AT&T CORP, 10-K, 2000-03-27

AT&T CORP
10-K, 2000-03-27
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For The Fiscal Year Ended December 31, 1999

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For The Transition Period From _________ to _________

Commission File Number 1-1105

AT&T CORP.

A NEW YORK I.R.S. EMPLOYER
CORPORATION NO. 13-4924710

32 Avenue of the Americas, New York, New York 10013-2412
Telephone Number 212-387-5400

Securities registered pursuant to Section 12(b) of the Act: See attached
SCHEDULE A.

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes....x.... No........

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not con-tained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

At February 29, 2000, the aggregate market value of voting stock held by
non-affiliates was approximately $157 billion. At February 29, 2000,
3,194,755,604 shares of AT&T common stock, 1,181,420,568 shares of Class A
Liberty Media Group tracking stock and 103,117,226 shares of Class B Liberty
Media Group tracking stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's annual report to shareholders for the year
ended December 31, 1999 (Part II)
(2) Portions of the registrant's definitive proxy statement dated March 27,
2000 issued in connection with the annual meeting of shareholders (Part III)
<PAGE>

SCHEDULE A

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on
Title of each class which registered

Common Shares # New York, Boston, Chicago,
(Par Value $1 Per Share) #### Philadelphia and Pacific
# Stock Exchanges
#
#
Class A Liberty Media Group Tracking #
Shares (common, Par Value $1 Per Share) #
#### New York Stock Exchange
Class B Liberty Media Group Tracking #
Shares (common, Par Value $1 Per Share) #
#
#
#
Thirty-Five Year 5-1/8% Debentures, due #
April 1, 2001 #
#
Ten Year 7-1/8% Notes, due January 15, 2002 #
#
Three Year 61/2% Notes due September 15, 2002 #
#
Five Year 5 5/8% Notes due March 15, 2004 #
#
Ten Year 6-3/4% Notes, due April 1, 2004 #
#
Ten Year 7% Notes, due May 15, 2005 #
#
Twelve Year 7-1/2% Notes, due June 1, 2006 ###### New York Stock Exchange
#
Twelve Year 7-3/4% Notes, due March 1, 2007 #
#
Ten Year 6% Notes due March 15, 2009 #
#
Thirty Year 8-1/8% Debentures, due #
January 15, 2022 #
#
Thirty Year 8.35% Debentures, due #
January 15, 2025 #
#
Thirty-Two Year 8-1/8% Debentures, due #
July 15, 2024 #
#
Thirty Year 61/2% Notes due March 15, 2029 #
#
Forty Year 8-5/8% Debentures, due #
December 1, 2031 #

<PAGE>

TABLE OF CONTENTS

PART I

Item Description Page

1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 36
4. Submission of Matters to a Vote of Security-Holders . . . . . . . . 37

PART II

Description

5. Market for Registrant's Common Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . 39
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . 39
8. Financial Statements and Supplementary Data . . . . . . . . . . . . 39
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . 39

PART III

Description

10. Directors and Executive Officers of the Registrant . . . . . . . . . 39
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . 39
12. Security Ownership of Certain Beneficial Owners and Management . . . 39
13. Certain Relationships and Related Transactions . . . . . . . . . . . 39

PART IV

Description

14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K . . 40

See page 38 for "Executive Officers of the Registrant."

<PAGE>

PART I

ITEM 1. BUSINESS.

GENERAL

AT&T Corp. was incorporated in 1885 under the laws of the State of New
York and has its principal executive offices at 32 Avenue of the Americas, New
York, New York 10013-2412 (telephone number 212-387-5400).

On March 9, 1999, AT&T completed the acquisition of
Tele-Communications, Inc. (TCI) in a merger. In the merger, AT&T acquired all
the business and assets of the TCI Group (now referred to as AT&T Broadband),
which consisted primarily of TCI's domestic cable and telecommunications
operations, as well as TCI's interest in At Home Corporation (@Home) in exchange
for approximately 664 million shares of Common Stock. AT&T Common Stock
continues to represent an interest in the business and assets of the historical
AT&T together with those assets acquired in the merger.

In addition, at the time of the merger TCI combined Liberty Media
Group, its programming arm, and TCI Ventures Group, its technology investments
unit, to form the new Liberty Media Group. The shareowners of the new Liberty
Media Group were issued separate tracking stock rather than traditional Common
Stock by AT&T Corp. in exchange for the shares held in Liberty Media Group and
TCI Ventures Group. Under the tracking stock arrangement, the Liberty Media
Group's earnings and losses will be excluded from earnings available to the
holders of Common Stock and the Liberty Media Group's businesses and assets will
be managed by a separate operating Board of Directors. As a result, although the
Liberty Media Group is wholly owned by AT&T Corp., it is accounted for as an
investment under the equity method of accounting in the consolidated financial
statements of AT&T Corp. since AT&T does not have a "controlling financial
interest" in the Liberty Media Group.

Consequently, throughout this document, references to AT&T or the
Company refer to the businesses, results or assets attributable to the Common
Stock; references to Liberty Media refer to the businesses, results or assets
attributable to the Liberty Media Group tracking stock; and references to AT&T
Corp. refer to the combined legal entity. References herein to AT&T Common
Shares, Common Shares, AT&T Common Stock or Common Stock excludes the Liberty
Media Group tracking stock.

On March 14, 2000 the AT&T shareholders approved amendments to the AT&T
certificate of incorporation that would permit AT&T to create a separate class
of its common stock, the AT&T Wireless Group tracking stock, which would track
the performance of our wireless business. As of the date of filing this Form
10-K, no shares of the AT&T Wireless Group tracking stock were outstanding.

AT&T

AT&T is among the world's communications leaders, providing voice, data
and video communications services to large and small businesses, consumers and
government entities. AT&T and its subsidiaries furnish domestic and
international long distance, regional, local and wireless communications
services, cable television and Internet communications services. AT&T also
provides billing, directory, and calling card services to support its
communications business.

<PAGE>

AT&T's primary lines of business are business services; consumer
services; broadband services; and wireless services. In addition, AT&T's other
lines of business include network management and professional services through
AT&T Solutions and international operations and ventures.

Internet users can access information about AT&T and its services at
www.att.com. Our web site is not a part of this Form 10-K.

DEVELOPMENT OF BUSINESS

Separation

During 1999 AT&T continued the transformation of its business begun in
1996 when AT&T separated its business into three publicly held stand-alone
companies: the current AT&T, focused on communications and information services;
Lucent Technologies Inc. (Lucent), focused on communications systems and
technology; and NCR Corporation (NCR), focused on transaction-intensive
computing. AT&T distributed to its shareowners all of the shares AT&T owned of
Lucent on September 30, 1996 and all of the shares of NCR on December 31, 1996.

Asset Sales

Following the separation, AT&T focused on its core businesses and
disposed of assets and businesses that were not strategic. In October 1996, AT&T
completed the sale of its majority interest in AT&T Capital Corporation (leasing
services business). In 1997, AT&T completed the sales of AT&T Skynet (satellite
services), AT&T Tridom (satellite data and video communications services), and
its submarine systems business, as well as its investment in DirectTV
(direct-broadcast television service and DSS equipment business). In addition,
in 1998 AT&T sold AT&T Universal Card Services, Inc. (credit card services
business), American Transtech Inc. (customer care services), its investment in
LIN Television Corporation (commercial television broadcasting), and its
investment in SmarTone Telecommunications Holdings Limited (a wireless joint
venture in Hong Kong). In 1999, AT&T sold its interest in Wood-TV (commercial
television broadcasting), AT&T Language Line Services (over the phone
interpretation business) and ACC Corp.'s operations in Europe
(telecommunications services).

TCG Acquisition

During 1998, AT&T engaged in a series of transactions to further
transform the Company from one dominated by a single product, domestic long
distance telecommunications, to a fully integrated, any distance, broadband
communications service provider. In July 1998, AT&T completed the merger with
Teleport Communications Group (TCG) pursuant to which each share of TCG was
exchanged for AT&T Common Stock in an all-stock transaction. TCG was the largest
competitive local exchange carrier (CLEC) in the United States, offering
comprehensive telecommunications services in major metropolitan markets
throughout the United States. TCG provides a broad array of telecommunications
services, including basic local exchange services, enhanced switch services,
Internet services, disaster avoidance services and video channel transmission
services, aimed at addressing high-volume business customers.

<PAGE>

TCI Acquisition

In the TCI merger, which closed on March 9, 1999, AT&T issued AT&T
Common Stock for each share of TCI Group Series A tracking stock and TCI Group
Series B tracking stock. In addition, AT&T Corp. issued newly created Liberty
Media Group Class A or Class B tracking stock for each outstanding TCI Liberty
Media Group Class A or Class B tracking stock and each outstanding TCI Ventures
Group Class A or Class B tracking stock. In the merger, AT&T also exchanged AT&T
Common Stock or Liberty Media Group tracking stock for shares of TCI convertible
preferred stock and made a cash payment in lieu of any fractional AT&T Common
Share or Liberty Media Group tracking share.

IBM Global Network Acquisition

On April 30, 1999, AT&T completed the first phase of its acquisition of
the IBM Global Network business (renamed AT&T Global Network Services or AGNS)
by obtaining the IBM Global Network assets in the United States. Under the terms
of the agreement, AT&T acquired the global network of IBM for approximately $5
billion, and the two companies entered into outsourcing agreements with each
other. IBM is outsourcing a significant portion of its global networking needs
to AT&T, and AT&T is outsourcing certain applications-processing and
data-center-management operations to IBM. AGNS serves the networking needs of
several hundred large global companies, tens of thousands of mid-sized
businesses and more than one million individual Internet users in 59 countries.
About 5,300 IBM employees joined AT&T as part of the acquisition. AGNS has more
than 1,300 dial-up points of presence and dedicated access from more than 850
cities in 59 countries. AGNS offers business customers innovative services and
worldwide operations and support, including in-country, native-language support
personnel. The acquisition occurred in phases throughout 1999 as legal and
regulatory requirements were met in each of the countries in which the business
operates. As of December 31, 1999, operations in over 70 countries have been
transferred from IBM to AT&T, representing more than 99% of the contract
revenue. We are awaiting regulatory approval in the remaining countries and
expect to be providing service to customers operating in over 80 countries by
the end of the first quarter of 2000.

Vanguard Acquisition

On May 3, 1999, AT&T acquired Vanguard Cellular Systems, Inc.
(Vanguard), an independent operator of wireless telephone systems in the United
States with over 700,000 subscribers and which operates in markets with a
population of approximately 6.9 million. Vanguard served 26 markets in the
Eastern United States. Consummation of the acquisition resulted in the issuance
of approximately 12.6 million shares of AT&T common stock and the payment of
approximately $485 million in cash.

Comcast Corporation Exchange

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

<PAGE>

MediaOne Group, Inc. Acquisition

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

MetroNet Merger

On June 1, 1999, AT&T Canada Corp. merged with MetroNet Communications
Corp., Canada's largest competitive local exchange carrier. Under the terms of
the merger agreement, AT&T received 31 percent of the equity interest and 23
percent of the voting interest in the combined entity in exchange for AT&T
Canada Corp. and ACC TelEnterprises Ltd. In addition, AT&T agreed to purchase
all of the remaining shares at the greater of the then appraised fair market
value or the accreted minimum price, which initially is C$37.50 per share
accreting after June 30, 2000 at a rate of 16% per annum, compounded quarterly.
If the acquisition is not completed by June 30, 2003, those shares, along with
AT&T's shares, would be sold through an auction process and AT&T will make whole
the other shareholders for the amount they would have been entitled to if AT&T
had purchased the shares. The completion of the acquisition is subject to the
condition that AT&T is permitted to acquire the shares under Canada's foreign
ownership restrictions. AT&T may acquire the shares prior to a change in the
ownership restrictions by developing a structure that addresses such ownership
restrictions.

Cox Communications, Inc. Exchange

On July 6, 1999, AT&T and Cox Communications, Inc. (Cox) signed an
agreement whereby AT&T would redeem approximately 50.3 million shares of AT&T
common stock held by Cox in exchange for cable television systems serving
approximately 312,000 customers, our interest in certain investments and
approximately $750 million in other consideration, including cash. Based on the
closing price of AT&T's stock on July 6, 1999, the transaction is valued at
approximately $2.8 billion. The transaction closed in March 2000.

AT&T/BT Joint Investments

On August 16, 1999, AT&T completed its sale to BT of 30% of AT&T's
stake in AT&T Canada for C$600 million. In addition, BT has agreed to purchase
30% of the shares AT&T will be acquiring from the other stockholders in
connection with the MetroNet merger, subject to BT's right to cap its purchase
at C$1.65 billion.

<PAGE>

In addition, on August 16, 1999, AT&T and BT completed their joint
purchase of 33.3% of the equity interest and 30.6% of the voting interest in
Rogers Cantel Mobile Communications Inc., Canada's largest mobile company
serving more than two million customers coast to coast, for a total purchase
price of C$1.4 billion. AT&T and BT hold their ownership position through a
newly established and jointly owned entity.

BT Joint Venture

On January 6, 2000 AT&T and British Telecommunications plc (BT) created
a global venture to serve the communications needs of multinational companies
and the international calling needs of businesses around the world. The venture,
named Concert, is owned equally by AT&T and BT and combined transborder assets
and operations of each company, including their existing international networks,
their international traffic, their transborder products for business customers
- -- including an expanding set of Concert services -- and AT&T and BT's
multinational accounts in selected industry sectors.

BUSINESS SERVICES

Business Services provides a variety of global communications services
including long distance, local and data and IP networking to large domestic and
multinational businesses, small and medium-sized businesses, and government
agencies. Business units within this group provide regular and custom long
distance and local communications services, data transmission and Internet
services, 500 services, toll-free or 800 and 888 services, 900 services, private
line services, software defined network services (SDN), asynchronous transfer
mode (ATM) and Internet protocol (IP) technology based services, integrated
services digital network (ISDN) technology based services, electronic mail,
electronic data interchanges, and enhanced facsimile services.

AT&T also provides special long distance services, including AT&T
Calling Card services, special calling plans and the Company's domestic and
international operator services. AT&T provides communications services
internationally, including transaction services, global networks, network
management and value added network services (i.e., services offered over
communications transmission facilities that employ computer processing
applications).

Business Services has a dedicated sales force through which it markets
its voice and data communication services. Sales forces are divided into
geographic markets, and in each market focus on large, multinational
corporations, small businesses, government markets, and value-added resellers
and other wholesalers. Business Services employs full service support teams to
provide significant customer support and service to ensure customer satisfaction
and retention.

Business Services offers its regulated services in accordance with
applicable tariffs filed with the Federal Communications Commission (FCC) and
various states. Rates can vary by a number of factors, particularly the volume
of usage and the day and time that calls are made. AT&T Business Services offers
voice and data services individually and in combination with other offerings.
Through combined offerings, AT&T provides customers with benefits such as single
billing, unified services for multilocation companies and customized calling
plans.

<PAGE>

Voice Services

Long distance voice services. Business Services' voice communication
offerings include the traditional "one plus" dialing of domestic and
international long distance for customers that select AT&T as their primary long
distance carrier.

Business Services' dedicated services include private line and
special access services that use high-capacity digital circuits to carry voice,
data and video (or multimedia) transmission from point-to-point in multiple
configurations. These services provide high-volume customers with a direct
connection to an AT&T switch instead of switched access shared by many users.
These services permit customers to create internal computer networks, access
external computer networks and the Internet, as well as reduce originating
access costs.

Business Services also offers toll free (800, 888 or 877) inbound
service, where the receiving party pays for the call. This is used in a wide
variety of applications, many of which generate revenue for the user (such as
reservation centers or customer service centers). AT&T offers a variety of
features to enhance customers toll free service, including call routing by
origination point and time of day routing.

Business Services also offers a variety of calling cards which allow
the user to place calls from virtually anywhere in the world. Additional
features include prepaid calling cards, conference calling, international
origination, information service access (such as weather or stock quotes), speed
dialing and voice messaging.

Business Local Services. Local carriers provide local exchange,
exchange access, toll, and resold services; sell, install and maintain customer
premises equipment; and provide operator and directory services. The market for
local exchange services consists of a number of distinct service components.
These service components are defined by specific regulatory tariff
classifications including: (i) local network services, which generally include
basic dial tone charges and private line services; (ii) network access services,
which consist of access charges received by local exchange carriers (LECs) from
long distance carriers for the local transport and termination portion of long
distance telephone calls; (iii) long distance network services, which include
the variable portion of charges received by local exchange carriers for
intra-LATA long distance calls; and (iv) additional value added services such as
caller identification, call waiting, call forwarding, three way calling and
voice mail.

AT&T Business Local's customers are principally
telecommunications-intensive businesses, healthcare, and educational
institutions, governmental agencies, long distance carriers and resellers,
Internet service providers, disaster recovery service providers and wireless
communications and financial services companies. AT&T Business Local's centrally
managed customer care and support operations are designed to facilitate the
installation of new services and the processing of orders for changes and
upgrades in customer services.

With a direct sales force in each of its markets, AT&T Business Local
initially targets the large telecommunications-intensive businesses concentrated
in the major metropolitan markets served by its networks. AT&T Business Local
also targets small- and medium-sized business customers in office buildings or
multiple dwelling units already served by its network.

<PAGE>

AT&T Business Local generally offers its services in accordance with
applicable tariffs filed with state regulatory agencies (for intrastate
services). AT&T Business Local typically offers local service as part of a
package of services, which can include any combination of other AT&T offerings.
Customers also choose among analog, digital voice-only and ISDN Centrex
telephone lines to their desktops. AT&T owns, houses, manages and maintains the
switch, while customers retain control over network configurations, allowing
customers to add, delete and move lines as needed. For local service, customers
are billed a fixed charge plus usage.

Data and Internet Services

Enhanced Data Communications. Enhanced data services consist of
interexchange data networks utilizing packet switching and transmission
technologies and application services, such as Internet access and Web Site
hosting and management, which utilize the frame relay network. Enhanced data
services enable customers to economically and securely transmit large volumes of
data typically sent in bursts from one site to another. Enhanced data services
are utilized for local area network (LAN) interconnection, remote site, point of
sale and branch office communications solutions.

AT&T utilizes both IP and ATM systems. Both technologies offer
significant efficiencies over circuit switched systems which use a single,
dedicated circuit to complete each transmission. ATM switching is also a more
efficient method of switching and transmitting comingled or multimedia
information. The packet switching technology breaks up a transmission into short
pieces, or packets, which are encoded and transmitted with other packets on the
same circuit, and reassembled at the desired destination. ATM differs from IP in
that the data packets used in ATM (called cells) are one size (53 bytes) whereas
in IP the data packets vary in length. Also, whereas ATM establishes virtual
circuits to ensure that the information sent is reassembled at its destination
in its proper sequence, IP ships each packet of information to its destination
by a different path. While AT&T will continue to have both circuit and packet
switching and transmission technologies for some time, significant future
capital expenditures are not scheduled for circuit switching.

ISDN services provide customers with multiple voice and data
communications services over a single telecommunications line. The Company's
ISDN services allow customers to perform multiple functions such as simultaneous
voice and computer links, and enable the Company to offer customers value-added
features. High speed ISDN applications include desk top video conferencing,
interconnection of LANs and Internet access.

AT&T Business Internet Services. AT&T WorldNet Business Services
provides IP connectivity and IP value-added services, messaging, and electronic
commerce services to businesses. AT&T offers Managed Internet Service, which
gives customers dedicated, high-speed access to the public Internet for business
applications at a variety of speeds and types of access, as well as Business
Dial Service, a dial-up version of Internet access designed to meet the needs of
small- and medium-sized businesses.

AT&T Virtual Private Network (VPN) Service allows businesses to obtain
remote access to e-mail, order entry systems, employee directories, human
resources and other databases, or to create an Intranet and extranets with their
clients, suppliers and business partners, and enables customers to tailor their
VPNs to accommodate specific business applications, performance requirements or
the need to integrate with existing data networks.

<PAGE>

AT&T Web Services are a family of hosting and transaction services and
platforms serving the web needs of thousands of businesses. Offers include AT&T
Shared Hosting Services, an economical way for businesses to establish a
presence on the World Wide Web, and AT&T Enhanced Web Development Package for
businesses that want to create web sites that require higher performance and
greater user demand. AT&T Dedicated Hosting Service provides customizable and
pre-packaged Web hosting solutions. AT&T SecureBuySM Service provides the
backoffice infrastructure required to electronically process credit card
transactions online, high-speed links into two of the leading credit card
processing services, and management reports that measure a site's success.

Other IP services AT&T offers let Web site visitors click on a "call me
now" icon if they wish to speak to a customer service agent; connect enterprise
networks that use host or LAN-based and browser-based e-mail systems to AT&T's
value-added messaging services such as e-mail and fax; and enhanced fax
services.

Transport

Business Services is one of the leaders in providing wholesale
networking services to other carriers, providing both network capacity and
switched services. AT&T offers a combination of high-volume transmission
capacity, conventional dedicated line services and dedicated switched services
to Internet service providers (ISPs) and Tier 1 and Tier 2 carriers on a
national or regional basis, as well as switchless resale services to Tier 3
carriers.

Wholesale networking service is typically provided pursuant to
long-term service agreements for terms of one year or longer. These agreements
generally provide for payments at fixed rates based on the capacity and length
of the circuit used. Customers are typically billed on a monthly basis and also
may incur an installation charge or certain ancillary charges for equipment.
After contract expiration, the contracts may be renewed or the services may be
provided on a month-to-month basis. Switched services agreements are generally
offered on a month-to-month basis and the service is billed on a minutes-of-use
basis. More recently, AT&T has also sold network capacity through indefeasible
rights of use agreements under which capacity is furnished for contract terms as
long as 25 years.

CONSUMER SERVICES

Long Distance Voice

AT&T is the leading provider of domestic and international long
distance service to residential consumers in the United States. AT&T provides
regular and custom long distance communications services which it offers
individually and in combination with other services.

AT&T provides interstate and intrastate long distance
telecommunications services throughout the continental United States and
provides, or joins in providing with other carriers, telecommunications services
to and from Alaska, Hawaii, Puerto Rico and the Virgin Islands and international
telecommunications services to and from virtually all nations and territories
around the world. Consumers can use AT&T domestic and international long
distance services by the traditional "one plus" dialing of the desired call
destination, by dial-up access or through the use of AT&T calling cards.

<PAGE>

AT&T both delivers and receives international traffic pursuant to its
operating agreements with foreign carriers throughout the world. The terms of
most switched voice operating agreements, as well as established FCC policy,
require that inbound switched voice traffic from the foreign carrier to the
United States be routed to United States international carriers, like AT&T, in
proportion to the percentage of United States outbound traffic routed by that
United States international carrier to the foreign carrier. AT&T's revenues and
costs of sales are sensitive to changes in international settlement rates and
international traffic routing patterns.

