dallas, Texas, and Vodafone AirTouch received CMT
    Partners' ownership interest in Kansas City, Missouri. The AT&T Wireless
    Group continues to hold a 50% equity and voting interest in the remaining
    assets of CMT Partners.

(3) During 1998, the AT&T Wireless Group entered into a venture with Triton PCS
    Holdings, Inc. to build and operate digital wireless networks in the
    Southeast and MidAtlantic areas of the United States. The AT&T Wireless
    Group contributed licenses to the venture in exchange for preferred stock.
    The effect of the above transaction resulted in a reclassification of
    license balances of approximately $101 to investments in 1998. Additionally
    during the fourth quarter of 1998, the AT&T Wireless Group sold its net
    assets in the geographic area of Norfolk, Virginia, including a portion of
    the PCS license, to Triton for cash and preferred stock. Ownership
    percentage reflects the AT&T Wireless Group's ownership of common stock,
    assuming conversion of all currently convertible preferred shares to common
    stock. In addition, the AT&T Wireless Group holds redeemable preferred
    shares in these investments, which are not currently convertible to common
    stock. These preferred shares have certain liquidation preference rights.

(4) During 1998, the AT&T Wireless Group entered into a venture with TeleCorp
    PCS, Inc. to build and operate digital wireless networks in portions of New
    England and the Midwestern and Southeastern United States. The AT&T Wireless
    Group contributed licenses to the venture in exchange for preferred stock.
    The effect of the above transaction resulted in a reclassification of
    license balances of approximately $40 to investments in 1998. Additionally
    in May 1999, the AT&T Wireless Group sold its net assets in the geographic
    area of San Juan, Puerto Rico, including a portion of the PCS license, to
    TeleCorp for cash and preferred stock. Ownership percentage reflects the
    AT&T Wireless Group's ownership of common stock, assuming conversion of all
    currently convertible preferred shares to common stock. In addition, the
    AT&T Wireless Group holds redeemable preferred shares in these investments,
    which are not currently convertible to common stock. These preferred shares
    have certain liquidation preference rights. See Note 13 regarding subsequent
    transactions associated with TeleCorp.

(5) In January 1999, the AT&T Wireless Group entered into a venture with Tritel,
    Inc. to build and operate a digital wireless network across parts of the
    Southwestern United States. The AT&T Wireless Group contributed licenses to
    the venture in exchange for preferred stock. The effect of the above
    transaction resulted in a reclassification of license balances of
    approximately $94 to investments in 1999. Ownership percentage reflects the
    AT&T Wireless Group's ownership of common stock, assuming conversion of all
    currently convertible preferred shares to common stock. In addition, the
    AT&T Wireless Group holds redeemable preferred shares in these investments,
    which are not currently convertible to common stock. These preferred shares
    have certain liquidation preference rights. During the fourth quarter of
    1999, Tritel completed its initial public offering resulting in the AT&T
    Wireless Group recognizing a gain of $42, net of deferred taxes of $27. See
    Note 13 regarding subsequent transactions with Tritel.

(6) During the fourth quarter of 1998, the AT&T Wireless Group sold a portion of
    its net assets in the geographic areas of Cincinnati and Dayton, Ohio,
    including portions of the PCS licenses, to Cincinnati Bell Wireless, LLC for
    cash and an ownership interest. The effect of this transaction resulted in a
    reclassification of license balances of approximately $20 to investments in
    1998.


   30
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(7) In August 1999, AT&T and British Telecommunications plc through a newly
    created joint venture acquired a 33.3% ownership interest in Rogers Cantel
    Mobile Communications, Inc. for approximately $934 in cash. AT&T contributed
    its interest in the joint venture to the AT&T Wireless Group as of the date
    of acquisition. The investment is owned equally by the AT&T Wireless Group
    and BT. This investment is accounted for under the equity method because of
    our ability to elect certain members of the board of directors of this
    entity, which we believe provides us with significant influence.

