LIBERTY MEDIA CORP /DE/, S-1/A, 2000-02-09

LIBERTY MEDIA CORP /DE/
S-1/A, 2000-02-09
CABLE & OTHER PAY TELEVISION SERVICES

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<PAGE>

As filed with the Securities and Exchange Commission on February 9, 2000

Registration No. 333-93917

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 1

to
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

LIBERTY MEDIA CORPORATION
(Exact name of Registrant as specified in its charter)

<TABLE>
<CAPTION>
Delaware 4841 84-1288730
<S> <C> <C>
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
ofincorporation or organization) Classification code number) Identification No.)
</TABLE>

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

9197 South Peoria Street, Englewood, Colorado 80112 (720) 875-5400
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

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

Charles Y. Tanabe, Esq.
Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112
(720) 875-5400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copy To:
Robert W. Murray Jr., Esq.

Baker Botts L.L.P.
599 Lexington Avenue
New York, New York 10022-6030
(212) 705-5000

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

Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act Registration Statement Number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering. [_]

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

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<PAGE>

PROSPECTUS

[LOGO OF LIBERTY MEDIA CORPORATION]

Liberty Media Corporation
4% Senior Exchangeable Debentures due 2029
(Exchangeable for Sprint Corporation PCS Common Stock--Series 1 or cash based
on the value of that stock)

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

This prospectus relates to $868,789,000 original principal amount of our 4%
senior exchangeable debentures due 2029, which may be sold from time to time by
the selling security holders named herein.

The debentures are exchangeable by the holders for the exchange market value
of the reference shares, calculated as described in this prospectus. The
reference shares currently consist of 22.9486 shares of Sprint PCS stock per
debenture. We will initially pay the exchange market value only in cash, and
may in the future, but not before December 1, 2001, pay the exchange market
value by delivering reference shares, cash or a combination of both.

In addition to paying interest on the debentures, we will distribute, as an
additional distribution on each debenture, cash or securities (other than
common equity securities) that correspond to any dividends, distributions or
other payments made in respect of the reference shares. If any common equity
securities are distributed in respect of the reference shares, those securities
will themselves become reference shares.

We may redeem the debentures at any time beginning on and after November 15,
2003, at the redemption prices described in this prospectus.

The debentures were initially sold by us in a private placement to qualified
institutional buyers. This prospectus has been made available to the selling
security holders in fullfillment of our obligations under a registration rights
agreement.

The selling security holders may offer and sell the debentures directly to
purchasers or through underwriters, brokers, dealers or agents, who may receive
compensation in the form of discounts, concessions or commissions. The
debentures may be sold in one or more transactions at fixed or negotiated
prices or at prices based on prevailing market prices at the time of sale.

We will not receive any proceeds from the sale of the debentures by the
selling security holders. We are, however, responsible for the costs of
registering, under the Securities Act of 1933, the offer and sale of the
debentures by the selling security holders.

Investing in the debentures involves risks. See "Risk Factors" beginning on
page 9.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

The date of this prospectus is February 9, 2000.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 9
Sprint Corporation ...................................................... 18
Price Range and Dividend History of the Sprint PCS Stock ................ 19
Use of Proceeds.......................................................... 19
Capitalization........................................................... 20
Selected Historical Financial Data....................................... 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Corporate History........................................................ 41
Business................................................................. 43
Management............................................................... 77
Selling Security Holders................................................. 92
Relationship with AT&T and Certain Related Transactions.................. 98
Description of the Debentures............................................ 107
Summary of Registration Rights of Selling Security Holders............... 132
Certain United States Federal Income Tax Considerations.................. 133
Plan of Distribution..................................................... 138
Legal Matters............................................................ 140
Experts.................................................................. 140
Where to Find More Information........................................... 140
Index to Financial Statements............................................ F-1
</TABLE>

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

This prospectus is based on information provided by us and other sources that
we believe to be reliable. This prospectus summarizes certain documents and
other information, and we refer you to them for a more complete understanding
of what we discuss in this prospectus.

This prospectus includes information concerning The News Corporation Limited,
Time Warner Inc., TV Guide, Inc., Gemstar International Group Limited, USA
Networks, Inc., Sprint Corporation, Telewest Communications plc, Motorola Inc.,
UnitedGlobalCom, Inc., Cendant Corp., Antec Corporation, America Online, Inc.,
Four Media Company, Todd-AO Corporation, The Associated Group, Inc. and
Teligent, Inc., all of which are public companies that file reports and other
information with the SEC in accordance with the requirements of the Securities
Act and the Securities Exchange Act of 1934. Information contained in this
prospectus concerning those companies has been derived from the reports and
other information filed by them with the SEC and is qualified in its entirety
by reference to those reports and other information. Liberty had no part in the
preparation of those reports and other information, nor are they incorporated
by reference in this prospectus, and Liberty takes no responsibility for their
accuracy. You may read and copy any reports and other information filed by
those companies as set forth under "Where to Find More Information."

You should rely only on the information contained in this prospectus or to
which we have referred you. We have not, and the selling security holders have
not, authorized any person to provide you with different information or to make
any representation not contained in this prospectus.

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

ii
<PAGE>

NOTICE TO NEW HAMPSHIRE RESIDENTS

Neither the fact that a registration statement or an application for a
license has been filed under RSA 421-B with the state of New Hampshire nor the
fact that a security is effectively registered or a person is licensed in the
state of New Hampshire constitutes a finding by the secretary of state that any
document filed under RSA 421-B is true, complete and not misleading. Neither
any such fact nor the fact that an exemption or exception is available for a
security or a transaction means that the secretary of state has passed in any
way upon the merits or qualification of, or recommended or given approval to,
any person, security or transaction. It is unlawful to make or cause to be made
to any prospective purchaser, customer or client any representation
inconsistent with the provisions of this paragraph.

iii
<PAGE>

PROSPECTUS SUMMARY

The following summary highlights selected information from this prospectus to
help you understand Liberty and the debentures. For a more complete
understanding of Liberty and the debentures, we encourage you to read this
entire document, including the "Risk Factors" section. All references to
"Liberty," "we," "us" and words to similar effect refer to Liberty Media
Corporation and, unless the context indicates otherwise, its consolidated
subsidiaries.

Liberty Media Corporation

We are a leading media, entertainment and communications company with
interests in a diverse group of public and private companies that are market
leaders in their respective industries. Our subsidiaries and business
affiliates are engaged in a broad range of programming, communications,
technology and Internet businesses and have some of the most recognized and
respected brands. These brands include Encore, STARZ!, Discovery, TV Guide,
Fox, USA, QVC, CNN, TBS, Motorola and Sprint PCS.

The media, entertainment and communications industries are currently
undergoing tremendous changes due in part to the growth of new distribution
technologies, led by the Internet and the implementation of digital
compression. The growth in distribution technologies has, in turn, created
strong demand for an ever increasing array of multimedia products and services.
Liberty is working with its subsidiaries and business affiliates to extend
their established brands, quality content and networks across multiple
distribution platforms to keep them at the forefront of these ongoing changes.

The following table lists our principal subsidiaries and business affiliates
and our direct equity interests or indirect attributed equity interests, based
on ownership of capital stock. Our direct or attributed equity interest in a
particular company does not necessarily represent our voting interest in that
company. Our indirect attributed interest is determined by multiplying our
ownership interest in the holder of an equity interest by that equity holder's
ownership interest in the listed subsidiary or business affiliate. The
ownership percentages are approximate, calculated as of September 30, 1999,
and, in the case of convertible securities we hold, assume conversion to common
stock by us and, to the extent known by us, other holders. In some cases our
interest is subject to buy/sell procedures, rights of first refusal or other
obligations. See "Business."

<TABLE>
<CAPTION>
Subsidiary/Business Affiliate Attributed Ownership %
----------------------------- ----------------------
<S> <C>
Encore Media Group LLC. ........................... 100%
Liberty Digital, Inc. ............................. 87%
Discovery Communications, Inc. .................... 49%
TV Guide, Inc. .................................... 44%
QVC Inc. .......................................... 43%
Flextech, plc...................................... 37%
Sprint PCS Group................................... 23%
Telewest Communications plc........................ 22%
USA Networks, Inc. ................................ 21%
Time Warner Inc. .................................. 9%
The News Corporation Limited....................... 8%
Motorola Inc. (successor to General Instrument
Corporation)...................................... 3%
</TABLE>

1
<PAGE>

Business Strategy

Our business strategy is to maximize the value of Liberty by (1) working with
the management teams of our existing subsidiaries and business affiliates to
grow their established businesses and create new businesses and (2) identifying
and executing strategic transactions that improve the value or optimize the
efficiency of Liberty's assets. Key elements of our business strategy include
the following:

.Promote the internal growth of our subsidiaries and business affiliates;

.Maintain significant involvement in governance;

.Participate with experienced management and strategic partners; and

.Execute strategic transactions that optimize the efficiency of our assets.

Relationship with AT&T Corp.

We have been a subsidiary of AT&T Corp. since March 9, 1999. On that date,
AT&T acquired by merger our parent TCI. As part of that merger, AT&T issued
AT&T common stock (NYSE: T) and Class A and Class B Liberty Media Group common
stock (NYSE: LMG.A and LMG.B). AT&T's Liberty Media Group common stock is a
tracking stock designed to reflect the economic performance of the businesses
and assets of AT&T attributed to the "Liberty Media Group." We are included in
the Liberty Media Group, and the businesses and assets of Liberty and its
subsidiaries constitute substantially all of the businesses and assets of the
Liberty Media Group. The AT&T common stock is intended to reflect all other
assets and businesses of AT&T, which we refer to as the AT&T Common Stock
Group. For a more detailed description of the relationship between AT&T and
Liberty, see "Relationship with AT&T and Certain Related Transactions" starting
on page 98.

We have a substantial degree of managerial autonomy from AT&T as a result of
our corporate governance arrangement with AT&T. Our board of directors is
controlled by persons designated by TCI prior to its acquisition by AT&T, and
our board will continue to be controlled by those persons, or others chosen by
them, until at least 2006. Our management consists of individuals who managed
the businesses of Liberty prior to the AT&T merger. We have entered into
agreements with AT&T which provide us with a level of financial and operational
separation from AT&T, define our rights and obligations as a member of AT&T's
consolidated tax group, enable us to finance our operations separately from
those of AT&T and provide us with certain programming rights with respect to
AT&T's cable systems. See "Relationship with AT&T and Certain Related
Transactions" starting on page 98.

Our principal executive offices are located at 9197 South Peoria Street,
Englewood, Colorado 80112. Our main telephone number is (720) 875-5400.

2
<PAGE>

Relationship of Liberty Media Corporation to the Liberty Media Group

Liberty Media Corporation and its consolidated subsidiaries are attributed to
the Liberty Media Group. The businesses and assets of Liberty and its
subsidiaries currently constitute substantially all of the businesses and
assets of the Liberty Media Group. The following diagram illustrates the assets
of AT&T that are attributed to the Liberty Media Group and to the AT&T Common
Stock Group. The following diagram also illustrates the assets of Liberty,
which is a holding company. For a more complete description of the relationship
of Liberty Media Corporation to AT&T and the Liberty Media Group, see
"Relationship with AT&T and Certain Related Transactions" starting on page 98.
For a discussion of Liberty's consolidated subsidiaries and principal business
affiliates, see "Business" starting on page 43.

[GRAPH]
AT&T Liberty Media AT&T Common Stock
Group Tracking Stock (intended to reflect the
(intended to reflect the performance of the AT&T
performance of the Liberty Common Stock Group)
Media Group)
-----------
AT&T CORP.
-----------
Liberty Media Group AT&T Common Stock
Group

LIBERTY MEDIA CORPORATION Other Assets All businesses, assets and
(indirect subsidiary of AT&T) liabilities of AT&T not
included in the
ISSUER OF AND SOLE OBLIGOR Liberty Media Group
UNDER THE DEBENTURES
|
|
- -------------------------------------------------------
100% 87% 100% 100% |
| | | | |
Encore Liberty Pramer TCI Other Assets
Media Digital, Inc. S.C.A. Cablevision (including
Group LLC of Puerto interests in
Rico, Inc. business affiliates)

3
<PAGE>

TERMS OF THE DEBENTURES

On November 16, 1999, we completed the private placement of $868,789,000
aggregate principal amount of our 4% Senior Exchangeable Debentures due 2029.
At that time we entered into a registration rights agreement with the initial
purchasers, in which we agreed to file for the benefit of the holders of the
debentures a shelf registration statement covering public resales of the
debentures. This prospectus is part of that shelf registration statement, and
the debentures being offered hereby are those initially sold by us in the
private placement.

Set forth below is a summary description of the terms of the debentures being
offered hereby. We refer you to "Description of the Debentures," beginning on
page 107, for a more complete description of the debentures.

Issuer..................... Liberty Media Corporation

Debentures offered......... $868,789,000 aggregate principal amount of 4%
Senior Exchangeable Debentures due 2029. The
debentures are being offered by the selling
security holders.

Ranking....................
The debentures are our unsecured senior
obligations and rank equally with all of our
existing and future unsecured and unsubordinated
obligations. As of September 30, 1999, after
giving pro forma effect to the sale of our 8 1/4%
senior debentures due 2030 on February 2, 2000, we
would have had approximately $2.6 billion of
unsecured and unsubordinated indebtedness, all of
which would have ranked equally with the
debentures. The debentures will be effectively
subordinated to all of our secured indebtedness to
the extent of the value of the assets securing
that indebtedness, and will be effectively
subordinated to all liabilities of our
consolidated subsidiaries. As of September 30,
1999, we had no secured indebtedness and our
consolidated subsidiaries had outstanding
approximately $12.9 billion of liabilities, all of
which would have effectively ranked senior to the
debentures.

Denominations; Principal
Amount.....................
The minimum denomination is $1,000 original
principal amount, which we refer to as a
debenture, and debentures may be transferred in
integral multiples of $1,000 original principal
amount. The principal amount of the debentures is
subject to adjustment as described in this
prospectus. Because the principal amount is
subject to change, we refer to the principal
amount, at any time of determination, as the
adjusted principal amount.

Exchangeability............
At your option, each debenture can be exchanged
for the exchange market value, calculated in the
manner described in this prospectus, of the
reference shares attributable to that debenture.
At the date of this prospectus, the reference
shares consist of 22.9486 shares of Sprint PCS
stock; however, the composition of the reference
shares is subject to change as described in this
prospectus.

4
<PAGE>

Until at least December 1, 2001, we will pay only
in cash the exchange market value of each
debenture that you present for exchange. After
that date or, if later, the date on which we and a
trust for our benefit, taken together, no longer
beneficially own 10% or more of the outstanding
shares of any class or series of reference shares
that are registered under the Securities Exchange
Act of 1934, we may pay the exchange market value
of each debenture that you present for exchange as
follows:

. in cash;

. by delivering the reference shares
attributable to the debenture; or

. in a combination of cash and reference shares.

Use of Proceeds............ We will not receive any of the proceeds from the
secondary sale by the selling security holders of
debentures. This prospectus fulfills an obligation
of ours under a registration rights agreement that
we entered into with the initial purchasers of the
debentures.

Sprint and its
Relationship to the
Debentures................. According to publicly available information,
Sprint is a domestic and international long
distance communications provider through its FON
Group and a domestic wireless mobile phone
services provider through its PCS Group. Sprint's
PCS Group operates a digital PCS wireless network
in the United States. The Sprint PCS stock is a
"tracking stock" intended to reflect the
performance of Sprint's domestic wireless personal
communications services operations. Sprint has
entered into a merger agreement with MCI WorldCom,
Inc. Under this agreement, holders of Sprint PCS
stock would receive one share of WorldCom PCS
tracking stock and 0.116025 shares of MCI WorldCom
common stock for each share of Sprint PCS stock.
If this merger occurs, the shares issued in the
MCI WorldCom merger would replace the Sprint PCS
common stock as the reference shares that are
attributable to the debentures and MCI WorldCom
would become a successor reference company.
However, the merger is subject to many conditions,
including regulatory approvals, and may never
occur. Even if it does occur, the exchange ratio
for the shares to be received by holders of Sprint
PCS stock in the merger may change.

Neither Sprint nor any other reference company
will have any obligations whatsoever under the
debentures. This prospectus relates only to a
secondary offering of the debentures and does not
relate to any offering of the Sprint PCS stock or
any other securities of Sprint or any successor
reference company.

Maturity................... The debentures have a stated maturity of November
15, 2029.

5
<PAGE>

Interest...................
We will pay you interest at the rate of 4% per
annum on the original principal amount of the
debentures. Interest will be paid semi-annually on
each May 15 and November 15, beginning on May 15,
2000. The interest rate on the debentures is
subject to increase (by up to an additional one
percentage point) in the event this prospectus
becomes unusable for more than 30 days in any
twelve-month period.

Additional Distributions... We will distribute, as an additional distribution
on each debenture, cash or securities (other than
publicly traded common equity securities) that
correspond to any dividends, distributions or
other payments made in respect of the reference
shares. If any common equity securities are
distributed in respect of the reference shares,
those securities will themselves become reference
shares.

Any additional distribution that we pay as a
result of a regular cash dividend on the reference
shares will be distributed to you with the next
semi-annual interest payment on the debentures.
All other additional distributions will be paid or
made within 20 business days after the payment or
delivery of the related dividends or distributions
on the reference shares.

As of the date of this prospectus, Sprint has
never paid a cash dividend or made an
extraordinary distribution on its Sprint PCS
stock.

Adjusted Principal The original principal amount of the debentures
Amount..................... will be reduced by the amount of all additional
distributions that we make to holders of the
debentures that are attributable to extraordinary
distributions on or in respect of the reference
shares. The adjusted principal amount will also be
reduced on subsequent interest payment dates to
the extent necessary so that the annualized yield
on the debentures paid by us does not exceed 4%
per annum. In no event will the adjusted principal
amount ever be less then zero. Reductions to the
adjusted principal amount will not affect the
amount of the semi-annual interest payment
received by a holder of debentures, which is based
on the original principal amount.

Optional Redemption........ We may redeem the debentures, in whole or in part,
at any time on or after November 15, 2003, at the
redemption prices described herein. If we make a
partial redemption, debentures with an aggregate
principal amount of at least $100 million must
remain outstanding.

We may also redeem the debentures, in whole but
not in part, if a "tax event" occurs on or before
February 15, 2000, or a "share event" occurs on or
before November 15, 2003, at the redemption prices
described in this prospectus.

6
<PAGE>

Covenants.................. The indenture governing the debentures contains
covenants with respect to:

.limitations on liens;

.limitations on sale and leaseback; and

.limitations on certain merger, consolidation
and similar transactions.

These covenants are subject to a number of
important qualifications and exceptions. See
"Description of the Debentures--Certain
Covenants."

Book-entry only............ The debentures have been issued in book-entry form
and are represented by global debentures deposited
with The Bank of New York on behalf of The
Depository Trust Company. Except to the extent
described herein, interests in the global
debentures will be shown on, and transfers will be
effected only through, records maintained by DTC
and its participants.

RISK FACTORS

An investment in the debentures involves risks. See "Risk Factors" beginning
on page 9 for a discussion of factors you should carefully consider before
deciding to purchase any debentures.

7
<PAGE>

Summary Historical Financial Data

In the table below we provide you with selected historical consolidated
financial data of Liberty. We derived the historical consolidated financial
data from our consolidated financial statements included elsewhere in this
prospectus. The unaudited financial data at September 30, 1999, February 28,
1999, and September 30, 1998, and for the seven months ended September 30,
1999, the two months ended February 28, 1999, and the nine months ended
September 30, 1998, contain all adjustments, consisting only of normal
recurring accruals, that, in the opinion of our management, are necessary for a
fair presentation of our results for these periods. The interim results of
operations are not necessarily indicative of results that may be expected for
the full year.

Liberty has been a wholly owned subsidiary of TCI since August 1994. On March
9, 1999, AT&T acquired TCI in a merger transaction. For financial reporting
purposes, the merger of AT&T and TCI is deemed to have occurred on March 1,
1999. In connection with the merger, the assets and liabilities of Liberty were
adjusted to their respective fair values pursuant to the purchase method of
accounting. For periods prior to March 1, 1999, the assets and liabilities of
Liberty and the related consolidated results of operations are referred to
below as "Old Liberty," and for periods subsequent to February 28, 1999, the
assets and liabilities of Liberty and the related consolidated results of
operations are referred to as "New Liberty." In connection with the merger, TCI
effected an internal restructuring as a result of which certain assets and
approximately $5.5 billion in cash were contributed to Liberty.

The financial data presented below are not necessarily comparable from period
to period as a result of several transactions, including acquisitions and
dispositions of consolidated subsidiaries. For this and other reasons, you
should read the selected historical financial data provided below in
conjunction with our consolidated financial statements and accompanying notes
beginning on page F-1 and the discussion under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" beginning on
page 22.

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------- ------------------------------------------------------
Seven months Two months Nine months
ended ended ended Year ended December 31,
September 30, February 28, September 30, ---------------------------
1999 1999 1998 1998 1997 1996
------------- ------------ ------------- -------- ------- --------
(unaudited) (unaudited) (unaudited)
(in millions, except ratios)
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Revenue................. $ 506 235 1,005 1,359 1,225 2,208
Operating loss.......... (728) (158) (188) (431) (260) (66)
Interest expense........ (87) (26) (62) (104) (40) (53)
Share of losses of
affiliates, net........ (597) (66) (828) (1,002) (785) (332)
Gain on dispositions,
net.................... 10 14 569 2,449 406 1,558
Net income (loss)....... (814) (70) (260) 622 (470) 741
Balance Sheet Data (at
period end):
Cash and cash
equivalents............ $ 499 31 199 228 100 434
Marketable securities... 2,949 125 55 159 248 59
Investments in
affiliates............. 15,939 3,971 2,831 3,079 2,359 1,519
Investment in Time
Warner, Inc............ 6,968 7,361 4,996 7,083 3,538 2,017
Investment in Sprint
Corporation............ 7,616 3,381 -- 2,446 -- --
Total assets............ 50,822 16,886 10,604 15,567 7,735 6,722
Debt including current
portion................ 2,194 2,087 2,175 2,096 785 555
Stockholder's equity.... 35,466 9,449 5,566 9,230 4,721 4,519
Other Data:
Ratio of earnings to
fixed charges (a)...... -- 5.12x -- 11.03x 2.06x 21.36x
</TABLE>
- -------
(a) The ratio of earnings to fixed charges of Liberty was less than 1.00x for
the seven-month period ended September 30, 1999, and for the nine-month
period ended September 30, 1998. Thus, earnings available for fixed charges
were inadequate to cover fixed charges for those periods. The amounts of
the coverage deficiencies for the seven-month period ended September 30,
1999, and for the nine-month period ended September 30, 1998, were $1,133
million and $348 million, respectively. For the ratio calculations,
earnings available for fixed charges consist of earnings (losses) before
income taxes plus fixed charges, distributions from and losses of less than
50%-owned affiliates with debt not guaranteed by Liberty (net of earnings
not distributed of less than 50%-owned affiliates) and minority interests
in (earnings) losses of consolidated subsidiaries. Fixed charges consist
of:

. interest on debt, including interest related to debt guaranteed by Liberty
of less than 50%-owned affiliates where the investment in such affiliates
results in the recognition of a loss,
. Liberty's proportionate share of interest of 50%-owned affiliates,
. that portion of rental expense which Liberty believes to be representative
of interest (one-third of rental expense) and
. amortization of debt issuance costs.

8
<PAGE>

RISK FACTORS

An investment in the debentures involves risk. You should carefully consider
the following factors, as well as the other information included in this
prospectus, before deciding to purchase the debentures. Any of the following
risks could have a material adverse effect on our business, financial condition
or results of operations or on the value of the debentures.

Factors Relating to the Debentures

The return to investors on the debentures depends on the Sprint PCS
stock. The terms of the debentures differ from those of ordinary debt
securities because:

. the effective yield on the debentures may change depending upon the
dividend policy of Sprint or any other reference company;

. the debentures are exchangeable for (1) cash in an amount based on the
then exchange market value of the reference shares or (2) no earlier
than December 1, 2001, at the option of Liberty, the reference shares
themselves; and

. the principal amount of the debentures will be reduced by the amount of
an additional distribution that is made by Liberty following any
extraordinary dividend or distribution being paid or made on or in
respect of the reference shares.

Accordingly, the return that a holder of the debentures will realize may be
less than that of an ordinary fixed income debt security that may be issued by
us.

We do not have any control over the dividend policy of Sprint. As of the date
of this prospectus, Sprint has never paid a cash dividend on its Sprint PCS
stock. You should not expect that Sprint will commence paying dividends in the
future or, if commenced, that the dividend rate on the Sprint PCS stock will
remain the same during the period the debentures are outstanding.

It is difficult to predict whether the price of the Sprint PCS stock will
rise or fall. Trading prices of the Sprint PCS stock will be influenced by
Sprint's operating results and by complex and interrelated political, economic,
financial and other factors that can affect the capital markets generally, the
NYSE and the market segments of which Sprint is a part.

We do not directly own any shares of Sprint PCS stock. We cannot control the
sale of shares of Sprint PCS stock owned by a trust established for our
benefit, which could result in an early redemption of your debentures. Pursuant
to a final judgment agreed to by TCI and AT&T with the United States Department
of Justice in connection with the AT&T merger, Liberty has transferred legal
and record ownership of the following to the Liberty PCS Trust, which we refer
to as the Trust:

. approximately 98.6 million shares of Sprint's Series 2 Sprint PCS stock,
which convert automatically on a one-for-one basis into Sprint PCS stock
in a number of situations, including generally upon sales of the Series
2 Sprint PCS stock by the Trust to persons who are not our affiliates,

. shares of Sprint PCS Series 7 Preferred Stock, which are presently
convertible into approximately 4 million shares of Sprint PCS stock, and

. warrants that presently entitle the holder to purchase approximately 6.3
million shares of Series 2 Sprint PCS stock.

Any sales of the Series 2 Sprint PCS stock by the Trust will be for our
benefit. Some of those sales will be subject to a top up right agreement among
France Telecom S.A., Deutsche Telekom AG and the Trust. Under the top up right
agreement and subject to a number of exceptions, the Trust generally must offer
France Telecom and Deutsche Telekom the right to purchase a portion,
approximating 18%, of any shares of Series 2

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Sprint PCS stock that are sold by the Trust. In addition, the trustee of the
Trust, after consultation with certain directors of Liberty, has the absolute
authority to sell any and all of the Sprint securities held in the Trust. Under
the terms of the final judgment, the trustee is required to divest, by May 23,
2002, a portion of the Sprint securities sufficient to decrease the Trust's
holdings to no more than 10% of the Sprint PCS stock, and is required to divest
of any remaining holdings of Sprint securities by May 23, 2004. Sales of Sprint
PCS stock by the trustee of the Trust will not affect our obligations under the
debentures, except that sales of a large enough amount of Sprint PCS stock by
the trustee of the Trust may result in a "share event," in which case we may
redeem the debentures. If a share event occurs, we currently intend to redeem
the debentures.

Although cash dividends and any other property not consisting of Sprint
equity securities distributed on or in respect of the Sprint PCS stock in the
Trust are to be distributed by the trustee of the Trust at our order, any
dividend or distribution consisting of Sprint equity securities must be
retained by the trustee and disposed of in accordance with the final judgment.

Under the terms of the trust agreement and the final judgment, we cannot
direct the trustee of the Trust to sell any shares of Sprint PCS stock and we
may not acquire any additional shares of Sprint PCS stock without the
permission of the Department of Justice, for so long as the final judgment is
in effect. An affiliate of ours has entered into a standstill agreement with
Sprint that may restrict our ability to acquire additional shares of Sprint PCS
stock. Hence, we may not be able to hedge, in whole or in part, our obligations
under the debentures that are based on the Sprint PCS stock unless the final
judgment is modified or terminated. The trustee will be under no obligation to
deliver shares of Sprint PCS stock in connection with an exchange request, or
to sell shares of Sprint PCS stock to raise cash for Liberty to honor an
exchange request or to effect an optional redemption of debentures.

Sprint has no obligations with respect to the debentures. Sprint is not
involved in the offering of the debentures and has no obligations with respect
to the debentures, including any obligation to take our interests or your
interests into consideration for any reason or under any circumstance. Holders
of the debentures will not be entitled to any rights with respect to the Sprint
PCS stock other than indirectly pursuant to the express terms of the debentures
or at such time, if any, that Sprint PCS stock is exchanged by us for
debentures.

The number of reference shares attributable to the debentures will not adjust
for some dilutive transactions involving the reference shares. If specific
dilutive or anti-dilutive events occur with respect to the reference shares, the
number and type of reference shares that will be used to calculate the amount of
cash or reference shares you will receive upon exchange, maturity or redemption
of a debenture will be adjusted to reflect such events. These adjustments will
not take into account various other events, such as offerings of reference
shares by a reference company for cash or business acquisitions by a reference
company with the reference shares, that may adversely affect the price of the
reference shares and may adversely affect the trading price and market value of
the debentures. We cannot assure you that a reference company will not make
offerings of the reference shares or other equity securities or enter into such
business acquisitions in the future. In particular, you should note that Sprint
may be able to take actions that would benefit its FON Group and disadvantage
its PCS Group. The number of shares of Sprint PCS stock attributable to the
debentures will not adjust for these actions.

Potential adverse tax consequences of purchasing the debentures. Before
purchasing the debentures, you should recognize that the amount of interest
income required to be included in income by you for each year will be in excess
of the semi-annual interest payments you actually receive. Any gain recognized
by you on the sale or exchange of the debentures will be ordinary income; any
loss will be ordinary loss to the extent of the interest previously included in
income, and thereafter, capital loss. See "Certain United States Federal Income
Tax Considerations."

The debentures are a recent issue of securities for which there is currently
no active trading market. The debentures are a recent issue of securities with
no active trading market. Liberty does not intend to list the debentures on any
national securities exchange. If a trading market does not develop or is not

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maintained, holders of the debentures may experience difficulty in reselling
the debentures or may be unable to sell them at all. We cannot assure you that
an active public or other market for the debentures will develop or be
maintained. If a market for the debentures develops, it may be discontinued at
any time.

The liquidity of any market for the debentures will depend upon the number of
holders of the debentures, our operating performance, the interest of
securities dealers in making a market in the debentures and other factors. A
liquid trading market may not develop for the debentures. Furthermore, the
market price for the debentures may be subject to substantial fluctuations.
Factors such as the following may have a significant effect on the market price
of the debentures:

. the market price of the Sprint PCS stock;

. hedging or arbitrage trading activity that may develop involving the
debentures and the Sprint PCS stock;

. actual or anticipated fluctuations in our operating results;

. our perceived business prospects;

. general economic conditions, including prevailing interest rates; and

. the market for similar securities.

Factors Relating to Liberty

Our holding company structure could restrict access to funds of our
subsidiaries that may be needed to service the debentures. Creditors of those
companies have a claim on their assets that is senior to that of holders of the
debentures. Liberty is a holding company with no significant assets other than
its equity interests in its subsidiaries and cash, cash equivalents and
marketable securities. Liberty is the only company obligated to make payments
under the debentures. Our subsidiaries are separate and distinct legal entities
and they have no obligation, contingent or otherwise, to pay any amounts due
under the debentures or to make any funds available for any of those payments.
In addition, neither AT&T nor any of its subsidiaries other than Liberty have
any obligation to make payments under the debentures or to make any funds
available for those payments.

All of the liabilities of our subsidiaries effectively rank senior to the
debentures. A substantial portion of the consolidated liabilities of Liberty
consists of liabilities incurred by its subsidiaries. Moreover, the indenture
governing the debentures does not limit the amount of indebtedness that may be
incurred by Liberty's subsidiaries in the future. The rights of Liberty and of
its creditors, including holders of the debentures, to participate in the
distribution of assets of any subsidiary upon the latter's liquidation or
reorganization will be subject to prior claims of the subsidiary's creditors,
including trade creditors, except to the extent Liberty may itself be a
creditor with recognized claims against the subsidiary. Where Liberty is itself
a creditor of a subsidiary, its claims will still be subject to the prior
claims of any secured creditor of that subsidiary and to the claims of any
holder of indebtedness that is senior to the claim held by Liberty. As of
September 30, 1999, the aggregate amount of the total liabilities of our
consolidated subsidiaries was approximately $12.9 billion, of which
approximately $11.6 billion was deferred income taxes.

We could be unable in the future to obtain a sufficient amount of cash with
which to service our financial obligations. Our ability to meet our debt
service requirements, including those with respect to the debentures, is
dependent upon our ability to access cash. Liberty's sources of cash include
its available cash balances, net cash from the operating activities of its
subsidiaries, dividends and interest from its investments, availability under
credit facilities and proceeds from asset sales. Although at September 30,
1999, Liberty had cash and cash equivalents of approximately $500 million and
marketable securities of approximately $2.9 billion, there is no requirement in
the indenture governing the debentures that any of Liberty's cash or cash
equivalents or proceeds from the sale of any of its marketable securities be
reserved for the payment of

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<PAGE>

Liberty's obligations under the debentures. We cannot assure you that Liberty
will maintain significant amounts of cash, cash equivalents or marketable
securities in the future.

Liberty obtained from one of its subsidiaries net cash of $5 million in 1998
and net cash of $4.1 million in the first nine months of 1999. Liberty did not
obtain cash, in the form of dividends, loans, advances or otherwise, from any
of its other operating subsidiaries during those periods. The ability of
Liberty's operating subsidiaries to pay dividends or to make other payments or
advances to Liberty depends on their individual operating results and any
statutory, regulatory or contractual restrictions to which they may be or may
become subject. Some of our subsidiaries are subject to loan agreements that
restrict sales of assets and prohibit or limit the payment of dividends or the
making of distributions, loans or advances to stockholders and partners.

Liberty generally does not receive cash, in the form of dividends, loans,
advances or otherwise, from its business affiliates. In this regard, we do not
have voting control over most of our business affiliates and cannot cause those
companies to pay dividends or make other payments or advances to their partners
or shareholders (including us).

AT&T has no obligation to provide financing for our operations and we do not
expect AT&T to provide us with any financing during the term of the debentures.
In addition, AT&T does not guarantee any of our indebtedness, and it will have
no obligations to the holders of the debentures in the event of a payment
default or other default by Liberty.

We may secure future indebtedness of Liberty with the capital stock of our
subsidiaries or other securities, in which case that indebtedness will
effectively rank senior to the debentures. The indenture does not restrict the
ability of Liberty to pledge shares of capital stock or other securities that
it owns to secure indebtedness. To the extent Liberty pledges shares of capital
stock or other securities to secure indebtedness, the indebtedness so secured
will effectively rank senior to the debentures to the extent of the value of
the shares or other securities pledged. The indenture also does not restrict
the ability of Liberty's subsidiaries to pledge shares of capital stock or
other assets that they own to secure indebtedness.

We have entered into bank credit agreements that contain restrictions on how
we finance our operations and operate our business, which could impede our
ability to engage in transactions that would be beneficial for us. Liberty and
its subsidiaries are subject to significant financial and operating
restrictions contained in outstanding credit facilities. These restrictions
will affect, and in some cases significantly limit or prohibit, among other
things, our ability or the ability of our subsidiaries to:

. borrow more funds;

. pay dividends or make other distributions;

. make investments;

. engage in transactions with affiliates; or

. create liens.

The restrictions contained in these credit agreements could have the
following adverse effects on us, among others:

. we could be unable to obtain additional capital in the future to

. fund capital expenditures or acquisitions that could improve the
value of Liberty;

. permit us to meet our loan and capital commitments to our business
affiliates or allow us to help fund their operating losses or future
development; or

. allow us to conduct necessary corporate activities;

. we could be unable to access the net cash of our subsidiaries to help
meet our own financial obligations;

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<PAGE>

. we could be unable to invest in companies in which we would otherwise
invest; and

. we could be unable to obtain lower borrowing costs that are available
from secured lenders or engage in advantageous transactions that
monetize our assets.

In addition, some of the credit agreements to which our subsidiaries are a
party require them to maintain financial ratios, including ratios of total debt
to operating cash flow and operating cash flow to interest expense. If Liberty
or its subsidiaries fail to comply with the covenant restrictions contained in
their credit agreements, that could result in a default which accelerates the
maturity of the indebtedness borrowed pursuant to those agreements. Such a
default could also result in indebtedness under other credit agreements and the
debentures becoming due and payable due to the existence of cross-default or
cross-acceleration provisions of our credit agreements and in the indenture
governing the debentures.

We have agreements with AT&T that restrict our ability to incur debt and
impede our ability to use AT&T Liberty Media Group tracking stock to effect
acquisitions or engage in other transactions. Liberty has entered into an
Inter-Group Agreement with AT&T that restricts the amount of indebtedness that
Liberty may incur as a member of the Liberty Media Group. Under the Inter-Group
Agreement, no subsidiary of AT&T that is attributed to the Liberty Media Group
may incur any debt, other than the refinancing of debt without any increase in
amount, that would cause the total indebtedness of all the subsidiaries of AT&T
that are attributed to the Liberty Media Group at any time to be in excess of
25% of the total market capitalization of the Class A and Class B Liberty Media
Group tracking stock, unless the excess would not adversely affect the credit
rating of AT&T. See "Relationship with AT&T and Certain Related Transactions--
Relationship with AT&T--Inter-Group Agreement." To the extent we are unable to
incur additional debt due to this restriction, the effects set forth in the
preceding risk factor arising out of restrictions on our ability to borrow
funds will be exacerbated. The AT&T Liberty Media Group tracking stock is a
common stock of AT&T, and we cannot use that stock to effect acquisitions or
for any other purpose without the prior approval of the AT&T board of directors
or of a three person capital stock committee of the AT&T board of directors.
Only one member of that committee, Dr. John C. Malone, is also a director of
Liberty. All of Liberty's common stock is owned by a subsidiary of AT&T.

We may make significant capital contributions and loans to our subsidiaries
and business affiliates to cover operating losses and fund development and
growth, which could limit the amount of cash available to pay Liberty's own
financial obligations. The development of video programming, communications,
technology and Internet businesses involves substantial costs and capital
expenditures. As a result, many of our business affiliates have incurred
operating and net losses to date and are expected to continue to incur
significant losses for the foreseeable future. Liberty's results of operations
include Liberty's and its consolidated subsidiaries' share of the net losses of
their affiliates. The share of net losses amounted to $785 million for 1997,
$1,002 million for 1998, $66 million for the two months ended February 28,
1999, and $597 million for the seven months ended September 30, 1999.

We may make significant capital contributions and loans to our existing and
future subsidiaries and business affiliates to help cover their operating
losses and fund the development and growth of their respective businesses and
assets. We have assisted, and may in the future assist, our subsidiaries and
business affiliates in their financing activities by guaranteeing bank and
other financial obligations. At September 30, 1999, we had guaranteed various
loans, notes payable, letters of credit and other obligations of certain of our
subsidiaries and business affiliates totaling $616 million. It is expected that
these commitments will be funded over the next two years.

To the extent Liberty makes loans and capital contributions to its
subsidiaries and business affiliates or Liberty is required to expend cash due
to a default by a subsidiary or business affiliate of any obligation guaranteed
by Liberty, there will be that much less cash available to Liberty with which
to pay its own financial obligations, including the debentures.

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<PAGE>

If we fail to meet required capital calls to a subsidiary or business
affiliate, we could be forced to sell our interest in that company, our
interest in that company could be diluted or we could forfeit important
rights. We are parties to shareholder and partnership agreements that provide
for possible capital calls on shareholders and partners. Our failure to meet a
capital call, or other commitment to provide capital or loans to a particular
company, may have adverse consequences to us. These consequences may include,
among others, the dilution of our equity interest in that company, the
forfeiture of our right to vote or exercise other rights, the right of the
other shareholders or partners to force us to sell our interest at less than
fair value, the forced dissolution of the company to which we have made the
commitment or, in some instances, a breach of contract action for damages
against us. Our ability to meet capital calls or other capital or loan
commitments is subject to our ability to access cash. See "--We could be unable
in the future to obtain a sufficient amount of cash with which to service our
financial obligations" above.

We are a member of the Liberty Media Group of AT&T, and, as a result, we may
incur substantial financial obligations on behalf of other members of that
group. We have entered into agreements with AT&T pursuant to which we have
agreed, on a joint and several basis with each other member of the Liberty
Media Group, to indemnify AT&T against any liabilities arising from the
operations and businesses of any of the members of the Liberty Media Group.
Hence, we may be obligated to indemnify AT&T against liabilities incurred by
members of the Liberty Media Group other than Liberty Media Corporation and its
consolidated subsidiaries. Although we anticipate that if we were required to
indemnify AT&T against such a liability we would seek reimbursement or
contribution from the other members of the Liberty Media Group, we cannot
assure you that those members would be financially capable of making that
reimbursement or contribution or that any indemnification obligation that
Liberty ultimately is required to fund will not be substantial. Liberty is also
jointly and severally liable with the other members of the Liberty Media Group
for any amounts owed by members of the Liberty Media Group to AT&T under a tax
sharing agreement, and those amounts could be substantial. See "Relationship
with AT&T and Certain Related Transactions."

Some of our officers have managerial obligations to other members of the
Liberty Media Group, which may divert their attention from Liberty. Some of
the officers of Liberty Media Corporation are also officers of other members of
the Liberty Media Group. Hence, to the extent those officers devote attention
to the operations of the other members of the Liberty Media Group, that
attention may be diverted from the assets and businesses of Liberty Media
Corporation and its consolidated subsidiaries.

We may use our assets and management time to effect acquisitions that only
benefit other members of the Liberty Media Group. Although we anticipate that
acquisitions involving companies that are attributed to the Liberty Media Group
will be effected through Liberty Media Corporation or its consolidated
subsidiaries, it is possible that some of these acquisitions will be effected
through other members of the Liberty Media Group. In addition to the diversion
of management's attention from the assets and business of Liberty Media
Corporation, acquisitions outside of Liberty Media Corporation and its
consolidated subsidiaries could have important consequences to the holders of
the debentures, including the following:

. Liberty may provide cash or other assets with which to effect these
acquisitions; and

. Liberty may provide cash for the purpose of funding subsequent operating
losses or the development and growth of the businesses of the acquired
companies.

To the extent we use our cash or other assets for the foregoing purposes,
that cash and those assets, as well as the businesses acquired with them, will
not be available to satisfy our obligations under the debentures. Hence, in any
bankruptcy proceeding owners of the debentures will not have any claims against
those businesses or the cash or other assets used by Liberty to effect their
acquisition.

The liquidity and value of our interests in our business affiliates may be
adversely affected by shareholder agreements and similar agreements to which we
are a party. A significant portion of the equity securities we own is held
pursuant to shareholder agreements, partnership agreements and other
instruments and agreements that contain provisions that affect the liquidity,
and therefore the realizable value, of those securities. Most of these
agreements subject the transfer of the stock, partnership or other interests
constituting

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the equity security to consent rights or rights of first refusal of the other
shareholders or partners. In certain cases, a change in control of Liberty or
of the subsidiary holding our equity interest will give rise to rights or
remedies exercisable by other shareholders or partners, such as a right to
initiate or require the initiation of buy/sell procedures. Some of our
subsidiaries and business affiliates are parties to loan agreements that
restrict changes in ownership of the borrower without the consent of the
lenders. All of these provisions will restrict our ability to sell those equity
securities and may adversely affect the price at which those securities may be
sold. For example, in the event buy/sell procedures are initiated at a time
when we are not in a financial position to buy the initiating party's interest,
we could be forced to sell our interest at a price based on the value
established by the initiating party, and that price might be significantly less
than what we might otherwise obtain.

We do not have the right to manage our business affiliates, which means we
cannot cause those affiliates to operate in a manner that is favorable to
Liberty. We do not have the right to manage the businesses or affairs of any of
our business affiliates in which we have less than a majority voting interest.
Rather, our rights, at most, may take the form of representation on the board
of directors or a partners' or similar committee that supervises management or
possession of veto rights over significant or extraordinary actions. The scope
of our veto rights varies from agreement to agreement. Although our board
representation and veto rights may enable us to prevent the sale by a business
affiliate in which we own less than a majority voting interest of assets or
prevent it from paying dividends or making distributions to its stockholders or
partners, they do not enable us to cause these actions to be taken.

Our business is subject to risks of adverse government regulation. In the
United States, the Federal Communications Commission regulates the providers of
satellite communications services and facilities for the transmission of
programming services, the cable television systems that carry such services,
and, to some extent, the availability of the programming services themselves
through its regulation of program licensing. Cable television systems and other
forms of video distribution in the United States are also regulated by
municipalities or other state and local government authorities. Cable
television companies are currently subject to federal rate regulation on the
provision of basic service, and continued rate regulation or other franchise
conditions could place downward pressure on the fees cable television companies
are willing or able to pay for programming services in which we have interests
and regulatory carriage requirements could adversely affect the number of
channels available to carry the programming services in which we have an
interest. In addition, Liberty's programming subsidiaries and business
affiliates may be limited in their ability to sell programming to AT&T's cable
television subsidiaries and affiliates as a result of federal regulations. See
"Business--Regulatory Matters."

The regulation of programming services, cable television systems, satellite
carriers and television stations is subject to the political process and has
been in constant flux over the past decade. Further material changes in the law
and regulatory requirements must be anticipated, and there can be no assurance
that our business will not be adversely affected by future legislation, new
regulation or deregulation. See "Business--Regulatory Matters."

In addition, substantially every foreign country in which we have, or may in
the future make, an investment regulates, in varying degrees, the distribution
and content of programming services and foreign investment in programming
companies and wireline and wireless cable communications, satellite, telephony
and Internet services. Regulations or laws that exist at the time we make an
investment in a subsidiary or business affiliate may subsequently change, and
there can be no assurance that material and adverse changes in the regulation
of the services provided by our foreign subsidiaries and business affiliates
will not occur in the future. Regulation can take the form of price controls,
service requirements and programming and other content restrictions, among
others. Moreover, some countries where we have or may in the future acquire
interests in a cable television operator do not issue exclusive licenses or
franchises to provide multi-channel television services within a geographic
area, and in those instances we may be adversely affected by an overbuild by
one or more competing cable operators. In certain countries where multi-channel
television is less developed, there is minimal regulation of cable television
and other forms of video distribution, and, hence, the protections of the
distributor's investment available in the United States and other countries
(such as rights to renewal of licenses, franchises and pole attachment) may not
be available in these countries.

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The Internet companies in which we have interests are subject, both directly
and indirectly, to various laws and governmental regulations relating to their
respective businesses. Due to the increasing popularity and use of commercial
online services and the Internet, it is possible that a number of laws and
regulations may be adopted with respect to commercial online services and the
Internet. The adoption of such laws or regulations in the future may decrease
the growth of such services and the Internet, which could in turn decrease the
demand for the services and products of the Internet companies in which we have
interests and increase such companies' costs of doing business or otherwise
have an adverse effect on their businesses, operating results and financial
conditions.

Our operations are subject to constraints imposed by the Investment Company
Act. Our operations are primarily conducted through subsidiaries and business
affiliates, and certain of our investments in those companies have been made
with strategic partners where we have a less than 50% voting interest. Under
the Investment Company Act of 1940, a company that is deemed to be an
"investment company," and which is not exempt from the provisions of the
Investment Company Act, is required to register as an investment company under
the Investment Company Act. Registered investment companies are subject to
extensive, restrictive and potentially adverse regulation relating to, among
other things, operating methods, management, capital structure, dividends and
transactions with affiliates. Registered investment companies are not permitted
to operate their business in the manner Liberty operates its business, nor are
registered investment companies permitted to have many of the relationships
that Liberty has with its affiliated companies.

Liberty's current holdings in its subsidiaries and business affiliates are
such that Liberty is not an "investment company" required to register under the
Investment Company Act, and Liberty intends to conduct its business in a manner
designed to avoid becoming subject to regulation under the Investment Company
Act. To avoid regulation under the Investment Company Act, Liberty's operations
will to an extent be limited by concerns that it acquire investments in
companies that assure to it majority ownership or primary control of a
magnitude sufficient to cause Liberty not to fall within the definition of an
investment company. These considerations could require Liberty to dispose of
otherwise desirable assets at disadvantageous prices, structure transactions in
a manner that assures Liberty has a majority interest or primary control,
irrespective of whether such a structure is the one that is most desirable, or
avoid otherwise economically desirable transactions, including the addition of
strategic partners in Liberty's current majority-owned subsidiaries and
business affiliates that it primarily controls. In addition, events beyond our
control, including significant appreciation in the market value of certain of
our publicly traded investments that may be deemed investment securities, could
result in our becoming an inadvertent investment company. If Liberty were to
become an inadvertent investment company, it would have one year to divest of a
sufficient amount of investment securities and/or acquire other assets
sufficient to cause Liberty to no longer be an investment company subject to
registration under the Investment Company Act.

If it were established that Liberty is an unregistered investment company,
there would be a risk, among other material adverse consequences, that we could
become subject to monetary penalties or injunctive relief, or both, in an
action brought by the SEC, that we would be unable to enforce contracts with
third parties or that third parties could seek to obtain rescission of
transactions with us undertaken during the period it was established that we
were an unregistered investment company.

We are dependent on a limited number of potential customers for carriage of
our programming services. The cable television and direct-to-home satellite
industries are currently undergoing a period of consolidation. As a result, the
number of potential buyers of our programming services and those of our
business affiliates is decreasing. AT&T's cable television subsidiaries and
affiliates, which as a group comprise one of the two largest operators of cable
television systems in the United States, are collectively the largest single
customer of Liberty's programming companies. With respect to some of our
programming services and those of our business affiliates, this is the case by
a significant margin. The existing agreements between AT&T's cable television
subsidiaries and affiliates and the program suppliers owned or affiliated with
Liberty were entered into prior to the AT&T merger. There can be no assurance
that our owned and affiliated program suppliers will be able to negotiate
renewal agreements with AT&T's cable television subsidiaries and affiliates.

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Although AT&T has agreed to extend any existing affiliation agreement of
Liberty and its affiliates that expires on or before March 9, 2004 to a date
not before March 9, 2009, that agreement is conditioned on mutual most favored
nation terms being offered and the arrangements being consistent with industry
practice. For more information about our relationship with AT&T, see
"Relationship with AT&T and Certain Related Transactions."

This prospectus contains forward looking statements concerning future events
that are subject to risks, uncertainties and assumptions. Certain statements
made in this prospectus under the captions entitled "Prospectus Summary," "Risk
Factors," "Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this prospectus are
forward-looking statements. These forward-looking statements are based on our
current expectations and projections about future events. When used in this
prospectus, the words "believe," "anticipate," "intend," "estimate," "expect"
and similar expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain such words. These forward-
looking statements are subject to risks, uncertainties and assumptions about us
and our subsidiaries and business affiliates, including, among other things,
the following:

. general economic and business conditions and industry trends;

. the continued strength of the industries in which we are involved;

. uncertainties inherent in our proposed business strategies;

. our future financial performance, including availability, terms and
deployment of capital;

. availability of qualified personnel;

. changes in, or our failure or inability to comply with, government
regulations and adverse outcomes from regulatory proceedings;

. changes in the nature of key strategic relationships with partners and
business affiliates;

. uncertainties inherent in the change over to the year 2000;

. rapid technological changes;

. our inability to obtain regulatory or other necessary approvals of any
strategic transactions; and

. social, political and economic situations in foreign countries where we
do business.

Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this prospectus. In light of
these risks, uncertainties and other assumptions, the forward-looking events
discussed in this prospectus might not occur.

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SPRINT CORPORATION

We refer to Sprint's PCS Common Stock--Series 1, par value $1.00 per share,
as Sprint PCS stock. In describing the debentures, the Sprint PCS stock will
initially comprise the reference shares. As of the date of this prospectus,
11.4743 shares of Sprint PCS stock are attributable to each debenture. The
reference shares will also include any other publicly traded common equity
securities that may be distributed on or in respect of the Sprint PCS stock, or
on or with respect to any publicly traded common equity security into which any
of those securities may be converted or exchanged. In describing the
debentures, we refer to Sprint and any other company which may in the future
become an issuer of reference shares as a reference company.

According to publicly available documents, Sprint is a domestic and
international long distance communications provider through its FON Group and a
domestic wireless mobile phone services provider through its PCS Group. Sprint
operates the only 100% digital PCS wireless network in the United States with
licenses to provide service nationwide utilizing a single frequency band and a
single technology. Sprint owns licenses to provide service to the entire United
States population, including Puerto Rico and the U.S. Virgin Islands. At
December 31, 1998, Sprint, together with certain affiliates, operated PCS
systems in 45 of the 50 largest U.S. metropolitan areas. Since the end of 1997,
the number of metropolitan markets served by Sprint has doubled to 280 and the
number of its customers has more than tripled to 3.35 million. Sprint's PCS
stock is a "tracking stock" intended to reflect the performance of Sprint's
domestic wireless personal communications services operations, while its FON
stock is a "tracking stock" intended to reflect the performance of all of
Sprint's other operations. The value of the debentures is based on the Sprint
PCS stock and not on the Sprint FON Group stock. Sprint is required to file
reports and other information with the SEC. Copies of these reports and other
information may be inspected and copied at the SEC offices specified under
"Where to Find More Information."

This prospectus relates only to the debentures being offered and does not
relate to the Sprint PCS stock or other securities of Sprint. Sprint has no
obligations whatsoever under the debentures. All disclosures contained in this
prospectus regarding Sprint are derived from the publicly available documents
referred to in the preceding paragraph. We have not participated in the
preparation of Sprint's documents nor made any due diligence inquiry with
respect to the information provided in those documents. The selling security
holders did not make any due diligence inquiry with respect to the information
provided in Sprint's documents in connection with the offering of the
debentures. Neither we nor the selling security holders represent that Sprint's
publicly available documents or any other publicly available information
regarding Sprint is accurate or complete. We cannot provide you with any
assurance that all events occurring prior to the date of this prospectus,
including events that would affect the accuracy or completeness of the publicly
available documents referred to in the preceding paragraph that would affect
the trading price of the Sprint PCS stock, and therefore the trading price of
the debentures, have been publicly disclosed. Subsequent disclosure of any such
events or the disclosure of or failure to disclose material future events
concerning Sprint could affect the trading price of the debentures.

We and our affiliates make no representation to you as to the performance of
Sprint, the Sprint PCS stock or any other securities of Sprint.

According to available public information, pursuant to a merger agreement
between MCI WorldCom, Inc. and Sprint, Sprint would be merged with and into MCI
WorldCom, Inc. Under this planned merger, holders of Sprint PCS stock would
receive one new share of MCI WorldCom PCS tracking stock and 0.116025 of a
share of MCI WorldCom common stock for each share of Sprint PCS stock. If the
merger occurs, the MCI WorldCom PCS stock and MCI WorldCom common stock will
become the reference shares. This merger is subject to many conditions,
including regulatory approvals, and may never occur. Even if it does occur, the
ratio by which holders of Sprint PCS stock would receive new stock may be
different from the ratio currently contemplated in that agreement.

18
<PAGE>

PRICE RANGE AND DIVIDEND HISTORY OF THE SPRINT PCS STOCK

The Sprint PCS stock is listed and traded on the NYSE under the symbol "PCS."

The following table sets forth, for the calendar quarters indicated (ended
March 31, June 30, September 30 and December 31), the range of high and low
sale prices of the Sprint PCS stock as reported on the NYSE Composite Tape
since its listing on November 23, 1998. To date, Sprint has never paid a cash
dividend on its Sprint PCS stock. Sprint paid a 2-for-1 stock dividend on the
Sprint PCS stock on February 4, 2000; the prices in the table below have not
been adjusted to give effect to this stock dividend.

<TABLE>
<CAPTION>
Sprint PCS Stock
----------------
High Low

-------- -------
<S> <C> <C>
1998:
Fourth quarter (beginning November 23).................. $23 3/8 $14 1/16
1999:
First quarter........................................... 48 5/16 20 7/8
Second quarter.......................................... 60 3/4 41 1/2
Third quarter........................................... 78 1/4 52 15/16
Fourth quarter ......................................... 114 7/16 66 13/16
2000:
First quarter (through February 4)...................... 113 90 1/2
</TABLE>

The last reported sale price on the NYSE of one share of Sprint PCS stock on
February 8, 2000 was $50 15/16 (post-stock dividend).

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of the debentures by
the selling security holders. We have filed, and have caused to become
effective, the registration statement of which this prospectus is a part solely
to satisfy our obligation to register the debentures pursuant to the terms of a
registration rights agreement with the initial purchasers of the debentures.

We intend to use the proceeds from the sale of the debentures on November 16,
1999 for general corporate purposes, including acquisitions and investments.
Pending our use of those proceeds, they have been placed in various instruments
consisting largely of short-term marketable securities, including government
securities.

19
<PAGE>

CAPITALIZATION

The following table sets forth our consolidated capitalization as of
September 30, 1999, and as adjusted to give effect to our sale of the 4% senior
exchangeable debentures due 2029 on November 16, 1999 and our 8 1/4% senior
debentures due 2030 on February 2, 2000, and our use of the net proceeds from
those sales. This table should be read in conjunction with Liberty's
consolidated financial statements and the related notes included elsewhere in
this prospectus. See "Index to Financial Statements."

<TABLE>
<CAPTION>
September 30, 1999 September 30, 1999
------------------ ------------------
(in millions) (in millions)
(Actual) (As Adjusted)
<S> <C> <C>
Cash and cash equivalents................ $ 499 $ 2,336
======= =======
Marketable securities.................... 2,949 2,949
======= =======
Long-term debt (including current
portion):
Bank credit facilities................. $ 926 $ 926
Other debt............................. 33 33
7 7/8% Senior Notes due 2009........... 741 741
8 1/2% Senior Debentures due 2029...... 494 494
4% Senior Exchangeable Debentures due
2029.................................. -- 869
8 1/4% Senior Debentures due 2030...... -- 1,000
------- -------
Total debt........................... $ 2,194 $ 4,063
------- -------
Stockholder's equity:
Common stock........................... --
Additional paid-in capital............. $33,787 $33,787
Accumulated other comprehensive
earnings, net of taxes................ 2,407 2,407
Retained earnings (deficit)............ (814) (814)
------- -------
35,380 35,380
------- -------
Due to related parties................. 86 86
------- -------
Total stockholder's equity........... 35,466 35,466
------- -------
Total capitalization................. $37,660 $39,529
======= =======
</TABLE>

20
<PAGE>

SELECTED HISTORICAL FINANCIAL DATA

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------- -------------------------------------------------------------
Seven months Two months Nine months
ended ended ended Year ended December 31,
September 30, February 28, September 30, ----------------------------------
1999 1999 1998 1998 1997 1996 1995 1994
------------- ------------ ------------- ------ ----- ----- ----- -----
(unaudited) (unaudited) (unaudited)
(in millions, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Revenue................. $ 506 235 1,005 1,359 1,225 2,208 1,821 1,577
Operating loss.......... (728) (158) (188) (431) (260) (66) (214) (5)
Interest expense........ (87) (26) (62) (104) (40) (53) (34) (11)
Share of losses of
affiliates, net........ (597) (66) (828) (1,002) (785) (332) (190) (59)
Gain on dispositions,
net.................... 10 14 569 2,449 406 1,558 (78) 181
Net income (loss)....... (814) (70) (260) 622 (470) 741 (56) 164

Balance Sheet Data (at
period end):
Cash and cash
equivalents............ $ 499 31 199 228 100 434 179 72
Marketable securities... 2,949 125 55 159 248 59 -- --
Investments in
affiliates............. 15,939 3,971 2,831 3,079 2,359 1,519 1,932 835
Investment in Time
Warner, Inc............ 6,968 7,361 4,996 7,083 3,538 2,017 945 654
Investment in Sprint
Corporation............ 7,616 3,381 -- 2,446 -- -- -- --
Total assets............ 50,822 16,886 10,604 15,567 7,735 6,722 5,605 3,482
Debt including current
portion................ 2,194 2,087 2,175 2,096 785 555 516 98
Stockholder's equity.... 35,466 9,449 5,566 9,230 4,721 4,519 3,731 2,386

Other Data:
Ratio of earnings to
fixed charges (a)...... -- 5.12x -- 11.03x 2.06x 21.36x 3.86x 9.20x
</TABLE>
- -------

(a) The ratio of earnings to fixed charges of Liberty was less than 1.00x for
the seven-month period ended September 30, 1999, and for the nine-month
period ended September 30, 1998. Thus, earnings available for fixed charges
were inadequate to cover fixed charges for such period. The amounts of the
coverage deficiencies for the seven-month period ended September 30, 1999
and for the nine-month period ended September 30, 1998 were $1,133 million
and $348 million, respectively. For the ratio calculations, earnings
available for fixed charges consist of earnings (losses) before income
taxes plus fixed charges, distributions from and losses of less than 50%-
owned affiliates with debt not guaranteed by Liberty (net of earnings not
distributed of less than 50%-owned affiliates) and minority interests in
(earnings) losses of consolidated subsidiaries. Fixed charges consist of:

. interest on debt, including interest related to debt guaranteed by Liberty
of less than 50%-owned affiliates where the investment in such affiliates
results in the recognition of a loss,

. Liberty's proportionate share of interest of 50%-owned affiliates,

. that portion of rental expense which Liberty believes to be representative
of interest (one-third of rental expense) and

. amortization of debt issuance costs.

21
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information concerning our
results of operations and financial condition. This discussion should be read
in conjunction with our consolidated financial statements and accompanying
notes beginning on page F-1.

Liberty's domestic subsidiaries generally operate or hold interests in
businesses which provide programming services including production, acquisition
and distribution through all available formats and media of branded
entertainment, educational and informational programming and software. In
addition, certain of Liberty's subsidiaries hold interests in businesses
engaged in wireless telephony, electronic retailing, direct marketing and
advertising sales relating to programming services, infomercials and
transaction processing. Liberty also has significant interests in foreign
affiliates, which operate in cable television, programming and satellite
distribution.

Liberty's consolidated subsidiaries at September 30, 1999, include Encore
Media Group, Liberty Digital, Inc. (formerly named TCI Music, Inc.), Pramer
S.C.A. and TCI Cablevision of Puerto Rico. These businesses are majority or
wholly owned and, accordingly, the results of operations of these businesses
are included in the consolidated results of Liberty for the periods in which
they were majority or wholly owned.

A significant portion of Liberty's operations are conducted through entities
in which Liberty holds a 20%-50% ownership interest. These businesses are
accounted for using the equity method of accounting and, accordingly, are not
included in the consolidated results of Liberty except as they affect Liberty's
interest in earnings or losses of affiliates for the period in which they were
accounted for using the equity method. Included in Liberty's investments in
affiliates at September 30, 1999 are USA Networks, Inc., Discovery
Communications, Inc., TV Guide, Inc., QVC Inc., Flextech, plc and Telewest
Communications plc.

Liberty holds interests in companies that are neither consolidated
subsidiaries nor affiliates accounted for using the equity method. The most
significant of these include Time Warner and Sprint Corporation. The Time
Warner stock and Sprint Corporation tracking stock that Liberty holds are
classified as available-for-sale securities and are carried at fair value.
Unrealized holding gains and losses on these securities are carried net of
taxes as a component of accumulated other comprehensive earnings in
stockholder's equity. Realized gains and losses are determined on a specific-
identification basis.

As a result of AT&T's acquisition of TCI by merger on March 9, 1999, the
shares of each series of TCI common stock were converted into shares of a class
of AT&T common stock, subject to applicable exchange ratios. The AT&T merger
has been accounted for using the purchase method. Accordingly, Liberty's assets
and liabilities have been recorded at their respective fair values therefore
creating a new cost basis. For financial reporting purposes the AT&T merger is
deemed to have occurred on March 1, 1999. Accordingly, for periods prior to
March 1, 1999, the assets and liabilities of Liberty and the related
consolidated financial statements are sometimes referred to herein as "Old
Liberty," and for periods subsequent to February 28, 1999, the assets and
liabilities of Liberty and the related consolidated financial statements are
sometimes referred to herein as "New Liberty." "Liberty" refers to both New
Liberty and Old Liberty.

Summary Of Operations

Liberty's programming businesses include Encore Media Group which provides
premium programming distributed by cable, direct-to-home satellite and other
distribution media throughout the United States. Additionally, Liberty Digital
is included in Liberty's financial results. Liberty Digital, through its
subsidiaries and affiliates, is principally engaged in programming,
distributing and marketing digital and analog music services to homes,
businesses and over the Internet. Also included in Liberty's financial results
through March 1, 1999, are those of TV Guide (formerly named United Video
Satellite Group, Inc.) which, during the period it was consolidated, was
engaged in the business of providing satellite-delivered video, audio, data,
and program

22
<PAGE>

promotion services to cable television systems, direct-to-home satellite dish
users, radio stations and private network users throughout the United States.
Effective March 1, 1999, Liberty began accounting for its investment in TV
Guide under the equity method of accounting. To enhance the reader's
understanding, separate financial data has been provided below for Encore Media
Group, Liberty Digital and TV Guide due to the significance of those
operations. The table sets forth, for the periods indicated, certain financial
information and the percentage relationship that certain items bear to revenue.
Liberty holds significant equity investments, the results of which are not a
component of operating income, but are discussed below under "--Investments in
Affiliates Accounted for Under the Equity Method." Other items of significance
are discussed separately below.

Nine months ended September 30, 1999, compared to nine months ended September
30, 1998

General Information

Due to the consummation of the AT&T merger, Liberty's 1999 statements of
operations include information reflecting the seven month period ended
September 30, 1999, and the two month period ended February 28, 1999. Also,
prior to March 1, 1999, Liberty consolidated the operations of TV Guide, and
subsequent to February 28, 1999, Liberty accounted for its ownership interests
in TV Guide under the equity method. (See note 6 to the accompanying September
30, 1999 consolidated financial statements.) The following discussion of
Liberty's results of operations includes a section that addresses the combined
operating results of "Old Liberty" and "New Liberty," collectively "Combined
Liberty."

<TABLE>
<CAPTION>
New Liberty Old Liberty
--------------------- ------------------------------------------
Seven months Two months Nine months
ended % of ended % of ended % of
September 30, total February 28, total September 30, total
1999 revenue 1999 revenue 1998 revenue
------------- ------- ------------ ------- ------------- -------
(dollar amounts in millions)
<S> <C> <C> <C> <C> <C> <C>
Encore Media Group
Revenue............................................ $ 372 100% $ 101 100% $ 388 100%
Operating, selling, general and administrative..... 279 75 60 59 318 82
Stock compensation................................. 4 1 3 3 18 5
Depreciation and amortization...................... 104 28 1 1 5 1
----- ---- ----- --- ----- ---
Operating income (loss)........................... $ (15) (4)% $ 37 37% $ 47 12%
===== ==== ===== === ===== ===
Liberty Digital
Revenue............................................ $ 51 100% $ 15 100% $ 63 100%
Operating, selling, general and administrative..... 47 92 14 93 59 94
Stock compensation................................. 205 402 -- -- -- --
Depreciation and amortization...................... 25 49 4 27 17 27
----- ---- ----- --- ----- ---
Operating loss.................................... $(226) (443)% $ (3) (20)% $ (13) (21)%
===== ==== ===== === ===== ===
TV Guide
Revenue............................................ $ -- -- $ 97 100% $ 443 100%
Operating, selling, general and administrative..... -- -- 76 79 350 79
Stock compensation................................. -- -- -- -- -- --
Depreciation and amortization...................... -- -- 10 10 21 5
----- ---- ----- --- ----- ---
Operating income.................................. $ -- -- $ 11 11% $ 72 16%
===== ==== ===== === ===== ===
Other
Revenue............................................ $ 83 (a) $ 22 (a) $ 111 (a)
Operating, selling, general and administrative..... 82 38 116
Stock compensation................................. 223 180 245
Depreciation and amortization...................... 265 7 44
----- ----- -----
Operating loss.................................... $(487) $(203) $(294)
===== ===== =====
</TABLE>
- --------
(a) Not meaningful.

23
<PAGE>

In order to provide a meaningful basis for comparing the nine months ended
September 30, 1999 and 1998 for purposes of the following table and discussion,
the operating results of Combined Liberty for the seven months ended September
30, 1999 have been combined with the operating results of Combined Liberty for
the two months ended February 28, 1999, and the operating results for the nine
months ended September 30, 1998. Depreciation, amortization and certain other
line items included in the operating results of Combined Liberty are not
comparable between periods as the seven month successor period ended September
30, 1999, includes the effects of purchase accounting adjustments related to
the AT&T merger, and prior periods do not. The combining of predecessor and
successor accounting periods is not acceptable under generally accepted
accounting principles.

<TABLE>
<CAPTION>
Combined Liberty
--------------------------------------------
Nine months Nine months
ended % of ended % of
September 30, total September 30, total
1999 revenue 1998 revenue
------------- ------- ------------- -------
(dollar amounts in millions)
<S> <C> <C> <C> <C>
Encore Media Group
Revenue.......................... $ 473 100% $ 388 100%
Operating, selling, general and
administrative.................. 339 72 318 82
Stock compensation............... 7 1 18 5
Depreciation and amortization.... 105 22 5 1
----- ---- ----- ---
Operating income................ $ 22 5% $ 47 12%
===== ==== ===== ===
Liberty Digital
Revenue.......................... $ 66 100% $ 63 100%
Operating, selling, general and
administrative.................. 61 92 59 94
Stock compensation............... 205 311 -- --
Depreciation and amortization.... 29 44 17 27
----- ---- ----- ---
Operating loss.................. $(229) (347)% $ (13) (21)%
===== ==== ===== ===
TV Guide
Revenue.......................... $ 97 100% $ 443 100%
Operating, selling, general and
administrative.................. 76 79 350 79
Stock compensation............... -- -- -- --
Depreciation and amortization.... 10 10 21 5
----- ---- ----- ---
Operating income................ $ 11 11% $ 72 16%
===== ==== ===== ===
Other
Revenue.......................... $ 105 (a) $ 111 (a)
Operating, selling, general and
administrative.................. 120 116
Stock compensation............... 403 245
Depreciation and amortization.... 272 44
----- -----
Operating loss.................. $(690) $(294)
===== =====
</TABLE>
- --------
(a) Not meaningful.

Consolidated Subsidiaries

Encore Media Group. The majority of Encore Media Group's revenue is derived
from the delivery of movies to subscribers under affiliation agreements between
Encore Media Group and cable operators and satellite direct-to-home
distributors. Encore Media Group entered into a 25-year affiliation agreement
in 1997 with TCI. TCI cable systems subsequently acquired by AT&T in the AT&T
merger operate under the name AT&T Broadband & Internet Services. Revenue from
AT&T Broadband accounted for approximately 61% of total revenue during 1998.
Under this affiliation agreement with AT&T Broadband, Encore Media Group
receives fixed monthly payments in exchange for unlimited access to all of the
existing Encore and STARZ!

24
<PAGE>

services. The payment from AT&T Broadband is adjusted, in certain instances, if
AT&T acquires or disposes of cable systems or if Encore Media Group's
programming costs increase above certain specified levels. Encore Media Group's
other affiliation agreements generally provide for payments based on the number
of subscribers that receive Encore Media Group's services.

Revenue from AT&T Broadband increased 13% to $179 million during the first
nine months of 1999, compared to the same period of 1998, pursuant to the terms
of the AT&T/Encore Media Group affiliation agreement. Under this agreement, the
amount paid by AT&T Broadband does not vary with the number of subscription
units from AT&T Broadband. This category also includes revenue from cable
systems that have been contributed by AT&T to joint ventures and are subject to
the AT&T/Encore Media Group affiliation agreement. Revenue from cable
affiliates other than AT&T Broadband increased 35% to $108 million during the
first nine months of 1999, compared to the same period of 1998 mainly due to
20% and 38% increases in subscription units for Encore and STARZ! services,
respectively, combined with increases in rates charged. MOVIEplex and Thematic
Multiplex subscribers from cable affiliates other than AT&T Broadband increased
by 1.7 million or 63% and 1.7 million or 425%, respectively, during the first
nine months of 1999 compared to the same period in 1998, contributing to the
increase in revenue. Revenue from satellite providers and other distribution
technologies increased 25% to $186 million during the first nine months of
1999, from $149 million during the first nine months of 1998, due to 15%, 13%
and 27% increases in STARZ!, Encore and Thematic Multiplex subscription units,
respectively, partially offset by subscriber volume and penetration discounts.

Programming and other operating expenses increased by 7% during the first
nine months in 1999, compared to the same period in 1998, primarily due to
increased first run exhibitions on Encore and the Thematic Multiplex channels.
Sales and marketing expenses increased by 6% during the first nine months of
1999, compared to the same period in 1998, due to the "New Encore" national
awareness campaign during 1999. The majority of Encore Media Group's national
consumer awareness campaign will continue into the fourth quarter of 1999;
therefore, operating expenses are expected to be higher during the fourth
quarter in 1999. The "New Encore" campaign is branding Encore as a first-run
premium pay service.

The fluctuations in depreciation, amortization and stock compensation are a
direct result of the effects of purchase accounting adjustments related to the
AT&T merger.

Liberty Digital. Liberty Digital's revenue is derived from its audio
business, which is engaged in programming, distributing and marketing a digital
music service, Digital Music Express(R) (DMX Service). This service provides
continuous, commercial free, CD-quality music programming to homes and
businesses. Liberty Digital's results of operations also include its
interactive media business, which is engaged in the development of interactive
television businesses and the management of investments in interactive
programming content and interactive television businesses.

Revenue increased 5% to $66 million for the nine months ended September 30,
1999 from $63 million for the corresponding period in 1998. The increase in
revenue is primarily due to increased residential and commercial subscribers in
its audio business offset by reduced revenue due to the sale of Liberty
Digital's video and Internet businesses. Additionally, revenue for the nine
months ended September 30, 1999 included a $3 million settlement from
PRIMESTAR, Inc., a provider of digital satellite television programming
services, for the loss of future revenue after the DMX Service was terminated
from distribution to PRIMESTAR customers on April 28, 1999, as a result of the
acquisition of PRIMESTAR by Hughes Electronic Corp.

Operating, selling, general and administrative expenses increased 3% to $61
million for the nine months ended September 30, 1999, from $59 million for the
corresponding period in 1998. The increase in expenses is primarily due to
increased affiliation fees in Liberty Digital's audio business as well as
increases in selling, general and administrative expenses due to increased
personnel, occupancy and promotional expenses associated with the audio
business's expansion.

25
<PAGE>

Depreciation and amortization increased 71% to $29 million for the nine
months ended September 30, 1999, from $17 million for the corresponding period
in 1998. The increase is a result of the effects of purchase accounting
adjustments related to the AT&T merger.

The amount of expense associated with stock compensation is generally based
on the vesting of the related stock options and stock appreciation rights and
the market price of the underlying common stock. The expense reflected in the
table is based on the market price of the underlying stock as of September 30,
1999, and is subject to future adjustment based on market price fluctuations
and, ultimately, on the final determination of market value when the rights are
exercised.

TV Guide. On March 1, 1999, United Video Satellite Group and News Corp.
completed a transaction whereby United Video Satellite Group acquired News
Corp.'s TV Guide properties in exchange for stock of United Video Satellite
Group and cash, creating a broader platform for offering television guide
services to consumers and advertisers. United Video Satellite Group was renamed
TV Guide. Upon consummation, Liberty began accounting for its interest in TV
Guide using the equity method of accounting and, accordingly, the results of
operations of TV Guide were no longer included in the consolidated financial
results of Liberty as of that date.

Other. Included in this information are the results of Liberty Media
International, Inc.'s consolidated subsidiaries, TCI Cablevision of Puerto Rico
and Pramer, and corporate expenses of Liberty. Revenue decreased 5% from $111
million for the nine months ended September 30, 1998, to $105 million for the
nine months ended September 30, 1999. The acquisition of Pramer in August 1998
accounted for a $43 million increase in revenue in the first nine months of
1999. This increase was offset by a decrease in revenue from the sale of
Netlink Wholesale, Inc. during January 1999 and the sale in February 1999 of
CareerTrack, Inc., a subsidiary that was a provider of business and educational
seminars and related publications.

Operating, selling, general and administrative expenses increased 3% to $120
million for the nine months ended September 30, 1999, from $116 million for the
corresponding period in 1998. The increase in expenses due to the acquisition
of Pramer was more than offset by the decrease in expenses as a result of the
sales of Netlink and CareerTrack. Corporate expenses for the nine months ended
September 30, 1999, included $12 million in costs associated with the AT&T
merger.

Depreciation and amortization increased 518% to $272 million for the nine
months ended September 30, 1999 from $44 million during the same period in
1998. The increase is a result of the effects of purchase accounting
adjustments related to the AT&T merger.

The amount of expense associated with stock compensation is generally based
on the vesting of the related stock options and stock appreciation rights and
the market price of the underlying common stock. The expense reflected in the
table is based on the market price of the underlying common stock as of
September 30, 1999 and is subject to future adjustment based on market price
fluctuations and, ultimately, on the final determination of market value when
the rights are exercised.

Other Income and Expense. Interest expense was $87 million, $26 million and
$62 million for the seven month period ending September 30, 1999, the two month
period ending February 28, 1999, and the nine months ended September 30, 1998,
respectively. The increase in interest expense during the 1999 periods is a
result of increased borrowings by Liberty during 1999.

Dividend and interest income was $171 million, $10 million and $49 million
for the seven month period ending September 30, 1999, the two month period
ending February 28, 1999 and the nine months ending September 30, 1998,
respectively. The increase in dividend and interest income during 1999
primarily represents dividends and interest income from the investment of the
$5.5 billion received in connection with the AT&T merger.

26
<PAGE>

Aggregate gains from dispositions and issuance of equity by affiliates and
subsidiaries during the seven month period ended September 30, 1999, the two
month period ended February 28, 1999, and the nine months ended September 30,
1998 were $10 million, $386 million and $665 million, respectively. Liberty
recognized a gain of $372 million (before deducting deferred income taxes of
$147 million) during the two months ended February 28, 1999, in connection with
the acquisition by United Video Satellite Group of the TV Guide properties. In
September 1997, Time Warner exercised an option to acquire the business of
Southern Satellite Systems, Inc. from Liberty. Pursuant to this option, Time
Warner acquired the business of Southern Satellite, effective January 1, 1998,
for $213 million in cash. Time Warner had paid Liberty shares of Time Warner
Series LMCN-V common stock, which are convertible into 12.8 million shares of
Time Warner common stock, valued at $306 million, for the option. Liberty
recognized a $515 million pre-tax gain in connection with these transactions in
the first quarter of 1998.

Investments in Affiliates Accounted for Under the Equity Method

Liberty's share of losses of affiliates was $597 million, $66 million and
$828 million during the seven month period ending September 30, 1999, the two
month period ending February 28, 1999, and the nine months ending September 30,
1998, respectively.

Discovery. Discovery's revenue increased $198 million or 27% from $737
million for the nine months ended September 30, 1998, to $935 million for the
same period in 1999. The increase in revenue resulted from increases in rates
charged to affiliates and increases in advertising rates due to higher ratings
and a generally strong advertising sales market. Subscriber growth at
Discovery's international and developing networks also contributed to the
increase in revenue. Earnings before interest, taxes, depreciation and
amortization ("Operating Cash Flow") increased by $39 million or 83% from $47
million for the nine months ended September 30, 1998, to $86 million for the
nine months ended September 30, 1999. The increase in Operating Cash Flow was
due to the increase in revenue offset by increases in programming and marketing
expenses. Marketing expenses have increased as Discovery continued the rollout
of Animal Planet and launched other developing networks. Discovery's net loss
increased $31 million or 41% from $76 million for the nine months ended
September 30, 1998, to $107 million for the nine months ended September 30,
1999. The increase in net loss is due to increased interest expense and launch
amortization due to the company's efforts to increase launch support related to
developing networks. Liberty's share of Discovery's net loss was approximately
$154 million, $8 million and $41 million for the seven month period ended
September 30, 1999, the two month period ended February 28, 1999 and the nine
months ended September 30, 1998, respectively. Liberty's share of losses for
the seven month period ended September 30, 1999, included $109 million in
amortization related to purchase accounting adjustments associated with
Liberty's investment in Discovery in connection with the AT&T merger.

USA Networks, Inc. Revenue increased $432 million or 23% for the nine months
ended September 30, 1999, from $1,867 million for the nine months ended
September 30, 1998, to $2,299 million for the same period in 1999. The increase
was due to increased advertising revenue from the Networks and Television
Production businesses of USA Networks and higher continuity (off-air) sales, as
well as the launch of Home Shopping en Espanol in the electronic retailing
sector. The inclusion of revenue from the Hotel Reservations Network since its
acquisition on May 10, 1999, also contributed to the increase in revenue.
Operating Cash Flow increased $77 million or 24% from $324 million for the nine
months ended September 30, 1998, to $401 million for the nine months ended
September 30, 1999. The increase in Operating Cash Flow was largely due to the
increase in revenue offset by increased cost of goods sold at the electronic
retailing unit due to the increased sales and increased Internet services
expenses as USA Networks continued to rollout new web sites. Net income
decreased from $26 million for the nine months ended September 30, 1998, to a
net loss of $10 million for the nine months ended September 30, 1999,
representing a decrease of $36 million. The decrease in net income is primarily
due to an increase in minority interests in earnings of subsidiaries due to
ownership changes at USA Networks, Inc. Liberty's share of USA Networks, Inc.'s
net earnings (loss) was approximately $(13) million, $10 million and $11
million for the seven month period ended September 30, 1999, the two month
period ended February 28, 1999 and the nine months ended September 30, 1998,
respectively. Liberty's

27
<PAGE>

share of losses for the seven month period ended September 30, 1999, included
$37 million in amortization related to purchase accounting adjustments
associated with Liberty's investment in USA Networks in connection with the
AT&T merger.

QVC. Revenue increased by $311 million or 19% for the nine months ended
September 30, 1999, from $1,648 million for the nine months ended September 30,
1998, to $1,959 million for the same period of 1999. The increase in revenue is
due to increased subscribers as well as increases in the average sales per home
for each of QVC's domestic, U.K. and German operations. Operating Cash Flow
increased by 29% or $85 million from $292 million for the nine months ended
September 30, 1998 to $377 million for the same period in 1999, due to the
revenue increase and the corresponding increase in cost of goods sold, offset
further by higher variable costs and additional costs associated with QVC's
expansion in the UK and Germany. Net income increased by $52 million or 58% to
$142 million for the nine months ended September 30, 1999, as compared to $90
million for the same period in 1998. The increase in net income was due to the
increase in Operating Cash Flow offset by increased income tax expense.
Liberty's share of QVC's net earnings (loss) was approximately $(17) million,
$13 million and $38 million for the seven month period ended September 30,
1999, the two month period ended February 28, 1999, and the nine months ended
September 30, 1998, respectively. Liberty's share of losses for the seven month
period ended September 30, 1999 included $64 million in amortization related to
purchase accounting adjustments associated with Liberty's investment in QVC in
connection with the AT&T merger.

Fox/Liberty Networks. Liberty's share of Fox/Liberty Networks' net loss was
approximately $48 million, $1 million and $76 million for the seven month
period ended September 30, 1999, the two month period ended February 28, 1999
and the nine months ended September 30, 1998, respectively. Liberty's share of
losses for the nine months ended September 30, 1998, includes previously
unrecognized losses of Fox/Liberty Networks of approximately $64 million.
Losses of Fox/Liberty Networks were not recognized in prior periods due to the
fact that Liberty's investment in Fox/Liberty Networks was less than zero. On
July 15, 1999, News Corp. acquired Liberty's 50% interest in Fox/Liberty
Networks. (See note 3 to the accompanying September 30, 1999 consolidated
financial statements).

Telewest. Revenue increased $329 million or 54% from $604 million for the
nine months ended September 30, 1998, to $933 million for the same period in
1999. The increase was primarily due to the acquisition of General Cable plc
and Birmingham Cable Corporation Limited in September 1998 and increased cable
penetration due to the success of Telewest's low-cost bundled television and
telephony services introduced during 1998. Operating Cash Flow increased $94
million or 64% from $148 million for the nine months ended September 30, 1998,
to $242 million for the nine months ended September 30, 1999. The increase in
Operating Cash Flow was largely due to the increase in revenue and economies of
scale resulting from the enlarged operations. Telewest's net loss increased
$286 million or 82% from $350 million for the nine months ended September 30,
1998, to $636 million for the nine months ended September 30, 1999. The
increase in net loss was due to increased interest expense of $139 million and
increased foreign currency transaction losses of $79 million. Telewest
experiences unrealized foreign currency transaction losses on its U.S. dollar
denominated debentures resulting from the translation of the debentures into UK
pounds sterling and the adjustment of a related foreign currency option
contract to market value. Liberty's share of Telewest's net losses was
approximately $154 million, $38 million and $90 million for the seven month
period ended September 30, 1999, the two month period ended February 28, 1999,
and the nine months ended September 30, 1998, respectively. Liberty's share of
losses for the seven month period ended September 30, 1999, included $51
million in amortization related to purchase accounting adjustments associated
with Liberty's investment in Telewest in connection with the AT&T merger.

PCS Ventures. Liberty's share of losses from its investment in the PCS
Ventures was $510 million during the nine months ended September 30, 1998. At
that time, the PCS Ventures included Sprint Spectrum Holding Company, L.P. and
MinorCo, L.P. (collectively, "Sprint PCS") and PhillieCo Partnership I, L.P.
The partners of each of the Sprint PCS partnerships were subsidiaries of
Sprint, Comcast Corporation, Cox Communications, Inc. and Liberty. The partners
of PhillieCo were subsidiaries of Sprint, Cox and Liberty.

28
<PAGE>

Liberty had a 30 % partnership interest in each of the Sprint PCS partnerships
and a 35% partnership interest in PhillieCo.

On November 23, 1998, Liberty, Comcast, and Cox exchanged their respective
interests in Sprint PCS and PhillieCo for shares of Sprint PCS Group stock,
which tracks the performance of Sprint's PCS Group (consisting initially of the
PCS Ventures and certain PCS licenses which were separately owned by Sprint).
Through November 23, 1998, Liberty accounted for its interest in the PCS
Ventures using the equity method of accounting; however, as a result of the
foregoing exchange, Liberty's less than 1% voting interest in Sprint and the
transfer of its Sprint Securities to a trust prior to the AT&T merger, Liberty
no longer exercises significant influence with respect to its investment in the
PCS Ventures. Accordingly, Liberty accounts for its investment in the Sprint
PCS Group stock as an available-for-sale security. (See note 5 to the
accompanying September 30, 1999 consolidated financial statements.)

Year Ended December 31, 1998 compared to December 31, 1997 and December 31,
1996

General Information

Due to a number of transactions that were completed during the three year
period ended December 31, 1998, the results of operations during this period
are not comparable from year to year. These transactions resulted in the
consolidation or deconsolidation of several entities:

. Effective February 1, 1998, Turner-Vision, Inc. contributed the assets,
obligations and operations of its retail C-band satellite business to
Superstar/Netlink Group LLC, a consolidated subsidiary of TV Guide, in
exchange for an approximate 20% ownership interest in Superstar/Netlink.
As a result of this transaction, Turner-Vision's results of operations
have been included in the consolidated financial results of TV Guide,
and therefore the consolidated results of Liberty, as of February 1,
1998.

. Effective January 1, 1998, Time Warner exercised an option to acquire
the business of Southern Satellite and accordingly the results of
operations of that business were no longer included in the consolidated
financial results of Liberty as of that date.

. During October 1997, Liberty Media International sold a portion of its
interest in Cablevision S.A. As a result, effective October 1, 1997,
Liberty ceased to consolidate Cablevision and began to account for its
investment in Cablevision using the equity method of accounting.

. Effective July 1, 1997, as a result of the merger of Liberty Digital
(then named TCI Music) and DMX, LLC, Liberty Digital's results of
operations have been included in the consolidated financial results of
Liberty (see note 11 to the accompanying December 31, 1998 consolidated
financial statements).

. In January 1997, Liberty Media International's voting interest in
Flextech was reduced to 50% and Liberty ceased to consolidate Flextech
and began to account for its investment in Flextech using the equity
method of accounting.

. Effective December 1996, Home Shopping Network, Inc. merged with Silver
King Communications, Inc. As a result of this merger, Liberty no longer
had voting control of Home Shopping Network and accordingly, Liberty
ceased to consolidate Home Shopping Network and began to account for its
investment in Home Shopping Network using the equity method of
accounting.

29
<PAGE>

The table below sets forth, for the periods indicated, certain financial
information and percentage relationship that certain items bear to revenue.

<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
% of % of % of
total total total
Amount revenue Amount revenue Amount revenue
------ ------- ------ ------- ------ -------
(dollar amounts in millions)
<S> <C> <C> <C> <C> <C> <C>
Encore Media Group
Revenue........................ $ 541 100% $ 350 100% $ 195 100%
Operating, selling, general and
administrative................ 445 82 382 109 290 149
Stock compensation............. 58 11 60 17 17 9
Depreciation and amortization.. 8 1 4 1 3 2
----- --- ----- --- ------ ---
Operating income (loss)....... $ 30 6% $ (96) (27)% $ (115) (60)%
===== === ===== === ====== ===
TV Guide
Revenue........................ $ 598 100% $ 508 100% $ 410 100%
Operating, selling, general and
administrative................ 475 79 404 79 343 84
Depreciation and amortization.. 28 5 19 4 16 4
----- --- ----- --- ------ ---
Operating income.............. $ 95 16% $ 85 17% $ 51 12%
===== === ===== === ====== ===
Other
Revenue........................ $ 220 (a) $ 367 (a) $1,603 (a)
Operating, selling, general and
administrative................ 223 280 1,475
Stock compensation............. 460 236 (23)
Depreciation and amortization.. 93 100 153
----- ----- ------
Operating loss................ $(556) $(249) $ (2)
===== ===== ======
</TABLE>
- --------
(a) Not meaningful.

Consolidated Subsidiaries

Encore Media Group. Revenue generated from Encore Media Group increased to
$541 million in 1998 from $350 million in 1997. This increase of $191 million,
or 55%, was primarily attributable to higher revenue from AT&T Broadband,
consistent with the terms of the affiliation agreement with AT&T Broadband, and
the increases in the distribution of Encore and STARZ! services to cable
operators other than AT&T Broadband and direct-to-home satellite providers
combined with increases in rates charged. Revenue generated from Encore Media
Group increased to $350 million in 1997 from $195 million in 1996. This
increase of $155 million, or 79%, can be attributed to higher revenue from AT&T
Broadband during the year as a result of an increase in units and the AT&T
Broadband/Encore Media Group affiliation agreement, and an increase in the
number of Encore and Multiplex units distributed to other cable operators and
direct broadcast satellite operators, when compared to 1996.

Operating, selling, general and administrative expenses increased to $445
million in 1998 from $382 million in 1997. The increase of $63 million, or 16%,
is the result of an increase in the first run program license fees during 1998
compared to 1997. Operating, selling, general and administrative expenses
increased to $382 million in 1997 from $290 million in 1996. This increase of
$92 million, or 32%, was caused by an increase in programming costs due to
Encore and Multiplex purchasing more recent programming, the transition to
digital technology, and an increase in national marketing and advertising
expenses.

TV Guide. Revenue increased 18% to $598 million in 1998 from $508 million in
1997, which in turn represented an increase of 24% from $410 million in 1996.
The increase in revenue in 1998 over 1997 was primarily due to the acquisition
of Turner-Vision's retail C-band operations which were consolidated with those
of Superstar/Netlink effective February 1, 1998 and increased advertising and
service fee revenue. These increases were partially offset by a decrease in
commission revenue from Superstar/Netlink acting as a service

30
<PAGE>

agent in the direct broadcast satellite market. The increase in revenue in 1997
over 1996 was attributable to the acquisitions of the retail C-band operations
of Liberty's Netlink USA division which were consolidated with those of
Superstar/Netlink's retail operations effective April 1, 1996. The remainder of
the increase in 1997 was due to increased advertising and fee service revenue.

Operating, selling and general and administrative expenses consist primarily
of costs for programming content for the C-band operations and personnel costs.
Operating, selling, general and administrative expenses increased 18% to $475
million in 1998 from $404 million in 1997. Operating, selling, general and
administrative expenses increased 18% to $404 million in 1997 from $343 million
in 1996. The increase in 1998 over 1997 was primarily attributable to
additional expenses due to the inclusion of Turner-Vision, increased personnel
costs due to internal growth and increased legal fees related to litigation and
periodic filings with the SEC, and increased costs associated with Prevue
Channel's new format under the TV Guide Brand. The increase in operating,
selling, general and administrative expenses in 1997 over 1996 was largely
attributable to additional expenses due to the C-band retail operations of
Netlink USA and increased personnel costs resulting from internal growth.

Depreciation and amortization consists primarily of depreciation of leased
transponders, electronic and other equipment and amortization of intangible
assets resulting from acquisitions and patents. Depreciation and amortization
increased $9 million to $28 million in 1998 from $19 million in 1997 which in
turn represented an increase of 19% from $16 million in 1996. The increase in
1998 over 1997 was attributable to the amortization of intangibles resulting
from the acquisition of Turner-Vision and increased depreciation resulting from
the acquisition of certain equipment to support the various Prevue products.
The increase in depreciation and amortization in 1997 over 1996 was largely due
to increased depreciation resulting from the acquisition of equipment to
support the various Prevue products.

Other. Included in this information are the results of Liberty Media
International, Liberty Digital and Home Shopping Network. Revenue decreased to
$220 million in 1998 from $367 million in 1997. Liberty Media International's
revenue decreased from $220 million in 1997 to $65 million in 1998. This $154
million decrease was attributable to the deconsolidation of Cablevision.
Cablevision represented $173 million in revenue during 1997. Additionally,
revenue decreased as a result of the sale of the business of Southern
Satellite. The business of Southern Satellite contributed $31 million to
revenue during 1997. In August 1998, Liberty Media International purchased
Pramer, which contributed an additional $17 million in revenue from the date of
acquisition to December 31, 1998. Revenue decreased to $367 million in 1997
from $1,603 million in 1996. This $1,236 million decrease is primarily
attributable to the deconsolidation of Home Shopping Network into an equity
method investment in December 1996. Revenue generated in 1996 by Home Shopping
Network through the date of deconsolidation amounted to $984 million. Effective
January 1, 1997, Liberty Media International ceased to consolidate the
operations of Flextech. Flextech represented $94 million in revenue during
1996.

Operating, selling, general and administrative expenses decreased to $223
million in 1998 from $280 million in 1997. The primary reason for this decrease
is the deconsolidation of Cablevision in October, 1997. Cablevision accounted
for approximately $105 million of operating expenses in 1997. Operating,
selling, general and administrative expenses decreased to $280 million in 1997
from $1,475 million in 1996. The decrease of $1,195 million was primarily
attributable to the deconsolidation of Home Shopping Network which accounted
for about $911 million in operating, selling and general and administrative
expense in 1996. An additional decrease was caused in operating, selling,
general and administrative expenses in 1997 because of the deconsolidation of
Flextech. Flextech represented $126 million in operating, selling, general and
administrative expenses during 1996.

The decrease of $53 million in depreciation and amortization expense in 1997
was attributable to the deconsolidation of Home Shopping Network in December
1996 and Flextech effective January 1, 1997.

The $224 million and $259 million increase in stock compensation in 1998 and
1997, respectively, is primarily attributable to Liberty corporate expenses.
The amount of expense associated with stock

31
<PAGE>

compensation is based on the vesting of the related stock options and stock
appreciation rights and the market price of the underlying common stock as of
the date of the financial statements. The expense is subject to future
adjustment based on vesting and market price fluctuations and, ultimately, on
the final determination of market value when the rights are exercised.

Other Income and Expense. Interest expense was $104 million, $40 million and
$53 million for 1998, 1997 and 1996, respectively. The increase in interest
expense of $64 million from 1997 to 1998 was a result of additional borrowing
on Liberty's credit facilities during 1998. There was a $13 million decrease in
interest expense from 1996 to 1997. Because the operations of Home Shopping
Network have not been included in Liberty's consolidated financial results
since December 20, 1996 interest expense related to Home Shopping Network
accounted for a majority of this decrease.

Dividend and interest income was $65 million, $59 million and $35 million for
1998, 1997 and 1996, respectively. Dividend and interest income for 1998
primarily represents dividends received of approximately $21 million on a
series of Time Warner common stock designated as Series LMCN-V Common Stock and
$31 million in dividends received on a new series of 30 year non-convertible 9%
preferred stock of Fox Kids Worldwide, Inc. During 1997 dividends received from
the Time Warner Series LMCN-V Common Stock and the Fox Kids Worldwide preferred
stock amounted to $19 million and $14 million, respectively. During 1997,
Liberty also recognized an additional $14 million in interest income relating
to short-term investments. The increase in dividend and interest income from
1996 to 1997 is due to the increase in both the Fox Kids Worldwide preferred
stock and Time Warner Series LMCN-V Common Stock dividends.

Aggregate gains from dispositions and issuance of equity by affiliates and
subsidiaries during 1998, 1997 and 1996 were $2,554 million, $406 million and
$1,558 million, respectively. As a result of the exchange by Liberty, Comcast
and Cox of their respective interests in Sprint PCS and PhillieCo Partnership
I, L.P. for shares of Sprint PCS Group stock, Liberty recorded a non-cash gain
of $1.9 billion (before deducting deferred income tax expense of $647 million)
during 1998 based on the difference between the carrying amount of Liberty's
interest in the PCS Ventures and the fair value of the Sprint securities
received. Pursuant to an option from Liberty, Time Warner acquired the business
of Southern Satellite, effective January 1, 1998 for $213 million in cash. Time
Warner had paid Liberty shares of Time Warner Series LMCN-V Common Stock, which
are convertible into 12.8 million shares of Time Warner common stock, valued at
$306 million for the option. Liberty recognized a $515 million pre-tax gain in
connection with these transactions in 1998. Effective September 1, 1998,
Telewest and General Cable PLC consummated a merger in which holders of General
Cable received Telewest shares and cash for each share of General Cable held.
As a result of the merger, Liberty recognized a non-cash gain of $60 million
(excluding related tax expense of $21 million) during 1998. Liberty recognized
a gain of $38 million in 1998 from the increase in Superstar/Netlink's equity,
net of the dilution of its interest in Superstar/Netlink, that resulted from
the above described transaction with Turner-Vision.

On August 1, 1997, Liberty IFE, Inc., a wholly owned subsidiary of Liberty,
which held non-voting Class C common stock of International Family
Entertainment, Inc. and $23 million of International Family Entertainment 6%
convertible secured notes due 2004, convertible into International Family
Entertainment Class C common stock, contributed its International Family
Entertainment Class C common stock and International Family Entertainment 6%
convertible secured notes to Fox Kids Worldwide in exchange for the Fox Kids
Worldwide preferred stock. As a result of the exchange, Liberty recognized a
pre-tax gain of approximately $304 million during 1997.

On October 10, 1996, Time Warner and Turner Broadcasting System, Inc.
consummated a merger in which Liberty received shares of Time Warner Series
LMCN-V Common Stock, which are convertible into approximately 101.2 million
shares of Time Warner common stock, in exchange for its Turner Broadcasting
System holdings. As a result of the merger, Liberty recognized a pre-tax gain
of approximately $1.5 billion in 1996.

32
<PAGE>

Investments in Affiliates Accounted for Under the Equity Method

Liberty's share of losses of affiliates was $1,002 million, $785 million and
$332 million during 1998, 1997 and 1996, respectively.

Discovery. Revenue increased $234 million or 27% to $1,094 million in 1998
from $860 million in 1997, which in turn represented a $192 million or 29%
increase over revenue of $668 million in 1996. The increase in revenue for each
of the respective periods was due to increases in the number of subscribers at
Discovery's various networks along with an increase in the average per
subscriber affiliate fee. Advertising revenue also contributed to the increases
due to the increase in subscribers combined with an increase in ratings.

Operating Cash Flow increased $80 million or 267% to $110 million in 1998
from $30 million in 1997, which in turn represented a decrease of $41 million
or 58% from Operating Cash Flow of $71 million in 1996. The increase in
Operating Cash Flow from 1998 to 1997 was due to the revenue growth at the
developed domestic and international networks offset by a smaller corresponding
increase in operating expenses at those networks. The decrease from 1996 to
1997 was due to continued growth in the developed domestic and international
networks offset by the launch of an array of new networks and services. Late in
1996 and during 1997, Discovery launched Animal Planet, the Travel Channel,
BBC/Discovery joint venture networks, Your Choice TV, the digital networks and
retail operations. The launch of these networks and services caused Operating
Cash Flow to decrease due to large marketing support payments and significant
start-up costs.

Discovery's net loss increased by $19 million or 36% to $72 million in 1998
from $53 million in 1997, which in turn represented a decrease of $56 million
from net income of $3 million in 1996. The increase in the net loss from 1997
to 1998 was due to the improvement in Operating Cash Flow offset by an increase
in interest expense, launch amortization and stock compensation as well as the
write off of Your Choice TV. The increase in the net loss from 1996 to 1997 was
due to the decrease in Operating Cash Flow as well as increases in launch
amortization, interest expense and stock compensation. Liberty's share of
losses was $39 million and $29 million, for each of 1998 and 1997, respectively
and Liberty's share of earnings for 1996 was less than $1 million.

USA Networks, Inc. Revenue increased $1,372 million or 109% to $2,634 million
in 1998 from $1,262 million in 1997, which in turn represented a $1,187 million
increase over revenue of $75 million in 1996. The increase in revenue from 1997
to 1998 was due to the Universal and Ticketmaster transactions being completed
by USA Networks during 1998 (see note 5 to the accompanying December 31, 1998
consolidated financial statements). The increase from 1996 to 1997 was
primarily due to a $1 billion increase in electronic retailing revenue and a
$156 million increase in ticketing revenue.

Operating Cash Flow increased $272 million to $464 million in 1998 from $192
million in 1997, which in turn represented an increase of $173 million over
Operating Cash Flow of $19 million in 1996. The increase in Operating Cash Flow
from 1997 to 1998 was due to the Universal and Ticketmaster transactions. The
increase from 1996 to 1997 was due to the revenue increase offset by an
increase in operating costs of $898 million and $144 million related to
electronic retailing and ticketing operations, respectively.

Net income increased by $64 million to $77 million in 1998 from $13 million
in 1997, which in turn represented an increase of $20 million from a net loss
of $7 million in 1996. The increase in net income from 1997 to 1998 was due to
the increase in Operating Cash Flow along with one-time transactional gains
offset by significant increases in depreciation, amortization, interest and
income tax expenses. The increase from 1996 to 1997 was also due to the
increase in Operating Cash Flow offset by increases in depreciation,
amortization, interest and income tax expenses. Liberty's share of earnings
(loss) of USA Networks and related investments was $30 million, $5 million and
($1) million for 1998, 1997 and 1996, respectively.

33
<PAGE>

QVC Inc. Revenue increased $321 million or 15% to $2,403 million in 1998 from
$2,082 million in 1997, which in turn represented a $246 million increase or
13% over revenue of $1,836 million in 1996. The respective increase in revenue
for the years ended December 31, 1998 and 1997 were primarily attributable to
the effects of 5.6% and 7.4% increases, respectively, in the average number of
homes receiving QVC services in the U.S. and 11.8% and 13.7% increases,
respectively, in the average number of homes receiving QVC services in the
United Kingdom.

Operating Cash Flow increased $96 million or 28% to $434 million in 1998 from
$338 million in 1997, which in turn represented a $38 million or 13% increase
over Operating Cash Flow of $300 million in 1996. The increase in Operating
Cash Flow was caused by the increase in revenue offset by increases in cost of
goods sold and variable costs associated with the increased sales. Start-up
costs of QVC Germany also contributed $3 million and $26 million to the
respective increases in offsetting costs for the years ended December 31, 1998
and 1997.

Net income increased 110% or $78 million to $149 million in 1998 from $71
million in 1997, which in turn represented an increase of $18 million or 34%
over net income of $53 million in 1996. The increases in net income were due to
the increases in Operating Cash Flow offset by increases in depreciation,
amortization and income tax expenses in each of the respective periods
presented. Liberty's share of earnings was $64 million, $30 million and $23
million for 1998, 1997 and 1996, respectively.

Fox/Liberty Networks. Revenue increased 39% or $183 million to $655 million
in 1998 from $472 million in 1997, which in turn represented an increase of
226% or $327 million from $145 million in 1996. A large portion of the increase
in revenue is due to the acquisition of Affiliated Regional Communications by
Fox/Liberty Networks on March 13, 1997 which increased the number of
consolidated subsidiaries and their respective operations. Had the acquisition
of Affiliated Regional Communications been completed for all periods presented,
revenue would have increased $128 million and $30 million for 1998 and 1997,
respectively. The increases in revenue were attributable to continued
subscriber growth at the regional sports networks and the FX network along with
increased advertising revenue due to increased subscribers and ratings.

Operating Cash Flow increased $94 million to $79 million in 1998 from a
deficit of $15 million in 1997, which in turn represented an increase of $69
million from a deficit of $84 million in 1996. The increases in Operating Cash
Flow were caused by the revenue growth coupled with an increase in operating
expenses. The increases in operating expenses for all periods presented were
due to an increase in the number of professional events, primarily Major League
Baseball games, as well as increased programming rights fees of regional sports
networks due to renegotiated and newly entered into sports rights agreements.

Fox/Liberty Networks net loss decreased by $16 million or 21% to $62 million
in 1998 from $78 million in 1997, which in turn represented a decrease of $39
million or 33% from a net loss of $117 million in 1996. The decrease in the net
loss was due to the improvement in Operating Cash Flow offset primarily by
interest expense. In 1998, interest expense increased to $113 million from $49
million due to additional indebtedness that was entered into in the latter half
of 1997. Liberty's share of losses was $83 million for 1998 and zero for both
1997 and 1996, as Liberty's basis in the investment was less than zero (see
note 5 to the accompanying December 31, 1998 consolidated financial
statements).

PCS Ventures. Liberty's share of losses from its investment in the PCS
Ventures was $629 million, $493 million and $133 million in 1998, 1997 and
1996, respectively. The increase in the share of losses in each year was
attributed primarily to increases in:

. selling, general and administrative costs associated with Sprint PCS's
efforts to increase its customer base,

. depreciation expense resulting from capital expenditures made to expand
its PCS network and

. interest expense associated with higher amounts of outstanding debt.

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<PAGE>

Telewest. Telewest accounted for $134 million, $145 million and $109 million
of Liberty's share of its affiliates' losses during 1998, 1997 and 1996,
respectively. The increase in the share of losses in each year was primarily
attributable to the net effects of:

. changes in foreign currency transaction losses,

. an increase in Operating Cash Flow resulting from revenue growth and

. an increase in interest expense.

Telewest issued debentures in connection with a previous merger transaction.
Changes in the exchange rate used to translate the Telewest debentures into
U.K. pounds sterling and the adjustment of a foreign currency option contract
to market value caused Telewest to experience foreign currency transaction
gains/losses that affected Liberty's share of Telewest's losses.

Liquidity and Capital Resources

Liberty's sources of funds include its available cash balances, net cash from
operating activities, dividend and interest receipts, proceeds from asset sales
and availability under certain credit facilities. Liberty is a holding company
and as such is generally not entitled to the cash resources or cash generated
by operations of its subsidiaries and business affiliates. Liberty is primarily
dependent upon its financing activities to generate sufficient cash resources
to meet its cash requirements. See "Risk Factors--Factors Relating to Liberty--
Our holding company structure could restrict access to funds of our
subsidiaries that may be needed to service the debentures. Creditors of those
companies have a claim on their assets that is senior to that of holders of the
debentures."

In connection with the AT&T merger and other related transactions, Liberty
received approximately $5.5 billion in cash. Also, upon consummation of the
AT&T merger, through a new tax sharing agreement between Liberty and AT&T,
Liberty became entitled to the benefit of all of the net operating loss
carryforwards available to the entities included in TCI's consolidated income
tax return as of the date of the AT&T merger. In addition, under the tax
sharing agreement, Liberty will receive a cash payment from AT&T in periods
when it generates taxable losses and those taxable losses are utilized by AT&T
to reduce the consolidated income tax liability. Additionally, certain warrants
held by TCI were transferred to Liberty in exchange for $176 million in cash.

At September 30, 1999, Liberty and its consolidated subsidiaries had bank
credit facilities which provided for borrowings of up to $1,059 million.
Borrowings under these facilities of $926 million were outstanding at September
30, 1999. Certain assets of Liberty's consolidated subsidiaries serve as
collateral for borrowings under these bank credit facilities. Also, these bank
credit facilities contain provisions which limit additional indebtedness, sale
of assets, liens, guarantees, and distributions by the borrowers. On July 7,
1999, Liberty received net cash proceeds of approximately $741 million and $494
million from the issuance of its 7 7/8% Senior Notes due 2009 and 8 1/2% Senior
Debentures due 2029, respectively. The proceeds were used to repay outstanding
borrowings under certain of Liberty's credit facilities, two of which were
subsequently terminated. See note 7 to the accompanying September 30, 1999
consolidated financial statements of Liberty. On January 13, 2000, Liberty
completed an exchange offer for the 7 7/8% Senior Notes due 2009 and 8 1/2%
Senior Debentures due 2029 that provided tendering holders with identical
securities registered under the United States securities laws.

On November 16, 1999, Liberty received net cash proceeds of $854 million from
the issuance of its 4% Senior Exchangeable Debentures due 2029.

On February 2, 2000, Liberty received net cash proceeds of $983 million from
the issuance of its 8 1/4% Senior Debentures due 2030.

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There are restrictions on incurrence of debt of Liberty Media Group and
therefore on Liberty, through an Inter-Group Agreement with AT&T. Liberty Media
Group may not incur any debt that would cause the total indebtedness of Liberty
Media Group at any time to be in excess of 25% of the total market
capitalization of the Liberty Media Group tracking stock, if the excess would
adversely affect the credit rating of AT&T. See "Relationship with AT&T and
Certain Related Transactions--Relationship with AT&T--Inter-Group Agreement--
There are Restrictions on the Incurrence of Debt and Other Financial
Obligations."

Various partnerships and other affiliates of Liberty accounted for under the
equity method finance a substantial portion of their acquisitions and capital
expenditures through borrowings under their own credit facilities and net cash
provided by their operating activities.

On April 8, 1999, substantially all of Liberty Media International's 4 1/2%
convertible subordinated debentures were converted into shares of Liberty Media
Group tracking stock. Since substantially all of the debenture holders elected
to convert, no payment of interest and no adjustment in respect of interest
were made.

On July 15, 1999, News Corp. acquired Liberty's 50% interest in Fox/Liberty
Networks in exchange for 51.8 million News Corp. American Depository Receipts
("ADRs"), representing preferred limited voting ordinary shares of News Corp.
Liberty also acquired from News Corp. 28.1 million additional ADRs representing
preferred limited voting ordinary shares of News Corp. for approximately $695
million. As a result of these transactions and subsequent open market
purchases, Liberty owns approximately 81.7 million ADRs representing preferred
limited voting shares of News Corp., or approximately 8.5% of News Corp.'s
diluted outstanding shares. News Corp. has historically paid cash dividends on
its common stock and it is anticipated that it will continue to do so. Holders
of the ADRs are entitled to receive dividends ratably with News Corp. common
stock, and, consequently, Liberty would receive cash dividends on the ADRs
received in the above described transactions. However, there can be no
assurance that such dividends will continue to be paid.