In the continental United States, AT&T provides long distance
telecommunications services over AT&T's backbone network. International
telecommunications services are provided by submarine cable systems in which
AT&T holds investment positions, satellites and facilities of other domestic and
foreign carriers.

AT&T markets its consumer long distance services in a variety of ways,
including by means of television advertising, direct mail solicitations and
telephonic solicitations, as well as through brand awareness.

AT&T charges customers based on applicable tariffs filed with the FCC
and individual states. Customers select different services and from various rate
plans which determine the price per minute that they pay on their long distance
calls. Rates typically vary based on a variety or factors, particularly the
volume of usage and the day and time that calls are made.

Consumer Local Services

Local carriers provide local exchange, exchange access, toll, and
resold services; and provide operator and directory services. By the end of
1997, AT&T offered resold local service to residential customers in 8 states.
Notwithstanding its substantial efforts, AT&T experienced significant difficulty
in entering local markets. AT&T's ability to purchase combined network elements
from the incumbent LECs (ILECs), one of the primary methods by which AT&T
intended to provide local service to residential customers, was severely limited
by, among other factors, ILEC-sponsored regulatory and judicial actions, and a
lack of operating interfaces necessary to process network element orders with
ILECs. In spite of strong demand, in the fourth quarter of 1997 AT&T stopped
actively marketing resold local service to residential customers in most of the
areas in which it offered such service because of limitations on ILECs' ability
to handle anticipated demand and because the wholesale rates AT&T received from
ILECs on the sale of such service were insufficient to make resale a viable
method of offering service.

AT&T intends to pursue local entry by transforming the cable footprint
of one-way cable plant into a two-way, broadband network capable of meeting the
full spectrum of communication needs of the residential customer. AT&T intends
to deploy a variety of services over the upgraded cable plant, including a
richly featured all distance (i.e., local, long distance, international) voice
telephony offering. AT&T has used existing circuit-switched technology to pilot
telephony service offers over the cable plant beginning in 1999. However, AT&T
expects to begin to transition to an integrated Internet protocol (IP) packet
data architecture by the end of 2000 that affords cost and feature benefits over
the older circuit-switched technology.

<PAGE>

In addition, AT&T will pursue other transport options, including:

o Expanding AT&T's ability to offer the full range of consumer services
our existing cable footprint through a variety of partnership and
investment initiatives;

o Continued investment in alternative narrowband, wideband and broadband
access technologies, including the fixed wireless technology that AT&T
is currently testing in select markets, and the construction of
dedicated, high-capacity access facilities to serve the broadband
communication needs of residential customers living in multiple
dwelling units (MDUs); and

o Using combinations of ILEC unbundled network elements, as well as ILEC
unbundled loops (which can be combined with switching, transport and
other network elements) to support differentiated voice and data
services.

AT&T intends to use the AT&T Broadband sales force actively to solicit
cable customers as local service customers. In these areas, AT&T intends to
offer cable and local telephony as a bundle of services. AT&T will market local
service in other areas as it rolls out its local telephony capabilities.

For local service, customers are billed a fixed charge plus usage. AT&T
intends to offer rates competitive with those offered by LECs, as well as
discounted offers for certain bundles of services.

AT&T WorldNet(R) Consumer Services

AT&T offers dial-up Internet access to consumers through its AT&T
WorldNet Services, a leading provider of direct Internet access service in the
United States. At December 31, 1999, AT&T WorldNet service had approximately
1.479 million customers.

In 1998, AT&T WorldNet Services entered into agreements with Yahoo!,
Excite and Lycos to offer co-branded access services to the portals' customers.
For example, a Yahoo! customer may subscribe to Internet access through Yahoo!
Online Powered by AT&T WorldNet Services. In these cases AT&T WorldNet Services
supplies the underlying access, billing and customer care, while the portal
provides the content in the form of a personalizable start page and other
popular features.

In 1999, AT&T WorldNet Services began offering members an AT&T branded
search engine as part of redesign of the Company's web site, and enhanced
several other subscriber features, including increasing the disk storage space
for personal web pages to 10 megabytes for each e-mail id (six e-mail ids per
account, 60 megabytes of disk storage) and providing a template that helps
members build personal web pages quickly and easily. AT&T WorldNet Services
entered into a co-marketing arrangement with Sega, providing Internet access via
Sega's new Dreamcast game machine, and it received recognition as the top ISP in
the industry from PC Week, PC Magazine and Smart Money.

AT&T WorldNet Services generates revenues principally through
subscription and usage fees, as well as from electronic commerce and advertising
revenues. AT&T WorldNet Service offers a variety of pricing plan options,
including bundled options. Generally, customers are charged a flat rate for a
certain number of hours with charges for each additional hour of usage.

<PAGE>

AT&T WorldNet Services' marketing programs are designed to attract and
retain profitable customers. AT&T seeks to build brand recognition and customer
loyalty and to make it easy for consumers to try, and stay with, AT&T WorldNet
Services. In addition to direct marketing through brand name advertising, direct
mail and magazine insert promotions and bundling offers, AT&T WorldNet service
maintains a large indirect channel marketing effort. Through this indirect
channel AT&T WorldNet service software is bundled in new computers produced by
major manufacturers, and is included on millions of software titles published by
independent software vendors.

BROADBAND SERVICES

AT&T Broadband offers a variety of services through its cable
broadband network, including traditional analog video and new services such as
digital cable and AT&T@Home, which offers high-speed cable Internet access
service. Also included in AT&T Broadband are the operations associated with
developing and refining the infrastructure that will support broadband
telephony.

Cable television systems receive video, audio and data signals
transmitted by nearby television and radio broadcast stations, terrestrial
microwave relay services and communications satellites. Such signals are then
amplified and distributed by coaxial cable and optical fiber to the premises of
customers who pay a fee for the service. In many cases, cable television systems
also originate and distribute local programming.

At December 31, 1999, approximately 74% of AT&T Broadband's cable
television systems had bandwidth capacities ranging from 450 megahertz to 750
megahertz. The Company's cable television systems generally carry up to 80
analog channels. Compressed digital video technology converts on average twelve
analog signals (now used to transmit video and voice) into a digital format and
compresses such signals (which is accomplished primarily by eliminating the
redundancies in television imagery) into the space normally occupied by one
analog signal. The digitally compressed signal is uplinked to a satellite, which
retransmits the signal to a customer's satellite dish or to a cable system's
headend to be distributed, via optical fiber and coaxial cable, to the
customer's home. At the home, a set-top video terminal converts the digital
signal into analog channels that can be viewed on a normal television set.

Domestic Basic-TV cable customers served by AT&T Broadband are
summarized as follows (amounts in millions):

Basic-TV customers at December 31,
-----------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
Managed through AT&T Broadband's
operating divisions 11.3 11.4 14.2 13.4 11.9
Other non-managed subsidiaries of
AT&T Broadband 0.1 0.5 0.2 0.5 0.6
------ ------ ------ ------ ------
11.4 11.9 14.4 13.9 12.5
====== ====== ====== ====== ======

<PAGE>

During 1999, AT&T Broadband completed two transactions in which it
contributed cable television systems serving in the aggregate approximately
863,000 customers to two separate joint ventures in exchange for non-controlling
ownership interests in such joint ventures, and the assumption and repayment by
the joint ventures of indebtedness.

The decline in total Basic-TV customers between 1997 and 1998 is
attributable to certain contribution transactions entered into in 1998. In the
most significant of these transactions, on March 4, 1998, AT&T Broadband
contributed to Cablevision Systems Corporation (CSC) certain of its cable
television systems serving approximately 830,000 customers in exchange for
approximately 48.9 million newly issued CSC Class A common shares (the CSC
Transaction) and the assumption of indebtedness.

In addition to the CSC Transaction, during 1998 AT&T Broadband also
completed eight transactions whereby AT&T Broadband contributed cable television
systems serving in the aggregate approximately 1,924,000 customers to eight
separate joint ventures (collectively, the 1998 Joint Ventures) in exchange for
non-controlling ownership interests in each of the 1998 Joint Ventures, and the
assumption and repayment by the 1998 Joint Ventures of indebtedness.

AT&T Broadband had approximately 1.8 million digital customers and
200,000 AT&T@Home customers at December 31, 1999.

AT&T Broadband operates cable television systems throughout the United
States.

Service Charges. AT&T Broadband offers a limited "basic service"
(Basic-TV) (primarily comprised of local broadcast signals and public,
educational and governmental (PEG) access channels) and an "expanded tier"
(primarily comprised of specialized programming services, in such areas as
health, family entertainment, religion, news, weather, public affairs,
education, shopping, sports and music). The monthly fee for basic service
generally ranges from $9.50 to $15.00, and the monthly service fee for the
expanded tier generally ranges from $15.00 to $21.50. AT&T Broadband offers
"premium services" (referred to in the cable television industry as "Pay-TV" and
"pay-per-view") to its customers. Such services consist principally of feature
films, as well as live and taped sports events, concerts and other programming.
AT&T Broadband also offers Pay-TV services for a monthly fee. Charges are
usually discounted when multiple Pay-TV services are ordered. Customers may also
elect to subscribe to digital video services comprised of up to 80 additional
video channe;s and between 10 and 30 additional audio channels featuring
additional specialized programming and premium services at an average
incremental monthly charge of $10.00.

As further enhancements to their cable services, for a monthly charge
customers may generally rent converters or converters with remote control
devices, as well as purchase a channel guide. Also a nonrecurring installation
charge is usually charged.

Monthly fees for Basic-TV and Pay-TV services to commercial customers
vary widely depending on the nature and type of service. Except under the terms
of certain contracts to provide service to commercial accounts, customers are
free to discontinue service at any time without penalty.

AT&T Broadband also offers AT&T@Home, a high speed cable Internet
access service, in some markets. Monthly charges for AT&T@Home range from $29.95
to $39.95.

<PAGE>

The Cable Television Consumer Protection and Competition Act of 1992
(the 1992 Cable Act) and the Telecommunications Act of 1996 (the
Telecommunications Act, together with the 1992 Cable Act, the Cable Acts),
established rules under which AT&T Broadband's basic service and expanded tier
service rates and equipment and installation charges are regulated if a
complaint is filed or if the appropriate franchise authority is certified.

Local Franchises. Cable television systems generally are constructed
and operated under the authority of nonexclusive permits or "franchises" granted
by local and/or state governmental authorities. Federal law, including the Cable
Communications Policy Act of 1984 (the 1984 Cable Act) and the 1992 Cable Act,
limits the power of the franchising authorities to impose certain conditions
upon cable television operators as a condition of the granting or renewal of a
franchise.

Franchises contain varying provisions relating to construction and
operation of cable television systems, such as time limitations on commencement
and/or completion of construction; quality of service, including (in certain
circumstances) requirements as to the number of channels and broad categories of
programming offered to customers; rate regulation; provision of service to
certain institutions; provision of channels for public access and commercial
leased-use; and maintenance of insurance and/or indemnity bonds. AT&T
Broadband's franchises also typically provide for periodic payments of fees, not
to exceed 5% of revenue, to the governmental authority granting the franchise.
Additionally, many franchises require payments to the franchising authority for
the funding of PEG access channels. Franchises usually require the consent of
the franchising authority prior to a transfer of the franchise or a transfer or
change in ownership or operating control of the franchisee.

Subject to applicable law, a franchise may be terminated prior to its
expiration date if the cable television operator fails to comply with the
material terms and conditions thereof. Under the 1984 Cable Act, if a franchise
is lawfully terminated, and if the franchising authority acquires ownership of
the cable television system or effects a transfer of ownership to a third party,
such acquisition or transfer must be at an equitable price or, in the case of a
franchise existing on the effective date of the 1984 Cable Act, at a price
determined in accordance with the terms of the franchise, if any.

In connection with a renewal of a franchise, the franchising authority
may require the cable operator to comply with different and more stringent
conditions than those originally imposed, subject to the provisions of the 1984
Cable Act and other applicable federal, state and local law. The 1984 Cable Act,
as supplemented by the renewal provisions of the 1992 Cable Act, establishes an
orderly process for franchise renewal which protects cable operators against
unfair denials of renewals when the operator's past performance and proposal for
future performance meet the standards established by the 1984 Cable Act. AT&T
Broadband believes that its cable television systems generally have been
operated in a manner which satisfies such standards and allows for the renewal
of such franchises; however, there can be no assurance that the franchises for
such systems will be successfully renewed as they expire.

Most of AT&T Broadband's present franchises had initial terms of
approximately 10 to 15 years. The duration of AT&T Broadband's outstanding
franchises presently varies from a period of months to an indefinite period of
time. Approximately one thousand of AT&T Broadband's franchises expire within
the next five years. This represents approximately 25% percent of the franchises
held by AT&T Broadband and involves over 4 million basic customers.

<PAGE>

Cable Telephony. AT&T Broadband's telephony pilot market initiatives
progressed on schedule in 1999. As of December 31, 1999, AT&T Broadband had
introduced broadband telephony service to customers in 16 cities within nine
pilot markets and had nearly 8,300 broadband telephony customers. The markets
include the California Bay Area (including Fremont), Chicago, Dallas, Denver,
Pittsburgh, Seattle, Salt Lake City, St. Louis and Portland, Oregon.

WIRELESS SERVICES

The AT&T Wireless Group Tracking Stock

The AT&T Wireless Group includes the results of certain assets and
liabilities which were not managed as part of the Wireless Services segment in
1999. AT&T Wireless Group tracking stock is designed to reflect the separate
economic performance of the AT&T Wireless Group. Except as described below, we
attribute all of AT&T's current wireless operations to the AT&T Wireless Group,
including:

o all mobile and fixed wireless licenses,
o all wireless networks, operations, cell sites,
retail operations, wireless customer care
facilities and customer location assets, and
o interests in partnerships and affiliates providing
wireless mobile communications in the United
States and internationally.

The AT&T Common Stock Group retains:

o existing and future wireless activities that stem
from country-specific joint venture relationships
that are predominantly non-wireless, and
o incidental wireless capabilities or links in any
backbone or other communications network that is
predominantly non-wireless.

We currently intend to include all future wireless activities in the
AT&T Wireless Group. Our board of directors may, however, in its discretion, but
subject to the AT&T Wireless Group policy statement, direct new businesses and
assets to the AT&T Wireless Group or the AT&T Common Stock Group or dispose of
or transfer businesses or assets of either group.

Business of the AT&T Wireless Group

The AT&T Wireless Group is one of the largest wireless service
providers in the United States, based on approximately $7.6 billion in revenues
for the year ended December 31, 1999. Including its partnership markets, the
AT&T Wireless Group had over 12 million total subscribers as of December 31,
1999.

The AT&T Wireless Group operates one of the largest U.S. digital
wireless networks. The AT&T Wireless Group, including its partnership and
affiliate markets, currently holds 850 megahertz and 1900 megahertz licenses to

<PAGE>

provide wireless services covering 94% of the U.S. population, with
approximately 81% of the U.S. population covered by at least 30 megahertz of
wireless spectrum as of December 31, 1999. As of December 31, 1999, the AT&T
Wireless Group's built network, including partnership and affiliate markets,
covered 65% of the U.S. population. This includes operations in 42 of the 50
largest U.S. metropolitan areas. The AT&T Wireless Group supplements its own
operations with roaming agreements that allow its subscribers to use other
providers' wireless services in regions where the AT&T Wireless Group does not
have operations. Through these roaming agreements, the AT&T Wireless Group is
able to offer its customers wireless services covering over 95% of the U.S.
population.

Services and products

The AT&T Wireless Group offers a variety of services for both voice and
data communications. Service can include wireless voice transmission as well as
custom calling services for digital services, such as voicemail, call
forwarding, call waiting, caller ID, three-way calling, no-answer and busy
transfer. The AT&T Wireless Group also offers a variety of other enhanced
features, including display messaging, which allows a cellular phone to receive
and store short alphanumeric messages and pages and to provide subscribers with
notification of voicemail messages, even if the handset is in use or switched
off, extended battery life and enhanced directory assistance, which enables
callers to be connected to the party whose number was sought without hanging up
and redialing.

As a packet-switched network, the AT&T Wireless Group's cellular
digital packet data (CDPD) network takes advantage of the fact that with many
data applications, data is sent in bursts with intermittent quiet periods, which
allows many users to share the network channel. As a result, relative to data
services carried over circuit-switched analog or digital wireless networks, the
AT&T Wireless Group's packet-switched CDPD service is a significantly more
cost-effective means of sending data for the majority of applications because it
allows a channel to be shared by many users. For example, for many applications,
the AT&T Wireless Group's packet-switched CDPD network allows it to offer its
customers unlimited, always-on usage, most often for a flat monthly fee. This
makes its CDPD network service attractive for a variety of new applications.

In the future, the AT&T Wireless Group expects a number of additional
applications will be developed, including e-commerce and shopping services and
services that are enhanced by information about the user's location. By
providing or facilitating such applications, the AT&T Wireless Group believes it
can generate new revenue streams, as well as develop personalized relationships
with its customers.

The AT&T Wireless Group offers a variety of products as complements to
its wireless service, including handsets and accessories, such as chargers,
headsets, belt clips, faceplates and batteries. As part of its basic service
offering, the AT&T Wireless Group provides easy-to-use, interactive menu-driven
handsets that can be activated over the air. These handsets primarily feature
word prompts and menus rather than numeric codes to operate handset functions.
Some handsets allow mobile access to the Internet. In addition, the AT&T
Wireless Group offers tri-mode handsets, which are handsets compatible with PCS,
digital cellular and analog cellular frequencies and service modes. Tri-mode
handsets permit customers to roam across a variety of wireless networks and
incorporates AT&T's intelligent roaming data base (IRDB) system. The AT&T
Wireless Group offers its customers use of Nokia, Ericsson, Mitsubishi and
Motorola handsets.

<PAGE>

The AT&T Wireless Group markets its wireless services in its managed
markets under the AT&T brand name. It markets wireless services to business and
residential customers through a direct sales force of 2,100, through sales
points of presence in approximately 390 AT&T company-owned stores located in 36
states, and kiosks and other customer points of presence, including the Internet
and inbound call centers, and through local and national non-affiliated
retailers throughout the United States. The AT&T Common Stock Group sales force
also sells wireless services to business and residential customers as part of
bundled offerings with services of the AT&T Common Stock Group. The AT&T
Wireless Group also relies upon dealers to market its services in some
locations.

The AT&T Wireless Group charges may include fees for service
activation, monthly access, per-minute airtime and customer-calling features,
which may include a fixed number of minutes or packets of data per month at a
set price and generally offers a variety of pricing options, most of which
combine a fixed monthly access fee for a fixed number of minutes or packets of
data and additional charges for usage in excess of those allotted. Customers may
also incur long distance and roaming fees.

Fixed Wireless

Fixed wireless service provides customers with high speed broadband
access coupled with wireline quality voice access. Fixed wireless provides a
high speed packet data channel which can be used by up to five data devices
simultaneously (for example, five personal computers simultaneously accessing
the Internet) at download speeds of up to 512 kilobits per second. The service
is expected to be capable of speeds of up to one megabit per second by mid 2000.
In addition, fixed wireless can provide up to four lines of wireline quality
voice telephony, including custom calling features (e.g., call waiting, caller
ID, three-way calling) available today over wireline networks. Fixed wireless
was reported within the Consumer Services segment in 1999, but will be included
in the AT&T Wireless Group in 2000.

Other assets

The AT&T Wireless Group also possesses certain other assets not
described above. The most significant of these assets include a number of equity
interests in domestic and international wireless operations and an air-to-ground
wireless operation.

Domestically, the AT&T Wireless Group has joint ventures with or
interests in a number of wireless operators, including Telecorp PCS, Triton PCS
and Tritel Inc.. Internationally, the AT&T Wireless Group owns one half of the
33.3% equity stake in Rogers Cantel it holds jointly with British
Telecommunications. The AT&T Wireless Group is the operating partner in wireless
ventures in Colombia, India and Taiwan. In 2000 the AT&T Wireless Group was also
allocated one half the interest that AT&T possesses in Japan Telecom. In
addition, subject to existing agreements or commitments, to the extent that AT&T
acquires any international wireless investments in connection with its merger
with MediaOne, AT&T intends to allocate those investments to the AT&T Wireless
Group in exchange for fair and reasonable consideration.

The Aviation Communications Division (ACD) of the AT&T Wireless Group
provides air-to-ground communications services. A minority ownership interest in
ACD is held by Rogers Cantel. ACD owns and operates a network of ground-based
and airborne telecommunications equipment and related assets that deliver
digital telephone service to commercial and private aircraft in North America.

<PAGE>

Wireless network

The AT&T Wireless Group's ownership position in U.S. markets was
obtained through FCC auctions and the FCC lottery and settlement process as well
as through acquisitions of, and purchases and exchanges of, licenses with other
cellular providers.

Mobile voice network

Coverage. As of December 31, 1999, the AT&T Wireless Group's built
network, including partnership and affiliate markets, covered 65% of the U.S.
population, including operations in 42 of the 50 largest U.S. metropolitan
areas. The AT&T Wireless Group provides virtually seamless services over its
wireless network, which operates using both 850 megahertz and 1900 megahertz
licenses. Where agreements are in place, the AT&T Wireless Group is able to
offer service to customers of other wireless providers when they travel through
its service area, and AT&T Wireless Group subscribers can roam through other
wireless providers' service areas.

Analog and digital technologies. The AT&T Wireless Group offers both
analog and digital service in its 850 megahertz markets and digital service in
its 1900 megahertz markets. The AT&T Wireless Group believes that digital
technology offers many advantages over analog technology, including
substantially increased network capacity, greater call privacy, enhanced
services and features, lower operating costs, reduced susceptibility to fraud
and the opportunity to provide improved data transmissions. Moving customers to
digital service has been a key component of the AT&T Wireless Group's overall
wireless strategy. Digital service enables the AT&T Wireless Group to provide
added benefits and services to its customers, including extended battery life,
caller ID, text messaging and voicemail with message waiting indicator.