     The combined results of operations and the financial position of the
significant equity method investments are summarized as follows:

CONDENSED INCOME STATEMENT INFORMATION



                                                                 FOR THE YEARS ENDED
                                                                     DECEMBER 31,
                                                              --------------------------
                                                               1999      1998      1997
                                                              ------    ------    ------
                                                                         
Revenues....................................................  $2,647    $1,717    $1,712
Operating (loss) income.....................................    (203)      477       560
Net (loss) income...........................................    (270)      464       571


CONDENSED BALANCE SHEET INFORMATION



                                                                   AS OF
                                                                DECEMBER 31,
                                                              ----------------
                                                               1999      1998
                                                              ------    ------
                                                                  
Current assets..............................................  $2,891    $1,782
Noncurrent assets...........................................   8,097     4,990
Current liabilities.........................................   1,025       562
Noncurrent liabilities......................................   2,938       811


     Current assets are comprised primarily of cash and accounts receivable.
Noncurrent assets are comprised primarily of net goodwill and other assets, net
property, plant and equipment and net licenses. Current liabilities are
comprised primarily of operating accruals and accounts payable. Noncurrent
liabilities are comprised primarily of long-term debt.


   31
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

7. INCOME TAXES

     The following table shows the principal reasons for the difference between
the effective income tax rate and the United States federal statutory income tax
rate:



                                                               FOR THE YEARS ENDED
                                                                   DECEMBER 31,
                                                              ----------------------
                                                              1999     1998    1997
                                                              -----    ----    -----
                                                                      
U.S. federal statutory income tax rate......................     35%     35%      35%
Federal income tax at statutory rate........................  $(219)   $105    $  76
State and local income taxes, net of federal income tax
  effect....................................................    (14)     12        9
Dividends received deduction................................     --      (2)      (6)
Amortization of intangibles.................................     17      12       14
Unutilized foreign equity losses............................     34      34       10
Change in valuation allowance and other estimates...........    (50)    (17)     (13)
Net equity losses on investments............................     13      --       --
Other differences -- net....................................     (2)     (7)       3
(Benefit) provision for income taxes........................  $(221)   $137    $  93
Effective income tax rate...................................   35.3%   45.5%    42.7%
(BENEFIT) PROVISION FOR INCOME TAXES
CURRENT
Federal.....................................................  $ (61)   $152    $(149)
State and local.............................................     20      25      (12)
                                                              $ (41)   $177    $(161)
DEFERRED
Federal.....................................................  $(124)   $(39)   $ 229
State and local.............................................    (56)     (1)      25
                                                              $(180)   $(40)   $ 254
(Benefit) provision for income taxes........................  $(221)   $137    $  93


     Deferred income tax liabilities are taxes the AT&T Wireless Group expects
to pay in future periods. Similarly, deferred income tax assets are recorded for
expected reductions in taxes payable in future periods. Deferred income taxes
arise because of differences in the book and tax bases of certain assets and
liabilities.


   32
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     Deferred income tax liabilities and assets consist of the following:



                                                               AT DECEMBER 31,
                                                              ------------------
                                                               1999       1998
                                                              -------    -------
                                                                   
LONG-TERM DEFERRED INCOME TAX LIABILITIES
  Property, plant and equipment and licenses................  $(3,246)   $(2,817)
  Investments...............................................     (508)      (731)
  Other.....................................................      (49)      (174)
Total long-term deferred income tax liabilities.............  $(3,803)   $(3,722)
LONG-TERM DEFERRED INCOME TAX ASSETS
  Net operating loss/credit carryforwards...................  $    65    $    75
  Valuation allowance.......................................      (12)       (15)
Total net long-term deferred income tax assets..............  $    53    $    60
Net long-term deferred income tax liabilities...............  $(3,750)   $(3,662)
CURRENT DEFERRED INCOME TAX LIABILITIES
Total current deferred income tax liabilities...............  $    --    $    --
CURRENT DEFERRED INCOME TAX ASSETS
  Employee benefits.........................................       11         10
  Reserves and allowances...................................      101         77
  Other.....................................................       15          4
  Total current deferred income tax assets..................  $   127    $    91
Current deferred income tax assets..........................  $   127    $    91


     At December 31, 1999, the AT&T Wireless Group had net operating loss
carryforwards for federal and state income tax purposes of $34 and $514,
respectively, expiring through 2019. The AT&T Wireless Group also has federal
tax credit carryforwards of $29 which are not subject to expiration. The AT&T
Wireless Group recorded a valuation allowance to reflect the estimated amount of
deferred tax assets which, more likely than not, will not be realized by AT&T.