As of September 30, 1999, Liberty held shares of Time Warner Series LMCN-V
common stock, which are convertible into 114 million shares of Time Warner
common stock. Holders of Time Warner Series LMCN-V common stock are entitled to
receive dividends ratably with Time Warner common stock. Liberty has received
approximately $5 million in cash dividends quarterly from Time Warner. It is
anticipated that Time Warner will continue to pay dividends on its common stock
and consequently that Liberty will receive dividends on the Time Warner Series
LMCN-V common stock it holds. However, there can be no assurance that such
dividends will continue to be paid. See "Business--Programming--Business
Affiliates--Time Warner Inc."

Liberty receives approximately $8 million in cash dividends quarterly on the
Fox Kids Worldwide preferred stock. This preferred stock pays quarterly
dividends at the annual rate of 9% of the liquidation value of $1,000 per
share. If Fox Kids Worldwide does not declare or pay a quarterly dividend, that
dividend will be added to the liquidation value and the dividend rate will
increase to 11.5% per annum until all accrued and unpaid dividends are paid.
News Corp. has undertaken to fund all amounts needed by Fox Kids Worldwide to
pay any amounts it is required to pay under the certificate of designations for
the Fox Kids Worldwide preferred stock, including payment of the liquidation
value of that stock upon any optional or mandatory redemption of that stock.

Pursuant to a proposed final judgment agreed to by TCI, AT&T and the United
States Department of Justice on December 30, 1998, Liberty transferred all of
its beneficially owned securities of Sprint to a trust prior to the AT&T
merger. The final judgment, which was entered by the United States District
Court for the District of Columbia on August 23, 1999, requires the trustee, on
or before May 23, 2002, to dispose of a portion of the Sprint securities held
by the trust sufficient to cause Liberty to own beneficially no more than 10%
of the outstanding Sprint PCS Group stock that would be outstanding on a fully
diluted basis on such date. On or before May 23, 2004, the trustee must divest
the remainder of the Sprint securities held by the trust. The final judgment
requires the trustee to vote the Sprint securities beneficially owned by
Liberty in the

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same proportion as other holders of Sprint PCS Group stock so long as such
securities are held by the trust. The final judgment also prohibits the
acquisition by Liberty of additional Sprint securities, with certain
exceptions, without the prior written consent of the Department of Justice.

During the seven month period ended September 30, 1999, the unrealized
depreciation, net of taxes, of the fair value of Liberty's shares of Time
Warner Series LMCN-V common stock was $522 million, based upon the market value
of the Time Warner common stock into which the Time Warner Series LMCN-V common
stock is convertible. During the seven month period ended September 30, 1999,
the unrealized appreciation, net
of taxes, of the fair value of the Sprint PCS Group stock held by Liberty was
$2,379 million based upon the market value of such shares.

Liberty has guaranteed notes payable and other obligations of certain
affiliates. At September 30, 1999, the U.S. dollar equivalent of the amounts
borrowed pursuant to these guaranteed obligations aggregated approximately $496
million.

Flextech has undertaken to finance the working capital requirements of a
joint venture that it has formed with BBC Worldwide Limited, and is obligated
to provide this joint venture with a primary credit facility of (Pounds)88
million ($145 million) and, subject to certain restrictions, a standby credit
facility of (Pounds)30 million ($49 million). As of September 30, 1999, this
joint venture had borrowed (Pounds)45 million ($74 million) under the primary
credit facility. If Flextech defaults in its funding obligation to the joint
venture and fails to cure the default within 42 days after receipt of notice
from BBC Worldwide, BBC Worldwide is entitled, within the following 90 days, to
require that Liberty assume all of Flextech's funding obligations to the joint
venture.

Liberty intends to continue to develop its entertainment and information
programming services and has made certain financial commitments related to the
acquisition of programming. As of September 30, 1999, Encore Media Group's
future minimum obligation related to certain film licensing agreements was $887
million. The amount of the total obligation is not currently estimable because
such amount is dependent upon the number of qualifying films released
theatrically by certain motion picture studios as well as the domestic
theatrical exhibition receipts upon the release of such qualifying films.
Continued development may require additional financing and it cannot be
predicted whether Encore Media Group will obtain such financing. If additional
financing cannot be obtained by Encore Media Group, Encore Media Group or
Liberty could attempt to sell assets but there can be no assurance that asset
sales, if any, can be consummated at a price and on terms acceptable to
Liberty.

Cash Flows from Operating Activities

Cash flows from operating activities for the seven month period ended
September 30, 1999 were $105 million. Cash flows used in operating activities
for the two month period ended February 28, 1999 were $107 million and cash
flows from operating activities for the nine months ended September 30, 1998
were $55 million. Improved Operating Cash Flow for Encore Media Group
contributed to the higher cash flows from operating activities for the seven
month period ended September 30, 1999. Dividends and interest income from the
investment of the $5.5 billion received in the AT&T merger contributed $39
million to cash flows from operating activities during the seven month period
ended September 30, 1999. Additionally, Liberty received $19 million from AT&T
pursuant to the AT&T tax sharing agreement during the seven month period ended
September 30, 1999. Cash used during the two month period ended February 28,
1999 included payments related to stock appreciation rights of $126 million.

Cash flows from operating activities for the years ended December 31, 1998,
1997 and 1996 were $26 million, $149 million and $85 million, respectively. Due
to a number of transactions during the three-year period ended December 31,
1998, the results of operations, and consequently cash flows from operating
activities, during this period are not comparable from year to year. These
transactions resulted in the consolidation or deconsolidation of several
entities, as discussed above in the "Summary of Operations."

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Cash Flows from Investing Activities

Investing cash flows were primarily used in the purchase of marketable
securities during the seven month period ended September 30, 1999. Liberty made
purchases of marketable securities of $7 billion and sales and maturities of
marketable securities of $4 billion during the seven month period ended
September 30, 1999. Liberty is a holding company and as such it uses investing
cash flows to make contributions and investments in entities in which Liberty
holds a 50% or less ownership interest. Cash flows from investing activities
were used for investments in and loans to affiliates amounting to $1,952
million, $51 million and $1,243 million during
the seven month period ended September 30, 1999, the two month period ended
February 28, 1999, and the nine months ended September 30, 1998, respectively.
Additionally, Liberty had cash proceeds from dispositions of $343 million
during the nine months ended September 30, 1998.

Liberty made investments in and loans to affiliates and others of $1.4
billion, $580 million and $536 million during the years ended December 31,
1998, 1997 and 1996, respectively. Cash proceeds received in investing cash
flows for the years ended December 31, 1998, 1997 and 1996 were $423 million,
$268 million and $170 million, respectively. Liberty invested $92 million, $41
million and $168 million in acquisitions during the years ended December 31,
1998, 1997 and 1996, respectively.

Cash Flows from Financing Activities

Liberty is primarily dependent on financing activities to generate sufficient
cash resources to meet its cash requirements. Financing cash flows consist
primarily of borrowings and repayments of debt. Liberty had borrowings of
$2,216 million, $155 million and $1,661 million and repayments of $2,166
million, $145 million and $479 million during the seven month period ended
September 30, 1999, the two month period ended February 28, 1999, and the nine
months ended September 30, 1998, respectively.

During the years ended December 31, 1998, 1997 and 1996, Liberty had
borrowings of $2.2 billion, $661 million and $465 million, respectively, and
repayments of $609 million, $341 million and $628 million, respectively. Cash
transfers to TCI during the years ended December 31, 1998 and 1997 were $215
million and $428 million, respectively. Cash transfers from TCI for the year
ended December 31, 1996 were $372 million.

Market Risk

Liberty is exposed to market risk in the normal course of its business
operations due to its investments in different foreign countries and ongoing
investing and financial activities. Market risk refers to the risk of loss
arising from adverse changes in foreign currency exchange rates, interest rates
and stock prices. The risk of loss can be assessed from the perspective of
adverse changes in fair values, cash flows and future earnings. Liberty has
established policies, procedures and internal processes governing its
management of market risks and the use of financial instruments to manage its
exposure to such risks.

Contributions to Liberty's foreign affiliates are denominated in foreign
currency. Liberty therefore is exposed to changes in foreign currency exchange
rates. Currently, Liberty does not hedge any foreign currency exchange risk
because of the long-term nature of its interests in foreign affiliates. Liberty
attempts to limit its exposure to changing foreign currency exchange rates
through operations and financial market actions, but Liberty continually
evaluates its foreign currency exposure (primarily the Argentine Peso, British
Pound Sterling, Japanese Yen and French Franc) based on current market
conditions and the business environment.

Liberty is exposed to changes in interest rates primarily as a result of its
borrowing and investment activities, which include fixed and floating rate
investments and borrowings used to maintain liquidity and fund its business
operations. The nature and amount of Liberty's long-term and short-term debt
are expected to vary as a result of future requirements, market conditions and
other factors. As of September 30, 1999, the majority of Liberty's debt was
composed of fixed rate debt resulting from the July 1999 issuance of notes and
debentures for net proceeds of approximately $1.2 billion. The proceeds were
used to repay floating rate debt,

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which reduced Liberty's exposure to interest rate risk associated with rising
variable interest rates. Had market interest rates been 1% higher throughout
the year ended December 31, 1998 and the nine months ended September 30, 1999,
Liberty would have recorded approximately $14 million and $11 million of
additional interest expense for the year ended December 31, 1998 and the nine
months ended September 30, 1999, respectively. At September 30, 1999, the fair
values of these notes and debentures were $754 million and $504 million,
respectively.

Liberty is exposed to changes in stock prices primarily as a result of its
significant holdings in publicly traded securities. Liberty continually
monitors changes in stock markets, in general, and a change in the stock prices
of its significant holdings, specifically. Changes in stock prices can be
expected to vary as a result of general market conditions, technological
changes, specific industry changes and other factors. Equity collars and equity
swaps are used to hedge investment positions subject to fluctuations in stock
prices.

In order to illustrate the effect of changes in stock prices on Liberty we
provide the following sensitivity analysis. Had the stock price of our
investments accounted for as available-for-sale securities been 10% lower at
December 31, 1998, and September 30, 1999, the value of such securities would
have been lower by $1,029 million and $1,648 million, respectively. Our
unrealized gains, net of taxes would have also been lower by $622 million and
$996 million, respectively. Had the stock price of our publicly traded
investments accounted for using the equity method been 10% lower at December
31, 1998, and September 30, 1999, there would have been no impact on the
carrying value of such investments.

Liberty measures the market risk of its derivative financial instruments
through comparison of the blended rates achieved by those derivative financial
instruments to the historical trends in the underlying market risk hedged. With
regard to interest rate swaps, Liberty monitors the fair value of interest rate
swaps as well as the effective interest rate the interest rate swap yields, in
comparison to historical interest rate trends. Liberty believes that any losses
incurred with regard to interest rate swaps would be offset by the effects of
interest rate movements on the underlying hedged facilities. With regard to
equity collars and hedges, Liberty monitors historical market trends relative
to values currently present in the market. Liberty believes that any unrealized
losses incurred with regard to equity collars and swaps would be offset by the
effects of fair value changes on the underlying hedged assets. These measures
allow Liberty's management to measure the success of its use of derivative
instruments and to determine when to enter into or exit from derivative
instruments.

Accounting Standards

. fair values of existing assets, liabilities, or firm commitments,

. variability of cash flows of forecasted transactions, or

. foreign currency exposures of net investments in foreign operations.

Although our management has not completed its assessment of the impact of
Statement 133 on Liberty's consolidated results of operations and financial
position, management estimates that the impact of Statement 133 will not be
significant.

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Year 2000

Liberty, in conjunction with TCI, and following the AT&T merger, AT&T has
implemented enterprise-wide, comprehensive efforts to assess and remediate its
computer systems and related software and equipment to ensure such systems,
software and equipment recognize, process and store information in the year
2000 and thereafter.

Liberty's year 2000 remediation efforts included an assessment of its most
critical systems. The majority of these efforts had been focused on our
operating subsidiaries, primarily Liberty Digital, Encore Media Group and TCI
Cablevision of Puerto Rico. The most critical systems for these operating
subsidiaries include their customer service systems, product delivery systems
and billing systems.

Significant market value is associated with our investments in certain public
and private corporations, partnerships and other businesses. Accordingly, we
have monitored the public disclosure of such publicly-held business entities to
determine their year 2000 readiness, including Time Warner and Sprint. In
addition, we have surveyed and monitored the year 2000 status of certain
privately held business entities in which we have significant investments.

As of the date of this prospectus, we are not aware of any significant year
2000 issue arising at our operating subsidiaries or our investments. However,
there can be no assurance that a significant year 2000 issue will not arise
with these entities in the future.

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CORPORATE HISTORY

Liberty's former parent, TCI, began acquiring interests in programming
businesses in the late 1970s in an effort to ensure quality content for
distribution on its cable television systems. TCI's early programming interests
included those in Black Entertainment Television (since renamed BET Network),
Turner Broadcasting System (since acquired by Time Warner), Cable Educational
Network (since renamed Discovery Communications, Inc.), QVC Network, Inc.,
International Family Entertainment, Inc. and several regional sports networks.

TCI formed Liberty's predecessor, which we refer to as "LMC," for the purpose
of spinning off to TCI's shareholders, by means of an exchange offer, TCI's
interests in most of its cable television programming businesses and certain of
its affiliated cable television systems. TCI retained a significant interest in
LMC through its ownership of preferred stock. The spinoff was effected due to
concerns over proposals that were then pending before Congress that, if
enacted, would impose horizontal limits on the number of subscribers that could
be served by a single cable operator and vertical limits on the ownership by
cable operators of interests in cable programming services.

LMC began trading on March 28, 1991, with a fully diluted equity market
capitalization of approximately $190 million. At that time, its assets included
interests in cable television systems serving approximately 1.6 million
subscribers, regional sports networks and eight national programming services,
including QVC, Black Entertainment Television and The Family Channel. Over the
next three years LMC increased its programming assets by acquiring interests in
and developing companies that produced branded programming content, including
Encore Media Corporation, the Home Shopping Network and two national and
several regional sports networks.

On August 4, 1994, TCI reacquired the public's interest in LMC by means of a
merger, and LMC again became a wholly owned subsidiary of TCI. TCI reacquired
LMC largely because of the FCC's adoption in 1994 of vertical and horizontal
cable and programming regulations, which a combined TCI and LMC fit within. At
the time LMC was reacquired by TCI, LMC's fully diluted equity market
capitalization had grown to approximately $3.2 billion. At that time, Liberty
had interests in cable television systems serving approximately 3.2 million
subscribers, 11 national programming services, including Encore, STARZ! and QVC
and two national and 13 regional sports networks.

In the fourth quarter of 1994, TCI reorganized its businesses into four
divisions: (1) Domestic Cable and Communications, (2) Programming, (3)
International Cable and Programming and (4) Technology/Venture Capital. This
business-line reorganization was effected in an effort to better focus
management expertise in the various areas into which TCI had evolved, and to
gain greater market recognition of the value of TCI's four lines of businesses.
In an effort to further gain market recognition of what TCI believed to be
hidden values in its asset base, in August 1995, TCI divided its common stock
into two tracking stocks, with one series of tracking stock intended to reflect
the separate performance of a newly created "Liberty Media Group." The assets
attributed to the Liberty Media Group were comprised primarily of the assets of
TCI's Programming division. The other series of tracking stock was intended to
reflect the separate performance of the "TCI Group," which was comprised of the
three other divisions of TCI.

The Liberty Media Group tracking stock began trading on August 10, 1995, with
a fully diluted equity market capitalization of approximately $4.5 billion. At
that time, Liberty's assets included interests in more than 30 national cable
programming services, three national and 15 regional sports networks and
various other businesses involved in television programming production and
distribution. Over the course of the next three years, Liberty continued to
expand its interests in programming services and leveraged several of its
interests to obtain the benefits of scale and liquidity. This included
Liberty's acquisition of an approximately 9% interest in Time Warner in
exchange for its interest in Turner Broadcasting System and the exchange of its
shares in International Family Entertainment for a preferred stock interest in
Fox Kids Worldwide.

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In August 1997, TCI created a third class of tracking stock intended to track
the separate performance of the "TCI Ventures Group," which was comprised of
the International Cable and Programming division and the Technology/Venture
Capital division of TCI.

On March 9, 1999, TCI was acquired by AT&T in a merger transaction in which
the holders of TCI Group tracking stock received AT&T common stock and holders
of Liberty Media Group tracking stock and TCI Ventures Group tracking stock
received shares of AT&T's Liberty Media Group tracking stock. In the merger
with AT&T, the holders of TCI's Liberty Media Group and TCI Ventures Group
tracking stocks received shares of AT&T's Liberty Media Group tracking stock
with a value of approximately $24 billion and $13 billion, respectively, based
on the closing price of AT&T's Liberty Media Group tracking stock on the NYSE
on March 10, 1999 (which was the first day of trading). At the time of the
merger, Liberty's assets included interests in more than 50 national cable
programming services, six national, 25 regional and six international sports
networks, 23 digital networks, ten Internet businesses, over 65 international
programming services, and cable and cable telephony systems in Europe, Latin
America and Japan.

As a result of the merger with AT&T, TCI and Liberty became subsidiaries of
AT&T. In connection with the merger, most of the assets formerly attributed to
the TCI Ventures Group were transferred to Liberty. Other assets that had been
attributed to the TCI Ventures Group were transferred to TCI in exchange for a
cash contribution of approximately $5.5 billion to Liberty. As a result of
these asset transfers, Liberty obtained interests in foreign distribution
companies, interests in certain foreign programming businesses and interests in
Internet and technology companies as well as approximately $5.5 billion cash
and the right to the U.S. federal income tax benefits of a net operating tax
loss carryforward possessed by TCI at the time of its merger with AT&T. In
addition, certain transaction agreements were entered into in connection with
the merger which provide Liberty with a level of financial and operational
separation from AT&T and certain programming rights with respect to AT&T's
cable systems. See "Relationship with AT&T and Certain Related Transactions."

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BUSINESS

Overview

Our management team, led by Dr. John C. Malone, our Chairman, and Mr. Robert
R. Bennett, our President and Chief Executive Officer, has extensive expertise
in creating and developing new businesses and opportunities for our
subsidiaries and business affiliates and in building scale, brand power and
market leadership. This expertise dates back to the mid-1980s, when members of
our management were instrumental in identifying and executing strategic
transactions to provide TCI, our former parent, with quality programming for
its cable television systems. Today, our management team continues to leverage
its expertise and industry relationships on behalf of our subsidiaries and
business affiliates to identify and execute strategic transactions that improve
the value of their businesses and that allow us to take full advantage of new
developments in consumer and technological trends.

Business Strategy

Promoting the internal growth of our subsidiaries and business affiliates. We
actively seek to foster the internal growth of our subsidiaries and business
affiliates by working with their management teams to expand their established
businesses and create new businesses, often by extending their existing brands
across multiple distribution platforms or effecting transactions that enhance
the scale of their operations. Our emphasis is on the creation and development
of multiple sources of revenue that enhance cash flow. We also seek to use our
extensive industry experience and relationships to provide our subsidiaries and
business affiliates with strategic alliances, greater visibility and improved
positioning in their respective markets. While the form of our participation in
our subsidiaries and business affiliates may change over time as a result of
acquisitions, mergers and other strategic transactions, we generally seek to
retain a significant long-term interest in their successors.

Maintaining significant involvement in governance. We seek to add
considerable value to our subsidiaries and business affiliates through our
strategic, operational and financial advice. To ensure Liberty can exert
significant influence over management where we own less than a majority voting
interest in a business affiliate, we often seek representation at the board of
directors level and contractual rights that assure our participation in
material decision making. These contractual rights will typically include
participation in budget decisions, veto rights over significant corporate
actions and rights of first refusal with respect to significant dispositions of
stock by management or strategic partners.

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Participating with experienced management and strategic partners. We seek to
participate in companies with experienced management teams that are led by
strong entrepreneurs, and partner with strategic investors that are engaged in
complementary businesses with a demand for the products and services of our
subsidiaries and business affiliates. Our existing business affiliates are led
by such entrepreneurs as Barry Diller of USA Networks, Inc., Rupert Murdoch of
News Corp. and John Hendricks of Discovery Communications, Inc., while our
existing strategic partners include Comcast Corporation, News Corp. and Time
Warner.

Executing strategic transactions that optimize the efficiency of our
assets. We seek to identify and execute acquisitions, consolidations and other
strategic transactions that rationalize our participation in the businesses of
our subsidiaries and business affiliates. We often undertake transactions of
this nature to obtain the benefits of scale and liquidity as well as to further
diversify Liberty's businesses. In pursuing new acquisition opportunities, we
focus on businesses that have attractive growth characteristics and offer
strategic benefits to our existing subsidiaries and business affiliates. We
employ a conservative capital structure in managing our assets and
rationalizing our businesses. We also seek to enhance our financial flexibility
by utilizing multiple sources of capital and preserving liquidity through our
ownership of a mix of public and private assets.

Business Operations

Liberty is engaged principally in three fundamental areas of business:

. Programming, consisting principally of interests in video programming
services;

. Communications, consisting principally of interests in cable television
systems and other communications systems; and

. Internet services and technology.

Recent Developments

On December 15, 1999, Liberty entered into an agreement with Cendant Corp. to
purchase 18 million shares of Cendant's common stock and a warrant to purchase
up to an additional approximate 29 million shares of common stock at an
exercise price of $23.00 per share (subject to anti-dilution adjustments),
which would result in Liberty having an approximate 6.5% ownership interest in
Cendant. Liberty is to pay a cash purchase price of $300 million for the 18
million shares of common stock and a cash purchase price of $100 million for
the warrant. This transaction closed on February 7, 2000. Cendant is primarily
engaged in the consumer and business services industries, with its principal
operations in travel related services, real estate related services and
alliance marketing related services.

Also on December 15, 1999, a trust for Liberty's benefit entered into a
"cashless collar" with a financial institution with respect to 9 million shares
of Sprint PCS stock--Series 1, secured by 9 million shares of the trust's
Sprint PCS stock--Series 2. The Sprint PCS stock--Series 2 is convertible upon
transfer into the Sprint PCS stock--Series 1 on a one-for-one basis. The collar
consists of a put option that gives the trust the right to require its
counterparty to buy 9 million shares of Sprint PCS stock--Series 1 from the
trust in three tranches in approximately two years for $100.00 per share. The
counterparty has a call option giving the counterparty the right to buy the
same shares from the trust in three tranches in approximately two years for
$130.46 per share. The put and the call options were equally priced, resulting
in no cash cost to the trust or Liberty.

On December 6, 1999, Liberty entered into an agreement with Four Media
Company with respect to a transaction pursuant to which the Liberty Media Group
would acquire all of the outstanding common stock of Four Media in exchange for
approximately $123 million in cash and the issuance of approximately 3.2
million shares of AT&T Class A Liberty Media Group tracking stock. Four Media
is a leading provider of technical and creative services to owners, producers
and distributors of television programming, feature films and other

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entertainment products both domestically and internationally. The transaction
with Four Media is subject to the approval of Four Media's shareholders, as
well as other customary closing conditions.

On December 10, 1999, Liberty entered into an agreement with The Todd-AO
Corporation with respect to a transaction pursuant to which the Liberty Media
Group would acquire approximately 60% of the outstanding equity and 94% of the
voting power of Todd in exchange for approximately 3 million shares of AT&T's
Class A Liberty Media Group tracking stock. Todd provides sound, video and
ancillary post production and distribution services to the motion picture and
television industries in the United States and Europe. The transaction with
Todd is subject to the approval of Todd's shareholders, as well as other
customary closing conditions.

On December 30, 1999, Liberty entered into an agreement with Soundelux
Entertainment Group, Inc. with respect to a transaction pursuant to which the
Liberty Media Group would acquire more than 55% of the outstanding equity and
92% of the voting power of Soundelux in exchange for approximately 2 million
shares of AT&T's Class A Liberty Media Group tracking stock. Soundelux provides
video, audio, show production, design and installation services to location-
based entertainment venues and provides production and post-production sound
services, including content, editing, re-recording and music supervision, to
the motion picture, television and interactive gaming industries. The
transaction with Soundelux is subject to the approval of Soundelux's
shareholders and the closing of the Todd transaction, and other customary
closing conditions.

Following the acquisition of controlling interests in Todd and Soundelux and
of 100% of the voting securities of Four Media, and subject to certain
conditions, the Liberty Media Group would cause the following additional
transactions to occur: (i) contribution of the Liberty Media Group's
controlling interest in Todd to Soundelux, in exchange for additional shares of
voting stock of Soundelux; (ii) contribution by Soundelux to Todd of 100% of
the business and operations of Soundelux, in exchange for additional shares of
voting stock of Todd and the assumption by Todd of 100% of the liabilities of
Soundelux; and (iii) contribution by the Liberty Media Group to Soundelux, and
by Soundelux to Todd, of 100% of the stock of Four Media.

As a result of such transactions, the assets and operations now owned and
operated by Four Media, Soundelux and Todd would be consolidated within Todd,
which would change its name to Liberty Livewire, Inc. Liberty Livewire would
become a subsidiary of Liberty.

On September 30, 1999, Liberty purchased 4.93 million class B shares of
UnitedGlobalCom, Inc. for approximately $493 million in cash. UnitedGlobalCom
is the largest global broadband communications provider of video, voice and
data services with operations in over 20 countries throughout the world. As
part of the transaction, Liberty has agreed to form a 50/50 joint venture or
similar arrangement with United Pan-Europe Communications N.V.,
UnitedGlobalCom's European subsidiary, to own the UnitedGlobalCom shares and to
evaluate content and distribution opportunities together in Europe. Liberty
will contribute to the joint venture its 4.93 million class B shares of
UnitedGlobalCom and United Pan-Europe will contribute its 2.78 million class A
shares of UnitedGlobalCom. Liberty expects to assign 50% of its interest in the
joint venture to Microsoft Corporation. In addition to its 25% interest,
Liberty will receive approximately $144 million of redeemable preferred
interests in the joint venture. When formed, the joint venture will own
approximately 14.5% of the total outstanding shares of UnitedGlobalCom on a
fully diluted basis. The joint venture and its members will be bound by voting
and standstill agreements with UnitedGlobalCom and certain of its controlling
shareholders.

45
<PAGE>

Group was principally engaged in the ownership and operation of interests in
various communications-related businesses. Associated Group's primary assets
were (1) approximately 19.7 million shares of AT&T common stock, (2)
approximately 23.4 million shares of AT&T Class A Liberty Media Group tracking
stock, (3) approximately 5.3 million shares of AT&T Class B Liberty Media Group
tracking stock, (4) approximately 21.4 million shares of common stock,
representing approximately a 40% interest, of Teligent, Inc., a full-service,
facilities-based communications company, and (5) TruePosition, Inc., a wholly-
owned subsidiary of Associated Group which provides location services for
wireless carriers and users designed to determine the location of any wireless
transmitters, including cellular and PCS telephones. Immediately following the
completion of the merger, all of the shares of AT&T common stock, Class A
Liberty Media Group tracking stock and Class B Liberty Media Group tracking
stock previously held by Associated Group were retired by AT&T and all of the
businesses and assets of Associated Group, other than its interest in Teligent,
were transferred to Liberty. A member of the Liberty Media Group other than
Liberty holds Associated Group's interest in Teligent.

Programming

Programming networks distribute their services through a number of
distribution technologies, including cable television, direct-to-home
satellite, broadcast television and the Internet. Programming services may be
delivered to subscribers as part of a video distributor's basic package of
programming services for a fixed monthly fee, or may be delivered as a
"premium" programming service for an additional monthly charge. Whether a
programming service is on a basic or premium tier, the programmer generally
enters into separate multi-year agreements, known as "affiliation agreements,"
with those distributors that agree to carry the service. Basic programming
services derive their revenues principally from the sale of advertising time on
their networks and from per subscriber license fees received from distributors.
Premium services do not sell advertising and primarily generate their revenues
from subscriber fees.

Basic programming services have benefited from strong industry dynamics and
fundamentals in recent years and, according to Paul Kagan Associates, Inc.,
have experienced a 20% compounded annual growth rate in their revenues over the
past 10 years. Revenues of premium programming services have also grown
significantly. Subscriptions to pay television services increased significantly
during this period, as more programming choices and distribution formats became
available. With the growth in subscriptions and demand for programming options,
many programming networks have been able to impose significant rate increases
when entering into or renegotiating their affiliation agreements. The global
proliferation of multi-channel distribution technologies and new distribution
technologies, such as the Internet, are expected to continue to expand the
demand for quality, branded programming services. In addition, existing
distributors are upgrading their networks to provide digital and multimedia
services, which will increase channel capacity as well as demand for
programming services. According to Paul Kagan Associates, Inc., digital
subscribers in the United States should increase to 43.4 million by 2006
accounting for 60.4% of total cable subscribers, up from 5.9 million
subscribers in 1998. In response to the expected increase in demand for
programming services, programming service providers are expanding their service
offerings, including through additional channel launches and the development of
new multimedia and interactive services. The programming companies in which
Liberty has interests are actively involved in this expansion and development.

Consolidated Subsidiaries

Encore Media Group LLC

Encore Media Group LLC is a leading provider of cable and satellite-delivered
premium movie networks in the United States. It currently owns and operates 13
full-time domestic movie channels, including Encore, which airs first-run
movies and classic contemporary movies, STARZ!, a first-run premium movie
service, ten digital movie services programmed by theme, and MOVIEplex, a
"theme by day" channel featuring a different Encore or Encore Thematic
Multiplex channel each day, on a weekly rotation. Through the use of thematic
multiplexing--that is, the creation of multiple channels of programming by
reorganizing the movies by theme

46
<PAGE>

- --Encore Media Group is well positioned to take advantage of the increasing
channel capacities created by compressed digital distribution systems. In
addition, Encore Media Group currently has agreements in place with most of the
major program distributors and many smaller distributors to carry its thematic
multiplex services in digital packages. As digital service becomes more widely
available, these services will be available to most cable homes.

Encore Media Group currently has access to approximately 5,000 movies through
long-term licensing agreements and owns exclusive rights to the studio first-
run output from Disney's Hollywood Pictures, Touchstone and Miramax, as well as
Universal, New Line and Fine Line. Unlike vertically integrated programmers,
Encore Media Group is not committed to or dependent on any one source of film
productions. As a result, it has affiliations with every major Hollywood
studio, either through long-term output agreements or library access
arrangements. Encore Media Group's most significant long-term output agreements
are with Universal Pay Television, Inc., New Line Television, Inc. and Walt
Disney Pictures, and these output agreements expire between 2003 and 2007.
Encore Media Group also engages in original programming production.

The table below sets forth certain information about each of Encore Media
Group's domestic programming services.

<TABLE>
<CAPTION>
Liberty's
Subscribers/Units/1/ Attributed
at 9/30/99 Year Ownership %
Entity (000's) Launched at 9/30/99
- ------------------------------------- -------------------- -------- -----------
<S> <C> <C> <C>
Encore Media Group LLC............... 100%
Encore............................. 13,410 1991 100%
MOVIEplex.......................... 7,006 1995 100%
Thematic Multiplex (aggregate
units)............................ 23,101/2/ 1994 100%
Love Stories
Westerns
Mystery
Action
True Stories
WAM! America's Kidz Network
STARZ!............................. 9,708 1994 100%
STARZ! Multiplex (aggregate
units)............................ 5,728/2/
STARZ! Theater................... 1996 100%
STARZ! Family.................... 1999 100%
STARZ! Cinema.................... 1999 100%
BET Movies/STARZ!................ 1997 88%
</TABLE>
- --------
(1) Each premium service to which a household subscribes is counted as one
"unit." For example, one household subscribing to four services would be
counted as four "units."
(2) Digital services.

Encore Media Group's business objective is to be the premier provider of
movie services. Its strategies for achieving its objective include: (1)
continuing to strengthen its core business assets in an effort to promote the
premium television category and increase cash flow from operations, (2) driving
demand for digital services to enable cable operators and direct broadcast
satellite providers to position themselves as a viable alternative to video
stores through a combination of pay-per-view channels, thematic multiplexing
and multiple time scheduled feeds, and (3) leveraging the strength of its brand
by extending its franchises into other forms of media, including online
applications, such as e-commerce.

Ownership Interest. Liberty owns 100% of Encore Media Group. Liberty's
ownership in Encore Media Group began with an investment in its predecessor in
1991 when Encore was launched as a low-priced movie

47
<PAGE>

channel that cable operators could offer individually or packaged with higher-
priced services such as HBO and Showtime. Since December 31, 1992, Encore's
subscribers have grown from approximately 3.5 million to almost 13.5 million at
September 30, 1999, and Encore Media Group's program offerings have grown from
one movie channel in 1991 to its current slate of 13 full-time movie channels.

Pramer S.C.A.

Pramer S.C.A. is the largest owner and distributor of cable television
programming services in Argentina. Pramer currently owns eight programming
services and distributes them throughout Argentina. Pramer also distributes
nine additional programming services, including two of Argentina's four
terrestrial broadcast stations, throughout Argentina. Of the 17 programming
services owned and/or distributed by Pramer, nine of them are distributed
throughout Latin America. Pramer intends to continue to develop and acquire
branded programming services and to further expand the carriage of its
programming to distribution networks outside Argentina. The table below sets
forth certain information about each of Pramer's owned programming services.

<TABLE>
<CAPTION>
Liberty's
Subscribers Attributed
at 6/30/99 Year Ownership %
Entity (000's) Launched at 9/30/99
- ----------------------------------------------- ----------- -------- -----------
<S> <C> <C> <C>
Pramer S.C.A. (Argentina)...................... 100%
Plus Satelital............................... 3,927 1988 100%
Magic Kids................................... 3,860 1995 100%
Big Channel.................................. 2,356 1992 100%
America Sports............................... 2,364 1990 100%
Cineplaneta.................................. 2,044 1997 100%
Canal a...................................... 2,270 1996 100%
P&E.......................................... 785 1996 100%
Ideas........................................ 785 1991 100%
</TABLE>

Ownership Interest. Liberty's ownership in Pramer evolved out of a 1995
transaction in which Liberty Media International, Inc., a wholly owned
subsidiary of Liberty, acquired an equity interest in Cablevision S.A. from its
founding stockholders. As part of the transaction, Liberty Media International
was granted a right of first refusal to purchase the programming assets of
Pramer, which at that time were owned by the former Cablevision stockholders.
In August 1998, Liberty Media International exercised this right and purchased
100% of Pramer's issued and outstanding common stock for $32 million in cash
and $65 million in notes payable. Liberty made an $11 million payment on the
notes on October 1, 1998 and the remainder is due in 20 equal monthly
installments beginning October 15, 1998.

Business Affiliates

Discovery Communications, Inc.

Discovery Communications, Inc. is the largest originator of documentary,
nonfiction programming in the world. Since the 1985 launch of its flagship
domestic cable service and brand, Discovery Channel, Discovery has grown into a
global media enterprise with 1998 revenues exceeding $1 billion. It currently
operates programming services reaching more than 160 million people across six
continents.

Discovery's programming, products and services derive from the following four
business units:

. Discovery Networks, U.S., which is comprised of Discovery Channel, The
Learning Channel, Animal Planet, The Travel Channel and a package of
seven digital services;

. Discovery Networks, International, which extends Discovery's programming
globally and currently reaches more than 73 million subscribers in 147
foreign countries in 24 languages;

. Discovery Enterprises Worldwide, which includes Discovery's brand
extension business in retail, online, video, multimedia, publishing,
licensing and education; and

48
<PAGE>

. Discovery Themed Entertainment, which seeks to extend Discovery's
documentary platform into destination experiences, including touring
exhibits, live shows and attractions, events and site-based media.

Discovery's business objective is to be the premier global creator and
distributor of nonfiction entertainment content, including products, programs
and destination experiences, across all significant media platforms. Its
strategies for achieving its objective include:

. leveraging the strength of its brand by exploiting it over several
platforms, including television, retail and the Internet,

. capitalizing on the global reach of its programming business through the
introduction of additional branded products and services in foreign
markets,

. developing universally distributed networks that appeal strongly to
significant advertising categories (such as travel, health and youth),
and

. continuing to preserve and strengthen its core business assets.

The table below sets forth certain information about Discovery's programming
services.

<TABLE>
<CAPTION>
Liberty's
Subscribers Attributed
at 9/30/99 Year Ownership %
Entity (000's) Launched at 9/30/99
- --------------------------------------------- ----------- -------- -----------
<S> <C> <C> <C>
Discovery Communications, Inc................ 49%
Discovery Channel.......................... 77,304 1985 49%
The Learning Channel....................... 71,290 1980 49%
Animal Planet.............................. 52,968 1996 49%
Discovery People........................... 10,900 1997 49%
Travel Channel............................. 33,064 1987 49%
Discovery Digital Services................. 5,177(/1/) 49%
Discovery Civilization................... 1996 49%
Discovery Health......................... 1998 49%
Discovery Home & Leisure................. 1996 49%
Discovery Kids........................... 1996 49%
Discovery Science........................ 1996 49%
Discovery Wings.......................... 1998 49%
Discovery en Espanol..................... 1998 49%
Animal Planet Asia......................... 5,510 1998 25%
Animal Planet Europe....................... 6,022 1998 49%
Animal Planet Latin America................ 6,135 1998 25%
Discovery Asia............................. 32,319 1994 49%
Discovery India............................ 12,004 1996 49%
Discovery Japan............................ 1,249 1996 49%
Discovery Europe........................... 18,892 1989 49%
Discovery Turkey........................... 600 1997 49%
Discovery Germany.......................... 420 1996 25%
Discovery Italy/Africa..................... 1,103 1996 49%
Discovery Latin America.................... 11,522 1996 49%
Discovery Latin America Kids Network....... 8,070 1996 49%
People & Arts (Latin America).............. 8,840 1995 25%
Discovery Channel Online................... Online 1995 49%
</TABLE>
- --------
(1) Digital services.

Ownership Interest. Liberty holds a 49.3% interest in Discovery with Cox
Communications, Inc., Advance/Newhouse Communications and Discovery's founder
and Chairman, John S. Hendricks, holding interests of 24.65%, 24.65% and 1.4%,
respectively. Liberty's involvement in Discovery dates back to 1986,

49
<PAGE>

when TCI provided Discovery with $25 million of capital in furtherance of TCI's
strategy of supporting quality, cable-exclusive programming companies.

Terms of Ownership. Discovery is organized as a close corporation managed by
its stockholders rather than a board of directors. Generally, all actions to be
taken by Discovery require the approval of the holders of a majority of
Discovery's shares, subject to certain exceptions, including certain
fundamental actions, which require the approval of the holders of at least 80%
of Discovery's shares. The stockholders of Discovery have agreed that they will
not be required to make additional capital contributions to Discovery unless
they all consent. They have also agreed not to own another basic programming
service carried by domestic cable systems that consists primarily of
documentary, science and nature programming, subject to certain exceptions.

Each stockholder has been granted preemptive rights on share issuances by
Discovery. Any proposed transfer of Discovery shares by a stockholder will be
subject to rights of first refusal in favor of the other stockholders, subject
to certain exceptions, with Liberty's right of first refusal being secondary
under certain circumstances. In addition, Liberty is not permitted to hold in
excess of 50% of Discovery's stock unless its increased ownership results from
exercises of its preemptive rights or rights of first refusal.

Flextech, plc

Flextech, through its subsidiaries and affiliates, creates, packages and
markets entertainment and information programming for distribution on cable
television, direct-to-home satellite and digital terrestrial television
providers throughout the United Kingdom and parts of continental Europe. By
acquiring interests in and establishing alliances among providers of a variety
of entertainment programming, Flextech has been able to achieve significant
economies of scale and establish itself as a major low-cost provider of
European television programming. Flextech has interests in 14 cable and
satellite channels, 13 of which are distributed in the United Kingdom market.
In addition to managing its five wholly owned programming services, Flextech
currently provides management services to two joint ventures that it has formed
with BBC Worldwide Limited, which operate several subscription television
channels, and to Discovery Europe, Animal Planet Europe, Discovery Home and
Leisure (formerly The Learning Channel) and HSN Direct International Limited.
For its management and consultancy services, Flextech receives a management fee
and, in some cases, a percentage of the programming company's gross revenues.
Flextech also holds interests in programming production and distribution
companies and a terrestrial broadcast network. Flextech's ordinary shares trade
on the London Stock Exchange under the symbol "FLXT."

The table below sets forth certain information about each of Flextech's
programming services.

50
<PAGE>

Flextech's business objective is to develop, package and market regionally
appealing television programming at the lowest practicable cost. To achieve its
objective, Flextech's strategy has been to spread production costs over
multiple revenue sources. Through co-management of several thematic programming
services, Flextech's programming channels have been able to share operating
costs, including those associated with marketing, administration, affiliate
relations, financial services and technical operations. In addition, by
acquiring interests in and creating alliances with established content
producers, Flextech has been able to secure a steady supply of programming
capable of being distributed over various distribution platforms.

Ownership Interest. Liberty holds a 37% equity interest in Flextech,
representing a 50% voting interest. Liberty's involvement with Flextech
developed out of programming investments made by TCI in the United Kingdom and
continental Europe beginning in 1988. TCI found that the United Kingdom, like
other parts of Europe, lacked the size necessary to sustain a large number of
niche-oriented programming services. Attracted by Flextech's business model of
co-managing several programming services to achieve economies of scale, TCI
chose Flextech as the vehicle to pursue its European programming strategy in
1994 by consolidating its U.K. and European programming investments and merging
those investments into Flextech.

Terms of Ownership. Liberty has the right to cast 50% of the votes on most
matters that are presented to Flextech's shareholders due to its ownership of a
special voting share. This special voting right will expire on the earlier of
April 14, 2000 and the occurrence of certain events that involve a decline in
Liberty's ownership of ordinary shares of Flextech. Liberty has the right to
appoint three of the 15 members of Flextech's board of directors for so long as
it has the special voting right, and will thereafter have the right to appoint
two members for so long as it owns at least 25% of Flextech's ordinary shares.
In addition, the appointment of some of Flextech's senior executive officers,
including its managing director and its chief executive, requires Liberty's
approval.

Liberty has granted a tag-along sale right to a shareholder of Flextech that,
at August 15, 1999, owned 6.7% of Flextech's ordinary shares. The tag-along
right will apply if Liberty sells more than 10% of its Flextech stock. In
addition, Liberty has agreed to purchase that shareholder's initial equity
stake in Flextech for not less than current market value if Flextech's ordinary
shares cease to be traded on the London Stock Exchange due to actions taken by
Liberty.

Liberty has undertaken to Flextech and BBC Worldwide Limited that it will
not, subject to certain exceptions, acquire an interest in excess of 20% in any
entity that competes with certain of the channels of two joint ventures that
Liberty has formed with BBC Worldwide Limited. The non-compete will terminate
on March 31, 2007 or, if earlier, at such time as Liberty's contingent funding
obligation to the joint ventures terminates or Liberty owns not more than 10%
of the ordinary shares of Flextech. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."

On December 17, 1999, Telewest Communications plc, a leading provider of
cable television and telephony services in the United Kingdom, announced its
intention to recommend a merger with Flextech at a purchase price of
approximately $3.2 billion. It is anticipated that each share of Flextech would
be exchanged for 3.78 ordinary shares of Telewest in the merger. Liberty owns
approximately a 37% interest in Flextech and a 22% interest in Telewest. See
"--Internet Services and Technology--Business Affiliates--Telewest
Communications plc" below. The proposed merger is subject to a number of
conditions, including a definitive offer by Telewest and the subsequent
approval of the shareholders of each of Flextech and Telewest. Liberty, as a
shareholder of Flextech, has agreed to vote in favor of the merger subject to
certain conditions, including the recommendation of the merger by the
independent directors of Flextech. Liberty, MediaOne and Microsoft, as
shareholders of approximately 51% of Telewest, in the aggregate, have agreed to
vote in favor of the merger and any other resolution proposed in connection
with the merger. Because of Liberty's holdings, the Listing Rules of the London
Stock Exchange require a separate vote by Telewest's shareholders, excluding
Liberty, to approve Telewest's acquisition of Liberty's interests in Flextech
in the merger. MediaOne and Microsoft have agreed to vote in favor of this
acquisition. Additionally, Liberty has agreed with Telewest not to dispose of
any of Liberty's interests in Flextech through March 31, 2000.

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<PAGE>

The News Corporation Limited

News Corp. is a diversified international communications company principally
engaged in:

. the production and distribution of motion pictures and television
programming;

. television, satellite and cable broadcasting;

. publication of newspapers, magazines and books;

. production and distribution of promotional and advertising products and
services;

. development of digital broadcasting; development of conditional access
and subscriber management systems; and

. the provision of computer information services.

News Corp.'s operations, are located in the United States, Canada, the United
Kingdom, Australia, Latin America and the Pacific Basin. News Corp.'s preferred
limited voting ordinary shares trade on the Australian Stock Exchange under the
symbol "NCPDP," and are represented on the NYSE by ADRs under the symbol
"NWS.A."

Ownership Interest. In July 1999, Liberty sold to News Corp. its 50% interest
in their jointly owned Fox/Liberty Networks programming venture, in exchange
for 51.8 million News Corp. ADRs representing preferred limited voting ordinary
shares of News Corp., valued at approximately $1.425 billion, or approximately
$27.52 per ADR. In a related transaction, Liberty acquired from News Corp. 28.1
million additional ADRs representing preferred limited voting ordinary shares
of News Corp. for approximately $695 million, or approximately $24.74 per ADR.
As a result of these transactions and subsequent open market purchases, Liberty
owns approximately 81.7 million ADRs representing preferred limited voting
ordinary shares of News Corp. or approximately 8.5% of News Corp.'s diluted
outstanding shares.

Liberty's involvement in sports programming originated in 1988 when TCI began
to pursue a strategy of creating regional sports networks. In April 1996,
Liberty and News Corp. formed Fox/Liberty Networks, a joint venture to hold
Liberty's national and regional sports networks and News Corp.'s FX, a general
entertainment network which also carries various sporting events. Also in 1996,
Liberty and News Corp. formed an alliance to hold their respective
international sports interests (the "International Interests"). These include
Fox Sports World Espanol, a Spanish language sports network, distributed in the
United States and in Latin America, as well as Fox Sports Americas (Latin
America) and Fox Sports Middle East. As part of their agreement relating to the
acquisition by News Corp. of Liberty's interest in Fox/Liberty Networks,
Liberty and News Corp. agreed that, during a specified period following the
second anniversary of the closing date of this transaction, each will have the
right to cause News Corp. to acquire and Liberty to sell to News Corp. the
International Interests in exchange for News Corp. ADRs with an aggregate value
at April 1, 1999 of approximately $100 million plus an additional number of
ADRs representing the aggregate number of News Corp. shares which could have
been purchased by reinvesting in ADRs each cash dividend declared on such
number of shares between the closing of the sale of Liberty's interest in
Fox/Liberty Networks and the sale of the International Interests. Between the
closing of the sale of Liberty's interest in Fox/Liberty Networks and the sale
of the International Interests, Liberty has further agreed to make capital
contributions in respect of the International Interests in the amount of $100
million, as and when requested by News Corp.

Terms of Ownership. In connection with the acquisition by News Corp. of
Liberty's interest in Fox/Liberty Networks, certain agreements were entered
into regarding Liberty's ability to transfer News Corp. shares and other
matters. Under these agreements, the ADRs and the underlying News Corp. shares
issued to Liberty are subject to a lock-up of either two years (as to 51.8
million ADRs) or nine months (as to 28.1 million ADRs), subject to certain
exceptions. Liberty is entitled to certain registration rights with respect to
its News Corp. shares. In addition, Liberty has agreed that it will not engage,
directly or indirectly, in any sports

52
<PAGE>

programming service in the United States and its territories (excluding Puerto
Rico) or in Canada, subject to certain exceptions, until July 2004.

QVC Inc.

QVC Inc. is one of the two largest home shopping companies in the United
States. QVC markets and sells a wide variety of consumer products and
accessories primarily by means of televised shopping programs on the QVC
network and via the Internet through iQVC. QVC also operates shopping networks
in Germany, the United Kingdom and Ireland. QVC purchases, or obtains on
consignment, products from domestic and foreign manufacturers and wholesalers,
often on favorable terms based on the volume of the transactions. QVC does not
depend upon any one particular supplier for any significant portion of its
inventory.

QVC distributes its television programs, via satellite, to affiliated video
program distributors for retransmission to subscribers. Generally, there are no
additional charges to U.S. subscribers for the distribution of QVC. In return
for carrying QVC, each domestic programming distributor receives an allocated
portion, based upon market share, of up to 5% of the net sales of merchandise
sold to customers located in the programming distributor's service area.

QVC has stated that it intends to continue introducing new products and
product lines and to recruit additional programming distributors in an effort
to enlarge both its audience and its sales.

The table below sets forth certain information about QVC's programming
interests.

<TABLE>
<CAPTION>
Liberty's
Subscribers Attributed
at 9/30/99 Year Ownership %
Entity (000's) Launched at 9/30/99
- ------------------------- ----------- -------- -----------
<S> <C> <C> <C>
QVC Inc.................. 43%
QVC Network............. 65,988 1986 43%
QVC-The Shopping Channel
(U.K. and Ireland)..... 7,561 1993 34%
QVC-Germany............. 14,908 1996 43%
iQVC.................... Online 1995 43%
</TABLE>

Ownership Interest. Liberty owns approximately 43% of QVC, and Comcast owns
the remaining 57%. Liberty's involvement in the televised home shopping
business originated in 1986 when TCI began acquiring ownership interests in QVC
Networks, Inc. in exchange for agreeing to carry QVC's programming to a
specified number of subscribers. During the same period, TCI also invested in
another home shopping channel, CVN Companies, Inc. In October 1989, CVN and QVC
merged which resulted in TCI owning approximately 34% of the combined company.
In August 1994, Liberty and Comcast purchased all of the remaining equity
interests in QVC not owned by them, resulting in their current ownership
interests.

Terms of Ownership. QVC is managed on a day-to-day basis by Comcast and
Comcast has the right to appoint all of the members of the QVC board of
directors. Liberty's interests are represented by two members on QVC's five-
member management committee. Generally, QVC's management committee votes on
every matter submitted, or required to be submitted, to a vote of the QVC
board, and Liberty and Comcast are required to use their best efforts to cause
QVC to follow the direction of any resolution of the management committee.
Liberty also has veto rights with respect to certain fundamental actions
proposed to be taken by QVC.

Liberty has been granted a tag-along right that will apply if Comcast
proposes to transfer control of QVC and Comcast may require Liberty to sell its
QVC stock as part of the transaction, under certain circumstances and subject
to certain conditions. In addition, under certain circumstances, Liberty will
have the right, exercisable after February 9, 2000, to initiate a put/call
procedure with Comcast in respect of Liberty's interest

53
<PAGE>

in QVC. Prior to February 9, 2000, however, neither Liberty nor Comcast may
directly or indirectly transfer their interests in QVC, except under certain
conditions.

Liberty and Comcast have certain mutual rights of first refusal and mutual
rights to purchase the other party's QVC stock following certain events,
including change of control events affecting them. Both also have registration
rights.

Time Warner Inc.

Time Warner is one of the largest media and entertainment companies in the
world. Time Warner classifies its business interests into four fundamental
areas:

. Cable Networks, consisting principally of interests in cable television
programming, including the following networks: CNN, Cartoon Network,
Headline News, TNT, Turner Classic Movies, TBS Superstation, CNNfn, HBO,
Cinemax, Comedy Central and TVKO;

. Publishing, consisting principally of interests in magazine publishing,
book publishing and direct marketing;

. Entertainment, consisting principally of interests in filmed
entertainment, television production, television broadcasting, recorded
music and music publishing; and

. Cable, consisting principally of interests in cable television systems
which, as of December 31, 1998, reached over 12 million subscribers.

Time Warner's common stock trades on the NYSE under the symbol "TWX."

Ownership Interest. Liberty currently owns an approximate 9% interest in Time
Warner. Liberty's interest in Time Warner evolved from a 1987 transaction in
which TCI led a consortium of cable operators in providing Turner Broadcasting
System with an aggregate cash infusion of approximately $560 million. Motivated
by its belief that the continued development of quality cable programming was a
critical element in driving its cable distribution business, TCI invested
approximately $250 million in Turner Broadcasting System in exchange for two
series of preferred stock. The terms of the preferred stock and agreements
entered into in connection with the investment provided the holders with
significant control rights, including representation on the Turner Broadcasting
System board and veto rights over extraordinary transactions, and with rights
of first refusal on certain dispositions of Turner Broadcasting System stock
held by Ted Turner. In 1996, Time Warner acquired Turner Broadcasting System in
a merger transaction.

In connection with the Turner Broadcasting System/Time Warner merger, Time
Warner, Turner Broadcasting System, TCI and Liberty entered into an Agreement
Containing Consent Order (the "FTC Consent Decree") with the Federal Trade
Commission ("FTC"). The FTC Consent Decree effectively prohibits Liberty and
its affiliates from owning voting securities of Time Warner other than
securities that have limited voting rights. Pursuant to the FTC Consent Decree,
among other things, Liberty agreed to exchange the shares of Time Warner common
stock it was to receive in the Turner Broadcasting System/Time Warner
combination for shares of a separate series of Time Warner common stock with
limited voting rights designated as Series LMCN-V Common Stock. The Series
LMCN-V Common Stock entitles the holder to one one-hundredth (1/100th) of a
vote for each share with respect to the election of directors. Liberty holds
approximately 114 million shares of such stock, which represent less than 1% of
the voting power of Time Warner's outstanding common stock. The Series LMCN-V
Common Stock is not transferable, except in limited circumstances, and is not
listed on any securities exchange. Each share of the Series LMCN-V Common Stock
is convertible at Liberty's option into one share of ordinary Time Warner
common stock, at any time when such conversion would not violate the federal
communications laws, subject to the FTC Consent Decree, and is mandatorily
convertible into ordinary Time Warner common stock upon transfer to a non-
affiliate of Liberty. Further, while shares of ordinary Time Warner common
stock are redeemable by action of the Time Warner board of directors under
certain circumstances, to the extent necessary to prevent the loss of certain
types of

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<PAGE>

governmental licenses or franchises, shares of Series LMCN-V Common Stock are
not redeemable under these circumstances.

In March 1999, Liberty entered into a seven-year "cashless collar" with a
financial institution with respect to 15 million shares of Time Warner common
stock, secured by 15 million shares of its approximately 114 million shares of
Time Warner Series LMCN-V Common Stock. In effect, Liberty purchased a put
option that gives it the right to require its counterparty to buy 15 million
Time Warner shares from Liberty in approximately seven years for $67.45 per
share. Liberty simultaneously sold a call option giving the counterparty the
right to buy the same shares from Liberty in approximately seven years for
$158.33 per share. Since the purchase price of the put option was equal to the
proceeds from the sale of the call option, the collar transaction had no cash
cost to Liberty. As a result of this transaction, Liberty has effectively
locked in the value of these 15 million Time Warner shares at between $1
billion and $2.4 billion in the future, regardless of potential fluctuations in
the stock price.

On January 10, 2000, Time Warner and America Online, Inc. announced that they
had entered into an Agreement and Plan of Merger relating to the combination of
their businesses. Pursuant to this Agreement and Plan of Merger, Time Warner
and America Online would each merge with, and become wholly-owned subsidiaries
of, a newly formed holding company called "AOL Time Warner Inc." According to
publicly available information, in this transaction each share of LMCN-V Common
Stock held by Liberty would be converted into 1.5 shares of Series LMCN-V
Common Stock, par value $0.01 per share, of AOL Time Warner Inc. These
securities of AOL Time Warner Inc. would have substantially the same terms as
the Series LMCN-V Common Stock of Time Warner currently held by Liberty. This
transaction is subject to several conditions, including the approval of Time
Warner's and America Online's stockholders as well as regulatory approvals.

TV Guide, Inc.

TV Guide, Inc., formerly known as United Video Satellite Group, Inc., is a
media and communications company and the market leader in the program listings
guide business. TV Guide is engaged predominantly in providing print, passive
and interactive program listings guides to households, distributing programming
to cable television systems and direct-to-home satellite providers, and
marketing satellite-delivered programming to C-band satellite dish owners. TV
Guide markets and distributes its products in the United States to over 100
million cable and satellite homes each week, and also markets its products
internationally in over 40 countries. TV Guide Magazine, TV Guide Channel, TV
Guide Interactive and TV Guide Online are the largest print, electronic,
interactive and Internet guidance products in the world. TV Guide's Class A
common stock trades on the National Market tier of The Nasdaq Stock Market
under the symbol "TVGIA."

TV Guide is organized into three primary business units:

. TV Guide Magazine Group,

. TV Guide Entertainment Group and

. United Video Group.

The TV Guide Magazine Group publishes and distributes TV Guide magazine, the
most widely circulated paid weekly magazine in the United States, to households
and newsstands. In addition, the TV Guide Magazine Group provides customized
monthly television programming guides for cable and satellite operators in the
United States and internationally. The TV Guide Entertainment Group supplies
satellite-delivered on-screen program promotion and guide services, including
TV Guide Channel and Sneak Prevue, to cable television systems and other multi-
channel video programming distributors, both nationally and internationally.
The TV Guide Entertainment Group also offers interactive television technology
that allows television viewers to retrieve on demand continuously updated
program guide information through their cable television systems and provides
TV Guide Online, an Internet-based program listings guide. The United Video
Group provides direct-

55
<PAGE>

to-home satellite services, satellite distribution of video entertainment
services, software development and systems integration services and satellite
transmission services for private networks. This group owns TV Guide's 80%
interest in Superstar/Netlink Group LLC, which markets satellite entertainment
programming packages to C-band satellite dish owners in North America. Its
retail subscriber base was approximately one million at September 30, 1999. The
United Video Group also markets and distributes three independent
superstations--WGN (Chicago), KTLA (Los Angeles) and WPIX (New York)--to cable
television systems and other multi-channel video programming distributors, and
offers six Denver-based broadcast television stations and programming packages
to satellite master antenna television systems.

TV Guide's business objective is, among other things, to be the dominant
provider of program listings guides for traditional and emerging distribution
platforms. Its strategies for achieving its objective include:

. extending its brand by exploiting it over several platforms, including
home shopping, e-commerce and database marketing,

. capitalizing on the success of TV Guide Channel, TV Guide Interactive
and TV Guide Sneak Prevue through the introduction of customized
programming and service promotion on a localized platform,

. capitalizing on cross-platform advertising and promotion opportunities
by taking advantage of audience exposure across multiple platforms
(print, cable, satellite and Internet), and

. continuing to develop product and brand extensions that will leverage
its distribution footprint, including interactive services, home
shopping, e-commerce and data base marketing.

In October 1999, TV Guide announced that it had entered into a definitive
merger agreement with Gemstar International Group Limited, pursuant to which TV
Guide would become a wholly owned subsidiary of Gemstar. Under the merger
agreement, TV Guide shareholders would receive 0.6573 shares of Gemstar common
stock for each share of TV Guide class A and class B common stock. The exchange
ratio is not subject to adjustment. TV Guide shareholders would, in the
aggregate, receive approximately 45% of the fully diluted shares of the
combined company. Consummation of the transaction is subject to limited
conditions, including approval by the shareholders of each company and the
satisfaction of regulatory requirements. Each of Liberty and News Corp. has
entered into a voting agreement to vote in favor of the transaction and it is
anticipated that the transaction will close in the second half of 2000. Upon
consummation of the transaction, the company is expected to be renamed TV Guide
International Inc. and the board of directors will be expanded to twelve
members, of which 6 members will be persons designated by the board of
directors of TV Guide prior to the merger.

Gemstar develops, markets and licenses proprietary technologies and systems
that simplify and enhance consumers' interaction with electronics products and
other platforms that deliver video, programming information and other data.
Gemstar seeks to have its technologies widely licensed, incorporated and
accepted as the technologies and systems of choice by

. consumer electronics manufacturers,

. service providers such as owners or operators of cable systems,
telephone networks, Internet service providers, direct broadcast
satellite providers, wireless systems and other multi-channel video
programming distributors,

. software developers and

. consumers.

Gemstar's first proprietary system, VCR Plus+, was introduced in 1990 and is
widely accepted as an industry standard for programming VCRs. VCR Plus+ enables
consumers to record a television program simply by entering a number--the
PlusCode number--into a VCR or television equipped with the VCR Plus+
technology. Gemstar is also a leading provider of electronic program guide
services, which allow a user to view a television program guide on screen,
obtain details about a program, sort programs by themes or categories, and
select programs for tuning or recording, all through the remote control.
Gemstar's common stock trades on the National Market tier of The Nasdaq Stock
Market under the symbol "GMST."

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<PAGE>

The table below sets forth certain information about TV Guide's programming
services and other assets.

<TABLE>
<CAPTION>
Liberty's
Subscribers Attributed
at 9/30/99 Year Ownership %
Entity (000's) Launched at 9/30/99
- --------------------------------------------- ----------- -------- -----------
<S> <C> <C> <C>
TV Guide, Inc................................ 44%
TV Guide Channel........................... 49,827 1988 44%
TV Guide Interactive....................... 2,300/1/ /2/ 44%
TV Guide Sneak Prevue...................... 33,743 1991 32%
UVTV....................................... 60,789/3/ N/A 44%
Superstar/Netlink.......................... 1,005 N/A 35%
TV Guide Magazine.......................... 11,000/4/ N/A 44%
TV Guide Online............................ Online 44%
The Television Games Network............... N/A 1999 43%
Infomedia S.A.............................. N/A 1991 33%/5/
</TABLE>
- --------
(1) Digital service.
(2) TV Guide's original interactive service was launched in the early 1990s,
followed by the current digital version.
(3) Aggregate number of units. UVTV uplinks three superstations (WGN, KTLA, and
WPIX) and six Denver broadcast stations. One household subscribing to six
services would be counted as six "units."
(4) Magazine circulation--includes subscription and newsstand distribution.
(5) In May 1999, TV Guide acquired a 75% stake in Infomedia S.A., Luxembourg,
and has an option to buy the remaining 25%. Infomedia S.A. is a leading
provider of television program listings in Europe, offering program
schedules and related information for more than 300 channels in 13
languages to clients in 29 countries throughout Europe and North Africa.

Ownership Interest. TV Guide is jointly controlled by Liberty and News Corp.,
with each owning approximately 44% of its equity and 49% of its voting power.
Liberty's interest in TV Guide began in January 1996 when TCI acquired a
controlling interest in United Video Satellite Group, Inc. ("UVSG"), a provider
of satellite-delivered video, audio, data and program promotion services to
cable television systems, satellite dish owners, radio stations and private
network users primarily throughout North America. TCI believed that the
availability of electronic program guide services was becoming an increasingly
important element of video programming delivery due to developments in digital
and other technologies that were increasing the volume and variety of video
programming. As a result of the transaction, UVSG became a majority-controlled
subsidiary of TCI. In January 1998, TCI increased its equity interest in UVSG
to approximately 73% and its voting interest to approximately 93%. On March 1,
1999, UVSG acquired Liberty's 40% interest in Superstar/Netlink Group and its
100% interest in Netlink USA, which uplinks the signals of six Denver-based
broadcast television stations, in exchange for shares of UVSG common stock. On
the same date, UVSG acquired News Corp.'s TV Guide properties in exchange for
cash and shares of UVSG common stock. By combining UVSG's passive and
interactive electronic program listing guides with TV Guide's well-recognized
magazine and brand name, UVSG became a leading provider of program listing
guides. Following this transaction, UVSG changed its name to TV Guide, Inc.

Terms of Ownership. Pursuant to a stockholders agreement between Liberty and
News Corp., each of them is entitled to designate one director to the ten-
member TV Guide board for each 12.5% of the outstanding shares of TV Guide
Class B common stock owned by such party, with the remaining directors being
designated by the TV Guide board. So long as Liberty or News Corp., as the case
may be, is entitled to designate at least one director to TV Guide's board of
directors, the other party is subject to certain restrictions on its ability to
sell any of its shares of TV Guide common stock or to convert any of its shares
of TV Guide Class B common stock (10 votes per share) into shares of TV Guide
Class A common stock (one vote per share) unless it first offers to sell the
stock to the other party. Upon the consummation of Gemstar's acquisition of TV
Guide, a new agreement among Liberty, News Corp., Henry C. Yuen, Chairman and
Chief Executive Officer of Gemstar, and Gemstar will take effect.

57
<PAGE>

For so long as there continues to be at least two stockholders that each own
in the aggregate at least 30% of the outstanding TV Guide Class B common stock,
such stockholders are required to vote their shares on all matters submitted to
a vote of TV Guide's stockholders only as shall be mutually agreed upon by such
stockholders and, if they are unable to agree on how to vote with respect to a
proposal, they will each be obligated to vote against that proposal. In
addition, Liberty and News Corp. have mutual rights of first refusal, tag-along
rights on transfers of significant interests and registration rights. Liberty
and News Corp. have further agreed that, for so long as they both are entitled
to appoint at least one of TV Guide's directors, TV Guide will be the exclusive
vehicle through which they will each conduct program guide businesses
worldwide, subject to certain limited exceptions.

USA Networks, Inc.

USA Networks is a diversified media and electronic commerce company that is
engaged in seven principal areas of business:

. Networks and Television Production, which operates the USA Network, a
general entertainment basic cable television network, The Sci-Fi
Channel, which features science fiction, horror, fantasy and science-
fact oriented programming, and Studios USA, which produces and
distributes television programming;

. Electronic Retailing, which primarily consists of Home Shopping Network
and America's Store, which are engaged in the electronic retailing
business;

. Broadcasting, which owns and operates television stations;

. Ticketing Operations, which includes Ticketmaster, the leading provider
of automated ticketing services in the United States, and Ticketmaster
Online, Ticketmaster's exclusive agent for online ticket sales;

. Hotel Reservations, consisting of Hotel Reservations Network, a leading
consolidator of hotel rooms for resale in the consumer market in the
United States;

. Internet Services, which represents USA Networks' online retailing
networks business and local city guide business; and

. Filmed Entertainment, which primarily represents USA Networks' domestic
theatrical film distribution and production businesses.

USA Networks' common stock trades on the National Market tier of The Nasdaq
Stock Market under the symbol "USAI."

The table below sets forth certain information about USA Networks' assets.
Liberty's attributed ownership interest in USA Networks assumes the conversion
or exchange by Liberty of direct and indirect interests in various USA Networks
and HSN securities for USA Networks common stock, and the conversion or
exchange of certain securities owned by Universal Studios, Inc. and certain of
its affiliates for USA Networks common stock.

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<PAGE>

Ownership Interest. Liberty's interest in USA Networks consists of shares of
USA Networks common stock held by Liberty and its subsidiaries, shares of USA
Networks common stock held by certain entities in which Liberty has an equity
interest but only limited voting rights, and securities of certain subsidiaries
of USA Networks which are exchangeable for shares of USA Networks common stock.
Assuming the exchange of these securities and the conversion or exchange of
certain securities owned by Universal Studios, Inc. ("Universal") and certain
of its affiliates for USA Networks common stock, Liberty and Universal would
own approximately 21% and 45%, respectively, of USA Networks. In general, until
the occurrence of certain events and with the exception of certain negative
controls, Mr. Barry Diller has voting power over Liberty's interest in USA
Networks, as more fully described below under "--Terms of Ownership."

Liberty's ownership in USA Networks began in 1993 when it purchased a
controlling stake in Home Shopping Network, Inc., which at the time was
principally engaged in the sale of merchandise to viewers of its home shopping
programming. In connection with that acquisition, Liberty also obtained an
option to acquire a controlling interest in Silver King Communications, Inc.,
an owner and operator of broadcast television stations. In August 1995, Liberty
formed an alliance with Mr. Barry Diller that resulted in a significant shift
in Liberty's strategy for Home Shopping Network and Silver King. As part of
this alliance, Liberty contributed its control option relating to Silver King
to a new corporation in which it retained substantially all of the equity
interests and ceded control over the voting securities of Silver King held by
the corporation to Mr. Diller, except with respect to certain fundamental
matters. At the same time, Mr. Diller agreed to join Home Shopping Networks'
board of directors. In December 1996, Silver King and Home Shopping Network
were combined to form HSN, Inc., which also acquired Savoy Pictures
Entertainment, Inc., a television broadcasting and filmed entertainment
company, and Ticketmaster Group, Inc., a leading provider of automated
ticketing services. In February 1998, HSN, Inc. acquired certain assets from
Universal USA Networks, consisting of USA Network and Sci-Fi Channel, and the
domestic television production and distribution business of Universal.
Following this transaction, HSN, Inc. changed its name to USA Networks, Inc. In
connection with this transaction, Liberty contributed $300 million in cash to a
subsidiary of USA Networks (the "LLC") in exchange for equity shares of that
subsidiary ("LLC Shares") (which are generally exchangeable for USA Networks
common stock on a one-for-one basis). The LLC holds all of the assets acquired
from Universal and all of the businesses of HSN, Inc. and its subsidiaries,
other than the broadcasting business.

Terms of Ownership. In connection with the Universal transaction, USA
Networks, Universal, Liberty and Mr. Diller entered into several agreements
involving governance matters relating to USA Networks and stockholder
arrangements. With respect to governance matters, Mr. Diller generally has full
authority to operate the day-to-day business affairs of USA Networks and has an
irrevocable proxy over all USA Networks

59
<PAGE>

securities owned by Universal, Liberty and certain of their affiliates for all
matters except for certain fundamental changes. However, each of Liberty,
Universal and Mr. Diller has veto rights with respect to certain fundamental
changes relating to USA Networks and its subsidiaries (including the LLC). If
Mr. Diller and Universal agree to certain fundamental changes that Liberty does
not agree to, Universal will be entitled to purchase Liberty's entire equity
interest in USA Networks, subject to certain conditions, at a price determined
by an independent appraiser taking into account a number of agreed upon
factors.

Pursuant to FCC law and regulations, Liberty is not currently permitted to
have a designee on the board of directors of USA Networks. However, at such
time as Liberty is no longer subject to such prohibition, Liberty will have the
right to designate up to two directors if its stock ownership in USA Networks
remains at certain levels. Liberty currently has the right to designate up to
two directors to the LLC board and will continue to have that right for so long
as it is not permitted to designate directors of USA Networks and continues to
maintain certain ownership levels.

Each of Universal and Liberty has a preemptive right with respect to future
issuances of USA Networks's capital stock, subject to certain limitations.
Liberty has agreed with Universal that Liberty will not beneficially own more
than approximately 21% of the equity of USA Networks until the earlier of such
time as Liberty beneficially owns less than 5% of the shares of USA Networks
securities or the date that Universal beneficially owns fewer shares than
Liberty beneficially owns. Also, Liberty has agreed not to propose to the board
of directors of USA Networks the acquisition by Liberty of the outstanding USA
Networks securities or to otherwise influence the management of USA Networks,
including by proposing or supporting certain transactions relating to USA
Networks that are not supported by USA Networks' board of directors.

Liberty is subject to a number of agreements that limit or control its
ability to transfer its USA Network securities. As long as Mr. Diller is Chief
Executive Officer of USA Networks, Liberty generally cannot transfer shares of
USA Networks stock prior to August 24, 2000, subject to certain exceptions.
Each of Universal and Mr. Diller has a right of first refusal with respect to
certain sales of USA Networks securities by the other party. Liberty's rights
in this regard are secondary to any Universal right of refusal on transfers by
Mr. Diller. Each of Liberty and Mr. Diller also generally has a right of first
refusal with respect to certain transfers by the other party and tag-along sale
rights on certain sales of USA Networks stock by the transferring stockholder
and in the event Universal transfers a substantial amount of its USA Networks
stock. Liberty, Universal and Mr. Diller are each entitled to registration
rights relating to their USA Networks securities and have agreed to certain put
and call arrangements, pursuant to which one party has the right to sell (or
the other party has the right to acquire) shares of USA Networks stock held by
another party, at a price determined by an independent appraiser taking into
account a number of agreed upon factors.

Other Programming Assets

The table below sets forth certain information about some of Liberty's other
programming interests.

<TABLE>
<CAPTION>
Liberty's
Subscribers Attributed
at 9/30/99 Year Ownership
Entity (000's) Launched % at 9/30/99 Partner(s)
- ------------------------ ----------- -------- ------------ ----------------------------
<S> <C> <C> <C> <C>
BET Holdings II, Inc.... 35% Robert Johnson
BET Cable Network...... 57,111 1980 35%
BET Action Pay-Per-
View.................. 10,563/1/ 1990 35%
BET on Jazz............ 4,638 1996 35%
Canales n............... 13/2/ 1998 100% --
Court TV................ 35,493 1991 50% Time Warner Inc.
E! Entertainment
Television............. 58,033 1990 10% Comcast Corporation,
Style.................. 3,121 1998 10% The Walt Disney Company,
MediaOne Group, Inc.
</TABLE>

60
<PAGE>

<TABLE>
<CAPTION>
Liberty's
Subscribers Attributed
at 9/30/99 Year Ownership
Entity (000's) Launched % at 9/30/99 Partner(s)
- ------------------------ ----------- -------- ------------ --------------------------------
<S> <C> <C> <C> <C>
Fox Kids Worldwide, N/A N/A /3/ The News Corporation Limited,
Inc.................... former stockholders of Saban
Entertainment, Inc.
International
Channel/4.........../.. 8,255 1990 90% JJS II Communications, LLC
Jupiter Programming Co.,
Ltd. (Japan)........... 50% Sumitomo Corporation
Cable Soft Network..... 2,309 1989 50%
CNBC Asia Business News
Japan................. N/A 1997 10%
Golf Network........... 1,780 1996 44%
Discovery Japan........ 1,249 1996 49%
J-Sports............... 656 1998 67%
Shop Channel........... 6,500 1996 41%
MultiThematiques,
S.A. .................. 30% Canal + S.A., Havas Images,
Canal Jimmy (France)... 2,127 1991 30% Part'Com
Canal Jimmy (Italy).... 515 1997 30%
Cine Cinemas (France).. 709 1991 30%
Cine Cinemas (Italy)... 164 1997 30%
Cine Classics
(France).............. 626 1991 30%
Cine Classics (Spain).. 176 1995 15%
Cine Classics (Italy).. 164 1997 30%
Forum Planete
(France).............. 1,171 1997 30%
Planete (France)....... 2,897 1988 30%
Planete (Poland)....... 1,836 1996 30%
Planete (Germany)...... 412 1997 30%
Planete (Italy)........ 515 1997 30%
Seasons (France)....... 99 1996 30%
Seasons (Spain)........ 29 1997 30%
Seasons (Germany)...... 12 1997 30%
Seasons (Italy)........ 36 1997 30%
Odyssey................. 26,995 1998 33% Hallmark Entertainment, The Jim
Henson Company, National
Interfaith Cable Coalition, Inc.
Premium Movie 840 1995 20% Twentieth Century Fox Films,
Partnership Universal Studios, Paramount
(Australia)............ Pictures, Columbia TriStar
Telemundo Network/5/.... N/A N/A 50% Sony Pictures Entertainment Inc.
Telemundo Station N/A N/A 25% Sony Pictures Entertainment
Group/6/............... Inc., Station Partners, LLC
Torneos y Competencias,
S.A. (Argentina)/7/.... N/A N/A 40% CEI CitiCorp Holdings S.A.
</TABLE>
- --------
(1) Number of subscribers to whom service is available.
(2) Digital services.
(3) Liberty's interest consists of shares of 30-year 9% preferred stock which
have a stated aggregate value of $345 million and are not convertible into
common stock.
(4) International Channel provides news, sports, music, movies and general
entertainment programming from around the world in more than 20 different
languages.

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<PAGE>

(5) Telemundo Network is a 24-hour broadcast network serving 61 markets in the
United States, including the 37 largest Hispanic markets.
(6) Telemundo Station Group, Inc. owns and operates eight full power UHF
broadcast stations and 15 low power television stations serving some of the
largest Hispanic markets in the United States and Puerto Rico. Although
Liberty has an approximately 25% equity interest in Telemundo Station
Group, Inc., its voting power is less than 5% to meet certain regulatory
requirements.
(7) Torneos y Competencias, S.A. is Argentina's dominant sports programming
service. It also owns a minority interest in Telefe and Canal Azul, general
entertainment broadcast channels in Buenos Aires, Argentina. Canal Azul has
also become an international superchannel, providing programming to the
United States and, via cable, to outlying areas of Argentina.

Communications

Cable television systems deliver multiple channels of television programming
to subscribers who pay a monthly fee for the service. Video, audio and data
signals are received over-the-air or via satellite delivery by antennas,
microwave relay stations and satellite earth stations and are modulated,
amplified and distributed over a network of coaxial and fiber optic cable to
the subscribers' television sets. Cable television providers in most markets
are currently upgrading their cable systems to deliver new technologies,
products and services to their customers. These upgraded systems allow cable
operators to expand channel offerings, add new digital video services, offer
high-speed data services and, where permitted, provide telephony services. The
implementation of digital technology significantly enhances the quantity and
quality of channel offerings, allows the cable operator to offer video-on-
demand, additional pay-per-view offerings, premium services and incremental
niche programming. Upgraded systems also enable cable networks to transmit data
and gain access to the Internet at significantly faster speeds, up to 100 times
faster, than data can be transmitted over conventional dial-up connections.
Lastly, cable providers have been developing the capability to provide
telephony services to residential and commercial users at rates well below
those offered by incumbent telephone providers. Each of these businesses
represents a significant opportunity for cable providers to increase their
revenue and operating cash flow from the traditional pay television services
currently offered today.

Telephony providers offer local, long distance, switched services, private
line and advanced networking features to customers who pay a monthly fee for
the service, generally based on usage. Wireless telecommunications networks use
a variety of radio frequencies to transmit voice and data in place of, or in
addition to, standard landline telephone networks. Wireless telecommunications
technologies include two-way radio applications, such as cellular, personal
communications services, specialized mobile radio and enhanced specialized
mobile radio networks, and one-way radio applications, such as paging services.
Each application operates within a distinct radio frequency block. As a result
of advances in digital technology, digital-based wireless system operators are
able to offer enhanced services, such as integrated voicemail, enhanced custom-
calling and short-messaging, high-speed data transmissions to and from
computers, advanced paging services, facsimile services and Internet access
service. The wireless industry has benefited in recent years from increasing
demand for its services and industry experts expect this demand to continue to
increase. According to International Data Corporation, subscribers to wireless
communications services in the United States are expected to increase to over
118 million by 2003, up from approximately 64.4 million subscribers at the end
of 1998. Wireless subscribers generally are charged for service activation,
monthly access, air time, long distance calls and custom-calling features.
Wireless system operators pay fees to local exchange companies for access to
their networks and toll charges based on standard or negotiated rates. When
wireless operators provide service to roamers from other systems, they
generally charge roamer air time usage rates, which usually are higher than
standard air time usage rates for their own subscribers, and additionally may
charge daily access fees.

Consolidated Subsidiaries

TCI Cablevision of Puerto Rico, Inc.

TCI Cablevision of Puerto Rico, Inc. is one of the largest providers of cable
television services in Puerto Rico. It owns and operates cable television
franchises, serving the communities of Luquillo, Arecibo, Florida, Caguas,
Humacao, Cayey and Barranquitas.

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<PAGE>

On September 21, 1998, hurricane Georges struck Puerto Rico and caused
considerable property damage to the area in general, including TCI Cablevision
of Puerto Rico's cable television systems. However, all of TCI Cablevision of
Puerto Rico's systems have been rebuilt, and as of September 30, 1999,
approximately 99% of its pre-hurricane basic customers were receiving cable
television services. TCI Cablevision of Puerto Rico regained 100% of its pre-
hurricane customer base during the fourth quarter of 1999.

At September 30, 1999, the Puerto Rico cable systems passed an aggregate of
approximately 288,000 homes and served approximately 109,000 basic subscribers,
resulting in a penetration rate of approximately 38%. As of that date,
approximately 38% of TCI Cablevision of Puerto Rico's network had been rebuilt
utilizing 550 MHz bandwidth capacity, with the remainder consisting of 450 MHz.
At September 30, 1999, TCI Cablevision of Puerto Rico operated from five
headends, and provided subscribers with 63 channels.

A significant portion of TCI Cablevision of Puerto Rico's cable network
consists of fiber-optic and coaxial cable. This infrastructure allows TCI
Cablevision of Puerto Rico to offer enhanced entertainment information and
telecommunications services and, when and to the extent permitted by law, cable
telephony services. TCI Cablevision of Puerto Rico currently offers its
subscribers pay-per-view events and premium movies and as it introduces new
revenue generating products and services, such as interactive services, TCI
Cablevision of Puerto Rico expects to aggressively market those products and
services to its subscribers in areas with sufficient bandwidth capacity. TCI
Cablevision of Puerto Rico expects to begin offering high speed data
transmission services and Internet access using high speed cable modems to its
subscribers during the first half of 2000.

Business Affiliates

Sprint PCS Group

Sprint Corporation operates the only 100% digital PCS wireless network in the
United States with licenses to provide service nationwide utilizing a single
frequency band and a single technology. Sprint owns licenses to provide service
to the entire United States population, including Puerto Rico and the U.S.
Virgin Islands. At December 31, 1998, Sprint, together with certain affiliates,
operated PCS systems in 45 of the 50 largest U.S. metropolitan areas. Since the
end of 1997, the number of metropolitan markets served by Sprint has doubled to
280 and the number of its customers has more than tripled to 3.35 million.
Sprint attributes this business and its assets to Sprint's "Sprint PCS Group."
The Sprint PCS stock is intended to reflect the performance of the Sprint PCS
Group. The Sprint PCS stock trades on the NYSE under the symbol "PCS."

The business objective of the Sprint PCS Group is to expand network coverage
and increase market penetration by aggressively marketing competitively priced
PCS products and services under the "Sprint" and "Sprint PCS" brand names.

On October 5, 1999, Sprint announced that it had entered into a definitive
merger agreement with MCI WorldCom, Inc., pursuant to which Sprint would be
merged with and into MCI WorldCom. Under the merger agreement, each share of
Sprint's FON common stock would be exchanged for $76.00 of MCI WorldCom common
stock, subject to a collar, and each share of Sprint PCS stock, Series 2 Sprint
PCS stock and Series 3 Sprint PCS stock would be exchanged for one share of a
new MCI WorldCom PCS tracking stock of the corresponding series and 0.116025
shares of MCI WorldCom common stock. The terms of each series of MCI WorldCom
PCS tracking stock would be equivalent to those of the corresponding Sprint
security and would track the performance of the PCS business of the surviving
company. The merger would be tax free to stockholders of Sprint and accounted
for as a purchase. Consummation of the merger is subject to the approvals of
the stockholders of Sprint and MCI WorldCom as well as customary regulatory
approvals. It is anticipated that the merger will close in the second half of
2000. Upon consummation of the merger, the company is expected to be renamed
WorldCom and its board of directors will have 16 members, 10 from MCI WorldCom
and 6 from Sprint.

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Ownership Interest. Liberty owns approximately 23% (on a fully diluted basis)
of the Sprint PCS stock through its ownership of shares of Series 2 Sprint PCS
stock (which have limited voting rights) and certain warrants and shares of
convertible preferred stock exercisable for or convertible into these shares.

Liberty's interest in the business that makes up the Sprint PCS Group began
in 1994 when TCI, Comcast Corporation, Cox Communications, Inc. and Sprint
Corporation determined to engage in the wireless communications business
through a series of limited partnerships known collectively as "Sprint PCS." In
November 1998, Sprint Corporation assumed ownership and management control of
Sprint PCS and issued a new class of Sprint stock, the "Sprint PCS Common
Stock," which was issued in three series, to track the performance of Sprint's
combined wireless operations. In exchange for its approximate 30% limited
partnership interest in Sprint PCS, TCI received shares of Series 2 Sprint PCS
stock, shares of Sprint PCS preferred stock and warrants to purchase shares of
Series 2 Sprint PCS stock.

Pursuant to a final judgment agreed to by TCI, AT&T and the United States
Department of Justice in connection with the AT&T merger, all of the Sprint
securities held by TCI were deposited in the Trust with an independent trustee,
pursuant to a trust agreement approved by the Department of Justice and the
FCC. Liberty holds trust certificates evidencing its beneficial interest in the
assets of the Trust. The final judgment, which was entered by the United States
District Court for the District of Columbia on August 23, 1999, requires the
trustee, on or before May 23, 2002, to dispose of a portion of the Sprint
securities held by the Trust sufficient to cause Liberty to own beneficially no
more than 10% of the Sprint PCS stock that would be outstanding on a fully
diluted basis on such date. On or before May 23, 2004, the trustee is required
to divest the remainder of the Sprint securities held by the trust.

The trust agreement grants the trustee the sole right to sell the Sprint
securities beneficially owned by Liberty and provides that all decisions
regarding such divestiture will be made by the trustee without discussion or
consultation with AT&T or Liberty; however, the trustee is required to consult
with the board of directors of Liberty (other than AT&T representatives and
John C. Malone) regarding such divestiture. The trustee has the power and
authority to accomplish such divestiture only in a manner reasonably calculated
to maximize the value of the Sprint securities beneficially owned by Liberty.

The trust agreement provides for the trustee to vote the Sprint securities
beneficially owned by Liberty in the same proportion as other holders of Sprint
PCS stock so long as such securities are held by the Trust. The final judgment
also prohibits the acquisition by Liberty of additional Sprint securities
without the prior written consent of the Department of Justice, subject to
limited exceptions.

Terms of Ownership. Liberty was granted registration rights with respect to
its Sprint PCS holdings. These registration rights are currently exercisable by
the trustee. If Liberty's shares of Series 2 Sprint PCS stock are transferred,
the transferred shares become shares of full voting Sprint PCS stock.

Telewest Communications plc

Telewest is a leading provider of cable television and residential and
business cable telephony services in the United Kingdom. Telewest provides
cable television services over a broadband network and uses its network,
together with twisted-pair copper wire connections for final delivery to the
customer premises, to provide telephony services to its customers. The
broadband network enables Telewest to deliver a wide variety of both television
and telephony services to its customers and to provide customers with a wide
range of interactive and integrated entertainment, telecommunications and
information services as they become more widely available in the future. By
offering both television and telephony service, Telewest is able to spread the
costs of its network over two revenue sources as well as take advantage of
various efficiencies such as cross marketing. Telewest has installed its own
telephone switches, which permits it to minimize fees otherwise charged by
public telephone companies and to offer a variety of value-added services
without relying on public telephone operators for implementation. Telewest also
offers home access to the Internet in all of its franchises. Telewest's
ordinary shares trade on the London Stock Exchange under the symbol "TWT.L,"
and are

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represented by ADRs in the United States, where they trade on the National
Market tier of The Nasdaq Stock Market under the symbol "TWSTY."

Telewest owns and operates 37 cable franchises and has a minority equity
interest in an affiliated company which owns and operates four affiliated
franchises. As of September 30, 1999, these owned and operated and affiliated
franchises covered approximately 34% of the homes in the United Kingdom in
areas for which cable franchises have been awarded. At that date, these
franchises together included approximately 6.1 million homes and over 400,000
businesses, of which approximately 5.9 million and approximately 383,000 were
Telewest's equity homes and equity businesses, respectively. As of September
30, 1999, the network in these franchises had passed approximately 4.5 million
of Telewest's equity homes (approximately 4.2 million of which had been passed
and marketed) and Telewest had approximately 1.1 million equity cable
television customers, 1.5 million equity residential telephone lines and
274,000 equity business telephone lines. As of September 30, 1999, Telewest's
owned and operated franchises served more than 1.0 million cable subscribers
and 1.3 million telephone customers, and its affiliated franchise provided
Telewest with an additional 98,000 subscribers and 101,000 telephone customers.
According to Telewest, approximately 62% of its customers subscribe for both
cable television and cable telephony services.

Telewest believes that it is well positioned in key growth markets and will
benefit from the growing demand for voice, video, data and Internet services.
Telewest plans to introduce digital services in 1999, offering greater
opportunity for the development of differentiated products and exploitation of
the full potential of interactive, broadband cable. Telewest's business
objective is to be the premier provider of telephony, television, multimedia,
data, Internet and e-commerce services in the United Kingdom. Its strategies
for achieving its objective include:

. leveraging the scale and scope of its business to provide new content
and services,

. increasing market share and generating additional revenue from existing
customers through the development of innovative and targeted products
and the launch of digital services and high-speed Internet service
delivered via cable modem technology, and

. capitalizing on the growing demand for advanced business voice and data
services, digital television and high-speed Internet access through its
high capacity local networks and its national backbone network.

Ownership Interest. Liberty owns approximately a 22% interest in Telewest
through a limited liability company, which is 50% owned by Liberty and 50%
owned by MediaOne Group, Inc. MediaOne owns an approximately 22% interest in
Telewest through the limited liability company. In addition, MediaOne owns an
approximately 8% interest in Telewest outside the limited liability company.

Liberty's involvement with Telewest developed out of investments in the cable
business made by TCI in the United Kingdom beginning in 1986. In April 1992, U
S WEST, Inc. and TCI contributed substantially all of their respective U.K.
cable interests to a joint venture in which each held a 50% interest. TCI and U
S WEST combined substantially all of their respective U.K. cable interests in
an effort to obtain cost and other efficiencies inherent in a larger network,
as well as to gain greater access to the capital markets. The combination also
permitted TCI to gain the benefits of U S WEST's telephony experience, and U S
WEST to gain the benefits of TCI's cable television experience. Telewest was
formed in anticipation of its initial public offering (which was effected in
November 1994) to acquire the assets of the TCI/U S WEST joint venture.
Subsequent to Telewest's initial public offering, TCI contributed its interests
in Telewest to Liberty Media International, and Liberty Media International and
U S WEST contributed all of their respective equity ownership interests in
Telewest to the limited liability company referred to above. In June 1998,
MediaOne separated from U S WEST and, in connection with that transaction,
succeeded to all of U S WEST's rights and obligations relating to its Telewest
investment.

Terms of Ownership. Liberty and MediaOne have been granted preemptive rights
on share issuances by Telewest which enable them to collectively maintain a
majority of the voting rights in Telewest. Liberty and

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MediaOne have agreements with respect to the voting of shares of Telewest
beneficially owned by them and the manner in which they will cause their
designees to the Telewest board of directors to vote. In general, Liberty and
MediaOne have agreed that, on any matter requiring shareholder approval, they
will vote their Telewest shares together in such manner as may be agreed by
them. As a result, Liberty and MediaOne together generally will be able to
influence materially the outcome of any matter requiring shareholder approval.
In addition, each of Liberty and MediaOne has veto rights with respect to
certain fundamental matters affecting Telewest for so long as each holds 15% or
more of the outstanding Telewest ordinary shares. Further, for so long as each
of them beneficially owns at least 15% of the outstanding Telewest ordinary
shares, each is entitled to appoint two members to the 10-member Telewest board
of directors, and they have agreed that on any matter requiring board approval,
they will cause the directors designated by them to vote together as agreed by
them.

Each of Liberty and MediaOne agreed not to transfer its Telewest shares prior
to December 31, 1999, and thereafter, any proposed transfer will be subject to
rights of first refusal in favor of the other party, in each case subject to
certain exceptions. In addition, each of Liberty and MediaOne has the right to
trigger a put/call procedure in the event the other is deemed to undergo a
change of control.

Each of Liberty and MediaOne has agreed with Telewest, subject to certain
exceptions, not to acquire interests in other cable television or cable
telephony companies in the United Kingdom, and Telewest has agreed to certain
restrictions on its ability to engage in businesses in the United Kingdom
outside of cable television, cable telephony and wireless telephony.

In May 1999, as part of a series of agreements entered into with AT&T in
connection with AT&T's proposed acquisition of MediaOne, Microsoft Corporation
agreed to purchase MediaOne's interest in Telewest through a tax-free exchange
of Microsoft shares, subject to certain conditions, including receipt of the
consent of Liberty and the closing of the proposed business combination between
AT&T and MediaOne. It is expected that if this purchase is completed, Microsoft
will succeed to all of MediaOne's rights and obligations set forth above.

On December 17, 1999, Telewest announced its intention to recommend a merger
with Flextech, plc at a purchase price of approximately $3.2 billion. Liberty
owns approximately a 37% interest in Flextech and a 22% interest in Telewest.
The proposed merger is subject to a number of conditions, including a
definitive offer by Telewest and the subsequent approval of the shareholders of
each of Flextech and Telewest. Liberty has entered into certain voting
arrangements with respect to the merger and has agreed with Telewest not to
dispose of any of Liberty's interests in Flextech through March 31, 2000. See
"--Programming--Business Affiliates-- Flextech, plc" above.

Other Communications Assets

The table below sets forth certain information about Liberty's other
communications assets. In the table below:

. "Homes in Service Area" refers to the number of homes to which the
relevant operating company is permitted by law to offer its services.
Not all service areas are granted exclusively to the respective
operating company.

. "Homes Passed" refers to the homes that can be connected to a cable
distribution system without further extension of the distribution
network.

. "Basic Subscribers" refers to subscribers to a cable or other
television distribution system who receive the basic television service
and who are usually charged a flat monthly rate for a specific number of
channels.

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<TABLE>
<CAPTION>
Homes in Liberty's
Service Homes Basic Attributed
Area at Passed at Subscribers Ownership
9/30/99 9/30/99 at 9/30/99 % at
Entity (000's) (000's) (000's) 9/30/99 Partner(s)
- ----------------------------------- -------- --------- ----------- ---------- --------------------------------
<S> <C> <C> <C> <C> <C>
Metropolis-Intercom, S.A. (Chile).. 1,600 1,084 269 30% Cordillera Communicaciones,
Ltda, Compania de
Telecomunicaciones de Chile S.A.

Cablevision S.A. (Argentina)....... 4,000 3,388 1,451 28% CEI CitiCorp Holdings S.A.,
Telefonica Internacional S.A.

Jupiter Telecommunications
Co., Ltd. (Japan)................. 4,801 3,516 472 40% Sumitomo Corporation
Princes Holdings Limited
(Ireland)......................... 490 384 155 50% Independent Newspapers plc
Sky Latin America LLC/1/........... N/A N/A 761 10% Organizacoes Globo, Grupo
Televisa, S.A., News Corp.
</TABLE>
- --------
(1) Satellite-delivered television platform currently serving Mexico, Brazil,
Chile and Columbia.

Internet Services and Technology

The Internet has emerged as a significant global communications and commerce
medium, enabling millions of people worldwide to share information, create
community among individuals with similar interests and conduct business
electronically. International Data Corporation projects that the number of
Internet users will increase from approximately 100 million at the end of 1998
to approximately 320 million by the end of 2002. In addition to its emergence
as a significant global communications medium, the Internet has features and
functions that are unavailable in traditional media, which enable online
merchants to communicate effectively with customers and advertisers to target
users with specific needs and interests. As a result, the Internet has emerged
as an attractive medium for advertising and electronic commerce. According to
International Data Corporation, worldwide commerce revenue on the Internet is
expected to increase from approximately $32 billion at the end of 1998 to more
than $425 billion in 2002. Jupiter Communications, a new media research firm
that specializes in online research and analysis, estimates that the amount of
advertising dollars spent on the Internet is expected to increase from
approximately $1.9 billion in 1998 to $7.7 billion by 2002, a compound annual
growth rate of 42%.

Consolidated Subsidiaries

Liberty Digital, Inc.

Liberty Digital, Inc. (formerly known as TCI Music, Inc.) is a diversified
new media company with investments in Internet content and interactive
television businesses, as well as music services delivered to commercial and
residential customers via cable, satellite, the Internet and other platforms.
Liberty Digital's series A common stock trades on the National Market tier of
The Nasdaq Stock Market under the symbol "LDIG."

As of September 30, 1999, the assets of Liberty Digital consisted primarily
of the following:

<TABLE>
<CAPTION>
Liberty
Digital's
Ownership
Entity % Business
- ------------------------ ---------- -------------------------------------------------
<S> <C> <C>
AT&T Access Agreement... N/A Certain programming rights with respect to AT&T's
cable systems

Academic Systems 5% Provider of higher education multimedia
Corporation............ instruction manuals

</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
Liberty
Digital's
Ownership
Entity % Business
- --------------------------------- ---------- -------------------------------------------------
<S> <C> <C>
ACTV, Inc.
(Nasdaq: IATV)................... 12%/1/ Producer of tools for interactive programming for
television and Internet platforms

DMX, LLC......................... 100% Programs, markets and distributes the premium
digital audio service, Digital Music Express

Drugstore.com, Inc.
(Nasdaq: DSCM)................... 1% Online pharmacy and sundries

HomeGrocer.com, Inc.............. 1% Online grocery store

iBeam Broadcasting Corporation... 8% Satellite delivery of streaming media from
programmers to Internet service providers

Interactive Pictures Corporation
Interactive photographic technology for the
(Nasdaq: IPIX)................... 4% Internet

iVillage, Inc.
(Nasdaq: IVIL)................... 3% Internet and on-line provider of branded
communications and information services for adult
women

Kaleidoscope Interactive, LLC.... 50% Online provider of information and services
related to health concerns and disabilities

Kaleidoscope Network, Inc........ 12% 24-hour cable network that provides video
programming related to health concerns and
disabilities

KPCB Java Fund, L.P. ............ 6% Investor in Java application development

Lifescape, LLC................... 15% Online provider of information concerning
substance abuse, addictions and health problems

MedScholar Digital Network, LLC.. 100% Provider of continuous medical education services
to healthcare professionals

MTVN Online L.P. ................ 10% Online music venture with MTV Networks

Online Retail Partners........... 21% Create e-commerce partnerships with brick-and-
mortar retailers
Pogo.com, Inc.................... 19% Online game service targeting family Internet
game players

priceline.com Incorporated
(Nasdaq: PCLN)................... 2% E-commerce service allowing consumers to make
offers on products and services
Quokka Sports, Inc.
(Nasdaq: QKKA)................... 3% Internet provider of live digital sports
entertainment

Replay Networks, Inc. ........... 1% Producer of technology that allows customers to
customize television viewing

Sportsline USA, Inc.
(Nasdaq: SPLN)................... 3% Internet provider of branded interactive sports
information, programming and merchandise

The Lightspan Partnership, 13%
Inc. ........................... Developer of educational programming

TiVo Inc.
(Nasdaq: TIVO)................... 1% Producer of technology that allows customers to
customize television viewing
</TABLE>

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<PAGE>

- --------
(1) Liberty Digital also holds warrants to purchase additional shares of ACTV,
Inc. common stock, which it may exercise over a period of one to five
years. Exercise of these warrants would increase Liberty Digital's
ownership to approximately 25%.

Ownership Interest. Liberty owns an approximately 87% interest in Liberty
Digital, and a member of the Liberty Media Group that is not part of Liberty
Media Corporation or its consolidated subsidiaries owns an additional
approximately 8% interest in Liberty Digital.

Liberty's interest in Liberty Digital began in 1997 when TCI Music was formed
as a wholly owned subsidiary of TCI for the purpose of entering into a business
combination with DMX, LLC. DMX currently programs, markets and distributes the
premium digital audio music service known as Digital Music Express, to more
than 29 million subscribers in the United States. In December of 1997, TCI
Music acquired The Box Worldwide, Inc., which programs and distributes an
interactive music video television programming service to cable and broadcast
television systems via satellite delivery, and SonicNet, Inc., a leading
Internet music network consisting of a group of music web sites. TCI Music
acquired The Box to serve as the platform for music video and acquired SonicNet
to provide music-related content to DMX and The Box and to position itself to
take advantage of developments in music distribution through the Internet.

In July 1999, TCI Music entered into an Internet music alliance with MTV
Networks, a division of Viacom, Inc., to form and operate an online music
venture, MTVN Online L.P. As part of that transaction, TCI Music contributed to
MTVN Online certain of its music-related assets and businesses, including
substantially all of the assets and businesses of The Box and SonicNet, subject
to certain exceptions. In return, TCI Music received a 10% interest in MTVN
Online. We believe that MTVN Online creates a stronger platform from which to
pursue an online music business. In connection with this transaction, TCI Music
and Liberty each agreed not to compete with MTVN Online in its online music
video business or in the music video business generally, subject to certain
exceptions.

In September 1999, TCI Music and Liberty completed a transaction pursuant to
which Liberty and certain of its affiliates contributed to TCI Music
substantially all of their respective Internet content and interactive
television assets and a combination of cash and notes receivable equal to $150
million, in exchange for preferred and common stock of TCI Music. As part of
the transaction, Liberty also assigned to TCI Music certain of its rights under
an agreement with AT&T, which provides for certain programming rights with
respect to AT&T's cable systems. See "Relationship with AT&T and Certain
Related Transactions-- Relationship with AT&T--Intercompany Agreement--
Interactive Video Services." In connection with this transaction, TCI Music
changed its name to Liberty Digital, Inc. In addition, Liberty adopted a policy
that Liberty Digital would be its primary vehicle to pursue corporate
opportunities relating to interactive programming and content related services
in the United States and Canada, subject to certain exceptions.

Business Affiliates

Motorola Inc. (successor to General Instrument Corporation)

Liberty's interest in Motorola Inc. derives from its former interest in
General Instrument Corporation. GI merged with Motorola on January 5, 2000.
Prior to its merger with Motorola, General Instrument Corporation was a leading
worldwide provider of integrated and interactive broadband access solutions
and, with its strategic partners and customers, GI sought to advance the
convergence of the Internet, telecommunications and video entertainment
industries. To that end, GI made products that allow video, voice and data to
be delivered over cable, digital satellite and telephony networks. GI was a
leading supplier of digital and analog set-top terminals and systems for wired
and wireless cable television networks, as well as hybrid fiber/coaxial network
transmission systems used by cable television operators. GI also provided
digital satellite television systems for programmers, direct-to-home satellite
networks and private networks for business communications. Through its limited
partnership interest in Next Level Communications L.P., GI provided next-
generation broadband access

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<PAGE>

solutions for local telephone companies. GI also had audio and Internet/data-
delivery systems among its product lines. GI had facilities in Asia, Europe,
Latin America, and the United States.

In the Motorola merger, each share of GI common stock was exchanged for 0.575
shares of Motorola common stock. In connection with the merger, Liberty entered
into an agreement with Motorola, pursuant to which Liberty agreed to vote its
shares of GI common stock in favor of the transaction and Motorola granted to
Liberty certain registration rights with respect to the shares of Motorola
common stock acquired by Liberty in the merger. Immediately following the
merger, GI stockholders owned approximately 17% of Motorola.

Motorola is a global leader in providing integrated communications solutions
and embedded electronic solutions. These include:

. software-enhanced wireless telephone, two-way radio, messaging and
satellite communications products and systems, as well as networking and
Internet access products, for consumers, network operators, and
commercial, government and industrial customers,

. embedded semiconductor solutions for customers in networking,
transportation, wireless communications and imaging and entertainment
markets, and

. embedded electronic systems for automotive, communications, imaging,
manufacturing systems, computer and consumer markets.

Motorola's common stock trades on the NYSE under the symbol "MOT."

Ownership Interest. Liberty currently holds a 2.4% interest in Motorola.
Liberty also holds warrants to purchase approximately 12.3 million additional
shares of Motorola common stock at $24.78 per share. The warrants vest at
specified dates, with the number of warrants vesting on each such date relating
to the number of advanced digital set-top terminals purchased by AT&T and
certain of its affiliates. If the warrants do not vest on the specified date,
the warrants will terminate. If any warrants terminate solely because AT&T
fails to purchase the required number of advanced digital set-top terminals,
AT&T will pay to Liberty an amount equal to $14.35 for each warrant terminated,
adjusted as appropriate for any changes in the capitalization of Motorola.
Warrants to purchase 6.1 million shares are currently vested, and assuming
Liberty's exercise of such vested warrants, its ownership interest in Motorola
would increase to 3.3%.

Liberty's relationship with GI began in December 1997 when National Digital
Television Center, Inc., a wholly owned subsidiary of TCI ("NDTC"), entered
into an agreement with GI to purchase advanced digital set-top terminals. In
connection with NDTC's purchase commitment, GI granted the warrants specified
above. In July 1998, TCI acquired 21.4 million restricted shares of GI common
stock in exchange for:

. certain of the assets of NDTC's set-top authorization business,

. the license of certain related software to GI,

. a $50 million promissory note from TCI to GI and

. a nine year revenue guarantee from TCI in favor of GI.

In connection with the AT&T merger, the shares of GI common stock and the note
payable were contributed to Liberty. In April 1999, Liberty acquired an
additional 10 million shares of GI from Forstmann Little & Co. for $280
million. This purchase by Liberty increased Liberty's ownership in GI to
approximately 18% and made Liberty the largest stockholder of GI.

Terms of Ownership. In general, Liberty has certain registration rights with
respect to the Motorola shares it currently holds and those that it has a right
to acquire upon exercise of the warrants. In addition, a portion of Liberty's
Motorola shares are non-transferable until July 2001 and Liberty is further
restricted in its ability to knowingly transfer a portion of its Motorola
shares to a competitor of Motorola until December 2002 or, in some cases, prior
to that date if a change of control occurs with respect to Motorola.

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<PAGE>

Other Assets

Liberty also holds an approximately 19% interest in Antec Corporation, an
international communications technology company specializing in the design and
engineering of hybrid fiber/coaxial broadband networks and the development and
distribution of products for these broadband networks. Antec provides its
customers, primarily cable system operators, with products and services that
enable reliable, high-speed, two-way broadband transmission of video,
telephony, and data. In addition, Antec has developed a full line of
technologically advanced fiber optic products to capitalize on current and
future upgrades of cable systems employing hybrid fiber/coaxial technology
capable of providing state-of-the-art video, voice and data services. Antec's
common stock trades on the National Market tier of The Nasdaq Stock Market
under the symbol "ANTC."

Regulatory Matters

Domestic Programming

In the United States, the FCC regulates the providers of satellite
communications services and facilities for the transmission of programming
services, the cable television systems that carry such services, and, to some
extent, the availability of the programming services themselves through its
regulation of program licensing. Cable television systems in the United States
are also regulated by municipalities or other state and local government
authorities. Cable television companies are currently subject to federal rate
regulation on the provision of basic service, and continued rate regulation or
other franchise conditions could place downward pressure on the fees cable
television companies are willing or able to pay for programming services in
which Liberty has interests and regulatory carriage requirements could
adversely affect the number of channels available to carry the programming
services in which we have an interest.

Regulation of Program Licensing. The Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") directed the FCC to promulgate
regulations regarding the sale and acquisition of cable programming between
multi-channel video programming distributors (including cable operators) and
satellite-delivered programming services in which a cable operator has an
attributable interest. The legislation and the implementing regulations adopted
by the FCC preclude virtually all exclusive programming contracts between cable
operators and satellite programmers affiliated with any cable operator (unless
the FCC first determines the contract serves the public interest) and generally
prohibit a cable operator that has an attributable interest in a satellite
programmer from improperly influencing the terms and conditions of sale to
unaffiliated multi-channel video programming distributors. Further, the 1992
Cable Act requires that such affiliated programmers make their programming
services available to cable operators and competing multi-channel video
programming distributors such as multi-channel multi-point distribution systems
and direct broadcast satellite distributors on terms and conditions that do not
unfairly discriminate among distributors. The Telecommunications Act of 1996
has extended these rules to programming services in which telephone companies
and other common carriers have attributable ownership interests. The FCC
recently revised its program licensing rules, by implementing a damages remedy
in situations where the defendant knowingly violates the regulations and by
establishing a timeline for the resolution of such complaints, among other
things.

Regulation of Carriage of Programming. Under the 1992 Cable Act, the FCC has
adopted regulations prohibiting cable operators from requiring a financial
interest in a programming service as a condition to carriage of such service,
coercing exclusive rights in a programming service or favoring affiliated
programmers so as to restrain unreasonably the ability of unaffiliated
programmers to compete.

Regulation of Ownership. The 1992 Cable Act required the FCC, among other
things, (a) to prescribe rules and regulations establishing reasonable limits
on the number of channels on a cable system that will be allowed to carry
programming in which the owner of such cable system has an attributable
interest and (b) to consider the necessity and appropriateness of imposing
limitations on the degree to which multi-channel video

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<PAGE>

programming distributors (including cable operators) may engage in the creation
or production of video programming. In 1993, the FCC adopted regulations
limiting carriage by a cable operator of national programming services in which
that operator holds an attributable interest to 40% of the first 75 activated
channels on each of the cable operator's systems. The rules provide for the use
of two additional channels or a 45% limit, whichever is greater, provided that
the additional channels carry minority-controlled programming services. The
regulations also grandfather existing carriage arrangements that exceed the
channel limits, but require new channel capacity to be devoted to unaffiliated
programming services until the system achieves compliance with the regulations.
These channel occupancy limits apply only up to 75 activated channels on the
cable system, and the rules do not apply to local or regional programming
services. These rules may limit carriage of the programming companies in which
Liberty has interests on certain systems of affiliated cable operators. In the
same rulemaking, the FCC concluded that additional restrictions on the ability
of multi-channel distributors to engage in the creation or production of video
programming were then unwarranted.

The FCC's rules also generally prohibit common ownership of a cable system
and broadcast television stations or multichannel multi-point distribution
systems ("MMDS") with overlapping service areas. In August 1999, the FCC
revised the attribution standards, which are used to implement these ownership
rules, and adopted new attribution standards based upon a combination of
equity, debt and other indicia of influence. The new attribution criteria could
limit Liberty's ability to engage in certain transactions involving broadcast
stations and MMDS systems. The ownership attribution standards used to enforce
other rules, including the horizontal cable system ownership, channel occupancy
limits, program access and program carriage rules, also were revised in October
1999.

Regulation of Carriage of Broadcast Stations. The 1992 Cable Act granted
broadcasters a choice of must carry rights or retransmission consent rights.
The rules adopted by the FCC generally provided for mandatory carriage by cable
systems of all local full-power commercial television broadcast signals
selecting must carry rights and, depending on a cable system's channel
capacity, non-commercial television broadcast signals. Such statutorily
mandated carriage of broadcast stations coupled with the provisions of the
Cable Communications Policy Act of 1984, which require cable television systems
with 36 or more "activated" channels to reserve a percentage of such channels
for commercial use by unaffiliated third parties and permit franchise
authorities to require the cable operator to provide channel capacity,
equipment and facilities for public, educational and government access
channels, could adversely affect some or substantially all of the programming
companies in which Liberty has interests by limiting the carriage of such
services in cable systems with limited channel capacity. The FCC recently
initiated a proceeding asking to what extent cable operators must carry all
digital signals transmitted by broadcasters. The imposition of such additional
must carry regulation, in conjunction with the current limited cable system
channel capacity, would make it likely that cable operators will be forced to
drop cable programming services, which may have an adverse impact on the
programming companies in which Liberty has interests.

Closed Captioning and Video Description Regulation. The Telecommunications
Act of 1996 also required the FCC to establish rules and an implementation
schedule to ensure that video programming is fully accessible to the hearing
impaired through closed captioning. The rules adopted by the FCC will require
substantial closed captioning over an eight to ten year phase-in period with
only limited exemptions. As a result, the programming companies in which
Liberty has interests are expected to incur significant additional costs for
closed captioning. In November 1999, the FCC also issued a notice of proposed
rulemaking that would require certain broadcasters and the largest national
video programming services to begin to provide audio descriptions of visual
events for the visually impaired on the secondary audio program. Depending upon
the final requirements of any rule, increased costs for programmers may result.