TDMA network. The AT&T Wireless Group has chosen time division multiple
access (TDMA) technology for its digital network. TDMA permits the use of
advanced tri-mode handsets that allow for roaming across analog and digital
systems and across 850 megahertz and 1900 megahertz spectrums. TDMA digital
technology allows for enhanced services and features, such as short alphanumeric
message service, extended battery life, added call security and improved voice
quality. TDMA's hierarchical cell structure enables the AT&T Wireless Group to
enhance network coverage with lower incremental investment through the
deployment of micro and pico, as opposed to macro, cell sites. This enables the
AT&T Wireless Group to offer customized billing options and to track billing
information per individual cell site, which is practical for advanced wireless
applications such as fixed wireless and wireless office applications. TDMA
served an estimated 35 million subscribers worldwide and 18 million subscribers
in North America as of December 31, 1999, according to the Universal Wireless
Communications Consortium, an association of TDMA service providers and
manufacturers. TDMA equipment is available from leading telecommunication
vendors such as Lucent, Ericsson and Nortel Networks Corporation. A number of
other wireless service providers have chosen code division mobile access (CDMA)
or global system for mobile communications (GSM) as their digital wireless
technology.

CDPD network. The AT&T Wireless Group's CDPD network currently covers
89 million POPs, which represents over 60% of its built network, and its CDPD
customers can roam on the CDPD networks of other wireless providers, which,
together, cover an additional 72 million POPs. CDPD is an industry standard
using Internet Protocol, which allows most applications written for the Internet
as well as many corporate applications to run efficiently over the network

<PAGE>

without modification. Using CDPD, data files and transactions are divided into
small packets and sent on a dedicated wireless channel. In many data
applications, data is sent in bursts with intermittent quiet periods. Packet
transmission technologies take advantage of this fact and allow user data to be
efficiently carried on the same network channel. As a result, relative to data
services carried over circuit-switched analog or digital wireless networks, the
AT&T Wireless Group's packet-switched CDPD service is a significantly more
cost-effective means of sending data for the majority of applications because it
allows many users to share the same channel.

OTHER BUSINESSES

AT&T Solutions

AT&T Solutions, established in 1995, provides outsourcing, consulting
and networking integration services to large businesses. AT&T Solutions provides
clients with a broad array of professional services to satisfy clients complete
networking technology needs.

AT&T Solutions' offerings include operational and networking management
services for a broad range of computing platforms, including mainframe,
mid-range computers, personal computer and network environments, such as
local-area networks and wide-area networks. Most customers execute long-term
contracts for AT&T Solutions networking services.

AT&T Solutions' customers are generally within the top 2000
multinational corporations in the world. AT&T Solutions' sales force engages in
direct solicitation of those customers as well as referrals from other units of
AT&T.

International

AT&T has established a number of international alliances to increase
the reach and scope of AT&T's services and network over time and has invested in
certain countries in order to increase the range of services AT&T offers in
those countries.

International operations include international carrier services
businesses, international online services, as well as consolidated foreign
operations such as frame relay services in the United Kingdom. AT&T also has a
number of international joint ventures and alliances, such as Alestra in Mexico,
AT&T Canada Corp., and Japan Telecom.

On January 6, 2000 AT&T and British Telecommunications plc (BT) created
a global venture to serve the communications needs of multinational companies
and the international calling needs of businesses around the world. The venture,
called Concert and owned equally by AT&T and BT, combined transborder assets and
operations of each company, including their existing international networks,
their international traffic, their transborder products for business customers
- -- including an expanding set of Concert services -- and AT&T and BT's
multinational accounts in selected industry sectors.

<PAGE>

all of the remaining shares at the greater of the then appraised fair market
value or the accreted minimum price, which initially is C$37.50 accreting after
June 30, 2000 at a rate of 16% per annum, compounded quarterly. If the
acquisition is not completed by June 30, 2003, those shares, along with AT&T's
shares, would be sold through an auction process and AT&T will make whole the
other shareholders for the amount they would have been entitled to if AT&T had
purchased the shares. The completion of the acquisition is subject to the
condition that AT&T is permitted to acquire the shares under Canada's foreign
ownership restrictions. AT&T may acquire the shares prior to a change in the
ownership restrictions by developing a structure that addresses such ownership
restrictions.

LEGISLATIVE AND REGULATORY DEVELOPMENTS

Telecommunications Act of 1996

In February 1996, the Telecommunications Act became law. The
Telecommunications Act, among other things, was designed to foster local
exchange competition by establishing a regulatory framework to govern new
competitive entry in local and long distance telecommunications services. The
Telecommunications Act will permit the Regional Bell Operating Companies (RBOCs)
to provide interexchange services originating in any state in its region after
demonstrating to the FCC that such provision is in the public interest and
satisfying the conditions for developing local competition established by the
Telecommunications Act.

In August 1996, the FCC adopted rules and regulations, including
pricing rules (the "Pricing Rules") to implement the local competition
provisions of the Telecommunications Act, including with respect to the terms
and conditions of interconnection with LEC networks and the standards governing
the purchase of unbundled network elements and wholesale services from LECs.
These implementing rules rely on state public utilities commissions (PUCs) to
develop the specific rates and procedures applicable to particular states within
the framework prescribed by the FCC.

On July 18, 1997, the United States Court of Appeals for the 8th
Circuit issued a decision holding that the FCC lacks authority to establish
pricing rules to implement the sections of the local competition provisions of
the Telecommunications Act applicable to interconnection with LEC networks and
the purchase of unbundled network elements and wholesale services from LECs.
Accordingly, the Court vacated the rules that the FCC had adopted in August
1996, and which had been stayed by the Court since September 1996. On October
14, 1997, the 8th Circuit Court of Appeals vacated an FCC Rule that had
prohibited incumbent LECs from separating network elements that are combined in
the LEC's network, except at the request of the competitor purchasing the
elements. This decision increased the difficulty and costs of providing
competitive local service through the use of unbundled network elements
purchased from the incumbent LECs.

On January 25, 1999, the Unites States Supreme Court issued a decision
reversing the 8th Circuit Court of Appeal's holding that the FCC lacks
jurisdiction to establish pricing rules applicable to interconnection and the
purchase of unbundled network elements, and the Court of Appeal's decision to
vacate the FCC's rule prohibiting incumbent LECs from separating network
elements that are combined in the LEC's network. The effect of the Supreme
Court's decision is to reinstate the FCC's rules governing pricing and the
separation of unbundled network elements. The 8th Circuit Court of Appeals will

<PAGE>

now consider the incumbent LECs' claims that although the FCC has jurisdiction
to adopt pricing rule, the rules it adopted are not consistent with the
applicable provisions of the Act. The Supreme Court also vacated the FCC's rule
identifying and defining the unbundled network elements that incumbent LECs are
required to make available to new entrants, and directed the FCC to reexamine
this issue in light of the standards mandated by the Act.

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

In view of the proceedings pending before the 8th Circuit, DC Circuit,
FCC and state PUCs, there can be no assurance that the prices and other
conditions established in each state will provide for effective local service
entry and competition or provide AT&T with new market opportunities.

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

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

Modification of Final Judgment of 1982

Prior to 1996, AT&T and the RBOCs were subject to the provisions of the
Modification of Final Judgment of 1982 (MFJ) since its implementation. The
Telecommunications Act effectively superseded future operation of the MFJ.
Consequently, on April 11, 1996, Judge Harold Greene issued an order terminating
the MFJ.
Regulation of Rates

AT&T is subject to the jurisdiction of the FCC with respect to
interstate and international rates, lines and services, and other matters. From
July 1989 to October 1995, the FCC regulated AT&T under a system known as "price
caps" whereby AT&T's prices, rather than its earnings, were limited. On October
12, 1995, recognizing a decade of enormous change in the long distance market
and finding that AT&T lacked market power in the interstate long distance
market, the FCC reclassified AT&T as a "non-dominant" carrier for its domestic
interstate services. As a result, AT&T became subject to the same regulations as
its long distance competitors for such services. Thus, AT&T was no longer
subject to price cap regulation for these services, was able to file tariffs
that are presumed lawful on one day's notice, and was free of other regulations
and reporting requirements that apply only to dominant carriers.

In addition, on October 31, 1996, the FCC issued an order that would
have prohibited non-dominant carriers, including AT&T, from filing tariffs for

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their domestic interstate services. AT&T and other parties have filed an appeal
of the FCC's order with the United States Court of Appeals for the D.C. Circuit.
In February 1997, the D.C. Circuit stayed the effectiveness of the FCC's order
pending appeal. Oral argument has not yet been scheduled. If the Court affirms
the FCC's order and lifts the stay, non-dominant carriers, including AT&T, will
have to utilize mechanisms other than tariffs to establish the terms and
conditions that apply to domestic, interstate telecommunications services.

Furthermore, in May 1997, the FCC adopted three orders relating to
Price Caps, Access Reform, and Universal Service that substantially revised the
level and structure of access charges that AT&T as a long distance carrier pays
to incumbent LECs. AT&T has agreed to pass through to consumers any savings to
AT&T as a result of access charge reform. AT&T began implementing these
reductions July 15, 1997. Consequently, AT&T's results after June 1997 reflects
lower revenue per minute of usage and lower access and other interconnection
costs per minute of usage.

The Price Cap Order requires LECs to reduce their price cap indices by
6.5 percent annually, less an adjustment for inflation, which is likely to
result in a reduction in the interstate access charges that long distance
carriers, such as AT&T, pay to LECs. The Access Charge Reform Order restructured
access charges so that certain costs that do not vary with usage will be
recovered on a flat-rate basis and permitted increased flat-rate assessments on
multiline business customers and on residential lines beyond the primary
telephone line. This restructuring allows a reduction in access charges assessed
on long distance carriers on a usage basis. Finally, the Universal Service Order
(which represents an FCC mandated contribution to support schools and libraries
and rural health care programs, high cost support and low income support
mechanisms which are paid to the Universal Service Administrative Company)
adopts a new mechanism for funding universal service which expands the set of
carriers that must contribute to support universal service from only long
distance carriers to all carriers, including LECs, that provide interstate
telecommunications services. Similarly, the set of carriers eligible for the
universal service support has been expanded from only LECs to any eligible
carrier providing local service to a customer, including AT&T as a new entrant
in local markets. The Universal Service Order also adopted measures to provide
discounts on telecommunications services, Internet access and inside wire to
eligible schools and libraries and rural health carrier providers.

AT&T remains subject to the statutory requirements of Title II of the
Communications Act. AT&T must offer service under rates, terms and conditions
that are just, reasonable and not unreasonably discriminatory; it is subject to
the FCC's complaint process, and it must give notice to the FCC and affected
customers prior to discontinuance, reduction, or impairment of service. AT&T has
also made certain commitments that address concerns that had been raised with
regard to the potential impact of declaring AT&T to be non-dominant, including a
three-year rate assurance for low income and low usage residential users and a
three-year limit on, and 5 days advance notice for, rate increases on 800
directory assistance and analog private line services.

AT&T's international private line services have been classified as
non-dominant for several years. AT&T's switched international services have
become subject to increased competition, similar to its domestic services and on
May 9, 1996, the FCC adopted an order reclassifying AT&T as a non-dominant
carrier for such services. AT&T has made certain voluntary commitments that
address issues raised in that proceeding, including commitments: (i) to maintain
its annual average revenue per minute for international residential calls at or

<PAGE>

below the 1995 level through May 9, 1999, and in the event of a significant
change that substantially raises AT&T's costs, to provide the FCC five business
days notice prior to implementing rate increases that would raise the annual
average revenue per minute for such calls above the 1995 level; and (ii) to
maintain certain discount calling plans providing at least a 15% discount off
basic pricing schedules until May 9, 1999. AT&T also made voluntary commitments
relating to its operation of international cable facilities, its negotiation of
settlement agreements with foreign carriers and its relationship with foreign
partners.

In addition to the matters described above with respect to the
Telecommunications Act, state public service commissions or similar authorities
having regulatory power over intrastate rates, lines and services and other
matters regulate AT&T's local and intrastate communications services. The system
of regulation used in many states is rate-of-return regulation. In recent years,
many states have adopted different systems of regulation, such as: complete
removal of rate-of-return regulation, pricing flexibility rules, price caps and
incentive regulation.

Wireless Regulatory Environment

The FCC regulates the licensing, construction, operation, acquisition,
sale and resale of wireless systems in the United States pursuant to the
Communications Act of 1934 and the associated rules, regulations and policies
promulgated by the FCC.

Licensing of wireless services systems

The AT&T Wireless Group owns protected geographic service area licenses
granted by the FCC to provide cellular service and PCS. It also owns licenses
granted by the FCC to provide point-to-multi-point communications services in
various bands, including significant licenses in the 37 to 39 gigahertz bands.

A cellular system operates on one of two 25 megahertz frequency blocks
that the FCC allocates for cellular radio service. Cellular systems generally
are used for two-way mobile voice applications, although they may be used for
data applications and fixed wireless services as well. Cellular license areas
are issued for either metropolitan service areas or rural service areas.
Initially, one of the two cellular licenses available in each metropolitan
service area or rural service area was awarded to a local exchange telephone
company by the FCC, while the other license was awarded either through
competitive processes or lotteries. Licenses were issued beginning in 1983, and
over the years numerous license transfers and corporate reorganizations have
obscured the original pattern of distributing one set of licenses to local
telephone company affiliates and the other to companies that do not have local
exchange service in the license area.

A PCS system operates on one of six frequency blocks allocated for
personal communications services. PCS systems generally are used for two-way
voice applications although they may carry two-way data communications as well.
Narrowband PCS systems, in contrast, are for non-voice applications such as
paging and data service and are separately licensed. For the purpose of awarding
PCS licenses, the FCC has segmented the United States into 51 large regions
called major trading areas, which are comprised of 493 smaller regions called
basic trading areas. The FCC awarded two PCS licenses for each major trading
area and four licenses for each basic trading area. Thus, generally, six
licensees are authorized to compete in each area. The two major trading area

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licenses authorize the use of 30 megahertz of spectrum. One of the basic trading
area licenses is for 30 megahertz of spectrum, and the other three are for 10
megahertz each. The FCC permits licensees to split their licenses and assign a
portion, on either a geographic or frequency basis or both, to a third party.

The FCC awarded initial PCS licenses by auction. Auctions began with
the 30 megahertz major trading area licenses and concluded in 1998 with the last
of the basic trading area licenses. However, in March 1998, the FCC adopted an
order that allows troubled entities that won PCS 30 megahertz C-Block licenses
at auction to obtain financial relief from their payment obligations and to
return some or all of their C-Block licenses to the FCC for reauctioning. The
FCC completed the reauction of the returned licenses in April 1999. In addition,
certain of the C-block licenses are currently in bankruptcy proceedings, and
these licenses may be returned to the FCC for reauction.

Under the FCC's current rules specifying spectrum aggregation limits
affecting wireless licensees, no entity may hold attributable interests,
generally 20% or more of the equity of, or an officer or director position with,
the licensee, in licenses for more than 45 megahertz of PCS, cellular and
certain specialized mobile radio services where there is significant overlap in
any geographic area. Significant overlap will occur when at least 10% of the
population of the PCS licensed service area is within the cellular and/or
specialized mobile radio service area(s). The FCC recently increased this limit
to 55 megahertz in situations in which a 25 megahertz cellular rural service
area is attributed to a 30 megahertz PCS license. These spectrum aggregation
rules are subject to a pending FCC proceeding that could revise or eliminate
them.

All wireless licenses have a 10-year term, at the end of which term
they must be renewed. The FCC will award a renewal expectancy to a wireless
licensee that has provided substantial service during its past license term, and
has substantially complied with applicable FCC rules and policies and the
Communications Act. Licenses may be revoked for cause and license renewal
applications denied if the FCC determines that a renewal would not serve the
public interest. FCC rules provide that competing renewal applications for
licenses will be considered in comparative hearings, and establish the
qualifications for competing applications and the standards to be applied in
hearings.

All wireless licenses must satisfy specified coverage requirements.
Cellular licenses were required, during the five years following the grant of
the license, to construct their systems to provide service (at a specified
signal strength) to the territory encompassed by their service area. Failure to
provide such coverage resulted in reduction of the relevant license area by the
FCC. All A and B block PCS licensees must construct facilities that offer
coverage to one-third of the population of the service area within five years of
the original license grants and to two-thirds of the population within ten
years. All D and E block PCS licensees must construct facilities that offer
coverage to one-fourth of the population of the licensed area or "make a showing
of substantial service in their license area" within five years of the original
license grants. Licensees that fail to meet the coverage requirements may be
subject to forfeiture of the license.

For a period of up to five years after the grant of a PCS license,
subject to extension, a licensee will be required to share spectrum with
existing licensees that operate certain fixed microwave systems within its
license area under circumstances where interconnection is not available through

<PAGE>

the local exchange carrier or the competitive local exchange carrier. In an
effort to balance the competing interests of existing microwave users and newly
authorized PCS licensees, the FCC has adopted a transition plan to relocate such
microwave operators to other spectrum blocks and a cost sharing plan so that if
the relocation of an incumbent benefits more than one PCS licensee, those
licensees will share the cost of the relocation. Initially, this transition plan
allowed most microwave users to operate in the PCS spectrum for a voluntary
two-year negotiation period and an additional mandatory one-year negotiation
period. For public safety entities that dedicate a majority of their system
communications to police, fire or emergency medical services operations, the
voluntary negotiation period is three years, with an additional mandatory
two-year negotiation period. In 1998, the FCC shortened the voluntary
negotiation period by one year, without lengthening the mandatory negotiation
period, for non-public safety PCS licensees in the C, D, E and F Blocks. Parties
unable to reach agreement within these time periods may refer the matter to the
FCC for resolution, but the incumbent microwave user is permitted to continue
its operations until final FCC resolution of the matter. The transition and cost
sharing plans expire on April 4, 2005, at which time remaining microwave
incumbents in the PCS spectrum will be responsible for the costs of relocating
to alternate spectrum locations.

Wireless systems are subject to certain FAA regulations governing the
location, lighting and construction of transmitter towers and antennas and are
subject to regulation under federal environmental laws and the FCC's
environmental regulations. State or local zoning and land use regulations also
apply to tower siting and construction activities. We expect to use common
carrier point-to-point microwave facilities to connect certain wireless cell
sites, and to link them to the main switching office. The FCC licenses these
facilities separately and they are subject to regulation as to technical
parameters and service.

The Communications Act preempts state and local regulation of the entry
of, or the rates charged by, any provider of private mobile radio service or of
commercial mobile radio service, which includes PCS and cellular service. The
FCC does not regulate commercial mobile radio service or private mobile radio
service rates. However, commercial mobile radio service providers are common
carriers and are required under the Communications Act to offer their services
to the public without unreasonable discrimination. The FCC's rules currently
require providers to permit others to resell their services for a profit;
however, these rules will expire in 2002.

Transfers and assignments of cellular and PCS
licenses

The Communications Act and FCC rules require the FCC's prior approval
of the assignment or transfer of control of a license for a PCS or cellular
system. In addition, the FCC has established transfer disclosure requirements
that require licensees who assign or transfer control of a PCS license within
the first three years of their license terms to file associated sale contracts,
option agreements, management agreements or other documents disclosing the total
consideration that the licensee would receive in return for the transfer or
assignment of its license. Non-controlling interests in an entity that holds an
FCC license generally may be bought or sold without FCC approval subject to the
FCC's spectrum aggregation limits. However, notification and expiration or
earlier termination of the applicable waiting period under Section 7A of the
Clayton Act by either the Federal Trade Commission or the Department of Justice
may be required, as well as approval by state or local regulatory authorities

<PAGE>

having competent jurisdiction, if we sell or acquire PCS or cellular interests
over a certain size.

Foreign ownership

Under existing law, no more than 20% of an FCC licensee's capital stock
may be owned, directly or indirectly, or voted by non-U.S. citizens or their
representatives, by a foreign government or its representatives or by a foreign
corporation. If an FCC licensee is controlled by another entity, as is the case
with our ownership structure, up to 25% of that entity's capital stock may be
owned or voted by non-U.S. citizens or their representatives, by a foreign
government or its representatives or by a foreign corporation. Foreign ownership
above the 25% level may be allowed should the FCC find such higher levels not
inconsistent with the public interest. The FCC has ruled that higher levels of
foreign ownership, even up to 100%, are presumptively consistent with the public
interest with respect to investors from certain nations. If our foreign
ownership were to exceed the permitted level, the FCC could revoke our FCC
licenses, although we could seek a declaratory ruling from the FCC allowing the
foreign ownership or take other actions to reduce our foreign ownership
percentage in order to avoid the loss of our licenses. We have no knowledge of
any present foreign ownership in violation of these restrictions.

Recent regulatory developments

The FCC has announced rules for making emergency 911 services available
by cellular, PCS and other commercial mobile radio service providers, including
enhanced 911 services that provide the caller's telephone number, location and
other useful information. The original timetable required commercial mobile
radio services providers to be able to process and transmit 911 calls without
call validation, including those from callers with speech or hearing
disabilities, by late 1997. Additionally, commercial mobile radio service
providers are required to take actions enabling them to relay a caller's
automatic number identification and cell site if requested to do so by a public
safety dispatch agency that agreed to reimburse the provider for the additional
expenses incurred to provide those services. In October 1999, the FCC revised
its rules to eliminate any requirement that such agencies reimburse wireless
providers. In a companion order issued earlier in the fall of 1999, the FCC also
modified rules requiring commercial mobile radio service providers to provide
information on the location of a 911 call. The modified rules allow providers to
use either network or handset-based technologies to provide such information.
However, providers are not permitted to recover their costs of deploying such
technologies from dispatch agencies.

The FCC has granted waivers of the requirement to provide 911 service
to users with speech or hearing disabilities to various providers, and we have
obtained a waiver. On June 9, 1999, the FCC also adopted rules designed to
ensure that analog cellular calls to 911 are completed. These rules, which do
not apply to digital cellular service or to PCS, give each cellular provider a
choice of three ways to meet this requirement. State actions incompatible with
the FCC rules are subject to preemption.

On August 8, 1996, the FCC released its order implementing the
interconnection provisions of the Telecommunications Act. Although many of the
provisions of this order were struck down by the U.S. Court of Appeals for the
Eighth Circuit, on January 25, 1999, the U.S. Supreme Court reversed the Eighth
Circuit and upheld the FCC in all respects material to our operations. On June
10, 1999, the Eighth Circuit issued an order requesting briefs on certain issues

<PAGE>

it did not address in its earlier order, including the pricing regime for
interconnection. While appeals have been pending, the rationale of the FCC's
order has been adopted by many states' public utility commissions, with the
result that the charges that cellular and PCS operators pay to interconnect
their traffic to the public switched telephone network have declined
significantly from pre-1996 levels.

In its implementation of the Telecommunications Act, the FCC
established federal universal service requirements that affect commercial mobile
radio service operators. Under the FCC's rules, commercial mobile radio service
providers are potentially eligible to receive universal service subsidies for
the first time; however, they are also required to contribute to the federal
universal service fund and can be required to contribute to state universal
funds. Many states also are moving forward to develop state universal service
fund programs. A number of these state funds require contributions, varying
greatly from state to state, from commercial mobile radio service providers. The
FCC's universal service order was modified on appeal in the U.S. Court of
Appeals for the Fifth Circuit. The court's ruling has had the effect of reducing
commercial mobile radio service provider support payments required for the
federal universal service programs.