8. EMPLOYEE BENEFIT PLAN

     The AT&T Wireless Group sponsors a savings plan for the majority of its
employees. The plan allows employees to contribute a portion of their pretax
income in accordance with specified guidelines. The plan matches a percentage of
the employee contributions up to certain limits. In addition, the AT&T Wireless
Group may make discretionary or profit sharing contributions. Contributions
amounted to $37 in 1999, $31 in 1998 and $32 in 1997.

9. STOCK-BASED COMPENSATION PLANS

     Under the 1997 Long-term Incentive Program, which was effective June 1,
1997, and amended on May 19, 1999, AT&T grants stock options, performance
shares, restricted stock and other awards.


   33
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Under the Program, there were 150 million shares of common stock available for
grant with a maximum of 22.5 million common shares that could be used for awards
other than stock options. From the time the Program became effective to the
period ended December 31, 1999, there were approximately 109 million shares
granted and approximately 41 million shares that remained available for grant.
Beginning with January 1, 2000, the remaining shares available for grant at
December 31, of the prior year, plus 1.75% of the shares of AT&T common stock
outstanding on January 1 of each year become available for grant. There is a
maximum of 37.5 million shares that may be used for awards other than stock
options. The exercise price of any stock option is equal to the stock price when
the option is granted. Generally, the options vest over three years and are
exercisable up to 10 years from the date of grant. Under the 1987 Long-term
Incentive Program, which expired in April 1997, AT&T granted awards with the
same terms, and on January 1 of each year 0.6% of the outstanding shares of AT&T
common stock became available for grant.

     Under the Program, performance share units are awarded to key employees in
the form of either common stock or cash at the end of a three-year period based
on AT&T's total shareholder return and certain financial performance targets.
Under the 1987 Long-term Incentive Program, performance share units with the
same terms were also awarded to key employees based on AT&T's return-to-equity
performance compared with a target.

     On August 1, 1997, substantially all of the AT&T Wireless Group's employees
were granted a stock option award to purchase 150 shares representing a total of
1.8 million shares of AT&T's common stock. The options vest after three years
and are exercisable up to ten years from the grant date.

     Under the AT&T 1996 Employee Stock Purchase Plan, which was effective July
1, 1996, AT&T is authorized to issue up to 75 million shares of common stock to
its eligible employees. Under the terms of the Plan, employees may have up to
10% of their earnings withheld to purchase AT&T's common stock. The purchase
price of the stock on the date of exercise is 85% of the average high and low
sale prices of shares on the New York Stock Exchange for that day. Under the
Plan, AT&T sold approximately 424 thousand shares to the AT&T Wireless Group
employees in 1999, approximately 535 thousand shares in 1998 and approximately
600 thousand shares in 1997.

     AT&T applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
plans. Accordingly, no compensation expense has been recognized for stock-based
compensation plans other than for performance-based and restricted stock awards
and stock appreciation rights. Compensation costs charged against the AT&T
Wireless Group's results of operations were not material in 1999, 1998 or 1997.

     AT&T has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." If AT&T had elected to recognize
compensation costs based on the fair value at the date of grant for awards in
1999, 1998 and 1997, consistent with the provisions of SFAS No. 123, the AT&T
Wireless Group's net (loss) income would have been adjusted to reflect
additional compensation expense resulting in the following pro forma amounts:



                                                               FOR THE YEARS ENDED
                                                                  DECEMBER 31,
                                                              ---------------------
                                                              1999     1998    1997
                                                              -----    ----    ----
                                                                      
Net (loss) income...........................................  $(464)   $127    $107



   34
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     The pro forma effect on net (loss) income for 1999, 1998 and 1997 may not
be representative of the pro forma effect on net (loss) income of future years
because the SFAS No. 123 method of accounting for pro forma compensation expense
has not been applied to options granted prior to January 1, 1995.

     At the date of grant, the weighted average exercise price for options
granted during 1999, 1998 and 1997 were $59.35, $41.86 and $27.31, respectively.

     The weighted-average fair values at date of grant for options granted to
AT&T Wireless Group employees during 1999, 1998 and 1997 were $15.36, $9.80 and
$6.37, respectively, and were estimated using the Black-Scholes option-pricing
model. The weighted average risk-free interest rates applied for 1999, 1998 and
1997 were 4.71%, 5.27% and 6.14%, respectively. The following assumptions were
applied for 1999, 1998 and 1997, respectively: (i) expected dividend yields of
1.7%, 2.1% and 2.2%, (ii) expected volatility rates of 27.2%, 23.8% and 21.8%,
and (iii) expected lives of 4.9 years, 4.5 years and 4.5 years.