Copyright Regulation. Satellite carriers, such as TV Guide's UVTV division,
retransmit the broadcast signals of "superstations," such as KWGN and WGN, and
of network stations to home satellite dish owners for private home viewing
under statutory license pursuant to the Satellite Home Viewer Act of 1994 (the
"SHV Act"). The Intellectual Property and Communications Omnibus Reform Act of
1999 ("IPCORA"), enacted into law in November 1999, extends the SHV Act license
until December 31, 2004. Under the SHV

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<PAGE>

Act, satellite carriers previously paid a monthly fee of 27 cents per
subscriber for the secondary transmission of distant superstations and distant
network stations. However, IPCORA has decreased the royalty fee for distant
superstations by 30% and distant network stations by 45%. To the extent that
satellite carriers transmit superstation or network station signals to cable
operators, such cable operators pay the copyright fee under the separate
compulsory license. Satellite carriers may only distribute the signals of
network broadcast stations, as distinguished from superstations, to "unserved
households" that are outside the Grade B contours of a station affiliated with
such network. IPCORA requires the FCC to conduct a number of rulemaking
proceedings that may ultimately subject superstations and distant network
stations delivered by satellite directly to dish owners to new program
exclusivity rules (similar to those imposed on cable operators), including
syndicated exclusivity, network non-duplication and sports blackout rules. The
FCC also will commence rule makings to review the signal strength measurement
and subscriber eligibility standards. The new legislation provides a copyright
liability moratorium for all satellite carriers distributing distant network
signals to existing (as of October 31, 1999) and recently terminated (after
July 1, 1998) subscribers who are within Grade B contours of local network
affiliates. Moreover, the entire C-band satellite industry is exempt from all
restrictions on delivering distant network signals to subscribers who received
C-band service before October 31, 1999. IPCORA and rulemakings, exemptions, and
regulatory requirements adopted under it will substantially impact the C-band
and DBS industry, potentially affecting the economics of uplinking and
distributing distant network stations and superstations to dish owners. A
subsidiary of TV Guide entered into an agreement with the National Association
of Broadcasters, the ABC, CBS, FOX and NBC networks, their affiliate
associations, and several hundred broadcast stations to identify by zip code
those geographic areas which are "unserved" by network affiliated stations in
May 1998. With the passage of IPCORA, that subsidiary has opted to discontinue
that agreement. The broadcasters have, however, objected to such termination
and have asserted claims for liquidated damages and other damages as a result
of the failure to terminate distant network signal subscribers during the
period from September, 1999 through the passage of IPCORA and the termination
of the agreement.

Satellites and Uplink. In general, authorization from the FCC must be
obtained for the construction and operation of a communications satellite. The
FCC authorizes utilization of satellite orbital slots assigned to the United
States by the World Administrative Radio Conference. Such slots are finite in
number, thus limiting the number of carriers that can provide satellite
transponders and the number of transponders available for transmission of
programming services. At present, however, there are numerous competing
satellite service providers that make transponders available for video services
to the cable industry.

Proposed Changes in Regulation. The regulation of programming services, cable
television systems, satellite carriers and television stations is subject to
the political process and has been in constant flux over the past decade.
Further material changes in the law and regulatory requirements must be
anticipated and there can be no assurance that Liberty's business will not be
adversely affected by future legislation, new regulation or deregulation.

Domestic Telephony

The FCC regulates the licensing, construction, operation, acquisition, resale
and interconnection arrangements of domestic wireless telecommunications
systems. The activities of wireless service providers, such as the Sprint PCS
Group, are subject to regulation in varying degrees, depending on the
jurisdiction, by state and local regulatory agencies as well. The FCC, in
conjunction with the U.S. Federal Aviation Administration, also regulates tower
marking and lighting, and FCC environmental rules may cause certain PCS network
facilities to become subject to regulation under the National Environmental
Policy Act and the National Historic Preservation Act.

International Cable, Telephony and Programming

Some of the foreign countries in which Liberty has, or proposes to make, an
investment regulate, in varying degrees, (a) the granting of cable and
telephony franchises, the construction of cable and telephony systems and the
operations of cable, other multi-channel television operators and telephony
operators and

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<PAGE>

service providers, as well as the acquisition of, and foreign investments in,
such operators and service providers, and (b) the distribution and content of
programming and Internet services and foreign investment in programming
companies. Regulations or laws may cover wireline and wireless telephony,
satellite and cable communications and Internet services, among others.
Regulations or laws that exist at the time Liberty makes an investment in a
foreign subsidiary or business affiliate may thereafter change, and there can
be no assurance that material and adverse changes in the regulation of the
services provided by Liberty's subsidiaries and business affiliates will not
occur in the future. Regulation can take the form of price controls, service
requirements and programming and other content restrictions, among others.
Moreover, some countries do not issue exclusive licenses to provide multi-
channel television services within a geographic area, and in those instances
Liberty may be adversely affected by an overbuild by one or more competing
cable operators. In certain countries where multi-channel television is less
developed, there is minimal regulation of cable television, and, hence, the
protections of the cable operator's investment available in the United States
and other countries (such as rights to renewal of franchises and utility pole
attachment) may not be available in these countries.

Internet Services

The Internet companies in which we have interests are subject, both directly
and indirectly, to various laws and governmental regulations relating to their
respective businesses. There are currently few laws or regulations directly
applicable to access to or commerce on commercial online services or the
Internet. For example, the Digital Millennium Copyright Act, enacted into law
in 1998, protects certain qualifying online service providers from copyright
infringement liability, the Internet Tax Freedom Act, also enacted in 1998,
placed a three year moratorium on new state and local taxes on Internet access
and commerce, and under the Communications Decency Act, an Internet service
provider will not be treated as the publisher or speaker of any information
provided by another information content provider. However, due to the
increasing popularity and use of commercial online services and the Internet,
it is possible that a number of laws and regulations may be adopted with
respect to commercial online services and the Internet. Such laws and
regulations may cover issues such as user privacy, defamatory speech, copyright
infringement, pricing and characteristics and quality of products and services.
The adoption of such laws or regulations in the future may slow the growth of
commercial online services and the Internet, which could in turn cause a
decline in the demand for the services and products of the Internet companies
in which we have interests and increase such companies' costs of doing business
or otherwise have an adverse effect on their businesses, operating results and
financial conditions. Moreover, the applicability to commercial online services
and the Internet of existing laws governing issues such as property ownership,
libel, personal privacy and taxation is uncertain and could expose these
companies to substantial liability.

Broadcasters

Liberty also has nonattributable minority ownership interests in group owners
of broadcast television and radio stations. The FCC extensively regulates the
ownership and operation of such stations through a variety of rules.

Competition

Programming. The business of distributing programming for cable and satellite
television is highly competitive, both in the United States and in foreign
countries. The programming companies in which we have interests directly
compete with other programmers for distribution on a limited number of
channels. Once distribution is obtained, our programming services and our
business affiliates' programming services compete, in varying degrees, for
viewers and advertisers with other cable and off-air broadcast television
programming services as well as with other entertainment media, including home
video (generally video rentals), pay-per-view services, online activities,
movies and other forms of news, information and entertainment. The programming
companies in which we have interests also compete, to varying degrees, for
creative talent and

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programming content. Our management believes that important competitive factors
include the prices charged for programming, the quantity, quality and variety
of the programming offered and the effectiveness of marketing efforts. In
addition, HSN and QVC operate in direct competition with businesses that are
engaged in retail merchandising.

Communications. The cable television systems and other forms of media
distribution in which we have interests directly compete for viewer attention
and subscriptions in local markets with other providers of entertainment, news
and information, including other cable television systems in those countries
that do not grant exclusive franchises, broadcast television stations, direct-
to-home satellite companies, satellite master antenna television systems,
multi-channel multi-point distribution systems and telephone companies, other
sources of video programs (such as videocassettes) and additional sources for
entertainment news and information, including the Internet. Cable television
systems also face strong competition from all media for advertising dollars.
Our management believes that important competitive factors include fees charged
for basic and premium services, the quantity, quality and variety of the
programming offered, the quality of signal reception, customer service and the
effectiveness of marketing efforts.

In addition, there is substantial competition in the domestic wireless
telecommunications industry, and it is expected that such competition will
intensify as a result of the entrance of new competitors and the increasing
pace of development of new technologies, products and services. Each of the
markets in which the Sprint PCS Group competes is served by other two-way
wireless service providers, including cellular and PCS operators and resellers.
A majority of the markets will have five or more commercial mobile radio
service providers and each of the top 50 metropolitan markets have at least one
other PCS competitor in addition to two cellular incumbents. Many of these
competitors have been operating for a number of years and currently service a
significant subscriber base.

Internet Services and Technology. The markets for Internet services, online
content and products are relatively new, intensely competitive and rapidly
changing. Since the Internet's commercialization in the early 1990's, the
number of Internet companies and web sites competing for consumers' attention
and spending has proliferated with no substantial barriers to entry, and we
expect that competition will continue to intensify in the future. The Internet
companies and web sites in which we have interests compete, directly and
indirectly, for members, visitors, advertisers, content providers and
merchandise sales with many categories of companies, including:

. other Internet companies and web sites targeted to the respective
audiences of the Internet companies and web sites in which we have
interests;

. publishers and distributors of traditional off-line media (such as
television, radio and print), including those targeted to the respective
audiences of the Internet companies and web sites in which we have
interests, many of which have made, or may in the future make,
significant acquisitions of or investments in Internet companies and/or
have established, or may in the future establish, web sites;

. general purpose consumer online services such as America Online and
Microsoft Network, each of which provides access to content and services
targeted to the respective audiences of the Internet companies and web
sites in which we have interests;

. vendors of information, merchandise, products and services distributed
through other means, including retail stores, mail, facsimile and
private bulletin board services; and

. web search and retrieval services and other high-traffic web sites.

Liberty anticipates that the number of such competitors will increase in the
future.

The technology companies in which we have interests compete with a
substantial number of foreign and domestic companies, and the rapid
technological changes occurring in such companies' markets are expected to lead
to the entry of new competitors. The ability of the technology companies in
which we have interests to anticipate technological changes and introduce
enhanced products on a timely basis will be a significant factor

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in their ability to expand and remain competitive. Existing competitors'
actions and new entrants may have an adverse impact on these companies' sales
and profitability.

Employees

As of September 30, 1999, Liberty had approximately 40 employees and
Liberty's consolidated subsidiaries had an aggregate of approximately 1,434
employees. None of our employees are represented by a labor union or covered by
a collective bargaining agreement. We believe that our employee relations are
good.

Properties

With the exception of its corporate offices in Englewood, Colorado (which
Liberty leases), Liberty does not own or lease any real or personal property
other than through its interests in its subsidiaries and business affiliates.
Liberty's subsidiaries and business affiliates own or lease the fixed assets
necessary for the operation of their respective businesses, including office
space, transponder space, headends, cable television and telecommunications
distribution equipment, telecommunications switches and customer equipment
(including converter boxes). Liberty's management believes that its current
facilities are suitable and adequate for its business operations for the
foreseeable future.

Legal Proceedings

There are no material pending legal proceedings, other than ordinary routine
litigation incidental to Liberty's business, to which Liberty or any of its
subsidiaries is a party or of which any of their property is subject.

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MANAGEMENT

Directors and Executive Officers

The following table sets forth certain information concerning our directors
and executive officers.

<TABLE>
<CAPTION>
Date of
Name Birth Position
---- --------- --------
<S> <C> <C>
John C. Malone.......... 3/7/41 Chairman of the Board and Director

Robert R. Bennett....... 4/19/58 President, Chief Executive Officer and Director

Gary S. Howard.......... 2/22/51 Executive Vice President, Chief Operating Officer and Director

David B. Koff........... 12/26/58 Senior Vice President

Charles Y. Tanabe....... 11/27/51 Senior Vice President and General Counsel

Carl E. Vogel........... 10/18/57 Senior Vice President

Peter N. Zolintakis..... 7/10/57 Senior Vice President

Vivian J. Carr.......... 12/13/47 Vice President and Secretary

Kathryn S. Douglass..... 3/5/65 Vice President and Controller

David J.A. Flowers...... 5/17/54 Vice President and Treasurer

Paul A. Gould........... 9/27/45 Director

Jerome H. Kern.......... 6/1/37 Director

John C. Petrillo........ 4/30/49 Director

Larry E. Romrell........ 12/30/39 Director

Daniel E. Somers........ 12/9/47 Director

John D. Zeglis.......... 5/2/47 Director
</TABLE>

The following is a five-year employment history for our directors and
executive officers, including any directorships held in public companies.

John C. Malone has served as Chairman of the Board and one of our directors
since 1990. Dr. Malone has also served, since December 1996, as Chairman of the
Board and a director of TCI Satellite Entertainment, Inc. Dr. Malone served as
Chairman of the Board of TCI from November 1996 to March 1999, as Chief
Executive Officer of TCI from January 1994 to March 1999, and as President of
TCI from January 1994 to March 1997. Dr. Malone served as Chief Executive
Officer of TCI Communications, Inc., the domestic cable subsidiary of TCI prior
to the AT&T merger ("TCIC"), from March 1992 to October 1994, and as President
of TCIC from 1973 to October 1994. Dr. Malone is also a director of AT&T, The
Bank of New York, TCI, TCI Satellite Entertainment, Inc. and At Home
Corporation.

Robert R. Bennett has served as our President and Chief Executive Officer and
one of our directors since April 1997. Mr. Bennett served as Executive Vice
President of TCI from April 1997 to March 1999. Mr. Bennett served as our
Executive Vice President and Chief Financial Officer, Secretary and Treasurer
from June 1995 through March 1997, and as our Senior Vice President from
September 1991 to June 1995. Mr. Bennett also served as acting Chief Financial
Officer of Liberty Digital, Inc. from June 1997 to July 1997. Mr. Bennett is a
director of TV Guide, Inc. and Chairman of the Board of Liberty Digital, Inc.

Gary S. Howard has served as our Executive Vice President, Chief Operating
Officer and one of our directors since July 1998. Mr. Howard has also served as
Chief Executive Officer of TCI Satellite

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<PAGE>

Entertainment, Inc. since December 1996. Mr. Howard served as Executive Vice
President of TCI from December 1997 to March 1999; as Chief Executive Officer,
Chairman of the Board and a director of TV Guide, Inc. from June 1997 to March
1999; and as President and Chief Executive Officer of TCI Ventures Group, LLC
from December 1997 to March 1999. Mr. Howard served as President of TV Guide,
Inc. from June 1997 to September 1997; as President of TCI Satellite
Entertainment, Inc. from February 1995 through August 1997; as Senior Vice
President of TCIC from October 1994 to December 1996; and as Vice President of
TCIC from December 1991 through October 1994. Mr. Howard is a director of TV
Guide, Inc., Liberty Digital, Inc. and TCI Satellite Entertainment, Inc.

David B. Koff has served as a Senior Vice President of Liberty since February
1998. Mr. Koff has also served as Vice President and Assistant Secretary of
Liberty Digital, Inc. since January 1998. Mr. Koff served as Vice President--
Corporate Development of Liberty from August 1994 to February 1998, and as
special counsel to Liberty from March 1993 to August 1994. Mr. Koff also served
as interim President and Chief Executive Officer of Liberty Digital, Inc. from
May 1997 to January 1998. Mr. Koff is a director of Liberty Digital, Inc.

Charles Y. Tanabe has served as a Senior Vice President and General Counsel
of Liberty since January 1999. Prior to joining Liberty, Mr. Tanabe was a
member of Sherman & Howard L.L.C., a law firm based in Denver, Colorado, for
more than five years.

Carl E. Vogel has served as Senior Vice President of Liberty since December
1999. Mr. Vogel served as Executive Vice President/Chief Operating Officer of
Field Operations for AT&T Broadband & Internet Services from June 1999 until
joining Liberty. He served as Chairman and Chief Executive Officer of
Primestar, Inc. from June 1998 to June 1999. From October 1997 to June 1998,
Mr. Vogel was Chief Executive Officer of Star Choice Communications. From March
1994 to March 1997, he served first as Executive Vice President and Chief
Operating Officer and later as President of EchoStar Communications
Corporation. Mr. Vogel began his career at Arthur Andersen & Co. and
subsequently held several senior level financial and operating positions at
Jones Intercable, Inc. Mr. Vogel is a director of Canadian Satellite
Communications.

Peter N. Zolintakis has served as Senior Vice President of Tax Strategy of
Liberty since November 1998. Prior to joining Liberty, Mr. Zolintakis was a
partner of PricewaterhouseCoopers, where he specialized, for more than five
years, in the tax issues relating to corporate mergers, acquisitions,
divestitures and restructurings for clients primarily in the cable television
and high technology industries.

Vivian J. Carr has served as a Vice President of Liberty since June 1993 and
was appointed Secretary of Liberty in August 1994. Ms. Carr served as Director
of Investor Relations of Liberty from March 1991 to June 1993.

Kathryn S. Douglass has served as a Vice President of Liberty since September
1997 and as Controller of Liberty since September 1993. Ms. Douglass served as
Accounting Manager of Liberty from October 1991 to September 1993.

David J.A. Flowers has served as a Vice President and Treasurer of Liberty
since April 1997. Mr. Flowers served as Vice President--Portfolio Manager of
Liberty from June 1995 to April 1997. Prior to joining Liberty, Mr. Flowers
held several positions at Toronto Dominion Bank from August 1989 to June 1995,
including Managing Director in its Media Finance Group.

Paul A. Gould has served as one of our directors since March 1999. Mr. Gould
has also served as a Managing Director and Executive Vice President of Allen &
Company Incorporated, an investment banking services company, for more than the
last five years. Mr. Gould served as a director of TCI from December 1996 to
March 1999 and of Liberty from November 1992 to August 1994. Mr. Gould is a
director of Ascent Entertainment Group, Inc., TCI and Sunburst Hospitality
Corporation.

Jerome H. Kern has served as one of our directors since March 1999. Mr. Kern
served as Vice Chairman and as a consultant of TCI from June 1998 to March
1999. Prior to joining TCI, Mr. Kern was Special Counsel

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<PAGE>

with the law firm of Baker Botts L.L.P. from July 1996 to June 1998, and a
senior partner of Baker Botts L.L.P. from September 1992 to July 1996. Mr. Kern
served as a director of TCIC from December 1993 to August 1994. Mr. Kern is a
director of TCI.

John C. Petrillo has served as one of our directors since March 1999. Mr.
Petrillo has served as Executive Vice President of Corporate Strategy and
Business Development for AT&T since May 1996. Mr. Petrillo was the President of
AT&T's Business Communications Services from 1993 to 1995 and also served as
AT&T Vice President of Strategic Planning from 1991 to 1993, AT&T Vice
President of Business Communications Services in 1990, AT&T Services Vice
President in 1987 and AT&T Director of Personnel in 1986. Mr. Petrillo is a
director of TCI and At Home Corporation.

Larry E. Romrell has served as one of our directors since March 1999. Mr.
Romrell has also served as a consultant to Liberty since March 1999. Mr.
Romrell served as Executive Vice President of TCI from January 1994 to March
1999 and since March 1999 has served as a consultant to TCI. Mr. Romrell also
served, from December 1997 to March 1999, as Executive Vice President and Chief
Executive Officer of TCI Business Alliance and Technology Co., a subsidiary of
TCI prior to the AT&T merger that oversaw and developed TCI's technology
activities; from December 1997 to March 1999, as Senior Vice President of TCI
Ventures Group, LLC; and, from September 1994 to October 1997, as President of
TCI Technology Ventures, Inc., a subsidiary of TCI prior to the AT&T merger
that invested in and developed companies engaged in advancing
telecommunications technology. Mr. Romrell served as Senior Vice President of
TCIC from 1991 to October 1994. Mr. Romrell is a director of TV Guide, Inc. and
General Communication, Inc.

Daniel E. Somers has served as one of our directors since March 1999. Mr.
Somers has also served as Acting Co-Chief Executive Officer of AT&T Broadband &
Internet Services since October 6, 1999 and as Senior Executive Vice President
and Chief Financial Officer of AT&T since May 1997. Prior to joining AT&T, Mr.
Somers served as Chairman and Chief Executive Officer of Bell Cablemedia, plc
from 1995 to 1997, and as Executive Vice President and Chief Financial Officer
of Bell Canada International, Inc. from 1992 to 1995. Mr. Somers is a member of
AT&T's Executive Council and Operations Group. He is also a director of TCI and
Lubrizol Corporation.

John D. Zeglis has served as one of our directors since October 11, 1999. Mr.
Zeglis has also served as President of AT&T since November 1997. Mr. Zeglis
served as Vice Chairman of AT&T from June to November 1997, General Counsel and
Senior Executive Vice President of AT&T from 1996 to 1997, and Senior Vice
President and General Counsel of AT&T from 1986 to 1996. He is also a director
of AT&T, Helmerich and Payne Corporation, Sara Lee Corporation and Illinova
Corporation.

The executive officers named above will serve in such capacities until the
next annual meeting of our board of directors, or until their respective
successors have been duly elected and have been qualified, or until their
earlier death, resignation, disqualification or removal from office. There is
no family relationship between any of the directors.

Board Composition

Our certificate of incorporation (the "Liberty Charter") provides for a
classified board of directors of not less than three members, with the exact
number of directors to be fixed by resolution of our board. The Liberty Charter
further provides for the number of directors to always be a multiple of three,
divided evenly among three classes. The number of directors on our board is
currently nine. Of the nine members of our board, three are elected by the
holders of our Class A common stock, voting as a separate class (the "Class A
Directors"), three are elected by the holders of our Class B common stock,
voting as a separate class (the "Class B Directors"), and three are elected by
the holders of our Class C common stock, voting as a separate class (the "Class
C Directors"). Currently, all of our common stock is owned by AT&T; however,
the Class B Directors and the Class C Directors were designated by TCI prior to
the AT&T merger.

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<PAGE>

The Class A Directors, whose terms expire at the annual meeting of
stockholders in 2000, are John D. Zeglis, Daniel E. Somers and John C.
Petrillo. The Class B Directors, whose terms expire at the annual meeting of
stockholders in 2006, are Larry E. Romrell, Jerome H. Kern and Gary S. Howard.
The Class C Directors, whose terms expire at the annual meeting of stockholders
in 2009, are John C. Malone, Paul A. Gould and Robert R. Bennett. At each
annual meeting of our stockholders, the successors of that class or classes of
directors whose term(s) expire at that meeting shall be elected to hold office
for a term expiring at the annual meeting of stockholders held, in the case of
the Class A Directors, in the following year, in the case of the Class B
Directors, in the seventh year following the year of such election and, in the
case of the Class C Directors, in the tenth year following the year of such
election. The directors of each class will hold office until their respective
death, resignation or removal and until their respective successors are elected
and qualified.

Committees of the Board

Our board of directors has established an Executive Committee, whose members
are the Class C Directors. The Executive Committee has been granted and may
exercise all the powers and authority of the board in the management of our
business and affairs, except as specifically prohibited by the General
Corporation Law of the State of Delaware (the "DGCL"), the Liberty Charter or
Liberty's bylaws. The Executive Committee does not have power or authority to:
(1) approve or adopt, or recommend to the stockholders, any action or matter
expressly required by the DGCL to be submitted to stockholders for approval, or
(2) adopt, amend or repeal any of Liberty's bylaws.

The board, by resolution passed by a majority of the whole board present at
any meeting at which a quorum is present (provided that any such majority must
include a majority of the Class B Directors and Class C Directors) may from
time to time establish certain other committees of the board, consisting of one
or more directors of Liberty. Any committee so established will have the powers
delegated to it by resolution of the board, subject to applicable law and the
Liberty Charter.

Compensation of Directors

No member of our board of directors receives any compensation for serving on
our board. However, all members of our board are reimbursed for travel expenses
incurred to attend any meetings of our board or any committee thereof.

Compensation of Executive Officers

The following tables set forth information relating to compensation,
including grants of stock options and stock appreciation rights ("SARs") in
respect of securities of AT&T, for:

. our Chief Executive Officer;

. our four other most highly compensated executive officers for the fiscal
year ended December 31, 1999; and

. one additional executive officer who would have been included above but
for the fact that he was not serving as an executive officer of Liberty
for the full fiscal year ended December 31, 1999.

These executive officers are collectively referred to as our "named executive
officers."

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Summary Compensation Table. The following table sets forth information
concerning the compensation paid to the named executive officers by Liberty for
the two years ended December 31, 1999. Compensation for Mr. Vogel reflects the
annual compensation that would have been paid to him had he been serving as an
executive officer of Liberty since the beginning of 1999 based on his 2000
annual compensation. Mr. Vogel became an executive officer of Liberty on
December 4, 1999.

Summary Compensation Table

<TABLE>
<CAPTION>
Annual
Compensation Long-Term Compensation
--------------- ---------------------------------------------
Securities
Restricted Underlying
Stock Award Options/SARs All Other
Name and Principal Bonus ($ in (# in Compensation
Position with Liberty Year Salary ($) ($) thousands) thousands) ($)
- ------------------------ ---- ---------- ------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert R. Bennett....... 1999 $1,000,000 $ -- $ -- -- $47,013(5)(6)
President and Chief
Executive Officer 1998 $ 559,354 $ -- $7,738(1) 6,000(3) $36,540(5)(6)
Gary S. Howard.......... 1999 $ 750,000 $23,210 $ -- -- $15,000(6)
Executive Vice President
and Chief Operating
Officer 1998 $ 533,769 $ -- $ -- 5,000(3) $15,000(6)
Charles Y. Tanabe....... 1999 $ 492,308 $ -- $ -- -- $15,000(6)
Senior Vice President
and General Counsel 1998 $ -- $ -- $ -- 1,200(3) $ --
Peter N. Zolintakis..... 1999 $ 496,865 $ -- $ -- -- $15,000(6)
Senior Vice President 1998 $ 76,946 $ -- $1,978(2) 1,200(3) $ --
David B. Koff........... 1999 $ 375,000 $ -- $ -- -- $15,000(6)
Senior Vice President 1998 $ 275,000 $ -- $ -- 1,200(3) $14,985(6)
Carl E. Vogel........... 1999 $ 500,000 $ -- $ -- 500(4) $15,000(6)
Senior Vice President 1998 $ -- $ -- $ -- -- $ --
</TABLE>
- --------

(1) On June 23, 1998, pursuant to the Tele-Communications, Inc. 1998 Incentive
Plan (the "1998 Incentive Plan"), Mr. Bennett was granted 200,000
restricted shares of Series A TCI Group tracking stock. These restricted
shares, as adjusted for the AT&T merger and a subsequent AT&T stock split,
became 232,710 restricted shares of AT&T common stock. The restricted
shares vest as to 50% of the shares in June 2002 and as to the remaining
50% in June 2003. At the end of 1999, the restricted shares had an
aggregate value of $11,824,577, based upon the closing sales price per
share of AT&T common stock on the New York Stock Exchange (the "NYSE") on
December 31, 1999. Cash dividends on the restricted shares of AT&T common
stock are paid to Mr. Bennett.

(2) On November 15, 1998, pursuant to the 1998 Incentive Plan, Mr. Zolintakis
was granted 50,000 restricted shares of Series A TCI Group tracking stock.
These restricted shares, as adjusted for the AT&T merger and a subsequent
AT&T stock split, became 58,177 restricted shares of AT&T common stock. All
of the restricted shares vest in November 2000. At the end of 1999, the
restricted shares had an aggregate value of $2,956,119, based upon the
closing sales price per share of AT&T common stock on the NYSE on December
31, 1999. Cash dividends on the restricted shares of AT&T common stock are
paid to Mr. Zolintakis.

(3) On December 29, 1998, pursuant to the 1998 Incentive Plan, these executive
officers were granted options in tandem with SARs to acquire shares of
TCI's Series A Liberty Media Group tracking stock. In the AT&T merger,
those options and tandem SARs were converted into options and rights with
respect to AT&T Class A Liberty Media Group tracking stock at an exercise
price of $21.62 per share, as adjusted for a subsequent two-for-one stock
split. The options and tandem SARs vest evenly over five years on each
anniversary of the date of grant. The options and tandem SARs expire on
December 29, 2008, subject to earlier termination in certain events.
Notwithstanding the vesting schedule as set forth in the option agreements,
the options and SARs will immediately vest and become exercisable if the
grantee's employment with Liberty terminates by reason of disability or the
grantee dies while employed by Liberty.

(4) Consists of SARs granted to Mr. Vogel on November 2, 1999, which vest and
become exercisable ratably over a five-year term, commencing on each
anniversary of the date of the grant. The SARs expire on

81
<PAGE>

November 2, 2009, subject to earlier termination in certain events. Upon the
valid exercise of SARs, Mr. Vogel shall be entitled to receive from Liberty
cash equal to the excess of the fair value of each share of AT&T Class A
Liberty Media Group tracking stock with respect to which such SARs have been
exercised over $37.25 per share. Notwithstanding the vesting schedule as set
forth in the option agreements, the SARs will immediately vest and become
exercisable if the grantee's employment with Liberty terminates by reason of
disability or the grantee dies while employed by Liberty.

(5) Includes $32,013 and $21,540 which consists of the amounts of premiums paid
by Liberty in fiscal 1999 and 1998, respectively, pursuant to split dollar,
whole life insurance policies for the insured executive officer. Liberty
will pay a portion of the premiums annually until the first to occur of:

. 10 years from the date of the policy;
. the insured executive's death;
. the premiums are waived under a waiver of premium provision;
. the policy is terminated as set forth below; and
. premiums are prepaid in full for the 10-year period as set forth
below.

The insured executive has granted an assignment of policy benefits in favor
of Liberty in the amounts of the premiums paid by Liberty. At the end of
such 10-year period or upon acceleration of premiums as described below, the
entire policy vests to the sole benefit of the insured executive and Liberty
will remove or cancel the assignment in its favor against the policy. In the
event of a change of control of Liberty, liquidation of Liberty or sale of
substantially all of the assets of Liberty, the policy will immediately be
prepaid in full through the tenth year, prior to such event. Similarly, if
the insured executive is dismissed for any reason (except for conviction of
a felony class miscarriage of responsibilities as a Liberty officer),
Liberty will immediately prepay and fully fund the policy through the tenth
year. Upon any of the foregoing events, the policy will vest to the sole
benefit of the insured executive. If, however, the insured executive
voluntarily chooses to terminate employment (and that decision is not a
result of pressure from Liberty to resign or a resignation related to an
adverse change in Liberty or its affiliates) without cause, Liberty will
have no further obligation to fund premiums, but the policy will vest to the
sole benefit of the insured executive.

(6) Amounts represent contributions to the Liberty Media 401(k) Savings Plan
(the "Liberty Savings Plan"), formerly the TCI 401(k) Stock Plan. The
Liberty Savings Plan provides employees with an opportunity to save for
retirement. The Liberty Savings Plan participants may contribute up to 10%
of their compensation and Liberty contributes a matching contribution of
100% of the participants' contributions. Participant contributions to the
Liberty Savings Plan are fully vested upon contribution.

Generally, participants acquire a vested right in Liberty contributions as
follows:

<TABLE>
<CAPTION>
Years of service Vesting Percentage
---------------- ------------------
<S> <C>
Less than 1................... 0%
1-2........................... 33%
2-3........................... 66%
3 or more..................... 100%
</TABLE>

With respect to Liberty contributions made to the Liberty Savings Plan in
1999 and 1998, Messrs. Bennett, Howard and Koff are fully vested.

Directors who are not employees of Liberty are ineligible to participate in
the Liberty Savings Plan. Under the terms of the Liberty Savings Plan,
employees are eligible to participate after three months of service.

Option and SAR Grants in Last Fiscal Year. The following table sets forth
information regarding free-standing SARs granted to the executive officer named
in the table below during the year ended December 31, 1999 (numbers of
underlying securities and dollar amounts present value in thousands). No other
named executive officer was granted stock options or SARs during the year ended
December 31, 1999.

82
<PAGE>

Option and SAR Grants in the Last Fiscal Year

<TABLE>
<CAPTION>
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base Grant
Options Employees in Price Expiration Date Present
Name Granted (1) 1998 ($/Sh) Date Value (2)
- ---- ----------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Carl E. Vogel........ 500 90% $37.25 11/02/09 $21,765
</TABLE>
- --------

(1) Consists of SARs granted to Mr. Vogel on November 2, 1999, which vest and
become exercisable ratably over a five-year term, commencing on each
anniversary of the date of the grant. The SARs expire on November 2,
2009, subject to earlier termination in certain events. Upon the valid
exercise of SARs, Mr. Vogel shall be entitled to receive from Liberty
cash equal to the excess of the fair value of each share of AT&T Class A
Liberty Media Group tracking stock with respect to which such SARs have
been exercised over $37.25 per share. Notwithstanding the vesting
schedule as set forth in the option agreements, the SARs will immediately
vest and become exercisable if the grantee's employment with Liberty
terminates by reason of disability or the grantee dies while employed by
Liberty.

(2) Liberty used the low sales price per share of AT&T Class A Liberty Media
Group tracking stock on the NYSE on the date of the grant in determining
the grant-date market price of the security underlying the free-standing
SARs.

(3) The value shown is based on the Black-Scholes model and is stated in
current annualized dollars on a present value basis. The key assumptions
used in the model for purposes of this calculation include the following:

. a 6.73% discount rate;

. a volatility factor based upon the historical trading pattern of
AT&T Class A Liberty Media Group tracking stock;

. the 10-year option term; and

. the closing price of AT&T Class A Liberty Media Group tracking
stock on December 31, 1999.

The actual value the executive may realize will depend upon the extent to
which the stock price exceeds the exercise price on the date the option is
exercised. Accordingly, the value, if any, realized by the executive would
not necessarily be the value determined by the model.

Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Values. The
following table sets forth information concerning exercises of stock options
and SARs by the named executive officers during the year ended December 31,
1999 (numbers of securities and dollar amounts in thousands).

83
<PAGE>

Aggregated Option/SAR Exercises in the Last Fiscal Year and
Fiscal Year-End Option/SAR Values

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options/SARs at Options/SARs at
Acquired Value December 31, 1999 (#) December 31, 1999
on Exercise Realized Exercisable/ ($) Exercisable/
Name (#)(1) ($) Unexercisable Unexercisable
- ---- ----------- -------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Robert R. Bennett
Exercisable
AT&T Class A Liberty
Media Group .......... 935 $43,081 3,091 $130,861
AT&T common stock...... -- -- 25 $ 941
TCI Group Series A
(2)................... 191 $10,985 -- --
Unexercisable
AT&T Class A Liberty
Media Group .......... -- -- 6,006 $228,723
AT&T common stock...... -- -- 45 $ 1,685
Gary S. Howard
Exercisable
AT&T Class A Liberty
Media Group .......... 256 $13,017 1,014 $ 29,876
AT&T common stock...... 39 $ 1,604 47 $ 1,797
TCI Group Series A
(2)................... 116 $ 5,852 -- --
Unexercisable
AT&T Class A Liberty
Media Group .......... -- -- 4,019 $141,702
AT&T common stock...... -- -- 23 $ 895
Charles Y. Tanabe
Exercisable
AT&T Class A Liberty
Media Group .......... 240 $ 8,011 -- --
Unexercisable
AT&T Class A Liberty
Media Group .......... -- -- 960 $ 33,785
Peter N. Zolintakis
Exercisable
AT&T Class A Liberty
Media Group .......... 240 $ 7,861 -- --
Unexercisable
AT&T Class A Liberty
Media Group .......... -- -- 960 $ 33,785
David B. Koff
Exercisable
AT&T Class A Liberty
Media Group .......... -- -- 623 $ 26,517
AT&T common stock...... -- -- 4 $ 157
TCI Group Series A
(2)................... 4 $ 187 -- --
Unexercisable
AT&T Class A Liberty
Media Group .......... -- -- 1,131 $ 42,315
Carl E. Vogel
Unexercisable
AT&T Class A Liberty
Media Group .......... -- -- 500 $ 9,781
</TABLE>
- --------

(1) Represents the number of shares underlying SARs which were exercised in
1999.

(2) Represents the number of shares of TCI Group Series A tracking stock
exercised and value realized prior to the AT&T merger.

84
<PAGE>

Employment Contracts

In connection with the AT&T merger, an employment agreement between Dr.
Malone and TCI was assigned to Liberty. The term of Dr. Malone's employment
agreement is extended daily so that the remainder of the employment term is
five years. The employment agreement was amended in June 1999 to provide for,
among other things, an annual salary of $2,600, subject to increase upon
approval of Liberty's board. Additionally, the employment agreement provides
for personal use of Liberty's aircraft and flight crew, limited to an aggregate
value of $200,000 per year, and payment or reimbursement of professional fees
and expenses incurred by Dr. Malone for estate and tax planning services.

Dr. Malone's employment agreement provides, among other things, for deferral
of a portion (not in excess of 40%) of the monthly compensation payable to him.
The deferred amounts will be payable in monthly installments over a 20-year
period commencing on the termination of Dr. Malone's employment, together with
interest thereon at the rate of 8% per annum compounded annually from the date
of deferral to the date of payment.

Dr. Malone's employment agreement also provides that, upon termination of his
employment by Liberty (other than for cause, as defined in the agreement) or if
Dr. Malone elects to terminate the agreement because of a change in control of
Liberty, all remaining compensation due under the agreement for the balance of
the employment term shall be immediately due and payable.

Dr. Malone's agreement provides that, during his employment with Liberty and
for a period of two years following the effective date of his termination of
employment with Liberty, unless termination results from a change in control of
Liberty, he will not be connected with any entity in any manner specified in
the agreement, which competes in a material respect with the business of
Liberty. The agreement provides, however, that Dr. Malone may own securities of
any corporation listed on a national securities exchange or quoted in The
Nasdaq Stock Market to the extent of an aggregate of 5% of the amount of such
securities outstanding.

For a period of 12 months following a change in control, as defined in Dr.
Malone's employment agreement, Liberty's ability to terminate Dr. Malone's
employment for cause will be limited to situations in which Dr. Malone has
entered a plea of guilty to, or has been convicted of, the commission of a
felony offense.

Dr. Malone's agreement also provides that in the event of termination of his
employment with Liberty, he will be entitled to receive 240 consecutive monthly
payments of $15,000 (increased at the rate of 12% per annum compounded annually
from January 1, 1988 to the date payment commences), the first of which will be
payable on the first day of the month succeeding the termination of Dr.
Malone's employment. In the event of Dr. Malone's death, his beneficiaries will
be entitled to receive the foregoing monthly payments.

Liberty pays a portion of the annual premiums on three whole-life insurance
policies of which Dr. Malone is the insured and trusts for the benefit of
members of his family are the owners. The portion that Liberty pays is equal to
the "PS-58" costs, which represent the costs to buy one-year term insurance
coverage as set forth in IRS Pension Service Table No. 58. For the year ending
December 31, 1999, such amount will be $447,931. Liberty is the designated
beneficiary of the proceeds of such policies less an amount equal to the
greater of the cash surrender value thereof at the time of Dr. Malone's death
and the amounts of the premiums paid by the policy owners.

Dr. Malone deferred a portion of his monthly compensation under his previous
employment agreement. The obligation to pay that deferred compensation was
assumed by Liberty in connection with the AT&T merger. The compensation that he
deferred (together with interest on that compensation at the rate of 13% per
annum compounded annually from the date of deferral to the date of payment)
will continue to be payable under the terms of the previous agreement. The rate
at which interest accrues on the previously deferred compensation was
established in 1983 pursuant to the previous agreement.

85
<PAGE>

Liberty Media 401(k) Savings Plan

Liberty maintains an employee benefit plan known as the Liberty Media 401(k)
Savings Plan. This plan is intended to be a qualified employee plan under
Sections 401(a) and 401(k) of the Internal Revenue Code of 1986. An employee
must be an employee of Liberty or of an employer owned 80% or more by Liberty
(a "Participating Employer") and must complete three months of continuous
employment and be at least 18 years of age to participate in the plan. Credit
will be given for service with TCI, Liberty and their affiliates for
eligibility and vesting service under the plan. The employee will commence
participation as of the first payroll period following the employee's
completion of the eligibility requirements and his or her enrollment in the
plan.

Upon commencing participation, the participant may elect to make pre-tax
contributions, after-tax contributions, or both to the plan. All participant
contributions are made by payroll deduction and all participant contributions
may not exceed 10% of the participant's wages from the Participating Employer.
Pre-tax participant contributions are not subject to income tax when
contributed to the plan, but will be subject to FICA taxes when contributed to
the plan. Those pre-tax participant contributions (and earnings) will be taxed
to the participant when the participant receives a distribution from the plan.
Pre-tax participant contributions are limited to $10,000 for each year (as
adjusted for cost of living increases). After-tax participant contributions are
subject to income taxes and FICA taxes when contributed to the plan, but
earnings on those contributions will not be taxed to the participant until the
participant receives a distribution from the plan.

A participant may change the amount of his or her participant contributions
as of any prospective payroll period. Participant contributions always are 100%
vested. The participant may direct the investment of his or her participant
contributions, and earnings on those amounts, into a variety of investment
options, including the AT&T Class A Liberty Media Group Common Stock Fund and
the AT&T Common Stock Fund (the "Employer Stock Funds").

Only the first $160,000 (as adjusted in 2000 and thereafter for cost of
living increases) of any participant's wages is taken into account for all
purposes under the plan, as required by law.

Generally, Liberty will make a matching contribution to the plan for each
plan year equal to 100% of each participant's participant contributions to the
plan, unless Liberty, in its discretion, decides upon a different percentage
for the matching contribution. All Liberty contributions to the plan are
invested solely in the AT&T Class A Liberty Media Group Common Stock Fund.

Liberty contributions to the plan become 33% vested after one year of
service, 66% vested after two years of service, and 100% vested after three
years of service. Generally, a year of service will be credited for each
twelve-month period of employment completed by the participant. In addition, a
participant will be 100% vested in his or her Liberty contributions upon
attaining normal retirement age (age 65), upon becoming totally disabled, or
upon the participant's death while employed with a Participating Employer.

Liberty contributions to the plan (and earnings on those contributions) on
behalf of a participant are not taxable to the participant until those amounts
are distributed from the plan. Liberty receives a deduction for the amounts it
contributes to the plan.

A participant can withdraw his or her participant contributions and Liberty
contributions while he or she remains employed only in the following limited
circumstances: upon attaining age 59 1/2, the participant may request a
withdrawal of all or any portion of his or her Liberty contributions account
(including earnings on such contributions) and his or her pre-tax participant
contributions account (including earnings on such contributions). A participant
may withdraw any portion of his or her after-tax participant contributions at
any time. Upon experiencing a financial hardship, a participant may request a
withdrawal of his or her pre-tax participant contributions (but not the
earnings on such contributions) in an amount necessary to meet the financial
need. A participant who takes a hardship withdrawal may not contribute to the
plan for 12 months after the withdrawal, and there are limitations on the
maximum salary reduction amounts that may be made in the year following the
year of the hardship withdrawal.

86
<PAGE>

Upon terminating employment with Liberty, the participant may receive a
distribution of his or her entire vested account in the plan. If the vested
account equals $5,000 or less, the distribution will be made as soon as
administratively reasonable after the participant's termination of employment
occurs. If the participant's vested account exceeds $5,000, the participant
must consent to the distribution and such distribution will be made as soon as
administratively reasonable after the participant's consent to the distribution
is received. The participant must commence distributions from the plan by April
1 of the year following the year in which occurs the later of the participant's
attainment of age 70 1/2 or the participant's retirement.

Distributions will be made in cash, however, the participant may elect to
receive that portion of his or her vested account which is invested in the
Employer Stock Funds in whole shares of those Employer Stocks. Any qualified
distribution from the plan may be rolled over to an IRA or other qualified plan
upon the election of the participant.

A 10% federal penalty tax may be imposed on the taxable amount of certain
early distributions from the plan. The early distribution penalty tax does not
apply to distributions made on account of: the death or disability of the
participant, the participant's attainment of age 55 and separation from
service, the participant's payment of certain medical expenses, payment to an
alternate payee under a qualified domestic relations order, or the
participant's attainment of age 59 1/2.

Security Ownership of Management

The following table sets forth information with respect to the ownership by
each director and each of the named executive officers of Liberty and by all
directors and executive officers of Liberty as a group of shares of AT&T common
stock and Class A and Class B Liberty Media Group tracking stock, all of which
are equity securities of AT&T Corp., which owns 100% of the outstanding common
stock of TCI, which in turn indirectly owns 100% of the outstanding common
stock of Liberty. The table also sets forth information with respect to the
ownership by each director and each of the named executive officers of Liberty
and by all directors and executive officers of Liberty as a group of shares of
series A common stock of Liberty Digital, Inc., a subsidiary of Liberty. The
table also sets forth information with respect to the ownership by each
director and each of the named executive officers of Liberty and by all
directors and executive officers of Liberty as a group of shares of TCI's Class
B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock. The AT&T
Liberty Media Group tracking stock is intended to reflect the separate
performance of the businesses and assets attributed to the Liberty Media Group.
Liberty is included in the Liberty Media Group, and the businesses and assets
of Liberty and its subsidiaries constitute substantially all of the businesses
and assets of the Liberty Media Group. See "Relationship with AT&T and Certain
Related Transactions--Relationship with AT&T."

The AT&T charter provides that, except as otherwise required by New York law
or any special voting rights of AT&T preferred stock, the holders of AT&T
common stock, AT&T Liberty Media Group tracking stock and AT&T preferred stock,
if any, entitled to vote with the common shareholders, vote together as one
class. No separate class vote is required for the approval of any matter except
as described in the next sentence. The following circumstances require the
separate class approval of the AT&T Liberty Media Group tracking stock:
. any amendment to the AT&T charter that would change the total number of
authorized shares or the par value of AT&T Liberty Media Group tracking
stock or that would adversely change the rights of AT&T Liberty Media
Group tracking stock;
. a Covered Disposition, which generally includes a sale or transfer by
AT&T of its equity interest in Liberty or Liberty Media Group LLC or a
grant of a pledge or other security interest in the equity interest of
AT&T in Liberty or Liberty Media Group LLC; and
. any merger or similar transaction in which AT&T Liberty Media Group
tracking stock is converted, reclassified or changed into or otherwise
exchanged for any consideration unless specified requirements are met
that are generally intended to ensure that the rights of the holders are
not materially altered and the composition of the holders is not
changed.

87
<PAGE>

In a separate shareholder vote with respect to any of the foregoing matters,
the ownership of AT&T Class A Liberty Media Group and AT&T Class B Liberty
Media Group tracking stock indicated in the table below as beneficially owned
by (1) Dr. Malone would entitle him to cast 32.63% of the votes on such matter
and (2) by all directors and executive officers as a group would entitle them
to cast, in the aggregate, 32.96% of the votes on such matter. No other person
named in the table below had the right, at June 30, 1999, to cast 1% or more of
the votes on any such matter.

The following information is given as of June 30, 1999 and, in the case of
percentage ownership information, is based on 3,196,236,144 shares of AT&T
common stock, 1,156,716,104 shares of AT&T Class A Liberty Media Group tracking
stock, 108,430,704 shares of AT&T Class B Liberty Media Group tracking stock,
24,061,232 shares of Liberty Digital series A common stock and 1,552,490 shares
of TCI Class B Preferred Stock outstanding on that date. Shares of AT&T common
stock, AT&T Class A and Class B Liberty Media Group tracking stock and Liberty
Digital, Inc. series A common stock issuable upon exercise or conversion of
convertible securities are deemed to be outstanding for the purpose of
computing the percentage ownership and overall voting power of persons
beneficially owning such convertible securities, but have not been deemed to be
outstanding for the purpose of computing the percentage ownership or overall
voting power of any other person. So far as is known to Liberty, the persons
indicated below have sole voting power with respect to the shares indicated as
owned by them except as otherwise stated in the notes to the table.

<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Ownership of Voting
Name of Beneficial Owner Title of Class (in thousands) Class Power
- ------------------------ -------------- -------------- ------- ------
<S> <C> <C> <C> <C>
John C. Malone.......... AT&T common stock 34,826(/1/)(/2/) 1.09% 3.20%
Class A Liberty Media Group 3,220(/1/)(/2/) *
Class B Liberty Media Group 96,964(/1/)(/2/)(/3/) 88.95%
Liberty Digital Series A 0
TCI Class B Preferred 274(/4/) 17.62% *

Robert R. Bennett....... AT&T common stock 265(/5/)(/6/) * *
Class A Liberty Media Group 2,851(/5/) *
Class B Liberty Media Group 0
Liberty Digital Series A 40(/7/) * *
TCI Class B Preferred 1 * *

Gary S. Howard.......... AT&T common stock 44(/8/)(/9/) * *
Class A Liberty Media Group 227(/8/)(/9/) *
Class B Liberty Media Group 0
Liberty Digital Series A 0
TCI Class B Preferred 0

Paul A. Gould........... AT&T common stock 0 *
Class A Liberty Media Group 753(/10/) *
Class B Liberty Media Group 214 *
Liberty Digital Series A 0
TCI Class B Preferred 12 * *

Jerome H. Kern.......... AT&T common stock 936(/11/)(/12/) * *
Class A Liberty Media Group 1,010(/11/)(/12/) *
Class B Liberty Media Group 0
Liberty Digital Series A 0
TCI Class B Preferred 0

John C. Petrillo........ AT&T common stock 198(/13/) * *
Class A Liberty Media Group 0
Class B Liberty Media Group 0
Liberty Digital Series A 0
TCI Class B Preferred 0
</TABLE>

88
<PAGE>

<S> <C> <C> <C> <C>
Larry E. Romrell........ AT&T common stock 292(/14/)(/15/) * *
Class A Liberty Media Group 1,181(/14/)(/15/) *
Class B Liberty Media Group 2 *
Liberty Digital Series A 0
TCI Class B Preferred 0

Daniel E. Somers........ AT&T common stock 120(/16/) * *
Class A Liberty Media Group 0
Class B Liberty Media Group 0
Liberty Digital Series A 0
TCI Class B Preferred 0

David B. Koff........... AT&T common stock 0 *
Class A Liberty Media Group 370(/17/) *
Class B Liberty Media Group 0
Liberty Digital Series A 40(/18/) * *
TCI Class B Preferred 0

Charles Y. Tanabe....... AT&T common stock 0 *
Class A Liberty Media Group 0 *
Class B Liberty Media Group 0
Liberty Digital Series A 0
TCI Class B Preferred 0

Carl E. Vogel........... AT&T common stock 0 *
Class A Liberty Media Group 9 *
Class B Liberty Media Group 0
Liberty Digital Series A 0
TCI Class B Preferred 0

Peter N. Zolintakis..... AT&T common stock 58(/19/) * *
Class A Liberty Media Group 88 *
Class B Liberty Media Group 0
Liberty Digital Series A 0
TCI Class B Preferred 0

David J. A. Flowers..... AT&T common stock 1 * *
Class A Liberty Media Group 372(/20/) *
Class B Liberty Media Group 0
Liberty Digital Series A 0
TCI Class B Preferred 0

John D. Zeglis.......... AT&T common stock 516(/21/) * *
Class A Liberty Media Group 0
Class B Liberty Media Group 0
Liberty Digital Series A 0
TCI Class B Preferred 0

All directors and
executive officers as a
group (15 persons)..... AT&T common stock 37,257(/22/)(/23/) 1.17% 3.29%
Class A Liberty Media Group 10,393(/3/)(/22/)(/23/) *
Class B Liberty Media Group 97,180(/22/)(/23/) 89.14%
Liberty Digital Series A 80(/24/) *% *
TCI Class B Preferred 287(/4/) 18.46% *
</TABLE>
- --------

*Less than one percent

(1) Includes beneficial ownership of the following shares which may be
acquired within 60 days pursuant to stock options granted in tandem with
stock appreciation rights: (a) 162,897 shares of AT&T common stock; (b)
3,194,600 shares of AT&T Class A Liberty Media Group tracking stock; and
(c) 582,400 shares of AT&T Class B Liberty Media Group tracking stock.

(2) Includes 1,004,620 shares of AT&T common stock, 25,452 shares of AT&T
Class A Liberty Media Group tracking stock and 1,704,718 shares of AT&T
Class B Liberty Media Group tracking stock held by Dr. Malone's wife, Mrs.
Leslie Malone, as to which Dr. Malone has disclaimed beneficial ownership.

89
<PAGE>

(3) In connection with the AT&T merger, TCI assigned to Liberty its rights
under a call agreement with Dr. Malone and Dr. Malone's wife (the
"Malones") and a call agreement with the Estate of Bob Magness, the Estate
of Betsy Magness, Gary Magness (individually and in certain representative
capacities) and Kim Magness (individually and in certain representative
capacities) (collectively, the "Magness Group"). As a result, Liberty has
the right, under certain circumstances, to acquire the AT&T Class B
Liberty Media Group tracking stock owned by the Malones and the Magness
Group. Further, in connection with the AT&T merger, TCI assigned to
Liberty its rights under a shareholders agreement with the Magness Group
and the Malones, pursuant to which, among other things, Dr. Malone has an
irrevocable proxy, under certain circumstances, to vote the AT&T Class B
Liberty Media Group tracking stock or any super voting class of equity
securities issued by Liberty held by the Magness Group. See "Relationship
with AT&T and Certain Related Transactions--Other Related Party
Transactions--Certain Rights to Purchase Liberty Media Group Tracking
Stock," below for additional information related to the call agreements
and the shareholders' agreement.

As a result of certain provisions of the shareholders' agreement referred
to above, Dr. Malone's beneficial ownership of AT&T Class B Liberty Media
Group tracking stock includes 47,791,166 shares held by the Magness Group.

(4) Includes 6,900 shares of TCI Class B Preferred Stock held by Dr. Malone's
wife, Mrs. Leslie Malone, as to which Dr. Malone has disclaimed beneficial
ownership.

(5) Includes beneficial ownership of the following shares which may be
acquired within 60 days pursuant to stock options granted in tandem with
stock appreciation rights: (a) 15,475 shares of AT&T common stock; and (b)
2,808,872 shares of AT&T Class A Liberty Media Group tracking stock.

(6) Includes 232,710 restricted shares of AT&T common stock, none of which are
currently vested.

(7) Assumes the exercise in full of stock options to acquire 40,000 shares of
Liberty Digital series A common stock, all of which are currently
exercisable.

(8) Includes beneficial ownership of the following shares which may be
acquired within 60 days pursuant to stock options granted in tandem with
stock appreciation rights: (a) 28,842 shares of AT&T common stock; and (b)
178,183 shares of AT&T Class A Liberty Media Group tracking stock.

(9) Includes 11,103 restricted shares of AT&T common stock and 11,350
restricted shares of AT&T Class A Liberty Media Group tracking stock, none
of which are currently vested.

(10) Includes beneficial ownership of 57,300 shares of AT&T Class A Liberty
Media Group tracking stock which may be acquired within 60 days pursuant
to stock options granted in tandem with stock appreciation rights.

(11) Includes beneficial ownership of the following shares which may be
acquired within 60 days pursuant to stock options granted in tandem with
stock appreciation rights: (a) 296,705 shares of AT&T common stock; and
(b) 629,551 shares of AT&T Class A Liberty Media Group tracking stock.

(12) Includes 481,267 restricted shares of AT&T common stock and 75,670
restricted shares of AT&T Class A Liberty Media Group tracking stock,
none of which are currently vested.

(13) Includes beneficial ownership of 195,944 shares of AT&T common stock
which may be acquired within 60 days pursuant to stock options.

(14) Includes beneficial ownership of the following shares which may be
acquired within 60 days pursuant to stock options granted in tandem with
stock appreciation rights: (a) 136,833 shares of AT&T common stock; and
(b) 1,004,292 shares of AT&T Class A Liberty Media Group tracking stock.

(15) Includes 149,456 restricted shares of AT&T common stock and 75,268
restricted shares of AT&T Class A Liberty Media Group tracking stock,
none of which are currently vested.

(16) Includes beneficial ownership of 118,998 shares of AT&T common stock
which may be acquired within 60 days pursuant to stock options.

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<PAGE>

(17) Includes beneficial ownership of 364,979 shares of AT&T Class A Liberty
Media Group tracking stock which may be acquired within 60 days pursuant
to stock options granted in tandem with stock appreciation rights.

(18) Assumes the exercise in full of stock options to acquire 40,000 shares of
Liberty Digital series A common stock, all of which are currently
exercisable.

(19) Includes 58,177 restricted shares of AT&T common stock, none of which are
currently vested.

(20) Includes beneficial ownership of 370,000 shares of AT&T Class A Liberty
Media Group tracking stock which may be acquired within 60 days pursuant
to stock options granted in tandem with stock appreciation rights.

(21) Includes beneficial ownership of 507,446 shares of AT&T common stock
which may be acquired within 60 days pursuant to stock options.

(22) Includes beneficial ownership of the following shares which may be
acquired within 60 days pursuant to stock options granted in tandem with
stock appreciation rights: (a) 1,463,140 shares of AT&T common stock; (b)
8,897,777 shares of AT&T Class A Liberty Media Group tracking stock; and
(c) 582,400 shares of AT&T Class B Liberty Media Group tracking stock.

(23) Includes 932,713 restricted shares of AT&T common stock and 162,288
restricted shares of AT&T Class A Liberty Media Group tracking stock,
none of which are currently vested.

(24) Assumes the exercise in full of stock options to acquire 80,000 shares of
Liberty Digital series A common stock, all of which are currently
exercisable.

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<PAGE>

SELLING SECURITY HOLDERS

We issued and sold the debentures in a private placement that was exempt from
the registration requirements of the Securities Act. We understand that the
initial purchasers of the debentures subsequently resold the debentures in
compliance with Rule 144A. Prior to the date of this prospectus, the debentures
were transferable in accordance with Rule 144A and were eligible for trading in
Nasdaq's Private Offerings, Resales and Trading Through Automated Linkages
(PORTAL) market. The selling security holders listed below (including their
transferees, pledgees, donees or successors) may offer and sell pursuant to
this prospectus any or all of the debentures owned by them from time to time.

In accordance with the terms of a registration rights agreement that we
entered into with the initial purchasers of the debentures, we have made this
prospectus available to the selling security holders so that they may publicly
resell their debentures.

The following table sets forth information with respect to each selling
security holder and the principal amount of debentures owned by it. The entire
principal amount of the debentures owned by each of the selling security
holders named in the table may be sold pursuant to this prospectus. Because
each selling security holder may sell all or some of its debentures from time
to time under this prospectus, no estimate can be given at this time as to the
principal amount of debentures that will be held by a particular selling
security holder following any sale of debentures by it. In addition, some of
the selling security holders named in the table may have sold, transferred,
loaned or otherwise disposed of all or a portion of their debentures since the
date they last advised us of their holdings. Hence, the total principal amount
of debentures included in the following table does not equal the maximum
aggregate principal amount of debentures to which this prospectus relates.
Changes in the information concerning the selling security holders will be set
forth in supplements to this prospectus, when and if necessary.

<TABLE>
<CAPTION>
Principal
amount of
debentures Percentage of
that may be outstanding
Name sold ($) debentures
- ---- ----------- -------------
<S> <C> <C>
AIG Soundshore Strategic Holding Fund Ltd (formerly
Soundshore Strategic Holding Fund Ltd.)............ 1,750,000 *
Allstate Insurance Company.......................... 6,750,000 *
Allstate Life Insurance Company..................... 15,000,000 1.73%
Aloha Airlines Non-Pilots Pension Trust............. 160,000 *
Aloha Airlines Pilots Retirement Trust.............. 90,000 *
American Fidelity Assurance Company................. 175,000 *
Amerisure Companies/Michigan Mutual Insurance
Company............................................ 625,000 *
Arkansas PERS....................................... 3,200,000 *
Arkansas Teachers Retirement System................. 2,716,000 *
Associated Electric & Gas Insurance Services
Limited............................................ 1,275,000 *
Bank Austria Cayman Island, Ltd. by Ramius Capital
Group LLC, its investment advisor.................. 5,000,000 *
Bankers Life and Casualty Company-Convertible....... 2,000,000 *
Bankers Life Insurance Co. L.A. + Co. Single
Premium............................................ 50,000 *
Bankers Life Insurance Co........................... 40,000 *
Bankers Trust, Trustee for Chrysler Corp. Employee
#1 Pension Plan, dated April 1, 1989............... 4,190,000 *
Banque Nationale de Paris Georgetown Branch by
Banque Nationale de Paris New York Branch as
Agent.............................................. 8,000,000 *
Baptist Health of South Florida..................... 179,000 *
Bay County-PERS..................................... 500,000 *
Bear, Stearns & Co. Inc............................. 3,422,000 *
BI Convertibles Internacional, FIM.................. 150,000 *
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
Principal
amount of
debentures Percentage of
that may be outstanding
Name sold ($) debentures
- ---- ----------- -------------
<S> <C> <C>
Blue Cross Blue Shield of Florida................... 2,660,000 *
Boilermakers Blacksmith Pension Trust............... 2,500,000 *
Boilermakers Blacksmith Pension Trust by Calamos
Asset Management, Inc.
as Investment Manager.............................. 1,050,000 *
BP Amoco Savings Plan............................... 500,000 *
C&H Sugar Company, Inc.............................. 250,000 *
CALAMOS(R) Convertible Fund--CALAMOS(R) Investment
Trust.............................................. 1,225,000 *
CALAMOS(R) Convertible Portfolio--CALAMOS(R)
Advisors Trust..................................... 20,000 *
CALAMOS(R) Global Growth and Income Fund--CALAMOS(R)
Investment Trust................................... 80,000 *
CALAMOS(R) Growth and Income Fund--CALAMOS(R)
Investment Trust................................... 525,000 *
CALAMOS(R) Market Neutral Fund--CALAMOS(R)
Investment Trust................................... 160,000 *
California Public Employees' Retirement System...... 16,000,000 1.84%
Capital Guardian Global Convertible Fund #011....... 748,000 *
CapitalCare, Inc.................................... 70,000 *
CareFirst of Maryland, Inc.......................... 300,000 *
Champion International Corporation Master Retirement
Trust.............................................. 900,000 *
Circlet (IMA) Limited............................... 2,200,000 *
City of Birmingham Retirement & Relief System....... 2,025,000 *
City of Knoxville Pension System.................... 350,000 *
Conseco Annuity Assurance Company--Convertible...... 2,000,000 *
Conseco Annuity Assurance Company--Multi-Bracket
Annuity Convertible Bond Fund...................... 4,000,000 *
Conseco Fund Group--Convertible Securities Fund..... 2,000,000 *
Conseco Health Insurance Company--Convertible....... 2,000,000 *
Conseco Senior Health Insurance Company--
Convertible........................................ 2,000,000 *
Conseco Variable Insurance Company--Convertible..... 1,000,000 *
Consulting Group Capital Markets Funds.............. 160,000 *
Continental Assurance Company Separate Account [E].. 1,400,000 *
Continental Casualty Company........................ 8,600,000 *
Delaware PERS....................................... 2,700,000 *
Delta Airlines Master Trust......................... 2,000,000 *
Deutsche Bank Securities Inc........................ 107,252,000 12.34%
Donaldson, Lufkin & Jenrette Securities Corp........ 15,000,000 1.73%
Dorinco Reinsurance Company......................... 550,000 *
Dow Chemical Company Employees' Retirement Plan,
The................................................ 2,000,000 *
ELF Aquitaine Pension............................... 150,000 *
Employee Benefit Convertible Securities Fund........ 300,000 *
Engineers Joint Pension Fund........................ 372,000 *
Equity & Convertible Fund........................... 1,800,000 *
Fidelity Advisor Series I: Fidelity Advisor Balanced
Fund............................................... 1,970,000 *
Fidelity Destiny Portfolios: Destiny II............. 4,330,000 *
Fidelity Financial Trust: Fidelity Convertible
Securities Fund.................................... 14,000,000 1.61%
Fidelity Hastings Street Trust: Fidelity Fund....... 10,870,000 1.25%
Fidelity Management Trust Company on behalf of
accounts managed by it............................. 2,232,000 *
Fidelity Puritan Trust: Fidelity Puritan Fund....... 17,982,000 2.07%
Finance Factors Limited............................. 480,000 *
FIST Convertible Securities Fund.................... 2,000,000 *
FIST Equity Income Fund............................. 4,000,000 *
FIST Franklin Asset Allocation Fund................. 1,250,000
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
Principal
amount of
debentures Percentage of
that may be outstanding
Name sold ($) debentures
- ---- ----------- -------------
<S> <C> <C>
Fondren Foundation, The............................. 70,000 *
Forest Alternative Strategies Fund II LP Series
A5I................................................ 1,260,000 *
Forest Alternative Strategies Fund II LP Series
A5M................................................ 930,000 *
Forest Convertible Fund............................. 300,000 *
Forest Fulcrum Fund LP.............................. 10,440,000 1.2%
Forest Global Convertible Fund Series A-5........... 43,290,000 4.43%
Forest Performance Fund LP.......................... 1,100,000 *
Forrestal Funding Master Trust...................... 9,000,000 1.04%
Franklin and Marshall College....................... 315,000 *
Franklin Custodian Funds, Inc.: Franklin Utilities
Fund............................................... 10,000,000 1.15%
FreeState Health Plan, Inc.......................... 120,000 *
General Electric Mortgage Insurance Corporation..... 5,100,000 *
General Motors Welfare Benefit Trust (L/T Veba)..... 3,300,000 *
Genesee County Employees' Retirement System......... 575,000 *
Granville Capital Corp.............................. 6,000,000 *
Greek Catholic Union................................ 20,000 *
Greek Catholic Union II............................. 20,000 *
Group Hospitalization and Medical Services, Inc..... 400,000 *
Hamilton Partners Limited........................... 15,000,000 1.72%
Hawaiian Airlines Employees Pension Plan-IAM........ 135,000 *
Hawaiian Airlines Pension Plan for Salaried
Employees.......................................... 35,000 *
Hawaiian Airlines Pilots Retirement Plan............ 210,000 *
HBK Master Fund L.P................................. 72,000,000 8.28%
Healthcare Underwriters Mutual Insurance Company.... 900,000 *
HealthNow New York, Inc............................. 90,000 *
Hull Overseas Ltd................................... 500,000 *
ICI American Holdings Trust......................... 1,300,000 *
IL Annuity & Insurance Co........................... 35,000,000 4.03%
Island Insurance Convertible Acct. ................. 405,000 *
J. M. Hull Associates, L.P.......................... 500,000 *
Jackson County Employees' Retirement System......... 425,000 *
Jefferies & Co., Inc................................ 1,415,000 *
JMG Convertible Investments, L.P.................... 15,000,000 1.72%
JMG Triton Offshore Fund Limited.................... 15,000,000 1.72%
KD Offshore Fund C.V................................ 1,000,000 *
Kerr McGee Corporation.............................. 1,925,000 *
Kettering Medical Center Funded Depreciation
Account............................................ 70,000 *
Key Asset Management as Investment Manager for
Aerojet Inc Fdn.................................... 165,000 *
Key Asset Management as Investment Manager for the
EB Convertible Sec. Fd............................. 4,410,000 *
Key Asset Management as Investment Manager for the
Field Fdn of Illinois.............................. 205,000 *
Key Asset Management as Investment Manager for
General Electric Mortgage Insurance................ 4,100,000 *
Key Asset Management as Investment Manager for the
Health Foundation of Greater Cincinnati............ 725,000 *
Key Asset Management as Investment Manager for the
Int'l Licensing Ind Mch Assoc #2................... 40,000 *
Key Asset Management as Investment Manager for the
JCPenney Life Ins. Co.............................. 2,500,000 *
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
Principal
amount of
debentures Percentage of
that may be outstanding
Name sold ($) debentures
- ---- ----------- -------------
<S> <C> <C>
Key Asset Management as Investment Manager for the
Key Tr. Convertible Sec. Fd........................ 755,000 *
Key Asset Management as Investment Manager for
Omnova Solutions................................... 300,000 *
Key Asset Management as Investment Manager for the
Parker Society/Convertible Fund.................... 690,000 *
Key Asset Management as Investment Manager for the
Potlatch-First Trust Co. of St. Paul............... 2,900,000 *
Key Asset Management as Investment Manager for the
Standard Insurance Company......................... 1,600,000 *
Key Asset Management as Investment Manager for the
Victory Convertible Sec. Fd........................ 1,000,000 *
Key Asset Management as Investment Manager for the
Charitable Sec. Fd................................. 4,260,000 *
Key Asset Management as Investment Manager for Tote
Convertible Bonds.................................. 225,000 *
Key Asset Management as Investment Manager for the
Union Security Life Insurance Co................... 130,000 *
Knoxville Utilities Board Retirement System......... 200,000 *
Lawrence Flinn, Jr. Master Partnership I............ 3,000,000 *
LB Series--Income Portfolio, Inc.................... 1,900,000 *
Lehman Brothers Inc. ............................... 4,800,000 *
Lions Club International Foundation................. 150,000 *
Lipper Convertibles, L.P............................ 19,150,000 2.20%
LLT Limited......................................... 1,865,000 *
Lutheran Brotherhood................................ 5,000,000 *
Lutheran Brotherhood Income Fund.................... 1,100,000 *
Lyxor Master Fund c/o Forest Investment Management
LLC................................................ 4,485,000 *
Macomb County Employees' Retirement System.......... 400,000 *
Massachusetts Mutual Life Insurance Company......... 5,495,000 *
MassMutual Corporate Value Partners Limited......... 1,750,000 *
MassMutual High Yield Partners II LLC............... 2,100,000 *
Medical Liability Mutual Insurance Company.......... 27,500,000 3.17%
Merrill Lynch, Pierce Fenner & Smith Inc. .......... 5,001,000 *
MFS Series Trust V: MFS Total Return Fund........... 1,160,000 *
MFS Series Trust VI: MFS Utilities Fund............. 5,776,000 *
MFS/Sun Life Series Trust--Utilities Series......... 1,420,000 *
MFS Variable Insurance Trust: MFS Utility Series.... 640,000 *
Morgan Stanley Dean Witter.......................... 2,000,000 *
Morgan Stanley Dean Witter Convertible Securities
Trust.............................................. 2,000,000 *
Museum of Fine Arts, Boston......................... 119,000 *
Museum of Fine Arts, Boston by Putnam Advisory
Company, Inc....................................... 100,000 *
Nalco Chemical Company.............................. 390,000 *
Nashville Electric Service.......................... 300,000 *
Nations Capital Income Fund......................... 4,000,000 *
NCMIC Insurance Company............................. 400,000 *
New Hampshire Retirement System..................... 610,000 *
Nicholas-Applegate Convertible Fund................. 675,000 *
</TABLE>

95
<PAGE>

<TABLE>
<CAPTION>
Principal
amount of
debentures Percentage of
that may be outstanding
Name sold ($) debentures
- ---- ----------- -------------
<S> <C> <C>
Nicholas-Applegate Investment Grade Convertible..... 50,000 *
Nomura Securities International Inc................. 37,500,000 4.32%
NORCAL Mutual Insurance Company..................... 350,000 *
OHIC Insurance Company.............................. 600,000 *
Oppenheimer Convertible Securities Fund............. 14,500,000 1.66%
Pacific Life Insurance Company...................... 1,500,000 *
Paloma Securities LLC............................... 22,825,000 2.63%
Paloma Strategic Securities Limited................. 4,925,000 *
Paribas............................................. 11,500,000 1.32%
Parker Hannifin Corporation......................... 120,000 *
Penn Treaty Network America Insurance Co............ 280,000 *
Peoples Benefit Life Insurance Company.............. 3,300,000 *
Peoples Benefit Life Insurance Company - (Teamsters
Separate Account).................................. 8,750,000 1%
Physicians Life..................................... 271,000 *
Physicians' Reciprocal Insurers Account #7.......... 3,000,000 *
Pilgrim Convertible Fund............................ 3,101,000 *
PIMCO Convertible Bond Fund......................... 3,000,000 *
PIMCO Total Return Fund............................. 1,000,000 *
Port Authority of Allegheny County Retirement and
Disability Allowance Plan for the Employees
Represented by Local 85 of the Amalgamated Transit
Union.............................................. 1,125,000 *
PRIM Board.......................................... 5,800,000 *
ProMutual........................................... 380,000 *
Provident Life & Accident Insurance Company......... 3,000,000 *
Putnam Balanced Retirement Fund..................... 170,000 *
Putnam Convertible Income-Growth Trust.............. 7,000,000 *
Putnam Convertible Opportunities and Income Trust... 280,000 *
Queens Health Plan.................................. 55,000 *
Radian Guaranty Inc., Lord Abbett Group, Investment
Advisor, First Union National Bank, Custodian...... 1,500,000 *
Ramius Capital Group Holdings, Ltd.................. 2,000,000 *
Ramius, L.P. ....................................... 2,000,000 *
Raphael II, Ltd. ................................... 1,360,000 *
RBC Capital Services Inc. c/o Forest Investment
Management LLC..................................... 250,000 *
RCG Baldwin, L.P.................................... 1,050,000 *
RCG Multi-Strategy Account, LP...................... 3,040,000 *
RGA Reinsurance Trust............................... 5,000,000 *
Rhone-Poulenc Rorer Pension Plan.................... 140,000 *
San Diego City Retirement........................... 748,000 *
San Diego County Convertible........................ 2,386,000 *
SoundShore Opportunity Holdings Fund Ltd............ 2,000,000 *
South Dakota Retirement System...................... 6,000,000 *
Southern Farm Bureau Life Insurance Company FRIC ... 2,075,000 *
Southern Farm Bureau Life Insurance Company......... 500,000
SPT................................................. 875,000 *
St. Albans Partners Ltd............................. 5,500,000 *
Starvest Managed Portfolio.......................... 275,000 *
State of Oregon Equity.............................. 9,000,000 1.03%
State of Oregon/SAIF Corporation.................... 7,500,000 *
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
Principal
amount of
debentures Percentage of
that may be outstanding
Name sold ($) debentures
- ---- ----------- -------------
<S> <C> <C>
State Street Bank, Custodian for GE Pension Trust.... 2,215,000
Sylvan IMA Ltd c/o Forest Investment Management LLC.. 1,230,000 *
Tennessee Consolidated Retirement System............. 4,000,000 *
Travelers Indemnity Company, The .................... 4,462,000 *
Travelers Insurance Company Separate Account TLAC,
The ................................................ 335,000 *
Travelers Insurance Company, The .................... 2,853,000 *
Travelers Series Managed Assets Trust, The .......... 150,000 *
Travelers Series Trust Convertible Bond Portfolio,
The ................................................ 200,000 *
Triarc Companies, Inc................................ 1,340,000 *
UBK Arbitrage Fund................................... 1,000,000 *
Unifi, Inc. Profit Sharing Plan and Trust............ 105,000 *
United Food and Commercial Workers Local 1262 and
Employers Pension Fund.............................. 425,000 *
University of Rochester.............................. 100,000 *
University of South Florida FDN...................... 500,000 *
Van Kampen Utility Fund.............................. 700,000 *
Van Waters & Rogers, Inc. Retirement Plan (f.k.a.
Univar Corporation)................................. 300,000 *
Variable Insurance Products Fund III: Balanced
Portfolio........................................... 220,000 *
Virginia Insurance Reciprocal Convertible Bonds-
Invesco, First Union National Bank, Custodial
Agent............................................... 300,000 *
Wake Forest University............................... 908,000 *
White River Securities LLC........................... 3,423,000 *
Writers' Guild - Industry Health Fund................ 230,000 *
Yield Strategies Fund II, L.P........................ 2,200,000 *
Zeneca Holdings Trust................................ 1,275,000 *
Any other holder of debentures as of the date of this
prospectus**........................................ **
</TABLE>
* Less than 1%

** Information concerning other selling security holders will be listed in
prospectus supplements from time to time, when and if required.

Lawrence Flinn, Jr., managing agent of the Lawrence Flinn, Jr. Master
Partnership I, which is a selling security holder, was formerly Chief Executive
Officer of the predecessor of TV Guide, Inc. (formerly United Video Satellite
Group, Inc.), in which Liberty has an interest. See "Business--Business
Affiliates--TVGuide, Inc."

Donaldson, Lufkin & Jenrette Securities Corp. and Merrill Lynch, Pierce,
Fenner & Smith Inc., which are selling security holders, have engaged in
investment banking and other commercial dealings in the ordinary course of
business with us. Each received customary fees and commissions for its
services. The foregoing entities, and other selling security holders or their
affiliates, may in the future engage in investment banking and other commercial
dealings with us.

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<PAGE>

RELATIONSHIP WITH AT&T AND CERTAIN RELATED TRANSACTIONS

Relationship with AT&T

Liberty is a wholly owned subsidiary of TCI, all of the common stock of which
is owned by AT&T. The businesses and assets of Liberty and its subsidiaries
constitute substantially all of the businesses and assets of AT&T's Liberty
Media Group, which was created in connection with the AT&T merger. The assets
attributed to the Liberty Media Group that are not also currently assets of
Liberty consist of approximately 21.4 million shares of common stock of
Teligent, Inc., which are held indirectly by AGI LLC, and interests in each of
the "Covered Entities" and their respective properties and assets. The Covered
Entities are the following subsidiaries of AT&T: LMC AGI, Inc., Liberty SP,
Inc. and LMC Interactive, Inc. At such time as all of the equity in, or all of
the assets of, a company identified as a Covered Entity are held by Liberty,
that company will cease to be a Covered Entity. Two companies that were
identified in AT&T's certificate of incorporation as Covered Entities have
since been transferred to Liberty.

Neither Liberty SP, Inc. nor LMC AGI, Inc. currently has any significant
assets. LMC Interactive, Inc.'s assets consist of an 8% interest in Liberty
Digital. See "Business--Internet Services and Technology--Consolidated
Subsidiaries--Liberty Digital, Inc."

The Liberty Media Group also includes any proceeds of issuances or sales of
AT&T's Liberty Media Group tracking stock and any dividends or distributions
from Liberty or a Covered Entity.

AT&T's Liberty Media Group tracking stock, which is intended to reflect the
separate performance of the Liberty Media Group, is capital stock of AT&T. It
is not stock of Liberty.

In connection with the AT&T merger, a number of agreements were entered into
and governance arrangements put in place that address the relationship between
AT&T and Liberty.

Liberty Organizational Documents. The Liberty Charter provides that Liberty
will have three classes of directors, each of which is to have the same number
of directors, as follows:

. the Class A Directors, who are elected for a term of one year;

. the Class B Directors, who are elected for a term of seven years; and

. the Class C Directors, who are elected for a term of ten years.

The current Class B Directors and Class C Directors were designated by TCI
prior to the AT&T merger and, unless they resign, die or are otherwise removed,
will comprise two-thirds of the Liberty board until at least 2006. The members
of the Liberty board are only removable for cause (as defined in the Liberty
Charter) and, in the event of the death or resignation of a director in any
class, the remaining directors of that class are to choose a successor.

Under Delaware law, the Liberty board manages the business and affairs of
Liberty. In accordance with the Liberty Charter and bylaws, action by the
Liberty board generally requires the affirmative vote of a majority of the
directors present at a meeting at which a quorum is present, which majority
must include a majority of the Class B Directors and Class C Directors.

The officers of Liberty include the executive officers who were formerly in
charge of overseeing the businesses of TCI's former Liberty Media Group and TCI
Ventures Group. See "Management." The Liberty Charter provides that officers of
Liberty may only be removed by the Liberty board by the affirmative vote
described above. Similar governance arrangements were instituted with respect
to each of the Covered Entities.

Contribution Agreement. Liberty is a party to a Contribution Agreement
entered into immediately prior to the AT&T merger. The Contribution Agreement
provides that, in the event of a Triggering Event, Liberty will be obligated to
transfer all of its assets and liabilities to Liberty Media Group LLC, an
entity controlled by Liberty's current management through Liberty Management
LLC, the managing member, unless the Triggering

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<PAGE>

Event is waived by Liberty Management LLC. The subsidiary of AT&T that holds
the stock of the Covered Entities and Liberty is also a party to the
Contribution Agreement and is obligated under the same circumstances to
contribute the Contributed Entities or their assets to Liberty Media Group LLC.
A Triggering Event will occur if the incumbent Class B and Class C directors,
and their successors, cease to constitute a majority of the Liberty board, or
Liberty Management LLC reasonably determines that such event is reasonably
likely to occur.

AT&T Tracking Stock Amendment. AT&T's certificate of incorporation was
amended in connection with the AT&T merger in order to authorize the AT&T
Liberty Media Group tracking stock. Of particular relevance to Liberty is a
provision that requires a separate class vote of the holders of Liberty Media
Group tracking stock to authorize a Covered Disposition, which generally
includes a sale or transfer by AT&T of its equity interest in Liberty or
Liberty Media Group LLC or a grant of a pledge or other security interest in
the equity interest of AT&T in Liberty or Liberty Media Group LLC. Such
separate approval would not be required in connection with a redemption
permitted by AT&T's amended certificate of incorporation of all of the
outstanding Liberty Media Group tracking stock in exchange for all of the
shares of common stock of a subsidiary of AT&T that holds all of the assets and
liabilities of the Liberty Media Group and satisfies certain other
requirements.

AT&T's amended certificate of incorporation also provides that neither the
Liberty Media Group nor the AT&T Common Stock Group will have any duty,
responsibility or obligation to refrain from any of the following:

. engaging in the same or similar activities or lines of business as any
member of the other group;

. doing business with any potential or actual supplier or customer of any
member of the other group; or

. engaging in, or refraining from, any other activities whatsoever
relating to any of the potential or actual suppliers or customers of any
member of the other group.

Further, neither the Liberty Media Group nor the AT&T Common Stock Group will
have any duty, responsibility or obligation:

. to communicate or offer any business or other corporate opportunity to
any other person (including any business or other corporate opportunity
that may arise that either group may be financially able to undertake,
and that are, from their nature, in the line of more than one group's
business and are of practical advantage to more than one group);

. to provide financial support to the other group (or any member thereof);
or

. otherwise to assist the other group.

The foregoing provisions of the AT&T certificate of incorporation do not
prevent any member of the Liberty Media Group (including Liberty) from entering
into written agreements with AT&T or any other member of the AT&T Common Stock
Group to define or restrict any aspect of the relationship between the groups.

Inter-Group Agreement. AT&T, for itself and on behalf of the members of the
Common Stock Group, on the one hand, and Liberty, Liberty Media Group LLC and
each Covered Entity, for themselves and on behalf of the members of the Liberty
Media Group, on the other hand, entered into the Inter-Group Agreement, in
connection with the AT&T merger. A summary of the material provisions of the
Inter-Group Agreement is set forth below.

Neither the AT&T Common Stock Group Nor the Liberty Media Group Is Required
to Offer Financial Support or Corporate Opportunities to the Other. In general,
neither the AT&T Common Stock Group nor the Liberty Media Group will have any
obligation or responsibility to provide financial support or offer

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<PAGE>

corporate opportunities to the other group or to otherwise assist the other
group. Generally, neither group will have any rights to the tradenames,
trademarks or other intellectual property rights of the other group.

There are Restrictions on the Incurrence of Debt and Other Financial
Obligations. Neither the Liberty Media Group nor the AT&T Common Stock Group
may incur any debt or other obligation, including any preferred equity
obligation, that has or purports to have recourse to any member, or to the
assets of any member, of the other group. In addition, unless otherwise
expressly agreed between the two groups, no member of the Liberty Media Group
or the AT&T Common Stock Group may enter into any agreement, or incur any other
liability or obligation, that binds or purports to bind or impose any
liabilities or obligation on any member of the other group. AT&T may not
attribute any debt or other obligation to, or create, authorize or issue any
AT&T preferred stock that is attributed to, the Liberty Media Group without the
consent of the Liberty board.

The Liberty Media Group may not incur any debt, other than the refinancing of
debt without any increase in amount, that would cause the total indebtedness of
the Liberty Media Group at any time to be in excess of 25% of the total market
capitalization of the Liberty Media Group tracking stock, if the excess debt
would adversely affect the credit rating of AT&T. Prior to incurring any debt
that would exceed the 25% threshold, the Liberty Media Group is required to
consult with AT&T and, if requested by AT&T, with two nationally recognized
credit rating agencies to be selected by each of Liberty and AT&T to determine
if the incurrence of the excess debt would adversely affect the credit rating
of AT&T.

Each Group is Solely Responsible for its Costs and Liabilities;
Indemnification. Each of the Liberty Media Group and the AT&T Common Stock
Group will be solely responsible for all claims, obligations, liabilities and
costs arising from that group's operations and businesses, whether arising
before or after the AT&T merger.

Each of the Liberty Media Group and the AT&T Common Stock Group is required
to indemnify the other group and to hold the other group harmless against all
claims, liabilities, losses and expenses, including attorneys' fees, allocated
to the indemnifying group in accordance with the previous paragraph.

AT&T May Generally Not Allocate Corporate Overhead Expenses to the Liberty
Media Group. The AT&T Common Stock Group may not allocate general overhead
expenses to the Liberty Media Group, except (1) to the extent that the Liberty
Media Group receives specific services pursuant to services agreements or
similar arrangements between the AT&T Common Stock Group and the Liberty Media
Group and (2) if the Liberty Media Group uses the same independent accounting
firm as AT&T, an allocable share of the fees and expenses of such firm for
AT&T's annual audits.

Liberty Has a Limited Ability to Issue its own Stock. Liberty may issue
shares of its common stock and may authorize and issue shares of its preferred
stock only if, after giving effect to the issuance, AT&T would still be able to
include Liberty on its consolidated federal income tax return and Liberty would
remain a "Qualified Subsidiary" for purposes of the tax-free distribution rules
of Section 355 of the Code. Currently, Liberty would deconsolidate from AT&T if
Liberty issued an amount of shares that would result in neither AT&T nor a
subsidiary of AT&T owning at least 80% of the total combined voting power of
all classes of stock of Liberty entitled to vote and 80% of the fair market
value of all classes of stock of Liberty. For purposes of the preceding
sentence, "stock" does not include stock which is not entitled to vote, which
is limited and preferred as to dividends and does not participate in corporate
growth to any significant extent, which has redemption and liquidation rights
which do not exceed the issue price of such stock (except for a reasonable
redemption or liquidation premium), and which is not convertible into another
class of stock.

Any Proceeds from the Issuance of AT&T Liberty Media Group Tracking Stock
will be Contributed to Liberty. The net proceeds of any issuance or sale of
AT&T Liberty Media Group tracking stock are generally required to be
contributed by AT&T to Liberty. The parties have entered into a supplement to
the Inter-Group Agreement to provide an exception to this requirement and to
make alternative arrangements for the proposed acquisition of The Associated
Group, Inc.

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AT&T will Include in its SEC Reports Combined Financial Statements of the
Liberty Media Group. For so long as AT&T Liberty Media Group tracking stock is
outstanding, AT&T will include in its filings with the SEC combined financial
statements of the Liberty Media Group.

AT&T will Not Take Any Actions Involving the Equity of Liberty. AT&T has
also agreed that it will not, and will not permit any member of the AT&T
Common Stock Group to, directly or indirectly:

. sell, transfer, dispose of or otherwise convey, whether by merger,
consolidation, sale or contribution of assets or stock, or otherwise,
any direct or indirect equity interest of AT&T in Liberty;

. incur any indebtedness secured by, or pledge or grant a lien, security
interest or other encumbrance on, any direct or indirect equity interest
of AT&T in Liberty; or

. create any derivative instrument whose value is based on any direct or
indirect equity interest of AT&T in Liberty;

except that the foregoing will not apply to:

. any of the foregoing approved by the Liberty board by the affirmative
vote described under "--Liberty Organizational Documents" above;

. AT&T's issuance or sale of its own securities, other than indebtedness
secured by any direct or indirect equity interest of AT&T in Liberty and
other than any security convertible into or exercisable or exchangeable
for, or any derivative instrument whose value is based on, any direct or
indirect equity interest of AT&T in Liberty; or

. AT&T's participation in any merger, consolidation, exchange of shares or
other business combination transaction in which AT&T, or its successors,
continues immediately following the transaction to hold the same
interest in the business, assets and liabilities comprising the Liberty
Media Group that it held immediately prior to the transaction, other
than as a result of any action by Liberty or any other person included
in the Liberty Media Group.

AT&T has also agreed that for so long as any AT&T Liberty Media Group
tracking stock is outstanding, AT&T will not, and will not permit any member
of the AT&T Common Stock Group to, intentionally take any action that AT&T
knows would have the effect of deconsolidating Liberty from the AT&T
consolidated group for federal income tax purposes. This restriction will not
apply to certain dispositions or redemptions expressly contemplated by AT&T's
amended certificate of incorporation or to a Covered Disposition approved by
the separate class vote of the holders of AT&T Liberty Media Group tracking
stock.

Intercompany Agreement. In connection with the AT&T merger, AT&T, on behalf
of itself and the members of the Common Stock Group, and Liberty, on behalf of
itself and the members of the Liberty Media Group, entered into an
Intercompany Agreement, the material provisions of which are described below.

Preferred Vendor Status. Liberty will be granted preferred vendor status
with respect to access, timing and placement of new programming services. This
means that AT&T will use its reasonable efforts to provide digital basic
distribution of new services created by Liberty and its affiliates, on mutual
"most favored nation" terms and conditions and otherwise consistent with
industry practices, subject to the programming meeting standards that are
consistent with the type, quality and character of AT&T's cable services as
they may evolve over time.

Extension of Term of Affiliation Agreements. AT&T will agree to extend any
existing affiliation agreement of Liberty and its affiliates that expires on
or before March 9, 2004, to a date not before March 9, 2009, if most favored
nation terms are offered and the arrangements are consistent with industry
practice.

Interactive Video Services. AT&T will enter into arrangements with Liberty
for interactive video services under one of the following two arrangements,
which will be at the election of AT&T:

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. Pursuant to a five-year arrangement, renewable for an additional four-
year period on then-current most favored nation terms, AT&T will make
available to Liberty capacity equal to one 6 megahertz channel (in
digital form and including interactive enablement, first screen access
and hot links to relevant web sites--all to the extent implemented by
AT&T cable systems) to be used for interactive, category-specific video
channels that will provide entertainment, information and merchandising
programming. The foregoing, however, will not compel AT&T to disrupt
other programming or other channel arrangements. The suite of services
are to be accessible through advanced set-top devices or boxes deployed
by AT&T, except that, unless specifically addressed in a mutually
acceptable manner, AT&T will have no obligation to deploy set-top
devices or boxes of a type, design or cost materially different from
that it would otherwise have deployed. The content categories may
include, among others, music, travel, health, sports, books, personal
finance, automotive, home video sales and games; or

. AT&T may enter into one or more mutually agreeable ventures with Liberty
for interactive, category-specific video channels that will provide
entertainment, information and merchandising programming. Each venture
will be structured as a 50/50 venture for a reasonable commercial term
and provide that AT&T and Liberty will not provide interactive services
in the category(s) of interactive video services provided through the
venture for the duration of such term other than the joint venture
services in the applicable categories. When the distribution of
interactive video services occurs through a venture arrangement, AT&T
will share in the revenue and expense of the provision of the
interactive services pro rata to its ownership interest in lieu of the
commercial arrangements described in the preceding paragraph. At the
third anniversary of the formation of any such venture, AT&T may elect
to purchase the ownership interest of Liberty in the venture at fair
market value. The parties will endeavor to make any such transaction tax
efficient to Liberty.

Tax Sharing Agreement. Liberty, for itself and each member of the Liberty
Media Group, is a party to a tax sharing agreement that provides, among other
things, that:

. to the extent that the inclusion of the Liberty Media Group within the
consolidated U.S. federal income tax return (or any combined,
consolidated or unitary tax return) filed by a member of the AT&T Common
Stock Group increases tax liability for any period, the Liberty Media
Group will be responsible for paying the AT&T Common Stock Group an
amount equal to the increased tax liability; and

. to the extent that the Liberty Media Group's inclusion within the
consolidated U.S. federal income tax return (or any combined,
consolidated or unitary tax return) filed by a member of the AT&T Common
Stock Group reduces tax liability for any period, the AT&T Common Stock
Group will be responsible for paying the Liberty Media Group an amount
equal to the reduced tax liability.

The net operating loss for U.S. federal income tax purposes of the affiliated
group of which TCI was the common parent at the time of the AT&T merger (the
"TCI Affiliated Group") will be allocated to the Liberty Media Group (the
"Allocated NOL") to offset any obligations it would otherwise incur under the
tax sharing agreement for periods subsequent to March 9, 1999 (the date of the
AT&T merger). If the Liberty Media Group is deconsolidated for U.S. federal
income tax purposes from the affiliated group of which AT&T is the parent
corporation, the AT&T Common Stock Group will be required to pay the Liberty
Media Group an amount equal to the product of (a) the amount of the Allocated
NOL that has not been used as an offset to the Liberty Media Group's
obligations under the tax sharing agreement, and that has been, or is
reasonably expected to be, utilized by the AT&T Common Stock Group and (b) 35%.
Certain other tax carryovers of the TCI Affiliated Group will be allocated to
the AT&T Common Stock Group to offset any obligations it would otherwise incur
under the tax sharing agreement for periods subsequent to the AT&T merger on
March 9, 1999. In general, with respect to the TCI Affiliated Group, for
periods ending on or prior to March 9, 1999:

. the Liberty Media Group will pay the TCI Group any portion of regular
tax liability attributable to TCI's former Liberty Media Group or TCI
Ventures Group;

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. any regular tax losses or other tax attributes may be used by the
Liberty Media Group or the TCI Group without compensation to any other
group; and

. if the TCI Affiliated Group has an alternative minimum tax liability,
the group, if any, generating alternative minimum tax losses will be
paid for such losses to the extent that such losses reduce alternative
minimum tax liability of the TCI Affiliated Group but the Liberty Media
Group will not otherwise be required to pay its share of such
alternative minimum tax liability.

Facilities and Services Agreement. TCI and Liberty entered into a facilities
and services agreement effective upon the consummation of the AT&T merger.
Pursuant to the agreement, TCI provides Liberty with administrative and
operational services necessary for the conduct of its business, including, but
not limited to, such services as are generally performed by TCI's accounting,
finance, corporate, legal and tax departments. In addition, the agreement
provides Liberty with office space at TCI's facilities, permits Liberty to
obtain certain liability, property and casualty insurance under TCI's policies
and allows for the reciprocal use by TCI and Liberty of each other's aircraft.
Pursuant to the agreement, Liberty reimburses TCI for all direct expenses
incurred by TCI in providing services thereunder and a pro rata share of all
indirect expenses incurred by TCI in connection with the rendering of such
services, including a pro rata share of the salary and other compensation of
TCI employees performing services for Liberty and rental expenses for the
office space of TCI used by Liberty. The obligations of TCI to provide services
under the Agreement will continue in effect (A) until terminated by Liberty at
any time on not less than 180 days' notice to TCI, or by TCI at any time after
December 31, 2001, on not less than six months' notice to Liberty; or (B) until
March 31, 2000 with respect to the services of personnel and December 31, 2001
with respect to all other services. Liberty was allocated less than $1 million,
$2 million and $11 million, respectively, in corporate and general and
administrative costs by TCI, for the seven months ended September 30, 1999, the
two months ended February 28, 1999 and the year ended December 31, 1998.

Other Related Party Transactions

Affiliation Agreements. TCI is party to affiliation agreements pursuant to
which it purchases programming from subsidiaries and affiliates of Liberty.
Certain of these agreements provide for penalties and charges in the event the
supplier's programming is not carried on TCI's cable systems or not delivered
to a contractually specified number of customers. Charges to TCI for such
programming is generally based on customary rates and often provide for
payments to TCI by Liberty's subsidiaries and business affiliates for marketing
support. In July 1997, TCI entered into a 25 year affiliation agreement with
Encore Media Group pursuant to which TCI is obligated to pay monthly fixed
amounts in exchange for unlimited access to Encore and STARZ! programming. Also
in 1997, in connection with the merger of Liberty Digital and DMX, TCI
transferred to Liberty Digital the right to receive all revenue from sales of
DMX music services to TCI's residential and commercial subscribers, net of an
amount equal to 10% of revenue from such sales to residential subscribers and
net of the revenue otherwise payable to DMX as license fees under TCI's
existing affiliation agreements. Liberty received $125 million, $43 million and
$162 million in revenue for programming services provided to TCI for the seven
months ended September 30, 1999, the two months ended February 28, 1999 and the
year ended December 31, 1998, respectively.

Business Relationships with Directors. In connection with the AT&T merger,
Liberty paid Jerome H. Kern, a director of Liberty, the sum of $10 million for
his services in negotiating the merger agreement and completing the merger.
Liberty also paid Paul A. Gould, a director of Liberty, the sum of $1 million
for his services on the special committee of TCI's board of directors in
evaluating the AT&T merger and the consideration to be received by TCI's
stockholders.

From time to time, Liberty retains Peter Kern and/or Gemini Associates, Inc.,
a company controlled by Peter Kern, to act as an advisor on certain business
transactions. Peter Kern is the son of Jerome H. Kern, a director of Liberty.
In connection with these engagements, Peter Kern and Gemini Associates received
approximately $1.0 million from Liberty in each of 1998 and 1999, and
approximately $300,000 from TCI in 1998.

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Mr. Kern was Special Counsel with the law firm of Baker Botts L.L.P. from
July 1996 to June 1998. Liberty has retained Baker Botts to perform various
legal services from time to time for Liberty and certain of its subsidiaries
and business affiliates during its last fiscal year as well as its current
fiscal year.

Indemnification of Certain of Our Employees. In connection with the AT&T
merger, certain employees (including directors and executive officers) of
Liberty who were officers or directors of TCI prior to the AT&T merger received
undertakings of indemnification from TCI with respect to the effects of U.S.
federal excise taxes that may become payable by them as a result of the AT&T
merger and the resulting change in control of TCI. Pursuant to the Inter-Group
Agreement, each of the Liberty Media Group and the AT&T Common Stock Group are
responsible for all obligations to their respective officers and employees.
Accordingly, following the AT&T merger, these tax protection undertakings to
Liberty Media Group officers and employees became Liberty's obligations.

Certain Rights to Purchase Liberty Media Group Tracking Stock. On February 9,
1998, in connection with the settlement of certain legal proceedings relative
to the Estate of Bob Magness (the "Magness Estate"), the late founder and
former Chairman of the Board of TCI, TCI entered into a call agreement with Dr.
Malone and Dr. Malone's wife (together with Dr. Malone, the "Malones"), and a
call agreement with the Estate of Bob Magness, the Estate of Betsy Magness,
Gary Magness (individually and in certain representative capacities) and Kim
Magness (individually and in certain representative capacities) (collectively,
the "Magness Group"). Under these call agreements, each of the Magness Group
and the Malones granted to TCI the right to acquire all of the shares of TCI's
common stock owned by them ("High Voting Shares") that entitle the holder to
cast more than one vote per share (the "High-Voting Stock") upon Dr. Malone's
death or upon a contemplated sale of the High-Voting Shares (other than a
minimal amount) to third parties. In either such event, TCI had the right to
acquire such shares at a price equal to the then market price of shares of
TCI's common stock of the corresponding series that entitled the holder to cast
no more than one vote per share (the "Low-Voting Stock"), plus a 10% premium,
or in the case of a sale, the lesser of such price and the price offered by the
third party. In addition, each call agreement provides that if TCI were ever to
be sold to a third party, then the maximum premium that the Magness Group or
the Malones would receive for their High-Voting Shares would be the price paid
for shares of the relevant series of Low-Voting Stock by the third party, plus
a 10% premium. Each call agreement also prohibits any member of the Magness
Group or the Malones from disposing of their High-Voting Shares, except for
certain exempt transfers (such as transfers to related parties or to the other
group or public sales of up to an aggregate of 5% of their High-Voting Shares
after conversion to the respective series of Low-Voting Stock) and except for a
transfer made in compliance with TCI's purchase right described above. TCI paid
$150 million to the Malones and $124 million to the Magness Group in
consideration of their entering into the call agreements, of which an aggregate
of $140 million was allocated to and paid by Liberty.

Also in February 1998, TCI, the Magness Group and the Malones entered into a
shareholders' agreement which provides for, among other things, certain
participation rights by the Magness Group with respect to transactions by Dr.
Malone, and certain "tag-along" rights in favor of the Magness Group and
certain "drag-along" rights in favor of the Malones, with respect to
transactions in the High-Voting Stock. Such agreement also provides that a
representative of Dr. Malone and a representative of the Magness Group will
consult with each other on all matters to be brought to a vote of TCI's
shareholders, but if a mutual agreement on how to vote cannot be reached, Dr.
Malone will vote the High-Voting Stock owned by the Magness Group pursuant to
an irrevocable proxy granted by the Magness Group.

In connection with the AT&T merger, Liberty became entitled to exercise TCI's
rights and became subject to its obligations under the call agreement and the
shareholders' agreement with respect to the AT&T Liberty Media Group Class B
tracking stock acquired by the Malones and the Magness Group as a result of the
AT&T merger. If Liberty were to exercise its call right under the call
agreement with the Malones or the Magness Group, it may also be required to
purchase High-Voting Shares of the other group if such group exercises its
"tag-along" rights under the shareholders' agreement.

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Other Transactions. National Digital Television Center, a subsidiary of TCI
("NDTC"), leases transponder facilities to certain Liberty subsidiaries.
Charges by NDTC for such arrangements were $14 million for the seven months
ended September 30, 1999, $4 million for the two months ended February 28, 1999
and $25 million for the year ended December 31, 1998.

In addition, effective as of December 16, 1997, NDTC, on behalf of TCI and
other cable operators that may be designated from time to time by NDTC, entered
into an agreement (the "Digital Terminal Purchase Agreement") with General
Instrument Corporation, which has since merged with Motorola Inc., to purchase
advanced digital set-top terminals during the calendar years 1998, 1999 and
2000. In connection with the Digital Terminal Purchase Agreement, GI granted to
NDTC warrants to purchase shares of GI common stock, a portion of which become
exercisable each year if a sufficient number of set-top terminals is purchased
during that year. The 1998 purchase commitment of 1.5 million set-top terminals
was met, resulting in warrants to purchase 4,928,000 shares of GI common stock
vesting on January 1, 1999. The 1999 purchase commitment of 1,750,000 set-top
terminals was met, resulting in warrants to purchase an additional 5,750,000
shares of GI common stock vesting on January 1, 2000. As a result of the merger
of GI and Motorola on January 5, 2000, Liberty's vested warrants are
exercisable for approximately 6.1 million shares of Motorola common stock. The
purchase commitment for 2000 is 3,250,000 set-top terminals, which, if
satisfied, will result in warrants to purchase approximately 6.1 million shares
of Motorola common stock vesting on January 1, 2001. In connection with the
AT&T merger, these warrants were transferred to Liberty in exchange for
approximately $176 million in cash. The AT&T Common Stock Group has agreed to
pay the Liberty Media Group $14.25, adjusted as appropriate for any change in
the capitalization of Motorola, for each warrant that does not vest as a result
of any purchase commitment not having been met. In addition, no member of the
AT&T Common Stock Group may amend or modify the Digital Terminal Purchase
Agreement without the prior written consent of the Liberty Media Group. These
warrants are now exercisable for shares, on an adjusted basis, of Motorola
common stock pursuant to the merger of GI and Motorola.

On January 14, 2000, the Liberty Media Group completed its acquisition of The
Associated Group, Inc. pursuant to an Amended and Restated Agreement and Plan
of Merger, dated October 28, 1999, among AT&T, A-Group Merger Corp., a wholly
owned subsidiary of AT&T, Liberty and Associated Group. In this transaction,
Associated Group was acquired by and became a member of the Liberty Media Group
through the merger of A-Group Merger Corp into Associated Group. In the merger,
each share of Associated Group's Class A common stock and Class B common stock
was converted into 0.49634 shares of AT&T common stock and 1.20711 shares of
AT&T Class A Liberty Media Group tracking stock. Prior to the merger,
Associated Group was principally engaged in the ownership and operation of
interests in various communications-related businesses. Associated Group's
primary assets were (1) approximately 19.7 million shares of AT&T common stock,
(2) approximately 23.4 million shares of AT&T Class A Liberty Media Group
tracking stock, (3) approximately 5.3 million shares of AT&T Class B Liberty
Media Group tracking stock, (4) approximately 21.4 million shares of common
stock, representing approximately a 40% interest, of Teligent, Inc., a full-
service, facilities-based communications company, and (5) TruePosition, Inc., a
wholly-owned subsidiary of Associated Group which provides location services
for wireless carriers and users designed to determine the location of any
wireless transmitters, including cellular and PCS telephones. Immediately
following the completion of the merger, all of the shares of AT&T common stock,
Class A Liberty Media Group tracking stock and Class B Liberty Media Group
tracking stock previously held by Associated Group were retired by AT&T and all
of the businesses and assets of Associated Group, other than its interest in
Teligent, were transferred to Liberty. A member of the Liberty Media Group
other than Liberty holds Associated Group's interest in Teligent.

Pursuant to an asset purchase agreement with CSG Systems International, Inc.,
a member of the former TCI Ventures Group acquired warrants to purchase shares
of common stock of CSG, related registration rights and a right to receive a
contingent cash payment of $12,000,000. In connection with the AT&T merger,
these warrants and rights were transferred to a subsidiary of Liberty. On April
13, 1999, the CSG warrants were exercisable for 3,000,000 shares of common
stock of CSG, and AT&T purchased these warrants for $25.075

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per share, or an aggregate purchase price of $75,225,000. The related
registration rights were also assigned to AT&T on that date. The vesting of the
CSG warrants is contingent on AT&T meeting certain subscriber commitments to
CSG. If any warrants do not vest, a Liberty subsidiary must repurchase the
unvested warrants from AT&T, with interest at 6% from April 12, 1999. Liberty
has guaranteed the obligation of its subsidiary to repurchase any unvested
warrants.

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DESCRIPTION OF THE DEBENTURES

The debentures were issued under an indenture dated as of July 7, 1999,
between Liberty and The Bank of New York, as trustee, as supplemented by a
second supplemental indenture dated as of November 16, 1999, between Liberty
and the trustee. When we refer to the indenture, we mean the indenture as
supplemented by the second supplemental indenture. The terms of the debentures
include those stated in the indenture and those terms made part of the
indenture by reference to the Trust Indenture Act of 1939, as amended. A copy
of the indenture has been filed as an exhibit to the registration statement of
which this prospectus is a part. You can read the indenture, and obtain a copy
of it, at the locations described under "Where to Find More Information" on
page 140.

General

The indenture provides that senior debt securities may be issued by Liberty
thereunder from time to time in one or more series. The senior debt securities
that Liberty may issue under the indenture, including the debentures, are
collectively referred to in this section as the "senior debt securities." The
indenture does not limit the aggregate principal amount of senior debt
securities that may issued under it. Senior debt securities of each series
issued under the indenture, including the debentures, may be reopened at any
time and additional securities of that series may be issued.

The 4% senior exchangeable debentures due 2029 constitute a separate series
of senior debt securities under the indenture. The debentures are unsecured
senior obligations of Liberty and are initially limited to an aggregate
original principal amount of $868,789,000. They will mature on November 15,
2029, unless earlier exchanged by the holders or redeemed by Liberty. When we
refer to a "debenture" in this section, we are referring to a debenture in the
original principal amount of $1,000.

The indenture does not contain any provision that restricts the ability of
Liberty to incur additional indebtedness. It also does not afford holders of
debentures any protection in the event of a decline in Liberty's credit quality
as a result of a takeover, recapitalization or similar transaction involving
Liberty. Subject to the limitations set forth under "--Successor Corporation"
below, Liberty may enter into transactions, including a sale of all or
substantially all of its assets, a merger or a consolidation, that could
substantially increase the amount of Liberty's indebtedness or substantially
reduce or eliminate its assets, and which may have an adverse effect on
Liberty's ability to service its indebtedness, including the debentures.

Liberty will make payments of principal, premium, if any, interest and
distributions on the debentures through the trustee to the depositary, as the
registered holder of the debentures. See "--Form, Denomination and
Registration" below. Liberty will not have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in the global debentures registered in the name of the
depositary or its nominee, or for maintaining, supervising or reviewing any
records relating to those beneficial ownership interests.

If any payment or distribution on the debentures is to be made on a day that
is not a business day, that payment or distribution will be made on the next
business day, without interest or any other payment being made on account of
the delay. A business day means any day that is not a Saturday, Sunday or legal
holiday on which banking institutions or trust companies in The City of New
York are authorized or obligated by law or regulation to close.

If the debentures at some date are reissued in certificated form, Liberty
will make payments of principal, premium, if any, interest and distributions on
the debentures to the registered holders thereof. Liberty will make payments
due on the maturity date in immediately available funds upon presentation and
surrender by the holder of a certificated debenture at the office or agency
maintained by Liberty for this purpose in the Borough of Manhattan, The City of
New York, which is expected to be the office of the trustee at 101 Barclay
Street, New York, N.Y. 10286. Liberty will pay interest and additional
distributions attributable to regular cash dividends on the reference shares,
if any, due on a certificated debenture on any interest payment date other than
the maturity date by check mailed to the address of the holder entitled to the
payment as his address shall

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appear in the security register of Liberty. Notwithstanding the foregoing, a
holder of $10 million or more in aggregate original principal amount of
certificated debentures will be entitled to receive such payments, on any
interest payment date other than the maturity date, by wire transfer of
immediately available funds if appropriate wire transfer instructions have been
received in writing by the trustee not less than 15 calendar days prior to the
interest payment date. Any wire transfer instructions received by the trustee
will remain in effect until revoked by the holder. Any interest and any
additional distribution due and not punctually paid or duly provided for on a
certificated debenture on any interest payment date other than the maturity
date will cease to be payable to the holder of that debenture as of the close
of business on the related record date and may either be paid (1) to the person
in whose name the certificated debenture is registered at the close of business
on a special record date for the payment of the defaulted interest and any
additional distribution that is fixed by Liberty, written notice of which will
be given to the holders of the debentures not less than 30 calendar days prior
to the special record date, or (2) at any time in any other lawful manner.

Liberty will pay or distribute additional distributions, if any, due on a
certificated debenture to the holder of that debenture as of a special record
date which will be the 10th business day after the date the related
distribution is made on the reference shares, at the address shown for such
holder in the security register of Liberty.

All moneys or in-kind distributions paid or made by Liberty to the trustee or
any paying agent for the payment of principal, premium, if any, interest and/or
distributions on any certificated debenture which remain unclaimed for two
years after the payment or making thereof may be repaid or returned to Liberty
and, thereafter, the holder of the debenture may look only to Liberty for
payment.

Form, Denomination and Registration

The debentures have been issued in book-entry form only, and are represented
by global debentures registered in the name Cede & Co., as nominee of The
Depositary Trust Company. The debentures are transferrable on the books of DTC
in minimum denominations of $1,000 original principal amount and integral
multiples thereof.

So long as DTC, or its nominee or any successor depositary, is the registered
owner of the global debentures, the depositary or its nominee, as the case may
be, will be the sole holder of the debentures represented by the global
debentures for all purposes under the indenture. Except as otherwise provided
in this section, the beneficial owners of interests in the global debentures
will not be entitled to receive physical delivery of certificated debentures
and will not be considered the holders of the debentures for any purpose under
the indenture. Accordingly, each beneficial owner must rely on the procedures
of the depositary and, if the beneficial owner is not a participant of the
depositary, then the beneficial owner must rely on the procedures of the
participant through which the beneficial owner owns its interest, in order to
exercise any rights of a holder of debentures or under the indenture. The laws
of some jurisdictions may require that certain purchasers of securities take
physical delivery of those securities in certificated form. Such laws may
impair the ability of such a purchaser to transfer its beneficial interest in
the global debentures.

The global debentures representing the debentures will be exchangeable for
certificated debentures of like tenor and terms and of differing authorized
denominations aggregating a like principal amount, only if:

. the depositary notifies Liberty that it is unwilling or unable to continue
as depositary for the global debentures,

. the depositary ceases to be a clearing agency registered under the
Securities Exchange Act,

. Liberty, in its sole discretion, determines that the global debentures shall
be exchangeable for certificated securities, or

. there shall have occurred and be continuing an event of default under the
indenture with respect to the debentures.