On August 1, 1996, the FCC released a report and order expanding the
flexibility of cellular, PCS and other commercial mobile radio service providers
to provide fixed as well as mobile services. These fixed services include, but
need not be limited to, wireless local loop services, for example, to apartment
and office buildings, and wireless backup services to private branch exchange or
switchboards and local area networks, to be used in the event of interruptions
due to weather or other emergencies. The FCC has not yet decided whether fixed
services provided on a co-primary basis to mobility services should be subjected
to universal service obligations, or how such fixed services should be
regulated, but it has proposed a presumption that they be regulated as
commercial mobile radio service services. If the fixed services are provided as
an ancillary service to a carrier's mobility services, the FCC has decided that
such fixed services should be regulated as commercial mobile radio services.

The FCC has adopted rules on telephone number portability that will
enable customers to migrate their landline and cellular telephone numbers to
cellular or PCS providers and from a cellular or PCS provider to another service
provider. On February 8, 1999, the FCC extended the deadline for compliance with
this requirement to November 24, 2002, subject to any later determination that
number portability is necessary to conserve telephone numbers. The FCC has also
adopted rules requiring cellular and PCS providers to provide functions to
facilitate electronic surveillance by law enforcement officials by June 30,
2000, and has proposed to adopt certain additional obligations furthering
provision of these functions. Representatives of the cellular and PCS industry
are challenging the surveillance rules. Additionally, it is not clear that
commercial mobile radio service providers will be able to comply with the rules'
compatibility requirements by the current deadline of June 30, 2000; nor is it
clear whether the FCC will grant waivers to extend the deadline or what the
scope of penalties for failing to comply may be.

The FCC has determined that the interstate, interexchange offerings,
commonly referred to as long distance, of commercial mobile radio service
providers are subject to the interstate, interexchange rate averaging and
integration provisions of the Communications Act. Rate averaging requires us to
average our interstate long distance commercial mobile radio service rates
between high cost and urban areas. The FCC has delayed implementation of the

<PAGE>

rate integration requirements with respect to wide area rate plans we offer
pending further reconsideration of its rules. The FCC also delayed the
requirement to integrate commercial mobile radio service long distance rates
among commercial mobile radio service affiliates. On December 31, 1998, the FCC
reaffirmed, on reconsideration, that its interexchange rate integration rules
apply to interexchange commercial mobile radio service services. The FCC
announced it would initiate a further proceeding to determine how integration
requirements apply to typical commercial mobile radio service offerings,
including one-rate plans. Until this further proceeding is concluded, the FCC
will enforce long distance rate integration on our services only where we
separately state a long distance toll charge and bill to our customers. To the
extent that the AT&T Wireless Group offers services subject to the FCC's rate
integration and averaging requirements, these requirements generally reduce its
pricing flexibility. We cannot assure you that the FCC will decline to impose
rate integration or averaging requirements on the AT&T Wireless Group or decline
to require it to integrate its commercial mobile radio service long distance
rates across its commercial mobile radio service affiliates.

The FCC recently adopted new rules limiting the use of customer
proprietary network information by telecommunications carriers in marketing a
broad range of telecommunications and other services to their customers and the
customers of affiliated companies. The rules were struck down by the federal
circuit court in 1999, and their effectiveness has been stayed pending the
court's review of a petition to the FCC for reconsideration. Even if the rules
are reinstated, the AT&T Wireless Group does not anticipate that they will
result in a significant adverse impact on its financial position, results of
operation or liquidity.

In addition, state commissions have become increasingly aggressive in
their efforts to conserve numbering resources. These efforts may impact wireless
service providers disproportionately by imposing additional costs or limiting
access to numbering resources. Examples of state conservation methods include:
number pooling, number rationing and code sharing. A number of states have
petitioned the FCC for authority to adopt "technology specific" overlays that
would require wireless providers to obtain telephone numbers out of a separate
area code and may require wireless providers to change their customers'
telephone numbers. The FCC approval and the states' subsequent implementation of
such "technology specific overlays" could increase wireless providers' cost of
doing business and impact their ability to market services. On June 2, 1999, the
FCC released a notice of proposed rulemaking soliciting comments on a variety of
administrative and technical measures that would promote more efficient
allocation and use of numbering resources. Adoption of some of the proposed
methods could have a disproportionate impact on commercial mobile radio services
providers.

The FCC is also considering adopting rules to govern customer billing
by commercial mobile radio services providers and applied a number of these
rules to commercial mobile radio service providers. The FCC adopted detailed
billing rules for landline telecommunications service providers and is
considering whether to extend the remaining rules to commercial mobile radio
services providers. The FCC may require that more billing detail be provided to
consumers, which could add to the expense of the billing process as systems are
modified to conform to any new requirements. The FCC also is considering whether
carriers that decide to pass through their mandatory universal service
contributions to their customers should be required to provide a full
explanation of the program, and whether to ensure that the carriers that pass
through their contribution do not recover amounts greater than their mandatory

<PAGE>

contributions from their customers. Adoption of some of the FCC's proposals
could increase the complexity of our billing processes and restrict our ability
to bill customers for services in the most commercially advantageous way.

The FCC has adopted an order that determines the obligations of
telecommunications carriers to make their services accessible to individuals
with disabilities. The order requires telecommunications services providers to
offer equipment and services that are accessible to and useable by persons with
disabilities. While the rules exempt telecommunications carriers from meeting
general disability access requirements if such results are not readily
achievable, it is not clear how liberally the FCC will construe this exemption.
Accordingly, the rules require us to make material changes to our network,
product line, or services at our expense.

In June 1999, the FCC initiated an administrative rulemaking proceeding
to help facilitate the offering of calling party pays as an optional wireless
service. Under the calling party pays service, the party placing the call to a
wireless customer pays the wireless airtime charges. Most wireless customers in
the United States now pay both to place calls and to receive them. Adoption of a
calling party pays system on a widespread basis could make commercial mobile
radio service providers more competitive with traditional landline
telecommunications providers for the provision of regular telephone service.

State regulation and local approvals

State and local governments are preempted from regulating either market
entry by, or the rates of, wireless operators. However, state governments can
regulate other terms and conditions of wireless service and several states have
imposed (or have proposed legislation that will impose) various consumer
protection regulations on the wireless industry. States also may impose their
own universal service support regimes on wireless and other telecommunications
carriers, similar to the requirements that have been established by the FCC. At
the local level, wireless facilities typically are subject to zoning and land
use regulation. State and local jurisdictions may also impose some conditions on
a driver's use of wireless technology while operating a motor vehicle. However,
under the federal Telecommunications Act, neither local nor state governments
may categorically prohibit the construction of wireless facilities in any
community.

Cable Regulation and Legislation

The operation of cable television systems is extensively regulated by
the FCC, some state governments and most local governments. The
Telecommunications Act removes barriers to competition in both the cable
television market and the local telephone market and reduces the scope of cable
rate regulation.

The Telecommunications Act required the FCC to implement numerous
rulemakings, the final outcome of which cannot yet be determined due to court
challenges. Moreover, Congress and the FCC have frequently revisited the subject
of cable television regulation and may do so again. Future legislative and
regulatory changes could adversely affect AT&T Broadband's operations. This
section briefly summarizes key laws and regulations currently affecting the
growth and operation of AT&T Broadband's cable systems.

Cable Rate Regulation. The 1992 Cable Act imposed an extensive rate
regulation regime on the cable television industry, which limited the ability of

<PAGE>

cable companies to increase subscriber fees. Under that regime, all cable
systems were subjected to rate regulation, unless they faced "effective
competition" in their local franchise area. Federal law now defines "effective
competition" on a community-specific basis as requiring satisfaction of
conditions rarely satisfied in the current marketplace.

Although the FCC establishes all cable rate rules, local government
units (commonly referred to as local franchising authorities or LFAs) are
primarily responsible for administering the regulation of the lowest level of
cable -- the basic service tier (BST), which typically contains local broadcast
stations and PEG access channels. Before an LFA begins BST rate regulation, it
must certify to the FCC that it will follow applicable federal rules, and many
LFAs have voluntarily declined to exercise this authority. LFAs also have
primary responsibility for regulating cable equipment rates. Under federal law,
charges for various types of cable equipment must be unbundled from each other
and from monthly charges for programming services, and priced no higher than the
operator's actual cost, plus an 11.25% rate of return.

The FCC historically administered rate regulation of any cable
programming service tiers (CPST), which typically contain satellite-delivered
programming. Under the Telecommunications Act, the FCC's ability to regulate
CPST rates expired on March 31, 1999. The FCC has taken the position that it
will adjudicate pending CPST complaints but will strictly limit its review and
possible refund orders to the time period predating March 31, 1999.

Cable Entry Into Telecommunications. The Telecommunications Act
provides that no state or local laws or regulations may prohibit or have the
effect of prohibiting any entity from providing any interstate or intrastate
telecommunications service. States are authorized, however, to impose
"competitively neutral" requirements regarding universal service, public safety
and welfare, service quality, and consumer protection. State and local
governments also retain their authority to manage the public rights-of-way.
Although the Telecommunications Act clarifies that traditional cable franchise
fees may be based only on revenues related to the provision of cable television
services, it also provides that LFAs may require reasonable, competitively
neutral compensation for management of the public rights-of-way when cable
operators provide telecommunications service. In 1999, there were several
conflicting and inconclusive federal court decisions that addressed the issues
of lawful "management of the right-of-ways" and "competitively neutral
compensation." The Telecommunications Act prohibits LFAs from requiring cable
operators to provide telecommunications service or facilities as a condition of
a franchise grant, renewal or transfer, except that LFAs argue they can seek
"institutional networks" as part of such franchise negotiations. The favorable
pole attachment rates afforded cable operators under federal law can be
increased by utility companies owning the poles during a five year phase-in
period beginning in 2001, if the cable operator provides telecommunications
service, as well as cable service, over its plant. The FCC has clarified that a
cable operator's provision of Internet service does not affect the favorable
pole rates.

Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the Telecommunications Act intended to facilitate the entry of new
telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunications carriers. This requires, for
example, that the incumbent local telephone company must allow new competing
telecommunications providers to connect to the local telephone distribution

<PAGE>

system. In a January 1999 decision, the United States Supreme Court upheld the
FCC's fundamental interconnection requirements.

Cable Systems Providing Internet Service. Although there is at present
no significant federal regulation of cable system delivery of Internet services,
and the FCC recently issued several reports finding no immediate need to impose
such regulation, this situation may change as cable systems expand their
broadband delivery of Internet services. In particular, proposals have been
advanced at the FCC and Congress that would require cable operators to provide
access to unaffiliated Internet service providers and online service providers.
Additionally, some local franchising authorities are considering the imposition
of mandatory Internet access requirements as part of cable franchise renewals or
transfers. A federal district court in Portland, Oregon recently upheld the
legal ability of local franchising authorities to impose such conditions, but an
appeal was filed with the Ninth Circuit Court of Appeals, oral argument has been
held and the parties are awaiting a decision. Other local authorities have
imposed or may impose mandatory Internet access requirements on cable operators.
Finally, several states are considering legislation that would require mandatory
access for unafffiliated Internet service providers. These developments could,
if they become widespread, burden the capacity of cable systems and complicate
and delay plans for providing Internet service.

Telephone Company Entry Into Cable Television. The Telecommunications
Act allows telephone companies to compete directly with cable operators by
repealing the historic telephone company/cable company cross-ownership ban and
the FCC's video dialtone regulations. This will allow LECs, including the RBOCs,
to compete with cable operators both inside and outside their telephone service
areas. Because of their resources, LECs could be formidable competitors, and
certain LECs have begun offering cable service.

Under the Telecommunications Act, a LEC or other entity providing video
programming to customers will be regulated as a traditional cable operator
(subject to local franchising and federal regulatory requirements), unless it
elects to provide its programming via an "open video system" (OVS). It was
anticipated that the primary benefit of using an OVS regulatory model was to
avoid the need to obtain a local franchise prior to providing services. However,
a January 1999 federal court of appeals decision held that OVS providers can be
required to obtain such a franchise. To be eligible for OVS status, the provider
cannot occupy more than one-third of the system's activated channels when demand
for channels exceeds supply. Nor can it discriminate among programmers or
establish unreasonable rates, terms or conditions for service.

Although LECs and cable operators can now expand their offerings across
traditional service boundaries, the general prohibitions remain on LEC buyouts
(i.e., any ownership interest exceeding 10 percent) of co-located cable systems,
cable operator buyouts of co-located LEC systems, and joint ventures among cable
operators and LECs in the same market. The Telecommunications Act provides a few
limited exceptions to this buyout prohibition.

Electric Utility Entry Into
Telecommunications/Cable Television. The
Telecommunications Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services, information services, and
other services or products subject to the jurisdiction of the FCC,
notwithstanding the Public Utilities Holding Company Act. Electric utilities
must establish separate subsidiaries, known as "exempt telecommunications
companies" and must apply to the FCC for operating authority. Again, because of
their resources, electric utilities could be formidable competitors.

<PAGE>

Cable Television Ownership Restrictions. Pursuant to the 1992 Cable
Act, the FCC adopted regulations establishing a 30% limit on the number of homes
nationwide that a cable operator may reach through cable systems in which it
holds an attributable interest with an increase to 35% if the additional cable
systems are minority controlled. The FCC stayed the effectiveness of its
ownership limits pending the appeal of a September 16, 1993 decision by the
United States District Court for the District of Columbia which, among other
things, found unconstitutional the provision of the 1992 Cable Act requiring the
FCC to establish such ownership limits. If the ownership limits are determined
on appeal to be constitutional, they may affect AT&T Broadband's ability to
acquire attributable interests in additional cable systems including the pending
MediaOne Merger.

The FCC recently completed its reconsideration of both the national
subscriber cap formula and the manner in which cable ownership is attributed.
Although the new FCC formula increased the number of subscribers AT&T Broadband
may "own", it is not yet clear under the new attribution rules whether the
pending MediaOne Merger will be considered compliant with the new ownership cap.

The FCC previously adopted regulations limiting carriage by the cable
operator of national programming services in which that operator holds an
attributable interest to 40% of the 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 which 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.

The Telecommunications Act eliminates statutory restrictions on
broadcast/cable cross-ownership (including broadcast network/cable
restrictions), but leaves in place existing FCC regulations prohibiting local
cross-ownership between television stations and cable systems. The
Telecommunications Act leaves in place existing restrictions on cable
cross-ownership with Satellite Master Antenna Television (SMATV) and
multi-channel multi-point distribution systems (MMDS) facilities, but lifts
those restrictions where the cable operator is subject to effective competition.
In January 1995, however, the FCC adopted regulations which permit cable
operators to own and operate SMATV systems within their franchise area, provided
that such operation is consistent with local cable franchise requirements.

Must Carry/Retransmission Consent. The 1992 Cable Act contains
broadcast signal carriage requirements that allow local commercial television
broadcast stations to elect once every three years between requiring a cable
system to carry the station ("must carry") or negotiating for payments for
granting permission to the cable operator to carry the station ("retransmission
consent"). Less popular stations typically elect must carry, and more popular
stations typically elect retransmission consent. Must carry requests can dilute
the appeal of a cable system's programming offerings, and retransmission consent
demands may require substantial payments or other concessions (e.g. a
requirement that the cable system also carry the local broadcaster's affiliated
cable programming service). Either option has a potentially adverse effect on
AT&T Broadband's business. The burden associated with must-carry obligations
could dramatically increase if television broadcast stations proceed with
planned conversions to digital transmissions and if the FCC determines in a
pending rulemaking that cable systems must carry all analog and digital signals
transmitted by the television stations.

<PAGE>

Access Channels. LFAs can include franchise provisions requiring cable
operators to set aside certain channels for PEG access programming. Federal law
also requires a cable system with 36 or more channels to designate a portion of
its activated channel capacity (either 10% or 15%) for commercial leased access
by unaffiliated third parties. The FCC has adopted rules regulating the terms,
conditions and maximum rates a cable operator may charge for use of this
designated channel capacity, but use of commercial leased access channels has
been relatively limited. In February of 1997, the FCC released revised rules
which mandated a modest rate reduction that has made commercial leased access a
more attractive option for third party programmers, particularly for part-time
leased access carriage.

"Anti-Buy Through" Provisions. Federal law requires each cable system
to permit customers to purchase premium or pay-per-view video programming
offered by the operator on a per-channel or a per-program basis without the
necessity of subscribing to any tier of service (other than the basic service
tier) unless the system's lack of addressable converter boxes or other
technological limitations does not permit it to do so. The statutory exemption
for cable systems that do not have the technological capability to comply
expires in October 2002, but the FCC may extend that period if deemed necessary.

Access to Programming. To spur the development of independent cable
programmers and competition to incumbent cable operators, the 1992 Cable Act
imposed restrictions on the dealings between cable operators and cable
programmers. Of special significance from a competitive business posture, the
1992 Cable Act precludes satellite video programmers affiliated with cable
operators from favoring cable operators over competing multichannel video
programming distributors (such as DBS and MMDS distributors). This provision
limits the ability of vertically integrated satellite cable programmers to offer
exclusive programming arrangements to AT&T Broadband. Both Congress and the FCC
have considered proposals that would expand the program access rights of cable's
competitors, including the possibility of subjecting both terrestrially
delivered video programming and video programmers who are not affiliated with
cable operators to all program access requirements.

Inside Wiring; Subscriber Access. In an order issued in 1997, the FCC
established rules that require an incumbent cable operator upon expiration or
termination of an MDU service contract to sell, abandon, or remove "home run"
wiring that was installed by the cable operator in a MDU building. These inside
wiring rules are expected to assist building owners in their attempts to replace
existing cable operators with new programming providers who are willing to pay
the building owner a higher fee, where such a fee is permissible. The FCC has
also proposed abrogating all exclusive MDU contracts held by incumbent cable
operators, but allowing such contracts when held by new entrants. In another
proceeding, the FCC has preempted restrictions on the deployment of private
antenna on rental property within the exclusive use of a tenant, such as
balconies and patios. This FCC ruling may limit the extent to which multiple
dwelling unit owners may enforce certain aspects of MDU argreements which
otherwise prohibit, for example, placement of digital broadcast satellite
receiver antennae in MDU areas under the exclusive occupancy of a renter. These
developments may make it more difficult for AT&T Broadband to provide service in
MDUs.

Other FCC Regulations. In addition to the FCC regulations noted above,
there are other FCC regulations covering such areas as equal employment
opportunity, customer privacy, programming practices (including, among other
things, syndicated program exclusivity, network program nonduplication, local

<PAGE>

sports blackouts, indecent programming, lottery programming, political
programming, sponsorship identification, children's programming advertisements
and closed captioning), registration of cable systems and facilities licensing,
maintenance of various records and public inspection files, frequency usage,
lockbox availability, antenna structure notification, tower marking and
lighting, consumer protection and customer service standards, technical
standards, consumer electronics equipment compatibility and emergency alert
systems.

The FCC recently ruled that cable customers must be allowed to
purchase cable converters from third parties and established a multi-year
phase-in during which security functions, which would remain in the operator's
exclusive control, would be unbundled from basic converter functions, which
could then be satisfied by third party vendors.

The FCC has the authority to enforce its regulations through the
imposition of substantial fines, the issuance of cease and desist orders and/or
the imposition of other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities used in connection
with cable operations.

Copyright. Cable television systems are subject to federal copyright
licensing covering carriage of television and radio broadcast signals. In
exchange for filing certain reports and contributing a percentage of their
revenue to a federal copyright royalty pool (such percentage varies depending on
the size of the system and the number of distant broadcast television signals
carried), cable operators can obtain blanket permission to retransmit
copyrighted material on broadcast signals. The possible modification or
elimination of this compulsory copyright license is subject to continuing review
and could adversely affect AT&T Broadband's ability to obtain desired broadcast
programming. In addition, the cable industry pays music licensing fees to
Broadcast Music, Inc. and is negotiating a similar arrangement with the American
Society of Composers, Authors and Publishers. Copyright clearances for
nonbroadcast programming services are arranged through private negotiations.

State and Local Regulation. Cable television systems generally are
operated pursuant to nonexclusive franchises granted by a municipality or other
state or local government entity. The Telecommunications Act clarified that the
need for an entity providing cable services to obtain a local franchise depends
solely on whether the entity crosses public rights of way. Federal law now
prohibits franchise authorities from granting exclusive franchises or from
unreasonably refusing to award additional franchises covering an existing cable
system's service area. Cable franchises generally are granted for fixed terms
and in many cases are terminable if the franchisee fails to comply with material
provisions. Non-compliance by the cable operator with franchise provisions may
also result in monetary penalties.

The terms and conditions of franchises vary materially from
jurisdiction to jurisdiction. Each franchise generally contains provisions
governing cable operations, service rates, franchise fees, system construction
and maintenance obligations, system channel capacity, design and technical
performance, customer service standards, and indemnification protections. A
number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies. Although LFAs have considerable
discretion in establishing franchise terms, there are certain federal
limitations. For example, LFAs cannot insist on franchise fees exceeding 5% of

<PAGE>

the system's gross revenue, cannot dictate the particular technology used by the
system, and cannot specify video programming other than identifying broad
categories of programming.

Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees and funding for PEG channels as a condition of renewal.
Similarly, if a franchise authority's consent is required for the purchase or
sale of a cable system or franchise, such authority may attempt to impose more
burdensome or onerous franchise requirements in connection with a request for
consent. Historically, franchises have been renewed for cable operators that
have provided satisfactory services and have complied with the terms of their
franchises.

Proposed Changes in Regulation. The regulation of cable television
systems at the federal, state and local levels is subject to the political
process and has been in constant flux over the past decade. Material changes in
the law and regulatory requirements must be anticipated and there can be no
assurance that AT&T Broadband's business will not be affected adversely by
future legislation, new regulation or deregulation.

COMPETITION

Competition in communications services is based on price and pricing
plans, the types of services offered, customer service, access to customer
premises, and communications quality, reliability and availability, as well as,
for business customers, the ability to provide high quality data communication
services and technical support. AT&T's principal competitors include
MCIWorldcom, Inc., Sprint Corporation, the RBOCs and GTE Corporation. AT&T also
experiences significant competition in long distance from dial around resellers.