10. FAIR VALUES OF FINANCIAL INSTRUMENTS

     The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and other current liabilities are a reasonable estimate of
their fair value due to the short-term nature of these instruments. The fair
value of the long term debt due to AT&T approximates its carrying value.

11. COMMITMENTS AND CONTINGENCIES

     In the normal course of business, the AT&T Wireless Group is subject to
proceedings, lawsuits and other claims. Such matters are subject to many
uncertainties and outcomes are not predictable with assurance. Consequently, the
AT&T Wireless Group is unable to ascertain the ultimate aggregate amount of
monetary liability or financial impact with respect to these matters at December
31, 1999. The AT&T Wireless Group also makes routine filings with the Federal
Communications Commission and state regulatory authorities. These matters could
affect the operating results of any one quarter when resolved in future periods.
However, the AT&T Wireless Group believes that after final disposition any
monetary liability or financial impact to us beyond that provided for at
year-end would not be material to our annual combined financial statements.

     The AT&T Wireless Group leases land, buildings and equipment through
contracts that expire in various years through 2036. Rental expense under
operating leases was $205 in 1999, $181 in 1998 and $149 in 1997. The following
table shows the future minimum lease payments due under noncancelable operating
leases at December 31, 1999.



  2000   2001   2002   2003   2004   LATER YEARS
  ----   ----   ----   ----   ----   -----------
                      
  $180   $152   $113   $86    $61       $184


     In the second quarter of 1999, the AT&T Wireless Group entered into a
four-year commitment to purchase $1 billion in wireless network equipment. For
the year ended December 31, 1999, the AT&T Wireless Group spent over $500 in
partial satisfaction of this commitment.

     In addition, the AT&T Wireless Group has agreements with other wireless
carriers regarding subscriber activity on other carriers' wireless systems.
These agreements establish general terms and charges for system usage, and in
some cases also establish minimum usage requirements.


   35
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     During 1999, the AT&T Wireless Group expensed $82 for losses associated
with commitments related to certain investments. Included in the $82 loss, was
the AT&T Wireless Group's commitment of $63 to fund the long term debt
obligations of one of its investments, which fully satisfies the AT&T Wireless
Group's commitment for this investment.

     The AT&T Wireless Group also has various other purchase commitments for
materials, supplies and other items incidental to the ordinary course of
business which are not significant individually, nor in the aggregate.

12. RELATED PARTY TRANSACTIONS

     As discussed in Note 1, AT&T has provided necessary working capital
requirements through intercompany debt, preferred stock and cash contributions
to the AT&T Wireless Group. These amounts are reflected in the accompanying
combined balance sheets as preferred stock held by AT&T and long-term debt due
to AT&T. The 9% cumulative preferred stock was reflected at $1 billion and the
dividend requirements were $56 for each of the years ended December 31, 1999,
1998 and 1997, respectively, net of amounts recorded in accordance with the
methodology contained in the tax sharing agreement described in Note 1.

     Intercompany debt and interest was assumed based upon the methodology
outlined in Note 1. Intercompany debt was reflected as $3,400, and $2,500 at
December 31, 1999 and 1998. Intercompany interest was $214, $190 and $178, in
1999, 1998 and 1997, respectively, of which $88, $75 and $178, respectively, was
capitalized.

     The AT&T Wireless Group purchases long distance and other network related
services from AT&T at market-based prices. For the years ended December 31,
1999, 1998 and 1997, these amounts totaled $170, $65 and $58, respectively, and
are reflected within network and other costs of services expenses in the
accompanying combined statements of operations.

     AT&T has allocated general corporate overhead expenses, including finance,
legal, marketing, use of the AT&T brand, planning and strategy and human
resources to the AT&T Wireless Group amounting to $40, $42 and $47 for the years
ended December 31, 1999, 1998 and 1997, respectively, which are included within
selling, general and administrative expenses in the accompanying combined
statements of operations.

     Also included in selling, general and administrative expenses are charges
received from AT&T related to the AT&T Wireless Group's direct sales force who
are employees of AT&T, as well as commissions and marketing support costs
reimbursed to AT&T for costs incurred to acquire customers on our behalf. These
charges amounted to $223, $65 and $36 for the years ended December 31, 1999,
1998 and 1997, respectively.