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Upon any exchange of the global debentures for certificated debentures, the
certificated debentures shall be registered in the names of the beneficial
owners of interests in the global debentures, which names shall be provided by
the depositary's relevant participants, as identified by the depositary, to the
trustee.

Information Relating to DTC. The following is based on information furnished
by DTC, which is the initial depositary:

DTC will act as the depositary for the debentures. The debentures have been
issued as fully registered senior debt securities registered in the name of
Cede & Co., which is the depositary's partnership nominee. Fully registered
global debentures have been issued for the debentures, in the aggregate
principal amount of $868,789,000, and have been deposited with the depositary
or a custodian for its benefit.

DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants deposit with it. DTC also facilitates
the settlement among participants of securities transactions, including
transfers and pledges, in deposited securities through electronic computerized
book-entry changes to participants' accounts, thereby eliminating the need for
physical movement of certificates. Direct participants of DTC include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its direct
participants, including the initial purchasers of the debentures and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to DTC's system is also
available to indirect participants, which includes securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a direct participant, either directly or indirectly. The
rules applicable to DTC and its participants are on file with the SEC.

Purchases of securities under DTC's system must be made by or through direct
participants, which will receive a credit for the securities on DTC's records.
The ownership interest of each beneficial owner, which is the actual purchaser
of each security, represented by global securities, is in turn to be recorded
on the direct and indirect participants' records. Beneficial owners will not
receive written confirmation from DTC of their purchase, but beneficial owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the direct
or indirect participants through which the beneficial owner entered into the
transaction. Transfers of ownership interests in the global debentures
representing the debentures are to be accomplished by entries made on the books
of participants acting on behalf of beneficial owners. Beneficial owners of the
global debentures representing the debentures will not receive certificated
debentures representing their ownership interests therein, except in the event
that use of the book-entry system for the debentures is discontinued.

To facilitate subsequent transfers, all global debentures representing the
debentures which are deposited with, or on behalf of, DTC are registered in the
name of DTC's nominee, Cede & Co. The deposit of global debentures with, or on
behalf of, DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of the global debentures representing the debentures; DTC's records
reflect only the identity of the direct participants to whose accounts the
debentures are credited, which may or may not be the beneficial owners. The
participants will remain responsible for keeping account of their holdings on
behalf of their customers.

Conveyance of notices and other communications by DTC to direct participants,
by direct participants to indirect participants, and by direct and indirect
participants to beneficial owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.

Neither DTC nor Cede & Co. will consent or vote with respect to the global
debentures representing the debentures. Under its usual procedure, DTC mails an
omnibus proxy to Liberty as soon as possible after the

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applicable record date. The omnibus proxy assigns Cede & Co.'s consenting or
voting rights to those direct participants to whose accounts the debentures are
credited on the applicable record date (identified in a listing attached to the
omnibus proxy).

Principal, premium, if any, interest and/or distribution payments on the
global debentures representing the debentures will be made to DTC. DTC's
practice is to credit direct participants' accounts on the applicable payment
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on the date.
Payments by participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of the participant and not of DTC, the trustee or
Liberty, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal, premium, if any, interest
and/or distributions to DTC is the responsibility of Liberty or the trustee,
disbursement of the payments to direct participants will be the responsibility
of DTC, and disbursement of the payments to the beneficial owners will be the
responsibility of direct and indirect participants.

DTC may discontinue providing its services as securities depositary with
respect to the debentures at any time by giving reasonable notice to Liberty or
the trustee. Under such circumstances, in the event that a successor securities
depositary is not obtained, certificated debentures are required to be printed
and delivered.

Liberty may decide to discontinue use of the system of book-entry transfers
through DTC or a successor securities depositary. In that event, certificated
debentures will be printed and delivered.

DTC has further advised Liberty that management of DTC is aware that some
computer applications, systems, and the like for processing data ("Systems")
that are dependent upon calendar dates, including dates before, on, and after
January 1, 2000, may encounter "Year 2000 problems." DTC has informed its
participants and other members of the financial community (the "Industry") that
it has developed and is implementing a program so that its Systems, as they
relate to the timely payment of distributions (including principal and income
payments) to security holders, book-entry deliveries, and settlement of trades
within DTC, continue to function appropriately. This program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, DTC's plan includes a testing phase, which is expected to be
completed within the appropriate time frames.

However, DTC's ability to perform properly its service is also dependent upon
other parties, including but not limited to issuers and their agents, as well
as DTC's direct participants and indirect participants and third party vendors
from whom DTC licenses software and hardware, and third party vendors on whom
DTC relies for information or the provision of services, including
telecommunication and electrical utility service providers, among others. DTC
has informed the Industry that it is contacting, and will continue to contact,
third party vendors from whom DTC acquires services to: (1) impress upon them
the importance of the services being Year 2000 compliant, and (2) determine the
extent of their efforts for Year 2000 remediation (and, as appropriate,
testing) of their services. In addition, DTC is in the process of developing
such contingency plans as it deems appropriate.

According to DTC, the information in the preceding two paragraphs with
respect to DTC has been provided to the Industry for informational purposes
only and is not intended to serve as a representation, warranty, or contract
modification of any kind.

Although DTC has agreed to the procedures described above in order to
facilitate transfers of interests in the global debentures among participants
of DTC, it is under no obligation to perform or continue to perform these
procedures, and these procedures may be discontinued at any time. Neither the
trustee nor Liberty will have any responsibility for the performance by DTC or
its respective participants or indirect participants of its obligations under
the rules and procedures governing its operations.

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Ranking and Holding Company Structure

The debentures, which constitute unsecured senior indebtedness of Liberty,
rank equally with Liberty's existing and future unsubordinated unsecured
indebtedness, and senior in right of payment to all subordinated indebtedness
of Liberty. As of September 30, 1999, after giving pro forma effect to the sale
of our 8 1/4% senior debentures due 2030 on February 2, 2000, we would have had
outstanding $2.6 billion of unsecured and unsubordinated indebtedness, all of
which would have ranked equally with the debentures. The debentures are
effectively subordinated to all secured indebtedness of Liberty, to the extent
of the value of the assets securing that indebtedness, and to all liabilities
of Liberty's subsidiaries. As of September 30, 1999, we had no secured
indebtedness and our consolidated subsidiaries had outstanding $12.9 billion of
liabilities, all of which would have effectively ranked senior to the
debentures. See "Risk Factors--Factors Relating to Liberty--Our holding company
structure could restrict access to funds of our subsidiaries that may be needed
to service the debentures. Creditors of those companies have a claim on their
assets that is senior to that of holders of the debentures."

Liberty is a holding company and is largely dependent on dividends,
distributions and other payments from its subsidiaries and business affiliates
and other investments to meet its financial obligations, and will be dependent
on those payments to meet its obligations under the debentures. Liberty's
subsidiaries and business affiliates, as well as AT&T and its subsidiaries
other than Liberty, have no obligation, contingent or otherwise, to pay any
amounts due under the debentures or to make any funds available for any of
those payments. See "Risk Factors--Factors Relating to Liberty--We could be
unable in the future to obtain a sufficient amount of cash with which to
service our financial obligations."

Interest

Liberty will pay interest on the debentures semi-annually on May 15 and
November 15, beginning May 15, 2000, at the per annum rate of 4.0% of the
original principal amount of each debenture. The debentures began to accrue
interest on the date of original issuance of the debentures, which was November
16, 1999. Interest will be paid to the persons in whose names the debentures
are registered at the close of business on the May 1 and November 1 preceding
the interest payment date. We refer to these dates as the regular payment
dates. Changes in the adjusted principal amount will not affect the amount of
the semi-annual interest payments received by holders of the debentures, which
is calculated based solely on the original principal amount. See "--Adjusted
Principal Amount" below. Interest payable at maturity, or upon any earlier date
of redemption, will be payable to the person to whom principal shall be payable
on that date. Interest on the debentures is calculated on the basis of a 360-
day year of twelve 30-day months.

Until a debenture can be transferred in compliance with Rule 144(k) under the
Securities Act, the interest rate on that debenture is subject to increase in
the event this prospectus becomes unusable by the selling security holders for
more than 30 days in any twelve-month period. Beginning on the 31st day, the
interest rate will increase by one quarter of one percent (0.25%) of the
original principal amount of the debenture for the first 90-day period
thereafter, and will increase by an additional one quarter of one percent of
the original principal amount of the debenture at the beginning of each
subsequent 90-day period during which the prospectus remains unusable. However,
the maximum interest rate that may be borne by the debentures is 5.0%. Upon the
prospectus again becoming useable, the interest rate borne by the debentures
will return to the original interest rate of 4.0%.

Exchange Option

The holder of a debenture may at any time, except during the periods
described below under "--Payment at Stated Maturity" and "--Redemption,"
exchange the debenture for the exchange market value of the reference shares
attributable to that debenture. Liberty will pay the exchange market value of
each debenture tendered for exchange only in cash until the reference shares
eligibility date. From and after the reference shares eligibility date, Liberty
may pay the exchange market value of each debenture tendered for exchange as
follows:

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. in cash;

. by delivering, or causing to be delivered, the reference shares
attributable to the debenture; or

. in a combination of cash and reference shares.

The reference shares eligibility date means the later of December 1, 2001,
and the date on which we notify the trustee that Liberty and the Trust, taken
together, no longer beneficially own 10% or more of the outstanding shares of
any class or series of reference shares that are registered under the
Securities Exchange Act. In making this determination, Liberty will assume the
exercise, conversion or exchange of all securities beneficially owned by
Liberty or the Trust (but not by anyone else) that are convertible into, or
exercisable or exchangeable for, shares of any class or series of reference
shares, without regard to any restriction or limitation on the convertibilty,
exchangeability or exercisability of those securities. We will issue a press
release announcing the occurrence of the reference shares eligibility date, and
will provide that notice to DTC for dissemination through the DTC broadcast
facility.

For so long as the debentures are represented by global debentures registered
in the name of DTC or its nominee, exchanges may be effected only through DTC's
Automated Tender Offer Program, or ATOP. If the debentures at some date are
reissued in certificated form, the exchange right at that time will be
exercisable as follows:

. by completing and manually signing an exchange notice in the form
available from the exchange agent, which is initially the trustee, and
delivering the exchange notice to the exchange agent at the office it
maintains for this purpose;

. by surrendering the debentures to be exchanged to the exchange agent;

. if required, by furnishing appropriate endorsement and transfer
documents; and

. if required, by paying all transfer or similar taxes.

If an exchange is made during the period between a regular record date and
the next succeeding interest payment date, the exchanging holder will be
required to tender funds equal to the interest and any additional distribution
that is payable to the holders of debentures on that interest payment date.

We refer to the date on which all of the foregoing requirements for exchange
of a particular debenture are satisfied as the exchange date for that
debenture. The transmission of an agent's message requesting an exchange
through ATOP, or delivery of an exchange notice to the exchange agent, shall be
irrevocable. If a holder tenders debentures for exchange on or after the
reference shares eligibility date, the holder will be notified by 10:00 a.m.,
New York City time, on the next trading day after the exchange date of
Liberty's choice as to the manner in which it will pay the exchange market
value of those debentures.

If more than $1,000,000 aggregate original principal amount of debentures are
tendered for exchange on any day, notice of that event will be given to DTC for
dissemination through the DTC broadcast facility. Our failure to provide this
notice, however, will not affect the determination of the exchange market value
of the debentures tendered for exchange.

At the date of this prospectus, the reference shares attributable to each
debenture consist of 22.9486 shares of Sprint PCS stock. If any other publicly
traded common equity securities, including additional shares of Sprint PCS
stock, are issued as a distribution in respect of the Sprint PCS stock or any
other reference shares, or if any reference shares are exchanged for publicly
traded common equity securities of a different issuer in an exchange offer,
merger or other extraordinary transaction, then the reference shares will
include the shares so issued, or be replaced by the shares issued in the
exchange offer, merger or other transaction. See "-- Changes to the Reference
Shares" below.

We will pay the consideration due upon an exchange of debentures as soon as
reasonably practicable after the determination of the exchange market value,
but in no event later than 10 trading days thereafter. The

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calculation of the exchange market value of a debenture will depend on when the
notice of exchange for that debenture is delivered to the exchange agent. If
the notice is delivered before November 15, 2000, the exchange market value
will be the closing price of the reference shares attributable to that
debenture on the twentieth trading day following its exchange date, unless the
exchange agent receives notices of exchange for more than $1,000,000 aggregate
original principal amount of debentures on the same day, in which case the
exchange market value of those debentures will be the average of the closing
prices of the reference shares on the five trading days ending on the twentieth
trading day following the exchange date.

If the notice of exchange for a debenture is delivered on or after November
15, 2000, the exchange market value will be the closing price of the reference
shares attributable to that debenture on the trading day following its exchange
date, unless the exchange agent receives notices of exchange for more than
$1,000,000 aggregate original principal amount of debentures on the same day,
in which case the exchange market value of those debentures will be the average
of the closing prices of the reference shares on the five trading days
following the exchange date.

The closing price of a security on any date means:

. the closing sale price or, if no closing sale price is reported, the
last reported sale price, of that security (regular way) on the NYSE; or

. if the security is not listed for trading on the NYSE, as reported in
the composite transactions for the principal United States national or
regional securities exchange on which it is listed; or

. if the security is not listed on a United States national or regional
securities exchange, as reported by the Nasdaq National Market, or if
the security is not so reported, the last quoted bid price for the
security in the over-the-counter market as reported by the National
Quotation Bureau or a similar organization.

If the closing price of a security cannot be determined by any of the
foregoing methods on a particular trading day, our board of directors will be
entitled to determine the closing price on the basis of those quotations that
it, in good faith, considers appropriate. However, a nationally recognized
investment banking or appraisal firm retained by us will make that
determination if the securities at issue are to be distributed to holders of
the debentures and the aggregate value of those securities is expected to
exceed $100,000,000. With respect to options, warrants, and other rights to
purchase a security, the closing price of the option, warrant or other right
will be deemed to be the closing price of the underlying security, minus the
exercise price. With respect to securities exchangeable for or convertible into
another security, the closing price of the exchangeable or convertible security
will be the closing price of that security determined as aforesaid or, if its
closing price can not be so determined, then the closing price will be deemed
to be the fully exchanged or converted value based upon the closing price of
the underlying security. If an "ex-dividend" date for a security occurs during
the period used in determining that security's closing price, the closing price
of the security on any day prior to the "ex-dividend" date used in calculating
the closing price shall be reduced by the amount of the dividend. For this
purpose, the amount of a non-cash dividend will be equal to the value of that
dividend as determined by a nationally recognized investment banking firm that
we retain for this purpose.

Additional Distributions

If a reference company pays or makes a dividend or distribution on its
reference shares, we may pay or make an additional distribution to holders of
the debentures based on that dividend or distribution. At the date of this
prospectus, the reference shares attributable to each debenture consist of
22.9486 shares of Sprint PCS stock, and Sprint is the initial reference
company. The reference shares and the reference company are subject to change
as described under "-- Changes to the Reference Shares" below.

If a regular cash dividend is paid on any reference shares, we will pay to
holders of the debentures, as an additional distribution on each debenture, the
amount of the cash dividend paid to a holder of the number of reference shares
attributable to a debenture. We will pay this additional distribution on the
next semi-annual

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interest payment date for the debentures. The additional distribution will be
paid to holders of the debentures as of 5:00 p.m., New York City time, on the
regular record date for that interest payment date. We will treat as a regular
cash dividend any cash dividend that is paid by a reference company in
accordance with its publicly announced regular common equity dividend policy.
We refer to any dividend or distribution by a reference company on its
reference shares that is not a regular cash dividend as an extraordinary
distribution.

Whether and what we pay or make by way of an additional distribution
following an extraordinary distribution by a reference company on its reference
shares will depend on the nature of the extraordinary distribution. If an
extraordinary distribution consists of cash, we will pay to holders of the
debentures, as an additional distribution on each debenture, the amount of the
cash distribution received by a holder of the number of reference shares
attributable to a debenture.

If an extraordinary distribution consists of publicly traded common equity
securities, we will not make an additional distribution to holders of the
debentures. Rather, the number of publicly traded common equity securities
(including fractions thereof) distributed to a holder of the number of
reference shares attributable to a debenture will be treated as reference
shares that are also attributable to that debenture.

If an extraordinary distribution consists of publicly traded securities other
than common equity securities, including options, warrants or similar rights to
acquire reference shares, we will cause to be delivered to the holders of the
debentures, as an additional distribution on each debenture, those securities
received by a holder of the number of reference shares attributable to a
debenture. We will not, however, deliver fractional securities. Instead, we
will pay cash in an amount equal to the product of the fractional interest
times the closing price of the security as of the special record date we set
for the additional distribution. If Liberty is unable to distribute any
securities as an additional distribution because necessary qualifications or
registrations under applicable state or federal laws cannot be obtained on a
timely basis, then the additional distribution may instead consist of cash. The
cash payment will be based on the average, over the five trading days ending on
the trading day next preceding the date the additional distribution is paid, of
the closing prices of the security that would have otherwise been delivered.

If an extraordinary distribution consists of assets or property other than
cash or publicly traded securities, we will pay to holders of the debentures,
as an additional distribution on each debenture, an amount of cash equal to the
fair market value of the assets or properties distributed to a holder of the
number of reference shares attributable to a debenture. That fair market value
will be determined, in good faith, by our board of directors. However, a
nationally recognized investment banking or appraisal firm retained by us will
make that determination if we expect the aggregate fair market value of the
assets or properties distributed on the number of reference shares attributable
to all of the outstanding debentures to exceed $100,000,000.

We will treat as an extraordinary distribution any consideration that is
distributed in connection with a merger, consolidation, share exchange,
liquidation or dissolution involving a reference company, except to the extent
it consists of publicly traded common equity securities. Publicly traded common
equity securities that are issued in connection with a merger, consolidation,
share exchange, liquidation or dissolution involving a reference company will
themselves become reference shares. See "--Changes to the Reference Shares"
below.

We will make an additional distribution that is attributable to an
extraordinary distribution on the twentieth business day after such
extraordinary distribution is made by the applicable reference company or
successor reference company. The additional distribution will be paid to
holders of the debentures as of a special record date that will be the tenth
business day prior to the date we pay the additional distribution.

Liberty will issue a press release setting forth the amount and composition,
per debenture, of any additional distribution to be made by it that is
attributable to an extraordinary distribution, and will deliver such release to
DTC for dissemination through the DTC broadcast facility. All additional
distributions that are paid or made in respect of regular cash dividends or
extraordinary distributions will be paid or made without any interest or other
payment in respect of such amounts.

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Adjusted Principal Amount

Original Principal Amount. The principal amount of the debentures initially
is equal to their original principal amount, which is the amount set forth on
the face of the debentures.

Adjustments to Principal Amount. The principal amount of the debentures will
be adjusted downward to reflect any additional distributions that we make to
holders of the debentures that are attributable to extraordinary distributions
made on the reference shares. No adjustment will be made to the principal
amount, however, for additional distributions that are attributable to regular
cash dividends paid on the reference shares. Because the principal amount of
the debentures is subject to reduction, we refer to the principal amount of a
debenture at any time as its adjusted principal amount. In no event will the
adjusted principal amount of a debenture be less than zero.

On any date that we pay or make an additional distribution to the holders of
the debentures that is attributable to an extraordinary distribution on the
reference shares, the original principal amount of each debenture (or, if such
principal amount has previously been reduced, the adjusted principal amount of
the debenture) will be reduced by the amount of the additional distribution
that is paid or made with respect to that debenture. Thereafter, the adjusted
principal amount will be further reduced on each successive semi-annual
interest payment date to the extent necessary to cause the semi-annual interest
payment on that date to represent the payment by Liberty, in arrears, of an
annualized yield of 4% of the adjusted principal amount of the debentures. An
adjustment for purposes of ensuring that Liberty does not pay an annualized
yield of more than 4% of the adjusted principal amount of the debentures that
is necessitated by the payment of an additional distribution to holders of the
debentures will take effect on the second succeeding interest payment date
after the payment of that distribution. We will issue a press release, and
provide the release to DTC for dissemination through the DTC broadcast
facility, each time an adjustment is made to the adjusted principal amount of
the debentures.

The adjustments described above will not affect the amount of the semi-annual
interest payments received by holders of debentures, which will continue to be
a rate of interest equal to 4% per annum of the original principal amount of
the debentures.

Payment at Stated Maturity

The stated maturity of the debentures is November 15, 2029. The amount that
we will pay a holder of debentures at stated maturity will depend on whether we
notify holders, not less than 30 business days prior to the stated maturity
date:

. that we will cause reference shares to be delivered in payment of the
exchange market value of all debentures tendered for exchange up until
the close of business on the trading day preceding the stated maturity
date; or

. that we are terminating, as of the 30th business day prior to the stated
maturity date, the right of all holders to exchange their debentures for
the exchange market value thereof.

Continuation of Exchange Right. If we notify debenture holders that we will
cause reference shares to be delivered in payment of the exchange market value
of all debentures tendered for exchange up until the close of business on the
trading day preceding the stated maturity date, then we will pay, for each
debenture outstanding on the stated maturity date, an amount equal to the sum
of:

. the adjusted principal amount of the debenture, plus

. any accrued but unpaid interest on the debenture up to the stated
maturity date, plus

. any final period distribution on the debenture.

Termination of Exchange Right. If we notify debenture holders that we are
terminating, as of the 30th business day prior to the stated maturity date,
their right to exchange their debentures for the exchange market

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value thereof, then we will pay, for each debenture outstanding on the stated
maturity date, an amount equal to the sum of:

. the greater of:

-- the adjusted principal amount of the debenture, and

-- the current market value of the reference shares attributable to the
debenture; plus

. any accrued but unpaid interest on the debenture up to the stated
maturity date, plus

. any final period distribution on the debenture.

The current market value of the reference shares attributable to the
debentures for this purpose will be calculated based on the average closing
price for each reference share over the 20 trading day period immediately prior
to, but not including, the fifth business day preceding the stated maturity
date.

A final period distribution will be made if, as of the stated maturity date:

. a regular cash dividend or extraordinary dividend has been declared on
any of the reference shares;

. the ex-dividend date for that dividend or distribution has occurred; and

. the holders of such reference shares have not yet received the dividend
or distribution.

In the case of a regular cash dividend that has been declared on reference
shares as of the stated maturity date but not yet paid, the final period
distribution for each debenture will be equal to the amount of the regular cash
dividend that is payable to a holder of the number of reference shares
attributable to a debenture. This amount will be paid on the stated maturity
date with all other amounts then due. In the case of an extraordinary
distribution that has been declared on reference shares as of the stated
maturity date but not yet paid or made, the form and amount of the final period
distribution will be determined in the same manner as that for an additional
distribution that would have been attributable to that extraordinary
distribution, except that any publicly traded common equity securities to be
distributed on the reference shares will be part of any final period
distribution rather than treated as additional reference shares. Because any
additional distribution we make on a debenture that is attributable to an
extraordinary distribution on the reference shares is deducted from the
adjusted principal amount of that debenture, we will deduct from any final
period distribution that is attributable to an extraordinary distribution the
adjusted principal amount of the debenture, as of the stated maturity date, as
to which such final period distribution is paid. We will pay or make any final
period distribution that is attributable to an extraordinary distribution on
the 20th business day after the payment of that extraordinary dividend by the
applicable reference company.

The amount we pay for any debentures outstanding on the stated maturity date
will be payable in cash, except that any final period distribution included in
that amount which consists of publicly traded securities will be payable by
delivery of those securities.

Amount Payable upon Acceleration of the Debentures

If the maturity of the debentures is accelerated following an event of
default, the amount payable for each debenture will be determined in the same
manner as the amount payable at stated maturity under the circumstances in
which Liberty notifies debenture holders that it is terminating, as of the 30th
business day prior to the stated maturity date, their right to exchange their
debentures for the exchange market value thereof. See "--Payment at Stated
Maturity" above.

Redemption

Optional Redemption. Except as set forth under "Tax Event Redemption" and
"Share Event Redemption" below, the debentures are not redeemable before
November 15, 2003. At any time or from time to time on or after November 15,
2003, Liberty may redeem all or some of the debentures on not less than 30

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business days prior notice. If Liberty chooses to redeem only some of the
debentures, there must remain outstanding, immediately following any partial
redemption, at least $100,000,000 original principal amount of debentures.

The redemption price we pay for a debenture on any redemption date will
depend on whether we notify holders of debentures called for redemption, not
less than 30 business days prior to the redemption date:

. that we will cause reference shares to be delivered in payment of the
exchange market value of all debentures called for redemption that are
tendered for exchange up until the close of business on the trading day
next preceding the redemption date; or

. that we are terminating, as of the 30th business day prior to the
redemption date, the right of all holders of debentures called for
redemption to exchange those debentures for the exchange market value
thereof.

Any termination of the exchange right in the event of a partial redemption
will only apply to the debentures called for redemption.

Continuation of Exchange Right. If we notify debenture holders that we will
cause reference shares to be delivered in payment of the exchange market value
of all debentures called for redemption that are tendered for exchange up until
the close of business on the trading day next preceding the redemption date,
then we will pay, for each debenture that we redeem on the redemption date, a
redemption price equal to the sum of:

. the adjusted principal amount of the debenture, plus

. any accrued but unpaid interest on the debenture up to the redemption
date, plus

. any final period distribution on the debenture.

Termination of Exchange Right. If we notify holders of debentures called for
redemption that we are terminating, as of the 30th business day prior to the
redemption date, their right to exchange their debentures for the exchange
market value thereof, then we will pay, for each debenture that we redeem on
the redemption date, an amount equal to the sum of:

. the greater of:

-- the adjusted principal amount of the debenture, and

-- the current market value of the reference shares attributable to the
debenture; plus

. any accrued but unpaid interest on the debenture up to the redemption
date, plus

. any final period distribution on the debenture.

Tax Event Redemption. If a tax event occurs and is continuing at any time on
or before February 15, 2000, we will have the right to redeem all of the
debentures. If we choose to redeem the debentures after a tax event, we must
exercise our right within 180 days after the tax event and provide debenture
holders not less than 25 business days notice of the redemption date. Your
right to exchange the debentures will terminate on the giving of such notice
or, if later, on the 25th business day prior to the redemption date.

On a redemption date attributable to a tax event, we will redeem each
debenture outstanding at that date for a redemption price equal to the sum of:

. the greater of:

-- the adjusted principal amount of the debenture, and

-- the current market value of the reference shares attributable to the
debenture, plus

. any accrued but unpaid interest on the debenture up to the redemption
date, plus

. any final period distribution on the debenture.

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A tax event will occur if, prior to February 15, 2000, a change of law occurs
that results in there being a substantial risk that Liberty will not be able to
deduct, pursuant to Section 263(g) of the Code, all of the interest (including
original issue discount) it pays or accrues with respect to the debentures in
calculating its United States federal income tax liability. Before Liberty may
effect a redemption due to the occurrence of a tax event it must deliver to the
trustee a letter from a nationally recognized independent tax counsel, which
opines that a tax event has occurred. A "change of law" is defined as any
amendment to, clarification of, or change in the laws, or any regulations
thereunder, of the United States or any political subdivision or taxing
authority thereof or therein, or any judicial decision, official administrative
pronouncement, ruling, regulatory procedure, notice or announcement, including
any notice or announcement of proposed procedures or regulations, that occurs
after November 10, 1999.

Share Event. If a share event occurs and is continuing at any time on or
before November 15, 2003, we will have the right to redeem all of the
debentures. If we choose to redeem the debentures after a share event, we must
exercise our right within 5 business days after the share event and provide
debenture holders not less than 25 business days notice of the redemption date.
Your right to exchange the debentures will terminate on the giving of such
notice or, if later, on the 25th business day prior to the redemption date.

On a redemption date attributable to a share event, we will redeem each
debenture outstanding at that date for a redemption price equal to the sum of:

. the greater of:

-- the adjusted principal amount of the debenture, and

-- the sum of the current market value of the reference shares
attributable to the debenture and $115.04, plus

. the remaining scheduled semi-annual interest payments on the debenture
through and including November 15, 2003, plus

. any final period distribution on the debenture.

A share event will occur at such time as the Trust no longer holds the entire
pecuniary interest in:

. a number of shares of Sprint PCS stock, or other reference shares
received by the trustee of the Trust for shares of Sprint PCS stock, or

. securities convertible into or exercisable for that number of shares of
Sprint PCS stock or other reference shares,

free and clear of any rights or other claims of others, including rights or
claims relating to the market value of such securities, that are equal to or
greater than the aggregate number of reference shares attributable to all
debentures then outstanding. Before Liberty may effect a redemption due to the
occurrence of a share event it must deliver to the trustee an officers'
certificate certifying that a share event has occurred. See "Risk Factors--
Factors Relating to the Debentures--We do not own any shares of Sprint PCS
stock. We cannot control the sale of shares of Sprint PCS stock by a trust
established for our benefit, which could result in an early redemption of your
debentures." A share event can not occur due to a transfer of securities from
the Trust to or upon the order of Liberty.

Calculation of Current Market Value. If the current market value of the
reference shares attributable to a debenture needs to be calculated to
determine the amount of the redemption price, it will be calculated based on
the average closing price for each reference share over the 20 trading day
period immediately prior to, but not including, the fifth business day
preceding the redemption date.

Definition and Timing of Final Period Distribution. A final period
distribution will be made with respect to each debenture we redeem if, as of
the redemption date:

. a regular cash dividend or extraordinary dividend has been declared on
any of the reference shares;

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. the ex-dividend date for that dividend or distribution has occurred; and

. the holders of such reference shares have not yet received the dividend
or distribution.

The timing, amount and form of any final period distribution that we make in
connection with a redemption of debentures will be determined in the same
manner as that described under "--Payment at Stated Maturity" above for any
final distribution we may make in connection with the repayment of debentures
that are outstanding on the stated maturity date.

Payment of Redemption Price. The redemption price will be paid in cash,
except that any final period distribution included in the redemption price
which consists of publicly traded common equity securities will be payable by
delivery of those securities. On or prior to the redemption date, we will
irrevocably deposit with the trustee sufficient funds to pay the redemption
price for all debentures being redeemed at that date, other than any final
period distribution that is attributable to an extraordinary distribution on
the reference shares. A final period distribution that is attributable to an
extraordinary distribution will be paid on the 20th business day after the
extraordinary distribution is received by holders of reference shares. If the
redemption date is not a business day, then the redemption price will be
payable on the next business day, without any interest or other payment being
made in respect of the delay.

Additional distributions to be made after debentures have been called for
redemption and before the redemption date will be payable to the holders on the
record date for that distribution.

Once a notice of redemption is given and funds are irrevocably deposited,
interest on the debentures will cease to accrue on and after the date of
redemption and all rights of the holders of the debentures will cease, except
for the right of the holders to receive the redemption amount, including, if
applicable, any final period distribution (but without any interest or other
payment on that redemption amount).

If we improperly withhold or refuse to pay the redemption price for the
debentures, interest on the debentures will continue to accrue at an annual
rate of 4% from the original redemption date to the actual date of payment. In
this case, the actual payment date will be considered the redemption date for
purposes of calculating the redemption price. Any final period distribution
will be payable based on the original redemption date scheduled.

In compliance with applicable law (including the United States federal
securities laws), we and our affiliates may, at any time, purchase outstanding
debentures by tender, in the open market or by private agreement.

Changes to the Reference Shares.

As of the date of this prospectus, Sprint is the reference company and one
share of Sprint PCS stock represents one reference share. The reference company
may change over the 30-year term of the debentures, or there may be one or more
additional reference companies. A change in, or the addition of, a reference
company will result in a change in, or the addition to, the reference shares
attributable to the debentures. One reference share attributable to each
debenture may, over time, consist of a basket of reference shares.

The initial reference shares attributable to each debenture were 11.473
shares of Sprint PCS stock. As of February 4, 2000, the reference shares
attributable to each debenture became 22.9486 shares of Sprint PCS stock
effective upon the payment by Sprint of a 2-for-1 stock dividend.

The reference shares attributable to each debenture will be affected by the
following events, in the manner described below:

Dividends and Distributions. If a reference company makes a dividend or
distribution on its reference shares consisting of additional reference shares
of the same class, then the number of reference shares attributable to each
debenture will equal the sum of:

. the number of reference shares attributable to each debenture
immediately prior to the dividend or distribution, and

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. the number of additional references shares that a holder of the number
of reference shares attributable to each debenture receives as a result
of the dividend or distribution.

If a reference company makes a distribution on its reference shares
consisting of publicly traded common equity securities of another class of that
reference company or of another issuer, then the reference shares attributable
to each debenture will consist of the following:

. the number of reference shares attributable to each debenture
immediately prior to the distribution, and

. the number and type of new common equity securities that a holder of the
number of reference shares attributable to each debenture receives as a
result of the distribution.

Any change in the reference shares attributable to a debenture that results
from a dividend or distribution by a reference company will be deemed to have
occurred on the date the dividend or distribution is made by the reference
company.

Combinations, Subdivisions and Reclassifications. If a reference company
combines or subdivides its reference shares or issues by reclassification of
its reference shares any shares of any other class of its publicly traded
common equity securities (including any reclassification that is effected in
connection with a merger in which the reference company is the continuing
corporation), the reference shares will be adjusted so that the reference
shares attributable to each debenture will become the number and kind of
reference shares that a holder of the reference shares attributable to each
debenture immediately prior to the combination, subdivision or reclassification
owns immediately following that action.

Any change in the reference shares attributable to a debenture that results
from a combination, split or reclassification by a reference company will be
deemed to have occurred immediately after the effective date of the
combination, subdivision or reclassification.

Mergers and Consolidations. If a reference company merges or consolidates
with another company where the reference shares are exchanged for other
publicly traded common equity securities, the reference shares will be adjusted
so that the reference shares attributable to each debenture will become the
number and kind of publicly traded common equity securities that a holder of
the number of reference shares attributable to each debenture immediately prior
to the merger or consolidation owns immediately following the merger or
consolidation. To the extent the consideration received by the holders of
reference shares in a merger or consolidation consists of cash or assets other
than publicly traded common equity securities, the cash and assets so received
will be treated as though they were part of an extraordinary distribution by
the reference company or the successor reference company, and shall be the
object of an additional distribution by Liberty. See "--Additional
Distributions" above.

If an election is offered to holders of reference shares as to the form of
consideration they may receive in any merger or consolidation, such election
shall be deemed a reference share offer and treated in the manner described
under "Tender or Exchange Offer; Elections" below.

Any change in the reference shares attributable to a debenture that results
from a merger or consolidation will be deemed to have occurred immediately
after the effective date of the merger or consolidation.

For purposes of the foregoing, a conversion or redemption by Sprint of all
shares of Sprint PCS stock pursuant to Article Sixth, Section 7.1 of its
Articles of Incorporation shall be deemed a merger or consolidation.

According to available public information, Sprint has entered into a merger
agreement with MCI WorldCom, Inc. Under this agreement, holders of Sprint PCS
stock would receive one share of WorldCom PCS tracking stock and 0.116025
shares of MCI WorldCom common stock for each share of Sprint PCS

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stock. If this merger occurs, the shares issued in the MCI WorldCom merger
would replace the Sprint PCS stock as the reference shares that are
attributable to the debentures and MCI WorldCom would become a successor
reference company. Using the foregoing exchange ratio, immediately after the
Sprint/MCI WorldCom merger the reference shares attributable to each debenture
would consist of 22.9486 shares of WorldCom PCS tracking stock and 2.6626
shares of MCI WorldCom common stock. However, the merger is subject to many
conditions, including regulatory approvals, and may never occur. Even if it
does occur, the exchange ratio for the shares to be received by holders of
Sprint PCS stock in the merger may change.

Statutory Share Exchange. If a reference company participates in a statutory
share exchange with another company where the reference shares are exchanged
for other publicly traded common equity securities, the reference shares will
be adjusted so that the reference shares attributable to each debenture will
become the number and kind of publicly traded common equity securities that a
holder of the number of reference shares attributable to each debenture
immediately prior to the share exchange owns immediately following the share
exchange. To the extent the consideration received by the holders of reference
shares in a share exchange consists of cash or assets other than publicly
traded common equity securities, the cash and assets so exchanged will be
treated as though they were part of an extraordinary distribution by the
reference company or the successor reference company, and shall be the object
of an additional distribution by Liberty. See "--Additional Distributions"
above.

If an election is offered to holders of reference shares as to the form of
consideration they may receive in any statutory exchange, such election shall
be deemed a reference share offer and treated in the manner described under
"Tender or Exchange Offer; Elections" below.

Any change in the reference shares attributable to a debenture that results
from a share exchange will be deemed to have occurred immediately after the
effective date of the share exchange.

For the foregoing purposes, a redemption by Sprint of all of the outstanding
shares of Sprint PCS stock, pursuant to Article Sixth, Section 7.2 of its
Articles of Incorporation, in exchange for common stock of one or more of its
wholly owned subsidiaries that collectively hold all of the assets and
liabilities attributed to its PCS Group shall be deemed a statutory exchange of
shares of Sprint PCS stock for shares of common stock of the relevant
subsidiary or subsidiaries.

Liquidation or Dissolution. If a reference company liquidates or dissolves,
the reference shares will be adjusted so that the reference shares attributable
to each debenture will become the number and kind of publicly traded common
equity securities, if any, that a holder of the number of reference shares
attributable to each debenture immediately prior to the liquidation or
dissolution owns immediately thereafter. To the extent the consideration
received by the holders of reference shares in a liquidation or dissolution
consists of cash or assets other than publicly traded common equity securities,
the cash and assets so exchanged will be treated as though they were part of an
extraordinary distribution by the reference company, and shall be the subject
of an additional distribution by Liberty. See "--Additional Distributions"
above.

Any change in the reference shares attributable to a debenture that results
from the liquidation or dissolution of a reference company will be deemed to
have occurred immediately after the effective date of the liquidation or
dissolution.

Tender or Exchange Offer; Elections. The reference shares will be adjusted in
the event of any tender or exchange offer for 30% or more of the outstanding
reference shares of any reference company. In the event of such a tender offer,
or any consolidation, merger or statutory share exchange involving a reference
company in which an election is given to holders of reference shares as to the
consideration to be received in the transaction, a reference share offer shall
be deemed to have been made.

If a reference share offer is made, we will make a reference share offer
adjustment. This means the reference shares attributable to each debenture will
include, immediately after the closing of the reference share

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offer, the portion of the average transaction consideration that consists of
publicly traded common equity securities. In addition, this means reducing the
reference shares attributable to each debenture immediately prior to the
closing of such reference share offer by the reference share proportionate
reduction.

The term "average transaction consideration" means, as to each reference
share subject to the reference share offer, the quotient derived by dividing
(1) the aggregate amount of consideration actually distributed or paid to all
holders of reference shares that participated in the reference share offer, by
(2) the total number of reference shares outstanding immediately prior to the
closing of the reference share offer and entitled to participate in that
reference share offer.

The term "reference share proportionate reduction" means a proportionate
reduction in the number of reference shares attributable to each debenture that
are the subject of the reference share offer, calculated in accordance with the
following formula:

X
R = --
N

where:

R= the fraction by which the number of reference shares that are the
subject of the reference share offer and attributable to each debenture
will be reduced.

X= the aggregate number of such reference shares that are surrendered and
accepted in the reference share offer.

N= the aggregate number of reference shares, which are the subject of the
reference share offer, outstanding immediately prior to the closing of
the reference share offer.

Any portion of the average transaction consideration that does not consist of
publicly traded common equity securities will be treated as though it were part
of an extraordinary distribution by the reference company, and shall be the
object of an additional distribution by Liberty. See "-- Additional
Distributions" above.

Any change in the reference shares attributable to a debenture that results
from a reference share offer will be deemed to have occurred immediately after
the closing of the tender or exchange offer or the effective date of the
merger, consolidation or statutory share exchange involving an election, as the
case may be.

A conversion or redemption of less than all shares of Sprint PCS stock
pursuant to Article Sixth, Section 7.1 of Sprint's Articles of Incorporation
shall be treated as a reference share offer.

If following any merger, consolidation, liquidation, dissolution, exchange
offer or tender offer no reference shares were to remain outstanding, the
maturity of the debentures would not be accelerated and the debentures would
continue to remain outstanding until the stated maturity date, unless the
debentures were earlier redeemed by us. At the stated maturity or upon
redemption, holders of the debentures would only be entitled to receive the
adjusted principal amount of the debentures, plus any accrued but unpaid
interest.

Calculations in Respect of the Debentures

We will be responsible for making all calculations called for under the
debentures. These calculations include determination of:

. the adjusted principal amount of the debentures;

. the current market value of the reference shares;

. the exchange market value of the reference shares;

. any final period distribution on the debentures;

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. the cash value of any property distributed on the reference shares;

. the average transaction consideration in a reference share offer;

. reference share proportionate reduction resulting from a reference share
offer;

. the number and composition of the reference shares attributable to a
debenture; and

. the amount of accrued interest payable upon redemption or at maturity of
the debentures.

We will make all these calculations in good faith and, absent manifest error,
our calculations will be final and binding on holders of the debentures. We
will provide a schedule of our calculations to the trustee, and the trustee is
entitled to rely upon the accuracy of our calculations without independent
verification.

Certain Covenants

The covenants set forth below are contained in the indenture and are
applicable to Liberty and its Subsidiaries.

Limitation on Liens. Liberty will not, and will not permit any Restricted
Subsidiary to, create, incur or assume any Lien, except for Permitted Liens, on
any Principal Property to secure the payment of Funded Indebtedness of Liberty
or any Restricted Subsidiary if, immediately after the creation, incurrence or
assumption of such Lien, the sum of (A) the aggregate outstanding principal
amount of all Funded Indebtedness of Liberty and the Restricted Subsidiaries
that is secured by Liens (other than Permitted Liens) on any Principal Property
and (B) the Attributable Debt relating to any Sale and Leaseback Transaction
which would otherwise be subject to the provisions of clause 2(A)(i) of the
"Limitation on Sale and Leaseback" covenant would exceed 15% of the
Consolidated Asset Value, unless effective provision is made whereby the
debentures (together with, if Liberty shall so determine, any other Funded
Indebtedness ranking equally with the debentures, whether then existing or
thereafter created) are secured equally and ratably with (or prior to) such
Funded Indebtedness (but only for so long as such Funded Indebtedness is so
secured).

The foregoing limitation on Liens shall not apply to the creation, incurrence
or assumption of the following Liens ("Permitted Liens"):

(1) Any Lien which arises out of a judgment or award against Liberty or
any Restricted Subsidiary with respect to which Liberty or such Restricted
Subsidiary at the time shall be prosecuting an appeal or proceeding for
review (or with respect to which the period within which such appeal or
proceeding for review may be initiated shall not have expired) and with
respect to which it shall have secured a stay of execution pending such
appeal or proceedings for review or with respect to which Liberty or such
Restricted Subsidiary shall have posted a bond and established adequate
reserves (in accordance with generally accepted accounting principles) for
the payment of such judgment or award;

(2) Liens on assets or property of a person existing at the time such
person is merged into or consolidated with Liberty or any Restricted
Subsidiary or becomes a Restricted Subsidiary; provided, that such Liens
were in existence prior to the contemplation of such merger, consolidation
or acquisition and do not secure any property of Liberty or any Restricted
Subsidiary other than the property and assets subject to the Liens prior to
such merger, consolidation or acquisition;

(3) Liens existing on the date of original issuance of the debentures;

(4) Liens securing Funded Indebtedness (including in the form of
Capitalized Lease Obligations and purchase money indebtedness) incurred for
the purpose of financing the cost (including without limitation the cost of
design, development, site acquisition, construction, integration,
manufacture or acquisition) of real or personal property (tangible or
intangible) which is incurred contemporaneously therewith or within 60 days
thereafter; provided (i) such Liens secure Funded Indebtedness in an amount
not in excess of the cost of such property (plus an amount equal to the
reasonable fees and expenses incurred in connection with the incurrence of
such Funded Indebtedness) and (ii) such Liens do not extend to any property
of

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Liberty or any Restricted Subsidiary other than the property for which such
Funded Indebtedness was incurred;

(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;

(6) Liens to secure the debentures;

(7) Liens granted in favor of Liberty; and

(8) Any Lien in respect of Funded Indebtedness representing the
extension, refinancing, renewal or replacement (or successive extensions,
refinancings, renewals or replacements) of Funded Indebtedness secured by
Liens referred to in clauses (2), (3), (4), (5), (6) and (7) above,
provided that the principal of the Funded Indebtedness secured thereby does
not exceed the principal of the Funded Indebtedness secured thereby
immediately prior to such extension, renewal or replacement, plus any
accrued and unpaid interest or capitalized interest payable thereon,
reasonable fees and expenses incurred in connection therewith, and the
amount of any prepayment premium necessary to accomplish any refinancing;
provided, that such extension, renewal or replacement shall be limited to
all or a part of the property (or interest therein) subject to the Lien so
extended, renewed or replaced (plus improvements and construction on such
property).

Limitation on Sale and Leaseback. Liberty will not, and will not permit any
Restricted Subsidiary to, enter into any Sale and Leaseback Transaction;
provided, that Liberty or any Restricted Subsidiary may enter into a Sale and
Leaseback Transaction if:

(1) the gross cash proceeds of the Sale and Leaseback Transaction are at
least equal to the fair market value, as determined in good faith by the
Board of Directors and set forth in a board resolution delivered to the
trustee, of the Principal Property that is the subject of the Sale and
Leaseback Transaction, and

(2) either

(A) Liberty or the Restricted Subsidiary, as applicable, either (i)
could have incurred a Lien to secure Funded Indebtedness in an amount
equal to the Attributable Debt relating to such Sale and Leaseback
Transaction pursuant to the "Limitation on Liens" covenant, or (ii)
makes effective provision whereby the debentures (together with, if
Liberty shall so determine, any other Funded Indebtedness ranking
equally with the debentures, whether then existing or thereafter
created) are secured equally and ratably with (or prior to) the
obligations of Liberty or the Restricted Subsidiary under the lease of
the Principal Property that is the subject of the Sale and Leaseback
Transaction, or

(B) within 180 days, Liberty or the Restricted Subsidiary either (i)
applies an amount equal to the fair market value of the Principal
Property that is the subject of the Sale and Leaseback Transaction to
purchase the debentures or to retire other Funded Indebtedness, or (ii)
enters into a bona fide commitment to expend for the acquisition or
improvement of a Principal Property an amount at least equal to the
fair market value of such Principal Property.

Designation of Restricted Subsidiaries. Liberty may designate an Unrestricted
Subsidiary as a Restricted Subsidiary or designate a Restricted Subsidiary as
an Unrestricted Subsidiary at any time, provided that (1) immediately after
giving effect to such designation, Liberty and its Restricted Subsidiaries
would have been permitted to incur at least $1.00 of additional Funded
Indebtedness secured by a Lien pursuant to the "Limitation on Liens" covenant,
(2) no default or event of default shall have occurred and be continuing, and
(3) an Officers' Certificate with respect to such designation is delivered to
the trustee within 75 days after the end of the fiscal quarter of Liberty in
which such designation is made (or, in the case of a designation made during
the last fiscal quarter of Liberty's fiscal year, within 120 days after the end
of such fiscal year), which Officers' Certificate shall state the effective
date of such designation; Liberty has made the initial designation of all of
its Subsidiaries as Restricted Subsidiaries and will deliver the required
Officers' Certificate with respect thereto to the trustee, on or prior to the
date of initial issuance of the debentures.

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Successor Corporation

Liberty may not consolidate with or merge into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets
and the properties and assets of its Subsidiaries (taken as a whole) to, any
entity or entities (including limited liability companies) unless (1) the
successor entity or entities, each of which shall be organized under the laws
of the United States or a State thereof, shall assume by supplemental indenture
all the obligations of Liberty under the debentures and the indenture and (2)
immediately after giving effect to the transaction or series of transactions,
no default or event of default shall have occurred and be continuing.
Thereafter, all such obligations of Liberty shall terminate.

Events of Default

The term "event of default" means any one of the following events with
respect to any series of senior debt securities, including the debentures:

(1) default in the payment of any interest or distributions on any
senior debt security of the series, or any additional amounts payable with
respect thereto, when the interest or distributions becomes or the
additional amounts become due and payable, and continuance of the default
for a period of 30 days;

(2) default in the payment of the principal of or any premium on any
senior debt security of the series, or any additional amounts payable with
respect thereto, when the principal or premium becomes or the additional
amounts become due and payable at their maturity;

(3) failure of Liberty to comply with its obligations to deliver cash or
reference shares in exchange for debentures as described above under "--
Exchange Option";

(4) failure of Liberty to comply with any of its obligations described
above under "--Successor Corporation";

(5) default in the deposit of any sinking fund payment when and as due
by the terms of a senior debt security of the series;

(6) default in the performance, or breach, of any covenant or warranty
of Liberty in the indenture or the senior debt securities (other than a
covenant or warranty a default in the performance or the breach of which is
elsewhere in the indenture specifically dealt with or which has been
expressly included in the indenture solely for the benefit of a series of
senior debt securities other than the relevant series), and continuance of
the default or breach for a period of 60 days after there has been given,
by registered or certified mail, to Liberty by the trustee or to Liberty
and the trustee by the holders of at least 25% in principal amount of the
outstanding senior debt securities of the series, a written notice
specifying the default or breach and requiring it to be remedied and
stating that the notice is a "Notice of Default" under the indenture;

(7) if any event of default as defined in any mortgage, indenture or
instrument under which there may be issued, or by which there may be
secured or evidenced, any Indebtedness of Liberty, whether the Indebtedness
now exists or shall hereafter be created, shall happen and shall result in
Indebtedness in aggregate principal amount (or, if applicable, with an
issue price and accreted original issue discount) in excess of $100 million
becoming or being declared due and payable prior to the date on which it
would otherwise become due and payable, and (i) the acceleration shall not
be rescinded or annulled, (ii) such Indebtedness shall not have been paid
or (iii) Liberty shall not have contested such acceleration in good faith
by appropriate proceedings and have obtained and thereafter maintained a
stay of all consequences that would have a material adverse effect on
Liberty, in each case within a period of 30 days after there shall have
been given, by registered or certified mail, to Liberty by the trustee or
to Liberty and the trustee by the holders of at least 25% in principal
amount of the outstanding senior debt securities of the series then
outstanding, a written notice specifying the default or breaches and
requiring it to be remedied and stating that the notice is a "Notice of
Default" or other notice as prescribed in the indenture; provided, however,
that if after the expiration of such period, such event of default shall be
remedied or cured by

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Liberty or be waived by the holders of such Indebtedness in any manner
authorized by such mortgage, indenture or instrument, then the event of
default with respect to such series of senior debt securities or by reason
thereof shall, without further action by Liberty, the trustee or any holder
of senior debt securities of such series, be deemed cured and not
continuing;

(8) the entry by a court having competent jurisdiction of:

(a) a decree or order for relief in respect of Liberty or any
Material Subsidiary in an involuntary proceeding under any applicable
bankruptcy, insolvency, reorganization or other similar law and the
decree or order shall remain unstayed and in effect for a period of 60
consecutive days;

(b) a decree or order adjudging Liberty or any Material Subsidiary
to be insolvent, or approving a petition seeking reorganization,
arrangement, adjustment or composition of Liberty or any Material
Subsidiary and the decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or

(c) a final and non-appealable order appointing a custodian,
receiver, liquidator, assignee, trustee or other similar official of
Liberty or any Material Subsidiary or of any substantial part of the
property of Liberty or any Material Subsidiary or ordering the winding
up or liquidation of the affairs of Liberty;

(9) the commencement by Liberty or any Material Subsidiary of a
voluntary proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar law or of a voluntary proceeding seeking to
be adjudicated insolvent or the consent by Liberty or any Material
Subsidiary to the entry of a decree or order for relief in an involuntary
proceeding under any applicable bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any insolvency proceedings
against it, or the filing by Liberty or any Material Subsidiary of a
petition or answer or consent seeking reorganization or relief under any
applicable law, or the consent by Liberty or any Material Subsidiary to the
filing of the petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or similar official of
Liberty or any Material Subsidiary or any substantial part of the property
of Liberty or any Material Subsidiary or the making by Liberty or any
Material Subsidiary of an assignment for the benefit of creditors, or the
taking of corporate action by Liberty or any Material Subsidiary in
furtherance of any such action; or

(10) any other event of default provided in or pursuant to the indenture
with respect to senior debt securities of the series.

If an event of default with respect to senior debt securities of any series
at the time outstanding (other than an event of default specified in clause (8)
or (9) above) occurs and is continuing, then the trustee or the holders of not
less than 25% in principal amount of the outstanding senior debt securities of
the series may declare the principal of all the senior debt securities of the
series, or such lesser amount as may be provided for in the senior debt
securities of the series, to be due and payable immediately, by a notice in
writing to Liberty (and to the trustee if given by the holders), and upon any
declaration the principal or such lesser amount shall become immediately due
and payable. If an event of default specified in clause (8) or (9) above
occurs, all unpaid principal of and accrued interest on the outstanding senior
debt securities of that series (or such lesser amount as may be provided for in
the senior debt securities of the series) shall become and be immediately due
and payable without any declaration or other act on the part of the trustee or
any holder of any senior debt security of that series.

At any time after a declaration of acceleration or automatic acceleration
with respect to the senior debt securities of any series has been made and
before a judgment or decree for payment of the money due has been obtained by
the trustee, the holders of not less than a majority in principal amount of the
outstanding senior debt securities of the series, by written notice to Liberty
and the trustee, may rescind and annul the declaration and its consequences if:

(1) Liberty has paid or deposited with the trustee a sum of money
sufficient to pay all overdue installments of any interest and
distributions on all senior debt securities of the series and
additional

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amounts payable with respect thereto and the principal of and any
premium on any senior debt securities of the series which have become
due otherwise than by the declaration of acceleration and interest on
the senior debt securities; and

(2) all events of default with respect to senior debt securities of the
series, other than the non-payment of the principal of, any premium,
interest and distributions on, and any additional amounts with respect
to senior debt securities of the series which shall have become due
solely by the acceleration, shall have been cured or waived.

No rescission shall affect any subsequent default or impair any right
consequent thereon.

Certain Definitions

The following are certain of the terms defined in the indenture and used
under "--Certain Covenants" above:

"Attributable Debt" in respect of a Sale and Leaseback Transaction means, at
the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
Sale and Leaseback Transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with generally accepted
accounting principles.

"Capitalized Lease Obligation" of any person means any obligation of such
person to pay rent or other amounts under a lease with respect to any property
(whether real, personal or mixed) acquired or leased by such person and used in
its business that is required to be accounted for as a liability on the balance
sheet of such person in accordance with generally accepted accounting
principles and the amount of such Capitalized Lease Obligation shall be the
amount so required to be accounted for as a liability.

"Closing Price" means, with respect to any security on any date of
determination, the closing sale price (or, if no closing sale price is
reported, the last reported sale price) of such security on the NYSE on such
date or, if such security is not listed for trading on the NYSE on such date,
as reported in the composite transactions (or comparable system) for the
principal United States national or regional securities exchange on which such
security is so listed or a recognized international securities exchange, or, if
such security is not listed on a U.S. national or regional securities exchange
or on a recognized international securities exchange, as reported by the Nasdaq
Stock Market, or, if such security is not so reported, the last quoted bid
price for such security in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or, if such bid price is not
available, the market value of such security on such date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by Liberty; provided that, (1) with respect to options, warrants and
other rights to purchase Marketable Securities, the Closing Price shall be the
value based on the Closing Price of the underlying Marketable Security minus
the exercise price and (2) with respect to securities exchangeable for or
convertible into Marketable Securities, the Closing Price shall be the Closing
Price of the exchangeable or convertible security or, if it has no Closing
Price, the fully converted value based upon the Closing Price of the underlying
Marketable Security.

"Consolidated Asset Value" shall mean, with respect to any date of
determination, the sum of:

(A) the amount of cash of Liberty and its Restricted Subsidiaries on the
last day of the preceding month, plus the following assets owned by Liberty
and its Restricted Subsidiaries on the last day of the preceding month that
have the indicated ratings and maturities no greater than 270 days:

. the aggregate principal amount of certificates of deposit and
bankers' acceptances rated A/2 or P/2 or higher by the Rating
Agencies,

. the aggregate principal amount of participations in loans with
obligors with short-term ratings of

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A/2 or P/2 or higher by the Rating Agencies or long-term ratings of
Baa1or BBB+ or higher by the Rating Agencies,

. the aggregate principal amount of repurchase agreements of securities
issued by the U.S. government or any agency thereof with
counterparties with short-term ratings of A/2 or P/2 or higher by the
Rating Agencies or long-term ratings of Baa1or BBB+ or higher by the
Rating Agencies, and

. the aggregate principal amount at maturity of commercial paper rated
A/2 or P/2 or higher by the Rating Agencies,

(B) the aggregate value of all Marketable Securities owned by Liberty
and its Restricted Subsidiaries based upon the Closing Price of each
Marketable Security on the last day of the preceding month, or if such day
is not a Trading Day, on the immediately preceding Trading Day, and

(C) the arithmetic mean of the aggregate market values (or the midpoint
of a range of values) of the assets of Liberty and its Restricted
Subsidiaries having a value in excess of $200 million, other than the
assets referred to in clauses (A) and (B) above, as of a date within 90
days of the date of determination (or to the extent the research reports
referred to below have not been issued within such 90-day period, as of a
date within 180 days of the date of determination) as evidenced either:

. by research reports issued by three nationally recognized independent
investment banking firms selected by Liberty or

. if three such research reports have not been issued within 180 days
prior to the date of determination, by an appraisal by two nationally
recognized independent investment banking or appraisal firms retained
by Liberty for this purpose.

"Fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length transaction, for cash, between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy. Fair market value shall be
determined by the Board of Directors of Liberty acting in good faith evidenced
by a board resolution thereof delivered to the trustee.

"Funded Indebtedness" of any person means, as of the date as of which the
amount thereof is to be determined, without duplication, all Indebtedness of
such person and all Capitalized Lease Obligations of such person, which by the
terms thereof have a final maturity, duration or payment date more than one
year from the date of determination thereof (including, without limitation,
any balance of such Indebtedness or obligation which was Funded Indebtedness
at the time of its creation maturing within one year from such date of
determination) or which has a final maturity, duration or payment date within
one year from such date of determination but which by its terms may be renewed
or extended at the option of such person for more than one year from such date
of determination, whether or not theretofore renewed or extended; provided,
however, "Funded Indebtedness" shall not include (1) any Indebtedness of
Liberty or any Subsidiary to Liberty or another Subsidiary, (2) any guarantee
by Liberty or any Subsidiary of Indebtedness of Liberty or another Subsidiary,
provided that such guarantee is not secured by a Lien on any Principal
Property, (3) any guarantee by Liberty or any Subsidiary of the Indebtedness
of any person (including, without limitation, a business trust), if the
obligation of Liberty or such Subsidiary under such guaranty is limited in
amount to the amount of funds held by or on behalf of such person that are
available for the payment of such Indebtedness, (4) liabilities under interest
rate swap, exchange, collar or cap agreements and all other agreements or
arrangements designed to protect against fluctuations in interest rates or
currency exchange rates, and (5) liabilities under commodity hedge, commodity
swap, exchange, collar or cap agreements, fixed price agreements and all other
agreements or arrangements designed to protect against fluctuations in prices.
For purposes of determining the outstanding principal amount of Funded
Indebtedness at any date, the amount of Indebtedness issued at a price less
than the principal amount at maturity thereof shall be equal to the amount of
the liability in respect thereof at such date determined in accordance with
generally accepted accounting principles.

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"Indebtedness" of any person means:

(1) any indebtedness of such person (i) for borrowed money or (ii)
evidenced by a note, debenture or similar instrument (including a purchase
money obligation) given in connection with the acquisition of any property
or assets, including securities;

(2) any guarantee by such person of any indebtedness of others described
in the preceding clause (1); and

(3) any amendment, renewal, extension or refunding of any such
indebtedness or guarantee.

"Liberty" means Liberty Media Corporation, a Delaware corporation, until a
successor replaces it pursuant to the applicable provisions of the indenture
and thereafter means the successor.

"Lien" means any mortgage, pledge, lien, security interest, or other similar
encumbrance.

"Marketable Securities" means any securities listed on a U.S. national
securities exchange or reported by the Nasdaq Stock Market or listed on a
recognized international securities exchange or traded in the over-the-counter
market and quoted by at least two broker-dealers as reported by the National
Quotation Bureau or similar organization, including as Marketable Securities
options, warrants and other rights to purchase, and securities exchangeable for
or convertible into, Marketable Securities.

"Material Subsidiary" means, at any relevant time, any Subsidiary that meets
any of the following conditions:

(1) Liberty's and its other Subsidiaries' investments in and advances to
the Subsidiary exceed 10% of the total consolidated assets of Liberty and
its Subsidiaries; or

(2) Liberty's and its other Subsidiaries' proportionate share of the
total assets (after intercompany eliminations) of the Subsidiary exceeds
10% of the total consolidated assets of Liberty and its Subsidiaries; or

(3) Liberty's and its other Subsidiaries' proportionate share of the
total revenues (after intercompany eliminations) of the Subsidiary exceeds
10% of the total consolidated revenue of Liberty and its Subsidiaries; or

(4) Liberty's and its other Subsidiaries' equity in the income from
continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principle of the Subsidiary
exceeds 10% of such income of Liberty and its Subsidiaries;

all as calculated by reference to the then latest fiscal year-end accounts (or
consolidated fiscal year-end accounts, as the case may be) of such Subsidiary
and the then latest audited consolidated fiscal year-end accounts of Liberty
and its Subsidiaries. Based on the 1998 fiscal year-end accounts, as of the
date of this prospectus, the only Material Subsidiary of Liberty is Encore
Media Group LLC.

"Nasdaq Stock Market" means The Nasdaq Stock Market, a subsidiary of the
National Association of Securities Dealers, Inc.

"Principal Property" means, as of any date of determination, (a) any cable
system or manufacturing or production facility, including land and buildings
and other improvements thereon and equipment located therein, owned by Liberty
or a Restricted Subsidiary and used in the ordinary course of its business and
(b) any executive offices, administrative buildings, and research and
development facilities, including land and buildings and other improvements
thereon and equipment located therein, of Liberty or a Restricted Subsidiary,
other than any such property which, in the good faith opinion of the Board of
Directors, is not of material importance to the business conducted by Liberty
and its Restricted Subsidiaries taken as a whole.

"Rating Agencies" means (i) Standard & Poors, a division of The McGraw-Hill
Companies, Inc. and (ii) Moody's Investors Service, Inc. and (iii) if S&P or
Moody's or both shall not make a rating publicly available,

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a nationally recognized United States securities rating agency or agencies, as
the case may be, selected by Liberty, which shall be substituted for S&P or
Moody's or both, as the case may be.

"Restricted Subsidiary" means, as of any date of determination, a corporation
a majority of whose voting stock is owned by Liberty and/or one or more
Restricted Subsidiaries, which corporation has been, or is then being,
designated a Restricted Subsidiary in accordance with the "Designation of
Restricted Subsidiaries" covenant, unless and until designated an Unrestricted
Subsidiary in accordance with such covenant.

"Sale and Leaseback Transaction" means any arrangement providing for the
leasing to Liberty or a Restricted Subsidiary of any Principal Property (except
for temporary leases for a term, including renewals, of not more than three
years) which has been or is to be sold by Liberty or such Restricted Subsidiary
to the lessor.

"Subsidiary" means any corporation, association, limited liability company,
partnership or other business entity of which a majority of the total voting
power of the capital stock or other interests (including partnership interests)
entitled (without regard to the incurrence of a contingency) to vote in the
election of directors, managers, or trustees thereof is at the time owned,
directly or indirectly, by (i) Liberty, (ii) Liberty and one or more of its
Subsidiaries or (iii) one or more Subsidiaries of Liberty.

"Trading Day" means, with respect to any security the Closing Price of which
is being determined, a day on which there is trading on the principal United
States national or regional securities exchange or recognized international
securities exchange, in the Nasdaq Stock Market or in the over-the-counter
market used to determine such Closing Price.

"Unrestricted Subsidiary" means, as of any date of determination, any
Subsidiary of Liberty that is not a Restricted Subsidiary.

Modification and Waiver

Modification and amendments of the indenture may be made by Liberty and the
trustee with the consent of the holders of not less than a majority in
aggregate principal amount of the outstanding senior debt securities of each
series affected thereby; provided, however, that no modification or amendment
may, without the consent of the holder of each outstanding senior debt security
affected thereby,

(1) change the stated maturity of the principal of, or any premium or
installment of interest or distributions on, or any additional
amounts with respect to, any senior debt security,

(2) reduce the principal amount of, or the rate (or modify the
calculation of the rate) of interest or distributions on, or any
additional amounts with respect to, or any premium payable upon the
redemption of, any senior debt security,

(3) change the redemption provisions of any senior debt security or
adversely affect the right of repayment at the option of any holder
of any senior debt security,

(4) change the place of payment or the coin or currency in which the
principal of, any premium or installment of interest or distributions
on, or any additional amounts with respect to, any senior debt
security is payable,

(5) impair the right to institute suit for the enforcement of any payment
on or after the stated maturity of any senior debt security (or, in
the case of redemption, on or after the redemption date or, in the
case of repayment at the option of any holder, on or after the date
for repayment),

(6) reduce the percentage in principal amount of the outstanding senior
debt securities, the consent of whose holders is required in order to
take certain actions,

(7) reduce the requirements for quorum or voting by holders of senior
debt securities as provided in the indenture,

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(8) modify any of the provisions in the indenture regarding the waiver of
past defaults and the waiver of certain covenants by the holders of
senior debt securities except to increase any percentage vote
required or to provide that certain other provisions of the indenture
cannot be modified or waived without the consent of the holder of
each senior debt security affected thereby,

(9) reduce the amount of cash or reference shares deliverable upon
exchange of the debentures, or

(10) modify any of the above provisions.

The holders of at least a majority in aggregate principal amount of the
senior debt securities of any series may, on behalf of the holders of all
senior debt securities of the series, waive compliance by Liberty with certain
restrictive provisions of the indenture. The holders of not less than a
majority in aggregate principal amount of the outstanding senior debt
securities of any series may, on behalf of the holders of all senior debt
securities of the series, waive any past default and its consequences under the
indenture with respect to the senior debt securities of the series, except a
default

. in the payment of principal (or premium, if any), or any interest or
distributions on, or any additional amounts with respect to, senior debt
securities of the series, or

. in respect of a covenant or provision of the indenture that cannot be
modified or amended without the consent of the holder of each senior
debt security of any series.

Under the indenture, Liberty is required to furnish the trustee annually a
statement as to performance by Liberty of certain of its obligations under the
indenture and as to any default in the performance. Liberty is also required to
deliver to the trustee, within five days after becoming aware thereof, written
notice of any event of default or any event which after notice or lapse of time
or both would constitute an event of default.

Governing Law

The indenture and the debentures will be governed by, and construed in
accordance with, the laws of the State of New York.

Regarding the Trustee

The trustee is permitted to engage in other transactions with Liberty and its
subsidiaries from time to time, provided that if the trustee acquires any
conflicting interest it must eliminate the conflict upon the occurrence of an
event of default, or else resign.

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SUMMARY OF
REGISTRATION RIGHTS OF SELLING SECURITY HOLDERS

We entered into a registration rights agreement with the initial purchasers
of the debentures, pursuant to which we filed with the SEC and caused to become
effective a shelf registration statement of which this prospectus is a part.
Pursuant to the registration rights agreement, we are required to:

. use our reasonable best efforts to keep effective the shelf registration
statement until two years after the original issue date of the
debentures or until all of the debentures covered by the shelf
registration statement have been sold, exchanged or redeemed or
otherwise cease to be outstanding; and

. use our reasonable best efforts to ensure that

. the shelf registration statement and any amendment thereto and any
prospectus included therein comply in all material respects with the
Securities Act, and

. the shelf registration statement and any amendment thereto and any
prospectus included therein do not, when the shelf registration
statement or any amendment becomes effective, contain an untrue
statement of a material fact.

If the shelf registration statement is unusable by the holders for any reason
for more than 30 days in the aggregate in any consecutive 12-month period, then
the interest rate borne by the debentures will be increased by 0.25% per annum
of the principal amount of the debentures for the first 90-day period (or
portion thereof) beginning on the 31st day that the shelf registration
statement ceased to be usable. This interest rate will be increased by an
additional 0.25% per annum of the principal amount of the debentures at the
beginning of each subsequent 90-day period, provided that the maximum aggregate
increase in the interest rate will in no event exceed one percent (1%) per
annum. Upon the shelf registration statement once again becoming usable, the
interest rate borne by the debentures will be reduced to the original interest
rate. Additional interest shall be computed based on the actual number of days
elapsed in each 90-day period in which the shelf registration statement is
unusable.

Liberty shall notify the trustee within three business days of any event in
respect of which additional interest is required to be paid in accordance with
the registration rights agreement. Additional interest shall be paid by
depositing with the trustee, in trust, for the benefit of the holders of the
debentures, on or before the applicable semiannual interest payment date,
immediately available funds in sums sufficient to pay the additional interest
then due. The additional interest due shall be payable on each interest payment
date to the record holder of debentures entitled to receive the interest
payment to be paid on such date as set forth in the indenture. Each obligation
to pay additional interest shall be deemed to accrue from and including the
date following the applicable event date.

The registration rights agreement has been filed as an exhibit to the
registration statement of which this prospectus forms a part, and we refer you
to the registration rights agreement for a complete description of its terms.
See "Where to Find More Information." The registration rights agreement
requires us to pay substantially all of the expenses incident to the
registration, offering, and sale of the debentures to the public, other than
commissions, concessions and discounts of underwriters, dealers or agents, but
including the fees and disbursements of one counsel for the selling security
holders. We have agreed to indemnify the selling security holders and any
underwriters they may use against certain civil liabilities, including
liabilities under the Securities Act.

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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the material United States federal income tax
consequences of the acquisition, ownership and disposition of the debentures
and of any shares of Sprint PCS stock that a holder of debentures may receive
upon an exchange of debentures for their exchange market value. This summary is
based upon the United States Internal Revenue Code of 1986, as amended (which
we refer to as the "Code"), administrative pronouncements, judicial decisions,
and existing and proposed Treasury Regulations, changes to any of which
subsequent to the date of this prospectus may affect the tax consequences
described in this prospectus, possibly with retroactive effect. This summary
deals only with holders that will hold the debentures and any Sprint PCS stock
for which the debentures may be exchanged as "capital assets" within the
meaning of Section 1221 of the Code, and does not address tax considerations
applicable to holders that may be subject to special tax rules, such as dealers
or traders in securities, financial institutions, tax-exempt entities, holders
that hold the debentures as a part of a hedging, straddle, conversion or other
integrated transaction, or U.S. Holders (as defined below) whose functional
currency is not the United States dollar. The following summary assumes that
any reference shares received upon maturity, exchange or redemption of the
debentures consist of Sprint PCS stock.

The discussion set out below is intended only as a summary of certain United
States federal income tax consequences of an investment in the debentures.
Prospective investors are urged to consult their tax advisors as to the tax
consequences of an investment in the debentures, including the application to
their particular situations of the tax considerations discussed below, as well
as the application of state, local or foreign tax laws.

"U.S. Holder" means a beneficial owner of the debentures or Sprint PCS
stock, as the case may be, that is, for United States federal income tax
purposes, (i) an individual citizen or resident of the United States, (ii) a
corporation, partnership, or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, (iii) an estate
the income of which is subject to United States federal income taxation
regardless of its source or (iv) in general, a trust which is subject to the
primary supervision of a United States court and the control of one or more
United States fiduciaries. "Non-U.S. Holder" means any holder of the debentures
or Sprint PCS stock, as the case may be, that is not a U.S. Holder.

Tax Consequences to U.S. Holders

Interest Accrual on the Debentures. For United States federal income tax
purposes, the debentures will be subject to Treasury Regulations relating to
contingent payment debt instruments (which we refer to as the contingent
payment debt regulations). Under the contingent payment debt regulations, a
U.S. Holder will be required to accrue interest income on the debentures (in
amounts described in the next paragraph) regardless of whether such U.S. Holder
uses the cash or accrual method of tax accounting. As a result, a U.S. Holder
will be required to include interest in taxable income each year in excess of
the semi-annual interest payments received in that year.

Under the contingent payment debt regulations, for each accrual period prior
to and including the maturity date of the debentures, the amount of interest
that accrues, as original issue discount, on a debenture equals the product of
(a) the adjusted issue price (as defined below) as of the beginning of the
accrual period and (b) the comparable yield (as defined below) (adjusted for
the length of the accrual period). This amount is ratably allocated to each day
in the accrual period and is includable as ordinary interest income by a U.S.
Holder for each day in the accrual period on which the U.S. Holder holds the
debentures.

The "adjusted issue price" means the issue price of the debenture, which is
$1,000, increased by any interest previously accrued (determined without regard
to any adjustments to interest accruals described below) and decreased by the
amount of any projected payments (as defined below) with respect to the
debenture.

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The "comparable yield" means the annual yield we would pay, as of the issue
date, on a fixed-rate debt security with no exchange right or other contingent
payments but with terms and conditions otherwise comparable to those of the
debentures. Amounts treated as interest under the contingent payment debt
regulations are treated as original issue discount for all purposes of the
Code.

We have determined that the comparable yield is 9.069%, compounded semi-
annually. Under the contingent payment debt regulations, we are required,
solely for United States federal income tax purposes, to provide a schedule of
the projected amounts of payments (which we refer to as projected payments) on
the debentures. This schedule must produce the comparable yield. Based on our
determination of the comparable yield, the schedule of projected payments
(assuming a principal amount of $1,000 and an issue price of $1,000), consists
of (a) a payment of stated interest equal to $19.89 on May 15, 2000, (b)
payments of stated interest equal to $20.00 on all subsequent semi-annual
interest payment dates and (c) a payment of a projected amount at the maturity
date of the debentures (excluding the stated semi-annual interest on the
debentures payable on such date) equal to $8,436.40. For United States federal
income tax purposes, a U.S. Holder is required to use the comparable yield and
the schedule of projected payments in determining its interest accruals and
adjustments thereof in respect of the debentures, unless such U.S. Holder
timely discloses and justifies the use of other estimates to the IRS.

The comparable yield and the schedule of projected payments are not provided
for any purpose other than the determination of holders' interest accruals and
adjustments thereof in respect of the debentures for United States federal
income tax purposes and do not constitute a projection or representation
regarding the amounts that will actually be paid on the debentures.

Adjustments to Interest Accruals. If, during any taxable year, the sum of
any actual payments with respect to the debentures for that taxable year
(including additional distributions and, in the case of the taxable year which
includes the maturity date of the debentures, the fair market value of any
Sprint PCS stock received by such holder, plus the fair market value of any
other property received, plus the amount of cash received) exceeds the total
amount of projected payments for that taxable year, the difference will produce
a "net positive adjustment" under the contingent payment debt regulations,
which will be treated as additional interest for the taxable year. For this
purpose, the payments in a taxable year include the fair market value of
property received in that year. If the actual amount received in a taxable year
is less than the amount of projected payments for that taxable year, the
difference will produce a "net negative adjustment" under the contingent
payment debt regulations, which will (a) reduce the U.S. Holder's interest
income on the debentures for that taxable year and (b) to the extent of any
excess after the application of (a), give rise to an ordinary loss to the
extent of the U.S. Holder's interest income on the debentures during prior
taxable years (reduced to the extent such interest was offset by prior net
negative adjustments).

Sale or Exchange of Debentures. Upon the sale, exchange or retirement of the
debentures (including, for instance, an exchange by the U.S. Holder or the
redemption of the debentures by us) prior to the stated maturity date, the U.S.
Holder will recognize gain or loss equal to the difference between the amount
realized and the U.S. Holder's adjusted basis. A U.S. holder will be treated as
receiving an amount equal to the fair market value of any Sprint PCS stock
received, plus the fair market value of any other property received, plus the
amount of any cash received. The adjusted basis will be the U.S. Holder's
original basis in the debentures, increased by the interest income previously
included by the U.S. Holder with respect to the debentures (determined without
regard to any adjustments to interest accruals described in the preceding
paragraph) and decreased by the projected amount of all prior payments with
respect to the debentures. (See below under Purchase for Premium or Discount
for additional adjustments made with respect to U.S. Holders who did not
purchase debentures in the initial offering.) Any gain upon the sale or
exchange of the debentures will be ordinary interest income; any loss will be
ordinary loss to the extent of the interest previously included in income by
the U.S. Holder with respect to the debentures, and thereafter, capital loss.
The distinction between capital loss and ordinary loss is potentially
significant in several respects. For example, limitations apply to a U.S.
Holder's ability to offset capital losses against ordinary income.

134
<PAGE>

Purchase for Premium or Discount. A purchase of a debenture by a U.S. Holder
will cause the new U.S. Holder to have a basis in the debenture equal to the
amount paid for the debenture. A U.S. Holder is required to reasonably allocate
any difference between the adjusted issue price of the debenture and such U.S.
Holder's basis in the debenture to daily portions of interest or projected
payments over the remaining term of debenture. If such basis in the debenture
exceeds the debenture's adjusted issue price, the amount of the difference
allocated to a daily portion of interest or to a projected payment is treated
as a negative adjustment on the date the daily portion accrues or the payment
is made. On the date of the adjustment, the U.S. Holder's adjusted basis in the
debenture is reduced by the amount the U.S. Holder so treats as a negative
adjustment. If the new U.S. Holder's basis in the debenture is less than the
debenture's adjusted issue price, the amount of the difference allocated to a
daily portion of interest or to a projected payment is treated as a positive
adjustment on the date the daily portion accrues or the payment is made. On the
date of the adjustment, the U.S. Holder's adjusted basis in the debenture is
increased by the amount the U.S. Holder so treats as a positive adjustment.

Distributions on Sprint PCS Stock. If a U.S. Holder obtains Sprint PCS stock
in exchange for debentures, the gross amount of any distribution made by Sprint
to the U.S. Holder with respect to its Sprint PCS stock generally will be
includable in the income of the U.S. Holder as dividend income to the extent
that such distribution is paid out of Sprint's current or accumulated earnings
and profits as determined under U.S. federal income tax principles. Subject to
certain limitations, United States corporations holding Sprint PCS stock that
receive dividends thereon generally will be eligible for a dividends-received
deduction equal to 70% of the dividends received. If the amount of any
distribution exceeds Sprint's current and accumulated earnings and profits as
so computed, such excess first will be treated as a tax-free return of capital
to the extent of the U.S. Holder's tax basis in its Sprint PCS stock, and
thereafter as gain from the sale or exchange of property.

Dispositions of Sprint PCS Stock. A U.S. Holder generally will recognize
capital gain or loss for U.S. federal income tax purposes on the sale or other
disposition of Sprint PCS stock that it obtains in exchange for debentures, in
an amount equal to the difference between the amount realized on the sale or
other disposition and the U.S. Holder's tax basis in the Sprint PCS stock. Any
such gain or loss will be long-term gain or loss if the U.S. Holder held the
Sprint PCS stock for more than one year. A U.S. Holder that received Sprint PCS
stock from Liberty in exchange for a debenture either on or before the maturity
date will have a basis in that Sprint PCS stock equal to that stock's fair
market value on the date of such exchange. Additionally, the U.S. Holder's
holding period in the Sprint PCS stock will begin the day after such
disposition of the debenture.

Backup Withholding. Certain noncorporate U.S. Holders may be subject to
backup withholding at a rate of 31% on payments of principal and interest
(including original issue discount) on, or the proceeds of disposition of, the
debentures and dividends on the Sprint PCS stock. Backup withholding will apply
only if the U.S. Holder (a) fails to furnish its Taxpayer Identification Number
(which we refer to as TIN) which, for an individual, is his or her Social
Security number, (b) furnishes an incorrect TIN, (c) is notified by the IRS
that it has failed to properly report payments of interest and dividends or (d)
under certain circumstances, fails to certify, under penalties of perjury, that
it has furnished a correct TIN and has not been notified by the IRS that it is
subject to backup withholding for failure to report interest and dividend
payments. U.S. Holders should consult their tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption if applicable.

The amount of any backup withholding from a payment to a U.S. Holder will be
allowed as a credit against such U.S. Holder's United States federal income tax
liability and may entitle such U.S. Holder to a refund, provided that the
required information is furnished to the IRS.

Tax Consequences to Non-U.S. Holders

Withholding. Under present United States federal income tax law, and subject
to the discussion below concerning backup withholding, payments of principal
and interest (including original issue discount) on the debentures by us or any
paying agent to any Non-U.S. Holder, and gain realized on the sale or exchange
of the debentures or Sprint PCS stock by a Non-U.S. Holder, will be exempt from
United States federal income or withholding tax, provided that:

135
<PAGE>

. such Non-U.S. Holder does not own, actually or constructively, 10
percent or more of the total combined voting power of all classes of our
stock entitled to vote, is not a controlled foreign corporation related,
directly or indirectly, to us through stock ownership, and is not a bank
receiving interest described in Section 881(c)(3)(A) of the Code;

. the statement requirement set forth in Section 871(h) or Section 881(c)
of the Code has been fulfilled with respect to the beneficial owner, as
discussed below;

. such Non-U.S. Holder is not an individual who is present in the United
States for 183 days or more in the taxable year of disposition or who is
subject to special rules applicable to former citizens and residents of
the United States;

. such payments and gain are not effectively connected with the conduct by
such Non-U.S. Holder of a trade or business in the United States; and

. the Sprint PCS stock continues to be actively traded within the meaning
of Section 871(h)(4)(C)(v)(I) of the Code (which, for these purposes and
subject to certain exceptions, includes trading on the NYSE).

The statement requirement referred to in the preceding paragraph will be
fulfilled if the beneficial owner of a debenture certifies on an appropriate
form (generally IRS Form W-8BEN), under penalties of perjury, that it is not a
United States person and provides its name and address, and (a) the beneficial
owner files that form with the withholding agent or (b) a securities clearing
organization, bank or other financial institution holding customers' securities
in the ordinary course of its trade or business holds the debentures on behalf
of the beneficial owner, files with the withholding agent a statement that it
has received the Form W-8BEN from the beneficial owner and furnishes the
withholding agent with a copy thereof. With respect to any debentures held by a
foreign partnership, under current law, this certification may be provided by
the foreign partnership. However, unless a foreign partnership has entered into
a withholding agreement with the IRS, each partner that is a Non-U.S. Holder
will be required to supply this certification in order to avoid withholding
with respect to such partner's share of interest (including original issue
discount) and disposition proceeds paid with respect to debentures to the
foreign partnership after December 31, 2000. Prospective investors, including
foreign partnerships and their partners, should consult their tax advisors
regarding possible additional reporting requirements.

Distributions by Sprint with respect to Sprint PCS stock that are treated as
dividends paid, as described above under "--Tax Consequences to U.S. Holders--
Distributions on Sprint PCS Stock," to a Non-U.S. Holder (excluding dividends
that are effectively connected with the conduct of a trade or business in the
United States by such Holder and are taxable as described below) will be
subject to United States federal withholding tax at a 30% rate (or lower rate
provided under any applicable income tax treaty).

If a Non-U.S. Holder of the debentures or Sprint PCS stock is engaged in a
trade or business in the United States, and if interest on the debentures,
dividends on the Sprint PCS stock, or gain from the sale or exchange of the
debentures or Sprint PCS stock are effectively connected with the conduct of
such trade or business, the Non-U.S. Holder, although exempt from the
withholding tax discussed in the preceding paragraphs, will generally be
subject to regular United States federal income tax on such interest,
dividends, or gain realized on the sale or exchange of the debentures or Sprint
PCS stock in the same manner as if it were a U.S. Holder. In lieu of the
certificate described in the preceding paragraph, such a Non-U.S. Holder will
be required to provide to the withholding agent a properly executed IRS Form W-
8ECI (or successor form) in order to claim an exemption from withholding tax.
In addition, if such a Non-U.S. Holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% (or such lower rate provided by an
applicable treaty) of its effectively connected earnings and profits for the
taxable year, subject to certain adjustments.

Backup Withholding and Information Reporting. Backup withholding (at the
rate of 31%) will not apply to payments made by us or a paying agent on the
debentures or Sprint PCS stock if the certifications required

136
<PAGE>

by Sections 871(h) or 881(c) are received, provided in each case that we or
such paying agent, as the case may be, does not have actual knowledge (and,
with respect to payments made after December 31, 2000, does not have reason to
know) that the payee is a United States person.

Non-U.S. Holders of the debentures and Sprint PCS stock should consult their
tax advisors regarding the application of information reporting and backup
withholding in their particular situations, the availability of an exemption
therefrom, and the procedure for obtaining such an exemption, if available. Any
amounts withheld from a payment to a Non-U.S. Holder under the backup
withholding rules will be allowed as a credit against such Non-U.S. Holder's
United States federal income tax liability and may entitle such Non-U.S. Holder
to a refund, provided that the required information is furnished to the IRS.

137
<PAGE>

PLAN OF DISTRIBUTION

We will not receive any of the proceeds from sales of debentures by selling
security holders. The debentures may be sold from time to time:

. directly by any selling security holder to one or more purchasers,

. to or through underwriters, brokers or dealers,

. through agents on a best-efforts basis or otherwise, or

. through a combination of such methods of sale.

If debentures are sold through underwriters, brokers or dealers, the selling
security holder will be responsible for underwriting discounts or agent's
commissions.

The debentures may be sold:

. in one or more transactions at a fixed price or prices, which may be
changed,

. at prevailing market prices at the time of sale or at prices related to
such prevailing prices,

. at varying prices determined at the time of sale, or

. at negotiated prices.

Such sales may be effected in transactions (which may involve crosses or
block transactions):

. on any national securities exchange or quotation service on which the
debentures may be listed or quoted at the time of sale,

. in the over-the-counter market,

. in transactions otherwise than on such exchanges or services or in the
over-the-counter market, or

. through the writing of options.

In connection with the sale of the debentures, any selling security holder
may:

. enter into hedging transactions with brokers, dealers or others, which
may in turn engage in short sales of the debentures in the course of
hedging the positions they assume,

. sell short or deliver debentures to close out such short positions, or

. loan or pledge debentures to brokers, dealers or others that may in turn
sell such securities.

Any selling security holder may pledge or grant a security interest in some
or all of the debentures owned by it, and if it defaults in the performance of
its secured obligations, the pledgees or secured party may sell from time to
time the pledged debentures pursuant to the registration statement of which
this prospectus is a part. The selling security holders may also transfer and
donate debentures in other circumstances in which case the transferees, donees,
pledgees or other successors in interest will be the selling security holders
for purposes of this prospectus.

Underwriters, brokers, dealers and agents may receive compensation in the
form of underwriting discounts, concessions or commissions from the selling
security holders or the purchasers of debentures for whom they may act as
agent. The selling security holders and any underwriters, dealers or agents
that participate in the distribution of debentures may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit on the
sale of debentures by them and any discounts, commissions or concessions
received by them might be deemed to be underwriting discounts and commissions
under the Securities Act.

138
<PAGE>

There is currently no active trading market for the debentures. We do not
currently anticipate listing the debentures on any stock exchange. Therefore,
any trading with respect to the debentures is expected to occur in over-the-
counter markets.

At the time a particular offering or sale of debentures is made, a prospectus
supplement, if required, will be distributed which will set forth the aggregate
amount of debentures offered or sold and the terms of the offering or sale,
including the name or names of any underwriters, dealers or agents, any
discounts, commissions and other terms constituting compensation from the
selling security holders and any discounts, commissions or concessions allowed
or reallowed or paid to dealers.

To comply with the securities laws of certain jurisdictions, if applicable,
the debentures can be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain
jurisdictions the debentures may not be offered or sold unless they have been
registered or qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and is complied with.

There is no assurance that the selling security holders will sell any of the
debentures. In addition, any debentures covered by this prospectus which
qualify for sale pursuant to Rule 144 or Rule 144A under the Securities Act may
be sold pursuant to Rule 144 or Rule 144A rather than pursuant to this
prospectus.

139
<PAGE>

LEGAL MATTERS

Certain legal matters with respect to the validity of the debentures will be
passed upon for us by Baker Botts L.L.P., New York, New York.

EXPERTS

The consolidated balance sheets of Liberty Media Corporation and subsidiaries
as of December 31, 1998 and 1997, and the related consolidated statements of
operations and comprehensive earnings, stockholder's equity, and cash flows for
each of the years in the three-year period ended December 31, 1998, included in
this prospectus have been audited by KPMG LLP, independent certified public
accountants, to the extent and for the periods indicated on their report
thereon. Such consolidated financial statements have been included in reliance
upon the report of KPMG LLP and upon the authority of KPMG LLP as experts in
accounting and auditing.

The consolidated financial statements of Sprint Spectrum Holding Company,
L.P. and subsidiaries as of December 31, 1998 and 1997 and for each of the
three years in the period ended December 31, 1998, included in this prospectus
and the related financial statement schedule included elsewhere in this
registration statement have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and are included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.

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

WHERE TO FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the debentures that may be sold by this
prospectus. This prospectus, which forms a part of the registration statement,
does not contain all the information included in the registration statement.
You should refer to the registration statement, including its exhibits and
schedules, for further information about us or the debentures that may be sold
by this prospectus. Statements contained in this prospectus as to the contents
of any contract or other document are not necessarily complete, and, where any
contract or other document is an exhibit to the registration statement, we
refer you to that exhibit for a more complete description of the matter
involved.

We are subject to the informational requirements of the Securities Exchange
Act of 1934. Accordingly, we file reports and other information with the SEC.
In addition, AT&T files annual, quarterly and special reports, proxy statements
and other information with the SEC, and such reports, proxy statements and
other information may contain important information about us. AT&T has agreed,
pursuant to the Inter-Group Agreement, that for so long as AT&T Liberty Media
Group tracking stock is outstanding, AT&T will prepare and include in its SEC
filings consolidated financial statements of AT&T and combined financial
statements of the Liberty Media Group (of which we are the primary operating
unit).

You may read and copy the registration statement and the reports and other
information we file and any reports and other information AT&T files at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings and AT&T's SEC
filings are also available to the public from commercial document retrieval
services and at the Internet world wide web site maintained by the SEC at
www.sec.gov.

Sprint also files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy reports and other
information Sprint files at the SEC's public reference rooms as discussed
above.

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

140
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Liberty Media Corporation
Audited Consolidated Financial Statements
Independent Auditors' Report.......................................... F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997.......... F-3
Consolidated Statements of Operations and Comprehensive Earnings for
the years ended
December 31, 1998, 1997 and 1996..................................... F-5
Consolidated Statements of Stockholder's Equity for the years ended
December 31, 1998, 1997 and 1996..................................... F-6
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996.................................................. F-7
Notes to Consolidated Financial Statements............................ F-8

Unaudited Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 1999 and December 31,
1998................................................................. F-37
Consolidated Statements of Operations and Comprehensive Earnings for
the seven months ended September 30, 1999, the two months ended
February 28, 1999 and the nine months ended September 30, 1998....... F-39
Consolidated Statements of Stockholder's Equity for the seven months
ended September 30, 1999 and the two months ended February 28, 1999.. F-40
Consolidated Statements of Cash Flows for the seven months ended
September 30, 1999, the two months ended February 28, 1999 and the
nine months ended September 30, 1998................................. F-41
Notes to Consolidated Financial Statements............................ F-42

Sprint Spectrum Holding Company, L.P.
Audited Consolidated Financial Statements
Report of Independent Auditors........................................ F-57
Consolidated Statements of Operations for the years ended December 31,
1998, 1997 and 1996.................................................. F-58
Consolidated Balance Sheets as of December 31, 1998 and 1997.......... F-59
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996.................................................. F-60
Notes to Consolidated Financial Statements............................ F-61
Schedule II--Consolidated Valuation and Qualifying Accounts........... F-72
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholder
Liberty Media Corporation:

We have audited the accompanying consolidated balance sheets of Liberty Media
Corporation and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations and comprehensive earnings, stockholder's
equity, and cash flows for each of the years in the three-year period ended
December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Liberty Media Corporation and subsidiaries as of December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1998, in conformity with generally
accepted accounting principles.

KPMG LLP

Denver, Colorado
March 9, 1999

F-2
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
(subsidiary of AT&T Corp.)

CONSOLIDATED BALANCE SHEETS

December 31, 1998 and 1997

<TABLE>
<CAPTION>
1998 1997
------- -----
amounts in
millions
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents..................................... $ 228 100
Marketable securities......................................... 159 248
Trade and other receivables, net.............................. 142 109
Prepaid expenses and committed program rights................. 263 221
Other current assets.......................................... 21 6
------- -----
Total current assets........................................ 813 684
------- -----
Investments in affiliates, accounted for under the equity
method, and related receivables (note 5)....................... 3,079 2,359
Investment in Time Warner, Inc. ("Time Warner") (note 6)........ 7,083 3,538
Investment in Sprint Corporation ("Sprint") (notes 2 and 5)..... 2,446 --
Other investments and related receivables (note 7).............. 1,010 433
Property and equipment, at cost................................. 279 269
Less accumulated depreciation................................. 124 93
------- -----
155 176
------- -----
Intangible assets:
Excess cost over acquired net assets.......................... 940 429
Franchise costs............................................... 99 78
------- -----
1,039 507
Less accumulated amortization............................... 140 61
------- -----
899 446
------- -----
Other assets, at cost, net of accumulated amortization.......... 82 99
------- -----
Total assets................................................ $15,567 7,735
======= =====
</TABLE>

F-3
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
(subsidiary of AT&T Corp.)

CONSOLIDATED BALANCE SHEETS--(Continued)

December 31, 1998 and 1997

<TABLE>
<CAPTION>
1998 1997
------- -----
amounts in
millions
<S> <C> <C>
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable............................................... $ 49 28
Accrued liabilities............................................ 199 157
Accrued stock compensation..................................... 126 70
Program rights payable......................................... 156 156
Customer prepayments........................................... 124 103
Deferred option premium (note 6)............................... -- 306
Current portion of debt........................................ 184 31
------- -----
Total current liabilities.................................... 838 851
------- -----
Long-term debt (note 9).......................................... 1,912 754
Deferred income taxes (note 10).................................. 3,366 1,015
Other liabilities................................................ 89 20
------- -----
Total liabilities............................................ 6,205 2,640
------- -----
Minority interests in equity of subsidiaries (notes 5, 8 and
11)............................................................. 132 374
Stockholder's equity (note 11):
Preferred stock, $.0001 par value. Authorized 100,000 shares;
no shares issued and outstanding.............................. -- --
Class A common stock $.0001 par value. Authorized 1,000,000
shares; issued and outstanding 1,000 shares .................. -- --
Class B common stock $.0001 par value. Authorized 1,000,000
shares; issued and outstanding 1,000 shares .................. -- --
Class C common stock, $.0001 par value. Authorized 1,000,000
shares; issued and outstanding 1,000 shares .................. -- --
Additional paid-in capital..................................... 4,682 3,610
Accumulated other comprehensive earnings, net of taxes (note
13)........................................................... 3,186 767
Retained earnings.............................................. 952 330
------- -----
8,820 4,707
Due to related parties......................................... 410 14
------- -----
Total stockholder's equity................................... 9,230 4,721
------- -----
Commitments and contingencies (note 14)
Total liabilities and stockholder's equity................... $15,567 7,735
======= =====
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
(subsidiary of AT&T Corp.)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS

Years ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
1998 1997 1996
------- ----- ------
amounts in millions
<S> <C> <C> <C>
Revenue:
Unaffiliated parties................................. $ 1,197 1,070 998
Related parties (note 11)............................ 162 155 30
Net sales from electronic retailing services......... -- -- 1,180
------- ----- ------
1,359 1,225 2,208
------- ----- ------
Cost of sales, operating costs and expenses:
Cost of sales........................................ -- -- 816
Operating............................................ 729 627 698
Selling, general and administrative.................. 387 342 455
Charges from related parties (note 11)............... 27 97 139
Stock compensation (note 11)......................... 518 296 (6)
Depreciation and amortization........................ 129 123 172
------- ----- ------
1,790 1,485 2,274
------- ----- ------
Operating loss..................................... (431) (260) (66)
Other income (expense):
Interest expense..................................... (104) (40) (53)
Interest expense (income) to related parties, net
(note 11)........................................... (9) (15) 11
Dividend and interest income......................... 65 59 35
Share of losses of affiliates, net (note 5).......... (1,002) (785) (332)
Minority interests in losses (earnings) of
subsidiaries........................................ 13 (10) 18
Gains on dispositions, net (notes 5, 6 and 7)........ 2,449 406 1,558
Gains on issuance of equity by affiliates and
subsidiaries (notes 5
and 8).............................................. 105 -- --
Other, net........................................... (3) -- 3
------- ----- ------
1,514 (385) 1,240
------- ----- ------
Earnings (loss) before income taxes................ 1,083 (645) 1,174
Income tax (expense) benefit (note 10)................. (461) 175 (433)
------- ----- ------
Net earnings (loss)................................ $ 622 (470) 741
------- ----- ------
Other comprehensive earnings, net of taxes:
Foreign currency translation adjustments............. 2 (23) 35
Unrealized holding gains arising during the period,
net of reclassification adjustments................. 2,417 747 (319)
------- ----- ------
Other comprehensive earnings (loss).................. 2,419 724 (284)
------- ----- ------
Comprehensive earnings (note 13)....................... $ 3,041 254 457
======= ===== ======
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
(subsidiary of AT&T Corp.)

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

Years ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
Accumulated
other
Common stock Additional comprehensive Due to Total
Preferred ----------------------- paid-in earnings, Retained related stockholder's
stock Class A Class B Class C captial net of taxes earnings parties equity
--------- ------- ------- ------- ---------- ------------- -------- ------- -------------
amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1996................... $-- -- -- -- 3,030 327 59 314 3,730
Net earnings........... -- -- -- -- -- -- 741 -- 741
Foreign currency
translation
adjustments........... -- -- -- -- -- 35 -- -- 35
Recognition of
previously unrealized
gains on available-
for-sale securities... -- -- -- -- -- (356) -- -- (356)
Unrealized gains on
available-for-sale
securities............ -- -- -- -- -- 37 -- -- 37
Other transfers from
(to) related
parties, net.......... -- -- -- -- 465 -- -- (137) 328
---- --- --- --- ----- ----- ----- ----- -----
Balance at December 31,
1996................... -- -- -- -- 3,495 43 800 177 4,515
Net loss............... -- -- -- -- -- -- (470) -- (470)
Foreign currency
translation
adjustments........... -- -- -- -- -- (23) -- -- (23)
Unrealized gains on
available-for-sale
securities............ -- -- -- -- -- 747 -- -- 747
Excess of consideration
paid over carryover
basis of net assets
acquired from related
party................. -- -- -- -- (86) -- -- -- (86)
Gain in connection with
issuance of stock of
affiliate (note 5).... -- -- -- -- 66 -- -- -- 66
Issuance of stock by
subsidiary............ -- -- -- -- 19 -- -- -- 19
Excess of cash received
over carryover basis
of SUMMITrak Assets... -- -- -- -- 30 -- -- -- 30
Contribution to equity
from
Tele-Communications,
Inc. ("TCI") for
acquisitions.......... -- -- -- -- 30 -- -- -- 30
Other transfers from
(to) related
parties, net.......... -- -- -- -- 56 -- -- (163) (107)
---- --- --- --- ----- ----- ----- ----- -----
Balance at December 31,
1997................... -- -- -- -- 3,610 767 330 14 4,721
Net earnings........... -- -- -- -- -- -- 622 -- 622
Foreign currency
translation
adjustments........... -- -- -- -- -- 2 -- -- 2
Unrealized gains on
available-for-sale
securities............ -- -- -- -- -- 2,417 -- -- 2,417
Payments for call
agreements............ -- -- -- -- (140) -- -- -- (140)
Gains in connection
with issuances of
stock of affiliates
(note 5).............. -- -- -- -- 68 -- -- -- 68
Gain in connection with
the issuance of stock
by subsidiary (note
8).................... -- -- -- -- 2 -- -- -- 2
Transfers from related
party due to
acquisitions of
minority interests
(note 8).............. -- -- -- -- 772 -- -- -- 772
Assignment of option
from related party.... -- -- -- -- 16 -- -- (16) --
Transfer from related
party for acquisition
of cost investment
(note 14)............. -- -- -- -- 354 -- -- -- 354
Other transfers from
related parties, net.. -- -- -- -- -- -- -- 412 412
---- --- --- --- ----- ----- ----- ----- -----
Balance at December 31,
1998................... $-- -- -- -- 4,682 3,186 952 410 9,230
==== === === === ===== ===== ===== ===== =====
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
(subsidiary of AT&T Corp.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
1998 1997 1996
------- ---- -------
amounts in millions
(see note 4)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss).................................... $ 622 (470) 741
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization.......................... 129 123 172
Stock compensation..................................... 518 296 (6)
Payments of stock compensation......................... (58) (75) (1)
Share of losses of affiliates, net..................... 1,002 785 332
Deferred income tax expense............................ 546 11 484
Intercompany tax allocation............................ (89) (189) (54)
Minority interests in (losses) earnings of
subsidiaries.......................................... (13) 10 (18)
Gains on issuance of equity by affiliates and
subsidiaries.......................................... (105) -- --
Gains on disposition of assets, net.................... (2,449) (406) (1,558)
Other noncash charges.................................. -- 32 18
Changes in operating assets and liabilities, net of
the effect of acquisitions and dispositions:
Change in receivables................................. (56) 6 (41)
Change in prepaid expenses and committed program
rights............................................... (65) (1) (11)
Change in payables, accruals and customer
prepayments.......................................... 44 27 27
------- ---- -------
Net cash provided by operating activities............ 26 149 85
------- ---- -------
Cash flows from investing activities:
Cash paid for acquisitions............................. (92) (41) (168)
Capital expended for property and equipment............ (60) (110) (149)
Cash balances of deconsolidated subsidiaries........... -- (39) --
Investments in and loans to affiliates and others...... (1,404) (580) (536)
Return of capital from affiliates...................... 12 5 6
Collections on loans to affiliates and others.......... -- 133 24
Cash proceeds from dispositions........................ 423 268 170
Other, net............................................. -- (6) (45)
------- ---- -------
Net cash used by investing activities................ (1,121) (370) (698)
------- ---- -------
Cash flows from financing activities:
Borrowings of debt..................................... 2,199 661 465
Repayments of debt..................................... (609) (341) (628)
Issuance of debentures................................. -- -- 345
Payments for call agreements........................... (140) -- --
Cash transfers (to) from related parties............... (215) (428) 372
Contributions by minority shareholders of
subsidiaries.......................................... -- 4 319
Other, net............................................. (12) (9) (9)
------- ---- -------
Net cash provided (used) by financing activities..... 1,223 (113) 864
------- ---- -------
Effect of exchange rate changes on cash.............. -- -- 4
------- ---- -------
Net increase (decrease) in cash and cash
equivalents........................................ 128 (334) 255
Cash and cash equivalents at beginning of year...... 100 434 179
------- ---- -------
Cash and cash equivalents at end of year............ $ 228 100 434
======= ==== =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998, 1997 and 1996

(1) Basis of Presentation

The accompanying consolidated financial statements include the accounts of
Liberty Media Corporation ("Liberty" or the "Company") and those of all
majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The Company is a wholly
owned subsidiary of TCI. Effective March 9, 1999, AT&T Corp. ("AT&T")
indirectly owns 100% of the outstanding common stock of the Company.

Liberty's domestic subsidiaries generally operate or hold interests in
businesses which provide programming services including production, acquisition
and distribution through all available formats and media of branded
entertainment, educational and informational programming and software. In
addition, certain of Liberty's subsidiaries hold interests in businesses
engaged in wireless telephony, electronic retailing, direct marketing and
advertising sales relating to programming services, infomercials and
transaction processing. Liberty also has significant interests in foreign
affiliates which operate in cable television, programming and satellite
distribution.

(2) Merger with AT&T

On March 9, 1999, AT&T acquired TCI in a merger transaction (the "AT&T
Merger") whereby a wholly owned subsidiary of AT&T merged with and into TCI,
and TCI thereby became a subsidiary of AT&T. As a result of the AT&T Merger,
each series of TCI common stock was converted into a class of AT&T common stock
subject to applicable exchange ratios.

Pursuant to a proposed final judgment (the "Final Judgment") agreed to by
Liberty, AT&T and the United States Department of Justice (the "DOJ") on
December 31, 1998, Liberty transferred all of its beneficially owned securities
(the "Sprint Securities") of Sprint to a trustee (the "Trustee") prior to the
AT&T Merger. The Final Judgment, if entered by the United States District Court
for the District of Columbia, would require the Trustee, on or before May 23,
2002, to dispose of a portion of the Sprint Securities sufficient to cause
Liberty to beneficially own no more than 10% of the outstanding Series 1 PCS
Stock of Sprint on a fully diluted basis on such date. On or before May 23,
2004, the Trustee must divest the remainder of the Sprint Securities
beneficially owned by Liberty.

The Final Judgment would provide that the Trustee vote the Sprint Securities
beneficially owned by Liberty in the same proportion as other holders of
Sprint's PCS Stock so long as such securities are held by the trust. The Final
Judgment would also prohibit the acquisition of Liberty of additional Sprint
Securities, with certain exceptions, without the prior written consent of the
DOJ.

(3) Summary of Significant Accounting Policies

Cash and Cash Equivalents

Cash equivalents consist of investments which are readily convertible into
cash and have maturities of three months or less at the time of acquisition.

Receivables

Receivables are reflected net of an allowance for doubtful accounts. Such
allowance at December 31, 1998 and 1997 was not material.

Program Rights

Prepaid program rights are amortized on a film-by-film basis over the
anticipated number of exhibitions. Committed program rights and program rights
payable are recorded at the estimated cost of the programs when

F-8
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

the film is available for airing less prepayments. These amounts are amortized
on a film-by-film basis over the anticipated number of exhibitions.

Investments

All marketable equity securities held by the Company are classified as
available-for-sale and are carried at fair value. Unrealized holding gains and
losses on securities classified as available-for-sale are carried net of taxes
as a component of accumulated other comprehensive earnings in stockholder's
equity. Realized gains and losses are determined on a specific-identification
basis.

Other investments in which the ownership interest is less than 20% and are
not considered marketable securities are carried at the lower of cost or net
realizable value. For those investments in affiliates in which the Company's
voting interest is 20% to 50%, the equity method of accounting is generally
used. Under this method, the investment, originally recorded at cost, is
adjusted to recognize the Company's share of net earnings or losses of the
affiliates as they occur rather then as dividends or other distributions are
received, limited to the extent of the Company's investment in, advances to and
commitments for the investee. The Company's share of net earnings or losses of
affiliates includes the amortization of the difference between the Company's
investment and its share of the net assets of the investee. However,
recognition of gains on sales of properties to affiliates accounted for under
the equity method is deferred in proportion to the Company's ownership interest
in such affiliates.

Changes in the Company's proportionate share of the underlying equity of a
subsidiary or equity method investee, which result from the issuance of
additional equity securities by such subsidiary or equity investee, generally
are recognized as gains or losses in the Company's consolidated statements of
operations and comprehensive earnings.

Property and Equipment

Property and equipment, including significant improvements, is stated at cost
which includes acquisition costs allocated to tangible assets acquired.
Equipment acquired under capital leases are stated at the present value of
minimum lease payments, not to exceed the fair value of the leased asset.
Construction and initial customer installation costs, including interest during
construction, material, labor and applicable overhead, are capitalized.
Interest capitalized during 1998, 1997 and 1996 was not material.

Depreciation is computed on a straight-line basis using estimated useful
lives of 3 to 20 years for distribution systems (3 to 5 years for converters
and in-home wiring and 10 to 20 years for the remaining components of the
distribution system) and 3 to 40 years for support equipment and buildings (3
to 5 years for support equipment and 10 to 40 years for buildings and
improvements). Equipment held under capital leases are depreciated on a
straight-line basis over the shorter of the lease term or estimated useful life
of the asset.

Repairs and maintenance are charged to operations, and additions are
capitalized. At the time of ordinary retirements, sales or other dispositions
of cable property, the original cost and cost of removal of such property are
charged to accumulated depreciation, and salvage, if any, is credited thereto.
Gains and losses relating to cable property are only recognized in connection
with sales of properties in their entirety. Gains and losses relating to all
other assets are recognized at the time of disposal.

Excess Cost Over Acquired Net Assets

Excess cost over acquired net assets consists of the difference between the
cost of acquiring non-cable entities and amounts assigned to their tangible
assets. Such amounts are amortized on a straight-line basis over 5 to 30 years.

F-9
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Franchise Costs

Franchise costs generally include the difference between the cost of
acquiring cable companies and amounts allocated to their tangible assets. Such
amounts are amortized on a straight-line basis over 40 years.

Impairment of Long-lived Assets

The Company periodically reviews the carrying amounts of property, plant and
equipment and its intangible assets to determine whether current events or
circumstances warrant adjustments to such carrying amounts. If an impairment
adjustment is deemed necessary, such loss is measured by the amount that the
carrying value of such assets exceeds their fair value. Considerable management
judgment is necessary to estimate the fair value of assets, accordingly, actual
results could vary significantly from such estimates. Assets to be disposed of
are carried at the lower of their financial statement carrying amount or fair
value less costs to sell.

Minority Interests

Recognition of minority interests' share of losses of subsidiaries is
generally limited to the amount of such minority interests' allocable portion
of the common equity of those subsidiaries. Further, the minority interests'
share of losses is not recognized if the minority holders of common equity of
subsidiaries have the right to cause the Company to repurchase such holders'
common equity.

Preferred stock (and accumulated dividends thereon) of subsidiaries are
included in minority interests in equity of subsidiaries. Dividend requirements
on such preferred stocks are reflected as minority interests in earnings of
subsidiaries in the accompanying consolidated statements of operations and
comprehensive earnings.

Foreign Currency Translation

The functional currency of the Company is the United States ("U.S.") dollar.
The functional currency of the Company's foreign operations generally is the
applicable local currency for each foreign subsidiary and foreign equity method
investee. In this regard, the functional currency of certain of the Company's
foreign subsidiaries and foreign equity investees is the Argentine peso, the
United Kingdom ("UK") pound sterling ("(Pounds)" or "pounds"), the French franc
("FF") and the Japanese yen ("(Yen)"). All amounts presented herein with
respect to operations in Argentina are stated in U.S. dollars because the
Argentine government has maintained an exchange rate of one U.S. dollar to one
Argentine peso since April of 1991. However, no assurance can be given that the
Argentine government will maintain such an exchange rate in future periods.
Assets and liabilities of foreign subsidiaries and foreign equity investees are
translated at the spot rate in effect at the applicable reporting date, and the
consolidated statements of operations and the Company's share of the results of
operations of its foreign equity affiliates are translated at the average
exchange rates in effect during the applicable period. The resulting unrealized
cumulative translation adjustment, net of applicable income taxes, is recorded
as a component of accumulated other comprehensive earnings in stockholder's
equity.

Transactions denominated in currencies other than the functional currency are
recorded based on exchange rates at the time such transactions arise.
Subsequent changes in exchange rates result in transaction gains and losses
which are reflected in the accompanying consolidated statements of operations
and comprehensive earnings as unrealized (based on the applicable period end
exchange rate) or realized upon settlement of the transactions.

Cash flows from consolidated foreign subsidiaries are calculated in their
functional currencies. The effect of exchange rate changes on cash balances
held in foreign currencies is reported as a separate line item in the
accompanying consolidated statements of cash flows.