The ILECs have very substantial capital and other resources, long
standing customer relationships and extensive existing facilities and network
rights-of-way and are AT&T's primary competitors in the local services market.
In addition, it is anticipated that a number of long distance telecommunication,
wireless and cable service providers and others will enter the local services
market in competition with AT&T. Some of these potential competitors have
substantial financial and other resources. AT&T will also compete in the local
services market with a number of CLECs, a few of which have existing local
networks and significant financial resources.

Competition for subscribers among wireless service providers is based
principally upon the services and features offered, call quality, customer
service, system coverage and price. The AT&T Wireless Group's ability to compete
successfully will depend, in part, on its ability to anticipate and respond to
various competitive factors affecting the industry, including new services that
may be introduced, changes in consumer preferences, demographic trends, economic
conditions and pricing strategies. The AT&T Wireless Group's primary competitors
are Vodafone AirTouch, BellSouth, Bell Atlantic, GTE, Nextel Communications,
Inc., SBC, VoiceStream Communications and Sprint.

In addition, the wireless communications industry has been experiencing
significant consolidation and the AT&T Wireless Group expects that this
consolidation will continue. The previously announced mergers or joint ventures
of Bell Atlantic/GTE/Vodafone/AirTouch, MCIWorldCom/Sprint and SBC/Ameritech

<PAGE>

will create large, well-capitalized competitors with substantial financial,
technical, marketing and other resources to respond to the AT&T Wireless Group's
offerings. Assuming these mergers or ventures were completed today, the AT&T
Wireless Group estimates that its ranking would decline to second in U.S.
revenue, third in U.S. subscriber share and fourth in terms of U.S. population
covered by licenses, or POPs. As a result, these competitors may be able to
offer nationwide services and plans more quickly and more economically than the
AT&T Wireless Group and to obtain roaming rates that are more favorable than
those obtained by the AT&T Wireless Group, and may be better able to respond to
offers of the AT&T Wireless Group.

The AT&T Wireless Group's cellular operations have always experienced
direct competition from the second cellular licensee in each market. Beginning
in 1997, the AT&T Wireless Group began experiencing competition from as many as
six license holders in certain markets. Competition from new providers in the
AT&T Wireless Group's markets will continue to increase as the networks of
license holders are built out over the next several years. In addition, the FCC
is likely to offer additional spectrum for wireless mobile licenses in the
future using existing or new technologies.

Cable television competes for customers in local markets with other
providers of entertainment, news and information. The competitors in these
markets include broadcast television and radio, newspapers, magazines and other
printed material, motion picture theatres, video cassettes and other sources of
information and entertainment including directly competitive cable television
operations and internet service providers. The Cable Acts are designed to
increase competition in the cable television industry. There are alternative
methods of distributing the same or similar video programming offered by cable
television systems. These include DBS (allowing the subscriber to receive video
services directly via satellite using a relatively small dish), telephone
networks (whether it is through wireless cable, or through upgraded telephone
networks), utility company networks, MMDS (which deliver programming services
over microwave channels received by customers with special antennas),
competitive, non-exclusive franchises, city provided cable services, SMATV
systems (which provide multichannel program services directly to hotel, motel,
apartment, condominium and similar multi-unit complexes within a cable
television system's franchise area, generally free of any regulation by state
and local governmental authorities). In addition to competition for customers,
the cable television industry competes with broadcast television, radio, the
print media and other sources of information and entertainment for advertising
revenue. Additionally, as AT&T begins to offer new services such as high speed
Internet access and telephone services, there will be significant competition
from both the local telephone companies and new providers of such services.

AT&T currently faces significant competition and expects that the level
of competition will continue to increase. As competitive, regulatory and
technological changes occur, including those occasioned by the
Telecommunications Act, AT&T anticipates that new and different competitors will
enter and expand their position in the communications services markets. These
may include entrants from other segments of the communications and information
services industry or global competitors seeking to expand their market
opportunities. Many such new competitors are likely to enter with a strong
market presence, well recognized names and pre-existing direct customer
relationships.

The Telecommunications Act has already impacted the competitive
environment. Anticipating changes in the industry, non-RBOC LECs, which are not

<PAGE>

required to implement the Telecommunications Act's competitive checklist prior
to offering long distance in their home markets, have begun integrating their
local service offerings with long distance offerings in advance of AT&T offering
combined local and long distance service in these areas, adversely affecting
AT&T's revenues and earnings in these service regions.

In addition, the Telecommunications Act will permit RBOCs to provide
interLATA interexchange services after demonstrating to the FCC that such
provision is in the public interest and satisfying the conditions for developing
local competition established by the Telecommunications Act. The RBOCs have
petitioned the FCC for permission to provide interLATA interexchange services in
one or more states within their home market; to date the FCC granted only one
petition. In December 1999, Bell Atlantic became the first RBOC to obtain
approval to provide long distance in a state within its home territory, in New
York. In January 2000 Southwestern Bell applied to the FCC for authorization to
provide long distance service in Texas; by law, the FCC is required to rule on
the application in April 2000.

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

Furthermore, in February 1997, a General Agreement on Trade in Services
(GATS) was reached under the World Trade Organization. The GATS, which became
effective January 1, 1998, is designed to open each country's domestic
telecommunications markets to foreign competitors. The GATS, and future trade
agreements, may accelerate the entrance into the U.S. market of foreign
telecommunications providers, certain of whom are likely to possess dominant
home market positions in which there is not effective competition. The GATS may
also permit AT&T's entrance into other markets as only a small number of
countries refused to eliminate their foreign ownership restrictions.

In addition to the matters referred to above, various other factors,
including technological hurdles, market acceptance, start-up and ongoing costs
associated with the provision of new services and local conditions and
obstacles, could adversely affect the timing and success of AT&T's entrance into
the local exchange services market and AT&T's ability to offer combined service
packages that include local service.

EMPLOYEE RELATIONS

At December 31, 1999 AT&T employed approximately 148,000 persons in its
operations, approximately 96.5% of whom are located domestically. About 28% of
the domestically located employees of AT&T are represented by unions. Of those
so represented, about 94% are represented by the Communications Workers of

<PAGE>

America (CWA), which is affiliated with the AFL-CIO; about 5% by the
International Brotherhood of Electrical Workers (IBEW), which is also affiliated
with the AFL-CIO. In addition, there is a very small remainder of domestic
employees represented by other unions. Labor agreements with most of these
unions extend through May 2002.

SEGMENT, OPERATING REVENUE AND RESEARCH AND DEVELOPMENT
EXPENSE INFORMATION

For information about the Company's research and development expense,
see Note 2 to the Consolidated Financial Statements. For information about the
consolidated operating revenues contributed by the Company's major classes of
products and services, see the revenue tables and descriptions on pages 14 and
19 through 25 of the Company's annual report to shareholders for the year ended
December 31, 1999. All such information is incorporated herein by reference
pursuant to General Instruction G(2).

LIBERTY MEDIA GROUP

The economic performance of the Liberty Media Group are reflected in
the Liberty Media Group tracking stock. A description of the Liberty Media Group
is included as Exhibit 99 to this Form 10-K.

FORWARD LOOKING STATEMENTS

This Form 10-K contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
the financial condition, results of operations, cash flows, dividends, financing
plans, business strategies, operating efficiencies or synergies, budgets,
capital and other expenditures, competitive positions, growth opportunities for
existing products, benefits from new technology, plans and objectives of
management, and other matters.

Statements in this Form 10-K that are not historical facts are hereby
identified as "forward looking statements" for the purpose of the safe harbor
provided by Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Any Form 10-K, Annual Report to Shareholders,
Form 10-Q or Form 8-K of AT&T may include forward looking statements. In
addition, other written or oral statements which constitute forward looking
statements have been made and may in the future be made by or on behalf of AT&T,
including statements concerning future operating performance, business
prospects, capital needs, AT&T's share of new and existing markets, AT&T's
short- and long-term revenue and earnings growth rates, general industry growth
rates and AT&T's performance relative thereto. These forward looking statements
are necessarily estimates reflecting the best judgment of senior management that
rely on a number of assumptions concerning future events, many of which are
outside of AT&T's control, and involve a number of risks and uncertainties that
could cause actual results to differ materially from those suggested by the
forward-looking statements. These forward-looking statements should, therefore,
be considered in light of various important factors, including those set forth
in this Form 10-K. Important factors that could cause actual results to differ
materially from estimates or projections contained in the forward-looking
statements include, without limitation:

<PAGE>

- the adoption and implementation of balanced and effective rules and
regulations by the FCC and state regulatory agencies to implement the
provisions of the Telecommunications Act; the outcome of litigation
relative thereto; and the impact of regulatory changes relating to
access reform, the unbundling of cable facilities and international
settlement reform;

- success and market acceptance for new initiatives, including cable
telephony and fixed wireless, many of which are untested; the level
and timing of the growth and profitability of new initiatives;
start-up costs associated with entering new markets, including
advertising and promotional efforts; successful deployment and
technological implementation of new systems and applications to
support new initiatives; the ability to address the needs of
customers for broadband and Internet access; and local conditions and
obstacles;

- competitive pressures, including pricing pressures, alternative
routing developments, and the ability to offer combined service
packages that include local service; technological developments,
including the rate of technological advances in, and implementation
of, internet telephony services that compete with traditional
telephony services; the extent and pace at which different
competitive environments develop for each segment of the
telecommunications industry; the extent at and duration for which
competitors from each segment of the telecommunications industry are
able to offer combined or full service packages prior to AT&T being
able to; and the degree to which AT&T experiences material
competitive impacts to its traditional service offerings prior to
achieving adequate local service entry;

- the availability, terms and deployment of capital; the impact of
regulatory and competitive developments on capital outlays; the
ability to achieve cost savings and realize productivity
improvements; the ability to effectively integrate operations of
acquired entities with AT&T, the timing of approval of, and any
conditions imposed on, the completion of the MediaOne merger; the
ability to realize cost-saving and revenue synergies from the
MediaOne merger; the ability to successfully implement cable
telephony joint ventures; the ability to expand the cable footprint
and the wireless footprint in an economical and expeditious manner;
and the ability to enter into agreements which provide for reasonable
roaming rates for wireless services; and

- the ability to attract and retain qualified management employees in
all key areas of the business; general economic conditions,
government and regulatory policies, and business conditions in the
communications industry.

The words "estimate," "project," "intend," "expect," "believe" and
similar expressions are intended to identify forward-looking statements. These
forward-looking statements are found at various places throughout this Form 10-K
and throughout the other documents incorporated herein by reference. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. AT&T undertakes no obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

<PAGE>

ITEM 2. PROPERTIES.

The properties of AT&T Corp. consist primarily of plant and equipment
used to provide long distance and wireless telecommunications services and cable
television services and administrative office buildings. AT&T's owns and leases
properties to support its offices, facilities and equipment.

Telecommunications plant and equipment consists of: central office
equipment, including switching and transmission equipment; connecting lines
(cables, wires, poles, conduits, etc.); wireless cell sites, antennas and
wireless switching facilities; land and buildings; and miscellaneous properties
(work equipment, furniture, plant under construction, etc.). The majority of the
connecting lines are on or under public roads, highways and streets and
international and territorial waters. The remainder are on or under private
property. Physical cable television properties, which are located throughout the
United States, consist of system components, motor vehicles, miscellaneous
hardware, spare parts and other components. AT&T also operates a number of sales
offices, customer care centers, and other facilities, such as research and
development laboratories.

AT&T continues to manage the deployment and utilization of its assets
in order to meet its global growth objectives while at the same time ensuring
that these assets are generating value for the shareholder. AT&T will continue
to manage its asset base consistent with globalization initiatives, marketplace
forces, productivity growth and technology change.

ITEM 3. LEGAL PROCEEDINGS.

In the normal course of business, AT&T Corp. is subject to proceedings,
lawsuits and other claims, including proceedings under government laws and
regulations related to environmental and other matters. Such matters are subject
to many uncertainties and outcomes are not predictable with assurance.
Consequently, AT&T Corp. is unable to ascertain the ultimate aggregate amount of
monetary liability or financial impact with respect to these matters at December
31, 1999. While these matters could affect operating results of any one quarter
when resolved in future periods, it is management's opinion that after final
disposition, any monetary liability or financial impact to AT&T Corp. beyond
that provided for at year-end would not be material to AT&T Corp.'s annual
consolidated financial position or results of operations.

On July 6, 1997, MCI Telecommunications Corp. and Ronald A. Katz
Technology Licensing, L.P. filed suit in United States District Court in
Philadelphia, Pennsylvania against AT&T. The suit alleges that a number of AT&T
services infringe patents owned by Katz but licensed to MCI for enforcement
against AT&T. This matter is currently in discovery. Based on review to date, it
is management's opinion that the claims do not present any material monetary
liability or financial impact to AT&T that is not subject to patent indemnity
agreements with third-party equipment vendors.

AT&T is also a named party in a number of environmental actions, none
of which is material to the consolidated financial statements or business of the
Company. In addition, pursuant to the Separation and Distribution Agreement by
and among AT&T, Lucent, and NCR, dated as of February 1, 1996, and amended and
restated as of March 29, 1996, Lucent has assumed liability, subject to the
liability sharing provisions of that agreement, for a number of actions in which
AT&T remains a named party. AT&T is working to be released as a party to these
actions, although there can be no assurance that it will be successful in this
regard.

<PAGE>

There are four environmental proceedings which are required to be
reported pursuant to Instruction 5.C. of Item 103 of Regulation S-K. In
September 1997, the government of the U.S. Virgin Islands filed suit in the
federal district court of the Virgin Islands against the Company, AT&T Submarine
Systems International ("SSI International"), A&L Underground, Inc., a contractor
for SSI International at that time, and other entities. In connection with the
purported 1996 release of non-toxic bentonite drilling mud within the coastal
region of St. Croix by the contractor, the suit seeks penalties for violations
of various federal and Virgin Island statutes; damages under several statutory
and common law theories; removal of the mud (which has since been completed to
the satisfaction of the federal agency that ordered the cleanup); and
restitution of response costs allegedly incurred by the Virgin Islands. SSI
International was a wholly owned subsidiary of AT&T at the time of the alleged
violation. On December 31, 1998 the Government of the U.S. Virgin Islands filed
an administrative complaint against AT&T of the Virgin Islands, Inc., seeking
$23 million in penalties (primarily for the release of drilling mud in 1996 in
conjunction with the construction of the St. Croix cable landing station). The
foregoing environmental proceeding is not material to the consolidated financial
statements or business of the Company and would not be reported but for
Instruction 5 C. of Item 103 of Regulation S-K, which requires disclosure of
such matters.

In addition, three proceedings involve matters for which Lucent has
assumed liability, as described above. On July 31, 1991, the United States
Environmental Protection Agency Region III issued a complaint pursuant to
Section 3008a of the Resource Conservation and Recovery Act alleging violations
of various waste management regulations at the Company's Richmond Works,
Richmond, Virginia. The complaint seeks a total of $4.2 million in penalties. In
addition, on July 31, 1991, the United States Environmental Protection Agency
filed a civil complaint in the U.S. District Court for the Southern District of
Illinois against the Company and nine other parties seeking enforcement of its
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
Section 106 cleanup order, issued in November 1990 for the NL Granite City
Superfund site, Granite, Illinois, past costs, civil penalties of $25,000 per
day and treble damages related to certain United States' costs. Finally, during
1994, AT&T Nassau Metals Corporation ("Nassau"), a wholly owned subsidiary of
AT&T, and the New York State Department of Environmental Conservation ("NYSDEC")
were engaged in negotiations over a study and cleanup of the Nassau plant
located on Richmond Valley Road in Staten Island, New York. During these
negotiations, in June 1994, NYSDEC presented Nassau with a draft consent order
which included not only provisions relating to site investigation and
remediation but also a provision for payment of a $3.5 million penalty for
alleged violations of hazardous waste management regulations. No formal
proceeding has been commenced by NYSDEC.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.

No matter was submitted to a vote of security holders in the fourth
quarter of the fiscal year covered by this report.

<PAGE>

Executive Officers of the Registrant
(as of March 17, 2000)

Became AT&T
Name Age Executive Officer On
- ---- --- --------------------

C. Michael Armstrong* . 61 Chairman of the Board and
Chief Executive Officer . . . . . . 10-97

Harold W. Burlingame. . 59 Executive Vice President,
Communications and Human
Resources, AT&T Wireless Group . . 9-86

James Cicconi . . . . . 47 Executive Vice President-Law &
Government Affairs and
General Counsel . . . . . . . . . . 12-98

Mirian Graddick . . . . 45 Executive Vice President,
Human Resources . . . . . . . . . . 3-99

Mohan Gyani . . . . . . 48 Executive Vice President and
President & CEO, AT&T Wireless
Services . . . . . . . . . . . . . 1-00

Frank Ianna . . . . . . 50 Executive Vice President and
President, AT&T Network Services. . 3-97

Michael G. Keith. . . . 51 Executive Vice President - AT&T
Wireless Group . . . . . . . . . . 12-98

Richard J. Martin . . . 53 Executive Vice President, Public
Relations and Employee
Communication . . . . . . . . . . . 11-97

John C. Malone**. . . . 59 Chairman of the Board, Liberty
Media Corporation . . . . . . . . . 3-99

David C. Nagel. . . . . 55 President, AT&T Labs & Chief
Technology Officer . . . . . . . . 3-97

Charles H. Noski. . . . 47 Senior Executive Vice President
and Chief Financial Officer . . . . 12-99

John C. Petrillo. . . . 50 Executive Vice President, Corporate
Strategy and Business Development . 1-96

Richard Roscitt . . . . 48 Executive Vice President and
President, AT&T Business Services . 9-97

Daniel E. Somers. . . . 52 President and CEO, AT&T Broadband . . 5-97

John D. Zeglis**. . . . 52 President, AT&T, and Chairman and
Chief Executive Officer, AT&T
Wireless Group . . . . . . . . . . 9-86
- -----------
*Chairman of the Board of Directors and Chairman of the Executive
and Proxy Committees.
**Member of the Board of Directors.
<PAGE>

All of the above executive officers have held high level managerial
positions with AT&T or its affiliates for more than the past five years, except
Messrs. Armstrong, Cicconi, Guyani, Malone, Nagel, Noski and Somers. Prior to
joining AT&T in October 1997, Mr. Armstrong was Chairman and Chief Executive
Officer of Hughes Electronics from 1991. Prior to joining AT&T in September 1998
as Senior Vice President-Law and Government Affairs, Mr. Cicconi was a Partner
at the law firm of Akin, Gump, Strauss, Houer and Feld, L.L.P. from 1991. Prior
to joining AT&T in January 2000, Mr. Gyani was Executive Vice President and
Chief Financial Officer of Airtouch Communications from 1995 to 1999, and
following the merger of Vodafone and Airtouch, was head of strategy and
corporate development at Vodafone Airtouch plc. Prior to joining AT&T, Dr.
Malone was President, Chairman and Chief Executive Officer of TCI from 1994. In
addition, Dr. Malone served as director of TCI Pacific Communications, Inc.
since 1996. Prior to joining AT&T in April 1996, Mr. Nagel was with Apple
Computer, serving as Senior Vice President from 1995 and General Manager from
1988 through 1995. Prior to joining AT&T in December 1999, Mr. Noski was
president and chief operating officer of Hughes Electronics Corporation. Prior
to joining AT&T in May 1997, Mr. Somers was Chairman and Chief Executive Officer
for Bell Cablemedia, plc, of London for two years and from 1992 to 1995, Mr.
Somers was Executive Vice President and Chief Financial Officer for Bell Canada
International.

<PAGE>

PART II

Items 5. through 8.

The information required by these items is included in pages 12 through
55 and the inside back cover of the Company's annual report to shareholders for
the year ended December 31, 1999. Such information is incorporated herein by
reference, pursuant to General Instruction G(2). The referenced information from
the Company's annual report to shareholders has been filed as Exhibit 13 to this
document.

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.

There have been no changes in independent accountants and no
disagreements with independent accountants on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure during the last two years.

PART III

Items 10. through 13.

Information regarding executive officers required by Item 401 of
Regulation S-K is furnished in a separate disclosure in Part I of this report
because the Company did not furnish such information in its definitive proxy
statement prepared in accordance with Schedule 14A.

The other information required by Items 10 through 13 is included in
the Company's definitive proxy statement dated March 27, 2000: the third and
fourth paragraphs on page 7, the first and second paragraphs on page 8, the
first full paragraph on page 9 through the first full paragraph on page 21 and
the fourth paragraph on page 40 through page 71. Such information is
incorporated herein by reference, pursuant to General Instruction G(3).

<PAGE>

PART IV

Item 14. Exhibits, Financial Statement Schedule, and
Reports on Form 8-K.

(a) Documents filed as a part of the report:

(1) Financial Statements:
Pages
-----

Report of Management ....................... *
Report of Independent Accountants .......... *

Statements:

Consolidated Statements of Income .......... *
Consolidated Balance Sheets ................ *
Consolidated Statements of Changes in
Shareowners' Equity ...................... *
Consolidated Statements of Cash Flows ...... *
Notes to Consolidated Financial Statements . *

(2) Financial Statement Schedule:

Report of Independent Accountants .......... 47

Schedule:

II -- Valuation and Qualifying Accounts .... 48

Separate financial statements of Liberty Media Group, which is
a "significant subsidiary" pursuant to the provisions of Regulation
S-X, Article 3-9, are included as Exhibit 99.

(3) Exhibits:

Exhibits identified in parentheses below, on file with the
Securities and Exchange Commission ("SEC"), are incorporated herein
by reference as exhibits hereto.

Exhibit Number:

(3)a Restated Certificate of Incorporation of the registrant filed
January 10, 1989, Certificate of Correction of the registrant
filed June 8, 1989, Certificate of Change of the registrant
filed March 18, 1992, Certificate of Amendment of the
registrant filed June 1, 1992, Certificate of Amendment of the
registrant filed April 20, 1994, Certificate of Amendment
filed June 8, 1998 and Certificate of Amendment filed March 9,
1999 (Exhibit (3)a to Form 10-K for 1998, File No. 1-1105).

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

*Incorporated herein by reference to the appropriate portions of the Company's
annual report to shareholders for the year ended December 31, 1999. (See Part
II.)

<PAGE>

(3)b By-Laws of the registrant, as amended March 17, 1999 (Exhibit
(3)b to Form 10-K for 1998, File No. 1-1105).

(4) No instrument which defines the rights of holders of long term
debt, of the registrant and all of its consolidated
subsidiaries, is filed herewith pursuant to Regulation S-K,
Item 601(b)(4)(iii)(A). Pursuant to this regulation, the
registrant hereby agrees to furnish a copy of any such
instrument to the SEC upon request.