     The AT&T Wireless Group purchases their administrative telephone services
from AT&T. These amounts are included within selling, general and administrative
expenses and totaled $69, $50 and $33 as of December 31, 1999, 1998 and 1997,
respectively. Accounts payable in the accompanying combined balance sheets
included $5 and $12, as of December 31, 1999 and 1998, respectively, associated
with the purchases of these services.

     The AT&T Wireless Group sells receivables to AT&T for wireless customers
whose wireless charges are combined ("bundled") with their long distance charges
into one bill. Accounts receivable in the accompanying combined balance sheets
included $83 and $59, as of December 31, 1999 and 1998, respectively, associated
with receivables from AT&T for these bundled customers. Selling, general and
administrative expenses included $65, $39 and $6, for the years ended December
31, 1999, 1998 and 1997, respectively, for the billing and collection fees
charged by AT&T. Additionally, selling, general and administrative expenses
included reimbursement to the AT&T Wireless Group from AT&T totaling $21, $26



   36
                              AT&T WIRELESS GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

and $37 for the years ended December 31, 1999, 1998 and 1997, respectively, for
costs incurred by the AT&T Wireless Group to develop bundled billing systems.

     Beginning in 1998, the AT&T Wireless Group utilizes the AT&T remittance
processing organization to process customer payments into AT&T's lockbox. The
AT&T Wireless Group paid $22 and $12 to AT&T for reimbursement of their costs
associated with these services for the years ended December 31, 1999 and 1998,
respectively.

13. SUBSEQUENT EVENTS

     In February 2000, AT&T and Dobson Communications Corporation, through a
joint venture, acquired American Cellular Corporation for approximately $2.4
billion. AT&T contributed its interest in the joint venture to the AT&T Wireless
Group as of the date of the acquisition. The acquisition was funded with
non-recourse bank debt by the joint venture and cash equity contributions of
approximately $400 from each of the two partners. Dobson will be responsible for
day-to-day management of the joint venture, which will be equally owned and
jointly controlled by Dobson and the AT&T Wireless Group.

     In February 2000, certain Dobson securities held by the AT&T Wireless Group
were redeemed, resulting in a net pretax gain of approximately $21.

     In February 2000, TeleCorp PCS, Inc. announced that it will acquire Tritel,
Inc. for approximately $5.3 billion in stock. The AT&T Wireless Group currently
holds equity interests in each of these affiliates. Upon completion of the
transaction, the AT&T Wireless Group will own approximately 23% of the combined
entity. Additionally, in a separate transaction, the AT&T Wireless Group agreed
to exchange certain wireless licenses, commitments and rights in the Midwestern
United States, plus cash of approximately $100 for licenses owned by TeleCorp in
several New England markets. The boards of directors of AT&T and TeleCorp have
approved the transactions. The transactions are subject to certain federal
regulatory approvals and are expected to close in the fourth quarter of 2000.

     In February 2000, AT&T announced the signing of an agreement to purchase
the assets of Wireless One Network, L.P., for cash of approximately $850. AT&T
will attribute its interest in Wireless One to the AT&T Wireless Group as of the
acquisition date. The transaction has been approved by the boards of directors
of AT&T and Wireless One, however the transaction is subject to the approval of
certain federal regulatory agencies. The transaction is anticipated to close in
June of 2000.

     The AT&T Wireless Group has a signed agreement to sell one of its equity
investments and is expected to close by the end of the first quarter of 2000.

     On February 3, 2000, a registration statement was filed with the SEC for an
initial public offering of AT&T Wireless Group tracking stock. The new tracking
stock will provide current AT&T shareowners and future investors with a security
tied directly to the economic performance of the AT&T Wireless Group. A special
AT&T shareowner meeting was held in March, voting in favor of the tracking stock
proposal. Holders of AT&T common stock and Liberty Media Group tracking stock
were entitled to vote at the special meeting. AT&T intends to conduct an initial
public offering of AT&T Wireless Group tracking stock in the second quarter of
2000. A distribution, which may be in the form of a dividend, exchange offer, or
a combination of these, of the AT&T Wireless Group tracking stock is intended to
be made to shareowners of AT&T common stock sometime thereafter. Holders of
Liberty Media Group tracking stock will not be entitled to this distribution.