F-10
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Unless otherwise indicated, convenience translations of foreign currencies
into U.S. dollars are calculated using the applicable spot rate at December 31,
1998, as published in The Wall Street Journal.

Foreign Currency Derivatives

From time to time, the Company uses certain derivative financial instruments
to manage its foreign currency risks. Amounts receivable or payable pursuant to
derivative financial instruments that qualify as hedges of existing assets,
liabilities and firm commitments are reflected as an adjustment of the hedged
item. Market value changes in all other derivative financial instruments are
recognized currently in the consolidated statements of operations and
comprehensive earnings. At December 31, 1998 and 1997, the Company did not have
any significant deferred hedging gains or losses.

Derivative Instruments and Hedging Activities

During 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities, ("Statement 133"), which is effective for all fiscal
years beginning after June 15, 2000. Statement 133 establishes accounting and
reporting standards for derivative instruments and hedging activities by
requiring that all derivative instruments be reported as assets or liabilities
and measured at their fair values. Under Statement 133, changes in the fair
values of derivative instruments are recognized immediately in earnings unless
those instruments qualify as hedges of the (1) fair values of existing assets,
liabilities, or firm commitments, (2) variability of cash flows of forecasted
transactions, or (3) foreign currency exposure of net investments in foreign
operations. Although the Company's management has not completed its assessment
of the impact of Statement 133 on its consolidated results of operations and
financial position, management estimates that the impact of Statement 133 will
not be significant.

Revenue Recognition

Programming revenue is recognized in the period during which programming is
provided, pursuant to affiliation agreements. Advertising revenue is
recognized, net of agency commissions, in the period during which underlying
advertisements are broadcast. Cable revenue is recognized in the period that
services are rendered. Cable installation revenue is recognized in the period
the related 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
system.

Stock Based Compensation

Statement of Financial Accounting Standards No. 123, Accounting for Stock-
Based Compensation ("Statement 123"), establishes financial accounting and
reporting standards for stock-based employee compensation plans as well as
transactions in which an entity issues its equity instruments to acquire goods
or services from non-employees. As allowed by Statement 123, Liberty continues
to account for stock-based compensation pursuant to Accounting Principles Board
Opinion No. 25 ("APB Opinion No. 25").

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 at the date of the
financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

F-11
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(4) Supplemental Disclosures to Consolidated Statements of Cash Flows

Cash paid for interest was $103 million, $41 million and $46 million for the
years ended December 31, 1998, 1997 and 1996, respectively. Cash paid for
income taxes during the years ended December 31, 1998, 1997 and 1996 was $29
million, $35 million and $14 million, respectively. In addition, the Company
received income tax refunds amounting to $15 million during the year ended
December 31, 1996.

<TABLE>
<CAPTION>
Years ended
December 31,
-------------------
1998 1997 1996
----- ----- -----
amounts in
millions
<S> <C> <C> <C>
Cash paid for acquisitions:
Fair value of assets acquired....................... $ 162 260 688
Net liabilities assumed............................. (107) (72) (115)
Debt issued to related parties and others........... -- (128) (52)
Contribution to equity from TCI for acquisitions.... -- -- (196)
Deferred tax asset (liability) recorded in
acquisition........................................ -- 14 (37)
Increase in minority interests in equity of
subsidiaries due to issuance of shares by
subsidiary......................................... -- -- (43)
Minority interest in equity of acquired
subsidiaries....................................... 39 (119) (77)
Excess consideration paid over carryover basis of
net assets acquired from related party............. -- 86 --
Gain in connection with the issuance of stock by
subsidiary......................................... (2) -- --
----- ----- -----
Cash paid for acquisitions........................ $ 92 41 168
===== ===== =====

Significant noncash investing and financing activities are as follows:

<CAPTION>
Years ended
December 31,
-------------------
1998 1997 1996
----- ----- -----
amounts in
millions
<S> <C> <C> <C>
Noncash acquisitions of minority interests in equity
of subsidiaries (note 8):
Fair value of assets................................ $(741) (29) --
Deferred tax liability recorded..................... 154 -- --
Minority interests in equity of subsidiaries........ (185) (1) --
Contribution to equity from TCI for acquisitions.... 772 30 --
----- ----- -----
$ -- -- --
===== ===== =====
Common stock received in exchange for option (note
6)................................................... $ -- 306 --
===== ===== =====
Preferred stock received in exchange for common stock
and note receivable (note 7)......................... $ -- 371 --
===== ===== =====
Exchange of subsidiaries for note receivable and
equity investments................................... $ -- -- 574
===== ===== =====
Property and equipment purchased under capital
leases............................................... $ -- -- 56
===== ===== =====
</TABLE>

F-12
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Liberty ceased to include Flextech p.l.c. ("Flextech") and Cablevision S.A.
("Cablevision") in its consolidated financial results and began to account for
Flextech and Cablevision using the equity method of accounting, effective
January 1, 1997 and October 1, 1997, respectively. The effects of changing the
method of accounting for Liberty's ownership interests in Flextech and
Cablevision as of December 31, 1997 from the consolidation method to the equity
method are summarized below (amounts in millions):

<TABLE>
<S> <C>
Assets (other than cash and cash equivalents) reclassified to
investments in affiliates....................................... $(596)
Liabilities reclassified to investments in affiliates............ 484
Minority interests in equity of subsidiaries reclassified to
investments in affiliates....................................... 151
-----
Decrease in cash and cash equivalents............................ $ 39
=====
</TABLE>

(5) Investments in Affiliates Accounted for under the Equity Method

Liberty has various investments accounted for under the equity method. The
following table includes Liberty's carrying amount and percentage ownership of
the more significant investments at December 31, 1998 and the carrying amount
at December 31, 1997:

<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------- -----------------
Percentage Carrying Carrying
Ownership Amount Amount
---------- -------- -----------------
amounts in millions
<S> <C> <C> <C>
USA Networks, Inc. ("USAI") and
related investments.................. 21% $1,042 348
Telewest Communications plc
("Telewest")......................... 22% 515 324
Flextech.............................. 37% 320 261
Cablevision........................... 28% 315 239
QVC Inc. ("QVC")...................... 43% 197 134
Sprint Spectrum Holding Company L.P.,
MinorCo, L.P. and PhillieCo
Partnership I, L.P. (the "PCS
Ventures")........................... -- -- 607
Various foreign equity investments
(other than Telewest, Flextech and
Cablevision)......................... various 346 209
Other................................. various 344 237
------ -----
$3,079 2,359
====== =====
</TABLE>

Summarized unaudited combined financial information for affiliates is as
follows:

<TABLE>
<CAPTION>
December 31,
--------------
1998 1997
------- ------
amounts in
millions
<S> <C> <C>
Combined Financial Position
Investments.............................................. $ 2,003 4,085
Property and equipment, net.............................. 8,147 5,757
Franchise costs and other intangibles, net............... 14,395 7,870
Other assets, net........................................ 7,553 9,800
------- ------
Total assets........................................... $32,098 27,512
======= ======
Debt..................................................... $15,264 14,934
Other liabilities........................................ 11,620 7,417
Owners' equity........................................... 5,214 5,161
------- ------
Total liabilities and equity........................... $32,098 27,512
======= ======
</TABLE>

F-13
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>
Years ended December
31,
------------------------
1998 1997 1996
-------- ------ ------
amounts in millions
<S> <C> <C> <C>
Combined Operations
Revenue......................................... $ 14,062 6,613 4,308
Operating expenses.............................. (13,092) (7,163) (4,484)
Depreciation and amortization................... (2,629) (997) (469)
-------- ------ ------
Operating loss................................ (1,659) (1,547) (645)
Interest expense................................ (1,728) (540) (301)
Other, net...................................... (166) (469) (279)
-------- ------ ------
Net loss...................................... $ (3,553) (2,556) (1,225)
======== ====== ======
</TABLE>

USAI owns and operates businesses in network and television production,
television broadcasting, electronic retailing, ticketing operations, and
internet services. At December 31, 1998, Liberty directly and indirectly held
29.6 million shares of USAI's common stock. Liberty also held shares directly
in certain subsidiaries of USAI which are exchangeable into 39.5 million shares
of USAI common stock. Liberty's direct ownership of USAI is currently
restricted by Federal Communications Commission ("FCC") regulations. The
exchange of these shares can be accomplished only if there is a change to
existing regulations or if Liberty obtains permission from the FCC. If the
exchange of subsidiary stock into USAI common stock were completed at December
31, 1998, Liberty would own 69.1 million shares or approximately 21% (on a
fully-diluted basis) of USAI common stock. USAI's common stock had a closing
market value of $33 1/8 per share on December 31, 1998.

Liberty accounts for its investments in USAI and related subsidiaries on a
combined basis under the equity method. During the years ended December 31,
1998, 1997 and 1996, Liberty's share of affiliates' earnings (losses) from its
investments in USAI was $30 million, $5 million and ($1 million), respectively.

In February 1998, USAI paid cash and issued shares and one of its
subsidiaries issued shares in connection with the acquisition of certain assets
from Universal Studios, Inc. (the "Universal Transaction"). Liberty recorded an
increase to its investment in USAI of $54 million and an increase to additional
paid-in-capital of $33 million (after deducting deferred income taxes of $21
million) as a result of this share issuance.

USAI issued shares in June 1998 to acquire the remaining stock of
Ticketmaster Group, Inc. which it did not previously own (the "Ticketmaster
Transaction"). Liberty recorded an increase to its investment in USAI of $52
million and an increase to additional paid-in-capital of $31 million (after
deducting deferred income taxes of $21 million) as a result of this share
issuance.

No gain was recognized in the consolidated statement of operations and
comprehensive earnings for either the Universal Transaction or the Ticketmaster
Transaction due primarily to Liberty's intention to purchase additional equity
interests in USAI.

In connection with the Universal Transaction, Liberty was granted an
antidilutive right with respect to any future issuance of USAI's common stock,
subject to certain limitations, that enables it to maintain its percentage
ownership interests in USAI. During 1998 Liberty purchased 4.7 million shares
of USAI common stock and 22.9 million exchangeable shares of a USAI subsidiary
for an aggregate cost of $560 million pursuant to this right.

In December 1996, Silver King Communications, Inc. ("Silver King") acquired
Home Shopping Network, Inc. ("HSN"), a subsidiary of Liberty, by merger of HSN
with a subsidiary of Silver King (the "HSN Merger") where HSN was the surviving
corporation and a subsidiary of Silver King following the HSN

F-14
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Merger. As a result of the HSN Merger, HSN was no longer included in the
consolidated financial results of Liberty. Silver King was renamed HSN, Inc.,
which was the predecessor of USAI.

The PCS Ventures included Sprint Spectrum Holding Company, L. P. and MinorCo,
L.P. (collectively, "Sprint PCS") and PhillieCo Partnership I, L.P.
("PhillieCo"). The partners of each of the Sprint PCS partnerships were
subsidiaries of Sprint, Comcast Corporation ("Comcast"), Cox Communications,
Inc. ("Cox") and Liberty. The partners of PhillieCo were subsidiaries of
Sprint, Cox and Liberty. Liberty had a 30% partnership interest in each of the
Sprint PCS partnerships and a 35% partnership interest in PhillieCo. During the
years ended December 31, 1998, 1997 and 1996, the PCS Ventures accounted for
$629 million, $493 million and $133 million, respectively, of Liberty's share
of affiliates' losses.

On November 23, 1998, Liberty, Comcast, and Cox exchanged their respective
interests in Sprint PCS and PhillieCo (the "PCS Exchange") for shares of Sprint
PCS Group Stock which tracks the performance of Sprint's newly created PCS
Group (consisting initially of the PCS Ventures and certain PCS licenses which
were separately owned by Sprint). The Sprint PCS Group Stock collectively
represents an approximate 17% voting interest in Sprint. As a result of the PCS
Exchange, Liberty holds the Sprint Securities which consists of shares of
Sprint PCS Group Stock, as well as certain additional securities of Sprint
exercisable for or convertible into such securities, representing approximately
24% of the equity value of Sprint attributable to its PCS Group and less than
1% of the voting interest in Sprint. Through November 23, 1998, Liberty
accounted for its interest in the PCS Ventures using the equity method of
accounting, however, as a result of the PCS Exchange and Liberty's less than 1%
voting interest in Sprint, Liberty no longer exercises significant influence
with respect to its investment in the PCS Ventures. Accordingly, Liberty
accounts for its investment in the Sprint PCS Group Stock as an available-for-
sale security. As of December 31, 1998, the gross unrealized appreciation of
the fair value of Liberty's shares of the Sprint PCS Group Stock was $459
million.

As a result of the PCS Exchange, Liberty recorded a non-cash gain of $1.9
billion (before deducting deferred income taxes of $647 million) during the
fourth quarter of 1998 based on the difference between the carrying amount of
Liberty's interest in the PCS Ventures and the fair value of the Sprint
Securities received.

Telewest currently operates and constructs cable television and telephone
systems in the UK. Telewest accounted for $134 million, $145 million and $109
million of Liberty's share of its affiliates' losses during the years ended
December 31, 1998, 1997 and 1996, respectively.

At December 31, 1998 Liberty indirectly owned 463 million of the issued and
outstanding Telewest ordinary shares. The reported closing price on the London
Stock Exchange of Telewest ordinary shares was (Pounds)1.74 ($2.88) per share
at December 31, 1998.

Effective September 1, 1998, Telewest and General Cable PLC ("General Cable")
consummated a merger (the "General Cable Merger") in which holders of General
Cable received 1.243 new Telewest shares and (Pounds)0.65 ($1.11) in cash for
each share of General Cable. In addition, holders of American Depository shares
of General Cable ("General Cable ADS") (each representing five General Cable
shares) received 6.215 new Telewest shares and (Pounds)3.25 ($5.53) in cash for
each share of General Cable ADS. Based upon Telewest's closing share price of
(Pounds)0.89 ($1.51) on April 14, 1998, the General Cable Merger was valued at
approximately (Pounds)649 million ($1.1 billion).

The cash portion of the General Cable Merger was financed through an offer to
qualifying Telewest shareholders for the purchase of approximately 261 million
new Telewest shares at a price of (Pounds)0.925 ($1.57) per share (the
"Telewest Offer"). Liberty subscribed to 85 million Telewest ordinary shares at
an aggregate cost of (Pounds)78 million ($133 million) in connection with the
Telewest Offer.

F-15
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In connection with the General Cable Merger, Liberty converted its entire
holdings of Telewest convertible preference shares (133 million shares) into
Telewest ordinary shares. As a result of the General Cable Merger, Liberty's
ownership interest in Telewest decreased to 22%. In connection with the
increase in Telewest's equity, net of the dilution of Liberty's interest in
Telewest, that resulted from the General Cable Merger, Liberty recorded a non-
cash gain of $60 million (before deducting deferred income taxes of $21
million) during 1998.

In April 1997, Flextech and BBC Worldwide Limited ("BBC Worldwide") formed
two separate joint ventures (the "BBC Joint Ventures") and entered into certain
related transactions. The consummation of the BBC Joint Ventures and related
transactions resulted in, among other things, a reduction of Liberty's economic
ownership interest in Flextech from 46.2% to 36.8%. Liberty continues to
maintain a voting interest in Flextech of approximately 50%. As a result of
such dilution, Liberty recorded a $152 million increase to the carrying amount
of Liberty's investment in Flextech, a $53 million increase to deferred income
tax liability, a $66 million increase to additional paid-in-capital and a $33
million increase to minority interests in equity of subsidiaries. No gain was
recognized in the consolidated statement of operations and comprehensive
earnings due primarily to certain contingent obligations of Liberty with
respect to one of the BBC Joint Ventures (see note 14). Flextech accounted for
$21 million and $16 million of Liberty's share of its affiliates' losses during
the years ended December 31, 1998 and 1997, respectively.

Based on the (Pounds)6.07 ($10.07) per share closing price of the Flextech
ordinary shares on the London Stock Exchange, the 58 million Flextech ordinary
shares owned by Liberty had an aggregate market value of (Pounds)352 million
($584 million) at December 31, 1998.

On October 9, 1997, Liberty sold a portion of its 51% interest in Cablevision
to unaffiliated third parties. In connection with such sale and certain related
transactions, Liberty recognized a gain of $49 million. Cablevision accounted
for $23 million and $3 million of Liberty's share of its affiliates' losses
during the years ended December 31, 1998 and 1997, respectively.

On October 13, 1998, one of the Cablevision shareholders exercised a put
right representing a 7.2% interest in Cablevision. Consequently, on December
22, 1998, Liberty purchased its pro-rata portion of such shareholder's
ownership interest for $25 million, $8 million of which was paid at closing and
the remaining amount (including accrued interest thereon) will be paid in four
equal semi-annual installments. As a result of the put, Liberty's equity
interest in Cablevision increased from 26% to 28%.

As of April 29, 1996, Liberty and The News Corporation Limited ("News Corp.")
formed two sports programming ventures. In the U.S., Liberty and News Corp.
formed Fox/Liberty Networks LLC ("Fox Sports") into which Liberty contributed
interests in its national and regional sports networks and into which News
Corp. contributed its fx cable network and certain other assets. Liberty
received a 50% interest in Fox Sports and a distribution of $350 million in
cash. No gain or loss was recognized as the cash distribution approximated the
carrying amount of the assets contributed.

Prior to the first quarter of 1998, Liberty had no obligation, nor intention,
to fund Fox Sports. During 1998, Liberty made the determination to provide
funding to Fox Sports based on specific transactions consummated by Fox Sports.
Consequently, Liberty's share of losses of Fox Sports of $83 million for the
year ended December 31, 1998 includes previously unrecognized losses of Fox
Sports of approximately $64 million. Losses for Fox Sports were not recognized
in prior periods due to the fact that Liberty's investment in Fox Sports was
less than zero.

Internationally, News Corp. and Liberty formed a venture ("Fox Sports
International") to operate sports programming services in Latin American and
Australia and a variety of new sports services throughout the world except in
Asia and in the United Kingdom, Japan and New Zealand where prior arrangements
preclude

F-16
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

an immediate collaboration. Liberty owns 50% of Fox Sports International with
News Corp. owning the other 50%. Fox Sports International accounted for $34
million, $30 million and $21 million of Liberty's share of its affiliates'
losses during the years ended December 31, 1998, 1997 and 1996, respectively.

In addition to Telewest, Flextech, Fox Sports International and Cablevision,
Liberty has other less significant investments in affiliates in video
distribution and programming businesses located in the UK, other parts of
Europe, Asia, Latin America and certain other foreign countries. In the
aggregate, such other foreign investments in affiliates accounted for $70
million, $70 million and $54 million of Liberty's share of its affiliates'
losses during the years ended December 31, 1998, 1997 and 1996, respectively.

The $797 million aggregate excess of Liberty's aggregate historical cost
basis in its affiliates over Liberty's proportionate share of its affiliates'
net assets is being amortized over estimated useful lives ranging from 10 to 20
years.

Certain of Liberty's affiliates are general partnerships and, as such, are
liable as a matter of partnership law for all debts (other than non-recourse
debts) of that partnership in the event liabilities of that partnership were to
exceed its assets.

(6) Investment in Time Warner

On October 10, 1996, Time Warner and Turner Broadcasting System, Inc. ("TBS")
consummated a merger (the "TBS/Time Warner Merger") whereby TBS shareholders
received 1.5 Time Warner common shares (as adjusted for a two-for-one stock
split) for each TBS Class A and Class B common share held, and each holder of
TBS Class C preferred stock received 1.6 Time Warner common shares (as adjusted
for a two-for-one stock split) for each of the 6 shares of TBS Class B common
stock into which each share of Class C preferred stock could have been
converted.

Liberty entered into an agreement with the Federal Trade Commission ("FTC")
(the "FTC Consent Decree"), pursuant to which, among other things, Liberty
agreed to exchange the shares of Time Warner common stock to be received in the
TBS/Time Warner Merger for shares of a separate series of Time Warner common
stock with limited voting rights (the "TW Exchange Stock"). Holders of the TW
Exchange Stock are entitled to one one-hundredth (l/100th) of a vote for each
share with respect to the election of directors. Holders of the TW Exchange
Stock will not have any other voting rights, except as required by law or with
respect to limited matters, including amendments of the terms of the TW
Exchange Stock adverse to such holders. Subject to the federal communications
laws, each share of the TW Exchange Stock will be convertible at any time at
the option of the holder on a one-for-one basis for a share of Time Warner
common stock. Holders of TW Exchange Stock are entitled to receive dividends
ratably with the Time Warner common stock and to share ratably with the holders
of Time Warner common stock in assets remaining for common stockholders upon
dissolution, liquidation or winding up of Time Warner.

In connection with the TBS/Time Warner Merger, Liberty received approximately
50.6 million shares of the TW Exchange Stock in exchange for its TBS holdings.
As a result of the TBS/Time Warner Merger, Liberty recognized a pre-tax gain of
$1.5 billion in the fourth quarter of 1996. Liberty accounts for its investment
in Time Warner as an available-for-sale security.

On June 24, 1997 Liberty granted Time Warner an option to acquire the
business of Southern Satellite Systems, Inc. ("Southern") and certain of its
subsidiaries (together with Southern, the "Southern Business") through a
purchase of assets (the "Southern Option"). Liberty received 6.4 million shares
of TW Exchange Stock valued at $306 million in consideration for the grant. In
September 1997, Time Warner exercised the Southern Option. Pursuant to the
Southern Option, Time Warner acquired the Southern Business, effective

F-17
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

January 1, 1998, for $213 million in cash. Liberty recognized a $515 million
pre-tax gain in connection with such transactions in the first quarter of 1998.

Following a two-for-one stock split of Time Warner common stock during 1999,
Liberty's shares of the TW Exchange Stock are convertible into 114 million
shares of Time Warner common stock. As of December 31, 1998 and 1997, the gross
unrealized appreciation of the fair value of Liberty's shares of the TW
Exchange Stock was $4.8 billion and $1.2 billion, respectively.

As security for borrowings under one of its credit facilities, Liberty has
pledged a portion of its TW Exchange Stock. At December 31, 1998 such pledged
portion had an aggregate fair value of approximately $2.7 billion.

(7) Other Investments

Other investments and related receivables are summarized as follows:

<TABLE>
<CAPTION>
1998 1997
------ ----
amounts in
millions
<S> <C> <C>
Investment in preferred stock, at cost, including premium.... $ 371 371
Investment in General Instrument Corporation ("GI") (note
14)......................................................... 396 --
Other investments, at cost, and related receivables.......... 243 62
------ ---
$1,010 433
====== ===
</TABLE>

On August 1, 1997, Liberty IFE, Inc., a wholly-owned subsidiary of Liberty,
which held non-voting Class C common stock of International Family
Entertainment, Inc. ("IFE") ("Class C Stock") and $23 million of IFE 6%
convertible secured notes due 2004, convertible into Class C Stock,
("Convertible Notes"), contributed its Class C Stock and Convertible Notes to
Fox Kids Worldwide, Inc. ("FKW") in exchange for a new series of 30 year non-
convertible 9% preferred stock of FKW with a stated value of $345 million (the
"FKW Preferred Stock"). As a result of the exchange, Liberty recognized a pre-
tax gain of approximately $304 million during the third quarter of 1997.

Management of Liberty estimates the market value, calculated using a variety
of approaches including multiple of cash flow, per subscriber value, a value of
comparable public or private businesses or publicly quoted market prices, of
all of Liberty's other investments aggregated $1,743 million and $766 million
at December 31, 1998 and December 31, 1997, respectively. No independent
appraisals were conducted for those assets.

(8) Acquisitions and Dispositions

On January 25, 1996, the stockholders of United Video Satellite Group, Inc.
("UVSG") adopted the Agreement and Plan of Merger dated as of July 10, 1995, as
amended, among UVSG, TCI and TCI Merger Sub, Inc. ("UVSG Merger Sub"), pursuant
to which UVSG Merger Sub was merged into UVSG, with UVSG as the surviving
corporation (the "UVSG Merger"). TCI acquired 24.8 million shares of UVSG Class
B common stock and 4.2 million shares of UVSG Class A common stock, for a total
purchase price of $196 million, together representing approximately 39% of the
issued and outstanding common stock of UVSG and approximately 85% of the total
voting power of UVSG common stock immediately after the UVSG Merger, resulting
in UVSG becoming a majority-controlled subsidiary of TCI. Simultaneously, TCI
contributed such UVSG shares of common stock to Liberty. The UVSG Merger has
been accounted for by the purchase method. Accordingly, the results of
operations of UVSG have been consolidated with those of Liberty since January
25, 1996 and Liberty recorded UVSG's assets and liabilities at fair value. UVSG
is engaged in satellite delivered video, audio, data and program promotion
services to cable television systems, direct to home satellite users, radio
stations and private network users throughout North America.

F-18
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

During July 1997, the 10% minority interest in Encore Media Corporation
("EMC") was purchased by TCI for approximately 2.4 million shares of Liberty
Media Group Series A Stock. Such 10% interest in EMC was simultaneously
contributed to Liberty and was accounted for as an acquisition of a minority
interest and resulted in an increase of $30 million in additional paid-in-
capital.

On January 12, 1998, TCI acquired from a minority shareholder of UVSG 24.8
million shares of UVSG Class A common stock in exchange for shares of TCI
stock. The aggregate value assigned to the shares issued by TCI was based upon
the market value of such shares at the time the transaction was announced. Such
transaction was accounted for as an acquisition of minority interest.
Simultaneously, TCI contributed such UVSG shares of common stock to Liberty. As
a result of such transaction, Liberty increased its ownership in the equity of
UVSG to approximately 73% and the voting power increased to 93%. The purchase
price of $346 million in TCI stock was recorded as an increase in additional
paid-in-capital by Liberty.

Effective February 1, 1998, Turner-Vision, Inc. ("Turner Vision") contributed
the assets, obligations and operations of its retail C-band satellite business
to Superstar/Netlink Group LLC ("SNG") in exchange for an approximate 20%
interest in SNG. As a result of such transaction, Liberty's ownership interest
in SNG decreased to approximately 80%. In connection with the increase in SNG's
equity, net of the dilution of Liberty's ownership interest in SNG, that
resulted from such transaction, Liberty recognized a gain of $38 million
(before deducting deferred income taxes of $15 million). Turner Vision's
contribution to SNG was accounted for as a purchase and the $61 million excess
of the purchase price over the fair value of the net assets acquired was
recorded as excess cost and is being amortized over five years.

During 1998, TCI Music, Inc. ("TCI Music") issued approximately 382,000
shares of its Series A Common Stock in connection with certain acquisitions.
Such acquisitions were accounted for under the purchase method. Accordingly,
the results of operations of the acquired companies have been consolidated with
those of Liberty since their respective dates of acquisition. In connection
with the issuance of such shares, Liberty's ownership interest was diluted to
80.7% and Liberty recorded a $2 million increase to additional paid-in-capital.
No gain was recognized in the consolidated statements of operations and
comprehensive earnings due primarily to Liberty's contingent obligation to
purchase certain shares from shareholders of TCI Music (see note 11).

On August 24, 1998, Liberty purchased 100% of the issued and outstanding
common stock of Pramer S.A. ("Pramer"), an Argentine programming company, for a
total purchase price of $97 million, which was satisfied by $32 million in cash
and the issuance of notes payable in the amount of $65 million. Such
transaction was accounted for under the purchase method. Accordingly, the
results of operations of Pramer have been consolidated with those of Liberty
since August 24, 1998. The $101 million excess cost over acquired net assets is
being amortized over ten years.

On November 19, 1998, TCI exchanged, in a merger transaction, 10.1 million
shares of TCI common stock for shares of Tele-Communications International,
Inc. ("TINTA") common stock not beneficially owned by TCI. Such transaction was
accounted for by Liberty as an acquisition of minority interest in equity of
subsidiaries. The aggregate value assigned to the shares issued by TCI was
based upon the market value of the common stock at the time the merger was
announced. In connection with the contribution to Liberty of the TINTA shares
in such merger transaction, Liberty recorded the total purchase price of $426
million as an increase to additional paid-in-capital.

On March 1, 1999, UVSG and News Corp. completed a transaction whereby UVSG
acquired News Corp.'s TV Guide properties creating a broader platform for
offering television guide services to consumers and advertisers and UVSG was
renamed TV Guide, Inc. ("TV Guide"). News Corp. received $800 million in cash
and 60 million shares of UVSG's stock, including 22.5 million shares of its
Class A common stock and 37.5 million shares of its Class B common stock. In
addition, News Corp. purchased approximately 6.5 million additional shares of
UVSG Class A common stock for $129 million in order to equalize its ownership
with that of Liberty. As a result of these transactions, and another
transaction completed on the same date, News Corp.,

F-19
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Liberty and TV Guide's public stockholders own on an economic basis
approximately 44%, 44% and 12%, respectively, of TV Guide. Following such
transactions, News Corp. and Liberty each have approximately 49% of the voting
power of TV Guide's outstanding stock. Upon consummation, Liberty began
accounting for its interest in TV Guide under the equity method of accounting.

(9) Long-Term Debt

Debt is summarized as follows:

<TABLE>
<CAPTION>
Weighted December
average 31,
interest -----------
rate 1998 1997
-------- ------ ----
amounts in
millions
<S> <C> <C> <C>
Bank credit facilities.................................. 6.1% $1,629 390
4 1/2% Convertible Subordinated Debentures.............. 4.5% 345 345
Other................................................... 7.4% 122 50
------ ---
2,096 785
Less current maturities................................. 184 31
------ ---
Total................................................. $1,912 754
====== ===
</TABLE>

At December 31, 1998, Liberty had approximately $1 billion in unused lines of
credit under its bank credit facilities. The bank credit facilities of Liberty
generally contain restrictive covenants which require, among other things, the
maintenance of certain financial ratios, and include limitations on
indebtedness, liens and encumbrances, acquisitions, dispositions, guarantees
and dividends. Liberty was in compliance with its debt covenants at December
31, 1998. Additionally, Liberty pays fees ranging from .15% to .375% per annum
on the average unborrowed portions of the total amounts available for
borrowings under bank credit facilities.

As collateral for borrowings under one of Liberty's credit facilities, the
banks lend against certain assets designated by Liberty (the "Designated
Assets"). The components of the Designated Assets may be changed from time to
time. The aggregate market value of the Designated Assets, as determined by
certain criteria in the revolving credit agreement, must at all times exceed an
amount equal to three times the total outstanding borrowings under the
facility. The Designated Assets at December 31, 1998 were Liberty's holdings in
Discovery Communications, Inc., QVC and the FKW Preferred Stock. The carrying
amount of the Designated Assets as of December 31, 1998 was $617 million.
Recourse to the banks for payment of Liberty's obligations under this facility
is limited solely to the Designated Assets. Also, as security for borrowings
under one of its credit facilities, Liberty has pledged a portion of its TW
Exchange Stock. See note 6.

Certain of Liberty's bank credit facilities have credit agreements which
provide for a three month interest reserve to be held by an administrative
agent. Such amounts held in the interest reserve amounted to $17 million and $5
million for the years ended December 31, 1998 and 1997, respectively, and are
included in other current assets in the accompanying consolidated balance
sheets.

Liberty's subsidiary in Puerto Rico (a cable television operator) (the
"Puerto Rico Subsidiary") has a reducing revolving bank facility which is
unsecured and provides for maximum borrowing commitments of $100 million (the
"Puerto Rico Bank Facility"). On September 21, 1998, Hurricane Georges struck
Puerto Rico and caused considerable property damage to the area in general,
including the Puerto Rico Subsidiary's cable television systems. On September
27, 1998, the Puerto Rico Subsidiary submitted a property damage claim to its
insurance carrier for approximately $15 million which represents the estimated
replacement costs of its damaged property. In addition to property damage
caused by Hurricane Georges, the Puerto Rico Subsidiary suffered a loss in
revenue from its pre-hurricane customers. The loss of revenue from September
21, 1998 to

F-20
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998 was $7 million. The estimated loss of revenue exceeded its
business interruption insurance by $4 million. Such uncovered losses could
cause the Puerto Rico Subsidiary to be in violation of certain financial
covenants of the Puerto Rico Bank Facility in the fourth quarter of 1998 and
the first quarter of 1999. Violations of certain financial covenants will
prevent the Puerto Rico Subsidiary from borrowing any unused borrowing
commitments and could result in the acceleration of amounts due under the
Puerto Rico Bank Facility. See note 14.

The U.S. dollar equivalent of the annual maturities of Liberty's debt for
each of the next five years are as follows: 1999: $184 million; 2000: $495
million; 2001: $73 million; 2002: $80 million and 2003: $714 million.

A subsidiary of Liberty entered into an Interest Rate Swap effective March
1998, pursuant to which it receives a variable rate based on LIBOR (5.28% at
December 31, 1998) and pays a fixed rate of 5.98% on a notional amount of $100
million through March 2000. As of December 31, 1998, the subsidiary would be
required to pay an estimated $1.2 million to terminate such Interest Rate Swap.
Amounts resulting from this interest rate swap are recorded in interest expense
in the consolidated statement of operations and comprehensive earnings.

With the exception of the 4 1/2% Convertible Subordinated Debentures, which,
based on quoted market prices, had a fair value of $373 million at December 31,
1998, Liberty believes that the carrying value of Liberty's debt approximated
its fair value at December 31, 1998.

(10) Income Taxes

TCI files a consolidated federal income tax return with all of its 80% or
more owned subsidiaries. Consolidated subsidiaries in which TCI owns less than
80% each file a separate tax return. TCI and such subsidiaries calculate their
respective tax liabilities on a separate return basis. Income tax expense for
Liberty is based upon those items in the consolidated tax calculations of TCI
applicable to Liberty. The current tax allocation represents an apportionment
of tax expense or benefit (other than deferred taxes) and alternative minimum
taxes to Liberty in relation to its amount of taxable earnings or losses. Such
amounts are reflected as borrowings from or loans to related parties.

A tax sharing agreement (the "Old Tax Sharing Agreement") among TCI and
certain subsidiaries of TCI was implemented effective July 1, 1995. The Old Tax
Sharing Agreement formalized certain of the elements of a pre-existing tax
sharing arrangement and contains additional provisions regarding the allocation
of certain consolidated income tax attributes and the settlement procedures
with respect to the intercompany allocation of current tax attributes. Under
the Old Tax Sharing Agreement, Liberty was responsible to TCI for their share
of consolidated income tax liabilities (computed as if TCI were not liable for
the alternative minimum tax) determined in accordance with the Old Tax Sharing
Agreement, and TCI was responsible to Liberty to the extent that the income tax
attributes generated by Liberty and its subsidiaries were utilized by TCI to
reduce its consolidated income tax liabilities (computed as if TCI were not
liable for the alternative minimum tax). In the consolidated financial
statements of Liberty, the tax liabilities and benefits of such entities so
determined have been charged or credited to an intercompany account between TCI
and Liberty. Such intercompany account is required to be settled only upon the
date that an entity ceases to be a member of TCI's consolidated group for
federal income tax purposes. Under the Old Tax Sharing Agreement, TCI retains
the burden of any alternative minimum tax and has the right to receive the tax
benefits from an alternative minimum tax credit attributable to any tax period
beginning on or after July 1, 1995 and ending on or before October 1, 1997.

Effective October 1, 1997, (the "Effective Date"), the Old Tax Sharing
Agreement was replaced by a new tax sharing agreement (the "New Tax Sharing
Agreement"), which governs the allocation and sharing of income taxes.
Effective for periods on and after the Effective Date, through the AT&T Merger,
federal income

F-21
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

taxes were computed based upon the type of tax paid by TCI (on a regular tax or
alternative minimum tax basis) on a separate basis for each entity. Based upon
these separate calculations, an allocation of tax liabilities and benefits was
made such that each entity was required to make cash payments to TCI based on
its allocable share of TCI's consolidated federal income tax liabilities (on a
regular tax or alternative minimum tax basis, as applicable) attributable to
such entity and actually used by TCI in reducing its consolidated federal
income tax liability. Tax attributes and tax basis in assets was inventoried
and tracked for ultimate credit to or charge against each entity. Similarly, in
each taxable period that TCI paid alternative minimum tax, the federal income
tax benefits of each entity, computed as if such entity were subject to regular
tax, was inventoried and tracked for payment to or payment by each entity in
years that TCI utilized the alternative minimum tax credit associated with such
taxable period. The entity generating the utilized tax benefits received a cash
payment only if, and when, the unutilized taxable losses of the other entity
were actually utilized. If the unutilized taxable losses expired without ever
being utilized, the entity generating the unutilized tax benefits never
received payment for such benefits. Pursuant to the New Tax Sharing Agreement,
state and local income taxes were calculated on a separate return basis for
each entity (applying provisions of state and local tax law and related
regulations as if the entity was a separate unitary or combined group for tax
purposes), and TCI's combined or unitary tax liability was allocated among the
entities based upon such separate calculation.

Notwithstanding the foregoing, items of income, gain, loss, deduction or
credit resulting from certain specified transactions that were consummated
after the Effective Date pursuant to a letter of intent or agreement that was
entered into prior to the Effective Date were shared and allocated pursuant to
the terms of the Old Tax Sharing Agreement, as amended.

In connection with the AT&T Merger, Liberty became party to a new tax sharing
agreement.

Income tax benefit (expense) consists of:

<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
amounts in millions
<S> <C> <C> <C>
Year ended December 31, 1998:
State and local income tax expense, including
intercompany tax allocation...................... $ (4) (109) (113)
Federal income tax benefit (expense), including
intercompany tax allocation...................... 89 (437) (348)
---- ---- ----
$ 85 (546) (461)
==== ==== ====
Year ended December 31, 1997:
State and local income tax expense, including
intercompany tax allocation...................... $ (3) (25) (28)
Federal income tax benefit, including intercompany
tax allocation................................... 189 14 203
---- ---- ----
$186 (11) 175
==== ==== ====
Year ended December 31, 1996:
State and local income tax expense, including
intercompany tax allocation...................... $ (3) (97) (100)
Federal income tax benefit (expense), including
intercompany tax allocation...................... 54 (387) (333)
---- ---- ----
$ 51 (484) (433)
==== ==== ====
</TABLE>

F-22
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Income tax benefit (expense) differs from the amounts computed by applying
the U.S. federal income tax rate of 35% as a result of the following:

<TABLE>
<CAPTION>
Years ended
December 31,
-----------------
1998 1997 1996
----- ---- ----
amounts in
millions
<S> <C> <C> <C>
Computed expected tax benefit (expense)................. $(379) 226 (411)
Dividends excluded for income tax purposes.............. 13 8 2
Minority interest in equity of subsidiaries............. (5) 4 (6)
Amortization not deductible for income tax purposes..... (21) (10) (15)
State and local income taxes, net of federal income
taxes.................................................. (74) (18) (65)
Recognition of difference in income tax basis of
investments in subsidiaries............................ -- (25) 66
Increase in valuation allowance......................... (3) -- (13)
Other, net.............................................. 8 (10) 9
----- --- ----
$(461) 175 (433)
===== === ====
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1998 and 1997 are presented below:

<TABLE>
<CAPTION>
December 31,
------------
1998 1997
------ -----
amounts in
millions
<S> <C> <C>
Deferred tax assets:
Net operating and capital loss carryforwards................. $ 99 155
Future deductible amount attributable to accrued stock
compensation and deferred compensation...................... 218 36
Other future deductible amounts due principally to non-
deductible accruals......................................... 33 36
------ -----
Deferred tax assets.......................................... 350 227
------ -----
Less valuation allowance................................... 42 62
------ -----
Net deferred tax assets...................................... 308 165
------ -----
Deferred tax liabilities:
Investments in affiliates, due principally to losses of
affiliates recognized for income tax purposes in excess of
losses recognized for financial statement purposes.......... 3,637 1,166
Other, net................................................... 37 14
------ -----
Deferred tax liabilities..................................... 3,674 1,180
------ -----
Net deferred tax liabilities................................... $3,366 1,015
====== =====
</TABLE>

The valuation allowance relates principally to deferred tax assets arising
from net operating loss carryforwards of TCI Music.

At December 31, 1998, Liberty had net operating and capital loss
carryforwards for income tax purposes aggregating approximately $144 million
which, if not utilized to reduce taxable income in future periods, will expire
as follows: 2003: $3 million; 2004: $4 million; 2005: $5 million; 2006: $22
million; 2007: $22 million; 2011: $48 million; 2012: $36 million and 2013: $4
million.

F-23
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Certain subsidiaries of Liberty had additional net operating loss
carryforwards for income tax purposes aggregating $106 million and these net
operating losses are subject to certain rules limiting their usage.

(11) Stockholder's Equity

Preferred Stock

The Preferred Stock is issuable, from time to time, with such designations,
preferences and relative participating, option or other special rights,
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in a resolution or resolutions providing for the issue of such
Preferred Stock adopted by the Board.

Common Stock

The Class A Stock has one vote per share, and each of the Class B and Class C
Stock has ten votes per share.

As of December 31, 1998, all of the issued and outstanding common stock of
Liberty was held by Tele-Communications, Inc.

Transactions with Officers and Directors

On January 5, 1998, TCI announced that a settlement (the "Magness
Settlement") had been reached in the litigation brought against it and other
parties in connection with the administration of the Estate of Bob Magness (the
"Magness Estate"), the late founder and former Chairman of the Board of TCI.

On February 9, 1998, in connection with the Magness Settlement, TCI entered
into a call agreement (the "Malone Call Agreement") with Dr. John C. Malone,
and Dr. Malone's wife (together with Dr. Malone, the "Malones"), under which
the Malones granted to TCI the right to acquire any shares of TCI stock which
are entitled to cast more than one vote per share (the "High-Voting Shares")
owned by the Malones, which currently consist of an aggregate of approximately
60 million High-Voting shares upon Dr. Malone's death or upon a contemplated
sale of the High-Voting Shares (other than a minimal amount) to third persons.
In either such event, TCI has the right to acquire the shares at a maximum
price equal to the then relevant market price of shares of TCI's Series A
stocks plus a ten percent premium. The Malones also agreed that if TCI were
ever to be sold to another entity, then the maximum premium that the Malones
would receive on their High-Voting Shares would be no greater than a ten
percent premium over the price paid for the relevant shares of TCI's Series A
stocks. TCI paid $150 million to the Malones in consideration of them entering
into the Malone Call Agreement.

Also on February 9, 1998, in connection with the Magness Settlement, certain
members of the Magness family, individually and in certain cases, on behalf of
the Estate of Betsy Magness (the first wife of Bob Magness) and the Magness
Estate (collectively, the "Magness Family") also entered into a call agreement
with TCI (with substantially the same terms as the one entered into by the
Malones, including a call on the shares owned by the Magness Family upon Dr.
Malone's death) (the "Magness Call Agreement") on the Magness Family's
aggregate of approximately 49 million High-Voting Shares. The Magness Family
was paid $124 million by TCI in consideration of them entering into the Magness
Call Agreement. Additionally, on February 9, 1998, the Magness Family entered
into a stockholders' agreement with the Malones and TCI under which (i) the
Magness Family and the Malones agreed to consult with each other in connection
with matters to be brought to the vote of TCI's stockholders, subject to the
proviso that if they cannot mutually agree on how to vote the shares, Dr.
Malone has an irrevocable proxy to vote the High-Voting Shares owned by the
Magness Family, (ii) the Magness Family may designate a nominee for the Board
of TCI and Dr. Malone has agreed to vote his High Voting Shares for such
nominee and (iii) certain "tag along rights" have been created in favor of the
Magness Family and certain "drag along rights" have been created in favor of
the Malones.

F-24
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Of the aggregate amount paid by TCI pursuant to the Malone Call Agreement and
Magness Call Agreement, $140 million was allocated to Liberty and was paid
during the first quarter of 1998. Such payment is reflected as a reduction of
additional paid-in-capital.

Transactions with TCI and Other Related Parties

Certain TCI corporate general and administrative costs are charged to Liberty
at rates set at the beginning of the year based on projected utilization for
that year. Management believes this allocation method is reasonable. During the
years ended December 31, 1998, 1997 and 1996 Liberty was allocated $11 million,
$56 million and $4 million, respectively, in corporate general and
administrative costs by TCI.

Certain Liberty subsidiaries produce and/or distribute sports and other
programming and other services to cable distribution operators (including TCI)
and others. Charges to TCI are based upon customary rates charged to others.

During 1998 and 1997, Liberty made marketing support payments to TCI. Charges
by TCI for such arrangements for the years ended December 31, 1998 and 1997
aggregated $5 million and $19 million, respectively.

The Puerto Rico Subsidiary purchases programming services from TCI. The
charges, which approximate TCI's cost and are based on the aggregate number of
subscribers served by the Puerto Rico Subsidiary, aggregated $6 million, $6
million and $4 million during the years ended December 31, 1998, 1997 and 1996,
respectively.

In 1996, a Liberty subsidiary (i) issued preferred stock in connection with
an acquisition, which is convertible at the option of the holders into
1,084,056 of TCI Group Series A Common Stock beginning in April 1999 or sooner
in the event of a change in control of TCI and (ii) acquired an option contract
from TCI in exchange for a $14 million increase in the intercompany amount due
to TCI. Such option contract provided Liberty with the right to acquire
1,084,056 shares of TCI Group Series A Stock at a price equivalent to the fair
value at the time of exercise less $14.625 per share. During September 1998,
TCI assigned its obligation under the option contract to Liberty. As a result
of such assignment, Liberty recorded a $16 million reduction to the
intercompany amount due to TCI and a corresponding increase to additional paid-
in-capital. In July 1998, Liberty entered into an equity swap transaction with
a commercial bank, which provides Liberty with the right but not the obligation
to acquire 1,084,056 shares of TCI Group Series A Stock for approximately $45
million on or before April 19, 1999. In the event Liberty does not exercise its
right to acquire such shares, any difference between the counterparty's cost
and the market value of the shares on the settlement date will be settled in
cash or shares of TCI Ventures Group Series A Stock at Liberty's option. Such
shares could be used to satisfy the exchange requirements of the aforementioned
preferred stock.

Cablevision purchases programming services from certain Liberty affiliates.
The related charges generally are based upon the number of Cablevision's
subscribers that receive the respective services. During the year ended
December 31, 1997, such charges aggregated $12 million. Additionally, certain
of Cablevision's general and administrative functions are provided by Liberty.
The related charges, which generally are based upon the respective affiliate's
cost of providing such functions, aggregated $2 million during the year ended
December 31, 1997. The above-described programming and general and
administrative charges are included in operating costs in the accompanying
consolidated statements of operations and comprehensive earnings.

During July 1997, TCI entered into a 25 year affiliation agreement with
Encore Media Group LLC ("Encore Media Group") (the "EMG Affiliation Agreement")
pursuant to which TCI will pay monthly fixed amounts in exchange for unlimited
access to all of the existing Encore and STARZ! services.

F-25
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Effective July 11, 1997, pursuant to an Agreement and Plan of Merger, dated
as of February 6, 1997, as amended (the "DMX Merger Agreement"), by and among
TCI, TCI Music, a wholly-owned subsidiary of TCI, a wholly-owned subsidiary of
TCI Music ("DMX Merger Sub") and DMX, Inc. ("DMX"), Merger Sub was merged with
and into DMX, with DMX as the surviving corporation (the "DMX Merger"). As a
result of the DMX Merger, stockholders of DMX became stockholders of TCI Music.
TCI Music is engaged in the delivery of music programming and music related
services through audio, video and internet distribution channels, primarily
cable television.

In connection with the DMX Merger, TCI and TCI Music entered into an
agreement pursuant to which, effective as of the closing of the DMX Merger: (i)
TCI Music issued to TCI (as designee of certain of its indirect subsidiaries),
62.5 million shares of Series B Common Stock, $.01 par value per share, of TCI
Music ("TCI Music Series B Common Stock") and a promissory note in the amount
of $40 million, (ii) until December 31, 2006, certain subsidiaries of TCI
transferred to TCI Music the right to receive all revenue from sales of DMX
music services to their residential and commercial subscribers, net of an
amount equal to 10% of revenue from such sales to residential subscribers and
net of the revenue otherwise payable to DMX as license fees for DMX music
services under affiliation agreements currently in effect, (iii) TCI
contributed to TCI Music certain commercial digital DMX tuners that were not in
service as of the effective date of the DMX Merger, and (iv) TCI granted to
each stockholder who became a stockholder of TCI Music pursuant to the DMX
Merger, one right (a "Right") with respect to each whole share of TCI Music
Series A Common Stock acquired by such stockholder in the DMX Merger pursuant
to the terms of a Rights Agreement among TCI, TCI Music and the rights agent
(the "Rights Agreement"). Upon consummation of the DMX Merger, each outstanding
share of DMX Common Stock was converted into the right to receive (i) one-
quarter of a share of TCI Music Series A Common Stock, (ii) one Right with
respect to each whole share of TCI Music Series A Common Stock and (iii) cash
in lieu of the issuance of fractional shares of TCI Music Series A Common Stock
and Rights. Each Right entitled the holder to require TCI to purchase from such
holder one share of TCI Music Series A Common Stock for $8.00 per share,
subject to reduction by the aggregate amount per share of any dividend and
certain other distributions, if any, made by TCI Music to its stockholders,
and, payable at the election of TCI, in cash, a number of shares of TCI Group
Series A Stock, having an equivalent value or a combination thereof, if during
the one-year period beginning on the effective date of the DMX Merger, the
price of TCI Music Series A Common Stock did not equal or exceed $8.00 per
share for a period of at least 20 consecutive trading days.

Subsequently, TCI Music and TCI entered into an Amended and Restated
Contribution Agreement to be effective as of July 11, 1997 which provides,
among other things, for TCI to deliver, or cause certain of its subsidiaries to
deliver to TCI Music fixed monthly payments (subject to inflation and other
adjustments) through 2017.

Effective with the DMX Merger, TCI beneficially owned approximately 45.7% of
the outstanding shares of TCI Music Series A Common Stock and 100% of the
outstanding shares of TCI Music Series B Common Stock, which represented 89.6%
of the equity and 98.7% of the voting power of TCI Music. Simultaneously with
the DMX Merger, Liberty acquired the TCI-owned TCI Music Common Stock by
agreeing to reimburse TCI for any amounts required to be paid by TCI pursuant
to TCI's contingent obligation under the Rights Agreement to purchase up to 15
million shares (7 million of which are owned by Liberty) of TCI Music Series A
Common Stock and issuing an $80 million promissory note (the "Music Note") to
TCI. Liberty recorded its contingent obligation to purchase such shares under
the Rights Agreement as a component of minority interest in equity of
subsidiaries in the accompanying consolidated financial statements. Liberty may
elect to pay $50 million of the Music Note by delivery of a Stock Appreciation
Rights Agreement that will give TCI the right to receive 20% of the
appreciation in value of Liberty's investment in TCI Music, to be determined at
July 11, 2002. TCI Music was included in the consolidated financial results of
Liberty as of the date of the DMX

F-26
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Merger. Due to the related party nature of the transaction, the $86 million
excess of the consideration paid over the carryover basis of the TCI Music
common stock acquired by Liberty from TCI was reflected as a decrease in
additional paid-in-capital. The Music Note is included in amounts due to
related parties.

In December 1997, TCI Music issued convertible preferred stock and common
stock in connection with two acquisitions. After giving effect to such
issuances and assuming the conversion of the TCI Music convertible preferred
stock, Liberty, at December 31, 1997, owned TCI Music securities representing
78% of TCI Music's common stock and 97% of the voting power attributable to
such TCI Music common stock. In connection with the issuance of such common
shares, Liberty recorded a $19 million increase to additional paid-in-capital.
No gain was recognized in the consolidated statements of operations and
comprehensive earnings due primarily to Liberty's contingent obligation under
the Rights Agreement.

Prior to the July 1998 expiration of the Rights, Liberty was notified of the
tender of 4.9 million shares and associated Rights. On August 27, 1998, Liberty
paid $39 million to satisfy TCI's obligation under the Rights Agreement. Such
transaction was recorded as an acquisition of minority interest in equity of
subsidiaries.

During the third quarter of 1997, Liberty sold certain assets (the "SUMMITrak
Assets") to CSG Systems, Inc. ("CSG") for cash consideration of $106 million,
plus five-year warrants to purchase up to 1.5 million shares of CSG common
stock at $24 per share and $12 million in cash, once certain numbers of TCI
affiliated customers are being processed on a CSG billing system. In connection
with the sale of the SUMMITrak Assets, TCI committed to purchase billing
services from CSG through 2012. In light of such commitment, Liberty has
reflected the $30 million excess (after deducting deferred income taxes of $17
million) of the cash received over the book value of the SUMMITrak Assets as an
increase to additional paid-in-capital.

During the fourth quarter of 1997, Liberty's remaining assets in TCI
SUMMITrak of Texas, Inc. and TCI SUMMITrak L.L.C. were transferred to TCI in
exchange for a $19 million reduction of the amount owed by Liberty to TCI. Such
transfer was accounted for at historical cost due to the related party nature
of the transaction.

Due to Related Parties

The components of "Due to related parties" are as follows:

<TABLE>
<CAPTION>
1998 1997
---- ----
amounts
in
millions
<S> <C> <C>
Notes payable to TCI, including accrued interest................ $141 378
Note receivable from TCI........................................ -- (88)
Intercompany account............................................ 269 (276)
---- ----
$410 14
==== ====
</TABLE>

Amounts outstanding at December 31, 1998 under notes payable to TCI bear
interest at varying rates. During the second quarter of 1998, TCI made a
contribution to Liberty of $5 million, which was used to reduce the amount due
under the Music Note.

Amounts outstanding under the note receivable from TCI were repaid in their
entirety during the third quarter of 1998.

F-27
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The non-interest bearing intercompany account includes certain income tax and
stock compensation allocations that are to be settled at some future date. All
other amounts included in the intercompany account are to be settled within
thirty days following notification.

(12) Stock Options and Stock Appreciation Rights

Certain officers and other key employees of Liberty hold options with tandem
stock appreciation rights ("SARs") to acquire TCI Group Series A Stock, Liberty
Media Group Series A Stock and TCI Ventures Group Series A Stock as well as
restricted stock awards of TCI Group Series A Stock, Liberty Media Group Series
A Stock and TCI Ventures Group Series A Stock. Estimates of compensation
relating to SARs granted to such employees of Liberty have been recorded in the
accompanying consolidated financial statements pursuant to APB Opinion No. 25.
Such estimates are subject to future adjustment based upon vesting of the
related stock options and SARs and the market value of TCI Group Series A
Stock, Liberty Media Group Series A Stock and TCI Ventures Group Series A Stock
and, ultimately, on the final determination of market value when the rights are
exercised. In connection with the AT&T Merger, all series of TCI stock were
converted to classes of AT&T stock. Had Liberty accounted for its stock based
compensation pursuant to the fair value based accounting method in Statement
123, the amount of compensation would not have been significantly different
from what has been reflected in the accompanying consolidated financial
statements due to substantially all of Liberty's stock option plans having
tandem SARs, which are treated as liabilities for financial statement purposes
and require periodic remeasurement under both APB Opinion No. 25 and Statement
123.

The following table presents the number and weighted average exercise price
("WAEP") of certain options in tandem with SARs to purchase TCI Group Series A
Stock, Liberty Media Group Series A Stock (as adjusted for a stock dividend)
and TCI Ventures Group Series A Stock (as adjusted for a stock dividend)
granted to certain officers and other key employees of the Company.

<TABLE>
<CAPTION>
Liberty Media TCI Ventures
TCI Group Group Group
Series A Stock WAEP Series A Stock WAEP Series A Stock WAEP
-------------- ------ -------------- ------ -------------- -----
amounts in thousands, except for WAEP
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January
1, 1996................ 3,698 $ 8.46 6,698 $ 9.01 -- --
Adjustment for
transfer of
employees............ 3,285 13.19 1,998 12.64 -- --
Exercised............. (79) 10.79 (62) 7.60 -- --
------ ------
Outstanding at December
31, 1996............... 6,904 10.64 8,634 9.93 -- --
Adjustment for TCI
Ventures Exchange.... (2,149) 14.28 -- -- 4,298 $7.14
Adjustment for
transfer of
employees............ 228 12.08 22 8.39 (50) 6.74
Granted............... 595 15.04 591 -- -- --
Exercised............. (2,430) 9.81 (648) 5.62 (166) 6.45
Canceled.............. (30) 10.75 (23) 10.67 -- --
------ ------ ------
Outstanding at December
31, 1997............... 3,118 12.08 8,576 10.30 4,082 6.76
Granted............... 118 25.72 8,314 43.24 51 5.38
Exercised............. (1,331) 10.36 (1,203) 8.39 (1,714) 6.59
Canceled.............. (23) 14.92 (1) 9.78 (20) 7.46
------ ------ ------
Outstanding at December
31, 1998............... 1,882 14.03 15,686 29.08 2,399 6.89
====== ====== ======
Exercisable at December
31, 1998............... 1,117 3,763 1,708
====== ====== ======
Vesting Period........ 5 yrs 5 yrs 5 yrs
</TABLE>

F-28
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Tele-Communications International, Inc. Stock Incentive Plan. In 1995, TINTA
adopted the Tele-Communications International, Inc. 1995 Stock Incentive Plan
(the "TINTA 1995 Plan"). The TINTA 1995 Plan provides for Awards to be made in
respect of a maximum of 3,000,000 shares of TINTA Series A common stock ("TINTA
Series A Stock") (subject to certain anti-dilution adjustments). Shares of
TINTA Series A Stock that are subject to Awards that expire, terminate or are
annulled for any reason without having been exercised (or deemed exercised, by
virtue of the exercise of a related stock appreciation right), or are forfeited
prior to becoming vested will return to the pool of such shares available for
grant under the TINTA 1995 Plan.

On December 13, 1995, stock options in tandem with SARs to purchase 1,352,000
shares of TINTA Series A Stock were granted pursuant to the TINTA 1995 Plan.
Such options vest ratably over five years, first became exercisable August 4,
1996 and expire on August 4, 2005. During 1997, TINTA granted stock options in
tandem with SARs to purchase 1,130,000 shares of TINTA Series A Stock. Such
options vest ratably over five years, first become exercisable one year after
date of grant, and expire ten years after date of grant.

As a result of the TINTA Merger on November 19, 1998, each stock option and
SAR to purchase TINTA Series A Stock was converted into a stock option or SAR
to purchase Liberty Media Group Series A Stock determined by multiplying the
number of TINTA stock options or SARs by 0.58 at an exercise price per share of
such stock option or SAR divided by 0.58. The following descriptions of stock
options and/or SARs have been adjusted to reflect such change.

The following table presents the number and WAEP of certain options in tandem
with SARs to purchase TINTA Series A Stock and Liberty Media Group Series A
Stock pursuant to the TINTA 1995 Plan:

<TABLE>
<CAPTION>
Liberty Media
TINTA Group
Series A Series A
Stock WAEP Stock WAEP
-------- ------ ------------- -----
amounts in thousands, except for
WAEP
<S> <C> <C> <C> <C>
Outstanding at January 1, 1996 and
1997................................. 1,352 $16.00 -- $ --
Granted............................. 1,130 14.69 -- --
------ -------
Outstanding at December 31, 1997...... 2,482 15.40 -- --
Adjustment for TINTA Merger......... (1,982) 15.31 1,150 26.40
Exercised........................... (500) 15.75 (1) 25.21
------ -------
Outstanding at December 31, 1998...... -- -- 1,149 26.40
====== =======
Exercisable at December 31, 1998...... -- -- 448 26.97
====== =======
Vesting Period........................ -- 5 years
</TABLE>

On December 13, 1995, pursuant to the TINTA 1995 Plan, 40,000 restricted
shares of TINTA Series A Stock were awarded to certain officers and directors
of TINTA. Such restricted shares vest as to 50% in December 1999 and as to the
remaining 50% in December 2000. Such restricted shares had a fair value of
$25.375 on the date of grant. At December 31, 1998, 23,200 restricted shares of
Liberty Media Group Series A Stock (after adjustment for TINTA Merger) were
unvested.

On July 23, 1997, pursuant to the TINTA 1995 Plan, 150,000 restricted shares
of TINTA Series A Stock were awarded to a director of TINTA. Such restricted
shares vest as to 50% in July 2001 and as to the remaining 50% in July 2002.
Such restricted shares had a fair value of $14.625 on the date of grant. At
December 31, 1998, 87,000 restricted shares of Liberty Media Group Series A
Stock (after adjustment for TINTA Merger) were unvested.

F-29
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Tele-Communications International, Inc. Nonemployee Director Stock Option
Plan. On April 11, 1996, TINTA adopted the Tele-Communications International,
Inc. 1996 Nonemployee Director Stock Option Plan (the "TINTA Director Plan").
The TINTA Director Plan provides for grants to be made to nonemployee directors
of TINTA of options to purchase a maximum of 1,000,000 shares of TINTA Series A
Stock (subject to certain anti-dilution adjustments). Shares that are subject
to such options that expire or terminate for any reason without having been
exercised will return to the pool of shares underlying options available to
grant under the TINTA Director Plan. Pursuant to the TINTA Director Plan,
options to purchase 200,000 shares of TINTA Series A Stock were granted in
April 1996 at an exercise price of $16.00 per share. Such options had a
weighted average fair value of $14.01 on the date of grant. Options issued
pursuant to the TINTA Director Plan vest and become exercisable over a five-
year period from the date of grant and expire 10 years from the date of grant.

At December 31, 1998, 116,000 options with respect to Liberty Media Group
Series A Stock (after adjustment for TINTA Merger) granted pursuant to the
TINTA Director Plan were outstanding, 46,400 of which were exercisable. Such
options had an exercise price of $27.58 and a weighted average remaining
contractual life of 8 years.

United Video Satellite Group, Inc. Equity Incentive Plan and United Video
Satellite Group, Inc. Stock Option Plan for Non-Employee Directors. UVSG
sponsors the United Video Satellite Group, Inc. Equity Incentive Plan under
which 8 million shares of UVSG's Class A Common Stock are authorized to be
issued in connection with the exercise of awards of stock options, stock
appreciation rights and restricted stock granted under the plan. UVSG's Equity
Incentive Plan provides that the price at which each share of stock covered by
an option may be acquired shall in no event be less than 100% of the fair
market value of the stock on the date the option is granted, except in certain
limited circumstances. Additionally, UVSG sponsors the United Video Satellite
Group, Inc. Stock Option Plan for Non-Employee Directors under which 500,000
shares of UVSG's Class A Common Stock are authorized to be issued in connection
with the exercise of stock options granted thereunder.

At December 31, 1998, 6.3 million shares of UVSG's Class A Common Stock were
reserved for issuance under the stock option plans. The options granted under
the stock option plans expire ten years from the date of grant. Options
outstanding are as follows:

<TABLE>
<CAPTION>
UVSG
Class A Common
Stock (1) WAEP (1)
-------------- --------
amounts in thousands,
except for WAEP
<S> <C> <C>
At January 1, 1996................................... 4,121 $ 4.25
Granted............................................ 1,276 11.11
Exercised.......................................... (815) 4.04
Canceled........................................... (805) 9.21
------
At December 31, 1996................................. 3,777 5.56
Granted............................................ 916 8.54
Exercised.......................................... (2,089) 4.04
Canceled........................................... (252) 5.88
------
At December 31, 1997................................. 2,352 8.03
Granted............................................ 709 16.61
Exercised.......................................... (254) 6.84
Canceled........................................... (36) 9.41
------
Exercisable at December 31, 1998..................... 2,771 10.32
======
</TABLE>
- --------
(1) Adjusted for two-for-one stock split.

F-30
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Exercise prices for options outstanding as of December 31, 1998 ranged from
$4 to $17. The weighted-average remaining contractual life of such options is
7.8 years.

TCI Music, Inc. Stock Incentive Plan. During 1997 and 1998, TCI Music granted
stock options with tandem SARs to employees under the TCI Music, Inc. 1997
Stock Incentive Plan (the "TCI Music Stock Plan") which is authorized to issue
up to 4 million shares. Options granted under the TCI Music Stock Plan expire
ten years from the date of grant. In addition TCI Music granted stock options
with tandem SARs to the board of directors and employees in connection with
certain mergers. Options issued under the TCI Music Stock Plan and in
connection with certain mergers generally vest annually in 20% cumulative
increments.

On December 21, 1998, TCI Music re-priced the stock options with tandem SARs
pursuant to the TCI Music Stock Plan at $4.00 for all grants to executive
officers and employees of TCI Music and its subsidiaries.

The following table presents the number and WAEP of options in tandem with
SARs to purchase TCI Music Series A Common Stock, after giving effect to the
re-pricing at $4.00 for certain options and tandem SARs:

<TABLE>
<CAPTION>
TCI Music
Series A
Common Stock WAEP
------------ -----
amounts in
thousands, except
for WAEP
<S> <C> <C>
At January 1, 1997....................................... -- --
Granted................................................ 3,609 $5.75
-----
At December 31, 1997..................................... 3,609 5.75
Granted................................................ 1,771 4.00
Exercised.............................................. (21) 4.00
Canceled............................................... (311) 4.00
-----
At December 31, 1998..................................... 5,048 5.25
=====
Exercisable at December 31, 1998......................... 1,373 5.84
=====
</TABLE>

Exercise prices for options outstanding as of December 31, 1998 ranged from
$4.00 to $6.25. The weighted average remaining contractual life of such options
is 8.7 years. The weighted average fair value of options granted during 1998,
after giving effect to the re-pricing at $4.00 for certain options and tandem
SARs, and 1997 was $3.51 and $3.31, respectively.

The estimated fair values of the options noted above are based on the Black-
Scholes model and are stated in current annualized dollars on a present value
basis. The key assumptions used in the model for purposes of these calculations
generally include the following: (a) a discount rate equal to the 10-year
Treasury rate on the date of grant; (b) a 35% volatility factor, (c) the 10-
year option term; (d) the closing price of the respective common stock on the
date of grant; and (e) an expected dividend rate of zero.

F-31
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(13) Other Comprehensive Earnings

Accumulated other comprehensive earnings included in Liberty's consolidated
balance sheets and consolidated statements of stockholder's equity reflect the
aggregate of foreign currency translation adjustments and unrealized holding
gains and losses on securities classified as available-for-sale. The change in
the components of accumulated other comprehensive earnings, net of taxes, is
summarized as follows:

<TABLE>
<CAPTION>
Unrealized Accumulated
Foreign gains other
currency (losses) comprehensive
translation on earnings, net
adjustments securities of taxes
----------- ---------- -------------
amounts in millions
<S> <C> <C> <C>
Balance at January 1, 1996................ $ (9) 336 327
Other comprehensive earnings (loss)....... 35 (319) (284)
---- ----- -----
Balance at December 31, 1996.............. 26 17 43
Other comprehensive earnings (loss)....... (23) 747 724
---- ----- -----
Balance at December 31, 1997.............. 3 764 767
Other comprehensive earnings.............. 2 2,417 2,419
---- ----- -----
Balance at December 31, 1998.............. $ 5 3,181 3,186
==== ===== =====
</TABLE>

The components of other comprehensive earnings are reflected in Liberty's
consolidated statements of operations and comprehensive earnings, net of taxes
and reclassification adjustments for gains realized in net earnings (loss). The
following table summarizes the tax effects and reclassification adjustments
related to each component of other comprehensive earnings.

<TABLE>
<CAPTION>
Tax
Before-tax (expense) Net-of-tax
amount benefit amount
---------- --------- ----------
amounts in millions
<S> <C> <C> <C>
Year ended December 31, 1998:
Foreign currency translation adjustments....... $ 3 (1) 2
Unrealized gains on securities:
Unrealized holding gains arising during
period...................................... 3,998 (1,581) 2,417
------ ------ -----
Other comprehensive earnings................... $4,001 (1,582) 2,419
====== ====== =====
Year ended December 31, 1997:
Foreign currency translation adjustments....... $ (38) 15 (23)
Unrealized gains on securities:
Unrealized holding gains arising during
period...................................... 1,236 (489) 747
------ ------ -----
Other comprehensive earnings................... $1,198 (474) 724
====== ====== =====
Year ended December 31, 1996:
Foreign currency translation adjustments....... $ 58 (23) 35
------ ------ -----
Unrealized gains on securities:
Unrealized holding gains arising during
period...................................... 61 (24) 37
Less: reclassification adjustment for gains
realized in net earnings.................... (589) 233 (356)
------ ------ -----
Net unrealized losses........................ (528) 209 (319)
------ ------ -----
Other comprehensive loss....................... $ (470) 186 (284)
====== ====== =====
</TABLE>

F-32
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(14) Commitments and Contingencies

Encore Media Group, a wholly owned subsidiary of Liberty, provides premium
programming distributed by cable, direct satellite, TVRO and other distributors
throughout the United States. Encore Media Group is obligated to pay fees for
the rights to exhibit certain films that are released by various producers
through 2017 (the "Film Licensing Obligations"). Based on customer levels at
December 31, 1998, these agreements require minimum payments aggregating
approximately $808 million. The aggregate amount of the Film Licensing
Obligations under these license agreements is not currently estimable because
such amount is dependent upon the number of qualifying films released
theatrically by certain motion picture studios as well as the domestic
theatrical exhibition receipts upon the release of such qualifying films.
Nevertheless, required aggregate payments under the Film Licensing Obligations
could prove to be significant.

Flextech has undertaken to finance the working capital requirements of a
joint venture, (the "Principal Joint Venture") formed with BBC Worldwide and is
obligated to provide the Principal Joint Venture with a primary credit facility
of (Pounds)88 million ($150 million) and subject to certain restrictions, a
standby credit facility of (Pounds)30 million ($51 million). As of December 31,
1998, the Principal Joint Venture had borrowed (Pounds)16 million ($27 million)
under the primary credit facility. If Flextech defaults in its funding
obligation to the Principal Joint Venture and fails to cure within 42 days
after receipt of notice from BBC Worldwide, BBC Worldwide is entitled, within
the following 90 days, to require that Liberty assume all of Flextech's funding
obligations to the Principal Joint Venture.

Liberty has guaranteed various loans, notes payable, letters of credit and
other obligations (the "Guaranteed Obligations") of certain affiliates. At
December 31, 1998, the Guaranteed Obligations aggregated approximately $243
million. Currently, Liberty is not certain of the likelihood of being required
to perform under such guarantees.

Liberty leases business offices, has entered into pole rental and transponder
lease agreements and uses certain equipment under lease arrangements. Rental
expense under such arrangements amounts to $27 million, $20 million and $38
million for the years ended December 31, 1998, 1997 and 1996, respectively.

A summary of future minimum lease payments under noncancellable operating
leases as of December 31, 1998 follows (amounts in millions):

<TABLE>
<S> <C>
Years ending December 31:
1999.............................................................. $40
2000.............................................................. 35
2001.............................................................. 31
2002.............................................................. 29
2003.............................................................. 23
Thereafter........................................................ 47
</TABLE>

It is expected that in the normal course of business, leases that expire
generally will be renewed or replaced by leases on other properties; thus, it
is anticipated that future minimum lease commitments will not be less than the
amount shown for 1999.

On July 17, 1998, TCI acquired 21.4 million shares of restricted stock of GI
in exchange for (i) certain of the assets of NDTC's set-top authorization
business, (ii) the license of certain related software to GI, (iii) a $50
million promissory note from TCI to GI and (iv) a nine year revenue guarantee
from TCI in favor of GI. In connection therewith, NDTC also entered into a
service agreement pursuant to which it will provide certain postcontract
services to GI's set-top authorization business. Such shares of GI stock and
the promissory note

F-33
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

were contributed to Liberty. The 21.4 million shares of GI common stock are, in
addition to other transfer restrictions, restricted as to their sale by Liberty
for a three year period, and represent approximately 13% of the outstanding
common stock of GI at December 31, 1998. Liberty recorded its investment in
such shares at fair value which included a discount attributable to the above-
described liquidity restriction. Liberty carries its investment in such shares
at the lower of cost or net realizable value. The $396 million fair value of GI
common stock received net of the $42 million present value of the promissory
note due from Liberty to GI, has been reflected as an increase in additional
paid-in capital.

On September 21, 1998, Hurricane Georges struck Puerto Rico and caused
considerable property damage to the area in general, including the Puerto Rico
Subsidiary's cable television systems. The Puerto Rico Subsidiary's cable
television systems represent $45 million of Liberty's revenue for the year
ended December 31, 1998. The Puerto Rico Subsidiary has property and business
interruption insurance aggregating $15 million that is subject to a deductible
of $1 million. The Puerto Rico Subsidiary has submitted a property damage claim
to its insurance carrier for approximately $15 million which represents the
estimated replacement cost of its damaged property. As a result of the damage
caused by Hurricane Georges, the Puerto Rico Subsidiary, at December 31, 1998,
recorded an impairment to reduce the net book value of the damaged property and
equipment by $8 million and recorded a receivable in the amount of $12 million
as insurance coverage for property damages. The $12 million in insurance
coverage for property damages were fully collected prior to December 31, 1998.

As of December 31, 1998, approximately 82% of the Puerto Rico Subsidiary's
pre-hurricane basic customers were receiving cable television services. The
loss of revenue from September 21, 1998 through December 31, 1998 was $7
million. The Puerto Rico Subsidiary's business interruption insurance will
cover the first $3 million in lost revenue. The $3 million in business
interruption coverage was fully collected prior to December 31, 1998.

The Puerto Rico Subsidiary has also claimed coverage for business
interruption under a secondary insurance carrier. Such policy, which covers the
Puerto Rico Subsidiary's parent company's subsidiaries, carries a deductible of
$2.5 million. This insurance claim is subject to approval by such insurance
carrier and accordingly, no assurance can be given that amounts claimed will be
paid in their entirety. However, in the event such claims are collected the
overall impact in lost revenues for the Puerto Rico Subsidiary as a result of
Hurricane Georges will not exceed $2.5 million.

Liberty has contingent liabilities related to legal proceedings and other
matters arising in the ordinary course of business. Although it is reasonably
possible Liberty may incur losses upon conclusion of such matters, an estimate
of any loss or range of loss cannot be made. In the opinion of management, it
is expected that amounts, if any, which may be required to satisfy such
contingencies will not be material in relation to the accompanying consolidated
financial statements.

(15) Information about Liberty's Operating Segments

Liberty is a holding company with a variety of subsidiaries and investments
operating in the media, communications and entertainment industries. Each of
these businesses are separately managed. Liberty identifies its reportable
segments as those consolidated subsidiaries that represent 10% or more of its
combined revenue and those equity method affiliates whose share of earnings or
losses represent 10% or more of its pre-tax earnings or loss. Subsidiaries and
affiliates not meeting this threshold are aggregated together for segment
reporting purposes.

Liberty has three operating segments: Encore Media Group, UVSG and Other.
Encore Media Group owns and operates cable and satellite-delivered premium
movie networks in the United States. Encore Media Group is wholly owned and
consolidated by Liberty. UVSG is a media and communications company principally

F-34
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

engaged in providing program listing guides and other programming and
distribution services to its customers. UVSG is majority owned and consolidated
by Liberty. Other includes Liberty's investments, primarily in cable television
programming entities, corporate and other consolidated businesses not
representing separately reportable segments.

The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Liberty evaluates performance
based on measures of revenue and operating cash flow (as defined by Liberty),
appreciation in stock price along with other non-financial measures such as
average prime time rating, prime time audience delivery, subscriber growth and
penetration, as appropriate. Liberty believes operating cash flow is a widely
used financial indicator of companies similar to Liberty and its affiliates,
which should be considered in addition to, but not as a substitute for,
operating income, net income, cash flow provided by operating activities and
other measures of financial performance prepared in accordance with generally
accepted accounting principles. Liberty generally accounts for intersegment
sales and transfers as if the sales or transfers were to third parties, that
is, at current prices.

Liberty utilizes the following financial information for purposes of making
decisions about allocating resources to a segment and assessing a segment's
performance:

<TABLE>
<CAPTION>
EMG UVSG Other Total
---- ---- ------ ------
amounts in millions
<S> <C> <C> <C> <C>
Year ended December 31, 1998
Segment revenue from external customers including
intersegment revenue.............................. $541 598 220 1,359
Segment operating cash flow (deficit).............. 96 123 (3) 216
Segment equity in losses of affiliates............. -- -- (1,002) (1,002)
Year ended December 31, 1997
Segment revenue from external customers including
intersegment revenue.............................. 350 508 367 1,225
Segment operating cash flow (deficit).............. (32) 104 87 159
Segment equity in losses of affiliates............. -- -- (785) (785)
Year ended December 31, 1996
Segment revenue from external customers including
intersegment revenue.............................. 195 410 1,603 2,208
Segment operating cash flow (deficit).............. (95) 67 128 100
Segment equity in losses of affiliates............. -- -- (332) (332)
As of December 31, 1998
Segment assets..................................... 355 666 14,546 15,567
Investments in affiliates.......................... -- -- 3,079 3,079
As of December 31, 1997
Segment assets..................................... 289 428 7,018 7,735
Investments in affiliates.......................... -- -- 2,359 2,359
</TABLE>

F-35
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following table provides a reconciliation of segment operating cash flow
to earnings before income taxes:

<TABLE>
<CAPTION>
Year ended December 31,
-------------------------
1998 1997 1996
-------- ------- -------
(amounts in millions)
<S> <C> <C> <C>
Segment operating cash flow........................ $ 216 159 100
Stock compensation................................. (518) (296) 6
Depreciation and amortization...................... (129) (123) (172)
Interest expense................................... (104) (40) (53)
Segment equity in losses of affiliates............. (1,002) (785) (332)
Gains on dispositions, net......................... 2,449 406 1,558
Gain on issuance of equity by affiliates and
subsidiaries...................................... 105 -- --
Other, net......................................... 66 34 67
-------- ------ -------
Earnings (loss) before income taxes................ $1,083 (645) 1,174
======== ====== =======
</TABLE>

(16) Year 2000

During 1998, TCI continued its enterprise-wide, comprehensive efforts to
assess and remediate its computer systems and related software and equipment to
ensure such systems, software and equipment recognize, process and store
information in the year 2000 and thereafter. TCI's year 2000 remediation
efforts include an assessment of Liberty's most critical systems, equipment,
and facilities. TCI also continued its efforts to verify the year 2000
readiness of Liberty's significant suppliers and vendors and continued to
communicate with significant business partners and affiliates to assess such
partners and affiliates' year 2000 status.

TCI has a year 2000 Program Management Office (the "PMO") to organize and
manage its year 2000 remediation efforts. The PMO is responsible for
overseeing, coordinating and reporting on Liberty's year 2000 remediation
efforts.

During 1998, TCI continued its survey of significant third-party vendors and
suppliers whose systems, services or products are important to Liberty's
operations. The year 2000 readiness of such providers is critical to continued
provision of Liberty's programming services. Year 2000 expenses and capital
expenditures incurred during the year ended December 31, 1998 were not
material.

In addition to the survey process described above, management of Liberty has
identified its most critical supplier/vendor relationships and has instituted a
verification process to determine the vendor's year 2000 readiness. Such
verification includes, as deemed necessary, reviewing vendors' test and other
data and engaging in regular conferences with vendors' year 2000 teams. Liberty
is also requiring testing to validate the year 2000 compliance of certain
critical products and services.

Significant market value is associated with Liberty's investments in certain
public and private corporations, partnerships and other businesses.
Accordingly, Liberty is monitoring the public disclosure of such publicly-held
business entities to determine their year 2000 readiness. In addition, Liberty
has surveyed and monitored the year 2000 status of certain privately-held
business entities in which Liberty has significant investments.

The failure to correct a material year 2000 problem could result in an
interruption or failure of certain important business operations. There can be
no assurance that Liberty's systems or the systems of other companies on which
Liberty relies will be converted in time or that any such failure to convert by
Liberty or other companies will not have a material adverse effect on its
financial position, results of operations or cash flows.

F-36
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
(subsidiary of AT&T Corp.)

CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
New Liberty Old Liberty
------------- ------------
September 30, December 31,
1999 1998
------------- ------------
(note 1)
amounts in millions
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents......................... $ 499 228
Marketable securities............................. 2,949 159
Trade and other receivables, net.................. 125 142
Prepaid expenses and committed program rights..... 407 263
Deferred income tax assets........................ 380 216
Other current assets.............................. 5 21
------- ------
Total current assets............................ 4,365 1,029
------- ------
Investments in affiliates, accounted for under the
equity method, and related receivables (note 3).... 15,939 3,079
Investment in Time Warner, Inc. ("Time Warner")
(note 4)........................................... 6,968 7,083
Investment in Sprint Corporation ("Sprint") (note
5)................................................. 7,616 2,446
Other investments and related receivables........... 5,151 1,010
Property and equipment, at cost..................... 123 279
Less accumulated depreciation..................... 7 124
------- ------
116 155
------- ------
Intangible assets................................... 10,140 1,039
Less accumulated amortization..................... 319 140
------- ------
9,821 899
------- ------
Other assets, at cost, net of accumulated
amortization....................................... 846 82
------- ------
Total assets.................................... $50,822 15,783
======= ======
</TABLE>

F-37
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
(subsidiary of AT&T Corp.)

CONSOLIDATED BALANCE SHEETS--(Continued)
(unaudited)

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------- ------------
September 30, December 31,
1999 1998
------------- ------------
(note 1)
amounts in millions
<S> <C> <C>
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable and accrued liabilities.......................................................... $ 192 372
Accrued stock compensation........................................................................ 1,119 126
Program rights payable............................................................................ 170 156
Current portion of debt........................................................................... 474 184
------- ------
Total current liabilities....................................................................... 1,955 838
------- ------
Long-term debt (note 7)........................................................................... 1,720 1,912
Deferred income taxes (note 8).................................................................... 11,633 3,582
Other liabilities................................................................................. 23 89
------- ------
Total liabilities............................................................................... 15,331 6,421
------- ------
Minority interests in equity of subsidiaries........................................................ 25 132
Stockholder's equity (note 9):
Preferred stock, $.0001 par value. Authorized 100,000 shares; no shares issued and outstanding.... -- --
Class A common stock $.0001 par value. Authorized 1,000,000 shares; issued and outstanding 1,000
shares........................................................................................... -- --
Class B common stock $.0001 par value. Authorized 1,000,000 shares; issued and outstanding 1,000
shares........................................................................................... -- --
Class C common stock, $.0001 par value. Authorized 1,000,000 shares; issued and outstanding 1,000
shares........................................................................................... -- --
Additional paid-in capital........................................................................ 33,787 4,682
Accumulated other comprehensive earnings, net of taxes............................................ 2,407 3,186
Retained earnings (deficit)....................................................................... (814) 952
------- ------
35,380 8,820
Due to related parties............................................................................ 86 410
------- ------
Total stockholder's equity...................................................................... 35,466 9,230
------- ------
Commitments and contingencies (note 10)
Total liabilities and stockholder's equity...................................................... $50,822 15,783
- --------------------------------------------------
======= ======
</TABLE>

See accompanying notes to consolidated financial statements.

F-38
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
(subsidiary of AT&T Corp.)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS
(unaudited)

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------- --------------------------
Seven months Two months Nine months
ended ended ended
September 30, February 28, September 30,
1999 1999 1998
------------- ------------ -------------
amounts in millions
(note 1) (note 1)
<S> <C> <C> <C>
Revenue.............................................................................. $ 506 235 1,005
Operating costs and expenses:
Operating, selling, general and administrative..................................... 408 188 843
Stock compensation................................................................. 432 183 263
Depreciation and amortization...................................................... 394 22 87
------- ---- -----
1,234 393 1,193
------- ---- -----
Operating loss................................................................... (728) (158) (188)
Other income (expense):
Interest expense................................................................... (87) (26) (62)
Dividend and interest income....................................................... 171 10 49
Share of losses of affiliates, net (note 3)........................................ (597) (66) (828)
Minority interests in (earnings) losses of subsidiaries............................ 18 4 (2)
Gain on dispositions, net (notes 3 and 4).......................................... 10 14 569
Gains on issuance of equity by affiliates and subsidiaries
(notes 3 and 6)................................................................... -- 372 96
Other, net......................................................................... (6) (9) (1)
------- ---- -----
(491) 299 (179)
------- ---- -----
Earnings (loss) before income taxes.............................................. (1,219) 141 (367)
Income tax benefit (expense)......................................................... 405 (211) 107
------- ---- -----
Net loss......................................................................... $ (814) (70) (260)
======= ==== =====
Other comprehensive earnings, net of taxes:
Foreign currency translation adjustments........................................... 88 (15) 9
Unrealized holding gains arising during the period,
net of reclassification adjustments............................................... 2,319 885 877
------- ---- -----
Other comprehensive earnings....................................................... 2,407 870 886
------- ---- -----
Comprehensive earnings............................................................... $ 1,593 800 626
- --------------------------------------------------
======= ==== =====
</TABLE>

See accompanying notes to consolidated financial statements.

F-39
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
(subsidiary of AT&T Corp.)

CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
Accumulated
other Due to
Common Stock Additional comprehensive Retained (from) Total
Preferred ----------------------- paid-in earnings, earnings related stockholder's
stock Class A Class B Class C capital net of taxes (deficit) parties equity
--------- ------- ------- ------- ---------- ------------- --------- ------- -------------
amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1999................... $-- -- -- -- 4,682 3,186 952 410 9,230
Net loss............... -- -- -- -- -- -- (70) -- (70)
Foreign currency
translation
adjustments........... -- -- -- -- -- (15) -- -- (15)
Unrealized gains on
available-for-sale
securities............ -- -- -- -- -- 885 -- -- 885
Other transfers from
(to) related parties,
net................... -- -- -- -- 430 -- -- (1,011) (581)
---- --- --- --- ------ ----- ---- ------ ------
Balance at February 28,
1999................... -- -- -- -- 5,112 4,056 882 (601) 9,449
==== === === === ====== ===== ==== ====== ======
- ---------------------------------------------------------------------------------------------------------------------
Balance at March 1,
1999................... -- -- -- -- 33,468 -- -- 213 33,681
Net loss............... -- -- -- -- -- -- (814) -- (814)
Foreign currency
translation
adjustments........... -- -- -- -- -- 88 -- -- 88
Unrealized gains on
available-for-sale
securities............ -- -- -- -- -- 2,319 -- -- 2,319
Transfer from related
party for redemption
of debentures......... -- -- -- -- 354 -- -- -- 354
Gain in connection with
the issuance of common
stock of subsidiary... -- -- -- -- 50 -- -- -- 50
Utilization of net
operating losses of
Liberty by AT&T (note
8).................... -- -- -- -- (85) -- -- -- (85)
Other transfers to
related parties, net.. -- -- -- -- -- -- -- (127) (127)
---- --- --- --- ------ ----- ---- ------ ------
Balance at September 30,
1999................... $-- -- -- -- 33,787 2,407 (814) 86 35,466
==== === === === ====== ===== ==== ====== ======
</TABLE>

See accompanying notes to consolidated financial statements.

F-40
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES
(subsidiary of AT&T Corp.)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------------ ------------------------------------
(note 1) (note 1)
Nine months
Seven months ended Two months ended ended
September 30, 1999 February 28, 1999 September 30, 1998
------------------ ----------------- ------------------
amounts in millions
(see note 2)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................................. $ (814) (70) (260)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities:
Depreciation and amortization........................................ 394 22 87
Stock compensation................................................... 432 183 263
Payments of stock compensation....................................... (42) (126) (76)
Share of losses of affiliates, net................................... 597 66 828
Minority interests in earnings (losses) of subsidiaries.............. (18) (4) 2
Deferred income tax expense (benefit)................................ (356) 212 (26)
Intergroup tax allocation............................................ (49) (1) (81)
Cash payment from AT&T pursuant to tax sharing agreement............. 19 -- --
Gain on dispositions, net............................................ (10) (14) (569)
Gains on issuance of equity by affiliates and subsidiaries........... -- (372) (96)
Other noncash charges................................................ 5 18 4
Changes in current assets and liabilities, net of the effect of
acquisitions and dispositions:
Change in receivables............................................... (3) 33 (22)
Change in prepaid expenses and committed program rights............. (120) (23) (8)
Change in payables and accruals..................................... 70 (31) 9
------- ---- ------
Net cash provided (used) by operating activities................... 105 (107) 55
------- ---- ------
Cash flows from investing activities:
Capital expended for property and equipment.......................... (28) (15) (39)
Investments in and loans to affiliates and others.................... (1,952) (51) (1,243)
Purchases of marketable securities................................... (6,894) (3) (73)
Sales and maturities of marketable securities........................ 3,923 9 142
Cash paid for acquisitions........................................... (3) -- (83)
Cash proceeds from dispositions...................................... 90 43 343
Cash balances of deconsolidated subsidiaries......................... -- (53) --
Other, net........................................................... 1 (9) (9)
------- ---- ------
Net cash used by investing activities.............................. (4,863) (79) (962)
------- ---- ------
Cash flows from financing activities:
Borrowings of debt................................................... 2,216 155 1,661
Repayments of debt................................................... (2,166) (145) (479)
Cash transfers (to) from related parties............................. (156) 31 (20)
Net proceeds from issuance of stock by subsidiaries.................. 27 -- --
Repurchase of stock of subsidiary.................................... -- (45) --
Payments for call agreements......................................... -- -- (140)
Other, net........................................................... 17 (7) (16)
------- ---- ------
Net cash (used) provided by financing activities................... (62) (11) 1,006
------- ---- ------
Net increase (decrease) in cash and cash equivalents.............. (4,820) (197) 99
Cash and cash equivalents at beginning of period.................. 5,319 228 100
------- ---- ------
Cash and cash equivalents at end of period........................ $ 499 31 199
- --------------------------------------------------
======= ==== ======
</TABLE>

See accompanying notes to consolidated financial statements.

F-41
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 1999
(unaudited)

(1) Basis of Presentation

The accompanying consolidated financial statements include the accounts of
Liberty Media Corporation and those of all majority-owned subsidiaries
("Liberty" or the "Company"). All intercompany accounts and transactions have
been eliminated in consolidation. The Company is a wholly-owned subsidiary of
Tele-Communications, Inc. ("TCI"). On March 9, 1999, AT&T Corp. ("AT&T")
acquired TCI in a merger transaction (the "AT&T Merger") whereby a wholly owned
subsidiary of AT&T merged with and into TCI, and TCI thereby became a wholly
owned subsidiary of AT&T. As a result of the AT&T Merger, each series of TCI
common stock was converted into a class of AT&T common stock subject to
applicable exchange ratios. The AT&T Merger has been accounted for using the
purchase method. Accordingly, Liberty's assets and liabilities have been
recorded at their respective fair values therefore creating a new cost basis.
For financial reporting purposes the AT&T Merger is deemed to have occurred on
March 1, 1999. Accordingly, for periods prior to March 1, 1999 the assets and
liabilities of Liberty and the related consolidated financial statements are
sometimes referred to herein as "Old Liberty", and for periods subsequent to
February 28, 1999 the assets and liabilities of Liberty and the related
consolidated financial statements are sometimes referred to herein as "New
Liberty". The "Company" and "Liberty" refers to both New Liberty and Old
Liberty.

The following table represents the summary balance sheet of Old Liberty at
February 28, 1999, prior to the AT&T Merger and the opening summary balance
sheet of New Liberty subsequent to the AT&T Merger. Certain pre-merger
transactions occurring between March 1, 1999, and March 9, 1999, that affected
Old Liberty's equity, gains on issuance of equity by affiliates and
subsidiaries and stock compensation have been reflected in the two-month period
ended February 28, 1999.

<TABLE>
<CAPTION>
Old Liberty New Liberty
----------- -----------
(amounts in millions)
<S> <C> <C>
Assets
Cash and cash equivalents........................................................................... $ 31 5,319
Other current assets................................................................................ 410 447
Investments in affiliates........................................................................... 3,971 17,116
Investment in Time Warner........................................................................... 7,361 7,832
Investment in Sprint................................................................................ 3,381 3,681
Other investments................................................................................... 1,232 1,539
Property and equipment, net......................................................................... 111 125
Intangibles and other assets........................................................................ 389 11,211
------- ------
$16,886 47,270
======= ======
Liabilities and Equity
Current liabilities................................................................................. $ 1,051 1,741
Long-term debt...................................................................................... 2,087 1,845
Deferred income taxes............................................................................... 4,147 9,945
Other liabilities................................................................................... 90 19
------- ------
Total liabilities................................................................................. 7,375 13,550
------- ------
Minority interests in equity of subsidiaries........................................................ 62 39
Stockholder's equity................................................................................ 9,449 33,681
------- ------
$16,886 47,270
--------------------------------------------------
======= ======
</TABLE>

F-42
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following table reflects the recapitalization resulting from the AT&T
Merger (amounts in millions):

<TABLE>
<S> <C>
Stockholder's equity of Old Liberty................................ $ 9,449
Purchase accounting adjustments.................................... 24,232
-------
Initial stockholder's equity of New Liberty subsequent to the AT&T
Merger............................................................ $33,681
=======
</TABLE>

The following unaudited condensed results of operations for the nine months
ended September 30, 1999 and 1998 were prepared assuming the AT&T Merger
occurred on January 1, 1998. These pro forma amounts are not necessarily
indicative of operating results that would have occurred if the AT&T Merger had
occurred on January 1, 1998.

<TABLE>
<CAPTION>
Nine months ended
September 30,
-----------------------
1999 1998
----------- ----------
(amounts in millions)
<S> <C> <C>
Revenue.............................................. $ 741 1,005
Net loss............................................. $ (1,041) (951)
</TABLE>

Liberty's domestic subsidiaries generally operate or hold investments in
businesses which provide programming services including production, acquisition
and distribution through all available formats and media of branded
entertainment, educational and informational programming and software. In
addition, certain of Liberty's subsidiaries hold investments in businesses
engaged in wireless telephony, electronic retailing, direct marketing and
advertising sales relating to programming services. Liberty also has
significant investments in foreign affiliates which operate in cable
television, programming and satellite video distribution.

The accompanying interim consolidated financial statements are unaudited,
but, in the opinion of management, reflect all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of the results for
such periods. The results of operations for any interim period are not
necessarily indicative of results for the full year. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements for the year ended December 31, 1998, and notes thereto.

Certain prior period amounts have been reclassified for comparability with
the 1999 presentation.

F-43
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(2) Supplemental Disclosures to Consolidated Statements of Cash Flows

Cash paid for interest was $75 million for the seven month period ended
September 30, 1999, $32 million for the two month period ended February 28,
1999 and $67 million for the nine months ended September 30, 1998. Cash paid
for income taxes for the seven month period ended September 30, 1999 and the
two month period ended February 28, 1999 was not material. Cash paid for income
taxes for the nine months ended September 30, 1998 was $19 million.

During July 1999, certain subsidiaries of Liberty were exchanged for a
limited partnership interest having a fair value at the time of the transaction
of $150 million.

Liberty ceased to include TV Guide, Inc. ("TV Guide") in its consolidated
financial results and began to account for TV Guide using the equity method of
accounting, effective March 1, 1999 (see note 6). The effects of changing the
method of accounting for Liberty's ownership interests in TV Guide as of
September 30, 1999, from the consolidation method to the equity method are
summarized below (amounts in millions):

<TABLE>
<S> <C>
Assets (other than cash and cash equivalents) reclassified to
investments in affiliates......................................... $(572)
Liabilities reclassified to investments in affiliates.............. 190
Minority interests in equity of subsidiaries reclassified to
investments in affiliates......................................... 63
Gain on issuance of equity by subsidiary........................... 372
-----
Decrease in cash and cash equivalents.............................. $ 53
=====
</TABLE>

The following table reflects the change in cash and cash equivalents
resulting from the AT&T Merger and related restructuring transactions (amounts
in millions):

<TABLE>
<S> <C>
Cash and cash equivalents prior to the AT&T Merger................. $ 31
Cash contribution in connection with the AT&T Merger............. 5,464
Cash paid to TCI for certain warrants to purchase shares of
General Instruments Corporation ("GI").......................... (176)
------
Cash and cash equivalents subsequent to the AT&T Merger............ $5,319
======
</TABLE>

F-44
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(3) Investments in Affiliates Accounted for under the Equity Method

Liberty has various investments accounted for under the equity method. The
following table includes Liberty's carrying amount of the more significant
investments at September 30, 1999 and December 31, 1998:

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------- ------------
September 30, December 31,
1999 1998
------------- ------------
amounts in millions
<S> <C> <C>
USA Networks, Inc. ("USAI") and related
investments.................................... $ 2,710 1,042
Telewest Communications plc ("Telewest")........ 1,961 515
Discovery Communications, Inc. ("Discovery").... 3,546 49
TV Guide........................................ 1,756 --
QVC, Inc. ("QVC")............................... 2,505 197
Flextech p.l.c. ("Flextech").................... 757 320
Other foreign investments (other than Telewest
and Flextech).................................. 1,504 346
Other........................................... 1,200 610
------- -----
$15,939 3,079
======= =====
</TABLE>

The following table reflects Liberty's share of earnings (losses) of
affiliates:

F-45
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Summarized unaudited combined financial information for affiliates is as
follows:

USAI owns and operates businesses in network and television production,
television broadcasting, electronic retailing, ticketing operations, and
internet services. At September 30, 1999, Liberty directly and indirectly held
33.3 million shares of USAI's common stock. Liberty also held shares directly
in certain subsidiaries of USAI which are exchangeable into 39.5 million shares
of USAI common stock. Liberty's direct ownership of USAI is currently
restricted by FCC regulations. The exchange of these shares can be accomplished
only if there is a change to existing regulations or if Liberty obtains
permission from the FCC. If the exchange of subsidiary stock into USAI common
stock was completed at September 30, 1999, Liberty would own 72.8 million
shares or approximately 21% of the then outstanding USAI common stock. USAI's
common stock had a closing market price of $38 3/4 per share on September 30,
1999. Liberty accounts for its investments in USAI and related subsidiaries on
a combined basis under the equity method.

In February 1998, USAI paid cash and issued shares and one of it subsidiaries
issued shares in connection with the acquisition of certain assets from
Universal Studios, Inc. (the "Universal Transaction"). Liberty recorded an
increase to its investment in USAI of $54 million and an increase to
additional-paid-in capital of $33 million (after deducting deferred income
taxes of $21 million) as a result of this share issuance. No gain was
recognized in the consolidated statement of operations and comprehensive
earnings for the Universal Transaction due primarily to Liberty's intention at
such time to purchase additional equity interests in USAI. In connection with
the Universal Transaction, Liberty was granted an antidilutive right with
respect to any future issuance of USAI common stock, subject to certain
limitations, that enables it to maintain its percentage beneficial ownership
interests in USAI.

Effective September 1, 1998, Telewest and General Cable PLC consummated a
merger. In connection with the merger, Liberty's ownership interest in Telewest
decreased to 22%. In connection with the increase in Telewest's equity, net of
the dilution of Liberty's interest in Telewest, that resulted from the merger,
Liberty recorded a non-cash gain of $58 million (before deducting deferred
income taxes expense of $20 million) during the third quarter of 1998.

Telewest currently operates and constructs cable television and telephone
systems in the UK. At September 30, 1999, Liberty indirectly owned 463 million
of the issued and outstanding Telewest ordinary shares. The reported closing
price on the London Stock Exchange of Telewest ordinary shares was (Pounds)2.23
($3.67) per share at September 30, 1999.

F-46
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Liberty and The News Corporation Limited ("News Corp.") each owned 50% of Fox
Sports, which operates national and regional sports networks. Prior to the
first quarter of 1998, Liberty had no obligation, nor intention, to fund Fox
Sports. During 1998, Liberty made the determination to provide funding to Fox
Sports based on specific transactions consummated by Fox Sports. Consequently,
Liberty's share of losses of Fox Sports for the nine months ended September 30,
1998 included previously unrecognized losses of Fox Sports of approximately $64
million. Losses for Fox Sports were not recognized in prior periods due to the
fact that Liberty's investment in Fox Sports was less than zero.

On July 15, 1999, News Corp. acquired Liberty's 50% interest in Fox Sports in
exchange for 51.8 million News Corp. American Depository Receipts ("ADRs")
representing preferred limited voting ordinary shares of News Corp. Of the 51.8
million ADRs received, 3.6 million were placed in an escrow (the "Escrow
Shares") pending an independent third party valuation, as of the third
anniversary of the transaction. The remainder of the 51.8 million ADRs received
(the "Restricted Shares") are subject to a two-year lockup which restricts any
transfer of the securities for a period of two years from the date of the
transaction. Liberty recorded the ADRs at fair value of $1,403 million, which
included a discount from market value for the Restricted Shares due to the two-
year restriction on transfer, resulting in a $13 million gain on the
transaction. In a related transaction, Liberty acquired from News Corp. 28.1
million additional ADRs representing preferred limited voting ordinary shares
of News Corp. for approximately $695 million. Liberty accounts for its
investment in News Corp. as an available-for-sale security, with the exception
of the Restricted Shares and the Escrow Shares.

The Class A common stock of TV Guide is publicly traded. At September 30,
1999, Liberty held 29 million shares of TV Guide Class A common stock and 37
million shares of TV Guide Class B common stock. See note 6. The TV Guide Class
B common stock is convertible, one-for-one, into TV Guide Class A common stock.
The closing price for TV Guide Class A common stock was $39 1/8 per share on
September 30, 1999.

Flextech develops and sells a variety of television programming in the UK. At
September 30, 1999, Liberty indirectly owned 58 million Flextech ordinary
shares. The reported closing price on the London Stock Exchange of the Flextech
ordinary shares was (Pounds)9.45 ($15.56) per share at September 30, 1999.

The $14 billion aggregate excess of Liberty's aggregate carrying amount in
its affiliates over Liberty's proportionate share of its affiliates' net assets
is being amortized over an estimated useful life of 20 years.

Certain of Liberty's affiliates are general partnerships and subsidiaries of
Liberty that are general partners in such partnerships are liable as a matter
of partnership law for all debts (other than non-recourse debts) of that
partnership in the event liabilities of that partnership were to exceed its
assets.

(4) Investment in Time Warner

Liberty holds shares of a series of Time Warner's series common stock with
limited voting rights (the "TW Exchange Stock") that are convertible into an
aggregate of 114 million shares of Time Warner common stock.

In September 1997, Time Warner exercised an option to acquire the business of
Southern Satellite Systems, Inc. (the "Southern Business") from Liberty.
Pursuant to the option, Time Warner acquired the Southern Business, effective
January 1, 1998, for $213 million in cash. Liberty recognized a $515 million
pre-tax gain in connection with such transactions in the first quarter of 1998.

F-47
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Stock. This cashless collar provides Liberty with a put option that gives it
the right to require its counterparty to buy 15 million Time Warner shares from
Liberty in approximately seven years for $67.45 per share. Liberty
simultaneously sold a call option giving the counterparty the right to buy the
same number of Time Warner shares from Liberty in approximately seven years for
$158.33 per share.

(5) Investment in Sprint

Pursuant to a proposed final judgment (the "Final Judgment") agreed to by
TCI, AT&T and the United States Department of Justice (the "DOJ") on December
31, 1998, Liberty transferred all of its beneficially owned securities (the
"Sprint Securities") of Sprint to a trustee (the "Trustee") prior to the AT&T
Merger. The Final Judgment, which was entered by the United States District
Court for the District of Columbia on August 23, 1999, requires the Trustee, on
or before May 23, 2002, to dispose of a portion of the Sprint Securities
sufficient to cause Liberty to beneficially own no more than 10% of the
outstanding Series 1 PCS Stock of Sprint on a fully diluted basis on such date.
On or before May 23, 2004, the Trustee must divest the remainder of the Sprint
Securities beneficially owned by Liberty.

The Final Judgment requires that the Trustee vote the Sprint Securities
beneficially owned by Liberty in the same proportion as other holders of
Sprint's PCS Stock so long as such securities are held by the trust. The Final
Judgment also prohibits the acquisition by Liberty of additional Sprint
Securities, with certain exceptions, without the prior written consent of the
DOJ.

On November 23, 1998, Liberty, Comcast, and Cox exchanged their respective
interests in Sprint PCS and PhillieCo (the "PCS Exchange") for shares of Sprint
PCS Group Stock, which tracks the performance of Sprint's PCS Group (consisting
initially of the PCS Ventures and certain PCS licenses which were separately
owned by Sprint). The Sprint PCS Group Stock collectively represents an
approximate 17% voting interest in Sprint. As a result of the PCS Exchange,
Liberty, through the trust established pursuant to the Final Judgment, holds
the Sprint Securities which consists of shares of Sprint PCS Group Stock, as
well as certain additional securities of Sprint exercisable for or convertible
into such securities, representing approximately 24% of the equity value of
Sprint attributable to its PCS Group and less than 1% of the voting interest in
Sprint. Through November 23, 1998, Liberty accounted for its interest in the
PCS Ventures using the equity method of accounting; however, as a result of the
PCS Exchange, Liberty's less than 1% voting interest in Sprint and the Final
Judgment, Liberty no longer exercises significant influence with respect to its
investment in the PCS Ventures. Accordingly, Liberty accounts for its
investment in the Sprint PCS Group Stock as an available-for-sale security.

In September 1999, Liberty entered into a four and one-half year "cashless
collar" with a financial institution with respect to 17.5 million shares of
Sprint PCS Group Stock, secured by 17.5 million shares of such stock. This
cashless collar provides Liberty with a put option that gives it the right to
require its counterparty to buy 17.5 million shares of Sprint PCS Group Stock
from Liberty in approximately four and one-half years for a weighted average
price of $55.24 per share. Liberty simultaneously sold a call option giving the
counterparty the right to buy the same number of shares of Sprint PCS Group
Stock from Liberty in approximately four and one-half years for a weighted
average price of $114.84 per share.

F-48
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

As Liberty's cashless collars are designated to 15 million shares of TW
Exchange Stock and 17.5 million shares of Sprint PCS Group Stock (together the
"Underlying Securities") held by Liberty and the changes in the fair value of
the cashless collars are correlated with changes in the fair value of the
Underlying Securities, the cashless collars function as hedges. Accordingly,
changes in the fair value of the cashless collars are reported as a component
of comprehensive earnings (in unrealized gains) along with the changes in the
fair value of the Underlying Securities.

(6) Acquisitions and Dispositions

Effective February 1, 1998, Turner-Vision, Inc. ("Turner Vision") contributed
the assets, obligations and operations of its retail C-band satellite business
to Superstar/Netlink Group LLC ("SNG") in exchange for an approximate 20%
interest in SNG. As a result of such transaction, Liberty's direct and indirect
(through United Video Satellite Group, Inc. ("UVSG")) ownership interest in SNG
decreased to approximately 80%. In connection with the increase in SNG's
equity, net of the dilution of Liberty's ownership interest in SNG, that
resulted from such transaction, Liberty recognized a gain of $38 million
(before deducting deferred income taxes of $15 million).

On March 1, 1999, UVSG and News Corp. completed a transaction whereby UVSG
acquired News Corp.'s TV Guide properties creating a broader platform for
offering television guide services to consumers and advertisers and UVSG was
renamed TV Guide. News Corp. received total consideration of $1.9 billion,
including $800 million in cash, 22.5 million shares of UVSG's Class A common
stock and 37.5 million shares of UVSG's Class B common stock valued at an
average of $18.65 per share. In addition, News Corp. purchased approximately
6.5 million additional shares of UVSG Class A common stock for $129 million in
order to equalize its ownership with that of Liberty. As a result of these
transactions, and another transaction completed on the same date, News Corp.,
Liberty and TV Guide's public stockholders own on an economic basis
approximately 44%, 44% and 12%, respectively, of TV Guide. Following such
transactions, News Corp. and Liberty each have approximately 49% of the voting
power of TV Guide's outstanding stock. In connection with the increase in TV
Guide's equity, net of the dilution of Liberty's ownership interest in TV
Guide, Liberty recognized a gain of $372 million (before deducting deferred
income taxes of $147 million). Upon consummation, Liberty began accounting for
its interest in TV Guide using the equity method of accounting.

(7) Long-Term Debt

Debt is summarized as follows:

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------- ------------
September 30, December 31,
1999 1998
------------- ------------
amounts in millions
<S> <C> <C>
Bank credit facilities........................................................................... $ 926 1,629
Senior Notes, net of unamortized discount of $9 million.......................................... 741 --
Senior Debentures, net of unamortized discount of $6 million..................................... 494 --
4 1/2% Convertible subordinated debentures....................................................... -- 345
Other............................................................................................ 33 122
------ -----
2,194 2,096
Less current maturities.......................................................................... 474 184
------ -----
Total long-term debt........................................................................... $1,720 1,912
--------------------------------------------------
====== =====
</TABLE>

On April 8, 1999, Liberty redeemed all of its outstanding 4 1/2% convertible
subordinated debentures due February 15, 2005. See note 9.

F-49
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

On July 7, 1999, Liberty received net cash proceeds of approximately $741
million and $494 million from the issuance of 7 7/8% Senior Notes due 2009 (the
"Senior Notes") and 8 1/2% Senior Debentures due 2029 (the "Senior
Debentures"), respectively. The Senior Notes have an aggregate principal amount
of $750 million and the Senior Debentures have an aggregate principal amount of
$500 million. Interest on the Senior Notes and the Senior Debentures is payable
on January 15 and July 15 of each year. The proceeds were used to repay
outstanding borrowings under certain of Liberty's credit facilities, which were
subsequently canceled.

At September 30, 1999, Liberty had approximately $133 million in unused lines
of credit under its bank credit facilities.

The bank credit facilities of Liberty generally contain restrictive covenants
which require, among other things, the maintenance of certain financial ratios,
and include limitations on indebtedness, liens and encumbrances, acquisitions,
dispositions, guarantees and dividends. Additionally, Liberty pays fees ranging
from .15% to .375% per annum on the average unborrowed portions of the total
amounts available for borrowings under its bank credit facilities.

With the exception of the Senior Notes and the Senior Debentures which had
fair values of $754 million and $504 million, respectively, at September 30,
1999, Liberty believes that the carrying value of Liberty's debt approximated
its fair value at September 30, 1999.

(8) Income Taxes

Subsequent to the AT&T Merger, Liberty is included in the consolidated
federal income tax return of AT&T and party to a tax sharing agreement with
AT&T (the "AT&T Tax Sharing Agreement"). Liberty calculates its respective tax
liability on a separate return basis. The income tax provision for Liberty is
calculated based on the increase or decrease in the tax liability of the AT&T
consolidated group resulting from the inclusion of those items in the
consolidated tax return of AT&T which are attributable to Liberty.

Under the AT&T Tax Sharing Agreement, Liberty will receive a cash payment
from AT&T in periods when it generates taxable losses and such taxable losses
are utilized by AT&T to reduce the consolidated income tax liability. This
utilization of taxable losses will be accounted for by Liberty as a current
federal intercompany income tax benefit. To the extent such losses are not
utilized by AT&T, such amounts will be available to reduce federal taxable
income generated by Liberty in future periods, similar to a net operating loss
carryforward, and will be accounted for as a deferred federal income tax
benefit.

In periods when Liberty generates federal taxable income, AT&T has agreed to
satisfy such tax liability on Liberty's behalf up to a certain amount. The
reduction of such computed tax liabilities will be accounted for by Liberty as
a credit to additional paid-in-capital. The total amount of future federal tax
liabilities of Liberty which AT&T will satisfy under the AT&T Tax Sharing
Agreement is approximately $512 million, which represents the tax effect of the
net operating loss carryforward reflected in TCI's final federal income tax
return, subject to IRS adjustments. Thereafter, Liberty is required to make
cash payments to AT&T for federal tax liabilities of Liberty.