(10)(i)1 Form of Separation and Distribution Agreement by and among
AT&T Corp., Lucent Technologies Inc. and NCR Corporation,
dated as of February 1, 1996 and amended and restated as of
March 29, 1996 (Exhibit (10)(i)1 to Form 10-K for 1996, File
No. 1-1105).

(10)(i)2 Form of Distribution Agreement, dated as of November 20, 1996,
by and between AT&T Corp. and NCR Corporation (Exhibit
(10)(i)2 to Form 10-K for 1996, File No. 1-1105).

(10)(i)3 Tax Sharing Agreement by and among AT&T Corp., Lucent
Technologies Inc. and NCR Corporation, dated as of February 1,
1996 and amended and restated as of March 29, 1996 (Exhibit
(10)(i)3 to Form 10-K for 1996, File No. 1-1105).

(10)(i)4 Employee Benefits Agreement by and between AT&T Corp. and
Lucent Technologies Inc., dated as of February 1, 1996 and
amended and restated as of March 29, 1996 (Exhibit (10)(i)4 to
Form 10-K for 1996, File No. 1-1105).

(10)(i)5 Form of Employee Benefits Agreement, dated as of November 20,
1996, between AT&T Corp. and NCR Corporation (Exhibit (10)(i)5
to Form 10-K for 1996, File No. 1-1105).

(10)(ii)(B)1 General Purchase Agreement between AT&T Corp. and Lucent
Technologies Inc., dated February 1, 1996 and amended and
restated as of March 29, 1996 (Exhibit (10)(ii)(B)1 to Form
10-K for 1996, File No. 1-1105).

(10)(ii)(B)2 Form of Volume Purchase Agreement, dated as of November 20,
1996, by and between AT&T Corp. and NCR Corporation (Exhibit
(10)(ii)(B)2 to Form 10-K for 1996, File No. 1-1105).

(10)(iii)(A)1 AT&T Short Term Incentive Plan as amended March, 1994 (Exhibit
(10)(iii)(A)1 to Form 10-K for 1994, File No. 1-1105).

(10)(iii)(A)2 AT&T 1987 Long Term Incentive Program as amended December 17,
1997 (Exhibit 10)(iii)(A)2 to Form 10-K for 1997, File No.
1-1105).

(10)(iii)(A)3 AT&T Senior Management Individual Life Insurance Program as
amended March 3, 1998 (Exhibit (10)(iii)(A)3 to Form 10-K for
1997, File No. 1-1105).

(10)(iii)(A)4 AT&T Senior Management Long Term Disability and Survivor
Protection Plan, as amended and restated effective January 1,
1995 (Exhibit (10)(iii)(A)4 to Form 10-K for 1996, File No.
1-1105).

<PAGE>

(10)(iii)(A)5 AT&T Senior Management Financial Counseling Program dated
December 29, 1994 (Exhibit (10)(iii)(A)5 to Form 10-K for
1994, File No. 1-1105).

(10)(iii)(A)6 AT&T Deferred Compensation Plan for Non-Employee Directors, as
amended December 15, 1993 (Exhibit (10) (iii)(A)6 to Form 10-K
for 1993, File No. 1-1105).

(10)(iii)(A)7 The AT&T Directors Individual Life Insurance Program as
amended March 2, 1998 (Exhibit (10)(iii)(A)1 to Form 10-K for
1997, File No. 1-1105).

(10)(iii)(A)8 AT&T Plan for Non-Employee Directors' Travel Accident
Insurance (Exhibit (10)(iii)(A)8 to Form 10-K for 1990, File
No. 1-1105).

(10)(iii)(A)9 AT&T Excess Benefit and Compensation Plan, as amended and
restated effective October 1, 1996 (Exhibit (10)(iii)(A)9 to
Form 10-K for 1996, File No. 1-1105).

(10)(iii)(A)10 AT&T Non-Qualified Pension Plan, as amended and restated
January 1, 1995 (Exhibit (10)(iii)(A)10 to Form 10-K for 1996,
File No. 1-1105).

(10)(iii)(A)11 AT&T Senior Management Incentive Award Deferral Plan, as
amended January 21, 1998 (Exhibit (10)(iii)(A)11 to Form 10-K
for 1998, File No. 1-1105).

(10)(iii)(A)12 AT&T Mid-Career Hire Program revised effective January 1, 1988
(Exhibit (10)(iii)(A)4 to Form SE, dated March 25, 1988, File
No. 1-1105) including AT&T Mid-Career Pension Plan, as amended
and restated July 1, 1999.

(10)(iii)(A)13 AT&T 1997 Long Term Incentive Program as amended through March
14, 2000

(10)(iii)(A)14 Form of Indemnification Contract for Officers and Directors
(Exhibit (10)(iii)(A)6 to Form SE, dated March 25, 1987, File
No.1-1105).

(10)(iii)(A)15 Pension Plan for AT&T Non-Employee Directors revised February
20, 1989 (Exhibit 10)(iii)(A)15 to Form 10-K for 1993, File
No. 1-1105).

(10)(iii)(A)16 AT&T Corp. Senior Management Basic Life Insurance Program, as
amended February 27, 1998 (Exhibit (10)(iii)(A)16 to Form 10-K
for 1997, File No. 1-1105).

(10)(iii)(A)17 Form of AT&T Benefits Protection Trust Agreement as amended
and restated as of November 1993, including the first
amendment thereto dated December 23, 1997.

(10)(iii)(A)18 AT&T Senior Officer Severance Plan effective October 9, 1997,
as amended October 30, 1997 (Exhibit (10)(iii)(A)18 to Form
10-K for 1997, File No. 1-1105).

(10)(iii)(A)19 Form of Pension Agreement between AT&T Corp. and Frank Ianna
dated October 30, 1997 (Exhibit (10)(iii)(A)19 to Form 10-K
for 1997, File No. 1-1105).

<PAGE>

(10)(iii)(A)20 Form of Pension Agreement between AT&T Corp. and John C.
Petrillo dated October 30, 1997 (Exhibit (10)(iii)(A)21 to
Form 10-K for 1997, File No. 1-1105).

(10)(iii)(A)21 Form of Pension Agreement between AT&T Corp. and John Zeglis
dated May 7, 1997 (Exhibit (10)(iii)(A)22 to Form 10-K for
1997, File No. 1-1105).

(10)(iii)(A)22 Form of Employment Agreement between AT&T Corp. and C. Michael
Armstrong dated October 17, 1997 (Exhibit (10)(iii)(A)23 to
Form 10-K for 1997, File No. 1-1105).

(10)(iii)(A)23 Form of Employment Agreement between AT&T Corp. and Daniel E.
Somers dated April, 1997 (Exhibit (10)(iii)(A)23 to Form 10-K
for 1998, File No. 1-1105).

(10)(iii)(A)24 Liberty Media 401(K) Savings Plan (Incorporation herein by
reference to Exhibit 99.1 to Post-Effective Amendment No. 2 on
Form S-8 to the Registration Statement on Form S-4 of AT&T
Corp. (Commission File No. 333-70279) filed March 10, 1999).

(12) Computation of Ratio of Earnings to Fixed Charges.

(13) Specified portions (pages 12 through 55 and the inside back
cover) of the Company's Annual Report to Shareholders for the
year ended December 31, 1999.

(21) List of subsidiaries of AT&T.

(23)a Consent of PricewaterhouseCoopers, LLP

(23)b Consent of KPMG, LLP

(24) Powers of Attorney executed by officers and directors who
signed this report.

(27) Financial Data Schedules.

(99) Supplemental Information regarding Liberty Media Group.

AT&T will furnish, without charge, to a shareholder upon request a copy
of the annual report to shareholders and the proxy statement, portions of which
are incorporated herein by reference thereto. AT&T will furnish any other
exhibit at cost.

(b) Reports on Form 8-K:

During the fourth quarter 1999, Form 8-K dated October 29, 1999 was
filed pursuant to Item 5 (Other Events), Form 8-K dated November 16, 1999 was
filed pursuant to Item 5 (Other Events) and Form 8-K dated December 6, 1999 was
filed pursuant to Item 5 (Other Events).

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareowners of AT&T Corp.:

Our audits of the consolidated financial statements referred to in our report
dated March 9, 2000 appearing in the 1999 Annual Report to Shareholders of AT&T
Corp. (which report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included an audit of the
financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our
opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.

PricewaterhouseCoopers LLP

New York, New York

March 9, 2000

<PAGE>

Schedule II--Sheet 1

AT&T CORP.
AND ITS CONSOLIDATED SUBSIDIARIES

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

(Millions of Dollars)

- ------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------
Charged to
Balance at Costs and Balance
Beginning Expenses at End
Description of Period and Other Deductions(a) of Period
- ------------------------------------------------------------------------------
Year 1999

Allowances for doubtful
accounts (b) $1,106 $1,416 $ 962 $1,560

Deferred tax asset valuation
allowance (c) $ 278 $ 124 $ 171 $ 231

Year 1998

Allowances for doubtful
accounts (b) $1,037 $1,389 $1,320 $1,106

Deferred tax asset valuation
allowance (c) $ 361 $ 23 $ 106 $ 278

The Notes on Sheet 2 are an integral part of this Schedule.

<PAGE>

Schedule II--Sheet 2

AT&T CORP.
AND ITS CONSOLIDATED SUBSIDIARIES

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

(Millions of Dollars)

Allowances for doubtful
accounts (b) $1,000 $1,522 $1,485 $1,037

Deferred tax asset valuation
allowance (c) $ 220 $ 142 $ 1 $ 361

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

(a) Amounts written off as uncollectible, net of recoveries and
reclassifications.
(b) Includes allowances for doubtful accounts on long-term receivables of
$53, $46 and $49 at December 31, 1999, 1998 and 1997, respectively
(included in other assets in the Consolidated Balance Sheets).
(c) End of period balances at December 31, 1998 and 1997, include $18 and
$14, respectively, which represent the current portion of the deferred
tax valuation allowance. There was no current portion at December 31,
1999. The increase in the deferred tax asset valuation allowance in 1999
is due to the acquisition of Tele-Communications, Inc.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

AT&T Corp.

/s/ M. J. Wasser
------------------------------
By: M. J. Wasser
Vice President - Law
and Secretary

March 27, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

Principal Executive Officers: #
#
C. Michael Armstrong Chairman of the Board #
and Chief Executive #
Officer #
#
John Zeglis President and Director #
#
Principal Financial Officer: #
#
Charles H. Noski Senior Executive Vice #
President and Chief #
Financial Officer #
#
Principal Accounting Officer: #
#
Nicholas S. Cyprus Vice President and #
Controller ## By M. J. Wasser
# (attorney-in-fact)*
Directors: #
# March 27, 2000
Kenneth T. Derr #
M. Kathryn Eickhoff #
Walter Y. Elisha #
George M. C. Fisher #
Donald V. Fites #
Amos B. Hostetter, Jr. #
Ralph S. Larsen #
John C. Malone #
Donald F. McHenry #
Michael I. Sovern #
Sanford I. Weill #
Thomas H. Wyman #

Exhibit (10)(iii)(A)12 - Mid-Career Pension Plan

Executive Vice President - Human Resources
Approval Under Delegation of Board of Directors

AT&T MID-CAREER PENSION PLAN

Approval of Plan Language for Certain Amendments Adopted on April 16, 1997
and December 17, 1997 by the Board of Directors

On April 16, 1997, the Board of Directors of the Company adopted
resolutions amending the AT&T Mid-Career Pension Plan (the "Plan"), among other
things, to:

o Freeze benefit accruals as of December 31, 1996;

o Provide for payment of a single life annuity if the executive elects
the cash payment option under the AT&T Management Pension Plan;

o Provide that benefits under the Plan may be forfeited if the Executive
Vice President - Human Resources determines that the Employee has
violated the AT&T Non-Competition Guideline;

o Provide for a transfer of the liability for the benefit under this Plan
for Executives above E-band effective January 1, 1998.

Pursuant to the delegations from the Board of Directors and the Committee,
the Executive Vice President - Human Resources approves the following Plan
language reflecting these amendments: *

1. Amendment to freeze Term of Employment as of December 31, 1996 in the
calculation of Mid-Career Pension Credits. Effective August 1, 1997, add to end
of Section 2.15(a) as follows:

Mid-Career Pension Credits for Eligible Executives hired or rehired by a
Participating Company at E-band or above, and all of whose Term of Employment is
at E-band or above, is determined as if the Eligible Executive had actually
terminated employment as of December 31, 1996.

2. Amendment to freeze Term of Employment as of December 31, 1996 in the
calculation of Mid-Career Pension Credits. Effective August 1, 1997, add to end
of Section 2.15(b) as follows:

The numerator and denominator set forth in this Section 2.15(b) above is
determined as if the Eligible Executive had actually terminated employment as of
December 31, 1996. Further, for any Eligible Executive on the active roll as of
August 29, 1991, he shall be deemed to have terminated employment as of December
31, 1996.

3. Amendment to establish eligibility for Participant status. Effective
August 1, 1997, add to end of Section 4.1 as follows:

<PAGE>

An individual is an Eligible Executive in this Plan if the individual is
eligible for the Special Update, within the meaning of the Pension Plan, and
satisfies the requirements set forth in this Section 4.1(a) through (d) above if
he had terminated employment as of December 31, 1996, provided, however, that
any individual hired in 1996 shall be deemed to have satisfied the requirement
set forth in Section 4.1(c) above if he satisfies such requirement no later than
December 31, 1997.

4. Amendment to establish eligibility for the benefit under the Plan as an
Employee. Effective January 1, 1998, add to end of Section 4.2(a) as follows:

Only Eligible Executives, as defined in Section 4.1 above, who are E-bands, will
be considered Employees, provided, however, that for purposes of satisfying the
requirement in this Section 4.2(a) of completing a Term of Employment of at
least five years at E-band or above at termination of employment, all Eligible
Executives will be considered Employees, if otherwise considered an Employee
pursuant to this Section 4.2(a).

5. Amendment to eliminate concept of service, disability pension or deferred
pension benefits. Effective August 1, 1997, replace Sections 4.2(b) and (c) in
their entirety as follows:

(b) Service and Disability Benefit

Any Employee shall be eligible for a service benefit or disability benefit
pursuant to this Plan if he or she has retired with a service or disability
pension before January 1, 1997 under the Pension Plan, including an Employee who
was eligible for a service pension as a result of a Transition Leave of Absence
or a Transition to Retirement as set forth in the Pension Plan.

Any Employee is eligible for a Mid-Career Pension Benefit pursuant to this Plan
if the Employee in not eligible for a service or disability benefit under this
Plan as set forth in Section 4.2(b).

6. Amendment to the Plan's Formula to eliminate references to Post-Base
Period and explicitly provide the base formula multiplier amount. Effective
August 1, 1997, replace Section 4.3(a)(i) with the following:

The annual benefit amount will equal:

A * [(B * C) + (D * E)]

Where:

A = Mid-Career Pension Credits;

B = .008

C = Average Base Period Compensation x Term of Employment to the end
of the Base Period divided by Total Term of Employment;

D = .008

E = NQPP Average Base Period Compensation x Term of Employment to the
end of the Base Period divided by Total Term of Employment.

<PAGE>

7. Amendment to the definition of "Base Period" to correspond to the new Base
Period in the Pension Plan. Effective August 1, 1997, Section 4.3(a)(iii) is
amended in its entirety as follows:

For purposes of determining C in Section 4.3(a)(i), "Base Period" shall be the
pay base averaging period as is set forth in the Pension Plan effective August
1, 1997. For purposes of determining E in Section 4.3(a)(i), "Base Period" shall
be the Base Period as is set forth in the Basic Formula of the NQPP effective
August 1, 1997.

8. Effective August 1, 1997, delete Section 4.3(a)(iv), 4.3(a)(vii) and
4.3(a)(viii) in their entirety and renumber Section 4.3(a) accordingly.

9. Amendment to the definition of "Total Term of Employment" to freeze Term
of Employment as of December 31, 1996. Effective August 1, 1997, replace Section
4.3(a)(vi) in its entirety as follows:

For purposes of determining C and E in Section 4.3(a)(i), "Total Term of
Employment" shall be the Employee's Term of Employment as of December 31, 1996.

10. Amendment to the calculation of the monthly benefit under the Plan to
change the definition of Term of Employment. Effective August 1, 1997, add a new
Section 4.3(a)(ix) as follows:

(ix) Term of Employment

Effective August 1, 1997, for purposes of determining C and E in Section
4.3(a)(i), "Term of Employment" shall equal the lesser of (1) Term of
Employment, as defined in Section 2.22, as of December 31, 1996, plus 1 or (2)
105% of Term of Employment, as defined in Section 2.22, as of December 31, 1996.

11. Amendment to clarify that, for purposes of determining the early
retirement discount, if any, the discount is calculated in the same manner as
the discount applicable to the Special Update Benefit in the Pension Plan.
Effective August 1, 1997, replace Section 4.3(b) in its entirety as follows:

Effective August 1, 1997, where an Employee terminates employment under the age
of 55 years and commences a pension under the Pension Plan, his or her monthly
benefit shall be reduced in the same manner as set forth in the Pension Plan for
the Special Update Benefit, within the meaning of the Pension Plan.

12. Amendment relating to the elimination of the concept of a deferred
benefit. Effective August 1, 1997, any references in Section 4.3(c) to a
"deferred benefit amount" or "deferred benefit" shall be replaced with the term
"Mid-Career Pension Benefit."

13. Amendment to provide for special increases in service and disability
payments only for those Employees eligible for service and disability pension
benefits.

Section 4.3(e) shall be replaced in its entirety as follows:

Section 4.3(e) Special Increases

<PAGE>

Monthly service and disability benefit payments for retired Employees, eligible
as set forth in Section 4.2(b), shall be increased by the same percentage and
pursuant to the same terms and conditions as are set forth in the Pension Plan.

14. Amendment relating to commencement and duration of benefits. Effective
for monthly benefits commencing on or after August 1, 1997, replace Sections
4.5(a) and (b)(i) in their entirety as follows:

(a) Service or Disability Benefit

Payment of a service or disability benefit under this Plan shall commence to an
Employee at the same time as the Employee's service or disability pension
benefits commence under the Pension Plan and shall continue to the last day of
the month in which the death of the Employee occurs, or, in the case of a
disability benefit, until termination of disability pension payments under the
Pension Plan, if earlier, subject to Section 4.4 of this Plan, provided,
however, that if the Employee elects the cash payment option pursuant to the
Pension Plan, payment of a service or disability benefit under this Plan shall
be paid in the form of a single life annuity.

(b) Mid-Career Pension Benefit

(i) Payment of a Mid-Career Pension benefit under this Plan shall
commence to an Employee at the same time as the Employee's pension benefits
commence under the Pension Plan and shall continue to the last day of the month
in which the death of the Employee occurs, subject to Section 4.4 of this Plan,
provided, however, that if the Employee elects the cash payment option pursuant
to the Pension Plan, payment of a Mid-Career Pension benefit under this Plan
shall be paid in the form of a single life annuity.

15. Amendment to Section 4.6(a)(iii) to be consistent with amendment to AT&T
Non-Competition Guideline. Effective December 17, 1997, Section 4.6(a)(iii) is
amended in its entirety as follows:

(iii) If the Executive Vice President - Human Resources of the Company
determines, pursuant to the AT&T Non-Competition Guideline, determines that the
Employee has violated the AT&T Non-Competition Guideline.

16. Amendment to provide for a transfer of liability for certain Employees to
the AT&T Non-Qualified Pension Plan. Effective January 1, 1998, add a new
Section 4.7 as follows:

Section 4.7 Transfer of Liability

Effective January 1, 1998, the liability for the monthly benefit under this Plan
of Eligible Executives, as defined in Section 4.1, who are above the level of
E-band, shall be transferred to the AT&T Non-Qualified Pension Plan, effective
January 1, 1998. Solely for purposes of determining eligibility for the monthly
benefit under this Plan to be transferred, an Eligible Executive who is above
the level of E-band shall be considered an Employee who has completed a Term of
Employment of at least 5 years at E-band or above as of December 31, 1997.

Signature: /s/ Hal W. Burlingame
--------------------------------
By: Hal W. Burlingame
Executive Vice President - Human Resources

- ---------------------
* Each amendment is preceded by a brief explanation.

<PAGE>

Exhibit (10)(iii)(A)13 - AT&T 1997 LTIP

AT&T 1997 LONG TERM INCENTIVE PROGRAM

(as amended May 19, 1999 and March 14, 2000)

SECTION 1. PURPOSE. The purposes of the AT&T 1997 Long Term Incentive
Program (the "Plan") are to encourage selected employees and Non-Employee
Directors of AT&T Corp. (the "Company") and its Affiliates to acquire a
proprietary and vested interest in the growth and performance of the Company, to
generate an increased incentive to contribute to the Company's future success
and prosperity, thus enhancing the value of the Company for the benefit of
shareholders, and to enhance the ability of the Company and its Affiliates to
attract and retain individuals of exceptional managerial talent upon whom, in
large measure, the sustained progress, growth and profitability of the Company
depends.

SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall
have the meanings set forth below:

(a) "Affiliate" shall mean (i) any Person that directly, or through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the Company or (ii) any entity in which the Company has a significant
equity interest, as determined by the Committee.

(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Share, Performance Unit, Dividend Equivalent, Other
Stock Unit Award, or any other right, interest, or option relating to Shares or
other property granted pursuant to the provisions of the Plan.

(c) "Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award granted by the Committee hereunder,
which may, but need not, be executed or acknowledged by both the Company and the
Participant.

(d) "Board" shall mean the Board of Directors of the Company.