To the extent AT&T utilizes existing net operating losses of Liberty, such
amounts will be accounted for by Liberty as a reduction of additional paid-in-
capital. During the seven month period ending September 30, 1999, AT&T utilized
net operating losses of Liberty with a tax effected carrying value of $85
million.

Liberty will generally make cash payments to AT&T related to states where it
generates taxable income and receive cash payments from AT&T in states where it
generates taxable losses.

F-50
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Liberty's obligation under the 1995 TCI Tax Sharing Agreement of
approximately $139 million (subject to adjustment), which is included in "due
to related parties," shall be paid at the time, if ever, that Liberty
deconsolidates from the AT&T income tax return. Liberty's receivable under the
1997 TCI Tax Sharing Agreement of approximately $220 million was forgiven in
the AT&T Tax Sharing Agreement and recorded as an adjustment to additional
paid-in-capital by Liberty in connection with the AT&T Merger.

(9) Stockholder's Equity

Preferred Stock

The Preferred Stock is issuable, from time to time, with such designations,
preferences and relative participating, optional or other special rights,
qualifications, limitations or restrictions thereof as shall be stated and
expressed in a resolution or resolutions providing for the issue of such
Preferred Stock adopted by the Board.

Common Stock

The Class A Stock has one vote per share, and each of the Class B and Class C
Stock has ten votes per share.

As of September 30, 1999, all of the issued and outstanding common stock of
Liberty is owned by AT&T.

Stock Issuances by Subsidiary

On September 9, 1999, Liberty and TCI Music (renamed Liberty Digital, Inc.
("Liberty Digital")) completed a transaction (the "Liberty Digital
Transaction") pursuant to which Liberty contributed to Liberty Digital
substantially all of its directly held internet content and interactive
television assets, its rights to provide interactive video services on AT&T's
cable television systems and a combination of cash and notes receivable equal
to $150 million. In exchange, Liberty Digital issued common stock and
convertible preferred stock to Liberty.

Prior to the Liberty Digital Transaction, Liberty Digital issued
approximately 4.8 million shares of common stock in connection with the
conversion of its preferred stock and approximately 0.5 million shares of
common stock in connection with the exercise of certain employee stock options.
As a result, Liberty's interest in Liberty Digital was reduced to 86%.
Following the Liberty Digital Transaction, Liberty's interest in Liberty
Digital was increased to 86.5%. During the month of September 1999, Liberty
Digital issued approximately 0.5 million shares of common stock in connection
with the exercise of certain employee stock options. As a result, Liberty's
interest in Liberty Digital was reduced to 86.3%. In connection with the
increase in Liberty Digital's equity, net of the dilution of Liberty's interest
in Liberty Digital, that resulted from such stock issuances, Liberty recorded a
$50 million increase to additional paid-in-capital. No gain was recognized in
the consolidated statement of operations and comprehensive earnings due to
Liberty's continuing involvement in capital transactions of Liberty Digital.

Transactions with AT&T (formerly TCI) and Other Related Parties

Certain subsidiaries of Liberty produce and/or distribute programming and
other services to cable distribution operators (including AT&T) and others.
Charges to AT&T are based upon customary rates charged to others. Amounts
included in revenue for services provided to AT&T were $125 million, $43
million and $217 million for the seven month period ending September 30, 1999,
the two month period ending February 28, 1999 and the nine months ended
September 30, 1998, respectively.

F-51
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Certain AT&T corporate general and administrative costs are charged to
Liberty and included in operating, selling, general and administrative expenses
in the accompanying consolidated statements of operations and comprehensive
earnings. During the seven month period ended September 30, 1999, the two month
period ended February 28, 1999 and the nine months ended September 30, 1998,
Liberty was allocated less than $1 million, $2 million and $12 million,
respectively, in corporate general and administrative costs by AT&T.

Subsidiaries of Liberty lease satellite transponder facilities from the
National Digital Television Center, Inc. ("NDTC"), a subsidiary of AT&T.
Charges by NDTC for such arrangements and other related operating expenses for
the seven months ended September 30, 1999, two months ended February 28, 1999
and nine months ended September 30, 1998 aggregated $14 million, $4 million and
$17 million, respectively, and are included in operating expenses in the
accompanying consolidated statements of operations and comprehensive earnings.

In connection with the AT&T Merger, warrants to buy 3 million shares of
common stock of CSG Systems International, Inc. ("CSG") and related
registration rights were transferred to Liberty. On April 13, 1999, AT&T
purchased these warrants from Liberty for an aggregate purchase price of $75
million along with the related registration rights. The vesting of the CSG
warrants is contingent on AT&T meeting certain subscriber commitments to CSG.
If any warrants do not vest, Liberty must repurchase the unvested warrants from
AT&T, with interest at 6% from April 12, 1999. Accordingly, Liberty has
recorded the unvested CSG warrants as deferred income until such time as the
CSG warrants vest.

On April 8, 1999, Liberty redeemed all of its outstanding 4 1/2% convertible
subordinated debentures due February 15, 2005. The debentures were convertible
into shares of AT&T Liberty Media Group Class A tracking stock at a conversion
price of $23.54, or 42.48 shares per $1,000 principal amount. Certain holders
of the debentures had exercised their rights to convert their debentures and
14.6 million shares of AT&T Liberty Media Group tracking stock were issued to
such holders. In connection with such issuance of AT&T Liberty Media Group
tracking stock, Liberty recorded an increase to additional paid-in-capital of
$354 million.

Transactions with Officers and Directors

In connection with the AT&T Merger, Liberty paid two of its directors and one
other individual, all three of whom are directors of TCI, an aggregate of $12
million for services rendered in connection with the AT&T Merger. Such amount
is included in operating, selling, general and administrative expenses for the
two months ended February 28, 1999 in the accompanying consolidated statements
of operations and comprehensive earnings.

On February 9, 1998, in connection with the settlement of certain legal
proceedings relative to the Estate of Bob Magness (the "Magness Estate"), the
late founder and former Chairman of the Board of TCI, TCI entered into a call
agreement with Dr. Malone and Dr. Malone's wife (together with Dr. Malone, the
"Malones"), and a call agreement with the Estate of Bob Magness, the Estate of
Betsy Magness, Gary Magness (individually and in certain representative
capacities) and Kim Magness (individually and in certain representative
capacities) (collectively, the "Magness Group"). Under these call agreements,
each of the Magness Group and the Malones granted to TCI the right to acquire
all of the shares of TCI's common stock owned by them ("High Voting Shares")
that entitle the holder to cast more than one vote per share (the "High-Voting
Stock") upon Dr. Malone's death or upon a contemplated sale of the High-Voting
Shares (other than a minimal amount) to third parties. In either such event,
TCI had the right to acquire such shares at a price equal to the then market
price of shares of TCI's common stock of the corresponding series that entitled
the holder to cast no more than one vote per share (the "Low-Voting Stock"),
plus a 10% premium, or in the case of a sale, the lesser of such price and the
price offered by the third party. In addition, each call agreement

F-52
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

provides that if TCI were ever to be sold to a third party, then the maximum
premium that the Magness Group or the Malones would receive for their High-
Voting Shares would be the price paid for shares of the relevant series of Low-
Voting Stock by the third party, plus a 10% premium. Each call agreement also
prohibits any member of the Magness Group or the Malones from disposing of
their High-Voting Shares, except for certain exempt transfers (such as
transfers to related parties or to the other group or public sales of up to an
aggregate of 5% of their High-Voting Shares after conversion to the respective
series of Low-Voting Stock) and except for a transfer made in compliance with
TCI's purchase right described above. TCI paid $150 million to the Malones and
$124 million to the Magness Group in consideration of their entering into the
call agreements, of which an aggregate of $140 million was allocated to and
paid by Liberty.

In connection with the AT&T merger, Liberty became entitled to exercise TCI's
rights and became subject to its obligations under the call agreement and the
shareholders' agreement with respect to the Liberty Media Group Class B
tracking stock acquired by the Malones and the Magness Group as a result of the
AT&T merger. If Liberty were to exercise its call right under the call
agreement with the Malones or the Magness Group, it may also be required to
purchase High-Voting Shares of the other group if such group exercises its
"tag-along" rights under the shareholders' agreement.

Due to Related Parties

The components of "Due to related parties" are as follows:

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------- ------------
September 30, December 31,
1999 1998
------------- ------------
amounts in millions
<S> <C> <C>
Note payable to TCI, including accrued interest.................................................. $ -- 141
Intercompany account............................................................................. 86 269
---- ---
$ 86 410
--------------------------------------------------
==== ===
</TABLE>

The non-interest bearing intercompany account includes certain stock
compensation allocations (in Old Liberty) and income tax allocations that are
to be settled at some future date. Stock compensation liabilities of New
Liberty are classified as a separate component of current liabilities. All
other amounts included in the intercompany account are to be settled within
thirty days following notification.

(10) Commitments and Contingencies

Encore Media Group, a wholly owned subsidiary of Liberty, is obligated to pay
fees for the rights to exhibit certain films that are released by various
producers through 2017 (the "Film Licensing Obligations"). Based on customer
levels at September 30, 1999, these agreements require minimum payments
aggregating approximately $887 million. The aggregate amount of the Film
Licensing Obligations under these license

F-53
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

agreements is not currently estimable because such amount is dependent upon the
number of qualifying films released theatrically by certain motion picture
studios as well as the domestic theatrical exhibition receipts upon the release
of such qualifying films. Nevertheless, required aggregate payments under the
Film Licensing Obligations could prove to be significant.

Flextech has undertaken to finance the working capital requirements of a
joint venture (the "Principal Joint Venture") formed with BBC Worldwide, and is
obligated to provide the Principal Joint Venture with a primary credit facility
of (Pounds)88 million ($145 million) and, subject to certain restrictions, a
standby credit facility of (Pounds)30 million ($49 million). As of September
30, 1999, the Principal Joint Venture had borrowed (Pounds)45 million ($74
million) under the primary credit facility. If Flextech defaults in its funding
obligation to the Principal Joint Venture and fails to cure within 42 days
after receipt of notice from BBC Worldwide, BBC Worldwide is entitled, within
the following 90 days, to require that Liberty assume all of Flextech's funding
obligations to the Principal Joint Venture.

Liberty has guaranteed various loans, notes payable, letters of credit and
other obligations (the "Guaranteed Obligations") of certain affiliates. At
September 30, 1999, the Guaranteed Obligations aggregated approximately $496
million. Currently, Liberty is not certain of the likelihood of being required
to perform under such guarantees.

Liberty leases business offices, has entered into pole rental and transponder
lease agreements and uses certain equipment under lease arrangements.

On September 21, 1998, Hurricane Georges struck Puerto Rico and caused
considerable property damage to the area in general, including Liberty's cable
television systems owned by its subsidiary (the "Puerto Rico Subsidiary"). The
Puerto Rico Subsidiary's cable television systems represented $31 million of
Liberty's revenue for the nine months ended September 30, 1999.

As of September 30, 1999, approximately 99% of the Puerto Rico Subsidiary's
pre-hurricane basic customers were receiving cable television services. The
loss of revenue from September 21, 1998, through September 30, 1999, was $13
million. The Puerto Rico Subsidiary's business interruption insurance covered
the first $3 million in lost revenue.

The Puerto Rico Subsidiary has also claimed coverage for business
interruption under a secondary insurance carrier. Such policy, which covers the
Puerto Rico Subsidiary's parent company's subsidiaries, carries a deductible of
$2.5 million. This insurance claim is subject to approval by such insurance
carrier and, accordingly, no assurance can be given that amounts claimed will
be paid in their entirety. However, in the event such claims are collected the
overall impact in lost revenues for the Puerto Rico Subsidiary as a result of
Hurricane Georges will not exceed $2.5 million.

During the nine months ended September 30, 1999, Liberty, in conjunction with
AT&T, continued its enterprise-wide, comprehensive efforts to assess and
remediate its computer systems and related software and equipment to ensure
such systems, software and equipment recognize, process and store information
in the year 2000 and thereafter. AT&T's year 2000 remediation efforts include
an assessment of Liberty's most critical

F-54
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

systems, equipment, and facilities. AT&T also continued its efforts to verify
the year 2000 readiness of Liberty's significant suppliers and vendors and
continued to communicate with significant business partners and affiliates to
assess such partners' and affiliates' year 2000 status.

Failure to achieve year 2000 compliance by Liberty, its significant business
partners and affiliates with which it has a relationship could negatively
affect Liberty's ability to conduct business for an extended period. There can
be no assurance that all of Liberty's computer systems and related software
will be fully year 2000 compliant; in addition, other companies on which
Liberty's computer systems and related software and operations rely may or may
not be fully compliant on a timely basis, and any such failure could have a
material adverse effect on Liberty's financial position, results of operation
or liquidity.

(11) Information about Liberty's Operating Segments

Liberty is a holding company with a variety of subsidiaries and investments
operating in the media, communications and entertainment industries. Each of
these businesses is separately managed. Liberty identifies its reportable
segments as those consolidated subsidiaries that represent 10% or more of its
combined revenue and those equity method affiliates whose share of earnings or
losses represent 10% or more of its pre-tax earnings or loss. Subsidiaries and
affiliates not meeting this threshold are aggregated together for segment
reporting purposes.

For the seven months ended September 30, 1999, Liberty had five operating
segments: Encore Media Group, Liberty Digital, Telewest, Discovery and Other.
Encore Media Group owns and operates cable and satellite-delivered premium
movie networks in the United States. Encore Media Group is wholly owned and
consolidated by Liberty. Liberty Digital is primarily engaged in programming,
distributing and marketing a digital music service delivered to homes and
businesses. Liberty Digital is majority owned and consolidated by Liberty.
Telewest operates and constructs cable television and telephone systems in the
UK. Liberty accounts for its investment in Telewest using the equity method.
Discovery is a provider of nonfiction entertainment and information across all
media platforms. Liberty accounts for its investment in Discovery using the
equity method. Other includes Liberty's other investments, primarily in cable
television programming entities, corporate and other consolidated businesses
not representing separately reportable segments. For the two months ended
February 28, 1999, and the nine months ended September 30, 1998, Liberty had
six operating segments: Encore Media Group, TV Guide, Liberty Digital,
Telewest, Discovery and Other.

During the seven months ended September 30, 1999, Liberty's operating
segments changed in comparison to those at September 30, 1998, and February 28,
1999, due to the increased significance of Liberty Digital as a percentage of
revenue following the deconsolidation of TV Guide on March 1, 1999.

The accounting policies of the segments that are also consolidated
subsidiaries are the same as those described in the summary of significant
accounting policies. Liberty evaluates performance based on the measures of
revenue and operating cash flow (as defined by Liberty), appreciation in stock
price along with other non-financial measures such as average prime time
rating, prime time audience delivery, subscriber growth and penetration, as
appropriate. Liberty believes operating cash flow is a widely used financial
indicator of companies similar to Liberty and its affiliates, which should be
considered in addition to, but not as a substitute for, operating income, net
income, cash flow provided by operating activities and other measures of
financial performance prepared in accordance with generally accepted accounting
principles. Liberty generally accounts for intersegment sales and transfers as
if the sales or transfers were to third parties, that is, at current prices.

Liberty's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
segment requires different technology and marketing strategies.

F-55
<PAGE>

LIBERTY MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Liberty utilizes the following financial information for purposes of making
decisions about allocating resources to a segment and assessing a segment's
performance. The column headed "Eliminations" represents the elimination of the
revenue, operating cash flow and assets of the segments that are not included
in Liberty's consolidated results:

<TABLE>
<CAPTION>
Consolidated
Subsidiaries
--------------
Equity Method
Encore Affiliates
Media Liberty ------------------
Group Digital Telewest Discovery Other Eliminations Total
------ ------- -------- --------- ------ ------------ ------
amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C>
Seven months ended
September 30, 1999
Segment revenue from
external customers
including
intersegment
revenue.............. $ 372 51 726 744 83 (1,470) 506
Segment operating cash
flow................. 93 4 190 70 1 (260) 98
As of September 30, 1999
Segment assets........ 2,659 1,368 6,403 2,128 46,795 (8,531) 50,822
</TABLE>

<TABLE>
<CAPTION>
Consolidated
Subsidiaries
--------------------
Equity Method
Encore Affiliates
Media TV Liberty ------------------
Group Guide Digital Telewest Discovery Other Eliminations Total
------ ----- ------- -------- --------- ----- ------------ -----
amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Two months ended
February 28, 1999
Segment revenue from
external customers
including
intersegment
revenue.............. $101 97 15 207 191 22 (398) 235
Segment operating cash
flow (deficit)....... 41 21 1 52 16 (16) (68) 47
Nine months ended
September 30, 1998
Segment revenue from
external customers
including
intersegment
revenue.............. $388 443 63 604 737 111 (1,341) 1,005
Segment operating cash
flow (deficit)....... 70 93 4 148 47 (5) (195) 162
</TABLE>

The following table provides a reconciliation of segment operating cash flow
to earnings before income taxes:

F-56
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors of Sprint Corporation and
Partners of Sprint Spectrum Holding Company, L.P.

We have audited the consolidated balance sheets of Sprint Spectrum Holding
Company, L.P. and subsidiaries (the "Holdings") as of December 31, 1998 and
1997, and the related consolidated statements of operations and cash flows for
the three years in the period ended December 31, 1998. Our audits also included
the financial statement schedule ("Schedule II"). These financial statements
and Schedule II are the responsibility of Partnership management. Our
responsibility is to express an opinion on these consolidated financial
statements and Schedule II based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Sprint Spectrum Holding Company,
L.P. and subsidiaries at December 31, 1998 and 1997, and the results of their
operations and their cash flows for the three years ended December 31, 1998, in
conformity with generally accepted accounting principles. Also, in our opinion,
Schedule II, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

DELOITTE & TOUCHE LLP

Kansas City, Missouri

February 2, 1999

F-57
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- -------
(in millions)
<S> <C> <C> <C>
Net Operating Revenues.......................... $ 1,175.5 $ 248.6 $ 4.2
--------- --------- -------
Operating Expenses
Costs of services and products................ 1,142.8 555.0 36.1
Selling, general and administrative........... 1,334.9 696.9 312.7
Depreciation.................................. 637.1 258.6 9.6
Amortization.................................. 76.0 48.8 1.7
--------- --------- -------
Total operating expenses.................... 3,190.8 1,559.3 360.1
--------- --------- -------
Operating Loss.................................. (2,015.3) (1,310.7) (355.9)
Interest expense................................ (469.6) (121.9) (0.3)
Minority interest............................... 144.5 6.2 (0.2)
Equity in loss of unconsolidated partnerships... -- (168.9) (96.9)
Other income, net............................... 33.5 31.9 10.2
--------- --------- -------
Loss before Extraordinary Item.................. (2,306.9) (1,563.4) (443.1)
Extraordinary item.............................. (51.1) -- --
--------- --------- -------
Net Loss........................................ $(2,358.0) $(1,563.4) $(443.1)
========= ========= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-58
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31,

<TABLE>
<CAPTION>
1998 1997
--------- ---------
(in millions)
<S> <C> <C>
Assets
Current assets
Cash and equivalents................................. $ 123.5 $ 117.2
Accounts receivable, net of allowance for doubtful
accounts of $21.0 and $9.0 in 1998 and 1997,
respectively........................................ 280.5 113.5
Receivable from affiliates........................... 147.6 96.3
Inventories.......................................... 113.2 101.4
Prepaid expenses..................................... 31.2 28.4
--------- ---------
Total current assets............................... 696.0 456.8
Property, plant and equipment
Buildings and leasehold improvements................. 924.2 618.3
Network equipment.................................... 3,371.4 2,265.2
Construction work in progress........................ 864.1 632.9
Other................................................ 338.1 167.4
--------- ---------
Total property, plant and equipment.................. 5,497.8 3,683.8
Accumulated depreciation............................. (861.0) (254.6)
--------- ---------
Net property, plant and equipment.................... 4,636.8 3,429.2
Investment in unconsolidated partnership............... -- 273.5
Minority interest...................................... -- 56.7
Intangibles
PCS licenses......................................... 2,464.3 2,223.0
Goodwill............................................. 381.6 125.6
Microwave relocations................................ 335.7 269.4
--------- ---------
Total intangibles.................................... 3,181.6 2,618.0
Accumulated amortization............................. (124.5) (50.4)
--------- ---------
Net intangibles...................................... 3,057.1 2,567.6
--------- ---------
Other assets........................................... 45.8 113.2
--------- ---------
Total.............................................. $ 8,435.7 $ 6,897.0
========= =========
Liabilities and Partners' Capital
Current liabilities
Current maturities of long-term debt................. $ 119.4 $ 34.6
Accounts payable..................................... 539.2 416.0
Construction obligations............................. 636.0 705.3
Accrued expenses and other current liabilities....... 566.2 300.0
--------- ---------
Total current liabilities............................ 1,860.8 1,455.9
Long-term debt......................................... 6,491.6 3,533.9
Limited partner interest in consolidated subsidiary.... 34.0 13.7
Other.................................................. 79.0 49.0
Partners' capital and accumulated deficit
Partners' capital.................................... 4,448.5 3,964.7
Accumulated deficit.................................. (4,478.2) (2,120.2)
--------- ---------
Partners' capital and accumulated deficit............ (29.7) 1,844.5
--------- ---------
Total.............................................. $ 8,435.7 $ 6,897.0
========= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-59
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(in millions)
<S> <C> <C> <C>
Cash Flow from Operating Activities:
Net loss...................................... $(2,358.0) $(1,563.4) $ (443.1)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Equity in losses of unconsolidated
partnerships............................... -- 168.9 96.9
Minority interest........................... (144.5) (6.2) 0.2
Extraordinary item.......................... 51.1 -- --
Depreciation and amortization............... 712.1 307.9 11.3
Amortization of debt discount and issuance
costs...................................... 58.8 49.1 14.0
Changes in assets and liabilities, net of
effects of acquisitions:
Accounts receivable, net.................. (195.1) (182.9) (15.9)
Inventories............................... (2.2) (24.9) (72.4)
Prepaid expenses and other assets......... 4.7 (12.4) (21.6)
Accounts payable and other current
liabilities.............................. 219.8 361.5 946.7
Other noncurrent liabilities.............. 29.9 37.6 9.5
--------- --------- --------
Net cash provided by (used in) operating
activities............................. (1,623.4) (864.8) 525.6
--------- --------- --------
Cash Flows from Investing Activities:
Capital expenditures.......................... (1,495.0) (2,041.3) (1,386.3)
Microwave relocation costs, net............... (46.8) (116.3) (135.8)
Purchase of APC, net of cash acquired......... (28.9) (6.8) --
Purchase of Cox PCS, net of cash acquired..... (28.3) -- --
Investment in unconsolidated partnerships..... -- (191.2) (190.4)
Loan to unconsolidated partnership............ -- (111.4) (232.0)
Payment received on loan to unconsolidated
partnership.................................. -- 246.7 5.9
--------- --------- --------
Net cash used in investing activities... (1,599.0) (2,220.3) (1,938.6)
--------- --------- --------
Cash Flows from Financing Activities:
Advances from partners........................ -- -- 167.8
Net borrowings under revolving credit
facilities................................... 1,253.6 605.0 --
Proceeds from issuance of long-term debt...... 1,358.6 1,763.0 674.2
Long-term borrowings from parent.............. 3,526.6 -- --
Payments on long-term debt.................... (3,393.9) (170.8) --
Debt issuance costs........................... -- (20.0) (71.8)
Partner capital contributions................. 517.1 966.8 711.7
Return of capital............................. (33.3) (11.7) --
--------- --------- --------
Net cash provided by financing
activities............................. 3,228.7 3,132.3 1,481.9
--------- --------- --------
Increase in Cash and Equivalents.............. 6.3 47.2 68.9
Cash and Equivalents, Beginning of Period..... 117.2 70.0 1.1
--------- --------- --------
Cash and Equivalents, End of Period........... $ 123.5 $ 117.2 $ 70.0
--------- --------- --------
Supplemental Disclosure of Cash Flow
Information:
. Interest paid, net of amount capitalized.... $ 264.8 $ 35.6 $ 0.3
Non-cash Investing and Financing Activities:
. Accrued interest of $154.2 million and $51.7
million related to vendor financing was
converted to long-term debt during the years
ended December 31, 1998 and 1997,
respectively.
. A PCS license covering the Omaha MTA and
valued at $6.2 million was contributed to
Holdings by Cox Communications during the
year ended December 31, 1997.
</TABLE>

See accompanying notes to consolidated financial statements.

F-60
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

1. Organization

Sprint Spectrum Holding Company, L.P.

Sprint Spectrum Holding Company, L.P. (Holdings) is the 99% general partner
of, and is consolidated with, its subsidiaries, including NewTelco, L.P.
(NewTelco) and Sprint Spectrum L.P., which, in turn, has several subsidiaries.
Sprint Spectrum L.P.'s subsidiaries are Sprint Spectrum Equipment Company, L.P.
(EquipmentCo), Sprint Spectrum Realty Company, L.P. (RealtyCo), Sprint Spectrum
Finance Corporation (FinCo), and WirelessCo, L.P. (WirelessCo).

MinorCo, L.P. (MinorCo) holds the minority limited partnership interests of
1% in NewTelco, Sprint Spectrum L.P., EquipmentCo, RealtyCo, WirelessCo and
0.25% in American PCS, L.P. (APC) at December 31, 1998 and 1997.

The results of APC are consolidated from November 1997, the date the Federal
Communications Commission ("FCC") approved Holdings as the new managing partner
(Note 3). APC, through subsidiaries, owns a PCS license for and operates a
broadband GSM (global system for mobile communications) in the Washington
D.C./Baltimore Major Trading Area ("MTA"), and has launched a code division
multiple access ("CDMA") overlay for its existing GSM PCS system. APC includes
American PCS Communications, LLC, APC PCS, LLC, APC Realty and Equipment
Company, LLC and American Personal Communications Holdings, Inc.

As discussed in Note 3, Holdings also became the managing partner of Cox
Communications PCS, L.P. ("Cox PCS") in June 1998. Cox PCS results have been
included in the consolidated statements of operations from January 1, 1998. Cox
PCS, through subsidiaries, holds a PCS license for and operates a PCS system in
the Los Angeles-San Diego-Las Vegas MTA. Cox PCS includes Cox PCS License,
L.L.C., Cox PCS Assets, L.L.C., and PCS Leasing Co., L.P.

Restructuring and Reorganization

In November 1998, Sprint Corporation (Sprint) acquired the remaining
ownership interests in Holdings. Sprint acquired these ownership interests from
Tele-Communications, Inc., Comcast Corporation and Cox Communications, Inc.
(the Cable Partners). The purchase of the Cable Partners' interests is referred
to as the PCS Restructuring, which included the formation of the PCS Group.
Sprint accounted for the transaction as a purchase. Purchase accounting was not
"pushed down" to Holdings. PhillieCo, L.P. (PhillieCo) and SprintCom, Inc.
(SprintCom) are affiliates of Holdings through common ownership, and provide
PCS service in license areas not owned by Holdings.

Sprint Spectrum Holding Company, L.P. Partnership Agreement

Holdings was originally formed as a Delaware limited partnership on March 28,
1995, by Sprint Enterprises, L.P., TCI Spectrum Holdings, Inc., Cox Telephony
Partnership and Comcast Telephony Services. The Partnership Agreement was
amended concurrent with the PCS Restructuring discussed above. This amendment
provided for the interests of the Cable Partners in Holdings to be acquired by
wholly owned subsidiaries of Sprint.

Emergence from Development Stage Company

Prior to the third quarter of 1997, Holdings reported its operations as a
development stage enterprise. Holdings has commenced service in all of the MTAs
in which it owns a license. As a result, Holdings is no

F-61
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

longer considered a development stage enterprise, and the consolidated balance
sheets and statements of operations and cash flows are no longer presented in
development stage format.

2. Summary of Significant Accounting Policies

Basis of Consolidation

The assets, liabilities, results of operations and cash flows of entities in
which Holdings has a controlling interest have been consolidated. All
significant intercompany accounts and transactions have been eliminated.

Holdings' consolidated financial statements are prepared using generally
accepted accounting principles. These principles require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported amounts of revenues and expenses. Actual results could differ from
those estimates.

Certain prior year amounts have been reclassified to conform to the current
year presentation. These reclassifications had no effect on the results of
operations or partners' capital as previously reported.

Allocation of Shared Services and Group Financing

Sprint directly assigns, where possible, certain general and administrative
costs to Holdings based on the actual use of those services. Where direct
assignment of costs is not possible or practicable Sprint uses other methods to
estimate the assignment of costs to Holdings.

Financing activities for Holdings are managed by Sprint on a centralized
basis. Debt and the related interest expense incurred by Sprint and its
subsidiaries on behalf of Holdings are specifically allocated to and reflected
in these financial statements. Interest expense is allocated to Holdings based
on an interest rate that is largely equal to the rate Holdings would be able to
obtain from third parties as a direct or indirect wholly owned Sprint
subsidiary, but without the benefit of any guaranty by Sprint.

Minority Interests

In 1998, minority interest consisted primarily of Cox Pioneer Partnership's
(CPP) ownership in Cox PCS. Prior to 1998, minority interest primarily included
losses attributable to American Personal Communications, II, L.P. (APC II).

Trademark Agreement

Sprint owns various trademarks and service marks utilized by Holdings. Sprint
expects to apply for and develop trademarks, service marks and patents for the
benefit of Holdings in the ordinary course of business. Sprint is a registered
trademark of Sprint and Sprint PCSSM is a registered service mark of Sprint,
both of which are utilized by Holdings on a royalty-free basis under trademark
license agreements.

Revenue Recognition

Holdings recognizes operating revenues as services are rendered or as
products are delivered to customers. Holdings records operating revenues net of
an estimate for uncollectible accounts.

Cash and Equivalents

Cash equivalents generally include highly liquid investments with original
maturities of three months or less. They are stated at cost, which approximates
market value.

F-62
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Inventories

Inventories are stated at the lower of cost (principally first-in, first-out
method) or replacement value.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost. Generally, ordinary asset
retirements and disposals are charged against accumulated depreciation with no
gain or loss recognized. Property, plant and equipment is depreciated on a
straight-line basis over estimated economic useful lives. Repair and
maintenance costs are expensed as incurred.

Capitalized Interest

Interest costs associated with the construction of capital assets incurred
during the period of construction are capitalized. Capitalized interest totaled
approximately $63 million in 1998, $99 million in 1997 and $31 million in 1996.

PCS Licenses

Holdings acquired licenses from the Federal Communications Commission (FCC)
to operate as a PCS service provider. These licenses are granted for up to 10-
year terms with renewals for additional 10-year terms if license obligations
are met. These licenses are recorded at cost and are amortized over 40 years
when service begins in a specific geographic area. Accumulated amortization
totaled approximately $104 million at year-end 1998 and $45 million at year-end
1997.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of
the net assets acquired in business combinations accounted for as purchases.
Goodwill is being amortized over 40 years using the straight-line method for
Holdings. Accumulated amortization totaled $8 million at year-end 1998 and
$0.4 million at year-end 1997.

Microwave Relocations

Holdings has incurred costs related to microwave relocation in constructing
the PCS network. Microwave relocation costs are being amortized over the
remaining lives of the PCS licenses. Accumulated amortization for microwave
relocation costs totaled approximately $13 million at year-end 1998 and $5
million at year-end 1997.

Income Taxes

Holdings has not provided for federal or state income taxes since such taxes
are the responsibility of the Partners.

Derivative Financial Instruments

Prior to the PCS Restructuring, derivative financial instruments (interest
rate contracts) were utilized by APC to reduce interest rate risk. APC
established a control environment which included risk assessment and management
approval, reporting and monitoring of derivative financial instrument
activities. APC did not hold or issue derivative financial instruments for
trading purposes. At year-end 1998, no derivatives were outstanding.

F-63
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Comprehensive Income

Holdings' total comprehensive loss for all periods presented did not differ
from those amounts reported as net loss in the consolidated statements of
operations.

Major Customer

Holdings markets its products through multiple distribution channels,
including its own retail stores as well as other retail outlets. Holdings'
subscribers are dispersed throughout the United States. Equipment sales to one
retail outlet, and service revenues generated by sales to its customers
represented approximately 25% and 21% of net operating revenues in the
consolidated statements of operations in 1998 and 1997, respectively.

3. Investments in Partnerships

APC--In September 1997, Holdings increased its ownership in APC to 58.3%
through additional capital contributions of $30 million, and became the
managing partner in November 1997. At the beginning of 1998, Holdings increased
its ownership percentage to 99.75% of the partnership interests for
approximately $30 million. APC II has been allocated approximately $7 million
in losses in APC since November 1997. Prior to November 1997, APC II had been
allocated approximately $50 million in losses in excess of its investment. At
year-end 1997, these losses totaled $57 million and were recorded as minority
interest in Holdings' consolidated balance sheet. This treatment reflects APC
II's continued responsibility for funding its share of losses until January 1,
1998 when Holdings and MinorCo acquired the remaining interest in APC.

Cox PCS--At year-end 1996, Holdings acquired a 49% limited partner interest
in Cox PCS. CPP held a 50.5% general and a 0.5% limited partner interest and
was the general and managing partner. Holdings increased its ownership in Cox
PCS to 59.2% through an additional capital contribution of approximately
$81 million and became managing partner upon FCC approval in June 1998. CPP's
remaining ownership interest in Cox PCS is reflected as minority interest in
the consolidated balance sheet and statements of operations. CPP has been
allocated approximately $145 million in losses in Cox PCS since the date of
acquisition. Under the partnership agreement, Cox has the right to require
Holdings to purchase, under certain circumstances, all or part of CPP's
interest in Cox PCS, which could involve significant cash requirements. Cox may
require Holdings to acquire an additional 10.2% interest in Cox PCS per year
through 2000. Beginning in 2001 through 2005, CPP may require Holdings to
acquire up to all of its interest in Cox PCS. Cox has given Holdings notice to
start the appraisal process related to a potential put of all or a portion of
CPP's remaining partnership interest to Holdings.

The acquisition of APC was accounted for as a purchase and, accordingly, the
operating results of APC have been consolidated since the acquisition. The
acquisition of Cox PCS increasing ownership to 59.2% was also accounted for as
a purchase. The operating results of Cox PCS have been consolidated since the
beginning of 1998. In conjunction with the acquisitions liabilities assumed
were (in millions):

<TABLE>
<CAPTION>
Cox
APC PCS
---- -----
<S> <C> <C>
Assets acquired.............................................. $503 $ 725
Cash paid.................................................... (30) (81)
Minority interest............................................ 50 (104)
---- -----
Liabilities assumed.......................................... $523 $ 540
==== =====
</TABLE>

F-64
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The purchase price was allocated to the assets acquired and the liabilities
assumed based on an estimate of fair value. The ultimate purchase price of Cox
PCS may differ from the initial estimate. In connection with the above
acquisitions, the excess of the purchase price over the fair value of the net
assets acquired was accounted for as goodwill.

Prior to acquisition of controlling interest, Holdings' investments in APC
and Cox PCS were accounted for under the equity method. Losses of APC and Cox
PCS of approximately $61 million and $108 million, respectively, in 1997 and
losses of APC of $97 million in 1996 are included in equity in losses of
unconsolidated partnerships during the period prior to the acquisition of
controlling interest.

Under the terms of the partnership agreement, CPP and Holdings are obligated
to make additional capital contributions in an amount equal to such partner's
percentage interest times the amount of additional capital contributions being
requested. In 1998, Holdings completed its funding obligation to Cox PCS under
the partnership agreement by contributing $34 million, including $33 million in
interest that had accrued on the unfunded obligation. Holdings had previously
contributed equity of approximately $180 million in 1997 and $168 million in
1996.

The following unaudited pro forma financial information assumes the
acquisition of APC had occurred on January 1 of each year and the acquisition
of Cox PCS had occurred on January 1, 1997. It also assumes that Holdings had
owned 100% of each entity and consolidated their results in the Holdings'
financial statements (in millions):

<TABLE>
<CAPTION>
1997 1996
------ ----
<S> <C> <C>
Net sales................................................... $ 392 $ 76
Net loss (before minority interest)......................... (1,747) (553)
</TABLE>

These proforma amounts are for comparative purposes only and do not
necessarily represent what actual results of operations would have been, nor do
they indicate the results of future operations.

4. Employee Benefit Plans

Defined Contribution and Profit Sharing Plans

Holdings sponsors a savings and retirement program (the "Savings Plan") for
certain employees. Most permanent full-time, and certain part-time, employees
are eligible to participate after one year of service or on their 35th
birthday, whichever occurs first. The maximum contribution for any participant
for any year is 16% of their pay. Holdings matches contributions equal to 50%
of the contribution of each participant, up to the first 6% that the employee
elects to contribute. Contributions to the Savings Plan are invested, at the
participant's discretion, in several designated investment funds. Expense under
the Savings Plan was $6 million in 1998, $5 million in 1997 and $1 million in
1996. Effective January 1999, Holdings' employees began making contributions to
Sprint's defined contribution plan. The existing assets of the Savings Plan
will be rolled over to Sprint's defined contribution plan in early 1999.
Effective January 1999, Holdings' employees were also eligible to participate
in Sprint's pension and postretirement plans.

The Cox PCS Savings and Investment Plan (the "Cox PCS Plan") was established
effective July 1, 1997. Substantially all Cox PCS employees are eligible to
participate in the Cox PCS Plan after completing one year of eligible service
(as defined) and attaining age 21. Employees may make contributions to the Cox
PCS Plan on a pretax basis pursuant to Section 401(k) of the Internal Revenue
Code. Cox PCS makes matching contributions equal to 75% of the employee's
contribution up to a maximum amount equal to 4.5% of the employee's annual
compensation. Employee contributions vest immediately, and Cox PCS' matching

F-65
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

contributions vest over three years of service. Expense under the Cox PCS Plan
approximated $1 million in
1998. The Cox PCS Plan will be terminated in early 1999, and the existing
assets will be rolled over to Sprint's defined contribution plan.

Profit Sharing (Retirement) Plan

Effective January, 1996, Holdings established a profit sharing plan for its
employees. Employees are eligible to participate in the plan after completing
one year of service. Profit sharing contributions are based on the
compensation, age, and years of service of the employee. Profit sharing
contributions are deposited into individual accounts of Holdings' retirement
plan. Vesting occurs once a participant completes five years of service.
Expense under the profit sharing plan approximated $3 million in 1998, $3
million in 1997 and $1 million in 1996. The existing assets of the profit
sharing will be rolled over to Sprint's defined contribution plan in early
1999.

Deferred Compensation Plan for Executives

Effective January, 1997, Holdings established a non-qualified deferred
compensation plan which permits certain eligible executives to defer a portion
of their compensation. The plan allows the participants to defer up to 80% of
their base salary and up to 100% of their annual short-term incentive
compensation. The deferred amounts earn interest at the prime rate. Payments
will be made to participants upon retirement, disability, death or the
expiration of the deferral election under the payment method selected by the
participant. The deferred compensation plan will be terminated in early 1999,
and participants will be eligible to participate in Sprint's deferred
compensation plan.

Long-Term Incentive Plan

Holdings maintains a long-term incentive plan. Prior to the PCS Restructuring
employees meeting certain eligibility requirements were included in Holdings'
long-term incentive plan (LTIP). Under this plan, participants received
appreciation units based on independent appraisals. The 1997 plan appreciation
units vest 25% per year beginning on the first anniversary of the grant date
and expire after 10 years. Under the 1996 plan, appreciation units vest 25% per
year beginning two years after the grant date, and expire after 10 years.
Holdings expensed $3 million in 1998, $18 million in 1997 and $10 million in
1996. In 1996, Holdings adopted the pro forma disclosure requirements under
SFAS 123, "Accounting for Stock-Based Compensation." Holdings has continued to
apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees." No significant difference would have resulted had SFAS 123 been
applied.

After the PCS Restructuring, Sprint discontinued the LTIP plan. The
appreciation units were replaced with PCS shares and options to buy PCS shares
based on a formula designed to replace the appreciated value of the units at
the beginning of July 1998. For vested units at year-end 1998, participants
could elect to receive the appreciation in cash, or in shares and options. Most
elected to receive shares and options. Sprint will issue the shares, and the
options will become exercisable, based on the vesting requirements of the units
those awards replaced.

Sprint Corporation Management Incentive Stock Option Plan and Stock Option
Plan

Effective January 1, 1999, employees are eligible to participate in Sprint's
Management Incentive Stock Option Plan (MISOP) and the Sprint Corporation Stock
Option Plan (SOP). Under the MISOP, Sprint may grant stock options to employees
who are eligible to receive annual incentive compensation. Eligible employees
are entitled to receive stock options in lieu of a portion of the target
incentive under Sprint's management

F-66
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

incentive plans. The options generally become exercisable on December 31 of the
year granted and have a
maximum term of 10 years. MISOP options are granted with exercise prices equal
to the market price of Sprint's FON Group and PCS Group stock on the grant
date.

Under the SOP, Sprint may grant stock options to officers and key employees.
The options generally become exercisable at the rate of 25% per year, beginning
one year from the grant date, and have a maximum term of 10 years. SOP options
are granted with exercise prices equal to the market price of Sprint's FON
Group and PCS Group stock on the grant date.

Employee Stock Purchase Plan

Under Sprint's Employees Stock Purchase Plan (ESPP), employees may elect to
purchase Sprint common stock at a price equal to 85% of the market value on the
grant or exercise date, whichever is less.

5. Long-term Debt

Long term debt consists of the following as of December 31, 1998 and 1997 (in
millions):

<TABLE>
<CAPTION>
Maturing 1998 1997
------------ -------- --------
<S> <C> <C> <C>
Senior notes
8.6% to 9.5% (/1/)............................ 2008 to 2028 $3,346.6 $ --
11.0% to 12.5% (/2/).......................... 2006 613.8 572.3
Revolving credit facilities
variable rates................................ 2005 to 2006 1,800.0 746.4
Due to FCC at 7.75% (/3/)....................... 2001 265.2 90.4
Vendor Financing................................ -- 1,612.9
Other
2.3% to 14.4% (/4/)........................... 1998 to 2007 585.4 546.5
-------- --------
Total Debt...................................... 6,611.0 3,568.5
Less: current maturities........................ 119.4 34.6
-------- --------
Long-term debt.................................. $6,491.6 $3,533.9
======== ========
</TABLE>
- --------
(1) Holdings has notes payable to Sprint totaling $3.3 billion. See Note 2 for
a more detailed description of Holdings and PCS Group financing.
(2) Balances are net of unamortized discounts of $136.2 million in 1998 and
$177.7 million in 1997. Sprint holds approximately $133 million at year-end
1998 and $118 million at year-end 1997 of the Senior Discount Notes.
(3) Balances are net of unamortized discounts of $8.0 million in 1998 and $12.0
million in 1997.
(4) In 1998, Holdings received $180 million under grid notes from Sprint. These
notes had a weighted average interest rate of 7.8% at year-end 1998 and
mature in 2001.

Holdings' long-term debt maturities, during each of the next five years are
as follows:

<TABLE>
<CAPTION>
(in millions)
-------------
<S> <C>
1999........................................................ $119.4
2000........................................................ 126.4
2001........................................................ 354.6
2002........................................................ 301.1
2003........................................................ 462.1
</TABLE>

F-67
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Revolving Credit Facilities

At year-end 1998, available revolving credit facilities with banks totaled
$2.1 billion and Holdings had borrowed $1.8 billion at a weighted average
interest rate of 5.8%. At year-end 1997, $746 million had been drawn under the
revolving credit facilities at a weighted average interest rate of 8.4%.
Availability will be reduced commencing January 2002 and expires in 2007.
Borrowings under the term loans are included in Other debt and totaled $400
million with a weighted average interest rate of 7.7% at year-end 1998 and $300
million with a weighted average interest rate of 8.4% at year-end 1997.

Provisions of the credit facilities required the transfer of certain of
Holdings' assets into special purpose subsidiaries to facilitate the
collateralization of Holdings' assets.

Senior Notes and Senior Discount Notes (the Notes)

On August 15, 2001, Holdings will be required to redeem an amount equal to
$192 million in aggregate principal amount at maturity, assuming all of the
Senior Discount Notes remain outstanding at such date. The Notes are redeemable
at the option of Holdings, in whole or in part, at any time on or after August
15, 2001 at the stipulated redemption prices plus accrued and unpaid interest.
Interest on the Senior Discount Notes is not payable prior to August 15, 2001.

Vendor Financing

In 1996, Holdings entered into financing agreements with Northern Telecom,
Inc. (Nortel) and Lucent Technologies, Inc. (Lucent and together with Nortel,
the Vendors) for multiple drawdown term loan facilities totaling $1.3 billion
and $1.8 billion, respectively. At year-end 1997, approximately $1.6 billion,
including converted accrued interest of $52 million, had been borrowed at a
weighted average interest rate of 9.0% under the vendor financing agreements.
Amounts outstanding at year-end 1997 included $300 million that was syndicated
to Sprint. In 1998, all borrowings under the Vendor Financing were repaid using
long-term borrowings from Sprint.

Other

In 1998, Holdings redeemed, prior to scheduled maturities, $3.3 billion of
debt with a weighted average interest rate of 8.3%. This resulted in a $51
million extraordinary loss. The debt was repaid with a portion of the long-term
borrowings from Sprint.

Holdings has complied with all restrictive or financial covenants relating to
its debt arrangements at year-end 1998.

Holdings' PCS licenses and property, plant and equipment totaling $4.4
billion is pledged as security for certain notes.

Fair Value

The estimated fair value of Holdings' long-term debt was $6.8 billion at
year-end 1998 and $3.6 billion at year-end 1997.

F-68
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6. Equity

Following is a reconciliation of Holdings' equity:

<TABLE>
<CAPTION>
Partners' Accumulated
Capital Deficit Total
--------- ----------- --------
(in millions)
<S> <C> <C> <C>
Balance January 1, 1996....................... $2,291.7 $ (113.7) $2,178.0
Contributions of capital...................... 711.7 -- 711.7
Net loss...................................... -- (443.1) (443.1)
-------- --------- --------
Balance December 31, 1996..................... 3,003.4 (556.8) 2,446.6
Contributions of capital...................... 973.0 -- 973.0
Net loss...................................... -- (1,563.4) (1,563.4)
Return of capital............................. (11.7) -- (11.7)
-------- --------- --------
Balance December 31, 1997..................... 3,964.7 (2,120.2) 1,844.5
Contributions of capital...................... 517.1 -- 517.1
Net loss...................................... -- (2,358.0) (2,358.0)
Return of capital............................. (33.3) -- (33.3)
-------- --------- --------
Balance December 31, 1998..................... $4,448.5 $(4,478.2) $ (29.7)
======== ========= ========
</TABLE>

7. Commitments and Contingencies

Litigation, Claims and Assessments

Various suits arising in the ordinary course of business are pending against
Holdings. Holdings cannot predict the final outcome of these actions but
believes they will not be material to its consolidated financial statements.

Commitments

In 1998 Holdings amended a procurement and services contract with a vendor
for the engineering and construction of a PCS network. This contract provides
for an initial term of three years with renewals for additional one-year
periods. The minimum commitment for the initial term is $400 million. At year-
end 1998, $257 million had been purchased under the commitment with remaining
minimum commitment of $143 million.

In 1996 Holdings entered into a purchase and supply agreement with a vendor
for the purchase of handsets and other equipment. The total purchase commitment
must be satisfied by April 2000. Purchases under the commitment totaled $289
million in 1998 and $148 million in 1997. No purchases were made in 1996. At
year-end 1998, remaining commitments totaled $163 million.

Holdings has an agreement with a vendor to provide PCS call record and
retention services. Monthly rates per subscriber are variable based on overall
subscriber volume. If subscriber fees are less than specified annual minimum
charges, Holdings will be obligated to pay the difference between the amounts
paid for processing fees and the annual minimum. Annual minimums range from $20
million to $60 million through 2001. The agreement extends through December 31,
2001, with two automatic, two-year renewal periods, unless terminated by
Holdings. Holdings may terminate the agreement prior to the expiration date,
but would be subject to specified termination penalties.

F-69
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Holdings has a contract for consulting services. Under the terms of the
agreement, consulting services will be provided at specified hourly rates for a
minimum number of hours. Purchases under the contract totaled $38 million in
1998 and $20 million in 1997. The remaining commitment of $67 million must be
satisfied by the end of June 2000.

Operating Leases

Minimum rental commitments at year-end 1998 for all noncancelable operating
leases, consisting mainly of leases for cell and switch sites and office space,
are as follows:

<TABLE>
<CAPTION>
(in millions)
-------------
<S> <C>
1999........................................................ $139.2
2000........................................................ 131.8
2001........................................................ 92.3
2002........................................................ 43.3
2003........................................................ 19.0
Thereafter.................................................. 56.7
</TABLE>

Gross rental expense totaled $192 million in 1998, $125 million in 1997 and
$25 million in 1996. The table excludes renewal options related to certain cell
and switch site leases. These renewal options are generally for five-year terms
and may be exercised from time to time.

8. Related Party Transactions

Sprint

Sprint provides management, printing/mailing and warehousing services to
Holdings. Charges to Holdings for these services totaled $25 million in 1998,
$11 million in 1997, and $12 million in 1996.

Holdings has entered into agreements with Sprint for invoicing services,
operator services, and switching equipment. Holdings is also using the long
distance division of Sprint as its interexchange carrier. Charges to Holdings
for these services totaled $125 million in 1998, $61 million in 1997 and $1
million in 1996.

Holdings makes payments for inventory and payroll for PhillieCo and
SprintCom, resulting in receivables due from the affiliates. These receivables
are reflected on the consolidated balance sheet.

APC

Holdings has an affiliation agreement with APC which provides for the
reimbursement of certain allocable costs and payment of affiliation fees. In
1997, the reimbursement of allocable costs of approximately $14 million is
included in selling, general and administrative expenses. There were no
reimbursements recognized in 1996. Additionally, affiliation fees were
recognized based on a percentage of APC's net revenues. In 1997, affiliation
fees of $4 million were included in other income.

Cox PCS

Holdings has entered into an affiliation agreement with Cox PCS which
provides for the reimbursement of certain allocable costs and payment of
affiliate fees. These costs totaled $20 million in 1997 and $7 million in 1996
and are netted against selling, general and administrative expenses in the
accompanying consolidated statements of operations. Of these total allocated
costs, approximately $2 million in 1997 and $7 million in

F-70
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

1996 were included in receivables from affiliates in the consolidated balance
sheets. In addition, Holdings purchases certain equipment, such as handsets, on
behalf of Cox PCS. Receivables from affiliates for handsets and related
equipment were approximately $31 million in 1997 and $6 million in 1996.

PhillieCo

Allocable costs of approximately $21 million in 1998 and $36 million in 1997
were allocated to PhillieCo and are included as a reduction of selling, general
and administrative expenses in the accompanying consolidated statements of
operations. Additionally, affiliation fees are recognized based on a percentage
of PhillieCo's net revenues. Affiliation fees of $1 million in 1998 and $0.3
million in 1997 are included in other income in the accompanying consolidated
statements of operations. The allocated costs and affiliate fees of $3 million
in 1998 and $37 million in 1997 are included in receivable from affiliates.
There were no such costs in 1996.

SprintCom

In 1997 Holdings began building out the network infrastructure for SprintCom.
These services include engineering, management, purchasing, accounting and
other related services. Costs totaling $100 million in 1998 and $29 million in
1997 were allocated to SprintCom, and are included as a reduction of selling,
general and administrative expenses in the accompanying consolidated statements
of operations. Receivables from affiliates included $78 million at year-end
1998 and $14 million at year-end 1997.

9. Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
Quarter
------------------------------
1998 1st 2nd 3rd 4th
- ---- ------ ------ ------ ------
(in millions)
<S> <C> <C> <C> <C>
Net operating revenues.......................... $197.2 256.0 311.8 410.5
Operating loss.................................. (435.3) (471.0) (506.9) (602.1)
Loss before extraordinary items................. (497.9) (543.4) (599.3) (666.3)
Net loss........................................ (497.9) (543.4) (599.3) (717.4)
<CAPTION>
Quarter
------------------------------
1997 1st 2nd 3rd 4th
- ---- ------ ------ ------ ------
(in millions)
<S> <C> <C> <C> <C>
Net operating revenues.......................... $ 9.5 $ 25.4 $ 72.5 $141.2
Operating loss.................................. (190.8) (277.7) (382.7) (459.5)
Net Loss........................................ (188.9) (287.7) (420.9) (665.9)
</TABLE>

F-71
<PAGE>

SPRINT SPECTRUM HOLDING COMPANY, L.P.

SCHEDULE II--CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
Additions
----------------
Charged Charged Balance
Beginning to to Other Other End of
Balance Income Accounts Deductions Year
--------- ------- -------- ---------- -------
(in millions)
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
1998...................... $9.0 $76.7 $-- $(64.7)(/1/) $21.0
1997...................... 0.2 11.3 -- (2.5)(/1/) 9.0
1996...................... -- 0.2 -- -- 0.2
</TABLE>
- --------
(1) Accounts written off, net of recoveries.

F-72
<PAGE>

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

[LOGO OF LIBERTY MEDIA CORPORATION]

Liberty Media Corporation

4% Senior Exchangeable Debentures due 2029

PROSPECTUS

February 9, 2000

---------------------------------------------------------------------------
---------------------------------------------------------------------------
<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Registration

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of debentures being registered. All amounts are estimates except the SEC
registration fee.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $229,361
Printing and engraving expenses.................................... $100,000
Legal fees and expenses............................................ $100,000
Accounting fees and expenses....................................... $ 25,000
Miscellaneous...................................................... $ 10,000
--------
Total.............................................................. $464,361
</TABLE>

Item 14. Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law ("DGCL") provides,
generally, that a corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (except actions by or in the
right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation against all expenses,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. A corporation may similarly indemnify
such person for expenses actually and reasonably incurred by such person in
connection with the defense or settlement of any action or suit by or in the
right of the corporation, provided such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and, in the case of claims, issues and matters as
to which such person shall have been adjudged liable to the corporation,
provided that a court shall have determined, upon application, that, despite
the adjudication of liability but in view of all of the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.

Section 102(b)(7) of the DGCL provides, generally, that the certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such
provision may not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under section 174
of Title 8 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. No such provision
may eliminate or limit the liability of a director for any act or omission
occurring prior to the date when such provision became effective.

II-1
<PAGE>

Article V, Section E of the Restated Certificate of Incorporation, as amended
("Liberty Charter"), of Liberty Media Corporation, a Delaware corporation
("Liberty"), provides as follows:

"1.Limitation on Liability.

To the fullest extent permitted by the DGCL as the same exists or
may hereafter be amended, a director of the Corporation shall not be
liable to the Corporation or any of its stockholders for monetary
damages for breach of fiduciary duty as a director. Any repeal or
modification of this subparagraph 1 shall be prospective only and shall
not adversely affect any limitation, right or protection of a director
of the Corporation existing at the time of such repeal or modification.

2.Indemnification.

(a) Right to Indemnification. The Corporation shall indemnify and
hold harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person who was or is
made or is threatened to be made a party or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "proceeding") by reason of the fact that he, or a
person for whom he is the legal representative, is or was a director or
officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation or of a partnership, limited liability company, joint
venture, trust, enterprise or nonprofit entity, including service with
respect to employee benefit plans, against all liability and loss
suffered and expenses (including attorneys' fees) reasonably incurred
by such person. Such right of indemnification shall inure whether or
not the claim asserted is based on matters which antedate the adoption
of this Section E. The Corporation shall be required to indemnify a
person in connection with a proceeding (or part thereof) initiated by
such person only if the proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation.

(b) Prepayment of Expenses. The Corporation shall pay the expenses
(including attorneys' fees) incurred by a director or officer in
defending any proceeding in advance of its final disposition, provided,
however, that the payment of expenses incurred by a director or officer
in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the director or officer to repay
all amounts advanced if it should be ultimately determined that the
director or officer is not entitled to be indemnified under this
subparagraph 2 or otherwise.

(c) Claims. If a claim for indemnification or payment of expenses
under this subparagraph 2 is not paid in full within 60 days after a
written claim therefor has been received by the Corporation, the
claimant may file suit to recover the unpaid amount of such claim and,
if successful in whole or in part, shall be entitled to be paid the
expense of prosecuting such claim. In any such action the Corporation
shall have the burden of proving that the claimant was not entitled to
the requested indemnification or payment of expenses under applicable
law.

(d) Non-Exclusivity of Rights. The rights conferred on any person by
this subparagraph 2 shall not be exclusive of any other rights which
such person may have or hereafter acquire under any statute, provision
of this Certificate, the Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.

(e) Other Indemnification. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a
director, officer, employee or agent of another corporation,
partnership, limited liability company, joint venture, trust,
enterprise or nonprofit entity shall be reduced by any amount such
person may collect as indemnification from such other corporation,
partnership, limited liability company, joint venture, trust,
enterprise or nonprofit entity.

3.Amendment or Repeal.

Any repeal or modification of the foregoing provisions of this
Section E shall not adversely affect any right or protection hereunder
of any person in respect of any act or omission occurring prior to the
time of such repeal or modification."

II-2
<PAGE>

Item 15. Recent Sales of Unregistered Securities.

On March 8, 1999, in connection with the merger of AT&T and TCI, we
reclassified each share of our existing and outstanding common stock, $1.00 par
value per share, held by TCI into one share of Class A Common Stock, $.0001 par
value per share, one share of Class B Common Stock, $.0001 par value per share,
and one share of Class C Common Stock, $.0001 par value per share. We believe
this transaction was exempt from registration under the Securities Act either
because it did not involve a "sale" of securities as defined in Section 2(3) of
the Securities Act or, if it did involve a "sale," the transaction was exempt
from the registration requirements of the Securities Act by virtue of Section
4(2) of the Securities Act since it did not involve a public offering.

On June 30, 1999, we sold to Lehman Brothers, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Banc of America Securities LLC, BNY Capital Markets, Inc.,
Credit Lyonnais Securities, Donaldson, Lufkin & Jenrette, Morgan Stanley Dean
Witter, Salomon Smith Barney, Schroder & Co. Inc and TD Securities our 7 7/8%
senior notes due 2009 at an aggregate offering price of $750,000,000 (less a
discount to these initial purchasers of $4,875,000) and our 8 1/2% senior
debentures due 2029 at an aggregate offering price of $500,000,000 (less a
discount to these initial purchasers of $4,375,000).

On November 16, 1999, we sold the debentures to Donaldson, Lufkin & Jenrette
Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Goldman, Sachs & Co. and Salomon Smith Barney at an aggregate offering price of
$868,789,000 (less a discount to these initial purchasers of $15,000,000).

We believe that the sales of our 7 7/8% senior notes, our 8 1/2% senior
debentures and the debentures were exempt from the registration requirements of
the Securities Act by virtue of Section 4(2) of the Securities Act because none
of these transactions involved a public offering.

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits. The following is a complete list of Exhibits filed as part of
this Registration Statement:

II-3
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.8 Form of 4% Senior Exchangeable Debentures due 2029.+
4.9 Liberty undertakes to furnish the Securities and Exchange Commission,
upon request, a copy of all instruments with respect to long-term debt
not filed herewith.
5 Opinion of Baker Botts L.L.P., with respect to the legality of the
securities being registered.
10.1 Contribution Agreement dated March 9, 1999, by and among Liberty Media
Corporation, Liberty Media Management LLC, Liberty Media Group LLC and
Liberty Ventures Group LLC (incorporated by reference to Exhibit 10.1
to the Liberty S-4 Registration Statement).
10.2 Inter-Group Agreement dated as of March 9, 1999, between AT&T Corp.
and Liberty Media Corporation, Liberty Media Group LLC and each
Covered Entity listed on the signature pages thereof (incorporated by
reference to Exhibit 10.2 to the Liberty S-4 Registration Statement).
10.3 Intercompany Agreement dated as of March 9, 1999, between Liberty and
AT&T Corp (incorporated by reference to Exhibit 10.3 to the Liberty S-
4 Registration Statement).
10.4 Tax Sharing Agreement dated as of March 9, 1999, by and among AT&T
Corp., Liberty Media Corporation, Tele-Communications, Inc., Liberty
Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT
Holdings, Inc. and each Covered Entity listed on the signature pages
thereof (incorporated by reference to Exhibit 10.4 to the Liberty S-4
Registration Statement).
10.5 First Amendment to Tax Sharing Agreement dated as of May 28, 1999, by
and among AT&T Corp., Liberty Media Corporation, Tele-Communications,
Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz,
Inc., TCI CT Holdings, Inc. and each Covered Entity listed on the
signature pages thereof (incorporated by reference to Exhibit 10.5 to
the Liberty S-4 Registration Statement).
10.6 Second Amendment to Tax Sharing Agreement dated as of September 24,
1999, by and among AT&T Corp., Liberty Media Corporation, Tele-
Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity
listed on the signature pages thereof.
10.7 Third Amendment to Tax Sharing Agreement dated as of October 20, 1999,
by and among AT&T Corp., Liberty Media Corporation, Tele-
Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity
listed on the signature pages thereof.
10.8 Fourth Amendment to Tax Sharing Agreement dated as of October 28,
1999, by and among AT&T Corp., Liberty Media Corporation, Tele-
Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity
listed on the signature pages thereof.
10.9 Fifth Amendment to Tax Sharing Agreement dated as of December 6, 1999,
by and among AT&T Corp., Liberty Media Corporation, Tele-
Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity
listed on the signature pages thereof.
10.10 Sixth Amendment to Tax Sharing Agreement dated as of December 10,
1999, by and among AT&T Corp., Liberty Media Corporation, Tele-
Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity
listed on the signature pages thereof.
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.11 Seventh Amendment to Tax Sharing Agreement dated as of December 30,
1999, by and among AT&T Corp., Liberty Media Corporation, Tele-
Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity
listed on the signature pages thereof.
10.12 Instrument dated January 14, 2000, adding The Associated Group, Inc.
as a party to the Tax Sharing Agreement dated as of March 9, 1999, as
amended, among The Associated Group, Inc., AT&T Corp., Liberty Media
Corporation, Tele-Communications, Inc., Liberty Ventures Group LLC,
Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and
each Covered Entity listed on the signature pages thereof.
10.13 Amended and Restated Contribution Agreement dated January 14, 2000, by
and among Liberty Media Corporation, Liberty Media Management LLC,
Liberty Media Group LLC, Liberty Ventures Group LLC, The Associated
Group, Inc. and Liberty AGI, Inc.
10.14 First Supplement to Inter-Group Agreement dated as of May 28, 1999,
between and among AT&T Corp., on the one hand, and Liberty Media
Corporation, Liberty Media Group LLC and each Covered Entity listed on
the signature pages thereof, on the other hand.
10.15 Second Supplement to Inter-Group Agreement dated as of September 24,
1999, between and among AT&T Corp., on the one hand, and Liberty Media
Corporation, Liberty Media Group LLC and each Covered Entity listed on
the signature pages thereof, on the other hand.
10.16 Third Supplement to Inter-Group Agreement dated as of October 20,
1999, between and among AT&T Corp., on the one hand, and Liberty Media
Corporation, Liberty Media Group LLC and each Covered Entity listed on
the signature pages thereof, on the other hand.
10.17 Fourth Supplement to Inter-Group Agreement dated as of December 6,
1999, between and among AT&T Corp., on the one hand, and Liberty Media
Corporation, Liberty Media Group LLC and each Covered Entity listed on
the signature pages thereof, on the other hand.
10.18 Fifth Supplement to Inter-Group Agreement dated as of December 10,
1999, between and among AT&T Corp., on the one hand, and Liberty Media
Corporation, Liberty Media Group LLC and each Covered Entity listed on
the signature pages thereof, on the other hand.
10.19 Sixth Supplement to Inter-Group Agreement dated as of December 30,
1999, between and among AT&T Corp., on the one hand, and Liberty Media
Corporation, Liberty Media Group LLC and each Covered Entity listed on
the signature pages thereof, on the other hand.
10.20 Instrument dated January 14, 2000, adding The Associated Group, Inc.
as a party to the Inter-Group Agreement dated as of March 9, 1999, as
supplemented, between and among AT&T Corp., on the one hand, and
Liberty Media Corporation, Liberty Media Group LLC and each Covered
Entity listed on the signature pages thereof, on the other hand.
10.21 Restated and Amended Employment Agreement dated November 1, 1992,
between Tele-Communications, Inc. and John C. Malone (assumed by
Liberty as of March 9, 1999), and the amendment thereto dated June 30,
1999 and effective as of March 9, 1999, between Liberty and John C.
Malone (incorporated by reference to Exhibit 10.6 to the Liberty S-4
Registration Statement).
12 Computation of Ratio of Earnings to Fixed Charges (incorporated by
reference to Exhibit 12 to Amendment No. 4 to the Liberty S-4
Registration Statement, as filed on December 10, 1999).
21 List of Subsidiaries of Liberty (incorporated by reference to Exhibit
22 to the Liberty S-4 Registration Statement).
</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
23.1 Consent of KPMG LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Baker Botts L.L.P. (included in Exhibit 5).
24 Powers of Attorney.+
25 Statement of Eligibility of Trustee.+
</TABLE>
- --------

+ Previously filed.

(b) Financial Statement Schedules. Schedules not listed above have been
omitted because the information to be set forth therein is not material, not
applicable or is shown in the financial statements or notes thereto.

Item 17. Undertakings

(a) Liberty hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of the prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Liberty pursuant to the foregoing provisions or otherwise, Liberty has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Liberty of
expenses incurred or paid by a director, officer or controlling person of
Liberty in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, Liberty will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.

II-6
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the county of Douglas, state of
Colorado, on February 9, 2000.

LIBERTY MEDIA CORPORATION

/s/ Charles Y. Tanabe
By: _________________________________

Name: Charles Y. Tanabe
Title: Senior Vice President and
General Counsel

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons (which persons
constitute a majority of the Board of Directors) in the capacities and on the
dates indicated:

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>

Chairman of the Board and
* Director
- ----------------------------------
John C. Malone

President, Chief Executive
* Officer and Director (Principal
- ---------------------------------- Executive Officer)
Robert R. Bennett

Executive Vice President, Chief
* Operating Officer and Director
- ----------------------------------
Gary S. Howard

Director
*
- ----------------------------------
Paul A. Gould

Director
*
- ----------------------------------
Jerome H. Kern

Director
- ----------------------------------
John C. Petrillo

Director
*
- ----------------------------------
Larry E. Romrell

</TABLE>

II-7
<PAGE>

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>

Director
- ----------------------------------
Daniel E. Somers

Director
- ----------------------------------
John D. Zeglis

Vice President and Controller
(Principal Financial Officer
* and Principal Accounting
- ---------------------------------- Officer)
Kathryn S. Douglass

February 9,
*By: Robert W. Murray Jr. 2000
---------------------------------

Attorney-in-Fact

</TABLE>

II-8
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation of Liberty, dated March 8, 1999
(incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form S-4 of Liberty Media Corporation (File No. 333-
86491) as filed on September 3, 1999 (the "Liberty S-4 Registration
Statement")).
3.2 Bylaws of Liberty, as adopted March 8, 1999 (incorporated by reference
to Exhibit 3.2 to the Liberty S-4 Registration Statement).
4.1 Indenture dated as of July 7, 1999, between Liberty and The Bank of
New York (incorporated by reference to Exhibit 4.1 to the Liberty S-4
Registration Statement).
4.2 First Supplemental Indenture dated as of July 7, 1999, between Liberty
and The Bank of New York (incorporated by reference to Exhibit 4.2 to
the Liberty S-4 Registration Statement).
4.3 Registration Rights Agreement dated as of July 7, 1999, between
Liberty and the Initial Purchasers (incorporated by reference to
Exhibit 4.3 to the Liberty S-4 Registration Statement).
4.4 Form of 7 7/8% Senior Note due 2009 (incorporated by reference to
Exhibit 4.4 to the Liberty S-4 Registration Statement).
4.5 Form of 8 1/2% Senior Debenture due 2029 (incorporated by reference to
Exhibit 4.5 to the Liberty S-4 Registration Statement).
4.6 Second Supplemental Indenture dated as of November 16, 1999, between
Liberty and The Bank of New York.+
4.7 Registration Rights Agreement dated as of November 16, 1999 among
Liberty Media Corporation and Donaldson, Lufkin & Jenrette Securities
Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Goldman, Sachs & Co., and Salomon Smith Barney Inc.+
4.8 Form of 4% Senior Exchangeable Debentures due 2029.+
4.9 Liberty undertakes to furnish the Securities and Exchange Commission,
upon request, a copy of all instruments with respect to long-term debt
not filed herewith.
5 Opinion of Baker Botts L.L.P., with respect to the legality of the
securities being registered.
10.1 Contribution Agreement dated March 9, 1999, by and among Liberty Media
Corporation, Liberty Media Management LLC, Liberty Media Group LLC and
Liberty Ventures Group LLC (incorporated by reference to Exhibit 10.1
to the Liberty S-4 Registration Statement).
10.2 Inter-Group Agreement dated as of March 9, 1999, between AT&T Corp.
and Liberty Media Corporation, Liberty Media Group LLC and each
Covered Entity listed on the signature pages thereof (incorporated by
reference to Exhibit 10.2 to the Liberty S-4 Registration Statement).
10.3 Intercompany Agreement dated as of March 9, 1999, between Liberty and
AT&T Corp (incorporated by reference to Exhibit 10.3 to the Liberty S-
4 Registration Statement).
10.4 Tax Sharing Agreement dated as of March 9, 1999, by and among AT&T
Corp., Liberty Media Corporation, Tele-Communications, Inc., Liberty
Ventures Group LLC, Liberty Media Group LLC, TCI Starz, Inc., TCI CT
Holdings, Inc. and each Covered Entity listed on the signature pages
thereof (incorporated by reference to Exhibit 10.4 to the Liberty S-4
Registration Statement).
10.5 First Amendment to Tax Sharing Agreement dated as of May 28, 1999, by
and among AT&T Corp., Liberty Media Corporation, Tele-Communications,
Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI Starz,
Inc., TCI CT Holdings, Inc. and each Covered Entity listed on the
signature pages thereof (incorporated by reference to Exhibit 10.5 to
the Liberty S-4 Registration Statement).
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.6 Second Amendment to Tax Sharing Agreement dated as of September 24,
1999, by and among AT&T Corp., Liberty Media Corporation, Tele-
Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity
listed on the signature pages thereof.
10.7 Third Amendment to Tax Sharing Agreement dated as of October 20, 1999,
by and among AT&T Corp., Liberty Media Corporation, Tele-
Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity
listed on the signature pages thereof.
10.8 Fourth Amendment to Tax Sharing Agreement dated as of October 28,
1999, by and among AT&T Corp., Liberty Media Corporation, Tele-
Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity
listed on the signature pages thereof.
10.9 Fifth Amendment to Tax Sharing Agreement dated as of December 6, 1999,
by and among AT&T Corp., Liberty Media Corporation, Tele-
Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity
listed on the signature pages thereof.
10.10 Sixth Amendment to Tax Sharing Agreement dated as of December 10,
1999, by and among AT&T Corp., Liberty Media Corporation, Tele-
Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity
listed on the signature pages thereof.
10.11 Seventh Amendment to Tax Sharing Agreement dated as of December 30,
1999, by and among AT&T Corp., Liberty Media Corporation, Tele-
Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group
LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered Entity
listed on the signature pages thereof.
10.12 Instrument dated January 14, 2000, adding The Associated Group, Inc.
as a party to the Tax Sharing Agreement dated as of March 9, 1999, as
amended, among The Associated Group, Inc., AT&T Corp., Liberty Media
Corporation, Tele-Communications, Inc., Liberty Ventures Group LLC,
Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and
each Covered Entity listed on the signature pages thereof.
10.13 Amended and Restated Contribution Agreement dated January 14, 2000, by
and among Liberty Media Corporation, Liberty Media Management LLC,
Liberty Media Group LLC, Liberty Ventures Group LLC, The Associated
Group, Inc. and Liberty AGI, Inc.
10.14 First Supplement to Inter-Group Agreement dated as of May 28, 1999,
between and among AT&T Corp., on the one hand, and Liberty Media
Corporation, Liberty Media Group LLC and each Covered Entity listed on
the signature pages thereof, on the other hand.
10.15 Second Supplement to Inter-Group Agreement dated as of September 24,
1999, between and among AT&T Corp., on the one hand, and Liberty Media
Corporation, Liberty Media Group LLC and each Covered Entity listed on
the signature pages thereof, on the other hand.
10.16 Third Supplement to Inter-Group Agreement dated as of October 20,
1999, between and among AT&T Corp., on the one hand, and Liberty Media
Corporation, Liberty Media Group LLC and each Covered Entity listed on
the signature pages thereof, on the other hand.
10.17 Fourth Supplement to Inter-Group Agreement dated as of December 6,
1999, between and among AT&T Corp., on the one hand, and Liberty Media
Corporation, Liberty Media Group LLC and each Covered Entity listed on
the signature pages thereof, on the other hand.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.18 Fifth Supplement to Inter-Group Agreement dated as of December 10,
1999, between and among AT&T Corp., on the one hand, and Liberty Media
Corporation, Liberty Media Group LLC and each Covered Entity listed on
the signature pages thereof, on the other hand.
10.19 Sixth Supplement to Inter-Group Agreement dated as of December 30,
1999, between and among AT&T Corp., on the one hand, and Liberty Media
Corporation, Liberty Media Group LLC and each Covered Entity listed on
the signature pages thereof, on the other hand.
10.20 Instrument dated January 14, 2000, adding The Associated Group, Inc.
as a party to the Inter-Group Agreement dated as of March 9, 1999, as
supplemented, between and among AT&T Corp., on the one hand, and
Liberty Media Corporation, Liberty Media Group LLC and each Covered
Entity listed on the signature pages thereof, on the other hand.
10.21 Restated and Amended Employment Agreement dated November 1, 1992,
between Tele-Communications, Inc. and John C. Malone (assumed by
Liberty as of March 9, 1999), and the amendment thereto dated June 30,
1999 and effective as of March 9, 1999, between Liberty and John C.
Malone (incorporated by reference to Exhibit 10.6 to the Liberty S-4
Registration Statement).
12 Computation of Ratio of Earnings to Fixed Charges (incorporated by
reference to Exhibit 12 to Amendment No. 4 to the Liberty S-4
Registration Statement, as filed on December 10, 1999).
21 List of Subsidiaries of Liberty (incorporated by reference to Exhibit
22 to the Liberty S-4 Registration Statement).
23.1 Consent of KPMG LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Baker Botts L.L.P. (included in Exhibit 5).
24 Powers of Attorney.+
<CAPTION>
25 Statement of Eligibility of Trustee.+
</TABLE>
- --------

+ Previously filed.

<PAGE>

EXHIBIT 5

Baker Botts L.L.P.
599 Lexington Avenue
New York, New York 10022
Telephone: (212) 705-5000
Facsimile: (212) 705-5125

February 9, 2000

Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112

Ladies and Gentlemen:

You have requested our opinion, as counsel for Liberty Media Corporation, a
Delaware corporation ("Liberty"), in connection with Liberty's Registration
Statement on Form S-1 (No. 333- 93917) (as amended, the "Registration
Statement"). The Registration Statement relates to the offer and sale, under
the Securities Act of 1933, as amended (the "Act"), of up to $868,789,000
aggregate principal amount of Liberty's 4% Senior Exchangeable Debentures due
2029 (the "Debentures") by certain selling security holders ("Selling Security
Holders") named in the prospectus, or in supplements thereto (collectively, the
"Prospectus"), forming part of the Registration Statement.

In rendering our opinion, we have examined (i) the Indenture, dated as of
July 7, 1999, as supplemented by a Second Supplemental Indenture, dated as of
November 16, 1999, which were filed as exhibits to the Registration Statement,
(ii) the form of the Debentures, which was filed as an exhibit to the
Registration Statement, and (iii) such other documents, records, and instruments
as we have deemed necessary or advisable for the purpose of rendering this
opinion.

Based upon the foregoing, we are of the opinion that the Debentures, when
sold pursuant to a method of distribution described in the Prospectus and in
compliance with the Act and state securities laws, will be valid and binding
obligations of Liberty, except to the extent that the enforceability thereof may
be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium or other laws relating to or affecting creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our Firm under the caption "Legal
Matters" in the Prospectus. In so doing, we do not admit that we are in the
category of persons whose consent is required under
<PAGE>

Liberty Media Corporation
February 9, 2000
Page 2

Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.

Very truly yours,

BAKER BOTTS L.L.P.

<PAGE>

EXHIBIT 10.6

SECOND AMENDMENT TO THE TAX SHARING AGREEMENT

by and among

AT&T CORP.,

LIBERTY MEDIA CORPORATION,

for itself and each member of the Liberty Group,

TELE-COMMUNICATIONS, INC.,

LIBERTY VENTURES GROUP LLC,

LIBERTY MEDIA GROUP LLC,

TCI STARZ, INC.,

TCI CT HOLDINGS, INC.

and

each Covered Entity listed on the signature pages hereof,

dated as of September 24, 1999
<PAGE>

SECOND AMENDMENT TO THE TAX SHARING AGREEMENT
---------------------------------------------

This Second Amendment, dated as of September 24, 1999 (this "Second
Amendment"), to the Tax Sharing Agreement dated as of March 9, 1999, as amended
by the First Amendment (the "First Amendment") to the Agreement dated as of May
28, 1999 (the "Agreement") is entered into by and among AT&T Corp., a New York
corporation ("AT&T"), Liberty Media Corporation, a Delaware corporation
("Liberty"), for itself and on behalf of each member of the Liberty Group, Tele-
Communications, Inc., a Delaware corporation, Liberty Ventures Group LLC, a
Delaware limited liability company, Liberty Media Group LLC, a Delaware limited
liability company, TCI Starz, Inc., a Colorado corporation, TCI CT Holdings,
Inc., a Delaware corporation, each Covered Entity listed on the signature pages
hereof, and any entities which become parties to the Agreement pursuant to
Section 23 thereto. Unless otherwise stated herein, capitalized terms used in
this Second Amendment shall have the meaning ascribed to such terms in the
Agreement.

WHEREAS, the parties have entered into the Agreement, which governs
the sharing, allocation and reimbursement of federal, state, local and foreign
taxes by the members of the Common Stock Group and the Liberty Group;

WHEREAS, the Capital Stock Committee of the AT&T Board of Directors
has adopted the resolutions attached as Exhibit A to the Second Supplement to
the Inter-Group Agreement, dated as of September 24, 1999 (the "Second
Supplement"), approving and authorizing the repurchase by AT&T from time to time
of up to 135 million shares of Liberty Media Group Tracking Stock (as such
number shall be adjusted from time to time to reflect stock splits, stock
dividends, stock combinations and similar events affecting the Liberty Media
Group Tracking Stock), in accordance with the terms and conditions set forth in
the resolution of the Capital Stock Committee and the Second Supplement (the
"Stock Repurchase Program");

WHEREAS, the parties intend that certain Tax Items arising from or
related to the Stock Repurchase Program shall be considered Tax Items
attributable to the Liberty Group; and

WHEREAS the parties now wish to amend the Agreement in certain
respects to clarify the intent of the parties with respect to sharing,
allocation and reimbursement of federal, state, local and foreign taxes by the
members of the Common Stock Group and the Liberty Group and to make such other
amendments, as provided herein;

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby amend the Tax Sharing Agreement and agree as follows:

1. The Agreement, as amended by the First Amendment, is amended by
inserting in Section 1: "`Repurchase Transactions' shall have the meaning set
forth in the Second Supplement."
<PAGE>

2. The Agreement, as amended by the First Amendment, is amended by
inserting in Section 3(d)(i) the words "the adoption by the Capital Stock
Committee of the AT&T Board of Directors of the resolutions attached as Exhibit
A to the Second Supplement or any action taken by AT&T or any other member of
the Common Stock Group in good faith in accordance with the terms of the Second
Supplement or Second Amendment in connection with the Stock Repurchase Program
or any Repurchase Transaction or" after the words "(except in the case of
clauses (i), (ii) and (iii), to the extent arising out of or relating to" and
before the words "actions taken by AT&T at the request of Liberty...."

3. The Agreement, as amended by the First Amendment, is amended by
inserting as Section 3(d)(xi):

"(xi) Liberty Stock Repurchase Program. Except as set forth in the
--------------------------------
second sentence of this Section 3(d)(xi) with respect to the Excluded Buyback
Tax Items (as defined below) and in addition to (but without duplication of) any
Tax Item for which Liberty is responsible (other than pursuant to this Section
3(d)(xi)) under this Agreement, any Tax Item (including, without limitation, any
gain recognized under Code Section 311(b) and any fee or interest income)
arising from or relating to: (I) any agreement required to be entered into by
AT&T in connection with any Repurchase Transaction or the negotiation, review,
execution or delivery of the Second Amendment or the Second Supplement; (II) any
Repurchase Transaction entered into in accordance with the terms of the Second
Supplement and the applicable Repurchase Notice (as defined in the Second
Supplement); (III) any action taken in good faith by AT&T or any member of the
Common Stock Group in accordance with the terms of the Second Supplement or the
Second Amendment; (IV) AT&T's performance of its obligations under the Second
Supplement (or the Second Amendment) relating to the Stock Repurchase Program in
accordance with the terms of the Second Supplement (or the Second Amendment);
(V) any transaction undertaken by any member of the Liberty Group in connection
with the Stock Repurchase Program, any Repurchase Transaction or any transaction
related thereto; (VI) any excess loss account in the stock of Liberty or any
other member of the Liberty Group; and (VII) any excess loss account in the
stock of any member of the Common Stock Group to the extent that such excess
loss account would not have existed but for the creation or increase in the
excess loss accounts, if any, in the stock of Liberty and the Covered Entities
(to the extent such stock in the Covered Entities is held directly or indirectly
by Liberty Ventures Group LLC or TCI), determined on a collective basis, shall
be for the account of the Liberty Group, and Liberty shall pay AT&T any Tax (or
any reduction in any Tax refund, credit or other benefit) attributable thereto.
Any Tax Item arising from or relating to: (A) any excess loss account in the
stock of any member of the Common Stock Group (except as provided in clause
(VII) above of this Section 3(d)(xi)) or (B) the disposition by any member of
the Common Stock Group in a Repurchase Transaction of Liberty Media Group
Tracking Stock held for the account of the Common Stock Group (the foregoing Tax
Items specified in this sentence shall be referred to as "Excluded Buyback Tax
Items"), shall be for the account of AT&T.

-2-
<PAGE>

4. The words "the date hereof" shall be deleted in each place that
they appear in the Agreement and in lieu thereof shall be inserted the words
"March 9, 1999."

5. Except as otherwise expressly provided herein, the Agreement
shall continue in full force and effect without modification.

-3-
<PAGE>

IN WITNESS WHEREOF, each of the parties has caused this Second
Amendment to be executed by its respective duly authorized officer as of the
date first set forth above.

AT&T CORP.

By: /s/ Marilyn J. Wasser
-------------------------------------
Name: Marilyn J. Wasser
Title:

LIBERTY MEDIA CORPORATION, for itself and for
each member of the Liberty Group

By: /s/ Gary S. Howard
-------------------------------------
Name: Gary S. Howard
Title: Executive Vice President

-4-
<PAGE>

Each of the Covered Entities listed below on this page hereby executes this
Second Amendment as a member of the Liberty Group to acknowledge that such
Person is bound by this Second Amendment as a member of the Liberty Group:

LIBERTY SP, INC.

By: /s/ Gary S. Howard
------------------------------------
Name: Gary S. Howard
Title: Executive Vice President

LIBERTY AGI, INC.

By: /s/ Gary S. Howard
------------------------------------
Name: Gary S. Howard
Title: Executive Vice President

LMC INTERACTIVE, INC.

By: /s/ Gary S. Howard
------------------------------------
Name: Gary S. Howard
Title: Executive Vice President

-5-
<PAGE>

TELE-COMMUNICATIONS, INC.

By: /s/ Stephen M. Brett
-----------------------------------
Name: Stephen M. Brett
Title:

LIBERTY VENTURES GROUP LLC

By: /s/ Stephen M. Brett
-----------------------------------
Name: Stephen M. Brett
Title:

LIBERTY MEDIA GROUP LLC

By: /s/ Gary S. Howard
-----------------------------------
Name: Gary S. Howard
Title: Executive Vice President

TCI STARZ, INC.

By: /s/ Stephen M. Brett
-----------------------------------
Name: Stephen M. Brett
Title:

TCI CT HOLDINGS, INC.

By: /s/ Gary S. Howard
-----------------------------------
Name: Gary S. Howard
Title: Vice President

-6-

<PAGE>

EXHIBIT 10.7

THIRD AMENDMENT TO

TAX SHARING AGREEMENT

by and among

AT&T CORP.,

LIBERTY MEDIA CORPORATION,
for itself and each member of the Liberty Group,

TELE-COMMUNICATIONS, INC.,

LIBERTY VENTURES GROUP LLC,

LIBERTY MEDIA GROUP LLC,

TCI STARZ, INC.,

TCI CT HOLDINGS, INC.,

and

each Covered Entity listed on the signature pages hereof,

dated as of October 20, 1999
<PAGE>

This Third Amendment, dated as of October 20, 1999 (this "Third
Amendment"), to the Tax Sharing Agreement dated as of March 9, 1999, as amended
by the First Amendment (the "First Amendment") to the Tax Sharing Agreement
dated as of May 28, 1999 and the Second Amendment (the "Second Amendment") to
the Tax Sharing Agreement dated as of September 24, 1999 (the "Agreement"), is
entered into by and among AT&T Corp., a New York corporation ("AT&T"), Liberty
Media Corporation, a Delaware corporation ("Liberty"), for itself and on behalf
of each member of the Liberty Group, Tele-Communications, Inc., a Delaware
corporation, Liberty Ventures Group LLC, a Delaware limited liability company,
Liberty Media Group LLC, a Delaware limited liability company, TCI Starz, Inc.,
a Colorado corporation, TCI CT Holdings, Inc., a Delaware corporation, each
Covered Entity listed on the signature pages hereof, and each entity which
becomes a party to the Agreement pursuant to Section 23 thereto. Unless
otherwise stated herein, capitalized terms used in this Third Amendment shall
have the meaning ascribed to such terms in the Agreement.

WHEREAS, the parties have entered into the Agreement which governs the
sharing, allocation and reimbursement of federal, state, local and foreign taxes
by the members of the Common Stock Group and the Liberty Group;

WHEREAS, AT&T intends to acquire Ascent Entertainment Group, Inc., a
Delaware corporation ("Ascent"), in a transaction qualifying as a tax-free
reorganization under Section 368(a) of the Code pursuant to an Agreement and
Plan of Merger dated as of October 20, 1999 (the "Ascent Merger Agreement") for
and on behalf of the Liberty Group;

WHEREAS, the parties intend that any Tax Items arising from or
relating to the Ascent Merger (as defined below), including any Tax Items of
Ascent or any of its direct or indirect assets or subsidiaries, shall be
considered Tax Items attributable to the Liberty Group except to the extent set
forth herein; and

WHEREAS, the parties now wish to amend the Agreement in certain
respects to clarify the intent of the parties with respect to the sharing,
allocation and reimbursement of federal, state, local and foreign taxes by the
members of the Common Stock Group and the Liberty Group and to make such other
amendments, as provided herein;

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby amend the Tax Sharing Agreement as follows:

1. The Agreement is amended by inserting as Section 3(d)(xii):

"(xii) Ascent Merger. Any Tax Item arising from or relating to
-------------
Ascent, Ranger Acquisition Corp. ("Ascent Merger Sub"), On Command Corporation,
COMSAT Corporation, or any of their respective direct or indirect subsidiaries
or affiliates (or any predecessor or successor of any of the foregoing under
applicable corporate, limited liability company, partnership or other
organizational law) (the "Ascent Entities"); the status of any member of the
Common Stock Group as the successor under Code Section 381 (or comparable
provision of state, local or
<PAGE>

foreign Tax law) to any of the Ascent Entities; any direct or indirect asset,
liability, business, investment or operation of any of the Ascent Entities; the
merger of Ascent Merger Sub with and into Ascent (the "Ascent Merger"), the
Ascent Merger Agreement, the Post-Merger Restructuring Transactions (as defined
in the Ascent Merger Agreement), the issuance of New Liberty Media Group
Tracking Stock in the Ascent Merger or any other transaction contemplated by the
Ascent Merger Agreement, the Third Supplement to Inter-Group Agreement dated
October 20, 1999 (the "Third Supplement"), or this Third Amendment, or any other
document to which the Company, Liberty or any of their respective Subsidiaries
(as defined in the Ascent Merger Agreement) or Affiliates (as defined in the
Ascent Merger Agreement) is a party that is referred to in the Ascent Merger
Agreement, the Third Supplement, and this Third Amendment or executed in
connection therewith (any of the foregoing Tax Items specified in this sentence
shall be referred to hereinafter as an "Ascent Tax Item"), shall be for the
account of the Liberty Group (except to the extent otherwise provided in this
Section 3(d)(xii) with respect to any Ascent Tax Item), and Liberty shall pay
AT&T any Tax (or any reduction in any Tax refund, credit or other benefit)
attributable thereto. Notwithstanding anything in the preceding sentence to the
contrary, any Ascent Tax Item shall be for the account of AT&T hereunder if, and
to the extent that, such Ascent Tax Item arises directly from and would not have
arisen but for (i) any inaccuracy in any of the representations by AT&T or
Ascent Merger Sub in the Officer's Certificate dated as of the closing date of
the Ascent Merger delivered by AT&T and Ascent Merger Sub in connection with the
opinions to be delivered pursuant to Sections 8.2(h) and 8.3(e) of the Ascent
Merger Agreement, (ii) any breach by AT&T or Ascent Merger Sub of any of their
representations or covenants in Sections 3.9, 3.10, 3.11, 5.3, 7.7, 7.12, 7.13
of the Ascent Merger Agreement or (iii) any breach by AT&T of any representation
or covenant in the Inter-Group Agreement (except in the case of clauses (i),
(ii) and (iii), to the extent arising out of or relating to the adoption by the
Capital Stock Committee of the AT&T Board of Directors of the resolutions
attached as Exhibit A to the Second Supplement to the Inter-Group Agreement,
dated as of September 24, 1999 (the "Second Supplement") or any action taken by
AT&T or any other member of the Common Stock Group in good faith in accordance
with the terms of the Second Supplement or Second Amendment in connection with
the Stock Repurchase Program (as defined in the Second Supplement) or any
Repurchase Transaction or actions taken by AT&T at the request of Liberty as
contemplated by Section 1.2(d) of the Third Supplement or otherwise in writing),
and AT&T shall pay to the applicable Governmental Authority or to Liberty any
Tax, and shall pay to Liberty any reduction in any Tax refund, credit or other
benefit that is for the account of Liberty hereunder, attributable thereto.

2. The Agreement is amended by (i) deleting in Section 9(b) the word
"or" and inserting in lieu thereof "," after the words "any Pre-Closing Taxable
Period" and before the words "(II) AGI for any taxable period . . ." and (ii)
inserting in Section 9(b) the words ", or (III) Ascent for any taxable period
ending on or prior to the date of the closing of the Ascent Merger or any
Subsidiary of Ascent during any such period for such period" after the words "or
any Subsidiary of AGI during any such period for such period" and before the
words "; provided, however, that (i) AT&T shall be entitled to participate . . .
."
<PAGE>

3. Except as otherwise expressly provided herein, the Agreement
shall continue in full force and effect without modification.
<PAGE>

IN WITNESS WHEREOF, each of the parties has caused this Third
Amendment to be executed by its respective duly authorized officer as of the
date first set forth above.

AT&T CORP.

By: /s/ Daniel E. Somers
--------------------
Name: Daniel E. Somers
Title: Senior Executive Vice President and
Chief Financial Officer

LIBERTY MEDIA CORPORATION, for
itself and for each member of the Liberty Group

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President and Chief
Operating Officer
<PAGE>

Each of the Covered Entities listed below on this page hereby executes this
Third Amendment as a member of the Liberty Group to acknowledge that such Person
is bound by this Third Amendment as a member of the Liberty Group:

LIBERTY SP, INC.

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President and Chief
Operating Officer

LIBERTY AGI, INC.

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President and Chief
Operating Officer

LMC INTERACTIVE, INC.

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President and Chief
Operating Officer
<PAGE>

TELE-COMMUNICATIONS, INC.

By: /s/ Daniel E. Somers
--------------------
Name: Daniel E. Somers
Title: Acting President

LIBERTY VENTURES GROUP LLC

By: /s/ Stephen M. Brett
--------------------
Name: Stephen M. Brett
Title: Vice President and Secretary

LIBERTY MEDIA GROUP LLC

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Vice President

TCI STARZ, INC.

By: /s/ Stephen M. Brett
--------------------
Name: Stephen M. Brett
Title: Vice President and Secretary

TCI CT HOLDINGS, INC.

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President and Chief
Operating Officer

<PAGE>

EXHIBIT 10.8

FOURTH AMENDMENT TO

TAX SHARING AGREEMENT

by and among

AT&T CORP.,

LIBERTY MEDIA CORPORATION,
for itself and each member of the Liberty Group,

TELE-COMMUNICATIONS, INC.,

LIBERTY VENTURES GROUP LLC,

LIBERTY MEDIA GROUP LLC,

TCI STARZ, INC.,

TCI CT HOLDINGS, INC.,

and

each Covered Entity listed on the signature pages hereof,

dated as of October 28, 1999
<PAGE>

This Fourth Amendment, dated as of October 28, 1999 (this "Fourth
Amendment"), to the Tax Sharing Agreement (the "Agreement") dated as of March 9,
1999, as amended by the First Amendment (the "First Amendment") to the Tax
Sharing Agreement dated as of May 28, 1999, the Second Amendment (the "Second
Amendment") to the Tax Sharing Agreement dated as of September 24, 1999 and the
Third Amendment (the "Third Amendment") to the Tax Sharing Agreement dated as of
October 20, 1999, is entered into by and among AT&T Corp., a New York
corporation, Liberty Media Corporation, a Delaware corporation, for itself and
on behalf of each member of the Liberty Group, Tele-Communications, Inc., a
Delaware corporation, Liberty Ventures Group LLC, a Delaware limited liability
company, Liberty Media Group LLC, a Delaware limited liability company, TCI
Starz, Inc., a Colorado corporation, TCI CT Holdings, Inc., a Delaware
corporation, each Covered Entity listed on the signature pages hereof, and each
entity which becomes a party to the Agreement pursuant to Section 23 thereto.
Unless otherwise stated herein, capitalized terms used in this Fourth Amendment
shall have the meaning ascribed to such terms in the Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby agree as follows:

1. "AGI Merger Agreement" shall mean the Amended and Restated
Agreement and Plan of Merger dated as of October 28, 1999.

2. The first sentence of Section 3(d)(i) shall be amended as
follows:

a. the words "Cayman LLC (as defined in the AGI Merger
Agreement)," shall be deleted;

b. the words "the Original Agreement (as defined in the AGI
Merger Agreement)," shall be inserted after the words "; the
AGI Acquisition, the AGI Merger Agreement," and before the
words "the AGI Merger";

c. the words ", as amended" shall be inserted after the words
"the First Supplement to Inter-Group Agreement dated May 28,
1999" and before the words "(the "First Supplement")";
<PAGE>

d. the words "the Fourth Amendment" shall be inserted after the
words "this Clause D of this First Amendment," and before the
words "or the Voting Agreement dated May 28, 1999"; and

e. the words ", the Fourth Amendment" shall be inserted after the
words "this Clause D of this First Amendment" and before the
words "and the Voting Agreement or executed".

3. Except as otherwise expressly provided herein, the Agreement
shall continue in full force and effect without modification.
<PAGE>

IN WITNESS WHEREOF, each of the parties has caused this Fourth
Amendment to be executed by its respective duly authorized officer as of the
date first set forth above.

AT&T CORP.

By: /s/ Daniel E. Somers
--------------------
Name: Daniel E. Somers
Title: Senior Executive Vice President
and Chief Financial Officer

LIBERTY MEDIA CORPORATION, for
itself and for each member of the Liberty
Group

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President and Chief
Operating Officer
<PAGE>

Each of the Covered Entities listed below on this page hereby executes this
Fourth Amendment as a member of the Liberty Group to acknowledge that such
Person is bound by this Fourth Amendment as a member of the Liberty Group:

LIBERTY SP, INC.

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President and Chief
Operating Officer

LIBERTY AGI, INC.

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President and Chief
Operating Officer

LMC INTERACTIVE, INC.

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President and Chief
Operating Officer
<PAGE>

TELE-COMMUNICATIONS, INC.

By: /s/ Steven M. Brett
-------------------
Name: Steven M. Brett
Title: Sr. Executive Vice President

LIBERTY VENTURES GROUP LLC

By: /s/ Steven M. Brett
-------------------
Name: Steven M. Brett
Title: Vice President

LIBERTY MEDIA GROUP LLC

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Vice President

TCI STARZ, INC.

By: /s/ Stephen M. Brett
--------------------
Name: Stephen M. Brett
Title: Vice President

TCI CT HOLDINGS, INC.

By: /s/ Stephen M. Brett
--------------------
Name: Stephen M. Brett
Title: Vice President

<PAGE>

EXHIBIT 10.9

FIFTH AMENDMENT TO

TAX SHARING AGREEMENT

by and among

AT&T CORP.,

LIBERTY MEDIA CORPORATION,
for itself and each member of the Liberty Group,

TELE-COMMUNICATIONS, INC.,

LIBERTY VENTURES GROUP LLC,

LIBERTY MEDIA GROUP LLC,

TCI STARZ, INC.,

TCI CT HOLDINGS, INC.,

and

each Covered Entity listed on the signature pages hereof,

dated as of December 6, 1999

1
<PAGE>

This Fifth Amendment, dated as of December 6, 1999 (this "Fifth
Amendment"), to the Tax Sharing Agreement (the "Agreement") dated as of March 9,
1999, as amended by the First Amendment (the "First Amendment") to the Tax
Sharing Agreement dated as of May 28, 1999, the Second Amendment (the "Second
Amendment") to the Tax Sharing Agreement dated as of September 24, 1999, the
Third Amendment (the "Third Amendment") to the Tax Sharing Agreement dated as of
October 20, 1999, and the Fourth Amendment (the "Fourth Amendment") to the Tax
Sharing Agreement dated as of October 28, 1999, is entered into by and among
AT&T Corp., a New York corporation ("AT&T"), Liberty Media Corporation, a
Delaware corporation ("Liberty"), for itself and on behalf of each member of the
Liberty Group, Tele-Communications, Inc., a Delaware corporation, Liberty
Ventures Group LLC, a Delaware limited liability company, Liberty Media Group
LLC, a Delaware limited liability company, TCI Starz, Inc., a Colorado
corporation, TCI CT Holdings, Inc., a Delaware corporation, each Covered Entity
listed on the signature pages hereof, and each entity which becomes a party to
the Agreement pursuant to Section 23 thereto. Unless otherwise stated herein,
capitalized terms used in this Fifth Amendment shall have the meaning ascribed
to such terms in the Agreement.

WHEREAS, AT&T intends to acquire Four Media Company, a Delaware
corporation ("4MC"), pursuant to an Agreement and Plan of Merger dated as of
December 3, 1999 (the "4MC Merger Agreement") for and on behalf of the Liberty
Group;

WHEREAS, the parties intend that any Tax Items arising from or
relating to the 4MC Merger (as defined below), including any Tax Items of 4MC or
any of its direct or indirect assets or subsidiaries, shall be considered Tax
Items attributable to the Liberty Group except to the extent set forth herein;
and

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby amend the Tax Sharing Agreement as follows:

1. The Agreement is amended by inserting as Section 3(d)(xiii):

"(xiii) 4MC Merger. Any Tax Item arising from or relating to 4MC,
----------
D-Group Merger Corp. ("4MC Merger Sub") or any of their respective direct or
indirect subsidiaries or affiliates (or any predecessor or successor of any of
the foregoing under applicable corporate, limited liability company, partnership
or other organizational law) (the "4MC Entities"); the status

2
<PAGE>

of any member of the Common Stock Group as the successor under Code Section 381
(or comparable provision of state, local or foreign Tax law) to any of the 4MC
Entities; any direct or indirect asset, liability, business, investment or
operation of any of the 4MC Entities; the merger of 4MC Merger Sub with and into
4MC (the "4MC Merger"), the 4MC Merger Agreement, the Post-Merger Restructuring
Transactions (as defined in the 4MC Merger Agreement), the issuance of New
Liberty Media Group Tracking Stock in the 4MC Merger or any other transaction
contemplated by the 4MC Merger Agreement, the Fourth Supplement to Inter-Group
Agreement dated December 3, 1999 (the "Fourth Supplement"), or this Fifth
Amendment, or any other document to which 4MC, Liberty or any of their
respective Subsidiaries (as defined in the 4MC Merger Agreement) or Affiliates
(as defined in the 4MC Merger Agreement) is a party that is referred to in the
4MC Merger Agreement, the Fourth Supplement, or this Fifth Amendment or executed
in connection therewith (any of the foregoing Tax Items specified in this
sentence shall be referred to hereinafter as a "4MC Tax Item"), shall be for the
account of the Liberty Group (except to the extent otherwise provided in this
Section 3(d)(xiii) with respect to any 4MC Tax Item), and Liberty shall pay AT&T
any Tax (or any reduction in any Tax refund, credit or other benefit)
attributable thereto. Notwithstanding anything in the preceding sentence to the
contrary, any 4MC Tax Item shall be for the account of AT&T hereunder if, and to
the extent that, (x) such 4MC Tax Item arises directly from and would not have
arisen but for (i) any breach by AT&T or 4MC Merger Sub of any of their
representations or covenants in Sections 2.6 and 5.4 of the 4MC Merger
Agreement, (ii) any breach by AT&T of any representation or covenant in the
Inter-Group Agreement (except in the case of clauses (i) and (ii), to the extent
arising out of or relating to the adoption by the Capital Stock Committee of the
AT&T Board of Directors of the resolutions attached as Exhibit A to the Second
Supplement or any action taken by AT&T or any other member of the Common Stock
Group in good faith in accordance with the terms of the Second Supplement or
Second Amendment in connection with the Stock Repurchase Program (as defined in
the Second Supplement) or any Repurchase Transaction or actions taken by AT&T at
the request of Liberty as contemplated by Section 1.2(d) of the Fourth
Supplement or otherwise in writing) or (y) such 4MC Tax Item arises from or
relates to the ownership by any member of the Common Stock Group of any stock
of, or any interest in, 4MC that is held for the account of the Common Stock
Group, and AT&T shall pay to the applicable Governmental Authority or to Liberty
any Tax, and shall pay to Liberty any reduction in any Tax refund, credit or
other benefit that is for the account of Liberty hereunder, attributable
thereto."

2. The Agreement is amended by (i) deleting in Section 9(b) the word
"or" after the words "or any Subsidiary of AGI during any such period for such
period," and before the words "(III) Ascent for any taxable period ..." and
(ii) inserting in Section 9(b) the words ", or (IV) 4MC for any taxable period
ending on or prior to the date of the closing of the 4MC Merger or any
Subsidiary of 4MC during any such period for such period" after the words "or
any Subsidiary of Ascent during any such period for such period" and before the
words;" provided, however, that (i) AT&T shall be entitled to participate ...."

3
<PAGE>

3. The Agreement is amended by inserting as Section 3(d)(xiv):

"(xiv) For purposes of this Agreement, neither AT&T, AGI Merger Sub,
Ascent Merger Sub, nor 4MC Merger Sub (such subsidiaries, the "Acquisition
Subs") shall be considered to have breached a representation or covenant in any
of the AGI Merger Agreement, Ascent Merger Agreement, or 4MC Merger Agreement
(the "Acquisition Agreements") (or any Officer's Certificate delivered in
connection with the tax opinions delivered pursuant to such Acquisition
Agreements) or the Inter-Group Agreement by reason of any action (or failure to
act) of any of AGI, Ascent, 4MC or any of their respective subsidiaries, except
to the extent that AT&T or such subsidiary would in the absence of this
paragraph (xiv) be considered to have breached such representation or covenant
and such breach arises directly from, and would not have arisen but for, AT&T or
another member of the Common Stock Group knowingly causing such action (or
failure to act). In addition, for purposes of this Agreement, no action taken,
or not taken, by AT&T, any Acquisition Sub or any member of the Common Stock
Group at the written request or written direction of Liberty shall be deemed or
considered a breach of any of the Acquisition Agreements (or any Officer's
Certificate delivered in connection with the tax opinions delivered pursuant to
such Acquisition Agreements) or the Inter-Group Agreement."

4. Except as otherwise expressly provided herein, the Agreement
shall continue in full force and effect without modification.

4
<PAGE>

IN WITNESS WHEREOF, each of the parties has caused this Fifth
Amendment to be executed by its respective duly authorized officer as of the
date first set forth above.

AT&T CORP.

By: /s/ Marilyn J. Wasser
---------------------
Name: Marilyn J. Wasser
Title: Vice President--Law and Secretary

LIBERTY MEDIA CORPORATION, for
itself and for each member of the Liberty
Group

By: /s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President
<PAGE>

Each of the Covered Entities listed below on this page hereby executes this
Fifth Amendment as a member of the Liberty Group to acknowledge that such Person
is bound by this Fifth Amendment as a member of the Liberty Group:

LIBERTY SP, INC.

By: /s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LIBERTY AGI, INC.

By: /s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LMC INTERACTIVE, INC.

By: /s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President
<PAGE>

TELE-COMMUNICATIONS, INC.

By: /s/ Stephen M.. Brett
---------------------
Name: Stephen M. Brett
Title: Senior Executive Vice President

LIBERTY VENTURES GROUP LLC

By: /s/ Stephen M. Brett
--------------------
Name: Stephen M. Brett
Title: Vice President and Secretary

LIBERTY MEDIA GROUP LLC

By: /s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

TCI STARZ, INC.

By: /s/ Stephen M. Brett
--------------------
Name: Stephen M. Brett
Title: Vice President

TCI CT HOLDINGS, INC.

By: /s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

<PAGE>

EXHIBIT 10.10

SIXTH AMENDMENT TO

TAX SHARING AGREEMENT

by and among

AT&T CORP.,

LIBERTY MEDIA CORPORATION,
for itself and each member of the Liberty Group,

TELE-COMMUNICATIONS, INC.,

LIBERTY VENTURES GROUP LLC,

LIBERTY MEDIA GROUP LLC,

TCI STARZ, INC.,

TCI CT HOLDINGS, INC.,

and

each Covered Entity listed on the signature pages hereof,

dated as of December 10, 1999

1
<PAGE>

This Sixth Amendment, dated as of December 10, 1999 (this "Sixth
Amendment"), to the Tax Sharing Agreement (the "Agreement") dated as of March 9,
1999, as amended by the First Amendment (the "First Amendment") to the Tax
Sharing Agreement dated as of May 28, 1999, the Second Amendment (the "Second
Amendment") to the Tax Sharing Agreement dated as of September 24, 1999, the
Third Amendment (the "Third Amendment") to the Tax Sharing Agreement dated as of
October 20, 1999, the Fourth Amendment (the "Fourth Amendment") to the Tax
Sharing Agreement dated as of October 28, 1999, and the Fifth Amendment to the
Tax Sharing Agreement dated as of December 6, 1999, is entered into by and among
AT&T Corp., a New York corporation ("AT&T"), Liberty Media Corporation, a
Delaware corporation ("Liberty"), for itself and on behalf of each member of the
Liberty Group, Tele-Communications, Inc., a Delaware corporation, Liberty
Ventures Group LLC, a Delaware limited liability company, Liberty Media Group
LLC, a Delaware limited liability company, TCI Starz, Inc., a Colorado
corporation, TCI CT Holdings, Inc., a Delaware corporation, each Covered Entity
listed on the signature pages hereof, and each entity which becomes a party to
the Agreement pursuant to Section 23 thereto. Unless otherwise stated herein,
capitalized terms used in this Sixth Amendment shall have the meaning ascribed
to such terms in the Agreement.

WHEREAS, AT&T intends to acquire The Todd-AO Corporation, a Delaware
corporation ("Todd"), in a transaction qualifying as a tax-free reorganization
under Section 368(a) of the Code pursuant to an Agreement and Plan of Merger
dated as of December 10, 1999 (the "Todd Merger Agreement") for and on behalf of
the Liberty Group;

WHEREAS, the parties intend that any Tax Items arising from or
relating to the Todd Merger (as defined below), including any Tax Items of Todd
or any of its direct or indirect assets or subsidiaries, shall be considered Tax
Items attributable to the Liberty Group except to the extent set forth herein;
and

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby amend the Tax Sharing Agreement as follows:

1. The Agreement is amended by inserting as Section 3(d)(xv):

"(xv) Todd Merger. Any Tax Item arising from or relating to Todd,
-----------
B-Group Merger Corp. ("Todd Merger Sub") or any of their respective direct or
indirect subsidiaries or

2
<PAGE>

affiliates (or any predecessor or successor of any of the foregoing under
applicable corporate, limited liability company, partnership or other
organizational law) (the "Todd Entities"); the status of any member of the
Common Stock Group as the successor under Code Section 381 (or comparable
provision of state, local or foreign Tax law) to any of the Todd Entities; any
direct or indirect asset, liability, business, investment or operation of any of
the Todd Entities; the merger of Todd Merger Sub with and into Todd (the "Todd
Merger"), the Todd Merger Agreement, the Post-Merger Restructuring Transactions
(as defined in the Todd Merger Agreement), the Reclassification (as defined in
the Todd Merger Agreement), the issuance of New Liberty Media Group Tracking
Stock in the Todd Merger or any other transaction contemplated by the Todd
Transaction Documents (as defined below) (any of the foregoing Tax Items
specified in this sentence shall be referred to hereinafter as a "Todd Tax
Item"), shall be for the account of the Liberty Group (except to the extent
otherwise provided in this Section 3(d)(xv) with respect to any Todd Tax Item),
and Liberty shall pay AT&T any Tax (or any reduction in any Tax refund, credit
or other benefit) attributable thereto. Notwithstanding anything in the
preceding sentence to the contrary, any Todd Tax Item (except for any Todd Tax
Item realized after the stock in Todd acquired in the Todd Merger is transferred
to Liberty, other than any Todd Tax Item which consists of any income or gain
realized on the disposition, termination or settlement of any Todd/AT&T Option
(as defined below) (or any income or gain realized on the transfer of the
property described in clause (X) or (Y) of the definition of Todd/AT&T Option
pursuant to any Todd/AT&T Option)) shall be for the account of AT&T hereunder
if, and to the extent that, such Todd Tax Item arises directly from and would
not have arisen but for (i) any inaccuracy in any of the representations by AT&T
or Todd Merger Sub in the Officer's Certificate dated as of the closing date of
the Todd Merger delivered by AT&T and Todd Merger Sub in connection with the
opinions to be delivered pursuant to Sections 8.2(f), 8.3(e) and 8.4(f) of the
Todd Merger Agreement, (ii) any breach by AT&T or Todd Merger Sub of any of
their representations or covenants in Sections 2.8, 3.7(b), 3.8(a), 3.8(c), 3.9,
5.4 and (except to the extent of any conflict between the requirements of
Section 7.14 of the Todd Merger Agreement and Article 9 of this Agreement) 7.14
of the Todd Merger Agreement or (iii) any breach by AT&T of any representation
or covenant in the Inter-Group Agreement (except in the case of clauses (i),
(ii) and (iii), to the extent arising out of or relating to the adoption by the
Capital Stock Committee of the AT&T Board of Directors of the resolutions
attached as Exhibit A to the Second Supplement to the Inter-Group Agreement,
dated as of September 24, 1999 (the "Second Supplement") or any action taken by
AT&T or any other member of the Common Stock Group in good faith in accordance
with the terms of the Second Supplement or Second Amendment in connection with
the Stock Repurchase Program (as defined in the Second Supplement) or any
Repurchase Transaction or any other action taken by AT&T at the request of
Liberty as contemplated by Section 1.2(d) of the Fifth Supplement to Inter-Group
Agreement dated December 10, 1999 (the "Fifth Supplement") or otherwise in
writing), and AT&T shall pay to the applicable Governmental Authority or to
Liberty any Tax, and shall pay to Liberty any reduction in any Tax refund,
credit or other benefit that is for the account of Liberty hereunder,
attributable thereto. "Todd Transaction Documents" shall mean the Todd Merger
Agreement, the Fifth Supplement, or this Sixth Amendment, or any other document
to which Todd, Liberty or any of their respective Subsidiaries (as defined in
the Todd Merger Agreement) or Affiliates (as defined in the Todd

3
<PAGE>

Merger Agreement) is a party that is referred to in the Todd Merger Agreement,
the Fifth Supplement, or this Sixth Amendment or executed in connection
therewith. "Todd/AT&T Option" shall mean any option or contractual obligation
(other than any option or contractual obligation (A) that Liberty requests in
writing to be entered into or (B) pursuant to any of the Todd Transaction
Documents, the Contribution Agreement, the AT&T Charter or any other agreement
to which Liberty is a party) with respect to (X) the stock in Todd acquired in
the Todd Merger, or (Y) any direct or indirect asset, liability, business,
investment or operation of any of the Todd Entities, which option or contractual
obligation is entered into in writing by AT&T or any other member of the Common
Stock Group (or that AT&T or any other member of the Common Stock Group causes
any of the Todd Entities to enter into in writing) prior to the transfer of the
stock in Todd acquired in the Todd Merger to Liberty."

2. The Agreement is amended by (i) deleting in Section 9(b) the word
"or" after the words "or any Subsidiary of Ascent during any such period for
such period," and before the words "(IV) 4MC for any taxable period ..." and
(ii) inserting in Section 9(b) the words ", or (V) Todd for any taxable period
ending on or prior to the date of the closing of the Todd Merger or any
Subsidiary of Todd during any such period for such period" after the words "or
any Subsidiary of 4MC during any such period for such period" and before the
words "; provided, however, that (i) AT&T shall be entitled to participate ...
."

3. The Agreement is amended by (i) inserting in Section 3(d)(xiv)
the words "Todd Merger Sub," after the words "Ascent Merger Sub," and before the
words "nor 4MC Merger Sub ..."; (ii) inserting in Section 3(d)(xiv) the words
"Todd Merger Agreement," after the words "Ascent Merger Agreement," and before
the words "or 4MC Merger Agreement ..."; and (iii) inserting in Section
3(d)(xiv) the words "Todd," after the words "any action (or failure to act) of
any of AGI, Ascent," and before the words "4MC or any of their respective
subsidiaries...."

4. The Agreement is amended by inserting in Section 3(d)(i) the
words "(except to the extent of any conflict between the requirements of Section
7.13 of the AGI Merger Agreement and Article 9 of this Agreement)" after the
words "5.5, 7.7," and before the words "7.13, and 7.15 of the AGI Merger
Agreement ..." and by inserting in Section 3(d)(i) the words "(except to the
extent of any conflict between the requirements of Section 3.11 of the AGI
Merger Agreement and Article 9 of this Agreement)" after the words "3.6, 3.7,"
and before the words "3.11, 3.12 ...."

5. Except as otherwise expressly provided herein, the Agreement
shall continue in full force and effect without modification.

4
<PAGE>

IN WITNESS WHEREOF, each of the parties has caused this Sixth
Amendment to be executed by its respective duly authorized officer as of the
date first set forth above.

AT&T CORP.

By: /s/ Marilyn J. Wasser
---------------------
Name: Marilyn J. Wasser
Title: Vice President--Law & Secretary

LIBERTY MEDIA CORPORATION, for
itself and for each member of the Liberty
Group

By: /s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

5
<PAGE>

Each of the Covered Entities listed below on this page hereby executes this
Sixth Amendment as a member of the Liberty Group to acknowledge that such Person
is bound by this Sixth Amendment as a member of the Liberty Group:

LIBERTY SP, INC.

By: /s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LIBERTY AGI, INC.

By: /s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LMC INTERACTIVE, INC.

By: /s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

6
<PAGE>

TELE-COMMUNICATIONS, INC.

By: /s/ Stephen M Brett
-------------------
Name: Stephen M. Brett
Title: Sr. Executive Vice President

LIBERTY VENTURES GROUP LLC

By: /s/ Stephen M. Brett
--------------------
Name: Stephen M. Brett
Title: Vice President

LIBERTY MEDIA GROUP LLC

By: /s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Vice President

TCI STARZ, INC.

By: /s/ Stephen M. Brett
--------------------
Name: Stephen M. Brett
Title: Vice President

TCI CT HOLDINGS, INC.

By: /s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

<PAGE>

EXHIBIT 10.11

SEVENTH AMENDMENT TO

TAX SHARING AGREEMENT

by and among

AT&T CORP.,

LIBERTY MEDIA CORPORATION,
for itself and each member of the Liberty Group,

TELE-COMMUNICATIONS, INC.,

LIBERTY VENTURES GROUP LLC,

LIBERTY MEDIA GROUP LLC,

TCI STARZ, INC.,

TCI CT HOLDINGS, INC.,

and

each Covered Entity listed on the signature pages hereof,

dated as of December 30, 1999

1
<PAGE>

This Seventh Amendment, dated as of December 30, 1999 (this "Seventh
Amendment"), to the Tax Sharing Agreement (the "Agreement") dated as of March 9,
1999, as amended by the First Amendment to the Tax Sharing Agreement dated as of
May 28, 1999, the Second Amendment (the "Second Amendment") to the Tax Sharing
Agreement dated as of September 24, 1999, the Third Amendment to the Tax Sharing
Agreement dated as of October 20, 1999, the Fourth Amendment to the Tax Sharing
Agreement dated as of October 28, 1999, the Fifth Amendment to the Tax Sharing
Agreement dated as of December 6, 1999, and the Sixth Amendment to the Tax
Sharing Agreement dated as of December 10, 1999, is entered into by and among
AT&T Corp., a New York corporation ("AT&T"), Liberty Media Corporation, a
Delaware corporation ("Liberty"), for itself and on behalf of each member of the
Liberty Group, Tele-Communications, Inc., a Delaware corporation, Liberty
Ventures Group LLC, a Delaware limited liability company, Liberty Media Group
LLC, a Delaware limited liability company, TCI Starz, Inc., a Colorado
corporation, TCI CT Holdings, Inc., a Delaware corporation, each Covered Entity
listed on the signature pages hereof, and each entity which becomes a party to
the Agreement pursuant to Section 23 thereto. Unless otherwise stated herein,
capitalized terms used in this Seventh Amendment shall have the meaning ascribed
to such terms in the Agreement.

WHEREAS, following the merger of SounDelux Entertainment Group, Inc.,
a California corporation ("SounDelux California") with and into its wholly owned
subsidiary, Soundelux Entertainment Group of Delaware, Inc., a Delaware
corporation ("Soundelux") and the reclassification of the stock of Soundelux, as
the surviving corporation in such merger, AT&T intends to acquire Soundelux in a
transaction qualifying as a tax-free reorganization under Section 368(a) of the
Code pursuant to an Agreement and Plan of Merger dated as of December 30, 1999
(the "Soundelux Merger Agreement") for and on behalf of the Liberty Group;

WHEREAS, the parties intend that any Tax Items arising from or
relating to the Soundelux Merger (as defined below), including any Tax Items of
Soundelux or any of its direct or indirect assets or subsidiaries, shall be
considered Tax Items attributable to the Liberty Group except to the extent set
forth herein; and

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby amend the Tax Sharing Agreement as follows:

1. The Agreement is amended by inserting as Section 3(d)(xvi):

2
<PAGE>

"(xvi) Soundelux Merger. Any Tax Item arising from or relating to
----------------
Soundelux, SounDelux California, C-Group Merger Corp. ("Soundelux Merger Sub")
or any of their respective direct or indirect subsidiaries or affiliates (or any
predecessor or successor of any of the foregoing under applicable corporate,
limited liability company, partnership or other organizational law) (the
"Soundelux Entities"); the status of any member of the Common Stock Group as the
successor under Code Section 381 (or comparable provision of state, local or
foreign Tax law) to any of the Soundelux Entities; any direct or indirect asset,
liability, business, investment or operation of any of the Soundelux Entities;
the merger of Soundelux Merger Sub with and into Soundelux (the "Soundelux
Merger"), the Soundelux Merger Agreement, the Reclassified Company Charter (as
defined in the Soundelux Merger Agreement), the Post-Merger Restructuring
Transactions (as defined in the Soundelux Merger Agreement), the Todd
Contributions (as defined in the Soundelux Merger Agreement), the
Reincorporation Merger (as defined in the Soundelux Merger Agreement), the
Reclassification (as defined in the Soundelux Merger Agreement), the MTS Earnout
(as defined in the Soundelux Merger Agreement), the Escrow Agreement (as defined
in the Soundelux Merger Agreement), the Registration Rights Agreement (as
defined in the Soundelux Merger Agreement), the Shareholders Agreement (as
defined in the Soundelux Merger Agreement), the issuance of New Liberty Media
Group Tracking Stock in the Soundelux Merger or any other transaction
contemplated by the Soundelux Merger Agreement, the Reclassified Company Charter
(as defined in the Soundelux Merger Agreement), the Sixth Supplement to Inter-
Group Agreement dated December 30, 1999 (the "Sixth Supplement"), or this
Seventh Amendment, the Escrow Agreement (as defined in the Soundelux Merger
Agreement), the Registration Rights Agreement (as defined in the Soundelux
Merger Agreement), the Shareholders Agreement (as defined in the Soundelux
Merger Agreement), or any other document to which Soundelux, Liberty or any of
their respective Subsidiaries (as defined in the Soundelux Merger Agreement) or
Affiliates (as defined in the Soundelux Merger Agreement) is a party that is
referred to in the Soundelux Merger Agreement, the Reclassified Company Charter
(as defined in the Soundelux Merger Agreement), the Sixth Supplement, the Escrow
Agreement (as defined in the Soundelux Merger Agreement), the Registration
Rights Agreement (as defined in the Soundelux Merger Agreement), the
Shareholders Agreement (as defined in the Soundelux Merger Agreement), or this
Seventh Amendment or executed in connection therewith (any of the foregoing Tax
Items specified in this sentence shall be referred to hereinafter as a
"Soundelux Tax Item"), shall be for the account of the Liberty Group (except to
the extent otherwise provided in this Section 3(d)(xvi) with respect to any
Soundelux Tax Item), and Liberty shall pay AT&T any Tax (or any reduction in any
Tax refund, credit or other benefit) attributable thereto. Notwithstanding
anything in the preceding sentence to the contrary, any Soundelux Tax Item shall
be for the account of AT&T hereunder if, and to the extent that, such Soundelux
Tax Item arises directly from and would not have arisen but for (i) any breach
by AT&T or Soundelux Merger Sub of any of their representations or covenants in
Sections 2.8(a), 5.4 and (except to the extent of any conflict between the
requirements of Section 10.1 of the Soundelux Merger Agreement and Article 9 of
this Agreement) 10.1 of the Soundelux Merger Agreement or (ii) any breach by
AT&T of any representation or covenant in the Inter-Group Agreement (except in
the case of clauses (i) and

3
<PAGE>

(ii), to the extent arising out of or relating to the adoption by the Capital
Stock Committee of the AT&T Board of Directors of the resolutions attached as
Exhibit A to the Second Supplement to the Inter-Group Agreement, dated as of
September 24, 1999 (the "Second Supplement") or any action taken by AT&T or any
other member of the Common Stock Group in good faith in accordance with the
terms of the Second Supplement or Second Amendment in connection with the Stock
Repurchase Program (as defined in the Second Supplement) or any Repurchase
Transaction or any action taken by AT&T at the request of Liberty as
contemplated by Section 1.2(d) of the Sixth Supplement or otherwise in writing),
and AT&T shall pay to the applicable Governmental Authority or to Liberty any
Tax, and shall pay to Liberty any reduction in any Tax refund, credit or other
benefit that is for the account of Liberty hereunder, attributable thereto."

2. The Agreement is amended by (i) deleting in Section 9(b) the word
"or" after the words "or any Subsidiary of 4MC during any such period for such
period," and before the words "(V) Todd for any taxable period ..." and (ii)
inserting in Section 9(b) the words ", or (VI) Soundelux for any taxable period
ending on or prior to the date of the closing of the Soundelux Merger or any
Subsidiary of Soundelux during any such period for such period" after the words
"or any Subsidiary of Todd during any such period for such period" and before
the words "; provided, however, that (i) AT&T shall be entitled to
participate ...."

3. The Agreement is amended by (i) inserting in Section 3(d)(xiv)
the words "Soundelux Merger Sub," after the words "Todd Merger Sub," and before
the words "nor 4MC Merger Sub ..."; (ii) inserting in Section 3(d)(xiv) the
words "Soundelux Merger Agreement," after the words "Todd Merger Agreement," and
before the words "or 4MC Merger Agreement ..."; and (iii) inserting in Section
3(d)(xiv) the word "Soundelux," after the words "any action (or failure to act)
of any of AGI, Ascent, Todd," and before the words "4MC or any of their
respective subsidiaries ...."

4. The agreement is amended by (i) inserting in Section 3(d)(xv) the
words ""Soundelux Transaction Documents" shall mean the Soundelux Merger
Agreement, the Sixth Supplement, the Seventh Amendment, the Reclassified Company
Charter (as defined in the Soundelux Merger Agreement), the Shareholders
Agreement (as defined in the Soundelux Merger Agreement), the Escrow Agreement
(as defined in the Soundelux Merger Agreement), or the Registration Rights
Agreement (as defined in the Soundelux Merger Agreement), or any other document
to which Soundelux, Liberty or any of their respective Subsidiaries (as defined
in the Soundelux Merger Agreement) or Affiliates (as defined in the Soundelux
Merger Agreement) is a party that is referred to in the Soundelux Merger
Agreement, the Sixth Supplement, the Seventh Amendment, the Reclassified Company
Charter (as defined in the Soundelux Merger Agreement), the Escrow Agreement (as
defined in the Soundelux Merger Agreement), the Shareholders Agreement (as
defined in the Soundelux Merger Agreement) or the Registration Rights Agreement
(as defined in the Soundelux Merger Agreement) or executed in connection
therewith." after the words "or this Sixth Amendment or executed in connection
therewith." and before the words ""Todd/AT&T Option" shall mean ..." and (ii)
inserting in Section 3(d)(xv) the

4
<PAGE>

words "Soundelux Transaction Documents," after the words "pursuant to any of the
Todd Transaction Documents," and before the words "the Contribution
Agreement ..."

5. Except as otherwise expressly provided herein, the Agreement
shall continue in full force and effect without modification.
<PAGE>

IN WITNESS WHEREOF, each of the parties has caused this Seventh
Amendment to be executed by its respective duly authorized officer as of the
date first set forth above.

AT&T CORP.

By:/s/ Robert S. Feit
------------------
Name: Robert S. Feit
Title: Assistant Secretary

LIBERTY MEDIA CORPORATION, for
itself and for each member of the Liberty
Group

By:/s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

6
<PAGE>

Each of the Covered Entities listed below on this page hereby executes this
Seventh Amendment as a member of the Liberty Group to acknowledge that such
Person is bound by this Seventh Amendment as a member of the Liberty Group:

LIBERTY SP, INC.

By:/s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LIBERTY AGI, INC.

By:/s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LMC INTERACTIVE, INC.

By:/s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President
<PAGE>

TELE-COMMUNICATIONS, INC.

By:/s/ Stephen M. Brett
--------------------
Name: Stephen M. Brett
Title: Sr. Executive Vice President

LIBERTY VENTURES GROUP LLC

By:/s/ Stephen M. Brett
--------------------
Name: Stephen M. Brett
Title: Vice President

LIBERTY MEDIA GROUP LLC

By:/s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

TCI STARZ, INC.

By:/s/ Stephen M. Brett
--------------------
Name: Stephen M. Brett
Title: Vice President

TCI CT HOLDINGS, INC.

By:/s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

<PAGE>

EXHIBIT 10.12

The Associated Group, Inc., a Delaware corporation ("AGI"), hereby
executes this Instrument in order to become a party to the Tax Sharing Agreement
dated as of March 9, 1999, as amended by the First Amendment to the Tax Sharing
Agreement dated as of May 28, 1999, the Second Amendment to the Tax Sharing
Agreement dated as of September 24, 1999, the Third Amendment to the Tax Sharing
Agreement dated as of October 20, 1999, the Fourth Amendment to the Tax Sharing
Agreement dated as of October 28, 1999, the Fifth Amendment to the Tax Sharing
Agreement dated as of December 6, 1999, the Sixth Amendment to the Tax Sharing
Agreement dated as of December 10, 1999, and the Seventh Amendment to the Tax
Sharing Agreement dated as of December 30, 1999 (as amended, the "Agreement")
between and among AT&T Corp., a New York corporation ("AT&T"), Liberty Media
Corporation, a Delaware corporation ("Liberty"), for itself and on behalf of
each member of the Liberty Group (as defined in the Agreement), Tele-
Communications, Inc., a Delaware corporation, Liberty Ventures Group LLC, a
Delaware limited liability company, Liberty Media Group LLC, a Delaware limited
liability company, TCI Starz, Inc., a Colorado corporation, TCI CT Holdings,
Inc., a Delaware corporation, each Covered Entity listed on the signature pages
thereof, and each entity which becomes a party to the Agreement pursuant to
Section 23 thereto. Upon the acceptance hereof by the other parties to the
Agreement by execution hereof where indicated below, AGI will thereupon be a
party to the Agreement as a member of the Liberty Group (as defined in the
Agreement).

Dated: January 14, 2000 THE ASSOCIATED GROUP, INC.

By: /s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

AGREED AND ACCEPTED:

AT&T CORP. LIBERTY MEDIA CORPORATION, for
itself and for each member of the
Liberty Group

By: /s/ illegible By: /s/ Charles Y. Tanabe
------------- -------------------------------
Name: Name: Charles Y. Tanabe
Title: Title: Senior Vice President
<PAGE>

LIBERTY SP, INC. LIBERTY AGI, INC.

By: /s/ Charles Y. Tanabe By: /s/ Charles Y. Tanabe
------------------------ -------------------------------
Name: Charles Y. Tanabe Name: Charles Y. Tanabe
Title: Senior Vice President Title: Senior Vice President

LMC INTERACTIVE, INC. TELE-COMMUNICATIONS, INC.

By: /s/ Charles Y. Tanabe By: /s/ Stephen M. Brett
------------------------ -------------------------------
Name: Charles Y. Tanabe Name: Stephen M. Brett
Title: Senior Vice President Title: Sr. Executive Vice President

LIBERTY VENTURES GROUP LLC LIBERTY MEDIA GROUP LLC

By: /s/ Stephen M. Brett By: /s/ John C. Malone
------------------------ -------------------------------
Name: Stephen M. Brett Name: John C. Malone
Title: Vice President Title: Chairman

TCI STARZ, INC. TCI CT HOLDINGS, INC.

By: /s/ Stephen M. Brett By: /s/ Charles Y. Tanabe
------------------------ -------------------------------
Name: Stephen M. Brett Name: Charles Y. Tanabe
Title: Vice President Title: Senior Vice President

<PAGE>

EXHIBIT 10. 13

AMENDED AND RESTATED CONTRIBUTION AGREEMENT

BY AND AMONG

LIBERTY MEDIA CORPORATION,

LIBERTY MEDIA MANAGEMENT LLC,

LIBERTY MEDIA GROUP LLC,

LIBERTY VENTURES GROUP LLC,

THE ASSOCIATED GROUP, INC.

AND

LIBERTY AGI, INC.

January 14, 2000

______________________________________________________________________________
<PAGE>

TABLE OF CONTENTS
-----------------

<TABLE>
<CAPTION>
Page
----

ARTICLE I

DEFINITIONS

<S> <C>
Section 1.1. Certain Definitions.......................................... 2
Section 1.2. Terms Generally.............................................. 7

ARTICLE II

CONTRIBUTION

Section 2.1. Liberty Media Corporation Contribution....................... 8
Section 2.2. Stockholder Contribution..................................... 8
Section 2.3. AGI Contribution............................................. 9
Section 2.4. Liberty AGI Contribution..................................... 9
Section 2.5. Liberty Management Contribution.............................. 9
Section 2.6. Capital Contributions to Liberty Media Group LLC............. 10
Section 2.7. Procedures for Determination of Contribution Amount.......... 10
Section 2.8. Transfer and Documentation................................... 11
Section 2.9. Unassignable Assets.......................................... 11
Section 2.10. Certain Tax Issues........................................... 12
Section 2.11. Conveyance Taxes; Expenses................................... 12
Section 2.12. Further Assurances........................................... 13
Section 2.13. Stockholder Consent.......................................... 13

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE PARTIES

Section 3.1. Mutual Representations....................................... 13

ARTICLE IV

COVENANTS OF THE PARTIES

Section 4.1. Cooperation.................................................. 14
Section 4.2. Conduct of Business Prior to the Closing Date................ 15
Section 4.3. Avoidance of Certain Adverse Effects......................... 16
</TABLE>

(i)
<PAGE>

TABLE OF CONTENTS (cont'd)
-----------------

<TABLE>
<S> <C>
ARTICLE V

CONDITIONS TO CLOSING

Section 5.1. Conditions Precedent to Closing.............................. 17

ARTICLE VI

CLOSING

Section 6.1. Closing...................................................... 17

ARTICLE VII

TERMINATION

Section 7.1. Termination.................................................. 18

ARTICLE VIII

MISCELLANEOUS

Section 8.1. Notices...................................................... 18
Section 8.2. Binding Effect............................................... 20
Section 8.3. Construction................................................. 20
Section 8.4. Expenses..................................................... 20
Section 8.5. Table of Contents; Headings.................................. 21
Section 8.6. Governing Law................................................ 21
Section 8.7. Severability................................................. 21
Section 8.8. Amendments................................................... 21
Section 8.9. Assignment................................................... 21
Section 8.10. Waivers; Remedies............................................ 21
Section 8.11. Consent to Jurisdiction; Specific Performance................ 21
Section 8.12. Waiver of Jury Trial......................................... 22
Section 8.13. Further Assurances........................................... 22
Section 8.14. Counterparts................................................. 22
Section 8.15. Limitation on Rights of Others............................... 22
</TABLE>

(ii)
<PAGE>

AMENDED AND RESTATED CONTRIBUTION AGREEMENT

THIS AMENDED AND RESTATED CONTRIBUTION AGREEMENT (this "Agreement") is
made as of this 14th day of January, 2000 by and among Liberty Media
Corporation, a Delaware corporation ("Liberty Media Corporation"), Liberty Media
Management LLC, a Delaware limited liability company ("Liberty Management"),
Liberty Media Group LLC, a Delaware limited liability company ("Liberty Media
Group LLC"), Liberty Ventures Group LLC, a Delaware limited liability company
("Stockholder"), The Associated Group, Inc., a Delaware corporation ("AGI"), and
Liberty AGI, Inc., a Delaware corporation ("Liberty AGI").

WHEREAS, Liberty Media Corporation, Liberty Management, Liberty Media
Group LLC and Stockholder entered into a Contribution Agreement, dated as of
March 9, 1999 (the "Original Agreement"), pursuant to which Liberty Media
Corporation, Liberty Management and Stockholder agreed, as promptly as
practicable following the occurrence of a Triggering Event (as defined below),
to make certain contributions to Liberty Media Group LLC pursuant to Section 6.1
of the LLC Agreement (as defined below) as Subsequent Capital Contributions (as
defined therein);

WHEREAS, pursuant to an Amended and Restated Agreement and Plan of
Merger, dated as of October 28, 1999 (the "AGI Merger Agreement") among AT&T
Corp, a New York corporation ("Parent"), A-Group Merger Corp., a Delaware
corporation ("Merger Sub"), Liberty Media Corporation and AGI, Parent, on behalf
of the Liberty Media Group (except with respect to shares of common stock of
Parent held by Associated), acquired AGI by means of a merger (the "Merger") of
Merger Sub with and into AGI, with AGI as the surviving entity in the Merger;

WHEREAS, pursuant to the AGI Merger Agreement, (a) following the
execution hereof, AGI will convert to a Delaware limited liability company
having the name "AGI LLC" pursuant to Section 266 of the Delaware General
Corporation Law and Section 214 of the Delaware Limited Liability Company Act
with Parent as its sole member (the "LLC Conversion"); and (b) following the LLC
Conversion and the distribution of certain assets from AGI to Parent as
contemplated by Item 10 of Exhibit 7.15 to the AGI Merger Agreement (the "Asset
Distribution"), Liberty AGI will become the sole non-member manager of AGI;

WHEREAS, pursuant to the AGI Merger Agreement, after the earliest of
(a) six months following the LLC Conversion, (b) the beginning of the calendar
year immediately following the calendar year in which the LLC Conversion occurs,
or (c) such time after the LLC Conversion that Parent's ownership of the
outstanding interest in AGI, in Parent's reasonable judgment, causes a Parent
Adverse Effect (as defined in the AGI Merger Agreement) (provided that
transferring such outstanding interest in AGI to Liberty AGI would, in Parent's
reasonable judgment, reduce or eliminate such Parent Adverse Effect), Parent
will transfer all of the equity of AGI to Liberty AGI in exchange for common
stock of Liberty AGI representing the value of the equity interest in AGI which
in no event will be less than 80% of Liberty AGI's common stock (the "AGI
Exchange"); and
<PAGE>

WHEREAS, the parties desire to amend and restate the Original
Agreement in order to include AGI and Liberty AGI as parties and to make AGI and
Liberty AGI, in certain circumstances, subject to an obligation to contribute
all of the AGI Assets and the AGI Liabilities and the Liberty AGI Assets and the
Liberty AGI Liabilities to Liberty Media Group LLC as promptly as practicable
after the occurrence of a Triggering Event pursuant to Section 6.1 of the LLC
Agreement as a Subsequent Capital Contribution;

NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto agree that the Original Agreement is hereby
amended and restated in its entirety as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Certain Definitions. As used in this Agreement, the
-------------------
following terms shall have the meanings specified below:

"Additional Liberty Media Group Assets" has the meaning set forth in
Section 2.2(a).

"Additional Liberty Media Group Liabilities" means all Liabilities to
which the Additional Liberty Media Group Assets are subject (subject to Section
2.9, other than any such liabilities relating to any Beneficial Assets unless
and until such Asset is contributed to Liberty Media Group LLC).

"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person. For purposes of
this definition, the term "controls" (including its correlative meanings
"controlled by" and "under common control with") shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Notwithstanding the foregoing, for
purposes of this Agreement, Liberty Management and its Subsidiaries shall not be
deemed to be Affiliates of Liberty Media Group LLC or its Subsidiaries or of
Parent or its Subsidiaries (including Liberty Media Corporation) and Parent and
its Subsidiaries shall not be deemed to be Affiliates of Liberty Media Group LLC
or its Subsidiaries or of Liberty Management or its Subsidiaries.

"AGI" shall mean The Associated Group, Inc., a Delaware corporation,
and, following the conversion of The Associated Group, Inc. to a Delaware
limited liability company, AGI LLC.

"AGI Assets" means all of the Assets of AGI, now in existence or
hereafter acquired by AGI other than those Assets distributed to Parent in the
Asset Distribution.

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"AGI Exchange" has the meaning set forth in the preamble hereto.

"AGI Liabilities" means all Liabilities to which the AGI Assets are
subject (subject to Section 2.9, other than any such liabilities relating to any
Beneficial Assets unless and until such asset is contributed to Liberty Media
Group LLC).

"AGI Merger Agreement" has the meaning set forth in the preamble
hereto.

"Agreement" means this Amended and Restated Contribution Agreement,
including the Schedules and Exhibits attached hereto.

"Assets" of a Person means all of the properties, assets, privileges,
rights, interests, claims and goodwill of such Person, real and personal,
tangible and intangible, of every type and description, whether owned or leased
or otherwise possessed, whether or not used or held for use or usable in
connection with the business and assets of such Person and whether or not
reflected on the financial statements or accounts of such Person, including the
capital stock or other interests in any other Person held by such Person.

"Asset Distribution" has the meaning set forth in the preamble hereto.

"Beneficial Assets" has the meaning set forth in Section 2.9 hereto.

"Business Day" means a day of the year on which banks are not required
or authorized to be closed in the State of New York.

"Capital Contribution" has the meaning ascribed to such term in the
LLC Agreement.

"Capital Stock Committee" means the Capital Stock Committee of the
Board of Directors of Parent, as described in the form of Bylaw Amendment
attached to the Merger Agreement.

"Class B Director" and "Class C Director" mean, respectively, the
directors classified as such in the Liberty Media Corporation Charter.

"Closing" means a meeting at which, in whole or in part, the
transactions contemplated by this Agreement are concluded, held on the date and
at the place fixed in accordance with Article VI.

"Closing Date" means the date of the Closing.

"Code" means the Internal Revenue Code of 1986 and the rules and
regulations promulgated thereunder.

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"Contract" means any lease, license, contract or other agreement.

"Firewall Agreement" means the agreements referred to in Sections 7.14
and 7.18 of the Merger Agreement.

"GAAP" means generally accepted accounting principles in effect from
time to time in the United States of America.

"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any arbitrator.

"Incumbent Directors" means (i) those directors who are the Class B
Directors and Class C Directors of Liberty Media Corporation immediately prior
to the Effective Time (as defined in the Merger Agreement) and (ii) those
persons who become Class B Directors or Class C Directors of Liberty Media
Corporation upon the death, disability, resignation, removal or subsequent
election of a Class B or Class C Director (including upon any increase in the
size of the Board of Directors of Liberty Media Corporation), provided, that any
--------
Class B Director or Class C Director elected or appointed following the
Effective Time shall be an Incumbent Director only if (x) in the case of any
person who was appointed or elected to fill any vacancy among the Class B
Directors or Class C Directors resulting from the death, disability, resignation
or removal of a Class B Director or Class C Director, such person was so
appointed or nominated for election as such by a majority of the Incumbent
Directors (or single such director, if only one remains) who were then members
of the class of directors of Liberty Media Corporation in which such vacancy
occurred, or, (y) in the case of any election or appointment of a Class B or
Class C Director which results from any increase in the size of the Board of
Directors of Liberty Media Corporation or of the Class B or Class C Directors,
the person so elected or appointed to fill such directorship shall have been
appointed or nominated for election as such by a majority of the Incumbent
Directors (or single such director, if only one remains) who were then members
of the class of directors to which such newly created directorship was
apportioned.

"Intellectual Property" means all patents, trademarks, trade names,
service marks, copyrights and trade secrets.

"Liabilities" of a Person means all debts, liabilities and
obligations, whether absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising, and
whether or not the same would properly be reflected on a balance sheet,
including all costs and expenses relating thereto.

"Liberty AGI" has the meaning set forth in the preamble hereto.

"Liberty AGI Assets" means all of the Assets of Liberty AGI, now in
existence or hereafter acquired by Liberty AGI.

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<PAGE>

"Liberty AGI Liabilities" means all Liabilities to which the Liberty
AGI Assets are subject (subject to Section 2.9, other than any such liabilities
relating to any Beneficial Assets unless and until such asset is contributed to
Liberty Media Group LLC).

"Liberty Management" has the meaning set forth in the preamble hereto.

"Liberty Management Contribution" has the meaning set forth in Section
2.5.

"Liberty Media Corporation" has the meaning set forth in the preamble
hereto.

"Liberty Media Corporation Assets" means all of the Assets of Liberty
Media Corporation, now in existence or hereafter acquired by Liberty Media
Corporation, including, but not limited to, the following:

(i) all rights of any nature whatsoever of Liberty Media Corporation
under the Firewall Agreement, the Tax Sharing Agreement and the AGI Merger
Agreement (including with respect to the Asset Distribution); and

(ii) all Intellectual Property used or usable in connection with the
Liberty Media Corporation Assets.

"Liberty Media Corporation Charter" means the Restated Certificate of
Incorporation of Liberty Media Corporation filed with the Secretary of State of
the State of Delaware, as the same may be amended from time to time.

"Liberty Media Corporation Contribution" has the meaning set forth in
Section 2.1.

"Liberty Media Corporation Liabilities" means all Liabilities of
Liberty Media Corporation (subject to Section 2.9, other than any such
liabilities relating to any Beneficial Assets unless and until such Asset is
contributed to Liberty Media Group LLC) including, without limitation all
obligations of any nature whatsoever of Liberty Media Corporation under the
Firewall Agreement.

"Liberty Media Group" has the meaning ascribed to such term in the
Parent Charter.

"Liberty Media Group Assets" means the Liberty Media Corporation
Assets, the Additional Liberty Media Group Assets, the AGI Assets and the
Liberty AGI Assets, collectively.

"Liberty Media Group LLC" has the meaning set forth in the preamble
hereto.

"Lien" means any lien, pledge, claim, encumbrance, mortgage or
security interest in real or personal property.

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<PAGE>

"LLC Agreement" means the Amended and Restated Limited Liability
Company Agreement of Liberty Media Group LLC, dated as of the date hereof, among
Liberty Media Corporation, Liberty Media Management LLC, Liberty Ventures Group
LLC, The Associated Group, Inc. and Liberty AGI, Inc.

"Material Adverse Effect" means a material adverse change in, or
material adverse effect on, the business, assets, liabilities, results of
operations, condition (financial or otherwise) or prospects of a party
considered together with its consolidated subsidiaries on a combined basis,
other than any changes in, or effects on, any of the foregoing arising primarily
out of or resulting primarily from general economic or industry conditions.

"Merger Agreement" means that certain Agreement and Plan of
Restructuring and Merger, dated as of June 23, 1998, among Parent, Italy Merger
Corp. and Tele-Communications, Inc.

"Parent" has the meaning set forth in the preamble hereto.

"Parent Charter" means the Certificate of Incorporation of Parent, as
amended as contemplated by the Merger Agreement.

"Permitted Liens" means (i) Liens for Taxes not yet due and payable,
(ii) Liens for Taxes, the validity of which is being contested in good faith in
appropriate proceedings and with respect to which appropriate reserves have been
set aside on the books of the party against which such Liens have been created,
(iii) inchoate mechanic's and materialmen's Liens for construction in progress
or which are being contested in good faith in appropriate proceedings, (iv)
Liens on property which secure the purchase price of such property, (v)
workmen's, repairmen's, warehousemen's and carriers' Liens arising in the
ordinary course of business and evidencing indebtedness for related services
that is not more than 60 days past due or which is being contested in good faith
in appropriate proceedings, and (vi) minor imperfections in title and
encumbrances and other minor matters, if any, which singly or in the aggregate
are not substantial in amount, do not materially detract from the value of the
property subject thereto or interfere with the present use thereof or otherwise
impair the operations of a Person.

"Person" means any individual, corporation, partnership, limited
liability company, trust, unincorporated association or other entity.

"Stockholder" has the meaning set forth in the preamble hereto.

"Stockholder Contribution" has the meaning set forth in Section 2.2.

"Subsidiary" of any Person as of any date shall mean any other Person
more than 50% of the outstanding number or voting power of the shares, equity
interests or other ownership interests of which are, as of such date, owned or
controlled, directly or indirectly, by such Person and/or one or more of its
Subsidiaries.

6
<PAGE>

"Tax" or "Taxes" means all federal, state, local and foreign income,
profits, franchise, gross receipts, payroll, sales, employment, use, property,
withholding, excise and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts; provided, however, that "Tax" and "Taxes" shall not
-------- -------
include amounts paid to municipalities with respect to operating franchise
arrangements.

"Tax Return" or "Tax Returns" means all returns or reports required to
be filed under any statute, rule or regulation relating to Taxes.

"Tax Sharing Agreement" means the Tax Sharing Agreement, dated as of
March 9, 1999, as amended and supplemented from time to time, among Parent,
Liberty Media Corporation, certain Subsidiaries of Liberty Media Corporation and
Liberty Media Group LLC.

"TCI" means Tele-Communications, Inc., a Delaware corporation.

"Transfer" means, as a noun, any sale, exchange, assignment,
conveyance or transfer and, as a verb, to sell, exchange, assign, convey or
transfer.

"Triggering Event" means either (i) the failure of the Incumbent
Directors to constitute a majority of the members of the Board of Directors of
Liberty Media Corporation and to be entitled to cast a majority of the votes
entitled to be cast by all directors at any meeting of the Board of Directors of
Liberty Media Corporation (or to consent in writing thereto) or (ii) Liberty
Management's determination (evidenced by written notice to such effect to
Parent), in its reasonable judgment, that an event described in clause (i) is
reasonably likely to occur (unless Parent provides such assurances as Liberty
Management may reasonably request that such event will not occur within five
Business Days of such notice (and in any event prior to the occurrence of such
event described in clause (i)).

Liberty Management may, in its sole discretion, waive or suspend the
occurrence of a Triggering Event on such terms and conditions as are set forth
in written notice from Liberty Management to the other parties following the
occurrence of a Triggering Event. Any such waiver or suspension shall only be
effective with regard to the specific Triggering Event to which it applies, and
shall in no way impair the respective rights of Liberty Media Group LLC or
Liberty Management in connection with any subsequent occurrence of a Triggering
Event.

Section 1.2 Terms Generally. The definitions in Section 1.1 and
---------------
elsewhere in this Agreement shall apply equally to both the singular and plural
forms of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". The words "herein", "hereof", "hereto" and
"hereunder" and words of similar import refer to this Agreement (including the
Schedules and Exhibits) in its entirety and not to any part hereof unless the
context shall otherwise require. All references herein to Articles, Sections,
Exhibits and Schedules shall be deemed references to Articles and Sections of,
and Exhibits and

7
<PAGE>

Schedules to, this Agreement unless the context shall otherwise require. Unless
the context shall otherwise require, any references to any agreement or other
instrument (other than in the Schedules hereto) or statute or regulation are to
it as amended and supplemented from time to time (and, in the case of a statute
or regulation, to any corresponding provisions of successor statutes or
regulations). Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "Business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a Business Day, then such action or notice shall be deferred until,
or may be taken or given on, the next Business Day.

ARTICLE II

CONTRIBUTION

Section 2.1 Liberty Media Corporation Contribution.
--------------------------------------

(a) Upon the terms and subject to the conditions set forth in this
Agreement, as soon as practicable after the occurrence of a Triggering Event,
Liberty Media Corporation shall convey, assign and transfer to Liberty Media
Group LLC, and Liberty Media Group LLC shall acquire, accept and receive from
Liberty Media Corporation, all of Liberty Media Corporation's right, title and
interest in and to the Liberty Media Corporation Assets (the "Liberty Media
Corporation Contribution").

(b) Concurrently with the Liberty Media Corporation Contribution,
Liberty Media Group LLC shall assume, and agree to pay and discharge, as and
when they become due, or otherwise take subject to, all of the Liberty Media
Corporation Liabilities.

Section 2.2 Stockholder Contribution.
------------------------

(a) If at the time of the occurrence of a Triggering Event, any of the
Assets included in the Liberty Media Group are held, directly or indirectly, by
Stockholder (a) other than through its ownership interests in and through
Liberty Media Corporation, and (b) if at such time Liberty AGI is obligated to
make the Liberty AGI Contribution pursuant to Section 2.4 below, other than its
ownership interests in and through Liberty AGI (such Assets, the "Additional
Liberty Media Group Assets"), then upon the terms and subject to the conditions
set forth in this Agreement, as soon as practicable after the occurrence of such
Triggering Event, Stockholder shall convey, assign and transfer, or cause to be
conveyed, assigned and transferred, to Liberty Media Group LLC all of
Stockholder's right, title and interest in and to the Additional Liberty Media
Group Assets (the "Stockholder Contribution"), and Liberty Media Group LLC shall
acquire, accept and receive the Stockholder Contribution from Stockholder.

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<PAGE>

(b) Concurrently with the Stockholder Contribution, Liberty Media
Group LLC shall assume, and agree to pay and discharge, as and when they become
due, or otherwise take subject to, all of the Additional Liberty Media Group
Liabilities.

Section 2.3 AGI Contribution.
----------------

(a) Upon the terms and subject to the conditions set forth in this
Agreement, as soon as practicable after the occurrence of a Triggering Event, if
at such time the AGI Exchange has not been consummated, AGI shall convey, assign
and transfer, or cause to be conveyed, assigned and transferred, to Liberty
Media Group LLC all of AGI's right, title and interest in and to the AGI Assets
(the "AGI Contribution"), and Liberty Media Group LLC shall acquire, accept and
receive the AGI Contribution. Once the AGI Exchange has been consummated, AGI
shall have no obligation to make an AGI Contribution following the occurrence of
a Triggering Event and no other rights or obligations under this Agreement.

(b) Concurrently with the AGI Contribution, Liberty Media Group LLC
shall assume, and agree to pay and discharge, as and when they become due, or
otherwise take subject to, all of the AGI Liabilities.

Section 2.4 Liberty AGI Contribution.
------------------------

(a) Upon the terms and subject to the conditions set forth in this
Agreement, as soon as practicable after the occurrence of a Triggering Event, if
at such time the AGI Exchange has been consummated and Stockholder owns less
than 100% of the ownership interests in Liberty AGI, Liberty AGI shall convey,
assign and transfer, or cause to be conveyed, assigned and transferred, to
Liberty Media Group LLC all of Liberty AGI's right, title and interest in and to
the Liberty AGI Assets (the "Liberty AGI Contribution"), and Liberty Media Group
LLC shall acquire, accept and receive the Liberty AGI Contribution.

(b) Concurrently with the Liberty AGI Contribution, Liberty Media
Group LLC shall assume, and agree to pay and discharge, as and when they become
due, or otherwise take subject to, all of the Liberty AGI Liabilities.

Section 2.5 Liberty Management Contribution. Upon the terms and
-------------------------------
subject to the conditions set forth in this Agreement, at the Closing Liberty
Management shall convey, assign and transfer to Liberty Media Group LLC, and
Liberty Media Group LLC shall acquire, accept and receive from Liberty
Management, an amount in cash equal to the lesser of (i) $20 million and (ii)
0.001001 of the sum of the Liberty Media Contribution Amount, the Stockholder
Contribution Amount, the AGI Contribution Amount and the Liberty AGI
Contribution Amount (the "Liberty Management Contribution").

Section 2.6 Capital Contributions to Liberty Media Group LLC. The
------------------------------------------------
Liberty Media Corporation Contribution, the Liberty Management Contribution and,
if applicable, the

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<PAGE>

Stockholder Contribution, the AGI Contribution and the Liberty AGI Contribution
(collectively, the "Contributions") as contemplated by this Agreement shall
constitute Capital Contributions to Liberty Media Group LLC by Liberty Media
Corporation, Liberty Management, Stockholder, AGI and Liberty AGI, respectively,
as contemplated by Section 6.1(b) of the LLC Agreement.

Section 2.7 Procedures for Determination of Contribution Amount.
---------------------------------------------------
Upon the occurrence of the Contributions, Liberty Management and the independent
accounting firm responsible for preparing the audited financial statements of
Liberty Media Corporation will each designate one appraiser (the "First
Appraiser" and the "Second Appraiser") to determine the Gross Asset Value (as
defined in the LLC Agreement) of the Liberty Media Corporation Assets and the
fair market value of the Liberty Media Corporation Liabilities (the difference
between such amounts, the "Liberty Media Contribution Amount") and, if
applicable, the Gross Asset Value of the Additional Liberty Media Group Assets
and the fair market value of the Additional Liberty Media Group Liabilities (the
difference between such amounts, the "Stockholder Contribution Amount"), the
Gross Asset Value of the AGI Assets and the fair market value of the AGI
Liabilities (the difference between such amounts, the "AGI Contribution Amount")
and the Gross Asset Value of the Liberty AGI Assets and the fair market value of
the Liberty AGI Liabilities (the difference between such amounts, the "Liberty
AGI Contribution Amount"). Each of the First Appraiser and the Second Appraiser
shall submit its determination of the Liberty Media Contribution Amount, the
Stockholder Contribution Amount, the AGI Contribution Amount and the Liberty AGI
Contribution Amount (each, a "Contribution Amount") to the parties within ten
(10) Business Days of the date of its selection. If the respective
determinations of a Contribution Amount by the First Appraiser and the Second
Appraiser vary by less than ten percent (10%) of the higher determination, the
applicable Contribution Amount shall be the average of the two determinations.
If such determinations vary by ten percent (10%) or more of the higher
determination, such appraisers shall promptly designate a third appraiser (the
"Third Appraiser"). No party shall provide, and each appraiser shall be
instructed not to provide, any information to the Third Appraiser as to the
Contribution Amount determinations of the First Appraiser and the Second
Appraiser or otherwise influence such Third Appraiser's determination in any
way. The Third Appraiser shall submit its determination of the applicable
Contribution Amount to the parties within five (5) Business Days of the date of
its selection. The applicable Contribution Amount shall be equal to the average
of the two closest of the three determinations, provided that, if the difference
--------
between the highest and middle determinations is no more than one hundred and
five percent (105%) and no less than ninety-five percent (95%) of the difference
between the middle and lowest determinations, then the applicable Contribution
Amount shall be equal to the middle determination. The determination of a
Contribution Amount in accordance with this Section 2.7 shall be final and
binding on the parties. If any appraiser is only able to provide a range in
which the applicable Contribution Amount would exist, the average of the highest
and lowest value in such range shall be deemed to be such appraiser's
determination of such Contribution Amount. Each appraiser selected pursuant to
the provisions of this Section 2.7 shall be an independent investment banking
firm or other independent qualified Person with prior experience in appraising
businesses comparable to the businesses included in the Liberty Media
Corporation Assets, the Additional Liberty Media Group Assets, the AGI Assets
and the Liberty AGI Assets. The parties agree that the procedures described in
this Section 2.7 shall be conducted

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in a manner such that the final determination of the Contribution Amounts
(including any determination of the Contribution Amounts by the Third Appraiser)
shall be completed within twenty (20) Business Days of the occurrence of the
applicable Triggering Event. Liberty Media Corporation, and, if applicable,
Stockholder, AGI and Liberty AGI shall make customary representations and
warranties regarding the Liberty Media Corporation Assets, the Additional
Liberty Media Group Assets, the AGI Assets and the Liberty AGI Assets,
respectively, as agreed by the parties in connection with the Liberty Media
Corporation Contribution, the Stockholder Contribution, the AGI Contribution or
the Liberty AGI Contribution, as applicable, and any such representations and
warranties will be taken into account by the appraisers referred to above when
determining the Contribution Amounts. The Contribution Amounts shall also take
into account the matters described in Section 2.9 and 2.10.

Section 2.8 Transfer and Documentation. At the Closing, each of
--------------------------
Liberty Media Corporation, Liberty Management, and, if applicable, Stockholder,
AGI and Liberty AGI shall execute and deliver to Liberty Media Group LLC such
instruments of conveyance as Liberty Media Group LLC may reasonably request in
order to convey, assign and transfer title to the Liberty Media Corporation
Assets, the Liberty Management Assets, the Additional Liberty Media Group
Assets, if any, the AGI Assets, if any, and the Liberty AGI Assets, if any,
being conveyed, assigned and transferred to Liberty Media Group LLC at the
Closing, and Liberty Media Group LLC shall execute an assumption agreement
pursuant to which Liberty Media Group LLC shall assume and agree to pay when
due, discharge and perform the Liberty Media Corporation Liabilities, the
Additional Liberty Media Group Liabilities, if any, the AGI Liabilities, if any,
and the Liberty AGI Liabilities, if any.

Section 2.9 Unassignable Assets. Notwithstanding anything in this
-------------------
Agreement to the contrary, this Agreement shall not constitute an agreement to
assign any Liberty Media Group Asset without the consent of another Person if an
assignment or attempted assignment thereof without the consent of such Person
would constitute a breach thereof or in any way impair the rights thereunder. If
any such consent is not obtained or if an attempted assignment would be
ineffective or would impair any party's rights with respect to such Liberty
Media Group Asset so that Liberty Media Group LLC would not receive all such
rights, then (a) Liberty Media Corporation, Stockholder, AGI and Liberty AGI, as
applicable, shall continue to use their respective best efforts to obtain such
consents and approvals and use their respective best efforts to provide or cause
to be provided to Liberty Media Group LLC, to the extent permitted by law, the
benefits of any such Asset (the "Beneficial Assets"), and (b) if Liberty Media
Corporation, Stockholder, AGI or Liberty AGI, as the case may be, is able to
provide Liberty Media Group LLC with the benefits thereof, Liberty Media Group
LLC shall pay, perform and discharge on behalf of Liberty Media Corporation,
Liberty Management, Stockholder, AGI and Liberty AGI, if applicable, all of
Liberty Media Corporation's (and, if applicable, Stockholder's, AGI's and
Liberty AGI's) liabilities and other obligations with respect thereto in a
timely manner and in accordance with the terms thereof. In addition, Liberty
Media Corporation, Stockholder, AGI and Liberty AGI, as applicable, shall take
such other actions as may reasonably be requested by Liberty Media Group LLC in
order to place Liberty Media Group LLC, insofar as reasonably possible, in the
same position as if such Beneficial Asset had been transferred as contemplated
hereby, so that all the benefits and burdens relating thereto shall inure to

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<PAGE>

Liberty Media Group LLC. If and when any such consents and approvals are
obtained, the transfer of the applicable Beneficial Asset shall be promptly
effected in accordance with the terms of this Agreement.

Section 2.10 Certain Tax Issues. The exact manner of the
------------------
contribution of each Liberty Media Group Asset by Liberty Media Corporation,
Stockholder, AGI and Liberty AGI to Liberty Media Group LLC (i.e. whether an
asset shall be contributed directly or whether the equity interests of a Person
owning the asset shall be contributed) shall to the extent practicable be
designed to ensure, on both an immediate and an on-going basis, the most
efficient tax treatment to Liberty Media Group LLC and all of its members, after
taking into consideration contractual and regulatory restrictions on the
transfer of assets. To the extent that the contribution of any Liberty Media
Group Asset in the manner contemplated by Liberty Media Corporation,
Stockholder, AGI or Liberty AGI would result in the recognition of income or
gain pursuant to Treasury Regulations governing consolidated federal income tax
revenues and conveyance of such Liberty Media Group Asset by any alternative
means would not result in the recognition of such income or gain, such Liberty
Media Group Asset will be conveyed by such alternative means. If no such
alternative means of conveying such Liberty Media Group Asset exists, Liberty
Media Corporation, Stockholder, AGI or Liberty AGI, as applicable, and Liberty
Media Group LLC shall, at the option of Liberty Media Group LLC, enter into an
agreement providing that (a) such Liberty Media Group Asset shall not be
contributed to Liberty Media Group LLC hereunder and (b) to the extent
permissible without causing the recognition of income or gain, Liberty Media
Group LLC shall have the exclusive and irrevocable power to direct the
management, disposition and, if applicable, voting rights of such Liberty Media
Group Asset and shall have the exclusive right to receive any and all proceeds
of any such disposition.

Section 2.11. Conveyance Taxes; Expenses.
--------------------------

(a) Liberty Media Corporation agrees to assume liability for and to
pay all Transfer, stamp, real property transfer taxes (including New York State
Real Property Transfer Gains Tax or similar transfer or gains taxes) and any
other similar Taxes incurred as a result of the transactions contemplated
hereby, and shall hold each of the other parties hereto harmless against any
such Taxes.

(b) Liberty Media Corporation shall bear the fees and expenses of all
of Liberty Media Corporation, Stockholder, Liberty Media Group LLC, Liberty
Management, AGI and Liberty AGI relating to the transactions contemplated by
this Article II (including all legal and accounting fees and expenses and the
fees and expenses of the appraisers referred to in Section 2.7), whether or not
such transactions are consummated.

Section 2.12. Further Assurances. At or following the Closing, each
------------------
of the parties hereto will promptly execute such other documents and
instruments, and will take such further actions, as may be necessary to vest,
perfect or confirm any and all right, title and interest in, to and under the
Liberty Media Group Assets in Liberty Media Group LLC, and otherwise to carry
out the provisions hereof.

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Section 2.13. Stockholder Consent. Stockholder, as the holder of all
-------------------
of the outstanding capital stock of Liberty Media Corporation and Liberty AGI,
hereby consents to and approves the transactions contemplated hereby, including
the Liberty Media Corporation Contribution and the Liberty AGI Contribution, for
all purposes, and agrees and acknowledges that such consent and approval is
irrevocable.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE PARTIES

Section 3.1 Mutual Representations. Each party hereby represents
----------------------
and warrants to the other parties that:

(a) Due Incorporation or Organization: Authorization of Agreements.
--------------------------------------------------------------
Such party is a corporation or limited liability company duly organized and
validly existing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate or organizational power and
authority to own its property and carry on its business as owned and carried on
at the date hereof. Such party is duly qualified to do business and in good
standing (if applicable) in each jurisdiction in which the failure to be so
qualified would have a Material Adverse Effect on such party. Such party has all
requisite corporate or organizational power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by such party, and the execution, delivery and performance of this
Agreement by such party have been duly authorized by all requisite corporate or
organizational action, including any required approval of the stockholder(s) or
member(s) of such party. This Agreement constitutes the legal, valid and binding
obligation of such party, enforceable in accordance with its terms (except as
such enforceability may be limited by bankruptcy, insolvency (including all laws
relating to fraudulent transfers), reorganization, moratorium and similar laws
affecting the rights and remedies of creditors generally and the application of
general principles of equity).

(b) No Conflict; No Default. Except, as to clauses (i), (iii), (iv)
-----------------------
and (v) below only, as would not have a Material Adverse Effect on such party,
neither the execution or delivery of this Agreement by such party nor (assuming
all necessary consents, approvals, authorizations and other actions necessary
for the Liberty Media Corporation Contribution, the Stockholder Contribution,
the AGI Contribution, the Liberty AGI Contribution or the Liberty Management
Contribution, as applicable, have been obtained) the performance of this
Agreement by such party or the consummation by such party of the transactions
contemplated hereby in accordance with the terms and conditions hereof (i) will
conflict with, violate or result in a breach of any of the terms, conditions or
provisions of any law, regulation, order, writ, injunction, decree,
determination or award of any Governmental Authority applicable to such party or
any of its Subsidiaries, (ii) will conflict with, violate, result in a breach of
or constitute a default under any of the terms, conditions or provisions of the
certificate or articles of incorporation, bylaws or partnership agreement (or
other

13
<PAGE>

governing documents) of such party or any of its Subsidiaries, (iii) will
conflict with, violate, result in a breach of or constitute a default under any
of the terms, conditions or provisions of any material agreement or instrument
to which such party or any of its Subsidiaries is a party or by which such party
or any of its Subsidiaries is or may be bound or to which any equity interest
held by such party in any other entity or any of its other material properties
or assets is subject, (iv) will conflict with, violate, result in a breach of,
constitute a default under (whether with notice or lapse of time or both),
accelerate or permit the acceleration of the performance required by, give to
others any interests or rights or require any consent, authorization or approval
under any indenture, mortgage, lease agreement or similar instrument to which
such party or any of its Subsidiaries is a party or by which such party or any
of its Subsidiaries is or may be bound, (v) will result in the creation or
imposition of any Lien upon any asset held by such party that is transferred to
Liberty Media Group LLC pursuant to this Agreement or (vi) will result in the
creation or imposition of any Lien upon any of the other material properties or
assets of such party or any of its Subsidiaries, other than Permitted Liens.

ARTICLE IV

COVENANTS OF THE PARTIES

Each of the parties hereby agrees and covenants as follows:

Section 4.1 Cooperation. Between the date of the occurrence of any
-----------
Triggering Event and the Closing (or, if later, the contribution of the
applicable Liberty Media Group Asset to Liberty Media Group LLC pursuant to
Section 2.9 or 2.10), the parties shall cooperate with each other in their
efforts to obtain all necessary consents and approvals for the consummation of
the transactions contemplated hereby, including making qualified personnel
available for attending hearings and meetings respecting such required consents.
Without limiting the generality of the foregoing, each party shall use its best
efforts (i) to obtain all consents and authorizations of third parties and
Governmental Authorities and to make all filings with and give all notices to
third parties and Governmental Authorities which may be necessary or reasonably
required in order to effect the transactions contemplated hereby and (ii) to
provide the other parties and their respective counsel with copies of all such
filings made and all such notices given as such other parties may reasonably
request and to afford the other parties the opportunity to participate in any
discussions with any such third party or Governmental Authority or
representative thereof in connection with the transactions contemplated hereby
to the extent reasonably requested by any other party hereto. Subject to the
other provisions of this Section 4.1, the parties hereto will not take any
action that will have the effect of delaying, impairing or impeding the receipt
of any required approvals or consents. Without limiting the applicability of any
other provision hereof, Liberty Management and Liberty Media Group LLC shall be
afforded the opportunity by Liberty Media Corporation, AGI , Liberty AGI and
Stockholder, if applicable, to be involved in the process of obtaining required
consents from Governmental Authorities or other third parties, including
participation with Liberty Media Corporation and Stockholder, if applicable, in
the analysis of the correct procedures to be followed

14
<PAGE>

(A) to obtain such consents and (B) in the initiation, negotiation and
prosecution of obtaining such consents from Governmental Authorities or other
third parties.

Section 4.2 Conduct of Business Prior to the Closing Date. During
---------------------------------------------
the period from the date hereof to the Closing Date (or as to any applicable
Liberty Media Group Asset, the applicable date of contribution of such asset
pursuant to Section 2.9 or 2.10), except as permitted or otherwise contemplated
by this Agreement, Liberty Media Corporation, Stockholder, AGI and Liberty AGI
will not, without the consent of Liberty Media Group LLC (which shall not be
unreasonably withheld), enter into any agreement that is in conflict with the
terms of this Agreement and Liberty Media Corporation and each Person included
in the Additional Liberty Media Group Assets, AGI and Liberty AGI will, unless
otherwise consented to by Liberty Media Group LLC, use its commercially
reasonable efforts to preserve the current relationships of Liberty Media
Corporation, such Person, AGI and Liberty AGI with its customers, suppliers and
other Persons with which it has significant business relationships and to keep
available the services of its key employees. During the period from the
occurrence of a Triggering Event to the Closing Date, except as permitted or
otherwise contemplated by this Agreement or consented to in writing by Liberty
Media Group LLC (or as approved by a majority of the Incumbent Directors of
Liberty Media Corporation prior to the occurrence of a Triggering Event),
Liberty Media Corporation will not take, or commit to take, any of the following
actions (and Stockholder, AGI and Liberty AGI will not permit any Person
included in the Additional Liberty Media Group Assets, the AGI Assets or the
Liberty AGI Assets, as applicable, to take or commit to take any such action):

(i) amend its charter documents or bylaws;

(ii) merge or consolidate, or obligate itself to do so, or to be
liquidated or dissolved;

(iii) issue or sell any shares of capital stock, partnership
interests, participations or other equity or ownership interests or
any rights relating to any of the foregoing; provided that in the
--------
ordinary course of business, Liberty Media Corporation may incorporate
new wholly owned subsidiaries for the purpose of the operation of its
business as presently conducted or proposed to be conducted;

(iv) enter into any new lines of business outside of the business
as conducted or proposed to be conducted at such time;

(v) conduct its business other than in a manner consistent with
past practices or enter into any material transactions outside the
ordinary course of business (as such business is presently conducted
or proposed to be conducted);

(vi) change its accounting methods, principles or practices in
any material respect;

15
<PAGE>

(vii) declare, set aside or pay any dividend or equity distribution
(whether in cash, stock, property or any combination thereof) in respect of
its capital stock;

(viii) (A) establish any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing or other employee benefit
plan, or materially increase the compensation payable or to become payable
to any officers or employees, except in any case in the ordinary course of
business consistent with past practice or as may be required by law, or (B)
establish or increase any stock option, unit appreciation, stock purchase
or other equity-based plan;

(ix) incur any indebtedness for borrowed money, except in the
ordinary course of business;

(x) enter into, or make any offers to enter into, any partnership
or joint venture with any third party if any consent of any Person is
required (that has not been obtained in connection with the formation of
such new partnership or joint venture) in order to effect the transfer of
the interest in such partnership or joint venture to Liberty Media Group
LLC pursuant to this Agreement;

(xi) transfer or lease to any third party any assets used in
connection with its operations, except for any such transfer or lease (a)
made in the ordinary course of business consistent with past practice or
(b) with respect to which such assets have been or will be replaced with
assets of at least equal value performing comparable functions; or

(xii) except as specifically provided for by the Firewall
Agreement, enter into any transactions with Parent or its Affiliates that
are not on terms as least as favorable to Liberty Media Corporation (or
such Person included in the Additional Liberty Media Group Assets) as could
be obtained from an unaffiliated third party.

Section 4.3 Avoidance of Certain Adverse Effects. The parties
------------------------------------
shall use their best efforts to effect the transfer of the Liberty Media Group
Assets to Liberty Media Group LLC in such a form as to (a) avoid or limit the
adverse impact of such transfer on any agreements to which Liberty Media
Corporation, any Person included in the Additional Liberty Media Group Assets,
AGI or Liberty AGI, is a party and (b) avoid or minimize the consents and
approvals required to effectuate such Transfer.

16
<PAGE>

ARTICLE V

CONDITIONS TO CLOSING

Section 5.1 Conditions Precedent to Closing. The obligations of
-------------------------------
each of the parties under this Agreement to effect the transactions contemplated
to occur at the Closing are subject to the satisfaction, on or prior to the
Closing Date of the following conditions, compliance with which or the
occurrence of which may be waived in whole or in part by the other parties
hereto.

(a) Consents. Subject to Section 2.9, each consent, authorization or
--------
approval required to be obtained in connection with the consummation of the
transactions contemplated to occur at the Closing shall have been obtained
on or prior to the Closing Date, except for any of the foregoing the
failure of which to obtain would not, individually or in the aggregate, (i)
have a Material Adverse Effect on any party to this Agreement or (ii) have
a Material Adverse Effect on Liberty Media Group LLC following the
consummation of the transactions contemplated by this Agreement.

(b) No Injunction. No preliminary or permanent injunction or other
-------------
order, decree or ruling issued by a Governmental Authority, nor any
statute, rule, regulation or executive order promulgated or enacted by any
Governmental Authority shall be in effect, in any case that enjoins or
delays in any material respect the consummation of the transactions to be
effected at such Closing or imposes any material restrictions or
requirements thereon or on any of the parties in connection therewith.

ARTICLE VI

CLOSING

Section 6.1 Closing.
-------

The Closing will take place at the offices of Baker Botts, L.L.P., 599
Lexington Avenue, New York, New York, at 10:00 a.m. (local time at the place of
Closing) on the tenth Business Day after the satisfaction of all conditions set
forth in Section 5.1 (subject to Section 2.9), or at such other location or on
such other date or time as the parties hereto shall agree.

17
<PAGE>

ARTICLE VII

TERMINATION

Section 7.1 Termination.
-----------

(a) This Agreement shall be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing only:

(i) by mutual written consent of all of the parties;

(ii) upon the consummation of the redemption of all (but not
merely substantially all) outstanding shares of Liberty Media Group
Common Stock in exchange for shares of the Liberty Media Group
Subsidiary pursuant to Paragraph 5(a) of Part B of Article Third of
the Parent Charter; or

(iii) upon the consummation of the redemption of all (but not
merely substantially all) of the outstanding shares of Liberty Media
Group Common Stock pursuant to Paragraph 5(b)(ii)(A) of Part B of
Article Third of the Parent Charter.

(b) If this Agreement is terminated in accordance with this Section
7.1, then this Agreement shall become null and void and have no further effect,
without any liability of any party to any other party, except that the
obligations of the parties pursuant to Section 8.4 shall survive the termination
of this Agreement indefinitely.

ARTICLE VIII

MISCELLANEOUS

Section 8.1 Notices. Except as expressly provided herein, all
-------
notices, consents, waivers and other communications required or permitted to be
given by any provision of this Agreement shall be in writing and mailed
(certified or registered mail, postage prepaid, return receipt requested) or
sent by hand or overnight courier, or by facsimile transmission (with
acknowledgment received), charges prepaid and addressed to the intended
recipient as follows, or to such other address or number as such Person may from
time to time specify by like notice to the parties:

18
<PAGE>

(a) If to Liberty Media Corporation:

Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112
Attention: President
Telecopy: (720) 875-5434

with a copy similarly addressed
to the attention of General Counsel:
Telecopy: (720) 875-5382

with a copy to:

Baker Botts L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Elizabeth M. Markowski, Esq.
Telecopy: (212) 705-5125

(b) If to Liberty Management, Liberty Media Group LLC,
AGI or Liberty AGI:

c/o Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112
Attention: President
Telecopy: (720) 875-5434

with a copy similarly addressed
to the attention of General Counsel:
Telecopy: (720) 875-5382

with a copy to:

Baker Botts L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Elizabeth M. Markowski, Esq.
Telecopy: (212) 705-5125

19
<PAGE>

c/o Tele-Communications, Inc.
9197 South Peoria Street
Englewood, Colorado 80112
Attention: President
Telecopy: (720) 875-____

with a copy similarly addressed
to the attention of General Counsel:
Telecopy: (720) 875-____

with a copy to:

Wachtell, Lipton, Rosen & Katz
51 W. 52nd Street
New York, New York 10019
Attention: David M. Silk, Esq.
Telecopy: (212) 403-2000

Any party may from time to time specify a different address for notices by like
notice to the other parties. All notices and other communications given to a
Person in accordance with the provisions of this Agreement shall be deemed to
have been given and received (i) four Business Days after the same are sent by
certified or registered mail, postage prepaid, return receipt requested, (ii)
when delivered by hand or transmitted by facsimile (with acknowledgment received
and, in the case of a facsimile only, a copy of such notice is sent no later
than the next Business Day by a reliable overnight courier service, with
acknowledgment of receipt) or (iii) one Business Day after the same are sent by
a reliable overnight courier service, with acknowledgment of receipt.

Section 8.2 Binding Effect. Except as otherwise provided in this
--------------
Agreement, this Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors, permitted transferees, and permitted
assigns.

Section 8.3 Construction. This Agreement shall be construed
------------
simply according to its fair meaning and not strictly for or against any party.

Section 8.4 Expenses. Except as contemplated by Section 2.11 of
--------
this Agreement, each of the parties shall bear the fees and expenses relating to
its compliance with the various provisions of this Agreement, and each of the
parties agrees to pay all of its own expenses (including all legal and
accounting fees) incurred in connection with this Agreement, the transactions
contemplated hereby, the negotiations leading to the same and the preparation
made for carrying the same into effect.

20
<PAGE>

Section 8.5 Table of Contents; Headings. The table of contents and
---------------------------
section and other headings contained in this Agreement are for reference
purposes only and are not intended to describe, interpret, define or limit the
scope, extent or intent of this Agreement.

Section 8.6 Governing Law. The validity of this Agreement, the
-------------
construction of its terms and the interpretation of the rights and duties of the
parties shall be governed by the internal laws of the State of New York without
regard to principles of conflict of laws.

Section 8.7 Severability. Every provision of this Agreement is
------------
intended to be severable. If any term or provision hereof is illegal, invalid or
unenforceable for any reason whatsoever, that term or provision will be enforced
to the maximum extent permissible so as to effect the intent of the parties, and
such illegality, invalidity or unenforceability shall not affect the validity,
legality or enforceability of the remainder of this Agreement. If necessary to
effect the intent of the parties hereto, the parties hereto will negotiate in
good faith to amend this Agreement to replace the unenforceable language with
enforceable language which as closely as possible reflects such intent.

Section 8.8 Amendments. This Agreement may be modified or amended
----------
only by a written amendment signed by Persons authorized to so bind each party
hereto.

Section 8.9 Assignment. No party shall assign any of its rights
----------
under this Agreement or delegate its duties hereunder unless it obtains the
prior written consent of the other parties hereto, which consent may be withheld
at such party's absolute discretion.

Section 8.10 Waivers; Remedies. The observance of any term of this
-----------------
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) by the party or parties entitled to enforce such
term, but any such waiver shall be effective only if in a writing signed by the
party or parties against which such waiver is to be asserted. Except as
otherwise provided herein, no failure or delay of any party hereto in exercising
any power or right under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such right or power, preclude
any other or further exercise thereof or the exercise of any other right or
power.

Section 8.11 Consent to Jurisdiction; Specific Performance.
---------------------------------------------

(a) Each party hereto irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court sitting in the County of New York or any Federal court of the United
States of America sitting in the Southern District of New York, and any
appellate court from any such court, in any suit, action or proceeding arising
out of or relating to this Agreement, or for recognition or enforcement of any
judgment, and each party hereto irrevocably and unconditionally agrees that all
claims in respect of any such suit, action or proceeding may be heard and
determined in such New York State court or, to the extent permitted by law, in
such Federal court.

21
<PAGE>

(b) Each party hereto irrevocably and unconditionally waives, to the
fullest extent it may legally do so, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement in any New York State court sitting in the County of
New York or any Federal court sitting in the Southern District of New York. Each
party hereto irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such suit, action or
proceeding in any such court and further waives the right to object, with
respect to such suit, action or proceeding, that such court does not have
jurisdiction over such party.

(c) Each party hereto irrevocably consents to service of process in
the manner provided for the giving of notices pursuant to this Agreement;
provided that such service shall be deemed to have been given only when actually
- --------
received by such party. Nothing in this Agreement shall affect the right of a
party to serve process in any other manner permitted by law.

(d) Each party hereto agrees with the other parties that the other
parties would be irreparably damaged if any of the provisions of this Agreement
are not performed in accordance with their specific terms and that monetary
damages would not provide an adequate remedy in such event. Accordingly, in
addition to any other remedy to which the nonbreaching parties may be entitled,
at law or in equity, the nonbreaching parties shall be entitled to injunctive
relief to prevent breaches of this Agreement and specifically to enforce the
terms and provisions hereof.

Section 8.12 Waiver of Jury Trial. Each party hereto waives, to the
--------------------
fullest extent permitted by applicable law, any right it may have to a trial by
jury in respect of any action, suit or proceeding arising out of or relating to
this Agreement.

Section 8.13 Further Assurances. Upon reasonable request from time
------------------
to time, each party hereto shall execute, acknowledge and deliver any documents
and perform all further acts that may be reasonably necessary, appropriate or
desirable to carry out the intent and purposes of this Agreement.

Section 8.14 Counterparts. This Agreement may be executed in any
------------
number of counterparts, any one or more of which may bear facsimile signatures,
with the same effect as if all parties hereto had signed the same document. All
counterparts shall be construed together and shall constitute one agreement.

Section 8.15 Limitation on Rights of Others. Nothing in this
------------------------------
Agreement, whether express or implied, shall be construed to give any Person
other than the parties hereto any legal or equitable right, remedy or claim
under or in respect of this Agreement.

22
<PAGE>

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.

LIBERTY MEDIA CORPORATION

By: /s/ Charles Y. Tanabe
----------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LIBERTY MEDIA MANAGEMENT LLC

By: /s/ John C. Malone
----------------------------
Name: John C. Malone
Title: Sole Member

LIBERTY MEDIA GROUP LLC

By: /s/ John C. Malone
----------------------------
Name: John C. Malone
Title: Chairman

LIBERTY VENTURES GROUP LLC

By: /s/ illegible
----------------------------
Name:
Title:

THE ASSOCIATED GROUP, INC.

By: /s/ Charles Y. Tanabe
----------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President
<PAGE>

LIBERTY AGI, INC.

By:______________________________
Name:
Title:

<PAGE>

EXHIBIT 10.14
- --------------------------------------------------------------------------------

FIRST SUPPLEMENT TO

INTER-GROUP AGREEMENT

between and among

AT&T CORP.,

on the one hand,

and

LIBERTY MEDIA CORPORATION,

LIBERTY MEDIA GROUP LLC

and each Covered Entity listed on the

signature pages hereof,

on the other hand,

dated as of May 28, 1999

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

<PAGE>

FIRST SUPPLEMENT TO

INTER-GROUP AGREEMENT

Agreement dated as of May 28, 1999 between AT&T Corp., a New York
corporation ("AT&T"), for itself and on behalf of the members of the Common
----
Stock Group, on the one hand, and Liberty Media Corporation, a Delaware
corporation ("LMC"), Liberty Media Group LLC, a Delaware limited liability
---
company, and for so long as such Covered Entity remains a Covered Entity under
the applicable provisions of the AT&T Charter Amendment, each Covered Entity
listed on the signature pages hereof (collectively, the "Liberty Media
-------------
Parties"), for themselves and, in the case of LMC, on behalf of the other
- -------
members of the Liberty Media Group, on the other hand. Capitalized terms used
herein without definition have the meanings ascribed to such terms in (i) the
AGI Merger Agreement (as hereinafter defined), (ii) if not otherwise defined
herein or in the AGI Merger Agreement, the Inter-Group Agreement (as hereinafter
defined) or (iii) with respect to Section 1.5, the Telewest Letter (as
hereinafter defined).

WHEREAS, AT&T and the Liberty Media Parties are parties to that
certain Inter-Group Agreement (the "Inter-Group Agreement"), dated as of March
---------------------
9, 1999, which establishes certain terms and conditions concerning the
responsibilities and obligations of each Group to the other as well as certain
additional provisions concerning the Groups' relationships with each other;

WHEREAS, AT&T, AGI Merger Sub, Inc., a Delaware corporation ("Merger
------
Sub"), LMC and The Associated Group, Inc., a Delaware corporation ("AGI"),
- --- ---
intend to enter into an Agreement and Plan of Merger dated as of May 28, 1999
(the "AGI Merger Agreement") pursuant to which, among other things, subject to
--------------------
the terms and conditions contained in the AGI Merger
<PAGE>

Agreement, Merger Sub will be merged with and into AGI and AGI, as the Surviving
Entity of such merger, will initially become a direct wholly owned subsidiary of
AT&T (the "AGI Merger");
---

WHEREAS, certain members of the Liberty Media Group are negotiating a
form of letter (in the form approved in writing by AT&T, the "Telewest Letter")
to Microsoft Corporation ("Microsoft") relating to the interest currently held
by MediaOne Group, Inc. ("MediaOne") in Telewest that calls for the negotiation,
execution and delivery of certain agreements, instruments and other documents
that give effect to the arrangements described therein (collectively, and
including the obligations to which Microsoft would succeed pursuant to the
second paragraph of the Telewest Letter, but in each case only to the extent
approved in writing by AT&T, the "Microsoft/Telewest Arrangements");

WHEREAS, in connection herewith AT&T, LMC and certain of their
respective affiliates are also entering into a First Amendment to Tax Sharing
Agreement (the "Tax Sharing Amendment"), dated as of the date hereof, which
amends that certain Tax Sharing Agreement, dated as of March 9, 1999 (as so
amended, the "Tax Sharing Agreement"), to which AT&T, LMC and certain of their
respective affiliates are parties;

WHEREAS, as a condition to the willingness of each of AT&T and LMC to
enter into the AGI Merger Agreement and of the applicable members of the Liberty
Media Group to execute and deliver the Telewest Letter and the applicable
Microsoft/Telewest Arrangements, AT&T and the Liberty Media Parties have
determined to enter into this Agreement and the Tax Sharing Amendment;

2
<PAGE>

to the other as well as certain additional provisions concerning each Group's
relationship with each other as the same may relate to the AGI Merger,
Microsoft/Telewest Arrangements and certain related transactions;

WHEREAS, in connection herewith, the Capital Stock Committee has
adopted the resolutions attached as Exhibit A.

NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, AT&T and the Liberty Media Parties hereby agree as follows:

ARTICLE I

OBLIGATIONS RELATING TO THE AGI MERGER

SECTION 1.1 Post-Closing Restructuring Steps. To the extent not
--------------------------------
already accomplished pursuant to the AGI Merger Agreement, following the AGI
Merger but only if permitted by applicable law at such time, the Liberty Media
Group and the Common Stock Group shall take the actions and enter into the
transactions described in Exhibit 7.15 to the AGI Merger Agreement in the manner
and at the respective times described therein. Each of AT&T and LMC shall take,
and shall cause each of its respective Subsidiaries to take, any and all
required actions (whether as a stockholder (or other interest holder) or through
its respective representatives on the board of directors (or comparable
governing body) of the applicable entity), in the case of AT&T, only to the
extent specifically requested by LMC, to give effect to the previous sentence.
In the event that any of the actions or transactions described in Exhibit 7.15
to the AGI Merger Agreement are or become illegal or impossible to take or
complete under applicable law, the applicable members of the Common Stock Group
and the Liberty Media Group shall use their commercially reasonable

3
<PAGE>

efforts to take such other actions and/or complete such other transactions as
may be required so as to accomplish the respective intended results of and
benefits to the Common Stock Group and the Liberty Media Group from the actions
and transactions described in Exhibit B. From and after the taking of the action
described in paragraph 11 of such Exhibit 7.15, Silver Spur Land and Cattle
Company shall cause the Surviving Entity to comply with the Inter-Group
Agreement and the Tax Sharing Agreement.

SECTION 1.2. Certain Liabilities Relating to the AGI Merger.
----------------------------------------------

(a) Subject to the last sentence of this subsection (a), as between
the Common Stock Group and the Liberty Media Group, all of the following
Liabilities shall be Liabilities of the Liberty Media Group:

(i) all Liabilities of AGI and any of its subsidiaries and affiliates
(and, in each case, any predecessor or successor thereto);

(ii) all Liabilities arising out of or related to the AGI Agreement
and the transactions contemplated thereby, including (A) all
Liabilities arising out of or relating to any breach of the AGI
Merger Agreement by LMC or by AGI (whether such breach is of a
representation, warranty, agreement or obligation made to Parent,
LMC or otherwise, and without reference to any qualification of
any such representation, warranty, agreement or obligation by
reference to the Company SEC Reports or the Company Disclosure
Schedule, and without reference to any limitation or survival of
such representation, warranty, covenant or obligation set forth
in the AGI Merger Agreement and without regard to Section 10.10
of the AGI Merger Agreement), (B) any Liabilities

4
<PAGE>

to third parties contemplated by Section 4.10 of the AGI Merger
Agreement, (C) all Liabilities required to carry out the
provisions of Section 2.1 of the AGI Merger Agreement, (D) all
Liabilities under Sections 4.23 and 7.6 of the AGI Merger
Agreement, and (E) all Liabilities arising out of or related to
lawsuits brought, proposed or threatened by any third party
(other than AGI) against AT&T or Merger Sub (a "Third Party
Lawsuit") arising from the execution, delivery or performance of
the AGI Merger Agreement or this Agreement (other than Section
1.5) by AT&T or Merger Sub and (F) relieving AT&T and any member
of the Common Stock Group of any Liability or obligation that
binds or is enforceable against AT&T or such member of the
Common Stock Group as a result of any agreement between AGI and
its Subsidiaries, on the one hand, and any other person or
entity (other than an agreement executed by AT&T or a member of
the Common Stock Group), on the other hand;

(iii) all Liabilities arising out of the consummation of the AGI
Merger or any of the transactions contemplated thereby,
including the Post-Merger Restructuring Transactions and any
other transaction contemplated by this Agreement (other than
Section 1.5) or the AGI Merger Agreement notwithstanding the
failure to receive any consent, approval or authorization, or
any failure to make any filing or notification, from or to any
Person or Governmental Entity that may be required in connection
therewith;

5
<PAGE>

(iv) all Liabilities arising out of or related to the consummation
of, or failure to consummate, the Pre-Merger Restructuring
Transactions or the Post-Merger Restructuring Transactions;

(v) all Liabilities relating to employees, officers, directors,
consultants and other agents of AGI and any of its Subsidiaries
and Affiliates, including, subject to subsection (e) below, all
Liabilities contemplated by Sections 3.5, 3.6 and 3.7 of the AGI
Merger Agreement and all Rollover Options and other Stock
Incentives created pursuant to the AGI Merger Agreement; and

(vi) except to the extent resulting from any breach of this Agreement
or the AGI Merger Agreement by AT&T that do not arise out of or
relate to actions taken by AT&T at the request of LMC (as
contemplated by Section 1.2(e) hereof or otherwise in writing),
all Liabilities arising out of the execution, delivery or
performance of this Agreement (other than Section 1.5).

Notwithstanding the foregoing, as between the Common Stock Group and the Liberty
Media Group, the Common Stock Group shall be responsible for (i) any Liabilities
(other than any Liability arising from or relating to a Clause D Tax Item (as
defined in the Tax Sharing Amendment)) to the extent arising out of or relating
to any breach by AT&T or Merger Sub of the AGI Merger Agreement or this
Agreement that do not arise out of or relate to actions taken by AT&T at the
request of LMC (as contemplated by Section 1.2(e) hereof or otherwise in
writing), whether incurred by a member of the Common Stock Group or by a member
of the Liberty Media Group, and (ii) any Clause D Tax Item (as defined in the
Tax Sharing Amendment), to the extent set forth in Section 3(d)(i) of the Tax
Sharing Agreement. No action taken, or failed to be taken, by the Surviving
Entity following the

6
<PAGE>

Effective Time shall be deemed to be a breach of this Agreement or the AGI
Merger Agreement by AT&T or Merger Sub unless Parent is required to cause the
Surviving Entity to take such action pursuant to Section 1.1 (provided, that in
no event shall AT&T or Merger Sub be deemed to have breached this Agreement or
the AGI Merger Agreement as a result of any action taken, or failed to be taken
by the Surviving Corporation as a result of any action taken, or failed to be
taken, by LMC or a member of the Liberty Media Group).

(b) The Liberty Media Group shall be responsible for, and shall
reimburse the Common Stock Group for, any and all reasonable costs, fees and
expenses incurred by AT&T or any member of the Common Stock Group in connection
with: (i) the negotiation, review, execution and delivery of the AGI Merger
Agreement and, the Tax Sharing Amendment; (ii) the consummation of the
transactions contemplated by the AGI Merger Agreement and this Agreement (other
than Section 1.5); (iii) the preparation, review and filing of the Registration
Statement (and the proxy statement that will be a part thereof); (iv) the
consummation of the Post-Merger Restructuring Transactions; (v) making any
filings with any Governmental Entity and otherwise assisting in obtaining
approvals, consents and clearances required in connection with the transactions
contemplated by the AGI Merger Agreement and this Agreement (other than Section
1.5), including any Facilitating Approval required in connection with the AGI
Merger; and (vi) all other fees and expenses related thereto, including in each
case any internal costs, fees and expenses (which shall be determined in any
reasonable manner developed by AT&T for tracking such internal costs, fees and
expenses), and in each case such costs, fees and expenses to be reimbursed
promptly upon receipt of a statement therefor.

7
<PAGE>

(c) LMC shall indemnify and hold harmless AT&T and each member of the
Common Stock Group from and against, and pay and reimburse AT&T and each member
of the Common Stock Group for, any and all Liabilities (including reasonable
attorneys' fees and expenses) for which the Liberty Media Group is responsible
pursuant to this Section 1.2 in each case in accordance with Section 1.4(c) of
the Inter-Group Agreement.

(d) LMC shall ensure that there is delivered to AT&T within five
business days of the Effective Time, and shall indemnify AT&T from and against
any loss or Liability arising from or related to the failure to be delivered to
AT&T (including as a member of the Common Stock Group) immediately following the
Effective Time, in each case free and clear of all Liens and Restrictions and
ready for cancellation, a number of shares of Parent Common Stock equal to the
Parent Common Stock Number.

(e) Notwithstanding any provision of the AGI Merger Agreement, AT&T
and Merger Sub shall not waive any condition to their respective obligations to
consummate the AGI Merger set forth in Article VIII of the AGI Merger Agreement
(the "Parent Closing Conditions") without LMC's prior written consent; provided,
-------------------------
however, that consummation of the AGI Merger by Parent based on the reasonable
belief that all of the Parent Closing Conditions have been satisfied shall not
be deemed a breach of this Agreement unless (and to the extent) AT&T receives a
written request referred to in the next sentence at least 24 hours prior to the
then scheduled Closing of the AGI Merger. To the extent so requested in writing
by LMC, each of Parent and Merger Sub shall (i) assert that one or more of the
Parent Closing Conditions have not been satisfied and decline to consummate the
transactions contemplated by the AGI Merger Agreement or (ii) waive one or more
of the Parent Closing Conditions (other than those set forth in Section 8.1 of
the AGI Merger

8
<PAGE>

Agreement). The Liberty Media Group agrees to indemnify AT&T for any Liabilities
incurred by AT&T or any member of the Common Stock Group as a result of the
taking of an action by AT&T or Merger Sub at the request of LMC as contemplated
by the previous sentence (but without regard to whether such action constitutes
a breach of the AGI Merger Agreement). Notwithstanding clause (ii) of the
previous sentence, AT&T shall not be obligated to waive any Parent Closing
Condition and consummate the AGI Merger if AT&T, in its reasonable judgment,
determines that the foregoing agreement of LMC to indemnify AT&T from and
against any Liability incurred as a result of such action is not adequate to
fully protect AT&T and the Common Stock Group from and against any Parent
Adverse Effect that could reasonably be expected to result from such waiver and
the consummation of the AGI Merger in connection therewith (it being understood
that no such indemnification would be adequate if such Parent Adverse Effect
relates to, without limitation, any injunction applicable to AT&T or any of its
Subsidiaries, any restriction on the operation of any business or assets of AT&T
or any of its Subsidiaries or the relationship of AT&T or any of its
Subsidiaries with any Governmental Entity that has jurisdiction over AT&T or
such Subsidiary or any of their assets or businesses. Except as set forth in
this paragraph, nothing herein shall prohibit AT&T or Merger Sub from exercising
any of its rights under the AGI Merger Agreement, including any right to refuse
to consummate the AGI Merger and any right to terminate the AGI Merger
Agreement, in each case in accordance with the terms of the AGI Merger
Agreement. AT&T shall reasonably consider any amendments to, or any waiver of
any other provision of, the AGI Merger Agreement proposed by LMC. If so
requested by AT&T, in connection with the closing of the AGI Merger, LMC shall
acknowledge in writing to AT&T that the consummation of the AGI Merger would not
be inconsistent with AT&T's obligations under this paragraph, and the failure of
AT&T

9
<PAGE>

to consummate the AGI Merger in the absence of such acknowledgment shall be
deemed, for all purposes of this Agreement, not to be a violation of this
Agreement or the AGI Merger Agreement.

To the extent required in order to obtain any Facilitating Approval
necessary for the satisfaction of one or more of the Parent Closing Conditions
or to negate the effect of any Blocking Approval, LMC may, in its sole
discretion, elect to agree to one or more conditions, limitations or
restrictions regarding the conduct of its business or the ownership or operation
of its assets and businesses following the AGI Merger (including the businesses
and assets of AGI and its Subsidiaries), including any such condition,
limitation or restriction that may be imposed as a result of or in connection
with any Parent May Transaction, Parent Impeding Transaction or Munich Impeding
Transaction. In furtherance of the foregoing, in the event that AT&T elects to
delay the consummation of the AGI Merger pursuant to clause (ii) of Section
3.4(c) of the AGI Merger Agreement or delivers a Blocking Approval Notice, LMC,
may, in its sole discretion, take one or more of the actions described in the
previous sentence in order to prevent or eliminate the condition, event or
circumstance which is the basis for AT&T's election to delay the consummation of
the AGI Merger pursuant to clause (ii) of Section 3.4(c) of the AGI Merger
Agreement or to deliver a Blocking Approval Notice under clause (iv) of Section
3.4(c) of the AGI Merger Agreement.

(f) Subject to the condition that LMC shall have made available to
AT&T the amount(s) in cash required for AT&T to make the applicable payments,
AT&T shall make the cash payments required to be made by it or the Surviving
Entity in accordance with the terms and conditions of Sections 3.6(a) and 3.7 of
the AGI Merger Agreement at such times and in such amounts as may be directed by
LMC. LMC shall take all actions necessary to require the Surviving Entity to
give effect to the foregoing sentence.

10
<PAGE>

(g) All employees, officers, directors, consultants and other agents
of AGI and its Subsidiaries shall be deemed to be employees, officers,
directors, consultants and other agents of the Liberty Media Group, and all
Stock Incentives that are created as a result of the AGI Merger shall be the
responsibility of the Liberty Media Group.

(h) For purposes of Section 1.16 of the Inter-Group Agreement, the
Rollover Options, the obligation to issue AT&T Liberty Tracking Shares to AGI
shareholders pursuant to the AGI Merger Agreement, and any other obligation to
issue or sell any AT&T Liberty Tracking Shares pursuant to or in connection with
the AGI Merger, the AGI Merger Agreement, and any agreement referred to in the
AGI Merger Agreement or executed in connection therewith shall be deemed to be
Tracking Stock Obligations incurred with a Liberty Approval. The issuance of
AT&T Liberty Tracking Shares and Rollover Options pursuant to the AGI Merger,
any Pre-Merger Restructuring Step, any Post-Merger Restructuring Step and any
other transaction contemplated by the AGI Merger Agreement shall be deemed to
have occurred with a Liberty Approval for purposes of Section 1.11(a) of the
Inter-Group Agreement and shall not be a breach of Section 1.11(b) or (c) of the
Inter-Group Agreement. Subject to Section 1.16 of the Inter-Group Agreement, any
action taken by Parent to implement the terms of this paragraph (h) or Section
3.7 of the AGI Merger Agreement shall not constitute a breach of any provision
of the Inter-Group Agreement.

(i) At all times from the date of its formation until the Effective
Time of the AGI Merger, Merger Sub shall be a Subsidiary of AT&T.

SECTION 1.3. Allocation of Proceeds. For purposes of Section 1.6(b)
----------------------
of the Inter-Group Agreement and the definition of the term "Liberty Media
Group" in the AT&T Charter Amendment, (i) the net proceeds of the issuance of
the shares of Class A Munich Group Stock to be

11
<PAGE>

issued in the Merger shall consist of the entire interest of AT&T in the
Surviving Entity and each of its Subsidiaries (other than the shares of Parent
Common Stock held by AGI and its Subsidiaries at the time of the Merger referred
to in Exhibit B and any distributions on such shares that required an adjustment
pursuant to Section 2.5 of the AGI Merger Agreement), which shall be deemed to
represent the net proceeds of the issuance of the shares of Parent Common Stock
in the Merger), (ii) for purposes of clause (ii) of Section 1.6(b) of the Inter-
Group Agreement, the shares of Class A Munich Group Stock and Class B Munich
Group Stock held by AGI and its Subsidiaries at the time of the Merger shall be
deemed to have been acquired entirely with the shares of Class A Munich Group
Stock to be issued in the AGI Merger (provided, however, that Parent shall have
no obligation to LMC pursuant to Section 1.6(b) of the Inter-Group Agreement to
contribute such shares held by AGI and its Subsidiaries to LMC), and (iii) the
shares of Parent Common Stock and Class A Munich Group Stock issued upon
conversion of the shares Company Stock referred to in clause (b) of the
definition of the term "Liberty Media Group" in the AT&T Charter Amendment (and
the proceeds of any Disposition (as defined in the AT&T Charter Amendment)
thereof) shall remain attributed to the Liberty Media Group. Notwithstanding the
foregoing, if the foregoing allocation of proceeds would not be permitted under
the AT&T Charter Amendment, all of the assets acquired pursuant to the AGI
Merger Agreement shall be deemed to be part of the Liberty Media Group, except
that the shares of Parent Common Stock held by AGI and its Subsidiaries at the
time of the AGI Merger (and any distributions on such shares that required an
adjustment pursuant to Section 2.5 of the AGI Merger Agreement) shall be deemed
to have been transferred by the Liberty Media Group to the Common Stock Group in
respect of the agreement by AT&T to enter into this Agreement and issue an equal
number of shares of Parent Common Stock.

12
<PAGE>

In furtherance of the foregoing, any contract right or other similar
right associated with any asset that is attributed to a Group in accordance with
the preceding paragraph shall be the right of the Group to which such related
asset is so attributed.

SECTION 1.4. Certain Obligations.
-------------------

(a) Section 3.4(c) and clause (I) of the proviso to the second
sentence of Section 3.4(a) of the AGI Merger Agreement are incorporated herein
in their entirety.

(b) Notwithstanding the foregoing, AT&T agrees to reasonably consider
any actions that it may be requested by LMC to take in accordance with
consummation of the AGI Merger.

(c) LMC represents and warrants that true and complete copies of all
documents referred to in the AGI Merger Agreement that have been delivered to
LMC by or on behalf of the Company on or prior to the date hereof have been
delivered to AT&T (or its counsel) on or prior to the date hereof and agrees
that true and complete copies of all such documents delivered to LMC from and
after the date hereof until consummation of the transactions contemplated hereby
will be delivered promptly to AT&T (or its counsel).

SECTION 1.5. Certain Liabilities Relating to the Microsoft/Telewest
------------------------------------------------------
Arrangements.
- ------------

(a) As between the Common Stock Group and the Liberty Media Group,
all of the following Liabilities shall be Liabilities of the Common Stock Group:

(i) if the merger of MediaOne and AT&T or a subsidiary of AT&T (the
"MediaOne Merger") occurs, all Liabilities of MediaOne and any
predecessor or successor thereto relating to the interests in
Telewest that are owned by

13
<PAGE>

MediaOne and are transferred to Microsoft in connection with the
Telewest Letter (the "Telewest Interests"); and

(ii) all Liabilities arising out of or related to Liberty Media
Group's execution and delivery of, or performance of its
obligations under, the Telewest Letter and the Microsoft/Telewest
Arrangements and the transactions contemplated thereby, including
(A) all Liabilities arising out of or relating to any breach of
the Microsoft/Telewest Arrangements by AT&T or any of its
Subsidiaries or Affiliates and, if the MediaOne Merger occurs, by
MediaOne or any of its Subsidiaries or Affiliates, (B) all
Liabilities incurred by the Liberty Media Group required to carry
out the provisions of Telewest Letter or the Microsoft/Telewest
Arrangements (to the extent not reimbursed by Microsoft, provided
that AT&T will be subrogated to the rights of the Liberty Media
Group against Microsoft in such event), and (C) all Liabilities
arising out of or related to lawsuits brought, proposed or
threatened by any third party against LMC or a member of the
Liberty Media Group (a "Third Party Lawsuit") arising from the
execution, delivery or performance of the Telewest Letter or the
Microsoft/Telewest Arrangements by LMC or any member of the
Liberty Group (in any such case, without regard to the failure to
receive any consent, approval or authorization, or any failure to
make any filing or notification, from or to any Person or
Governmental Entity that may be required in connection
therewith).

14
<PAGE>

Notwithstanding the foregoing, the Liberty Media Group shall be responsible for
any Liabilities to the extent arising out of or relating to any breach by a
member of the Liberty Media Group of the Telewest Letter or the
Microsoft/Telewest Arrangements that do not arise out of or relate to actions
taken by a member of the Liberty Media Group at the express written request of
AT&T, whether incurred by a member of the Common Stock Group or by a member of
the Liberty Media Group.

(b) The Common Stock Group shall be responsible for, and shall
reimburse the Liberty Media Group for, any and all reasonable costs, fees and
expenses incurred by LMC or any member of the Liberty Media Group in connection
with: (i) the negotiation, review, execution and delivery of the Telewest
Letter and the Microsoft/Telewest Arrangements; (ii) the consummation of the
transactions contemplated by the Telewest Letter and the Microsoft/Telewest
Arrangements and this Agreement (with respect to the Microsoft Telewest
Arrangements); (iii) making any filings with any Governmental Entity and
otherwise assisting in obtaining approvals, consents and clearances required in
connection with the transactions contemplated by the Telewest Letter and the
Microsoft/Telewest Arrangements, including any Facilitating Approval required in
connection with the Microsoft/Telewest Arrangements; and (iv) all other
reasonable fees and expenses related thereto, including in each case any
reasonable internal costs, fees and expenses (which shall be determined in any
reasonable manner developed by LMC for tracking such internal costs, fees and
expenses), and in each case such costs, fees and expenses to be reimbursed
promptly upon receipt of a statement therefor; provided that, in each case (A)
LMC and the Liberty Media Group shall first seek such reimbursement from
Microsoft as provided in the Telewest Letter and (B) AT&T will be subrogated to
any rights of LMC and the Liberty Media Group against Microsoft with respect to
any payments made by AT&T pursuant to this Section 1.5.

15
<PAGE>

(c) AT&T shall indemnify and hold harmless LMC and each member of the
Liberty Media Group from and against, and pay and reimburse LMC and each member
of the Liberty Media Group for, any all Liabilities (including reasonable
attorneys' fees and expenses) for which the Common Stock Group is responsible
pursuant to this Section 1.5 in each case in accordance with Section 1.4(c) of
the Inter-Group Agreement.

(d) Unless and then only to the extent otherwise required by a
"determination" (as defined in Section 1313(a)(1) of the Code) or by a similar
applicable provision of state or local income or franchise tax law, LMC agrees
(i) to report the transactions contemplated by the Telewest Letter and the
Microsoft/Telewest Arrangements as transactions not giving rise to income, gain
or loss for tax purposes and (ii) not to take any position in any audit,
administrative proceeding or litigation that is inconsistent with clause (i) of
this sentence.

ARTICLE II

DEFINITIONS

SECTION 2.1. Certain Defined Terms. In addition to the terms defined
---------------------
elsewhere in this Agreement, for purpose of this Agreement the following terms
shall have the following meanings:

"Subsidiary" with respect to AGI, shall include Teligent and its
Subsidiaries and Portatel and its Subsidiaries.

SECTION 2.2. Other Definitional Provisions. The language used in this
-----------------------------
Agreement shall be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction shall be applied against
any party. Any references to any statute or law shall also refer to all rules
and regulations promulgated thereunder, unless the context requires

16
<PAGE>

otherwise. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include,"
"includes," and "including" shall be deemed to be followed by the phrase
"without limitation". The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Article and
Section references are to this Agreement unless otherwise specified. The
meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms. Unless the context shall otherwise
require, any references to any agreement or other instrument or statute or
regulation are to it as amended and supplemented from time to time (and, in the
case of a statute or regulation, to any successor provisions). Any reference in
this Agreement to a "day" or number of "days" (without the explicit
qualification of "business") shall be interpreted as a reference to a calendar
day or number of calendar days. If any action or notice is to be taken or given
on or by a particular calendar day, and such calendar day is not a business day,
then such action or notice shall be deferred until, or may be taken or given on,
the next business day.

ARTICLE III

MISCELLANEOUS

SECTION 3.1. Notices. All notices, requests, demands or other
-------
communications required by or otherwise with respect to this Agreement shall be
in writing and shall be deemed to have been given to any party when delivered
personally (by courier service or otherwise), when delivered by telecopy and
confirmed by return telecopy, or upon the receipt after being mailed by first-
class mail, postage prepaid and return receipt requested in each case to the
applicable addresses set forth below:

17
<PAGE>

If to AT&T or any member of the Common Stock Group:

AT&T Corp.
295 North Maple Avenue
Basking Ridge, New Jersey 07920
Attention: Vice President-Law
and Corporate Secretary
Facsimile: (908) 221-6618

with a copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Richard D. Katcher, Esq.
Steven A. Rosenblum, Esq.
Facsimile: (212) 403-2000

If to LMC or any member of the Liberty Media Group:

Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112
Attention: Charles Y. Tanabe, Esq.
Facsimile: (720) 875-5382

with a copy to:

Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Elizabeth M. Markowski, Esq.
John L. Graham, Esq.
Facsimile: (212) 705-5125

or such address as such party shall have designated by notice so given to each
other party.

SECTION 3.2. Amendments; No Waivers. (a) This Agreement shall be
----------------------
amended, changed, supplemented, waived or otherwise modified only by an
instrument in writing signed by each of AT&T and LMC (and following a Triggering
Event, Liberty Media Group LLC).

18
<PAGE>

(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

SECTION 3.3. Successors and Assigns. Neither this Agreement nor any
----------------------
of the rights or obligations under this Agreement shall be assigned, in whole or
in part, by any party without the prior written consent of the other parties
hereto; provided, however, that the assignment of its rights and obligations
-------- -------
under this Agreement by LMC or any Covered Entity to Liberty Media Group LLC in
connection with the transactions contemplated by the Contribution Agreement
shall not require the consent of AT&T. Subject to the foregoing, the provisions
of this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.

SECTION 3.4. Governing Law; Consent to Jurisdiction. This Agreement
--------------------------------------
and all disputes hereunder shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware, without regard to
the principles of conflicts of laws. Each party hereto irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the United
States District Court for the District of Delaware or the Chancery Court of the
State of Delaware in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding shall be
brought only in such court (and waives any objection based on forum non
----- ---
coveniens or any other objection to venue therein); provided, however, that such
- --------- -------- -------
consent to jurisdiction is solely for the purpose referred to in this Section
4.4 and shall not be deemed to be a general submission to the jurisdiction of
said courts or of the State of Delaware other than for

19
<PAGE>

such purpose. AT&T and LMC each hereby waive any right to a trial by jury in
connection with any such action, suit or proceeding.

SECTION 3.5. Counterparts; Effectiveness. This Agreement may be
---------------------------
executed in any number of counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts thereof signed by the other party hereto.

SECTION 3.6. Specific Performance. Each of AT&T and LMC acknowledges
--------------------
and agrees that money damages are not an effective remedy for violations of this
Agreement and that any party may, in its sole discretion, apply to a court of
competent jurisdiction for specific performance or injunctive or such other
relief as such court may deem just and proper in order to enforce this Agreement
or prevent any violation hereof and, to the extent permitted by applicable Law,
each party waives any objection to the imposition of such relief.

SECTION 3.7. Remedies Cumulative. All rights, powers and remedies
-------------------
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.

SECTION 3.8. Termination. This Agreement shall remain in full force
-----------
and effect until the earlier to occur of (i) such time as no shares of Class A
Munich Group Stock or Class B Munich Group Stock are outstanding and (ii) the
termination of the AGI Merger Agreement, at which time this Agreement shall
terminate and upon termination, no party shall have any liability or further
obligation to the other under this Agreement except that the provisions of this
Section 3.8

20
<PAGE>

shall survive the termination of this Agreement; provided, however, that such
termination shall not relieve any party hereto of any liability for any breach
of this Agreement or the AGI Merger Agreement. No termination of this Agreement
shall limit or otherwise affect the rights or obligations of the parties to the
Inter-Group Agreement.

SECTION 3.9. Severability. In case any provision in this Agreement
------------
shall be held invalid, illegal or unenforceable in a jurisdiction, such
provision shall be modified or deleted, as to the jurisdiction involved, only to
the extent necessary to render the same valid, legal and enforceable, and the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby nor shall the validity, legality
or enforceability of such provision be affected thereby in any other
jurisdiction.

SECTION 3.10. Cooperation. Each of AT&T and LMC covenants and agrees
-----------
with the other to use its reasonable best efforts to cause each member of the
Common Stock Group and each member of the Liberty Media Group, respectively, to
fulfill each of its respective obligations under this Agreement.

21
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.

AT&T CORP.

By: /s/ Daniel E. Somers
--------------------
Name: Daniel E. Somers
Title: Senior Executive Vice President and
Chief Financial Officer

LIBERTY MEDIA CORPORATION

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President and
Chief Operating Officer

LIBERTY MEDIA GROUP LLC

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Vice President
<PAGE>

Each of the following Covered Entities hereby
executes this Agreement as a member of the Liberty
Media Group to become a party to this Agreement
for so long as it remains a Covered Entity under
the applicable provisions of the AT&T Charter
Amendment:

TCIP, INC.

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title:

SILVER SPUR LAND AND CATTLE CO.

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title:

TCI INTERACTIVE, INC.

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title:

<PAGE>

EXHIBIT 10.15
- --------------------------------------------------------------------------------

SECOND SUPPLEMENT TO

INTER-GROUP AGREEMENT

between and among

AT&T CORP.,

on the one hand,

and

LIBERTY MEDIA CORPORATION,

LIBERTY MEDIA GROUP LLC

and each Covered Entity listed on the

signature pages hereof,

on the other hand,

dated as of September 24, 1999

- --------------------------------------------------------------------------------
<PAGE>

SECOND SUPPLEMENT TO

INTER-GROUP AGREEMENT

Agreement dated as of September 24, 1999 (this "Agreement") between
---------
AT&T Corp., a New York corporation ("AT&T"), for itself and on behalf of the
----
members of the Common Stock Group, on the one hand, and Liberty Media
Corporation, a Delaware corporation ("LMC"), Liberty Media Group LLC, a Delaware
---
limited liability company, and for so long as such Covered Entity remains a
Covered Entity under the applicable provisions of the AT&T Charter Amendment,
each Covered Entity listed on the signature pages hereof (collectively, the
"Liberty Media Parties"), for themselves and, in the case of LMC, on behalf of
- ----------------------
the other members of the Liberty Media Group, on the other hand. Capitalized
terms used herein without definition have the meanings ascribed to such terms in
the Inter-Group Agreement (as hereinafter defined).

WHEREAS, in response to the request of the Liberty Media Parties, the
Capital Stock Committee of the AT&T Board of Directors has adopted the
resolutions attached as Exhibit A hereto approving and authorizing the
repurchase by AT&T from time to time of up to 135 million AT&T Liberty Tracking
Shares (as such number shall be adjusted from time to time to reflect stock
splits,
<PAGE>

stock dividends, stock combinations and similar events affecting the AT&T
Liberty Tracking Shares), in accordance with the terms and conditions set forth
in the resolution of the Capital Stock Committee and this Agreement (the "Stock
-----
Repurchase Program"); and
- ------------------

WHEREAS, AT&T and the Liberty Media Parties desire to supplement and
modify the Inter-Group Agreement in the manner set forth in this Agreement and
to establish in this Agreement certain terms and conditions concerning the
responsibilities and obligations of each Group to the other as well as certain
additional provisions concerning each Group's relationship with the other as the
same may relate to the Stock Repurchase Program and certain related
transactions.

ARTICLE I

CERTAIN MATTERS RELATING TO THE STOCK REPURCHASE PROGRAM

SECTION 1.1. Repurchases of AT&T Liberty Tracking Shares.
-------------------------------------------

(a) Notwithstanding any provision of the Inter-Group Agreement to the
contrary, the Liberty Media Parties hereby consent (i) to the acquisition from
time to time of AT&T Liberty Tracking Shares by AT&T pursuant to the Stock
Repurchase Program, (ii) the use of funds, securities or other property
attributable to or to be made available by the Liberty Media Group to effect
such acquisitions and (iii) the consummation of any Repurchase Transaction in
accordance with the terms of any Repurchase Notice (as such terms are defined
herein).

(b) The Stock Repurchase Program will be effected through one or more
of the following methods, as specified by LMC (subject to Section 1.1(g) hereof)
in a Repurchase Notice

2
<PAGE>

(as defined below) from time to time following the date hereof: (i) the purchase
by AT&T of AT&T Liberty Tracking Shares in open market transactions ("Open
----
Market Purchase Transactions"), (ii) the entering into by AT&T of agreements or
- ----------------------------
arrangements, or the issuance and sale by AT&T of securities or other
instruments, in each case giving any Person the right to require AT&T to
purchase a specified amount of AT&T Liberty Tracking Shares at a specified price
(any such agreement, arrangement or instrument, a "Put Right"), (iii) the
---------
entering into by AT&T of agreements or arrangements with any Person granting to
AT&T the right to purchase a specified amount of AT&T Liberty Tracking Shares at
a specified price (such agreement or arrangement, a "Call Right") and (iv)
----------
AT&T's engaging in swaps or other derivative transactions relating to the AT&T
Liberty Tracking Shares pursuant to which AT&T would directly or indirectly
acquire AT&T Liberty Tracking Shares. The creation of any Put Right, the
acquisition of any Call Right or the entering into of any other transaction
involving a swap or other derivative transaction described in clauses (ii),
(iii) and (iv) above are hereinafter referred to collectively as "Derivative
----------
Transactions", and Derivative Transactions and Open Market Purchase Transactions
- ------------
are hereinafter referred to collectively as "Repurchase Transactions".
-----------------------

(c) LMC will notify AT&T in a writing signed by the President or any
Vice President of LMC (each, an "Authorized LMC Officer") of any proposed
----------------------
Repurchase Transaction, which notice shall specify the type of Repurchase
Transaction which LMC is requesting AT&T to engage in and include all material
terms and conditions thereof, including, without limitation, the amount of each
class of AT&T Liberty Tracking Shares to be acquired, the price or prices at
which such acquisitions should be consummated, the identity of any broker,
dealer or other securities professional to be utilized in connection with such
transaction, and the manner in which funds or

3
<PAGE>

other property or securities owned by a member of the Liberty Media Group will
be made available to AT&T in connection with such transaction (such notice, a
"Repurchase Notice"). Such Repurchase Notice shall include a representation by
-----------------
LMC to AT&T to the effect that there is no material nonpublic information
concerning the Liberty Media Parties and that consummation of the Repurchase
Transaction in the manner specified in the Repurchase Notice will comply with
applicable law. As to any Open Market Purchase Transaction, a Repurchase Notice
may be sent to AT&T contemporaneously with the placement of a purchase order on
behalf of AT&T by an Authorized LMC Officer with a broker, dealer or other
securities professional with whom AT&T has established an account at the request
of LMC (or in the event that AT&T has notified LMC that AT&T reasonably expects
to repurchase Common Stock on such day, with a broker designated by AT&T) for
the purpose of effecting Repurchase Transactions pursuant to this Agreement.

(d) Subject to Section 1.1(g) hereof, upon receipt of a Repurchase
Notice AT&T shall use its commercially reasonable efforts to effect the
requested transaction as promptly as practicable and in accordance with the
terms and conditions set forth in the Repurchase Notice and any applicable laws,
rules and regulations, including, but not limited to, federal and state
securities laws and the rules and regulations of The New York Stock Exchange,
Inc. Unless otherwise consented to by AT&T, the parties agree that any Open
Market Purchase Transactions shall be made in accordance with Rule 10b-18
promulgated under the Securities Exchange Act of 1934, as amended, and any
successor rule or regulation or other applicable rule or regulation relating to
purchases by an issuer or its affiliate of the issuer's securities.