(e) "Change in Control" shall mean the happening of any of the following
events:

(i) An acquisition by any individual, entity or group (within the
meaning of Section 13 (d) (3) or 14 (d) (2) of the Exchange Act) (an "Entity")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then outstanding AT&T Shares (the
"Outstanding Company Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); excluding,
however, the following: (1) any acquisition directly from the Company, other
than an acquisition by virtue of the exercise of a conversion privilege unless
the security being so converted was itself acquired directly from the Company,
(2) any acquisition by the Company, (3) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (4) any acquisition by any corporation
pursuant to a transaction which complies with clauses (A), (B) and (C) of
subsection (iii) of this Section 2(e);

<PAGE>

(ii) A change in the composition of the Board such that the individuals
who, as of the effective date of the Plan, constitute the Board (such Board
shall be hereinafter referred to as the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided, however, that for
purposes of this definition, any individual who becomes a member of the Board
subsequent to the effective date of the Plan, whose election, or nomination for
election, by the Company's stockholders was approved by a vote of at least a
majority of those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to this proviso)
shall be considered as though such individual were a member of the Incumbent
Board; and provided, further however, that any such individual whose initial
assumption of office occurs as a result of or in connection with either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of an Entity other than the
Board shall not be so considered as a member of the Incumbent Board;

(iii) The approval by the stockholders of the Company of a merger,
reorganization or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (each, a "Corporate Transaction")
or, if consummation of such Corporate Transaction is subject, at the time of
such approval by stockholders, to the consent of any government or governmental
agency, the obtaining of such consent (either explicitly or implicitly by
consummation); excluding however, such a Corporate Transaction pursuant to which
(A) all or substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock, and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such Corporate Transaction (including, without limitation, a corporation or
other Person which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries (a "Parent Company")) in substantially the same proportions as
their ownership, immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (B) no Entity (other than the Company, any employee benefit
plan (or related trust) of the Company, such corporation resulting from such
Corporate Transaction or, if reference was made to equity ownership of any
Parent Company for purposes of determining whether clause (A) above is satisfied
in connection with the applicable Corporate Transaction, such Parent Company)
will beneficially own, directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the election of
directors unless such ownership resulted solely from ownership of securities of
the Company prior to the Corporate Transaction, and (C) individuals who were
members of the Incumbent Board will immediately after the consummation of the
Corporate Transaction constitute at least a majority of the members of the board
of directors of the corporation resulting from such Corporate Transaction (or,
if reference was made to equity ownership of any Parent Company for purposes of
determining whether clause (A) above is satisfied in connection with the
applicable Corporate Transaction, of the Parent Company); or

(iv) The approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.

<PAGE>

(f) "Change in Control Price" means, with respect to an AT&T Share or a
Wireless Group Share, as the case may be, the higher of (A) the highest reported
sales price, regular way, of such Share in any transaction reported on the New
York Stock Exchange Composite Tape or other national exchange on which such
Shares are listed or on NASDAQ during the 60-day period prior to and including
the date of a Change in Control or (B) if the Change in Control is the result of
a tender or exchange offer or a Corporate Transaction, the highest price per
such Share paid in such tender or exchange offer or Corporate Transaction;
provided however, that in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, the Change in Control
Price shall be the Fair Market Value of such Share on the date such Incentive
Stock Option or Stock Appreciation Right is exercised or deemed exercised
pursuant to Section 11(b). To the extent that the consideration paid in any such
transaction described above consists all or in part of securities or other
noncash consideration, the value of such securities or other noncash
consideration shall be determined in the sole discretion of the Board.

(g) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.

(h) "Committee" shall mean the Compensation and Employee Benefits Committee
of the Board, or any successor to such committee, composed of no fewer than two
directors each of whom is a Non-Employee Director and an "outside director"
within the meaning of Section 162(m) of the Code, or any successor provision
thereto.

(i) "Company" shall mean AT&T Corp., a New York corporation.

(j) "Covered Employee" shall mean a "covered employee" within the meaning
of Section 162(m)(3) of the Code, or any successor provision thereto.

(k) "Employee" shall mean any employee of the Company or of any Affiliate.
Unless otherwise determined by the Committee in its sole discretion, for
purposes of the Plan, an employee shall be considered to have terminated
employment and to have ceased to be an Employee if his or her employer ceases to
be an Affiliate, even if he or she continues to be employed by such employer.

(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

(m) "Fair Market Value" shall mean, with respect to any property, the
market value of such property determined by such methods or procedures as
shall be established from time to time by the Committee.

(n) "Incentive Stock Option" shall mean an Option granted under Section 6
hereof that is intended to meet the requirements of Section 422 of the Code or
any successor provision thereto.

(o) "Non-Employee Director" shall have the meaning set forth in Rule
16b-3(b)(3) promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and Exchange
Commission.

(p) "Nonstatutory Stock Option" shall mean an Option granted under
Section 6 hereof that is not intended to be an Incentive Stock Option.

<PAGE>

(q) "Option" shall mean any right granted to a Participant under the Plan
allowing such Participant to purchase Shares at such price or prices and during
such period or periods as the Committee shall determine.

(r) "Other Stock Unit Award" shall mean any right granted to a Participant
by the Committee pursuant to Section 10 hereof.

(s) "Participant" shall mean an Employee or Non-Employee Director who is
selected by the Committee to receive an Award under the Plan.

(t) "Performance Award" shall mean any Award of Performance Shares or
Performance Units pursuant to Section 9 hereof.

(u) "Performance Period" shall mean that period established by the
Committee at the time any Performance Award is granted or at any time
thereafter during which any performance goals specified by the Committee
with respect to such Award are to be measured.

(v) "Performance Share" shall mean any grant pursuant to Section 9
hereof of a unit valued by reference to a designated number of Shares, which
value may be paid to the Participant by delivery of such property as the
Committee shall determine, including, without limitation, cash, Shares, or
any combination thereof, upon achievement of such performance goals during
the Performance Period as the Committee shall establish at the time of such
grant or thereafter.

(w) "Performance Unit" shall mean any grant pursuant to Section 9 hereof
of a unit valued by reference to a designated amount of property other than
Shares, which value may be paid to the Participant by delivery of such property
as the Committee shall determine, including, without limitation, cash, Shares,
or any combination thereof, upon achievement of such performance goals during
the Performance Period as the Committee shall establish at the time of such
grant or thereafter.

(x) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.

(y) "Restricted Stock" shall mean any Share issued with the restriction
that the holder may not sell, transfer, pledge, or assign such Share and with
such other restrictions as the Committee, in its sole discretion, may impose
(including, without limitation, any restriction on the right to vote such Share,
and the right to receive any cash dividends), which restrictions may lapse
separately or in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate.

(z) "Restricted Stock Award" shall mean an award of Restricted Stock under
Section 8 hereof.

(Aa) "Senior Manager" shall mean any Employee of the Company or any
Affiliate holding a position above E band or any future salary band that is the
equivalent thereof.

(Bb) "Shares" shall mean, collectively or as the case may be, (i)the shares
of AT&T Common Stock of the Company, $1.00 par value ("AT&T Shares"), and (ii)
the shares of Wireless Group Common Stock of the Company, $1.00 par value

<PAGE>

("Wireless Group Shares"). "Outstanding Wireless Group Shares" shall mean, as at
any date of determination, the sum of (i) the total issued and outstanding
Wireless Group Shares, plus (ii) the number of Wireless Group Shares represented
by the inter-group interest held by the "AT&T Common Stock Group" (as described
the Company's Proxy Statement dated January 26, 2000). The numbers of AT&T
Shares referred to in the Plan have been adjusted to reflect the Company's 3 for
2 stock split effective April 15, 1999.

(Cc) "Stock Appreciation Right" shall mean any right granted to a
Participant pursuant to Section 7 hereof to receive, upon exercise by the
Participant, the excess of (i) the Fair Market Value of one Share on the date of
exercise or, if the Committee shall so determine in the case of any such right
other than one related to any Incentive Stock Option, at any time during a
specified period before the date of exercise over (ii) the grant price of the
right on the date of grant, or if granted in connection with an outstanding
Option on the date of grant of the related Option, as specified by the Committee
in its sole discretion, which, except in the case of Substitute Awards or in
connection with an adjustment provided in Section 4(e), shall not be less than
the Fair Market Value of one Share on such date of grant of the right or the
related Option, as the case may be. Any payment by the Company in respect of
such right may be made in cash, Shares, other property, or any combination
thereof, as the Committee, in its sole discretion, shall determine.

(Dd) "Subsidiary" shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the
granting of the Award, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50 percent or more of the total
combined voting power of all classes of stock in one of the other corporations
in the chain.

(Ee) "Substitute Awards" shall mean Awards granted or Shares issued by the
Company in assumption of, or in substitution or exchange for, awards previously
granted, or the right or obligation to make future awards, by a company acquired
by the Company or with which the Company combines.

SECTION 3. ADMINISTRATION. The Plan shall be administered by the Committee.
The Committee shall have full power and authority, subject to such orders or
resolutions not inconsistent with the provisions of the Plan as may from time to
time be adopted by the Board, to: (i) select the Employees of the Company and
its Affiliates and Non-Employee Directors of the Company to whom Awards may from
time to time be granted hereunder; (ii) determine the type or types of Award to
be granted to each Participant hereunder; (iii) determine the number of Shares
to be covered by each Award granted hereunder; (iv) determine the terms and
conditions, not inconsistent with the provisions of the Plan, of any Award
granted hereunder; (v) determine whether, to what extent and under what
circumstances Awards may be settled in cash, Shares or other property or
canceled or suspended; (vi) determine whether, to what extent and under what
circumstances cash, Shares and other property and other amounts payable with
respect to an Award under this Plan shall be deferred either automatically or at
the election of the Participant; (vii) interpret and administer the Plan and any
instrument or agreement entered into under the Plan; (viii) establish such rules
and regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; and (ix) make any other determination and
take any other action that the Committee deems necessary or desirable for
administration of the Plan. Decisions of the Committee shall be final,
conclusive and binding upon all persons, including the Company, any Participant,
any shareholder, and any employee of the Company or of any Affiliate. A majority

<PAGE>

of the members of the Committee may determine its actions and fix the time and
place of its meetings. Notwithstanding the foregoing or anything else to the
contrary in the Plan, any action or determination by the Committee specifically
affecting or relating to an Award to a Non-Employee Director shall be approved
and ratified by the Board.

SECTION 4. SHARES SUBJECT TO THE PLAN.

(a) Subject to adjustment as provided in Section 4(e), a total of
twenty-two and one half (22.5) million AT&T Shares shall be available for a one
time grant of Options to substantially all Employees during 1997. Shares
available for such one time grant of Options, but not used for such Options,
shall be available for other Awards under the Plan, in 1997 or later years.

(b) In addition to the number of AT&T Shares available under Section 4(a),
and subject to adjustment as provided in Section 4(e), a total of (i) one
hundred twenty-seven and one half (127.5) million AT&T Shares, and (ii) a number
of Wireless Group Shares equal to 5.00% of the number of Outstanding Wireless
Group Shares shall be available for Awards granted under the Plan; provided
that, commencing on January 1, 2000 and on each subsequent January 1 throughout
the term of the Plan, an additional number of AT&T Shares shall be added to the
number of AT&T Shares available for Awards granted under the Plan, which
additional number of AT&T Shares shall be calculated by multiplying (x) the
number of AT&T Shares outstanding on such January 1, by (y) 1.75%; provided,
further, that the number of AT&T Shares available for Awards other than Options
and/or Stock Appreciation Rights shall not exceed thirty-seven and one half
(37.5) million; and provided further that, commencing on January 1, 2001 and on
each subsequent January 1 throughout the term of the Plan, an additional number
of Wireless Group Shares shall be added to the number of Wireless Group Shares
available for Awards granted under the Plan, which additional number of Wireless
Group Shares shall be calculated by multiplying (x) the number of Outstanding
Wireless Group Shares on such January 1, by (y) 2.00%; provided, further, that
the number of Wireless Group Shares available for Awards other than Options
and/or Stock Appreciation Rights shall not exceed 1.25% of the number of
Outstanding Wireless Group Shares; and provided, further, that if any Shares
subject to an Award or to an award under the Company's 1987 Long Term Incentive
Program or 1984 Stock Option Plan (the "Prior Plans") are forfeited or if any
Award or award under the Prior Plans based on Shares is settled for cash, or
expires or otherwise is terminated without issuance of such Shares, the Shares
subject to such Award shall to the extent of such cash settlement, forfeiture or
termination again be available for Awards under the Plan. In the event that any
Option or other Award granted hereunder is exercised through the delivery of
Shares or in the event that withholding tax liabilities arising from such Option
or other Award are satisfied by the withholding of Shares by the Company, the
number of Shares available for Awards under the Plan shall be increased by the
number of Shares so surrendered or withheld. In addition, Substitute Awards
shall not reduce the Shares available for grants under the Plan or to a
Participant in any calendar year.

(c) In addition to the number of Wireless Group Shares available under
Section 4(b), and subject to adjustment as provided in Section 4(e), such
additional number of Wireless Group Shares as are required for Awards as an
adjustment to existing Awards under the Plan based upon AT&T Shares as the
result of any distribution of Wireless Group Shares to holders of AT&T Shares as
more fully described in the Company's Proxy Statement dated January 26, 2000.

<PAGE>

(d) Any Shares issued hereunder may consist, in whole or in part, of
authorized and unissued shares, treasury shares, or shares purchased in the open
market or otherwise.

(e) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, reverse stock split, spin-off or
similar transaction or other change in corporate structure affecting the Shares,
such adjustments and other substitutions shall be made to the Plan and to Awards
as the Committee in its sole discretion deems equitable or appropriate,
including without limitation such adjustments in the aggregate number, class and
kind of securities which may be delivered under the Plan, in the aggregate or to
any one Participant, in the number, class, kind and option or exercise price of
securities subject to outstanding Options, Stock Appreciation Rights or other
Awards granted under the Plan, and in the number, class and kind of securities
subject to Awards granted under the Plan (including, if the Committee deems
appropriate, the substitution of similar options to purchase the shares of, or
other awards denominated in the shares of, another company) as the Committee may
determine to be appropriate in its sole discretion, provided that the number of
Shares subject to any Award shall always be a whole number.

SECTION 5. ELIGIBILITY. Any Employee or Non-Employee Director shall be
eligible to be selected as a Participant, provided, however, that Incentive
Stock Options shall only be awarded to Employees of the Company.

SECTION 6. STOCK OPTIONS. Options may be granted hereunder to Participants
either alone or in addition to other Awards granted under the Plan. Any Option
granted under the Plan shall be evidenced by an Award Agreement in such form as
the Committee may from time to time approve. Any such Option shall be subject to
the following terms and conditions and to such additional terms and conditions,
not inconsistent with the provisions of the Plan, as the Committee shall deem
desirable:

(a) OPTION PRICE. The purchase price per Share purchasable under an Option
shall be determined by the Committee in its sole discretion; provided that,
except in the case of Substitute Awards or in connection with an adjustment
provided for in Section 4(e), such purchase price shall not be less than the
Fair Market Value of the Share on the date of the grant of the Option.

(b) OPTION PERIOD. The term of each Option shall be fixed by the Committee
in its sole discretion; provided that no Option shall be exercisable after the
expiration of ten years from the date the Option is granted.

(c) EXERCISABILITY. Options shall be exercisable at such time or times as
determined by the Committee at or subsequent to grant.

(d) METHOD OF EXERCISE. Subject to the other provisions of the Plan, any
Option may be exercised by the Participant in whole or in part at such time or
times, and the Participant may make payment of the option price in such form or
forms, including, without limitation, payment by delivery of cash, Shares or
other consideration (including, where permitted by law and the Committee,
Awards) having a Fair Market Value on the exercise date equal to the total
option price, or by any combination of cash, Shares and other consideration as
the Committee may specify in the applicable Award Agreement.

<PAGE>

(e) INCENTIVE STOCK OPTIONS. In accordance with rules and procedures
established by the Committee, and except as otherwise provided in Section 11,
the aggregate Fair Market Value (determined as of the time of grant) of the
Shares with respect to which Incentive Stock Options held by any Participant
which are exercisable for the first time by such Participant during any calendar
year under the Plan (and under any other benefit plans of the Company or any
Subsidiary) shall not exceed $100,000 or, if different, the maximum limitation
in effect at the time of grant under Section 422 of the Code, or any successor
provision, and any regulations promulgated thereunder. Incentive Stock Options
shall be granted only to participants who are employees of the Company or a
Subsidiary of the Company. The terms of any Incentive Stock Option granted
hereunder shall comply in all respects with the provisions of Section 422 of the
Code, or any successor provision, and any regulations promulgated thereunder.
The aggregate number of Shares with respect to which Incentive Stock Options may
be granted under the Plan shall not exceed (i) seventy-five (75) million in the
case of AT&T Shares, and (ii) 50.00% of the aggregate number of all Wireless
Group Shares available for Awards under the Plan in the case of Wireless Group
Shares.

(f) FORM OF SETTLEMENT. In its sole discretion, the Committee may provide,
at the time of grant, that the Shares to be issued upon an Option's exercise
shall be in the form of Restricted Stock or other similar securities, or may
reserve the right so to provide after the time of grant.

SECTION 7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be
granted hereunder to Participants either alone or in addition to other Awards
granted under the Plan and may, but need not, relate to a specific Option
granted under Section 6. The provisions of Stock Appreciation Rights need not be
the same with respect to each recipient. Any Stock Appreciation Right related to
a Nonstatutory Stock Option may be granted at the same time such Option is
granted or at any time thereafter before exercise or expiration of such Option.
Any Stock Appreciation Right related to an Incentive Stock Option must be
granted at the same time such Option is granted. In the case of any Stock
Appreciation Right related to any Option, the Stock Appreciation Right or
applicable portion thereof shall terminate and no longer be exercisable upon the
termination or exercise of the related Option, except that a Stock Appreciation
Right granted with respect to less than the full number of Shares covered by a
related Option shall not be reduced until the exercise or termination of the
related Option exceeds the number of Shares not covered by the Stock
Appreciation Right. Any Option related to any Stock Appreciation Right shall no
longer be exercisable to the extent the related Stock Appreciation Right has
been exercised. The Committee may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it shall deem appropriate, provided
that no Stock Appreciation Right shall have a term that is longer than ten (10)
years.

SECTION 8. RESTRICTED STOCK.

(a) ISSUANCE. A Restricted Stock Award shall be subject to restrictions
imposed by the Committee during a period of time specified by the Committee (the
"Restriction Period"). Restricted Stock Awards may be issued hereunder to
Participants, for no cash consideration or for such minimum consideration as may
be required by applicable law, either alone or in addition to other Awards
granted under the Plan. The provisions of Restricted Stock Awards need not be
the same with respect to each recipient.

<PAGE>

(b) REGISTRATION. Any Restricted Stock issued hereunder may be evidenced in
such manner as the Committee in its sole discretion shall deem appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates. In the event any stock certificate is issued in
respect of shares of Restricted Stock awarded under the Plan, such certificate
shall be registered in the name of the Participant, and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award.

(c) FORFEITURE. Except as otherwise determined by the Committee at the time
of grant or thereafter, upon termination of employment for any reason during the
restriction period, all Shares of Restricted Stock still subject to restriction
shall be forfeited by the Participant and reacquired by the Company.
Unrestricted Shares, evidenced in such manner as the Committee shall deem
appropriate, shall be issued to the grantee promptly after the period of
forfeiture, as determined or modified by the Committee, shall expire.

(d) MINIMUM VESTING CONDITION. The minimum Restriction Period applicable to
any Restricted Stock Award that is not subject to performance conditions
restricting transfer shall be three (3) years from the date of grant; provided,
however, that a Restriction Period of less than three (3) years may be approved
under the Plan for such Awards with respect to (i) up to twelve (12) million
AT&T Shares, and (ii) up to 0.50% of the Outstanding Wireless Group Shares.

SECTION 9. PERFORMANCE AWARDS. Performance Awards may be issued hereunder to
Participants, for no cash consideration or for such minimum consideration as may
be required by applicable law, either alone or in addition to other Awards
granted under the Plan. The performance criteria to be achieved during any
Performance Period and the length of the Performance Period shall be determined
by the Committee upon the grant of each Performance Award. Except as provided in
Section 11, Performance Awards will be distributed only after the end of the
relevant Performance Period. Performance Awards may be paid in cash, Shares,
other property or any combination thereof, in the sole discretion of the
Committee at the time of payment. The performance levels to be achieved for each
Performance Period and the amount of the Award to be distributed shall be
conclusively determined by the Committee. Performance Awards may be paid in a
lump sum or in installments following the close of the Performance Period or, in
accordance with procedures established by the Committee, on a deferred basis.

SECTION 10. OTHER STOCK UNIT AWARDS.

(a) STOCK AND ADMINISTRATION. Other Awards of Shares and other Awards that
are valued in whole or in part by reference to, or are otherwise based on,
Shares or other property ("Other Stock Unit Awards") may be granted hereunder to
Participants, either alone or in addition to other Awards granted under the
Plan. Other Stock Unit Awards may be paid in Shares, cash or any other form of
property as the Committee shall determine. Subject to the provisions of the
Plan, the Committee shall have sole and complete authority to determine the
Employees of the Company and its Affiliates and Non-Employee Directors to whom
and the time or times at which such Awards shall be made, the number of Shares
to be granted pursuant to such Awards, and all other conditions of the Awards.
The provisions of Other Stock Unit Awards need not be the same with respect to
each recipient.

<PAGE>

(b) TERMS AND CONDITIONS. Subject to the provisions of this Plan and any
applicable Award Agreement, Awards and Shares subject to Awards made under this
Section 10, may not be sold, assigned, transferred, pledged or otherwise
encumbered prior to the date on which the Shares are issued, or, if later, the
date on which any applicable restriction, performance or deferral period lapses.
For any Award or Shares subject to any Award made under this Section 10 the
transferability of which is conditioned only on the passage of time, such
restriction period shall be a minimum of three (3) years. Shares (including
securities convertible into Shares) subject to Awards granted under this Section
10 may be issued for no cash consideration or for such minimum consideration as
may be required by applicable law. Shares (including securities convertible into
Shares) purchased pursuant to a purchase right awarded under this Section 10
shall be purchased for such consideration as the Committee shall in its sole
discretion determine, which, except in the case of Substitute Awards, shall not
be less than the Fair Market Value of such Shares or other securities as of the
date such purchase right is awarded.

SECTION 11. CHANGE IN CONTROL PROVISIONS.

(a) IMPACT OF EVENT. Notwithstanding any other provision of the Plan to the
contrary, unless the Committee shall determine otherwise at the time of grant
with respect to a particular Award, in the event of a Change in Control:

(i) any Options and Stock Appreciation Rights outstanding as of the
date such Change in Control is determined to have occurred, and which are not
then exercisable and vested, shall become fully exercisable and vested to the
full extent of the original grant;

(ii) the restrictions and deferral limitations applicable to any
Restricted Stock shall lapse, and such Restricted Stock shall become free of all
restrictions and limitations and become fully vested and transferable to the
full extent of the original grant;

(iii) all Performance Awards shall be considered to be earned and
payable in full, and any deferral or other restriction shall lapse and such
Performance Awards shall be immediately settled or distributed; and

(iv) The restrictions and deferral limitations and other conditions
applicable to any Other Stock Unit Awards or any other Awards shall lapse, and
such Other Stock Unit Awards or such other Awards hall become free of all
restrictions, limitations or conditions and become fully vested and transferable
to the full extent of the original grant.