(e) In connection with any Repurchase Notice relating to a proposed
Derivative Transaction, AT&T shall not be required to engage in such Derivative
Transaction unless (i) the

4
<PAGE>

period during which AT&T is obligated with respect to such Derivative
Transaction terminates no later than February 12, 2001 and (ii) following
discussions among the officers and employees of, and consultants and advisors
to, each of AT&T and LMC, as to the legal, tax, financial and accounting
implications of such proposed Derivative Transaction, AT&T and LMC, each acting
in good faith, shall have agreed that the proposed Derivative Transaction will
not result in or cause any significant negative impact upon AT&T or the Common
Stock Group, provided that any such agreement shall not prejudice AT&T's or the
Common Stock Group's rights under Section 1.2(b) hereof or under the Tax Sharing
Agreement among AT&T, LMC and the other parties thereto, as amended from time to
time (the "Tax Sharing Agreement").
---------------------

(f) In connection with any Repurchase Transaction, LMC shall make
available to the Common Stock Group such amount(s) in cash or, to the extent
that the Repurchase Transaction involves the payment by AT&T of consideration
other than cash, deliver such securities or other property as is required to
consummate the transaction contemplated by the Repurchase Notice, and, subject
to Section 1.1(g) hereof, AT&T shall make such cash payments or deliver such
securities or other property in connection with such transaction, all in
accordance with the terms specified in the Repurchase Notice; provided, however,
-------- -------
that in the event the Repurchase Transaction is not consummated for any reason
within the time period specified in such Repurchase Notice, AT&T shall so notify
LMC in writing of such event and, unless instructed in writing to the contrary
by LMC within two (2) Business Days of the date such notice is delivered, return
(i) to LMC any such cash, securities or other property that have been previously
delivered to AT&T and have not been delivered to a third party in accordance
with the terms of the Repurchase Notice or (ii) to the extent that such cash,
securities or other property have been delivered to a third party in accordance
with the terms

5
<PAGE>

of the Repurchase Notice, use commercially reasonable efforts to require such
third party to deliver to AT&T (which will then be obligated to deliver such
cash, securities or other property to LMC) or LMC such cash, securities or other
property; provided, that to the extent AT&T is unable, through its use of
--------
commercially reasonable efforts, to obtain the return of such cash, securities
or other property, AT&T shall assign any rights it may have with respect to such
cash, securities or other property (including any rights with respect to any
such third party) to LMC. In the case of a Repurchase Transaction effected in
accordance with the last sentence of Section 1.1(c), LMC shall make any such
payment or delivery to AT&T or, if so directed by AT&T, directly to the Person
specified in such Repurchase Notice, or if such Repurchase Notice contemplates
AT&T's establishment of an account for such purpose, to the account designated
by AT&T. All AT&T Liberty Tracking Shares acquired by AT&T pursuant to
Repurchase Transactions shall be cancelled and restored to the status of
authorized but unissued shares of the applicable class of AT&T Liberty Tracking
Shares.

(g) Notwithstanding anything to the contrary set forth in this
Agreement, AT&T shall not be required to effect a particular Repurchase
Transaction if (in each case, as reasonably determined by AT&T):

(i) at the time (x) the order is delivered to AT&T (or any
broker acting on its behalf) to purchase AT&T Liberty Tracking Shares in
connection with an Open Market Purchase Transaction, (y) AT&T (or any person
acting on its behalf) acquires the right to acquire AT&T Liberty Tracking Shares
from a third party in any Derivative Transaction or (z) that all parties to such
Repurchase Transaction have not irrevocably committed to consummate such
Repurchase Transaction, AT&T is or would be deemed to be in possession of
material nonpublic information

6
<PAGE>

concerning the Liberty Media Parties or the AT&T Liberty Tracking Shares;
provided, however, that upon any such determination by it pursuant to this
- -------- -------
Section 1(g)(i), AT&T shall promptly notify LMC of such determination and
thereafter AT&T's right to refuse to effect such Repurchase Transaction pursuant
to this Section 1(g)(i) shall terminate upon disclosure and dissemination (by
LMC or otherwise) of such material nonpublic information; provided, however,
-------- -------
that nothing herein shall require AT&T to make such disclosure.

(ii) consummation of such Repurchase Transaction would violate
any applicable law; or

(iii) except with respect to Repurchase Transactions for which
orders with third parties have already been placed, AT&T notifies LMC that such
(or any) Repurchase Transaction would materially delay or interfere with a
potential merger, acquisition, sale of Common Stock, repurchase of Common Stock
or other transaction in which AT&T or the Common Stock Group intends to engage.

SECTION 1.2. Certain Liabilities Relating to the Stock Repurchase
----------------------------------------------------
Program.
- -------

(a) Subject to the penultimate sentence of this subsection (a), the
Liberty Media Group shall be responsible for, and shall reimburse the Common
Stock Group for: (i) any and all reasonable costs, fees and expenses incurred
by AT&T or any member of the Common Stock Group in connection with the
negotiation, review, execution and delivery of this Agreement and any agreement
required to be entered into by AT&T in connection with any Repurchase
Transaction; (ii) any and all costs, fees and expenses incurred by AT&T or any
member of the Common Stock Group directly in connection with the consummation of
any Repurchase Transaction entered into in accordance with this Agreement and
the applicable Repurchase Notice, including, without limitation,

7
<PAGE>

any fees and expenses payable by AT&T to brokers, dealers or other securities
professionals or other advisors specified in any such Repurchase Notice (or to
the broker specified by AT&T pursuant to Section 1(c)) solely in connection with
any such Repurchase Transaction; (iii) any and all Liabilities (including
reasonable attorneys' fees and expenses) arising out of or resulting from any
action taken in good faith by AT&T or any member of the Common Stock Group in
accordance with this Agreement; and (iv) all other fees and expenses related to
AT&T's performance of its obligations hereunder relating to the Stock Repurchase
Program in accordance with the terms of this Agreement, including, in each case,
any internal costs, fees and expenses (which shall be determined in any
reasonable manner developed by AT&T for tracking such internal costs, fees and
expenses). All such costs, fees and expenses required to be reimbursed in
accordance with this Agreement shall be paid to AT&T promptly upon receipt of
appropriate documentation related thereto. Notwithstanding the foregoing, the
Common Stock Group will be liable for any Excluded Buyback Tax Items (as defined
in the amendment, dated the date hereof, to the Tax Sharing Agreement) to the
extent set forth in the Tax Sharing Agreement, as so amended. The Liberty Media
Group shall also be responsible for any and all costs, fees and expenses
incurred by any Liberty Media Party in connection herewith and any and all
Liabilities (including reasonable attorney's fees and expenses) arising out of
or resulting from any action taken by any Liberty Media Party in connection
herewith.

(b) LMC shall indemnify and hold harmless AT&T and each member of the
Common Stock Group from and against, and pay and reimburse AT&T and each member
of the Common Stock Group for, any and all Liabilities (including reasonable
attorneys' fees and expenses) (without duplication) for which the Liberty Media
Group is responsible pursuant to this Section 1.2 in each case in accordance
with Section 1.4(c) of the Inter-Group Agreement. Any such Liability

8
<PAGE>

shall be deemed to be a liability of the Liberty Media Group, as opposed to the
Common Stock Group, for all purposes hereunder and under the Inter-Group
Agreement.

SECTION 1.3. Debt Incurrence. Any debt incurred, directly or
---------------
indirectly, by AT&T or any member of the Common Stock Group in connection with
the acquisition, in compliance with this Agreement and the relevant Repurchase
Notice, of AT&T Liberty Tracking Shares pursuant to the Stock Repurchase Program
(i) shall constitute a Liberty Debt Incurrence, (ii) shall be deemed to be
incurred with a Liberty Approval and (iii) shall be included in total debt of
the Liberty Media Group for purposes of determining the Liberty Media Group Debt
Limit in accordance with Section 1.3(b) of the Inter-Group Agreement.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

SECTION 2.1. Representations and Warranties of AT&T. AT&T represents
--------------------------------------
and warrant to LMC that (a) AT&T is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder, (b) the execution and delivery of this Agreement by
AT&T and the consummation by AT&T of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of AT&T and
no other corporate proceedings on the part of AT&T are necessary to authorize
this Agreement or any of the transactions contemplated hereby, (c) this
Agreement has been duly executed and delivered by AT&T and constitutes a valid
and binding obligation of AT&T, and, assuming this Agreement constitutes a valid
and binding obligation of LMC and each of the Covered Entities, is enforceable
against AT&T

9
<PAGE>

and each member of the Common Stock Group in accordance with its terms, (d)
neither the execution, delivery or performance of this Agreement by AT&T
constitutes a breach or violation of or conflicts with the AT&T Charter or
AT&T's By-Laws or any material agreement to which AT&T is a party, and (e) none
of such material agreements would impair in any material respect the ability of
AT&T to perform its obligations hereunder.

SECTION 2.2. Representations and Warranties of LMC. LMC represents
-------------------------------------
and warrants to AT&T that (a) LMC is a corporation duly organized, validly
existing and in good standing under the laws of Delaware and has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder, (b) the execution and delivery of this Agreement by LMC
and the consummation by LMC of the transactions contemplated hereby have been
duly authorized by all necessary action on the part of LMC and no other
proceedings on the part of LMC are necessary to authorize this Agreement or any
of the transactions contemplated hereby, (c) this Agreement has been duly
executed and delivered by LMC and each Covered Entity and constitutes a valid
and binding obligation of LMC and each Covered Entity, and, assuming this
Agreement constitutes a valid and binding obligation of AT&T, is enforceable
against LMC and each Covered Entity in accordance with its terms, (d) neither
the execution, delivery or performance of this Agreement by LMC constitutes a
breach or violation of or conflicts with its certificate of incorporation or by-
laws or any material agreement to which LMC is a party, (e) none of such
material agreements would impair in any material respect the ability of LMC to
perform its obligations hereunder and (f) this Agreement has been approved by a
Required Majority (as defined in LMC's Certificate of Incorporation) of the
members of the board of directors of LMC.

10
<PAGE>

ARTICLE III

MISCELLANEOUS

If to AT&T or any member of the Common Stock Group:

AT&T Corp.
295 North Maple Avenue
Basking Ridge, New Jersey 07920
Attention: Vice President-Law
and Corporate Secretary
Facsimile: (908) 221-6618

with a copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Richard D. Katcher, Esq.
Steven A. Rosenblum, Esq.
Facsimile: (212) 403-2000

If to LMC or any member of the Liberty Media Group:

Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112
Attention: Charles Y. Tanabe, Esq.
Facsimile: (720) 875-5382

11
<PAGE>

with a copy to:

Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Elizabeth M. Markowski, Esq.
Facsimile: (212) 705-5125

or such other address as such party shall have designated by notice so given to
each other party.

SECTION 3.2. Amendments; No Waivers.
----------------------
(a) This Agreement shall be amended, changed, supplemented, waived or
otherwise modified only by an instrument in writing signed by each of AT&T and
LMC (and following a Triggering Event, Liberty Media Group LLC).

(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

12
<PAGE>

SECTION 3.4. Governing Law; Consent to Jurisdiction. This Agreement
--------------------------------------
and all disputes hereunder shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware, without regard to
the principles of conflicts of laws. Each party hereto irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the United
States District Court for the District of Delaware or the Chancery Court of the
State of Delaware in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding shall be
brought only in such court (and waives any objection based on forum non
----- ---
coveniens or any other objection to venue therein); provided, however, that such
- --------- -------- -------
consent to jurisdiction is solely for the purpose referred to in this Section
3.4 and shall not be deemed to be a general submission to the jurisdiction of
said courts or of the State of Delaware other than for such purpose. AT&T and
LMC each hereby waive any right to a trial by jury in connection with any such
action, suit or proceeding.

13
<PAGE>

SECTION 3.8. Termination. This Agreement shall remain in full force
-----------
and effect until the Stock Repurchase Program has terminated and the parties
hereto have performed all of their respective obligations hereunder with respect
to Repurchase Transactions effected prior to such termination. The Stock
Repurchase Program will terminate when the maximum number of AT&T Liberty
Tracking Shares to be repurchased pursuant to the Stock Repurchase Program (as
such amount may be increased or decreased from time to time by action of the
Capital Stock Committee) shall have been reacquired by AT&T and cancelled and
restored to the status of authorized but unissued shares or, if applicable, at
such earlier date as of which (a) the Capital Stock Committee terminates or
cancels the Stock Repurchase Program, (b) the Stock Repurchase Program is
terminated by the Liberty Media Parties, as set forth in a public announcement
to such effect, or (c) there cease to be any AT&T Liberty Tracking Shares
outstanding. Upon termination of this Agreement, no party shall have any
liability or further obligation to the other under this Agreement, except that
the provisions of this Section 3.8 shall survive the termination of this
Agreement; provided, however, that such termination shall not relieve any party
-------- -------
hereto of any liability (x) for any breach of this Agreement occurring prior to
such termination or (y) otherwise accrued hereunder. No termination of this
Agreement shall limit or otherwise affect the rights or obligations of the
parties to the Inter-Group Agreement or the Tax Sharing Agreement (as amended).

14
<PAGE>

SECTION 3.11. Interpretation. The language used in this Agreement
--------------
shall be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied against any party.
Any references to any statute or law shall also refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes," and
"including" shall be deemed to be followed by the phrase "without limitation".
The words "hereof," "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Article and Section references are
to this Agreement unless otherwise specified. The meanings given to terms
defined herein shall be equally applicable to both the singular and plural forms
of such terms. Unless the context shall otherwise require, any references to any
agreement or other instrument or statute or regulation are to it as amended and
supplemented

15
<PAGE>

from time to time (and, in the case of a statute or regulation, to any successor
provisions). Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a business day, then such action or notice shall be deferred until,
or may be taken or given on, the next business day.

16
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.

AT&T CORP.

By: /s/ Marilyn J. Wasser
---------------------
Name: Marilyn J. Wasser
Title: Vice President--Law & Secretary

LIBERTY MEDIA CORPORATION

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President

LIBERTY MEDIA GROUP LLC

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President
<PAGE>

LIBERTY SP, INC.

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President

LIBERTY AGI, INC.

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President

LMC INTERACTIVE, INC.

By: /s/ Gary S. Howard
------------------
Name: Gary S. Howard
Title: Executive Vice President

<PAGE>

EXHIBIT 10.16
- --------------------------------------------------------------------------------

THIRD SUPPLEMENT TO

INTER-GROUP AGREEMENT

between and among

AT&T CORP.,

on the one hand,

and

LIBERTY MEDIA CORPORATION,

LIBERTY MEDIA GROUP LLC

and each Covered Entity listed on the

signature pages hereof,

on the other hand,

dated as of October 20, 1999

- --------------------------------------------------------------------------------
<PAGE>

THIRD SUPPLEMENT TO

INTER-GROUP AGREEMENT

Agreement dated as of October 20, 1999 between AT&T Corp., a New York
corporation ("AT&T"), for itself and on behalf of the members of the Common
----
Stock Group, on the one hand, and Liberty Media Corporation, a Delaware
corporation ("LMC"), Liberty Media Group LLC, a Delaware limited liability
---
company, and for so long as such Covered Entity remains a Covered Entity under
the applicable provisions of the AT&T Charter Amendment, each Covered Entity
listed on the signature pages hereof (collectively, the "Liberty Media
-------------
Parties"), for themselves and, in the case of LMC, on behalf of the other
- -------
members of the Liberty Media Group, on the other hand. Capitalized terms used
herein without definition have the meanings ascribed to such terms in (i) the
Ascent Merger Agreement (as hereinafter defined), or (ii) if not otherwise
defined herein or in the Ascent Merger Agreement, the Inter-Group Agreement (as
hereinafter defined).

WHEREAS, AT&T, Ranger Acquisition Corp., a Delaware corporation

("Merger Sub"), LMC and Ascent Entertainment Group, Inc., a Delaware corporation
----------
("Ascent"), intend to
------
<PAGE>

enter into an Agreement and Plan of Merger, dated as of October 20, 1999 (the
"Ascent Merger Agreement"), pursuant to which, among other things, subject to
-----------------------
the terms and conditions contained in the Ascent Merger Agreement, Merger Sub
will be merged with and into Ascent and Ascent, as the Surviving Entity of such
merger, will initially become a direct wholly owned subsidiary of AT&T (the
"Ascent Merger");
-------------

WHEREAS, in connection herewith AT&T, LMC and certain of their
respective affiliates are also entering into a Third Amendment to Tax Sharing
Agreement (the "Third Tax Sharing Amendment"), dated as of the date hereof,
---------------------------
which amends that certain Tax Sharing Agreement, dated as of March 9, 1999, as
amended, (as so amended, the "Tax Sharing Agreement"), to which AT&T, LMC and
---------------------
certain of their respective affiliates are parties;

WHEREAS, as a condition to the willingness of each of AT&T and LMC to
enter into the Ascent Merger Agreement, AT&T and the Liberty Media Parties have
determined to enter into this Agreement and the Third Tax Sharing Amendment;

WHEREAS, AT&T and the Liberty Media Parties desire to supplement and
modify the Inter-Group Agreement in the manner set forth in this Agreement and
to establish in this Agreement certain terms and conditions concerning the
responsibilities and obligations of each Group to the other as well as certain
additional provisions concerning each Group's relationship with each other as
the same may relate to the Ascent Merger, and certain related transactions;

WHEREAS, in connection herewith, the Capital Stock Committee has
adopted the resolutions attached as Exhibit A.

2
<PAGE>

ARTICLE I

OBLIGATIONS RELATING TO THE ASCENT MERGER

SECTION 1.1. Post-Closing Contribution. As soon as reasonably
-------------------------
practicable following the effectiveness of the Ascent Merger, each of LMC and
AT&T shall use all reasonable efforts to engage in the Post-Merger Restructuring
Transactions. Each of AT&T and LMC shall take, and AT&T shall cause each of its
Subsidiaries to take, any and all required actions (whether as a stockholder (or
other interest holder) or through its respective representatives on the board of
directors (or comparable governing body) of the applicable entity), to give
effect to the previous sentence.

SECTION 1.2. Certain Liabilities Relating to the Ascent Merger.
-------------------------------------------------

(i) all Liabilities of Ascent and any of its subsidiaries and
affiliates (and, in each case, any predecessor or successor
thereto);

(ii) all Liabilities arising out of or related to the Ascent Merger
Agreement and the transactions contemplated thereby, including
(A) all Liabilities arising out of or relating to any breach of
the Ascent Merger Agreement by LMC or by Ascent (whether such
breach is of a representation, warranty, agreement or

3
<PAGE>

obligation made to AT&T, LMC or otherwise, and without reference
to any qualification of any such representation, warranty,
agreement or obligation by reference to materiality, the Company
SEC Reports or the Company Disclosure Schedule, and without
reference to any limitation or survival of such representation,
warranty, covenant or obligation set forth in the Ascent Merger
Agreement and without regard to Section 10.10 of the Ascent
Merger Agreement), (B) any Liabilities to third parties
contemplated by Section 4.10 of the Ascent Merger Agreement, (C)
all Liabilities required to carry out the provisions of Sections
2.1 and 2.4 of the Ascent Merger Agreement, (D) all Liabilities
under Sections 4.22 and 7.6 of the Ascent Merger Agreement, and
(E) all Liabilities arising out of or related to lawsuits
brought, proposed or threatened by any third party (other than
Ascent) against AT&T or Merger Sub (a "Third Party Lawsuit")
-------------------
arising from the execution, delivery or performance of the
Ascent Merger Agreement or this Agreement by AT&T or Merger Sub,
and (F) relieving AT&T and any member of the Common Stock Group
of any Liability or obligation that binds or is enforceable
against AT&T or such member of the Common Stock Group as a
result of any agreement between Ascent and its Subsidiaries, on
the one hand, and any other person (other than an agreement
executed by AT&T or a member of the Common Stock Group), on the
other hand;

(iii) all Liabilities arising out of the consummation of the Ascent
Merger or any of the transactions contemplated thereby,
including the Post-Merger

4
<PAGE>

Restructuring Transactions and any other transaction
contemplated by this Agreement or the Ascent Merger Agreement,
notwithstanding the failure to receive any consent, approval or
authorization, or any failure to make any filing or
notification, from or to any Person that may be required in
connection therewith;

(iv) all Liabilities arising out of the consummation of the Post-
Merger Restructuring Transactions;

(v) all Liabilities relating to current or former employees,
officers, directors, consultants and other agents of Ascent and
any of its current or former Subsidiaries and Affiliates,
including, all Liabilities contemplated by Sections 3.6 and 3.8
of the Ascent Merger Agreement and all Company Stock Options and
Company SARs assumed by AT&T and other Stock Incentives created
pursuant to the Ascent Merger Agreement; and

(vi) except to the extent resulting from any breach of this Agreement
or the Ascent Merger Agreement by AT&T that does not arise out
of or relate to actions taken by AT&T at the request of LMC (as
contemplated by Section 1.2(d) hereof or otherwise in writing),
all Liabilities arising out of the execution, delivery or
performance of this Agreement.

5
<PAGE>

Agreement or this Agreement that do not arise out of or relate to actions taken
by AT&T at the request of LMC (as contemplated by Section 1.2(d) hereof or
otherwise in writing), whether incurred by a member of the Common Stock Group or
by a member of the Liberty Media Group, and (ii) any Ascent Tax Item (as defined
in the Third Tax Sharing Amendment), to the extent set forth in Section
3(d)(xii) of the Tax Sharing Agreement.

(b) The Liberty Media Group shall be responsible for, and shall
reimburse the Common Stock Group for, any and all reasonable costs, fees and
expenses incurred by AT&T or any member of the Common Stock Group in connection
with: (i) the negotiation, review, execution and delivery of the Ascent Merger
Agreement, this Supplement and the Third Tax Sharing Amendment; (ii) the
consummation of the transactions contemplated by the Ascent Merger Agreement and
this Agreement; (iii) the preparation, review and filing of the Registration
Statement (and the Proxy Statement that will be a part thereof); (iv) the
consummation of the Post-Merger Restructuring Transactions; (v) making any
filings with any governmental entity and otherwise assisting in obtaining
approvals, consents and clearances required in connection with the transactions
contemplated by the Ascent Merger Agreement and this Supplement, if any; and (vi
all other fees and expenses related thereto, including in each case any internal
costs, fees and expenses (which shall be determined in any reasonable manner
developed by AT&T for tracking such internal costs, fees and expenses), and in
each case such costs, fees and expenses to be reimbursed promptly upon receipt
of a statement therefor.

6
<PAGE>

for which the Liberty Media Group is responsible pursuant to this Section 1.2 in
each case in accordance with Section 1.4(c) of the Inter-Group Agreement.

(d) Notwithstanding any provision of the Ascent Merger Agreement, AT&T
and Merger Sub shall not waive any condition to their respective obligations to
consummate the Ascent Merger set forth in Article VIII of the Ascent Merger
Agreement (the "Parent Closing Conditions") without LMC's prior written consent;
-------------------------
provided, however, that consummation of the Ascent Merger by Parent based on the
- -------- -------
reasonable belief that all of the Parent Closing Conditions have been satisfied
shall not be deemed a breach of this Agreement unless (and to the extent) AT&T
receives a written request referred to in the next sentence at least 24 hours
prior to the then scheduled Closing of the Ascent Merger. To the extent so
requested in writing by LMC, each of AT&T and Merger Sub shall (i) assert that
one or more of the Parent Closing Conditions have not been satisfied and decline
to consummate the transactions contemplated by the Ascent Merger Agreement or
(ii) to the extent lawful, waive one or more of the Parent Closing Conditions
(other than those set forth in Section 8.1 of the Ascent Merger Agreement). The
Liberty Media Group agrees to indemnify AT&T for any Liabilities incurred by
AT&T or any member of the Common Stock Group as a result of the taking of an
action by AT&T or Merger Sub at the request of LMC as contemplated by the
previous sentence (but without regard to whether such action constitutes a
breach of the Ascent Merger Agreement). Notwithstanding clause (ii) of the
second sentence of this paragraph, AT&T shall not be obligated to waive any
Parent Closing Condition and consummate the Ascent Merger if AT&T, in its
reasonable judgment, determines that the foregoing agreement of LMC to indemnify
AT&T from and against any Liability incurred as a result of such action is not
adequate to fully protect AT&T and the Common Stock Group from and against any
Liability that could reasonably be

7
<PAGE>

expected to result from such waiver and the consummation of the Ascent Merger in
connection therewith (it being understood that no such indemnification would be
adequate if such Liability relates to, without limitation, any injunction
applicable to AT&T or any of its Subsidiaries, any restriction on the operation
of any business or assets of AT&T or any of its Subsidiaries or the relationship
of AT&T or any of its Subsidiaries with any governmental entity that has
jurisdiction over AT&T or such Subsidiary or any of their assets or businesses).
Except as set forth in this paragraph, nothing herein shall prohibit AT&T or
Merger Sub from exercising any of its rights under the Ascent Merger Agreement.
AT&T shall reasonably consider any amendments to, or any waiver of any other
provision of, the Ascent Merger Agreement proposed by LMC. If so requested by
AT&T, in connection with the closing of the Ascent Merger, LMC shall acknowledge
in writing to AT&T that the consummation of the Ascent Merger would not be
inconsistent with AT&T's obligations under this paragraph, and the failure of
AT&T to consummate the Ascent Merger in the absence of such acknowledgment shall
be deemed, for all purposes of this Agreement, not to be a violation of this
Agreement or the Ascent Merger Agreement.

(e) All employees, officers, directors, consultants and other agents
of Ascent and its Subsidiaries shall be deemed to be employees, officers,
directors, consultants and other agents of the Liberty Media Group, and all
Stock Incentives (including without limitation any obligations pursuant to
Section 2.3(b) of the Ascent Merger Agreement) that are created as a result of
the Ascent Merger shall be the responsibility of the Liberty Media Group.

(f) For purposes of Section 1.16 of the Inter-Group Agreement, the
Company Stock Options and Company SARs to be assumed at the effective time of
the Ascent Merger, the obligation to issue Class A AT&T Liberty Tracking Shares
to Ascent shareholders pursuant to the

8
<PAGE>

Ascent Merger Agreement, and any other obligation to issue or sell any Class A
AT&T Liberty Tracking Shares pursuant to or in connection with the Ascent
Merger, the Ascent Merger Agreement, and any agreement referred to in the Ascent
Merger Agreement or executed in connection therewith shall be deemed to be
Tracking Stock Obligations incurred with a Liberty Approval. The issuance of
Class A AT&T Liberty Tracking Shares pursuant to the Ascent Merger and any
transaction contemplated by the Ascent Merger Agreement shall be deemed to have
occurred with a Liberty Approval for purposes of Section 1.11(a) of the Inter-
Group Agreement and shall not be a breach of Section 1.11(b) or (c) of the
Inter-Group Agreement. Subject to Section 1.16 of the Inter-Group Agreement, any
action taken by AT&T to implement the terms of this paragraph (f) or Sections
2.3(b) and 3.6 of the Ascent Merger Agreement shall not constitute a breach of
any provision of the Inter-Group Agreement.

(g) At all times from the date of its formation until the Effective
Time of the Ascent Merger, Merger Sub shall be a direct, wholly owned Subsidiary
of AT&T.

SECTION 1.3 Allocation of Proceeds. For purposes of Section 1.6(b) of
----------------------
the Inter-Group Agreement and the definition of the term "Liberty Media Group"
in the AT&T Charter Amendment, the net proceeds of the issuance of the Class A
AT&T Liberty Tracking Shares to be issued in the Merger shall consist of the
entire interest of AT&T in the Surviving Entity and each of its Subsidiaries.
Following the Effective Time, the Surviving Entity shall be a member of the
Liberty Media Group.

9
<PAGE>

SECTION 1.4. Certain Obligations.
-------------------

(a) AT&T agrees to reasonably consider any actions that it may be
requested by LMC to take in accordance with consummation of the Ascent Merger.

(b) LMC represents and warrants that true and complete copies of all
documents referred to in the Ascent Merger Agreement that have been delivered to
LMC by or on behalf of the Company on or prior to the date hereof have been
delivered to AT&T (or its counsel) on or prior to the date hereof and agrees
that true and complete copies of all such documents delivered to LMC from and
after the date hereof until consummation of the transactions contemplated hereby
will be delivered promptly to AT&T (or its counsel).

(c) To the fullest extent possible, LMC will perform all obligations
of AT&T under Section 3.4 of the Ascent Merger Agreement, such as preparation of
documents and filings, and seeking necessary consents. In connection with the
foregoing, LMC will not make any filing or take any action in the name of or on
behalf of AT&T without receiving the prior written consent of AT&T.

(d) AT&T acknowledges that its covenants in this Agreement and the
Ascent Merger Agreement are subject to the fiduciary duties of its board of
directors to all of its stock-holders, including the holders of AT&T Common
Shares and the holders of AT&T Liberty Tracking Shares, in each case in
accordance with the Parent Charter and the Policy Statement regarding Liberty
Media Group Tracking Stock Matters.

10
<PAGE>

ARTICLE II
DEFINITIONS

SECTION 2.1. Certain Definitional Provisions. The language used in
-------------------------------
this Agreement shall be deemed to be the language chosen by the parties to
express their mutual intent, and no rule of strict construction shall be applied
against any party. Any references to any statute or law shall also refer to all
rules and regulations promulgated thereunder, unless the context requires
otherwise. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include,"
"includes," and "including" shall be deemed to be followed by the phrase
"without limitation". The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Article and
Section references are to this Agreement unless otherwise specified. The
meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms. Unless the context shall otherwise
require, any references to any agreement or other instrument or statute or
regulation are to it as amended and supplemented from time to time (and, in the
case of a statute or regulation, to any successor provisions). Any reference in
this Agreement to a "day" or number of "days" (without the explicit
qualification of "business") shall be interpreted as a reference to a calendar
day or number of calendar days. If any action or notice is to be taken or given
on or by a particular calendar day, and such calendar day is not a business day,
then such action or notice shall be deferred until, or may be taken or given on,
the next business day.

11
<PAGE>

ARTICLE III
MISCELLANEOUS

If to AT&T or any member of the Common Stock Group:

AT&T Corp.
295 North Maple Avenue
Basking Ridge, New Jersey 07920
Attention: Vice President-Law
and Corporate Secretary
Facsimile: (908) 221-6618

with a copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Richard D. Katcher, Esq.
Steven A. Rosenblum, Esq.
Facsimile: (212) 403-2000

If to LMC or any member of the Liberty Media Group:

Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112
Attention: Charles Y. Tanabe, Esq.
Facsimile: (720) 875-5382

12
<PAGE>

with a copy to:

Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Elizabeth M. Markowski, Esq.
Lee D. Charles, Esq.
Facsimile: (212) 705-5125

or such address as such party shall have designated by notice so given to each
other party.

(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

13
<PAGE>

SECTION 3.4. Governing Law; Consent to Jurisdiction. This Agreement
--------------------------------------
and all disputes hereunder shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware, without regard to
the principles of conflicts of laws. Each party hereto irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the United
States District Court for the District of Delaware or the Chancery Court of the
State of Delaware in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding shall be
brought only in such court (and waives any objection based on forum non
----- ---
coveniens or any other objection to venue therein); provided, however, that such
- --------- -------- -------
consent to jurisdiction is solely for the purpose referred to in this Section
3.4 and shall not be deemed to be a general submission to the jurisdiction of
said courts or of the State of Delaware other than for such purpose. AT&T and
LMC each hereby waive any right to a trial by jury in connection with any such
action, suit or proceeding.

SECTION 3.6. Specific Performance. Each of AT&T and LMC
--------------------
acknowledges and agrees that money damages are not an effective remedy for
violations of this Agreement and that any party may, in its sole discretion,
apply to a court of competent jurisdiction for specific performance or
injunctive or such other relief as such court may deem just and proper in order
to enforce this Agreement or prevent any violation hereof and, to the extent
permitted by applicable Law, each party waives any objection to the imposition
of such relief.

14
<PAGE>

SECTION 3.8. Termination. This Agreement shall remain in full force
-----------
and effect until the earlier to occur of (i) such time as no Class A AT&T
Liberty Tracking Shares or Class B AT&T Liberty Tracking Shares are outstanding
and (ii) the termination of the Ascent Merger Agreement, at which time this
Agreement shall terminate and upon termination, no party shall have any
liability or further obligation to the other under this Agreement except that
the provisions of this Section 3.8 shall survive the termination of this
Agreement; provided, however, that such termination shall not relieve any party
hereto of any liability for any breach of this Agreement or the Ascent Merger
Agreement. No termination of this Agreement shall limit or otherwise affect the
rights or obligations of the parties to the Inter-Group Agreement.

15
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.

AT&T CORP.

By: /s/ Daniel E. Somers
------------------------------------
Name: Daniel E. Somers
Title: Senior Executive Vice President and
Chief Financial Officer

LIBERTY MEDIA CORPORATION

By: /s/ Gary S. Howard
------------------------------------
Name: Gary S. Howard
Title: Executive Vice President and Chief
Operating Officer

LIBERTY MEDIA GROUP LLC

By: /s/ Gary S. Howard
------------------------------------
Name: Gary S. Howard
Title: Vice President
<PAGE>

LIBERTY SP, INC.

By: /s/ Gary S. Howard
------------------------------------
Name: Gary S. Howard
Title: Executive Vice President and Chief
Operating Officer

LIBERTY AGI, INC.

By: /s/ Gary S. Howard
------------------------------------
Name: Gary S. Howard
Title: Executive Vice President and Chief
Operating Officer

LMC INTERACTIVE, INC.

By: /s/ Gary S. Howard
------------------------------------
Name: Gary S. Howard
Title: Executive Vice President and Chief
Operating Officer

<PAGE>

EXHIBIT 10.17

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

FOURTH SUPPLEMENT TO

INTER-GROUP AGREEMENT

between and among

AT&T CORP.,

on the one hand,

and

LIBERTY MEDIA CORPORATION,

LIBERTY MEDIA GROUP LLC

and each Covered Entity listed on the

signature pages hereof,

on the other hand,

dated as of December 6, 1999

- --------------------------------------------------------------------------------
<PAGE>

FOURTH SUPPLEMENT TO

INTER-GROUP AGREEMENT

Agreement dated as of December 6, 1999 (this "Agreement") between AT&T
Corp., a New York corporation ("AT&T"), for itself and on behalf of the members
----
of the Common Stock Group, on the one hand, and Liberty Media Corporation, a
Delaware corporation ("LMC"), Liberty Media Group LLC, a Delaware limited
---
liability company, and for so long as such Covered Entity remains a Covered
Entity under the applicable provisions of the AT&T Charter Amendment, each
Covered Entity listed on the signature pages hereof (collectively, the "Liberty
-------
Media Parties"), for themselves and, in the case of LMC, on behalf of the other
- -------------
members of the Liberty Media Group, on the other hand.

WHEREAS, AT&T and the Liberty Media Parties are parties to that
certain Inter-Group Agreement, dated as of March 9, 1999 (the "Inter-Group
-----------
Agreement"), as supplemented and modified by (i) the First Supplement to Inter-
- ---------
Group Agreement, dated as of May 28, 1999, as such First Supplement has been
amended (the "First Supplement"), (ii) the Second Supplement to Inter-Group
----------------
Agreement, dated as of September 24, 1999 (the "Second Supplement") and (iii)
-----------------
the Third Supplement to Inter-Group Agreement, dated as of October 20, 1999 (the
"Third Supplement"), which establishes certain terms and conditions concerning
----------------
the responsibilities and obligations of each Group to the other as well as
certain additional provisions concerning the Groups' relationships with each
other;
<PAGE>

WHEREAS, AT&T, D-Group Merger Corp., a Delaware corporation ("Merger
------
Sub D"), LMC, and Four Media Company, a Delaware corporation ("Four Media"),
- ----- ----------
intend to enter into an Agreement and Plan of Merger, dated as of December 3,
1999 (the "Four Media Merger Agreement"), pursuant to which, among other things,
---------------------------
subject to the terms and conditions contained in the Four Media Merger
Agreement, Merger Sub D will be merged with and into Four Media and Four Media,
as the surviving entity of such merger, will initially become a direct wholly
owned subsidiary of AT&T (the "Four Media Merger");
-----------------

WHEREAS, in connection herewith AT&T, LMC and certain of their
respective affiliates are also entering into a Fifth Amendment to Tax Sharing
Agreement (the "Fifth Tax Sharing Amendment"), dated as of the date hereof,
---------------------------
which amends that certain Tax Sharing Agreement, dated as of March 9, 1999, as
amended, (as so amended, the "Tax Sharing Agreement"), to which AT&T, LMC and
---------------------
certain of their respective affiliates are parties;

WHEREAS, LMC has requested in writing that AT&T enter into the Four
Media Merger Agreement, this Agreement and the Fifth Tax Sharing Agreement and
consummate the transactions contemplated thereby;

WHEREAS, as a condition to the willingness of each of AT&T and LMC to
enter into the Four Media Merger Agreement, AT&T and the Liberty Media Parties
have determined to enter into this Agreement and the Fifth Tax Sharing
Amendment;

2
<PAGE>

Group to the other as well as certain additional provisions concerning each
Group's relationship with each other as the same may relate to the Four Media
Merger, and certain related transactions;

WHEREAS, in connection herewith, the Capital Stock Committee has
adopted the resolutions attached as Exhibit A.

ARTICLE I

OBLIGATIONS RELATING TO THE FOUR MEDIA MERGER

SECTION 1.1. Post-Closing Contribution. As soon as reasonably
-------------------------
practicable following the effectiveness of the Four Media Merger, each of LMC
and AT&T shall use all reasonable efforts to engage in the Post-Merger
Restructuring Transactions, in each case, to the extent then permitted by law.
Each of AT&T and LMC shall take, and AT&T shall cause each of its Subsidiaries
to take, any and all required actions (whether as a stockholder (or other
interest holder) or through its respective representatives on the board of
directors (or comparable governing body) of the applicable entity), to give
effect to the previous sentence.

SECTION 1.2. Certain Liabilities Relating to the Four Media Merger.
-----------------------------------------------------

(i) all Liabilities of Four Media and any of its subsidiaries and
affiliates (and, in each case, any predecessor or successor
thereto);

3
<PAGE>

(ii) all Liabilities arising out of or related to the Four Media
Merger Agreement and the transactions contemplated thereby,
including (A) all Liabilities arising out of or relating to any
breach of the Four Media Merger Agreement by LMC or Four Media
(whether such breach is of a representation, warranty, agreement
or obligation made to AT&T, LMC or otherwise, and without
reference to any qualification of any such representation,
warranty, agreement or obligation by reference to materiality,
any Company SEC Reports or the Company Disclosure Schedule, and
without reference to any limitation on survival of such
representation, warranty, covenant or obligation set forth in
the Four Media Merger Agreement, (B) any Liabilities to third
parties contemplated by Section 4.25 of the Four Media Merger
Agreement, (C) all Liabilities required to carry out the
provisions of Sections 2.1, 2.3 and 2.4 (in each case subject to
Section 2.5) of the Four Media Merger Agreement, (D) all
Liabilities under Section 3.7 of the Four Media Merger
Agreement, (E) all Liabilities arising out of or related to any
registration rights granted by Four Media (it being agreed that
AT&T is not responsible for and is not assuming any such
obligation and shall not be required to register any AT&T
Liberty Tracking Shares or shares of Parent Common Stock
pursuant to any registration rights agreement related to Four
Media or the holders of any securities of Four Media, other than
the registration of the Stock Consideration pursuant to the
Registration Statement, as provided in the Four Media Merger
Agreement), (F) all Liabilities arising out of or related to any

4
<PAGE>

lawsuit brought, proposed or threatened against AT&T or Merger
Sub D in connection with the execution, delivery or performance
of the Four Media Merger Agreement or this Agreement by AT&T or
Merger Sub D, by any third party other than Four Media, it being
understood that all Liabilities arising out of or related to any
such lawsuit brought, proposed or threatened by Four Media shall
be the Liabilities of the Liberty Media Group if such lawsuit
relates to any action or omission that (1) is not (or under this
Agreement would be deemed not to be) a violation of the Four
Media Merger Agreement or this Agreement or (2) otherwise was
taken, or omitted to be taken, at the request or direction of
any member of the Liberty Media Group, including any issuance of
or failure to issue Class A Liberty Group Stock (regardless of
whether any such issuance would be in excess of the number of
shares of Class A Liberty Group Stock that are authorized but
not issued or reserved for issuance), and (G) any Liabilities
required to be incurred to relieve AT&T and any member of the
Common Stock Group of any Liability or obligation that binds or
is enforceable against AT&T or such member of the Common Stock
Group as a result of any agreement between Four Media and/or any
of its Subsidiaries, on the one hand, and any other person, on
the other hand (other than any such agreement executed by AT&T
or a member of the Common Stock Group);

(iii) all Liabilities arising out of the consummation of the Four
Media Merger or any of the transactions contemplated thereby,
including the Post-Merger

5
<PAGE>

Restructuring Transactions, and any other transaction
contemplated by this Agreement or the Four Media Merger
Agreement, notwithstanding the failure to receive any consent,
approval or authorization, or any failure to make any filing or
notification, from or to any Person that may be required in
connection therewith;

(iv) all Liabilities arising out of the consummation of, or failure
to consummate, the Post-Merger Restructuring Transactions;

(v) all Liabilities relating to current or former employees,
officers, directors, consultants and other agents of Four Media
or any of its current or former Subsidiaries and Affiliates,
including all Company Stock Options assumed by AT&T;

(vi) all Liabilities relating to any Warrants assumed by AT&T; and

(vii) except to the extent resulting from any breach of this Agreement
or the Four Media Merger Agreement by AT&T that does not arise
out of or relate to actions taken by AT&T at the request of LMC
(as contemplated by Section 1.2(d) hereof or otherwise in
writing), all Liabilities arising out of the execution, delivery
or performance of this Agreement.

6
<PAGE>

by AT&T or Merger Sub D at the request of LMC (as contemplated by Section 1.2(d)
hereof or otherwise in writing), whether incurred by a member of the Common
Stock Group or by a member of the Liberty Media Group, and (ii) any 4MC Tax Item
to the extent set forth in Sections 3(d)(xiii) and 3(d)(xiv) of the Tax Sharing
Agreement.

(b) The Liberty Media Group shall be responsible for, and shall
reimburse the Common Stock Group for, any and all reasonable costs, fees and
expenses incurred by AT&T or any member of the Common Stock Group in connection
with: (i) the negotiation, review, execution and delivery of the Four Media
Merger Agreement, this Agreement and the Fifth Tax Sharing Amendment; (ii) the
consummation of the transactions contemplated by the Four Media Merger Agreement
and this Agreement; (iii) the preparation, review and filing of the Registration
Statement contemplated by the Four Media Merger Agreement (and the Proxy
Statement that will be a part thereof); (iv) the consummation of the Post-Merger
Restructuring Transactions; (v) making any filings with any governmental entity
and otherwise assisting in obtaining approvals, consents and clearances required
in connection with the transactions contemplated by the Four Media Merger
Agreement and this Agreement, if any; and (vi) all other fees and expenses
related thereto, including in each case any internal costs, fees and expenses
(which shall be determined in any reasonable manner developed by AT&T for
tracking such internal costs, fees and expenses), and in each case such costs,
fees and expenses to be reimbursed promptly upon receipt of a statement
therefor.

7
<PAGE>

for which the Liberty Media Group is responsible pursuant to this Section 1.2 in
each case in accordance with Section 1.4(c) of the Inter-Group Agreement.

(d) Notwithstanding any provision of the Four Media Merger
Agreement, AT&T and Merger Sub D shall not waive any condition to their
respective obligations to consummate the Four Media Merger set forth in Article
VIII of the Four Media Merger Agreement (the "Parent Closing Conditions")
-------------------------
without LMC's prior written consent; provided, however, that consummation of the
-------- -------
Four Media Merger by Parent based on the reasonable belief that all of the
Parent Closing Conditions applicable to such merger have been satisfied shall
not be deemed a breach of this Agreement unless (and to the extent) AT&T
receives a written request referred to in the next sentence at least 24 hours
prior to the then scheduled Closing of such merger. To the extent so requested
in writing by LMC, each of AT&T and Merger Sub D shall (i) assert that one or
more of the Parent Closing Conditions applicable to the Four Media Merger have
not been satisfied and decline to consummate the transactions contemplated by
the Four Media Merger Agreement or (ii) to the extent lawful, waive one or more
of the Parent Closing Conditions (other than those set forth in Section 8.1 or
Section 8.3(d) of the Four Media Merger Agreement). The Liberty Media Group
agrees to indemnify AT&T for any Liabilities incurred by AT&T or any member of
the Common Stock Group as a result of the taking of an action by AT&T or Merger
Sub D at the request of LMC as contemplated by the previous sentence (but
without regard to whether such action constitutes a breach of the Four Media
Merger Agreement). Notwithstanding clause (ii) of the second sentence of this
paragraph, AT&T shall not be obligated to waive any Parent Closing Condition and
consummate the Four Media Merger if AT&T, in its reasonable judgment, determines
that the foregoing agreement of LMC to indemnify AT&T from and against any
Liability incurred as a result

8
<PAGE>

of such action is not adequate to fully protect AT&T and the Common Stock Group
from and against any Liability that could reasonably be expected to result from
such waiver and the consummation of the Four Media Merger in connection
therewith (it being understood that no such indemnification would be adequate if
such Liability relates to, without limitation, any injunction applicable to AT&T
or any of its Subsidiaries, any restriction on the operation of any business or
assets of AT&T or any of its Subsidiaries or the relationship of AT&T or any of
its Subsidiaries with any governmental entity that has jurisdiction over AT&T or
such Subsidiary or any of their assets or businesses). Except as set forth in
this paragraph, nothing herein shall prohibit AT&T or Merger Sub D from
exercising any of its rights under the Four Media Merger Agreement. AT&T shall
reasonably consider any amendments to, or any waiver of any other provision of,
the Four Media Merger Agreement proposed by LMC. If so requested by AT&T, in
connection with the closing of any Livewire Merger, LMC shall acknowledge in
writing to AT&T that the consummation of such merger would not be inconsistent
with AT&T's obligations under this paragraph, and the failure of AT&T to
consummate such merger in the absence of such acknowledgment shall be deemed,
for all purposes of this Agreement, not to be a violation of this Agreement or
the Four Media Merger Agreement.

(e) All employees, officers, directors, consultants and other agents
of Four Media and its Subsidiaries shall be deemed to be employees, officers,
directors, consultants and other agents of the Liberty Media Group, and all
Rollover Options and Rollover Warrants (including any obligations pursuant to
Section 2.3(b) of the Four Media Merger Agreement) that are created as a result
of the Four Media Merger shall be the responsibility of the Liberty Media Group.

9
<PAGE>

(f) For purposes of Section 1.16 of the Inter-Group Agreement, the
Rollover Options and the Rollover Warrants to be assumed at the Effective Time
of the Four Media Merger, the obligation to issue Class A Liberty Group Stock to
shareholders and warrant holders of Four Media pursuant to the Four Media Merger
Agreement, and any other obligation to issue or sell any Class A Liberty Group
Stock pursuant to or in connection with the Four Media Merger, the Four Media
Merger Agreement, and any agreement referred to in the Four Media Merger
Agreement or executed in connection therewith (the "Four Media Issuance
-------------------
Obligations") shall be deemed to be Tracking Stock Obligations (as defined in
- -----------
the Inter-Group Agreement) incurred with a Liberty Approval (as defined in the
Inter-Group Agreement), and the incurrence of such obligations shall not
constitute a breach of the second sentence of Section 1.16 of the Inter-Group
Agreement. The issuance of Class A Liberty Group Stock pursuant to the Four
Media Merger and any other transaction contemplated by the Four Media Merger
Agreement shall be deemed to have occurred with a Liberty Approval for purposes
of Section 1.11(a) of the Inter-Group Agreement and shall not be a breach of
Section 1.11(b) or (c) of the Inter-Group Agreement. Subject to the requirements
set forth in Section 1.16 of the Inter-Group Agreement that apply following a
Tax Law Change, any action taken by AT&T to implement the terms of this
paragraph (f) or otherwise to satisfy the Four Media Issuance Obligations shall
not constitute a breach of any provision of the Inter-Group Agreement.

(g) At all times from the date of its formation until the Effective
Time of the Four Media Merger, Merger Sub D shall be a direct, wholly owned
Subsidiary of AT&T.

SECTION 1.3. Allocation of Proceeds. For purposes of Sections 1.6(b)
----------------------
and 1.11 of the Inter-Group Agreement and the definition of the term "Liberty
Media Group" in the

10
<PAGE>

AT&T Charter Amendment, the net proceeds of the issuance of the Class A Liberty
Group Stock to be issued in the Four Media Merger shall consist of the entire
interest of AT&T in Four Media and each of its respective Subsidiaries other
than any interest in AT&T Liberty Tracking Shares (the "Excluded Shares")
received in respect of any shares of common stock of Four Media owned by AT&T or
any of its Subsidiaries immediately prior to the Effective Time. Following the
Effective Time, Four Media and its Subsidiaries shall be members of the Liberty
Media Group. For purposes of Section 1.6(b) of the Inter-Group Agreement, all
proceeds received by Four Media upon exercise or conversion of any options,
warrants, debentures or other securities that may be exercised, converted or
exchanged in whole or in part for Class A Liberty Group Stock shall be deemed to
have been received by or contributed to LMC, without any further action by
Parent or any other Person. Notwithstanding anything to the contrary in the
Inter-Group Agreement, there shall be no restriction on the Transfer of any
Excluded Shares and there shall be no obligation to contribute to LMC the net
proceeds from any such Transfer(s).

In furtherance of the foregoing, any contract right or other similar
right associated with any asset that is attributed to a Group (as defined in the
Inter-Group Agreement) in accordance with the preceding paragraph shall be the
right of the Group (as defined in the Inter-Group Agreement) to which such
related asset is so attributed.

SECTION 1.4. Certain Obligations.
-------------------
(a) AT&T agrees to reasonably consider any actions that it may be
requested by LMC to take in accordance with consummation of the Four Media
Merger.

(b) LMC represents and warrants that true and complete copies of all
documents referred to in the Four Media Merger Agreement that have been
delivered to LMC by or on behalf

11
<PAGE>

of Four Media on or prior to the date hereof have been delivered to AT&T on or
prior to the date hereof and agrees that true and complete copies of all such
documents delivered to LMC from and after the date hereof until consummation of
the transactions contemplated hereby will be delivered promptly to AT&T.

(c) To the fullest extent possible, LMC will perform all obligations
of AT&T under Sections 3.2 and 3.4(a) of the Four Media Merger Agreement, such
as (to the extent, if any, required of Parent thereby) preparation of documents
and filings, and seeking necessary consents. In connection with the foregoing,
LMC will not make any filing or take any action in the name of or on behalf of
AT&T without receiving the prior written consent of AT&T.

(d) AT&T acknowledges that its covenants in this Agreement and the
Four Media Merger Agreement are subject to the fiduciary duties of its board of
directors to all of its stockholders, including the holders of Parent Common
Stock and the holders of AT&T Liberty Tracking Shares, in each case in
accordance with the Parent Charter and the AT&T board of directors' Policy
Statement regarding Liberty Media Group Tracking Stock Matters.

ARTICLE II

DEFINITIONS

SECTION 2.1. Certain Definitional Provisions. Capitalized terms
-------------------------------
used herein without definition have the meanings ascribed to such terms in (i)
the Four Media Merger Agreement or (ii) if not otherwise defined herein or in
the Four Media Merger Agreement, the Inter-Group Agreement. The language used in
this Agreement shall be deemed to be the language chosen by the parties to
express their mutual intent, and no rule of strict construction shall be applied
against any party. Any references to any statute or law shall also refer to all
rules and regulations promulgated

12
<PAGE>

thereunder, unless the context requires otherwise. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include," "includes," and "including" shall be deemed
to be followed by the phrase "without limitation". The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Article and Section references are to this Agreement unless
otherwise specified. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. Unless the
context shall otherwise require, any references to any agreement or other
instrument or statute or regulation are to it as amended and supplemented from
time to time (and, in the case of a statute or regulation, to any successor
provisions). Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a business day, then such action or notice shall be deferred until,
or may be taken or given on, the next business day.

ARTICLE III

MISCELLANEOUS

13
<PAGE>

If to AT&T or any member of the Common Stock Group:

AT&T Corp.
295 North Maple Avenue
Basking Ridge, New Jersey 07920
Attention: Vice President-Law
and Corporate Secretary
Facsimile: (908) 221-6618

with a copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Richard D. Katcher, Esq.
Steven A. Rosenblum, Esq.
David M. Silk, Esq.
Facsimile: (212) 403-2000

If to LMC or any member of the Liberty Media Group:

Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112
Attention: Charles Y. Tanabe, Esq.
Facsimile: (720) 875-5382

with a copy to:

Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Elizabeth M. Markowski, Esq.
Marc A. Leaf, Esq.
Facsimile: (212) 705-5125

or such address as such party shall have designated by notice so given to each
other party.

SECTION 3.2. Amendments; No Waivers. (a) This Agreement shall be
----------------------
amended, changed, supplemented, waived or otherwise modified only by an
instrument in writing

14
<PAGE>

signed by each of AT&T and LMC (and following a Triggering Event (as defined in
the Inter-Group Agreement), Liberty Media Group LLC).

SECTION 3.3. Successors and Assigns. Neither this Agreement nor
----------------------
any of the rights or obligations under this Agreement shall be assigned, in
whole or in part, by any party without the prior written consent of the other
parties hereto; provided, however, that the assignment of its rights and
-------- -------
obligations under this Agreement by LMC or any Covered Entity (as defined in the
Inter-Group Agreement) to Liberty Media Group LLC in connection with the
transactions contemplated by the Contribution Agreement shall not require the
consent of AT&T. Subject to the foregoing, the provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.

SECTION 3.4. Governing Law; Consent to Jurisdiction. This
--------------------------------------
Agreement and all disputes hereunder shall be governed by and construed and
enforced in accordance with the internal laws of the State of Delaware, without
regard to the principles of conflicts of laws. Each party hereto irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the United
States District Court for the District of Delaware or the Chancery Court of the
State of Delaware in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding shall be
brought only in such court (and waives any objection

15
<PAGE>

based on forum non coveniens or any other objection to venue therein); provided,
----- --- --------- --------
however, that such consent to jurisdiction is solely for the purpose referred to
- -------
in this Section 3.4 and shall not be deemed to be a general submission to the
jurisdiction of said courts or of the State of Delaware other than for such
purpose. AT&T and LMC each hereby waive any right to a trial by jury in
connection with any such action, suit or proceeding.

SECTION 3.8. Termination. This Agreement shall remain in full
-----------
force and effect until the earlier to occur of (i) such time as no Class A
Liberty Group Stock or Class B Liberty

16
<PAGE>

Group Stock are outstanding and (ii) the termination prior to the Effective Time
of the Four Media Merger Agreement, at which time this Agreement shall terminate
and upon termination, no party shall have any liability or further obligation to
the other under this Agreement, except that the provisions of Section 1.2(a)
(other than subsections 1.2 (a) (i), (v) and (vi)), Section 1.2 (b), Section
1.2(c) (to the extent of any Liabilities described therein that arose at or
prior to the termination of this Agreement or under any provision of this
Agreement that survives such termination) and this Section 3.8 shall survive the
termination of this Agreement; provided, however, that such termination shall
not relieve any party hereto of any liability for any breach of this Agreement
or the Four Media Merger Agreement. No termination of this Agreement shall limit
or otherwise affect the rights or obligations of the parties to the Inter-Group
Agreement.

SECTION 3.9. Severability. In case any provision in this Agreement
------------
shall beheld invalid, illegal or unenforceable in a jurisdiction, such provision
shall be modified or deleted, as to the jurisdiction involved, only to the
extent necessary to render the same valid, legal and enforceable, and the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby nor shall the validity, legality
or enforceability of such provision be affected thereby in any other
jurisdiction.

SECTION 3.10. Cooperation. Each of AT&T and LMC covenants and
-----------
agrees with the other to use its reasonable best efforts to cause each member of
the Common Stock Group and each member of the Liberty Media Group, respectively,
to fulfill each of its respective obligations under this Agreement.

17
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.

AT&T CORP.

By: /s/ Marilyn J. Wasser
------------------------------------------
Name: Marilyn J. Wasser
Title: Vice President - Law and Secretary

LIBERTY MEDIA CORPORATION

By: /s/ Charles Y. Tanabe
------------------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LIBERTY MEDIA GROUP LLC

By: /s/ Charles Y. Tanabe
------------------------------------------
Name: Charles Y. Tanabe
Title: Vice President
<PAGE>

LIBERTY SP, INC.

By: /s/ Charles Y. Tanabe
-----------------------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LIBERTY AGI, INC.

By: /s/ Charles Y. Tanabe
-----------------------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LMC INTERACTIVE, INC.

By: /s/ Charles Y. Tanabe
-----------------------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

<PAGE>

EXHIBIT 10.18
- --------------------------------------------------------------------------------

FIFTH SUPPLEMENT TO

INTER-GROUP AGREEMENT

between and among

AT&T CORP.,

on the one hand,

and

LIBERTY MEDIA CORPORATION,

LIBERTY MEDIA GROUP LLC

and each Covered Entity listed on the

signature pages hereof,

on the other hand,

dated as of December 10, 1999

- --------------------------------------------------------------------------------
<PAGE>

FIFTH SUPPLEMENT TO

INTER-GROUP AGREEMENT

Agreement dated as of December 10, 1999 (this "Agreement") between
AT&T Corp., a New York corporation ("AT&T"), for itself and on behalf of the
----
members of the Common Stock Group, on the one hand, and Liberty Media
Corporation, a Delaware corporation ("LMC"), Liberty Media Group LLC, a Delaware
---
limited liability company, and for so long as such Covered Entity remains a
Covered Entity under the applicable provisions of the AT&T Charter Amendment,
each Covered Entity listed on the signature pages hereof (collectively, the
"Liberty Media Parties"), for themselves and, in the case of LMC, on behalf of
---------------------
the other members of the Liberty Media Group, on the other hand.

WHEREAS, AT&T and the Liberty Media Parties are parties to that
certain Inter-Group Agreement, dated as of March 9, 1999 (the "Inter-Group
-----------
Agreement"), as supplemented and modified by (i) the First Supplement to Inter-
- ---------
Group Agreement, dated as of May 28, 1999, as such First Supplement has been
amended (the "First Supplement"), (ii) the Second Supplement to Inter-Group
----------------
Agreement, dated as of September 24, 1999 (the "Second Supplement"), (iii) the
-----------------
Third Supplement to Inter-Group Agreement, dated as of October 20, 1999 (the
"Third Supplement") and (iv) the Fourth Supplement to Intergroup Agreement,
----------------
dated as of December 6, 1999 (the "Fourth Supplement"), which establishes
-----------------
certain terms and conditions concerning the responsibilities and obligations of
each Group to the other as well as certain additional provisions concerning the
Groups' relationships with each other;
<PAGE>

WHEREAS, AT&T, B-Group Merger Corp., a Delaware corporation ("Merger
------
Sub B"), LMC and The Todd-AO Corporation, a Delaware corporation ("Todd"),
- ----- ----
intend to enter into an Agreement and Plan of Merger, dated as of December 10,
1999 (the "Todd Merger Agreement"), pursuant to which, among other things,
---------------------
subject to the terms and conditions contained in the Todd Merger Agreement,
Merger Sub B will be merged with and into Todd, and a controlling interest in
Todd, as the surviving entity of such merger, initially will be acquired
directly by AT&T (the "Todd Merger");
-----------

WHEREAS, in connection herewith AT&T, LMC and certain of their
respective affiliates are also entering into a Sixth Amendment to Tax Sharing
Agreement (the "Sixth Tax Sharing Amendment"), dated as of the date hereof,
---------------------------
which amends that certain Tax Sharing Agreement, dated as of March 9, 1999, as
amended, (as so amended, the "Tax Sharing Agreement"), to which AT&T, LMC and
---------------------
certain of their respective affiliates are parties;

WHEREAS, LMC has requested in writing that AT&T enter into the Todd
Merger Agreement, this Agreement and the Sixth Tax Sharing Agreement and
consummate the transactions contemplated thereby;

WHEREAS, as a condition to the willingness of each of AT&T and LMC to
enter into the Todd Merger Agreement, AT&T and the Liberty Media Parties have
determined to enter into this Agreement and the Sixth Tax Sharing Amendment;

2
<PAGE>

Group to the other as well as certain additional provisions concerning each
Group's relationship with each other as the same may relate to the Todd Merger,
and certain related transactions;

WHEREAS, in connection herewith, the Capital Stock Committee has
adopted the resolutions attached as Exhibit A.

ARTICLE I

OBLIGATIONS RELATING TO THE TODD MERGER

SECTION 1.1. Post-Closing Contribution. As soon as reasonably
-------------------------
practicable following the effectiveness of the Todd Merger, each of LMC and AT&T
shall use all reasonable efforts to engage in the Post-Merger Restructuring
Transactions, in each case, to the extent then permitted by law. Each of AT&T
and LMC shall take, and AT&T shall cause each of its Subsidiaries to take, any
and all required actions (whether as a stockholder (or other interest holder) or
through its respective representatives on the board of directors (or comparable
governing body) of the applicable entity), to give effect to the previous
sentence.

SECTION 1.2. Certain Liabilities Relating to the Todd Merger.
-----------------------------------------------

(i) all Liabilities of Todd and any of its subsidiaries and
affiliates (and, in each case, any predecessor or successor
thereto);

3
<PAGE>

(ii) all Liabilities arising out of or related to the Todd Merger
Agreement and the transactions contemplated thereby, including
(A) all Liabilities arising out of or relating to any breach of
the Todd Merger Agreement by LMC or Todd (whether such breach is
of a representation, warranty, agreement or obligation made to
AT&T, LMC or otherwise, and without reference to any
qualification of any such representation, warranty, agreement or
obligation by reference to materiality, any Company SEC Reports
or the Disclosure Schedule, and without reference to any
limitation on survival of such representation, warranty, covenant
or obligation set forth in the Todd Merger Agreement, (B) any
Liabilities to third parties contemplated by Section 4.10 of the
Todd Merger Agreement, (C) all Liabilities required to carry out
the provisions of Sections 2.2, 2.3, 2.4 and 2.5 (in each case
subject to Section 2.10) of the Todd Merger Agreement, (D) all
Liabilities under Section 3.7 of the Todd Merger Agreement, (E)
all Liabilities arising out of or related to any registration
rights granted by Todd (it being agreed that AT&T is not
responsible for and is not assuming any such obligation and shall
not be required to register any AT&T Liberty Tracking Shares or
shares of Parent Common Stock pursuant to any registration rights
agreement related to Todd or the holders of any securities of
Todd, other than the registration of the Merger Consideration
pursuant to the S-4 Registration Statement, as provided in the
Todd Merger Agreement), (F) all Liabilities arising out of or
related to any lawsuit brought, proposed or threatened against
AT&T or Merger Sub B

4
<PAGE>

in connection with the execution, delivery or performance of the
Todd Merger Agreement or this Agreement by AT&T or Merger Sub B,
by any third party other than Todd, it being understood that all
Liabilities arising out of or related to any such lawsuit
brought, proposed or threatened by Todd shall be the Liabilities
of the Liberty Media Group if such lawsuit relates to any action
or omission that (1) is not (or under this Agreement would be
deemed not to be) a violation of the Todd Merger Agreement or
this Agreement or (2) otherwise was taken, or omitted to be
taken, at the request or direction of any member of the Liberty
Media Group, including any issuance of or failure to issue Class
A Liberty Group Stock (regardless of whether any such issuance
would be in excess of the number of shares of Class A Liberty
Group Stock that are authorized but not issued or reserved for
issuance), and (G) any Liabilities required to be incurred to
relieve AT&T and any member of the Common Stock Group of any
Liability or obligation that binds or is enforceable against AT&T
or such member of the Common Stock Group as a result of any
agreement between Todd and/or any of its Subsidiaries, on the one
hand, and any other person, on the other hand (other than any
such agreement executed by AT&T or a member of the Common Stock
Group);

(iii) all Liabilities arising out of the consummation of the Todd
Merger or any of the transactions contemplated thereby, including
the Post-Merger Restructuring Transactions, the Reclassification,
and any other transaction

5
<PAGE>

contemplated by this Agreement or the Todd Merger Agreement,
notwithstanding the failure to receive any consent, approval or
authorization, or any failure to make any filing or notification,
from or to any Person that may be required in connection
therewith;

(iv) all Liabilities arising out of the consummation of, or failure to
consummate, the Post-Merger Restructuring Transactions or the
Reclassification;

(v) all Liabilities relating to current or former employees,
officers, directors, consultants and other agents of Todd or any
of its current or former Subsidiaries and Affiliates, including
all Company Stock Options assumed by AT&T; and

(vi) except to the extent resulting from any breach of this Agreement
or the Todd Merger Agreement by AT&T that does not arise out of
or relate to actions taken by AT&T at the request of LMC (as
contemplated by Section 1.2(d) hereof or otherwise in writing),
all Liabilities arising out of the execution, delivery or
performance of this Agreement.

Notwithstanding the foregoing, as between the Common Stock Group and the Liberty
Media Group, the Common Stock Group shall be responsible for (i) any Liabilities
(other than any Liability arising from or relating to a Todd Tax Item (as
defined in the Sixth Tax Sharing Amendment)) to the extent arising out of or
relating to any breach by AT&T or Merger Sub B of the Todd Merger Agreement or
this Agreement, that do not arise out of or relate to actions taken or omitted
to be taken by AT&T or Merger Sub B at the request of LMC (as contemplated by
Section 1.2(d) hereof or otherwise in writing), whether incurred by a member of
the Common Stock Group or by a member of the Liberty

6
<PAGE>

Media Group, and (ii) any Todd Tax Item to the extent set forth in Sections
3(d)(xiv) and 3(d)(xv) of the Tax Sharing Agreement.

(b) The Liberty Media Group shall be responsible for, and shall
reimburse the Common Stock Group for, any and all reasonable costs, fees and
expenses incurred by AT&T or any member of the Common Stock Group in connection
with: (i) the negotiation, review, execution and delivery of the Todd Merger
Agreement, this Agreement and the Sixth Tax Sharing Amendment; (ii) the
consummation of the transactions contemplated by the Todd Merger Agreement and
this Agreement; (iii) the preparation, review and filing of the Registration
Statement contemplated by the Todd Merger Agreement (and the Proxy Statement
that will be a part thereof); (iv) the consummation of the Post-Merger
Restructuring Transactions; (v) making any filings with any governmental entity
and otherwise assisting in obtaining approvals, consents and clearances required
in connection with the transactions contemplated by the Todd Merger Agreement
and this Agreement, if any; and (vi) all other fees and expenses related
thereto, including in each case any internal costs, fees and expenses (which
shall be determined in any reasonable manner developed by AT&T for tracking such
internal costs, fees and expenses), and in each case such costs, fees and
expenses to be reimbursed promptly upon receipt of a statement therefor.

7
<PAGE>

(d) Notwithstanding any provision of the Todd Merger Agreement, AT&T
and Merger Sub B shall not waive any condition to their respective obligations
to consummate the Todd Merger set forth in Article VIII of the Todd Merger
Agreement (the "Parent Closing Conditions") without LMC's prior written consent;
-------------------------
provided, however, that consummation of the Todd Merger by Parent based on the
- -------- -------
reasonable belief that all of the Parent Closing Conditions applicable to such
merger have been satisfied shall not be deemed a breach of this Agreement unless
(and to the extent) AT&T receives a written request referred to in the next
sentence at least 24 hours prior to the then scheduled Closing of such merger.
To the extent so requested in writing by LMC, each of AT&T and Merger Sub B
shall (i) assert that one or more of the Parent Closing Conditions applicable to
the Todd Merger have not been satisfied and decline to consummate the
transactions contemplated by the Todd Merger Agreement or (ii) to the extent
lawful, waive one or more of the Parent Closing Conditions (other than those set
forth in Section 8.1 or Section 8.3(h) of the Todd Merger Agreement). The
Liberty Media Group agrees to indemnify AT&T for any Liabilities incurred by
AT&T or any member of the Common Stock Group as a result of the taking of an
action by AT&T or Merger Sub B at the request of LMC as contemplated by the
previous sentence (but without regard to whether such action constitutes a
breach of the Todd Merger Agreement). Notwithstanding clause (ii) of the second
sentence of this paragraph, AT&T shall not be obligated to waive any Parent
Closing Condition and consummate the Todd Merger if AT&T, in its reasonable
judgment, determines that the foregoing agreement of LMC to indemnify AT&T from
and against any Liability incurred as a result of such action is not adequate to
fully protect AT&T and the Common Stock Group from and against any Liability
that could reasonably be expected to result from such waiver and the
consummation of the Todd Merger in connection therewith (it being understood
that no such

8
<PAGE>

indemnification would be adequate if such Liability relates to, without
limitation, any injunction applicable to AT&T or any of its Subsidiaries, any
restriction on the operation of any business or assets of AT&T or any of its
Subsidiaries or the relationship of AT&T or any of its Subsidiaries with any
governmental entity that has jurisdiction over AT&T or such Subsidiary or any of
their assets or businesses). Except as set forth in this paragraph, nothing
herein shall prohibit AT&T or Merger Sub B from exercising any of its rights
under the Todd Merger Agreement. AT&T shall reasonably consider any amendments
to, or any waiver of any other provision of, the Todd Merger Agreement proposed
by LMC. If so requested by AT&T, in connection with the closing of any Livewire
Merger, LMC shall acknowledge in writing to AT&T that the consummation of such
merger would not be inconsistent with AT&T's obligations under this paragraph,
and the failure of AT&T to consummate such merger in the absence of such
acknowledgment shall be deemed, for all purposes of this Agreement, not to be a
violation of this Agreement or the Todd Merger Agreement.

(e) All employees, officers, directors, consultants and other agents
of Todd and its Subsidiaries shall be deemed to be employees, officers,
directors, consultants and other agents of the Liberty Media Group, and all
Rollover Options and Rollover Debentures (including any obligations pursuant to
Sections 2.6(a), 2.6(b) and 2.7 of the Todd Merger Agreement) that are created
as a result of the Todd Merger shall be the responsibility of the Liberty Media
Group.

(f) For purposes of Section 1.16 of the Inter-Group Agreement, the
Rollover Options to be assumed at the Effective Time of the Todd Merger, the
obligation to issue Class A Liberty Group Stock to shareholders and debenture
holders of Todd pursuant to the Todd Merger Agreement, and any other obligation
to issue or sell any Class A Liberty Group Stock pursuant to or in connection
with the Todd Merger, the Todd Merger Agreement, and any agreement referred

9
<PAGE>

to in the Todd Merger Agreement or executed in connection therewith (the "Todd-
----
Issuance Obligations") shall be deemed to be Tracking Stock Obligations (as
- --------------------
defined in the Inter-Group Agreement) incurred with a Liberty Approval (as
defined in the Inter-Group Agreement), and the incurrence of such obligations
shall not constitute a breach of the second sentence of Section 1.16 of the
Inter-Group Agreement. The issuance of Class A Liberty Group Stock pursuant to
the Todd Merger and any other transaction contemplated by the Todd Merger
Agreement shall be deemed to have occurred with a Liberty Approval for purposes
of Section 1.11(a) of the Inter-Group Agreement and shall not be a breach of
Section 1.11(b) or (c) of the Inter-Group Agreement. Subject to the requirements
set forth in Section 1.16 of the Inter-Group Agreement that apply following a
Tax Law Change, any action taken by AT&T to implement the terms of this
paragraph (f) or otherwise to satisfy the Todd Issuance Obligations shall not
constitute a breach of any provision of the Inter-Group Agreement.

(g) At all times from the date of its formation until the Effective
Time of the Todd Merger, Merger Sub B shall be a direct, wholly owned Subsidiary
of AT&T.

SECTION 1.3. Allocation of Proceeds. For purposes of Sections 1.6(b)
----------------------
and 1.11 of the Inter-Group Agreement and the definition of the term "Liberty
Media Group" in the AT&T Charter Amendment, the net proceeds of the issuance of
the Class A Liberty Group Stock to be issued in the Todd Merger shall consist of
the entire interest of AT&T in Todd and each of its respective Subsidiaries
other than any interest in AT&T Liberty Tracking Shares (the "Excluded Shares")
and shares of Class A common stock of the Surviving Corporation received in
respect of any shares of common stock of Todd owned by AT&T or any of its
Subsidiaries immediately prior to the Effective Time. Following the Effective
Time, Todd and its Subsidiaries shall be members

10
<PAGE>

of the Liberty Media Group. For purposes of Section 1.6(b) of the Inter-Group
Agreement, all proceeds received by Todd upon exercise or conversion of any
options, warrants, debentures or other securities that may be exercised,
converted or exchanged in whole or in part for Class A Liberty Group Stock shall
be deemed to have been received by or contributed to LMC, without any further
action by Parent or any other Person. Notwithstanding anything to the contrary
in the Inter-Group Agreement, there shall be no restriction on the Transfer of
any Excluded Shares and there shall be no obligation to contribute to LMC the
net proceeds from any such Transfer(s).

SECTION 1.4 Certain Obligations.
-------------------

(a) AT&T agrees to reasonably consider any actions that it may be
requested by LMC to take in accordance with consummation of the Todd Merger.

(b) LMC represents and warrants that true and complete copies of all
documents referred to in the Todd Merger Agreement that have been delivered to
LMC by or on behalf of Todd on or prior to the date hereof have been delivered
to AT&T on or prior to the date hereof and agrees that true and complete copies
of all such documents delivered to LMC from and after the date hereof until
consummation of the transactions contemplated hereby will be delivered promptly
to AT&T.

(c) To the fullest extent possible, LMC will perform all obligations
of AT&T under Sections 3.2 and 3.5 of the Todd Merger Agreement, such as (to the
extent, if any, required of Parent thereby) preparation of documents and
filings, and seeking necessary consents. In

11
<PAGE>

connection with the foregoing, LMC will not make any filing or take any action
in the name of or on behalf of AT&T without receiving the prior written consent
of AT&T.

(d) AT&T acknowledges that its covenants in this Agreement and the
Todd Merger Agreement are subject to the fiduciary duties of its board of
directors to all of its stockholders, including the holders of Parent Common
Stock and the holders of AT&T Liberty Tracking Shares, in each case in
accordance with the Parent Charter and the AT&T board of directors' Policy
Statement regarding Liberty Media Group Tracking Stock Matters.

ARTICLE II

DEFINITIONS

SECTION 2.1. Certain Definitional Provisions. Capitalized terms used
-------------------------------
herein without definition have the meanings ascribed to such terms in (i) the
Todd Merger Agreement or (ii) if not otherwise defined herein or in the Todd
Merger Agreement, the Inter-Group Agreement. The language used in this Agreement
shall be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied against any party.
Any references to any statute or law shall also refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes," and
"including" shall be deemed to be followed by the phrase "without limitation".
The words "hereof," "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Article and Section references are
to this Agreement unless otherwise specified. The meanings given to terms
defined herein shall be equally applicable to both the singular and plural forms
of such terms.

12
<PAGE>

Unless the context shall otherwise require, any references to any agreement or
other instrument or statute or regulation are to it as amended and supplemented
from time to time (and, in the case of a statute or regulation, to any successor
provisions). Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a business day, then such action or notice shall be deferred until,
or may be taken or given on, the next business day.

ARTICLE III

MISCELLANEOUS

If to AT&T or any member of the Common Stock Group:

AT&T Corp.
295 North Maple Avenue
Basking Ridge, New Jersey 07920
Attention: Vice President-Law
and Corporate Secretary
Facsimile: (908) 221-6618

13
<PAGE>

with a copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Richard D. Katcher, Esq.
Steven A. Rosenblum, Esq.
David M. Silk, Esq.
Facsimile: (212) 403-2000

If to LMC or any member of the Liberty Media Group:

Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112
Attention: Charles Y. Tanabe, Esq.
Facsimile: (720) 875-5382

with a copy to:

Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Elizabeth M. Markowski, Esq.
Marc A. Leaf, Esq.
Facsimile: (212) 705-5125

or such address as such party shall have designated by notice so given to each
other party.

14
<PAGE>

and remedies herein provided shall be cumulative and not exclusive of any rights
or remedies provided by law.

SECTION 3.3. Successors and Assigns. Neither this Agreement nor any
----------------------
of the rights or obligations under this Agreement shall be assigned, in whole or
in part, by any party without the prior written consent of the other parties
hereto; provided, however, that the assignment of its rights and obligations
-------- -------
under this Agreement by LMC or any Covered Entity (as defined in the Inter-Group
Agreement) to Liberty Media Group LLC in connection with the transactions
contemplated by the Contribution Agreement shall not require the consent of
AT&T. Subject to the foregoing, the provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.

SECTION 3.4. Governing Law; Consent to Jurisdiction. This Agreement
--------------------------------------
and all disputes hereunder shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware, without regard to
the principles of conflicts of laws. Each party hereto irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the United
States District Court for the District of Delaware or the Chancery Court of the
State of Delaware in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding shall be
brought only in such court (and waives any objection based on forum non
----- ---
coveniens or any other objection to venue therein); provided, however, that such
- --------- -------- -------
consent to jurisdiction is solely for the purpose referred to in this Section
3.4 and shall not be deemed to be a general submission to the jurisdiction of
said courts or of the State of Delaware other than for such purpose. AT&T and
LMC each hereby waive any right to a trial by jury in connection with any such
action, suit or proceeding.
15
<PAGE>

SECTION 3.5 Counterparts; Effectiveness. This Agreement may be
---------------------------
executed in any number of counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts thereof signed by the other party hereto.

SECTION 3.8. Termination. This Agreement shall remain in full force
-----------
and effect until the earlier to occur of (i) such time as no Class A Liberty
Group Stock or Class B Liberty Group Stock are outstanding and (ii) the
termination prior to the Effective Time of the Todd Merger Agreement, at which
time this Agreement shall terminate and upon termination, no party shall have
any liability or further obligation to the other under this Agreement, except
that the provisions of Section 1.2(a) (other than subsections 1.2 (a) (i), (v)
and (vi), Section 1.2 (b), Section 1.2(c) (to the extent of any Liabilities
described therein that arose at or prior to the termination of this Agreement

16
<PAGE>

or under any provision of this Agreement that survives such termination) and
this Section 3.8 shall survive the termination of this Agreement; provided,
however, that such termination shall not relieve any party hereto of any
liability for any breach of this Agreement or the Todd Merger Agreement. No
termination of this Agreement shall limit or otherwise affect the rights or
obligations of the parties to the Inter-Group Agreement.

17
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.

AT&T CORP.

By: /s/ Marilyn J. Wasser
------------------------------------------
Name: Marilyn J. Wasser
Title: Vice President - Law and Secretary

LIBERTY MEDIA CORPORATION

By: /s/ Charles Y. Tanabe
------------------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LIBERTY MEDIA GROUP LLC

By: /s/ Charles Y. Tanabe
------------------------------------------
Name: Charles Y. Tanabe
Title: Vice President
<PAGE>

Each of the following Covered Entities hereby
executes this Agreement as a member of the
Liberty Media Group to become a party to this
Agreement for so long as it remains a Covered
Entity under the applicable provisions of the
AT&T Charter Amendment:

LIBERTY SP, INC.

By: /s/ Charles Y. Tanabe
------------------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LIBERTY AGI, INC.

By: /s/ Charles Y. Tanabe
------------------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LMC INTERACTIVE, INC.

By: /s/ Charles Y. Tanabe
------------------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

<PAGE>

EXHIBIT 10.19

================================================================================

SIXTH SUPPLEMENT TO

INTER-GROUP AGREEMENT

between and among

AT&T CORP.,

on the one hand,

and

LIBERTY MEDIA CORPORATION,

LIBERTY MEDIA GROUP LLC

and each Covered Entity listed on the

signature pages hereof,

on the other hand,

dated as of December 30, 1999

================================================================================
<PAGE>

SIXTH SUPPLEMENT TO

INTER-GROUP AGREEMENT

Agreement dated as of December 30, 1999 (this "Agreement") between
AT&T Corp., a New York corporation ("AT&T"), for itself and on behalf of the
----
members of the Common Stock Group, on the one hand, and Liberty Media
Corporation, a Delaware corporation ("LMC"), Liberty Media Group LLC, a Delaware
---
limited liability company, and for so long as such Covered Entity remains a
Covered Entity under the applicable provisions of the AT&T Charter Amendment,
each Covered Entity listed on the signature pages hereof (collectively, the
"Liberty Media Parties"), for themselves and, in the case of LMC, on behalf of
---------------------
the other members of the Liberty Media Group, on the other hand.

"Third Supplement", (iv) the Fourth Supplement to Inter-Group Agreement, dated
----------------
as of December 6, 1999 (the "Fourth Supplement") and (v) the Fifth Supplement to
-----------------
Inter-Group Agreement, dated as of December 10, 1999 (the "Fifth Supplement"),
----------------
which establishes certain terms and conditions concerning the responsibilities
and obligations of each Group to the other as well as certain additional
provisions concerning the Groups' relationships with each other;
<PAGE>

WHEREAS, AT&T, C-Group Merger Corp., a Delaware corporation ("Merger
------
Sub C"), LMC, SounDelux Entertainment Group, Inc., a California corporation
- -----
("SounDelux California"), Soundelux Entertainment Group of Delaware, Inc., a
--------------------
Delaware corporation (the "Delaware Company") and certain shareholders of
----------------
SounDelux California (each, a "Signing Shareholder"), intend to enter into an
Agreement and Plan of Merger, dated as of December 30, 1999 (the "Soundelux
---------
Merger Agreement"), pursuant to which, among other things, subject to the terms
- ----------------
and conditions contained in the Soundelux Merger Agreement, Merger Sub C will be
merged with and into the Delaware Company, and a controlling interest in the
Delaware Company, as the surviving entity of such merger, initially will be
acquired directly by AT&T (the "Soundelux Merger");
----------------

WHEREAS, in connection herewith AT&T, LMC and certain of their
respective affiliates are also entering into a Seventh Amendment to Tax Sharing
Agreement (the "Seventh Tax Sharing Amendment"), dated as of the date hereof,
-----------------------------
which amends that certain Tax Sharing Agreement, dated as of March 9, 1999, as
amended, (as so amended, the "Tax Sharing Agreement"), to which AT&T, LMC and
---------------------
certain of their respective affiliates are parties;

WHEREAS, LMC has requested in writing that AT&T enter into the
Soundelux Merger Agreement, this Agreement and the Seventh Tax Sharing Agreement
and consummate the transactions contemplated thereby;

WHEREAS, as a condition to the willingness of each of AT&T and LMC to
enter into the Soundelux Merger Agreement, AT&T and the Liberty Media Parties
have determined to enter into this Agreement and the Seventh Tax Sharing
Amendment;

2
<PAGE>

WHEREAS, AT&T and the Liberty Media Parties desire to supplement and
modify the Inter-Group Agreement in the manner set forth in this Agreement and
to establish in this Agreement certain terms and conditions concerning the
responsibilities and obligations of each Group to the other as well as certain
additional provisions concerning each Group's relationship with each other as
the same may relate to the Soundelux Merger, and certain related transactions;

WHEREAS, in connection herewith, the Capital Stock Committee has
adopted the resolutions attached as Exhibit A.

ARTICLE I

OBLIGATIONS RELATING TO THE SOUNDELUX MERGER

SECTION 1.1. Post-Closing Contribution. As soon as reasonably
-------------------------
practicable following the effectiveness of the Soundelux Merger, each of LMC and
AT&T shall use all reasonable efforts to engage in the Post-Merger Restructuring
Transactions, in each case, to the extent then permitted by law. Each of AT&T
and LMC shall take, and AT&T shall cause each of its Subsidiaries to take, any
and all required actions (whether as a stockholder (or other interest holder) or
through its respective representatives on the board of directors (or comparable
governing body) of the applicable entity), to give effect to the previous
sentence.

SECTION 1.2. Certain Liabilities Relating to the Soundelux Merger.
----------------------------------------------------

3
<PAGE>

(i) all Liabilities of Soundelux California and the Delaware Company
and any of their subsidiaries and affiliates (and, in each case,
any predecessors or successors thereto);

(ii) all Liabilities arising out of or related to the Soundelux Merger
Agreement and the transactions contemplated thereby, including
(A) all Liabilities arising out of or relating to any breach of
the Soundelux Merger Agreement by LMC, SounDelux California, the
Delaware Company or any Signing Shareholder, whether such breach
is of a representation, warranty, agreement or obligation made to
AT&T, LMC or otherwise, and without reference to any
qualification of any such representation, warranty, agreement or
obligation by reference to materiality or the Disclosure
Schedule, and without reference to any limitation on survival of
such representation, warranty, covenant or obligation set forth
in the Soundelux Merger Agreement, (B) any Liabilities to third
parties contemplated by Section 4.10 of the Soundelux Merger
Agreement, (C) all Liabilities required to carry out the
provisions of Sections 2.1, 2.2, 2.3, 2.4, 2.5 and 2.6 (in each
case subject to Section 2.9) of the Soundelux Merger Agreement,
(D) all Liabilities under Section 3.6 of the Soundelux Merger
Agreement, (E) all Liabilities arising out of or related to any
registration rights granted by SounDelux California or the
Delaware

4
<PAGE>

Company (it being agreed that AT&T is not responsible for and is not
assuming any such obligation and shall not be required to register any
AT&T Liberty Tracking Shares or shares of Parent Common Stock pursuant
to any registration rights agreement related to SounDelux California
or the Delaware Company or the holders of any securities of SounDelux
California or the Delaware Company, other than the registration of the
Merger Consideration pursuant to the Registration Statement, as
provided in the Soundelux Merger Agreement), (F) all Liabilities
arising out of or related to Section 2.10 of the Soundelux Merger
Agreement, including, without limitation, all Liabilities arising out
of or related to the Escrow Agreement and any impact that the Escrow
Agreement or such Section 2.10 of the Soundelux Merger Agreement may
have on the Escrowed Shares, (G) all Liabilities arising out of or
related to Section 7.10 of the Merger Agreement, (H) all Liabilities
arising out of or related to any lawsuit brought, proposed or
threatened against AT&T or Merger Sub C in connection with the
execution, delivery or performance of the Soundelux Merger Agreement
or this Agreement by AT&T or Merger Sub C, by any third party other
than SounDelux California, the Delaware Company or any Signing
Shareholder, it being understood that all Liabilities arising out of
or related to any such lawsuit brought, proposed or threatened by
SounDelux California, the Delaware Company or any Signing Shareholder
shall be the Liabilities of the Liberty Media Group if such lawsuit
relates to any action or omission that (1) is not (or under this

5
<PAGE>

Agreement would be deemed not to be) a violation of the
Soundelux Merger Agreement or this Agreement or (2) otherwise
was taken, or omitted to be taken, at the request or direction
of any member of the Liberty Media Group, including any
issuance of or failure to issue Class A Liberty Group Stock
(regardless of whether any such issuance would be in excess of
the number of shares of Class A Liberty Group Stock that are
authorized but not issued or reserved for issuance), and (I)
any Liabilities required to be incurred to relieve AT&T and any
member of the Common Stock Group of any Liability or obligation
that binds or is enforceable against AT&T or such member of the
Common Stock Group as a result of any agreement between
SounDelux California, the Delaware Company and/or any of their
Subsidiaries or any Signing Shareholder, on the one hand, and
any other person, on the other hand (other than any such
agreement executed by AT&T or a member of the Common Stock
Group);

(iii) all Liabilities arising out of the consummation of the
Soundelux Merger or any of the transactions contemplated
thereby, including the Post-Merger Restructuring Transactions,
the Todd Contributions, the Reclassification, the
Reincorporation Merger and any other transaction contemplated
by this Agreement or the Soundelux Merger Agreement,
notwithstanding the failure to receive any consent, approval or
authorization, or any failure to make any filing or
notification, from or to any Person that may be required in
connection therewith;

6
<PAGE>

(iv) all Liabilities arising out of the consummation of, or failure to
consummate, the Post-Merger Restructuring Transactions, the Todd
Contributions, the Reincorporation Merger or the
Reclassification;

(v) all Liabilities relating to current or former employees,
officers, directors, consultants and other agents of SounDelux
California or the Delaware Company or any of their respective
current or former Subsidiaries and Affiliates, including all
Company Stock Options assumed by AT&T; and

(vi) except to the extent resulting from any breach of this Agreement
or the Soundelux Merger Agreement by AT&T that does not arise out
of or relate to actions taken by AT&T at the request of LMC (as
contemplated by Section 1.2(d) hereof or otherwise in writing),
all Liabilities arising out of the execution, delivery or
performance of this Agreement.

Notwithstanding the foregoing, as between the Common Stock Group and the Liberty
Media Group, the Common Stock Group shall be responsible for (i) any Liabilities
(other than any Liability arising from or relating to a Soundelux Tax Item (as
defined in the Seventh Tax Sharing Amendment)) to the extent arising out of or
relating to any breach by AT&T or Merger Sub C of the Soundelux Merger Agreement
or this Agreement, that do not arise out of or relate to actions taken or
omitted to be taken by AT&T or Merger Sub C at the request of LMC (as
contemplated by Section 1.2(d) hereof or otherwise in writing), whether incurred
by a member of the Common Stock Group or by a member of the Liberty Media Group,
and (ii) any Soundelux Tax Item to the extent set forth in Sections 3(d)(xiv)
and 3(d)(xvi) of the Tax Sharing Agreement.

7
<PAGE>

(b) The Liberty Media Group shall be responsible for, and shall
reimburse the Common Stock Group for, any and all reasonable costs, fees and
expenses incurred by AT&T or any member of the Common Stock Group in connection
with: (i) the negotiation, review, execution and delivery of the Soundelux
Merger Agreement, this Agreement and the Seventh Tax Sharing Amendment; (ii) the
consummation of the transactions contemplated by the Soundelux Merger Agreement
and this Agreement; (iii) the preparation, review and filing of the Registration
Statement contemplated by the Soundelux Merger Agreement (and the Proxy
Statement that will be a part thereof); (iv) the consummation of the Post-Merger
Restructuring Transactions and the Todd Contributions; (v) making any filings
with any governmental entity and otherwise assisting in obtaining approvals,
consents and clearances required in connection with the transactions
contemplated by the Soundelux Merger Agreement and this Agreement, if any; and
(vi) all other fees and expenses related thereto, including in each case any
internal costs, fees and expenses (which shall be determined in any reasonable
manner developed by AT&T for tracking such internal costs, fees and expenses),
and in each case such costs, fees and expenses to be reimbursed promptly upon
receipt of a statement therefor.

(d) Notwithstanding any provision of the Soundelux Merger Agreement,
AT&T and Merger Sub C shall not waive any condition to their respective
obligations to consummate the

8
<PAGE>

Soundelux Merger set forth in Article VIII of the Soundelux Merger Agreement
(the "Parent Closing Conditions") without LMC's prior written consent; provided,
------------------------- --------
however, that consummation of the Soundelux Merger by Parent based on the
- -------
reasonable belief that all of the Parent Closing Conditions applicable to such
merger have been satisfied shall not be deemed a breach of this Agreement unless
(and to the extent) AT&T receives a written request referred to in the next
sentence at least 24 hours prior to the then scheduled Closing of such merger.
To the extent so requested in writing by LMC, each of AT&T and Merger Sub C
shall (i) assert that one or more of the Parent Closing Conditions applicable to
the Soundelux Merger have not been satisfied and decline to consummate the
transactions contemplated by the Soundelux Merger Agreement or (ii) to the
extent lawful, waive one or more of the Parent Closing Conditions (other than
those set forth in Section 8.1 or Section 8.3(g) of the Soundelux Merger
Agreement). The Liberty Media Group agrees to indemnify AT&T for any Liabilities
incurred by AT&T or any member of the Common Stock Group as a result of the
taking of an action by AT&T or Merger Sub C at the request of LMC as
contemplated by the previous sentence (but without regard to whether such action
constitutes a breach of the Soundelux Merger Agreement). Notwithstanding clause
(ii) of the second sentence of this paragraph, AT&T shall not be obligated to
waive any Parent Closing Condition and consummate the Soundelux Merger if AT&T,
in its reasonable judgment, determines that the foregoing agreement of LMC to
indemnify AT&T from and against any Liability incurred as a result of such
action is not adequate to fully protect AT&T and the Common Stock Group from and
against any Liability that could reasonably be expected to result from such
waiver and the consummation of the Soundelux Merger in connection therewith (it
being understood that no such indemnification would be adequate if such
Liability relates to, without limitation, any injunction applicable to AT&T or
any of its Subsidiaries,

9
<PAGE>

any restriction on the operation of any business or assets of AT&T or any of its
Subsidiaries or the relationship of AT&T or any of its Subsidiaries with any
governmental entity that has jurisdiction over AT&T or such Subsidiary or any of
their assets or businesses). Except as set forth in this paragraph, nothing
herein shall prohibit AT&T or Merger Sub C from exercising any of its rights
under the Soundelux Merger Agreement. AT&T shall reasonably consider any
amendments to, or any waiver of any other provision of, the Soundelux Merger
Agreement proposed by LMC. If so requested by AT&T, in connection with the
closing of the Soundelux Merger, LMC shall acknowledge in writing to AT&T that
the consummation of such merger would not be inconsistent with AT&T's
obligations under this paragraph, and the failure of AT&T to consummate such
merger in the absence of such acknowledgment shall be deemed, for all purposes
of this Agreement, not to be a violation of this Agreement or the Soundelux
Merger Agreement.

(e) All employees, officers, directors, consultants and other agents
of SounDelux California, the Delaware Company and their respective Subsidiaries
shall be deemed to be employees, officers, directors, consultants and other
agents of the Liberty Media Group, and all Rollover Options (including any
obligations pursuant to Sections 2.7(a) and 2.7(b) of the Soundelux Merger
Agreement) that are created as a result of the Soundelux Merger shall be the
responsibility of the Liberty Media Group.

(f) For purposes of Section 1.16 of the Inter-Group Agreement, the
Rollover Options, the obligation to issue Class A Liberty Group Stock to
shareholders of Soundelux pursuant to the Soundelux Merger Agreement, and any
other obligation to issue or sell any Class A Liberty Group Stock pursuant to or
in connection with the Soundelux Merger, the Soundelux Merger Agreement, and any
agreement referred to in the Soundelux Merger Agreement or executed in

10
<PAGE>

connection therewith (the "Soundelux Issuance Obligations") shall be deemed to
------------------------------
be Tracking Stock Obligations (as defined in the Inter-Group Agreement) incurred
with a Liberty Approval (as defined in the Inter-Group Agreement), and the
incurrence of such obligations shall not constitute a breach of the second
sentence of Section 1.16 of the Inter-Group Agreement. The issuance of Class A
Liberty Group Stock pursuant to the Soundelux Merger and any other transaction
contemplated by the Soundelux Merger Agreement shall be deemed to have occurred
with a Liberty Approval for purposes of Section 1.11(a) of the Inter-Group
Agreement and shall not be a breach of Section 1.11(b) or (c) of the Inter-Group
Agreement. Subject to the requirements set forth in Section 1.16 of the Inter-
Group Agreement that apply following a Tax Law Change, any action taken by AT&T
to implement the terms of this paragraph (f) or otherwise to satisfy the
Soundelux Issuance Obligations shall not constitute a breach of any provision of
the Inter-Group Agreement.

(g) At all times from the date of its formation until the Effective
Time of the Soundelux Merger, Merger Sub C shall be a direct, wholly owned
Subsidiary of AT&T.

SECTION 1.3 Allocation of Proceeds. For purposes of Sections 1.6(b)
----------------------
and 1.11 of the Inter-Group Agreement and the definition of the term "Liberty
Media Group" in the AT&T Charter Amendment, the net proceeds of the issuance of
the Class A Liberty Group Stock to be issued in the Soundelux Merger shall
consist of the entire interest of AT&T in Soundelux and each of its respective
Subsidiaries other than any interest in AT&T Liberty Tracking Shares (the
"Excluded Shares") and shares of Surviving Corporation Class A Stock (or any
other stock into which such Surviving Corporation Class A Stock is exchangeable)
received in respect of any shares of common stock of Soundelux owned by AT&T or
any of its Subsidiaries immediately prior to the Effective Time. Following the
Effective Time, the Surviving Corporation and its Subsidiaries shall be

11
<PAGE>

members of the Liberty Media Group. For purposes of Section 1.6(b) of the Inter-
Group Agreement, all proceeds received by SounDelux California or the Delaware
Company upon exercise or conversion of any options, warrants, debentures or
other securities that may be exercised, converted or exchanged in whole or in
part for Class A Liberty Group Stock shall be deemed to have been received by or
contributed to LMC, without any further action by Parent or any other Person.
Notwithstanding anything to the contrary in the Inter-Group Agreement, there
shall be no restriction on the Transfer of any Excluded Shares and there shall
be no obligation to contribute to LMC the net proceeds from any such
Transfer(s).

SECTION 1.4 Certain Obligations.
-------------------

(a) AT&T agrees to reasonably consider any actions that it may be
requested by LMC to take in accordance with consummation of the Soundelux
Merger.

(b) LMC represents and warrants that true and complete copies of all
documents referred to in the Soundelux Merger Agreement that have been delivered
to LMC by or on behalf of SounDelux California, the Delaware Company or any
Signing Shareholder on or prior to the date hereof have been delivered to AT&T
on or prior to the date hereof and agrees that true and complete copies of all
such documents delivered to LMC from and after the date hereof until
consummation of the transactions contemplated hereby will be delivered promptly
to AT&T.

12
<PAGE>

(c) To the fullest extent possible, LMC will perform all obligations
of AT&T under Sections 3.2 and 3.5 of the Soundelux Merger Agreement, such as
(to the extent, if any, required of Parent thereby) preparation of documents and
filings, and seeking necessary consents. In connection with the foregoing, LMC
will not make any filing or take any action in the name of or on behalf of AT&T
without receiving the prior written consent of AT&T.

(d) AT&T acknowledges that its covenants in this Agreement and the
Soundelux Merger Agreement are subject to the fiduciary duties of its board of
directors to all of its stockholders, including the holders of Parent Common
Stock and the holders of AT&T Liberty Tracking Shares, in each case in
accordance with the Parent Charter and the AT&T board of directors' Policy
Statement regarding Liberty Media Group Tracking Stock Matters.

ARTICLE II

DEFINITIONS

SECTION 2.1 Certain Definitional Provisions. Capitalized terms used
-------------------------------
herein without definition have the meanings ascribed to such terms in (i) the
Soundelux Merger Agreement or (ii) if not otherwise defined herein or in the
Soundelux Merger Agreement, the Inter-Group Agreement. The language used in this
Agreement shall be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction shall be applied against
any party. Any references to any statute or law shall also refer to all rules
and regulations promulgated thereunder, unless the context requires otherwise.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes," and
"including" shall be deemed to be followed by the phrase "without limitation".
The words "hereof," "herein" and "hereunder" and words of similar import when
used in this Agreement

13
<PAGE>

shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Article and Section references are to this Agreement unless
otherwise specified. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. Unless the
context shall otherwise require, any references to any agreement or other
instrument or statute or regulation are to it as amended and supplemented from
time to time (and, in the case of a statute or regulation, to any successor
provisions). Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a business day, then such action or notice shall be deferred until,
or may be taken or given on, the next business day.

ARTICLE III

MISCELLANEOUS

SECTION 3.1 Notices. All notices, requests, demands or other
-------
communications required by or otherwise with respect to this Agreement shall be
in writing and shall be deemed to have been given to any party when delivered
personally (by courier service or otherwise), when delivered by telecopy and
confirmed by return telecopy, or upon the receipt after being mailed by first-
class mail, postage prepaid and return receipt requested in each case to the
applicable addresses set forth below:

14
<PAGE>

If to AT&T or any member of the Common Stock Group:

AT&T Corp.
295 North Maple Avenue
Basking Ridge, New Jersey 07920
Attention: Vice President-Law
and Corporate Secretary
Facsimile: (908) 221-6618

with a copy to:

Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Richard D. Katcher, Esq.
Steven A. Rosenblum, Esq.
David M. Silk, Esq.
Facsimile: (212) 403-2000

If to LMC or any member of the Liberty Media Group:

Liberty Media Corporation
9197 South Peoria Street
Englewood, Colorado 80112
Attention: Charles Y. Tanabe, Esq.
Facsimile: (720) 875-5382

with a copy to:

Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Elizabeth M. Markowski, Esq.
Marc A. Leaf, Esq.
Facsimile: (212) 705-5125

or such address as such party shall have designated by notice so given to each
other party.

SECTION 3.2 Amendments; No Waivers. (a) This Agreement shall be
----------------------
amended, changed, supplemented, waived or otherwise modified only by an
instrument in writing

15
<PAGE>

signed by each of AT&T and LMC (and following a Triggering Event (as defined in
the Inter-Group Agreement), Liberty Media Group LLC).

(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

SECTION 3.3 Successors and Assigns. Neither this Agreement nor any of
-----------------------
the rights or obligations under this Agreement shall be assigned, in whole or in
part, by any party without the prior written consent of the other parties
hereto; provided, however, that the assignment of its rights and obligations
-------- -------
under this Agreement by LMC or any Covered Entity (as defined in the Inter-Group
Agreement) to Liberty Media Group LLC in connection with the transactions
contemplated by the Contribution Agreement shall not require the consent of
AT&T. Subject to the foregoing, the provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.

SECTION 3.4 Governing Law; Consent to Jurisdiction. This Agreement
--------------------------------------
and all disputes hereunder shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware, without regard to
the principles of conflicts of laws. Each party hereto irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the United
States District Court for the District of Delaware or the Chancery Court of the
State of Delaware in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding shall be
brought only in such court (and waives any objection

16
<PAGE>

SECTION 3.6 Specific Performance. Each of AT&T and LMC acknowledges
--------------------
and agrees that money damages are not an effective remedy for violations of this
Agreement and that any party may, in its sole discretion, apply to a court of
competent jurisdiction for specific performance or injunctive or such other
relief as such court may deem just and proper in order to enforce this Agreement
or prevent any violation hereof and, to the extent permitted by applicable Law,
each party waives any objection to the imposition of such relief.

SECTION 3.7 Remedies Cumulative. All rights, powers and remedies
-------------------
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.

SECTION 3.8 Termination. This Agreement shall remain in full force
-----------
and effect until the earlier to occur of (i) such time as no Class A Liberty
Group Stock or Class B Liberty

17
<PAGE>

Group Stock are outstanding and (ii) the termination prior to the Effective Time
of the Soundelux Merger Agreement, at which time this Agreement shall terminate
and upon termination, no party shall have any liability or further obligation to
the other under this Agreement, except that the provisions of Section 1.2(a)
(other than subsections 1.2 (a) (i), (v) and (vi), Section 1.2 (b), Section
1.2(c) (to the extent of any Liabilities described therein that arose at or
prior to the termination of this Agreement or under any provision of this
Agreement that survives such termination) and this Section 3.8 shall survive the
termination of this Agreement; provided, however, that such termination shall
not relieve any party hereto of any liability for any breach of this Agreement
or the Soundelux Merger Agreement. No termination of this Agreement shall limit
or otherwise affect the rights or obligations of the parties to the Inter-Group
Agreement.

SECTION 3.9 Severability. In case any provision in this Agreement
------------
shall be held invalid, illegal or unenforceable in a jurisdiction, such
provision shall be modified or deleted, as to the jurisdiction involved, only to
the extent necessary to render the same valid, legal and enforceable, and the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby nor shall the validity, legality
or enforceability of such provision be affected thereby in any other
jurisdiction.

SECTION 3.10 Cooperation. Each of AT&T and LMC covenants and agrees
-----------
with the other to use its reasonable best efforts to cause each member of the
Common Stock Group and each member of the Liberty Media Group, respectively, to
fulfill each of its respective obligations under this Agreement.

18
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.

AT&T CORP.

By: /s/ Marilyn J. Wasser
-----------------------------------------
Name: Marilyn J. Wasser
Title: Vice President - Law and Secretary

LIBERTY MEDIA CORPORATION

By: /s/ Charles Y. Tanabe
-----------------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LIBERTY MEDIA GROUP LLC

By: /s/ Charles Y. Tanabe
-----------------------------------------
Name: Charles Y. Tanabe
Title: Vice President
<PAGE>

LIBERTY SP, INC.

By: /s/ Charles Y. Tanabe
----------------------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LIBERTY AGI, INC.

By: /s/ Charles Y. Tanabe
----------------------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President

LMC INTERACTIVE, INC.

By: /s/ Charles Y. Tanabe
----------------------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President
<PAGE>

EXHIBIT A

UNANIMOUS WRITTEN CONSENT IN LIEU OF MEETING OF
THE CAPITAL STOCK COMMITTEE OF
THE BOARD OF DIRECTORS OF AT&T CORP.

Pursuant to Article V of the By-laws of AT&T Corp., a New York
corporation, and Section 708 of the New York Business Corporation Law, the
undersigned, being all the members of the Capital Stock Committee of the Board
of Directors of AT&T Corp. (this "Capital Stock Committee"), hereby by unanimous
written consent approve the following resolution:

RESOLVED, that the form, terms and provisions of (i) the Agreement and
Plan of Merger (the "Todd Merger Agreement") among AT&T Corp. (the "Company"),
B-Group Merger Corp., a wholly owned subsidiary of the Company, Liberty Media
Corporation and The Todd-AO Corporation, (ii) the Agreement and Plan of Merger
(the "Soundelux Merger Agreement") among Company, C-Group Merger Corp., a wholly
owned subsidiary of the Company, Liberty Media Corporation, SounDelux
Entertainment Group, Inc. ("Soundelux"), Soundelux Entertainment Group of
Delaware, Inc., a wholly owned subsidiary of Soundelux, and certain shareholders
of Soundelux party thereto and (iii) the Agreement and Plan of Merger (the "Four
Media Merger Agreement" and, collectively with the Todd Merger Agreement and the
Soundelux Merger Agreements, the "Livewire Merger Agreements") among Company, D-
Group Merger Corp., a wholly owned subsidiary of the Company, Liberty Media
Corporation and Four Media Company and the transactions contemplated thereby,
are hereby approved and adopted in all respects, in each case in substantially
the form attached hereto or described to this Capital
<PAGE>

Stock Committee, with such changes therein as the officers of the Company
executing the same shall approve;

RESOLVED, that the form, terms and provisions of the Fourth, Fifth and
Sixth Supplements to Inter-Group Agreement (collectively, the "Inter-Group
Agreement") between and among the Company, on the one hand, and Liberty Media
Corporation, Liberty Media Group LLC and each Covered Entity listed on the
signature pages thereof, on the other hand, and the transactions contemplated
thereby, are hereby approved and adopted in all respects, in each case in
substantially the form attached hereto or described to this Capital Stock
Committee, with such changes therein as the officers of the Company executing
the same shall approve;

RESOLVED, that the form, terms and provisions of the Fifth, Sixth and
Seventh Amendments to Tax Sharing Agreement (collectively, the "Tax Sharing
Agreement") by and among the Company, Liberty Media Corporation, Tele-
Communications, Inc., Liberty Ventures Group LLC, Liberty Media Group LLC, TCI
Starz, Inc., TCI CT Holding, Inc. and each Covered Entity listed on the
signature pages thereof, and the transactions contemplated thereby, are hereby
approved and adopted in all respects, in each case in substantially the form
attached hereto or described to this Capital Stock Committee, with such changes
therein as the officers of the Company executing the same shall approve;

RESOLVED, that the Inter-Group Agreement is in the best interests of
the Company and all of its shareholders after giving fair consideration to the
potentially divergent interest and all other relevant interests of the holders
of the separate classes of common stock of the Company, and that matters and
allocations contemplated by Section 1.3 of the Inter-Group Agreement are hereby
specifically approved and ratified;

2
<PAGE>

RESOLVED, that the foregoing resolutions of this Committee be
communicated to the Board of Directors of the Company, together with a
recommendation of this Capital Stock Committee that the Board of Directors of
the Company approve each of the Livewire Merger Agreements, the Inter-Group
Agreement and the Tax Sharing Agreement, and the transactions contemplated
thereby;

RESOLVED, that the proper officers of the Company be, and each of them
hereby is, authorized, empowered and directed, in the name and on behalf of the
Company, to execute and deliver or cause to be executed and delivered any or all
instruments, agreements or documents, and to do or cause to be done any and all
such other acts or things as, in the opinion of any such officer, may be
necessary, appropriate or desirable in order to enable the Company fully and
promptly to carry out the intent and purpose of the foregoing and consummate the
proposed transaction, and any such action taken or any agreement, instrument or
document executed and delivered by them in connection with any such action shall
be conclusive evidence of such officers' authority to take, execute and deliver
the same, and to pay any and all expenses and fees arising in connection with
any of the foregoing; and

RESOLVED, that actions heretofore taken by any of the officers,
directors, employees, representatives or agents of the Company on behalf of the
Company in connection with the matters contemplated by the foregoing are hereby
ratified, confirmed and approved as acts and deed of the Company.

3
<PAGE>

Dated: _________ __, 1999

____________________________
Donald V. Fites

____________________________
John C. Malone

____________________________
Michael I. Sovern

<PAGE>

EXHIBIT 10.20

The Associated Group, Inc. ("AGI") hereby executes this Instrument in order
to become a party to the Inter-Group Agreement, dated as of March 9, 1999,
between and among AT&T Corp, on the one hand, and Liberty Media Corporation,
Liberty Media Group LLC and each Covered Entity listed on the signature pages
thereof, on the other hand, as supplemented by the First Supplement to Inter-
Group Agreement, dated as of May 28, 1999, as amended, the Second Supplement to
Inter-Group Agreement, dated as of September 24, 1999, and the Third Supplement
to Inter-Group Agreement, dated as of October 20, 1999, as amended by the
Amendment to First, Second and Third Supplements to Inter-Group Agreement, dated
as of December 3, 1999 (collectively, the "Inter-Group Agreement"). Upon the
---------------------
acceptance hereof by the other parties to the Inter-Group Agreement by execution
hereof where indicated below, AGI will thereupon be a party to the Inter-Group
Agreement as a Liberty Media Party (as defined therein) and member of the
Liberty Media Group, unless and until (a) all of the equity of AGI has been
transferred to Liberty AGI, Inc. as contemplated by the Amended and Restated
Agreement and Plan of Merger, dated as of October 28, 1999 among AT&T Corp. A-
Group Merger Corp. Liberty Media Corporation and AGI, or (b) all of the assets
of AGI have been contributed to Liberty Media Group LLC pursuant to the Amended
and Restated Contribution Agreement by and among Liberty Media Corporation,
Liberty Media Management LLC, Liberty Media Group LLC, AGI and Liberty AGI, Inc.

THE ASSOCIATED GROUP, INC.
Dated: January 14, 2000

By: /s/ Charles Y. Tanabe
---------------------
Name: Charles Y. Tanabe
Title: Senior Vice President
AGREED AND ACCEPTED:

AT&T CORP. LIBERTY MEDIA GROUP LLC

By: /s/ illegible By: /s/ John C. Malone
------------- ------------------
Name: Name: John C. Malone
Title: Title: Chairman

LIBERTY MEDIA CORPORATION LIBERTY SP, INC.

By: /s/ Charles Y. Tanabe By: /s/ Charles Y. Tanabe
--------------------- ---------------------
Name: Charles Y. Tanabe Name: Charles Y. Tanabe
Title: Senior Vice President Title: Senior Vice President

LIBERTY AGI, INC. LMC INTERACTIVE, INC.

<PAGE>

EXHIBIT 23.1
------------

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
Liberty Media Corporation:

We consent to the use, in Amendment No. 1 to the Registration Statement
on Form S-1 (No. 333-93917), of our report dated March 9, 1999, relating to the
consolidated balance sheets of Liberty Media Corporation and subsidiaries as of
December 31, 1998 and 1997, and the related consolidated statements of
operations and comprehensive earnings, stockholder's equity, and cash flows for
each of the years in the three-year period ended December 31, 1998 included
herein and to the reference to our firm under the heading "Experts" in the
registration statement.

KPMG LLP

Denver, Colorado
February 7, 2000

<PAGE>

EXHIBIT 23.2
------------
INDEPENDENT AUDITORS' CONSENT

We consent to the use in Amendment No. 1 to the Registration Statement
No. 333-93917 of Liberty Media Corporation on Form S-1 of our report dated
February 2, 1999, on the consolidated financial statements of Sprint Spectrum
Holding Company, L.P. and subsidiaries and the related financial statement
schedule, for the year ended December 31, 1998, appearing in the Prospectus,
which is part of this Registration Statement, and to the reference to us under
the heading "Experts" in such Prospectus.

DELOITTE & TOUCHE LLP
Kansas City, Missouri
February 7, 2000