(b) CHANGE IN CONTROL CASH-OUT. Notwithstanding any other provision of the
Plan, during the 60-day period from and after a Change in Control (the "Exercise
Period"), if the Committee shall determine at, or at any time after, the time of
grant, a Participant holding an Option or Stock Appreciation Right shall have
the right, whether or not the Option or Stock Appreciation Right is fully
exercisable and in lieu of the payment of the purchase price for the Shares
being purchased under the Option or Stock Appreciation Right and by giving
notice to the Company, to elect (within the Exercise Period) to surrender all or
part of the Option or Stock Appreciation Right to the Company and to receive
cash, within 30 days of such notice, in an amount equal to the amount by which
the Change in Control Price per Share on the date of such election shall exceed
the purchase price per Share under the Option or Stock Appreciation Right (the

<PAGE>

"Spread") multiplied by the number of Shares granted under the Option or Stock
Appreciation right as to which the right granted under this Section 11(b) shall
have been exercised.

(c) Notwithstanding any other provision of this Plan, if any right granted
pursuant to this Plan would make a Change in Control transaction ineligible for
pooling-of-interests accounting under APB No. 16, that (after giving effect to
any other actions taken to cause such transaction to be eligible for such
pooling-of-interests accounting treatment) but for the nature of such right
would otherwise be eligible for such accounting treatment, the Committee shall
have the ability to substitute for the cash payable pursuant to such right
Shares with a Fair Market Value equal to the cash that would otherwise be
payable pursuant thereto.

SECTION 12. CODE SECTION 162(m) PROVISIONS.

(a) Notwithstanding any other provision of this Plan, if the Committee
determines at the time Restricted Stock, a Performance Award or an Other Stock
Unit Award is granted to a Participant who is then a Senior Manager or an E band
employee that such Participant is, or is likely to be as of the end of the tax
year in which the Company would claim a tax deduction in connection with such
Award, a Covered Employee, then the Committee may provide that this Section 12
is applicable to such Award.

(b) If an Award is subject to this Section 12, then the lapsing of
restrictions thereon and the distribution of cash, Shares or other property
pursuant thereto, as applicable, shall be subject to the achievement of one or
more objective performance goals established by the Committee, which shall be
based on the attainment of specified levels of one or any combination of the
following: net cash provided by operating activities, earnings per share from
continuing operations, operating income, revenues, gross margin, return on
operating assets, return on equity, economic value added, stock price
appreciation, total stockholder return, or cost control, of the Company or the
Affiliate or division of the Company for or within which the Participant is
primarily employed. Such performance goals also may be based upon the
achievement of specified levels of Company performance (or performance of
applicable Affiliate or division of the Company) under one or more of the
measures described above relative to the performance of other corporations. Such
performance goals shall be set by the Committee within the time period
prescribed by, and shall otherwise comply with the requirements of, Section
162(m) of the Code, or any successor provision thereto, and the regulations
thereunder.

(c) Notwithstanding any provision of this Plan other than Section 11, with
respect to any Award that is subject to this Section 12, the Committee may
adjust downwards, but not upwards, the amount payable pursuant to such Award,
and the Committee may not waive the achievement of the applicable performance
goals except in the case of the death or disability of the Participant.

(d) The Committee shall have the power to impose such other restrictions on
Awards subject to this Section 12 as it may deem necessary or appropriate to
ensure that such Awards satisfy all requirements for "performance-based
compensation" within the meaning of Section 162(m) (4) (C) of the Code, or any
successor provision thereto.

(e) Notwithstanding any provision of this Plan other than Section 4(e),
commencing with calendar year 1999, no Participant may be granted Options and/or

<PAGE>

SARs in any calendar year period with respect to more than three million
(3,000,000) AT&T Shares, or more than three million (3,000,000) Wireless Group
Shares and the maximum dollar value payable with respect to Performance Units
and/or Other Stock Unit Awards that are valued with reference to property other
than Shares and granted to any Participant in any one calendar year is
$10,000,000.

SECTION 13. AMENDMENTS AND TERMINATION. The Board may amend, alter, suspend,
discontinue or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without (i) shareholder approval if such approval is necessary to
qualify for or comply with any tax or regulatory requirement for which or with
which the Board deems it necessary or desirable to qualify or comply or (ii) the
consent of the affected Participant, if such action would impair the rights of
such Participant under any outstanding Award. Notwithstanding anything to the
contrary herein, the Committee may amend the Plan in such manner as may be
necessary so as to have the Plan conform to local rules and regulations in any
jurisdiction outside the United States.

The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Participant without his or her consent. Notwithstanding any provision of
this plan, the Committee may not amend the terms of any Option to reduce the
option price nor may the Committee, without prior shareholder approval, cancel
any outstanding Option and replace it with a new Option with a lower option
price, where the economic effect would be the same as reducing the option price
of the canceled Option.

SECTION 14. GENERAL PROVISIONS.

(a) Unless the Committee determines otherwise at the time the Award is
granted or thereafter: (i) no Award, and no Shares subject to Awards described
in Section 10 which have not been issued or as to which any applicable
restriction, performance or deferral period has not lapsed, may be sold,
assigned, transferred, pledged or otherwise encumbered, except by will or by the
laws of descent and distribution; provided that, if so determined by the
Committee, a Participant may, in the manner established by the Committee,
designate a beneficiary to exercise the rights of the Participant with respect
to any Award upon the death of the Participant; and (ii) each Award shall be
exercisable, during the Participant's lifetime, only by the Participant or, if
permissible under applicable law, by the Participant's guardian or legal
representative.

(b) The term of each Award shall be for such period of months or years from
the date of its grant as may be determined by the Committee; provided that in no
event shall the term of any Stock Option or any Stock Appreciation Right exceed
a period of ten (10) years from the date of its grant.

(c) No Employee or Participant shall have any claim to be granted any Award
under the Plan and there is no obligation for uniformity of treatment of
Employees or Participants under the Plan.

(d) The prospective recipient of any Award under the Plan shall not, with
respect to such Award, be deemed to have become a Participant, or to have any
rights with respect to such Award, until and unless such recipient shall have
executed an agreement or other instrument evidencing the Award and delivered a

<PAGE>

copy thereof to the Company, and otherwise complied with the then applicable
terms and conditions.

(e) Except as provided in Section 12, the Committee shall be authorized to
make adjustments in performance award criteria or in the terms and conditions of
other Awards in recognition of unusual or nonrecurring events affecting the
Company or its financial statements or changes in applicable laws, regulations
or accounting principles. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem desirable to carry it into effect. In the event
the Company shall assume outstanding employee benefit awards or the right or
obligation to make future such awards in connection with the acquisition of or
combination with another corporation or business entity, the Committee may, in
its discretion, make such adjustments in the terms of Awards under the Plan as
it shall deem appropriate.

(f) The Committee shall have full power and authority to determine whether,
to what extent and under what circumstances any Award shall be canceled or
suspended. In addition, all outstanding Awards to any Participant shall be
canceled if the Participant, without the consent of the Company, while employed
by the Company or after termination of such employment, establishes a
relationship with a competitor of the Company or engages in activity which is in
conflict with or adverse to the interest of the Company, as determined under the
AT&T Non-Competition Guideline.

(g) All certificates for Shares delivered under the Plan pursuant to any
Award shall be subject to such stock-transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Shares are then listed, and any applicable Federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.

(h) No Award granted hereunder shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding, unless and
until the Committee in its sole discretion has determined that any such offer,
if made, would be in compliance with all applicable requirements of the U.S.
federal securities laws and any other laws to which such offer, if made, would
be subject.

(i) The Committee shall be authorized to establish procedures pursuant to
which the payment of any Award may be deferred. Subject to the provisions of the
Plan and any Award Agreement, the recipient of an Award (including, without
limitation, any deferred Award) may, if so determined by the Committee, be
entitled to receive, currently or on a deferred basis, cash dividends, or cash
payments in amounts equivalent to cash dividends on Shares ("dividend
equivalents"), with respect to the number of Shares covered by the Award, as
determined by the Committee, in its sole discretion, and the Committee may
provide that such amounts (if any) shall be deemed to have been reinvested in
additional Shares or otherwise reinvested.

(j) Except as otherwise required in any applicable Award Agreement or by the
terms of the Plan, recipients of Awards under the Plan shall not be required to
make any payment or provide consideration other than the rendering of services.

<PAGE>

(k) The Committee may delegate to one or more Senior Managers or a committee
of Senior Managers the right to grant Awards to Employees who are not officers
or directors of the Company and to cancel or suspend Awards to Employees who are
not officers or directors of the Company.

(l) The Company shall be authorized to withhold from any Award granted or
payment due under the Plan the amount of withholding taxes due in respect of an
Award or payment hereunder and to take such other action as may be necessary in
the opinion of the Company to satisfy all obligations for the payment of such
taxes. The Committee shall be authorized to establish procedures for election by
Participants to satisfy such obligations for the payment of such taxes by
delivery of or transfer of Shares to the Company, or by directing the Company to
retain Shares otherwise deliverable in connection with the Award.

(m) Nothing contained in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to shareholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.

(n) The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws
of the State of New York and applicable Federal law.

(o) If any provision of this Plan is or becomes or is deemed invalid,
illegal or unenforceable in any jurisdiction, or would disqualify the Plan or
any Award under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform to applicable laws or if it cannot be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan, it shall be stricken and the
remainder of the Plan shall remain in full force and effect.

(p) Awards may be granted to Participants who are foreign nationals or
employed outside the United States, or both, on such terms and conditions
different from those applicable to Awards to Employees employed in the United
States as may, in the judgment of the Committee, be necessary or desirable in
order to recognize differences in local law or tax policy. The Committee also
may impose conditions on the exercise or vesting of Awards in order to minimize
the Company's obligation with respect to tax equalization for Employees on
assignments outside their home country.

SECTION 15. EFFECTIVE DATE OF PLAN. The Plan shall be effective as of
June 1, 1997.

SECTION 16. TERM OF PLAN. No Award shall be granted pursuant to the
Plan after May 31, 2004, but any Award theretofore granted may extend beyond
that date.

AT&T Corp.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in Millions)
(Unaudited)

For the years ended December 31,
1999 1998 1997 1996 1995

Income from continuing
operations before
income taxes $6,685 $8,307 $6,972 $8,697 $4,925

Less interest capitalized
during the period 143 197 254 193 107

Add equity investment losses,
net of distributions of
less than 50% owned
affiliates 966 288 144 155 205

Add fixed charges 2,387 872 846 855 730

Total earnings from
continuing operations
before income taxes
and fixed charges $9,895 $9,270 $7,708 $9,514 $5,753

Fixed Charges:

Total interest expense
including capitalized
interest $1,794 $ 624 $ 562 $ 610 $ 508

Interest portion of
rental expense 276 248 284 245 222

Dividend requirements on
subsidiary preferred stock
and interest on trust
preferred securities 317 - - - -

Total fixed charges $2,387 $ 872 $ 846 $ 855 $ 730

Ratio of earnings
to fixed charges 4.1 10.6 9.1 11.1 7.9

Exhibit 13

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

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

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

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

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

In addition to delivering on our domestic and global strategic objectives for
1999, we also achieved the aggressive financial targets we set for the year. We

<PAGE>

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

FORWARD-LOOKING STATEMENTS
Except for the historical statements and discussions contained herein,
statements contained herein constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including statements concerning future
operating performance, AT&T's share of new and existing markets, AT&T's short-
and long-term revenue and earnings growth rates, and general industry growth
rates and AT&T's performance relative thereto. These forward-looking statements
rely on a number of assumptions concerning future events, including the adoption

<PAGE>

and implementation of balanced and effective rules and regulations by the
Federal Communications Commission (FCC) and the state public regulatory
agencies, and AT&T's ability to achieve a significant market penetration in new
markets. These forward-looking statements are subject to a number of
uncertainties and other factors, many of which are outside AT&T's control, that
could cause actual results to differ materially from such statements. AT&T
disclaims any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.

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

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

Operating income margin 17.4% 14.1% 13.3%

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

Access and other interconnection expenses are the charges we pay to connect
calls on the facilities of local exchange carriers and other domestic service
providers, and fees we pay foreign telephone companies (international

<PAGE>

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

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

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

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

Selling, general and administrative (SG&A) expenses increased $746 million, or
5.8%, in 1999 compared with 1998. This increase was due to the Broadband and
AGNS acquisitions. Excluding these expenses, SG&A expenses declined $529
million, or 4.2%. Reductions in consumer long distance acquisition-program
spending resulted in lower marketing and sales expenses. In 1999 we continued
our efforts to achieve a best-in-class cost structure with companywide
cost-control initiatives, which yielded an improving cost structure. These
decreases were partially offset by increased costs in Wireless Services to

<PAGE>

support the growing subscriber base. SG&A expenses as a percent of revenue were
21.7% in 1999, 24.0% in 1998 and 27.9% in 1997. We expect SG&A expenses as a
percent of revenue to continue to decline as we continue to focus on controlling
our expenses and prioritizing our spending. In addition, we expect to realize a
larger pension credit in 2000 resulting from a higher pension trust asset base
and an increase in the discount rate used to measure the pension and
postretirement obligations.

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

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

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

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

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

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

<PAGE>

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

Net Restructuring and Other Charges

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

The restructuring initiative is projected to yield cash savings of approximately
$250 million per year, as well as EBIT [earnings, including other

<PAGE>

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

The effective income tax rate is the provision for income taxes as a percent of
income from continuing operations before income taxes. The effective income tax
rate was 48.7% in 1999, 37.0% in 1998 and 39.0% in 1997. The effective income
tax rate for AT&T Group was 37.4% in 1999, 37.0% in 1998 and 39.0% in 1997. The
1999 effective tax rate for AT&T Group was impacted by the in-process research

<PAGE>

and development charge, which was not tax deductible, and a change in the net
operating loss utilization tax rules that resulted in a $75 million reduction in
the valuation allowance and the income tax provision. In addition, the 1999
effective tax rate reflects tax benefits associated with investment
dispositions, legal entity restructurings and other tax planning strategies. The
effective tax rate for 1998 was impacted by the pooling of TCG's historical
results, which did not include tax benefits on preacquisition losses, and the
effects of certain foreign legal entity restructurings and investment
dispositions.

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

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

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

SEGMENT RESULTS

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

The discussion of segment results includes revenue; earnings, including other
income (expense), before interest and taxes (EBIT); earnings, including other
income (expense), before interest, taxes, depreciation and amortization
(EBITDA); total assets; and capital additions. The discussion of EBITDA for
Wireless Services and Broadband is modified to exclude other income (expense).
Total assets for each segment include all assets, except intercompany
receivables. Prepaid pension assets and corporate-owned or leased real estate
are generally held at the corporate level and therefore are included in the
Other and Corporate group. Shared network assets are allocated to the segments

<PAGE>

and reallocated each January, based on two years of volumes. Capital additions
for each segment include capital expenditures for property, plant and equipment,
acquisitions of licenses, additions to nonconsolidated investments, increases in
franchise costs and additions to internal-use software.

EBIT is the primary measure used by AT&T's chief operating decision makers to
measure AT&T's operating results and to measure segment profitability and
performance. AT&T calculates EBIT as operating income plus other income
(expense). In addition, management also uses EBITDA as a measure of segment
profitability and performance, and is defined as EBIT plus depreciation and
amortization. Interest and taxes are not factored into the profitability measure
used by the chief operating decision makers; therefore, trends for these items
are discussed on a consolidated basis. Management believes EBIT is meaningful to
investors because it provides analysis of operating results using the same
measures used by AT&T's chief operating decision makers and provides a return on
total capitalization measure. We believe EBITDA is meaningful to investors as a
measure of each segment's liquidity consistent with the measure utilized by our
chief operating decision makers. In addition, we believe that both EBIT and
EBITDA allow investors a means to evaluate the financial results of each segment
in relation to AT&T. Our calculation of EBIT and EBITDA may or may not be
consistent with the calculation of these measures by other public companies.
EBIT and EBITDA should not be viewed by investors as an alternative to generally
accepted accounting principles (GAAP) measures of income as a measure of
performance or to cash flows from operating, investing and financing activities
as a measure of liquidity. In addition, EBITDA does not take into account
changes in certain assets and liabilities that can affect cash flow.

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

EBIT increased $960 million, or 23.7%, and EBITDA increased $1,493 million, or
25.3%, in 1998. The increases were driven by growth in revenue and the benefits
reaped from cost-cutting initiatives. Partly offsetting the increase in EBIT and
EBITDA in 1998 was the gain on the sale of Skynet, recorded in 1997. In

<PAGE>

addition, the EBIT improvements were partially offset by increased depreciation
and amortization expenses correlated to the continued high levels of capital
expenditures.

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

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

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

For the Years Ended December 31, 1999 1998 1997
Dollars in millions

Revenue $21,972 $22,885 $23,690
EBIT 7,968 6,568 4,922
EBITDA 8,845 7,298 5,694
Capital additions 859 526 1,010

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

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

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

<PAGE>

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

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

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

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

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

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

For the Years Ended December 31, 1999 1998 1997
Dollars in millions

Revenue $ 7,627 $ 5,406 $ 4,668
EBIT (474) 182 366
EBITDA excluding other income (expense) 640 947 964
Capital additions 2,598 2,321 2,071

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

REVENUE
Wireless Services revenue grew $2,221 million, or 41.1%, in 1999 compared with
1998. Wireless Services' 1999 results include Vanguard Cellular Systems, Inc.

<PAGE>

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

At December 31, 1999
Total assets $56,536

REVENUE
From the date of acquisition through December 31, 1999, Broadband revenue was
$4,871 million. Broadband ended the year with 11.4 million basic cable

<PAGE>

customers, passing approximately 19.7 million homes, and had approximately 1.8
million digital-cable customers. Broadband's high-speed cable Internet service,
AT&T@Home, ended 1999 with approximately 207,000 customers.

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

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

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

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

For the Years Ended December 31, 1999 1998 1997
Dollars in millions

Revenue $ 2,819 $ 1,321 $ 888
EBIT (991) (3,023) (2,056)
EBITDA (273) (2,547) (1,587)
Capital additions 1,798 779 1,055

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

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

<PAGE>

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

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

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

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

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

SUPPLEMENTAL DISCLOSURES

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

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

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

REVENUE
AT&T Solutions revenue for 1999 rose $2,022 million, or 184.1%. Adjusted to
exclude the impact of the acquisition of AGNS, revenue grew $531 million, or

<PAGE>

48.3%, to $1,629 million. For 1998 revenue grew 33.2% to $1,098 million.
Throughout both 1999 and 1998, revenue strength was associated with the signing
of new contracts as well as the expansion of services provided to existing
clients.

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

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

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

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

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

For the Years Ended December 31, 1999 1998 1997
Dollars in millions

Revenue $1,228 $1,083 $ 712
EBIT (316) (333) (399)
EBITDA (252) (264) (338)
Capital additions 1,095 155 496

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

<PAGE>

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

At December 31, 1999, we had a 364-day, $7 billion revolving-credit facility
with a consortium of 42 lenders. We also had additional 364-day, revolving-

<PAGE>

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

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

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

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

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

We use forward and option contracts to reduce our exposure to the risk of
adverse changes in currency exchange rates. We are subject to foreign exchange
risk related to reimbursements to foreign telephone companies for their portion
of the revenue billed by AT&T for calls placed in the United States to a foreign
country. In addition, we are also subject to foreign exchange risk related to
other foreign-currency-denominated transactions. As of December 31, 1999, we had
a net unrealized loss on forward contracts of $27 million. As of December 31,
1998, we had a net unrealized gain on forward contracts of $9 million.
Unrealized gains and losses are calculated based on the difference between the
contract rate and the rate available to terminate the contracts. We monitor our

<PAGE>

foreign exchange rate risk on the basis of changes in fair value. Assuming a 10%
appreciation in the U.S. dollar at December 31, 1999 and 1998, the fair value of
these contracts would have resulted in additional unrealized losses of $29
million and $20 million, respectively. Because these contracts are entered into
for hedging purposes, we believe that these losses would be largely offset by
gains on the underlying firmly committed or anticipated transactions.

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

YEAR 2000
AT&T's Year 2000 (Y2K) program addressed the use of two-digit, instead of
four-digit, year fields in computer systems. If computer systems could not
distinguish between the year 1900 and the year 2000, system failures or other

<PAGE>

computer errors could have resulted. The potential for failures and errors
spanned all aspects of our business, including computer systems, voice and data
networks, and building infrastructures. We also needed to address our
interdependencies with our suppliers, connecting carriers and major customers,
all of whom faced the same concern. All computer systems were tested and
repaired as of December 31, 1999, and no major Y2K-related problems were
reported as the calendars rolled to January 1, 2000. The cost of AT&T's Y2K
program was $725 million since inception in 1997. Total costs for 1999 were $275
million, of which approximately $45 million represented capital spending for
upgrading and replacing noncompliant computer systems. Less than half of the
1999 costs represent internal information technology resources that were
redeployed from other projects and are expected to return to these projects in
2000.

SUBSEQUENT EVENTS

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

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

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

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

STOCK INFORMATION
AT&T (ticker symbol "T") is listed on the New York Stock Exchange, as well as
the Boston, Chicago, Cincinnati, Pacific and Philadelphia exchanges in the
United States, and on stock exchanges in Brussels, London, Paris and Geneva. As
of December 31, 1999, AT&T had 3.2 billion shares outstanding, held by more than
4.2 million shareowners. Liberty Media Group Class A and Class B common stock
(ticker symbols "LMG.A" and "LMG.B"), tracking stock of AT&T, are listed on the
New York Stock Exchange. As of December 31, 1999, Liberty Media Class A had 1.2
billion shares outstanding, held by 5,902 shareowners; Liberty Media Class B had
108.4 million shares outstanding, held by 417 shareowners.

List of Subsidiaries of AT&T Corp.
As of 3/23/00

Jurisdiction of Incorporation

ACC Corp.................................................Delaware
Alascom, Inc.............................................Alaska
AT&T Communications, Inc.................................Delaware
AT&T Communications of California, Inc...................California
AT&T Communications of Delaware, Inc.....................Delaware
AT&T Communications of Hawaii, Inc.......................Hawaii
AT&T Communications of Illinois, Inc.....................Illinois
AT&T Communications of Indiana, Inc......................Indiana
AT&T Communications of Maryland, Inc.....................Maryland
AT&T Communications of Michigan, Inc.....................Michigan
AT&T Communications of the Midwest, Inc..................Iowa
AT&T Communications of the Mountain States, Inc..........Colorado
AT&T Communications of Nevada, Inc.......................Nevada
AT&T Communications of New England, Inc..................New York
AT&T Communications of New Hampshire, Inc................New Hampshire
AT&T Communications of New Jersey, Inc...................New Jersey
AT&T Communications of New York, Inc.....................New York
AT&T Communications of Ohio, Inc.........................Ohio
AT&T Communications of the Pacific Northwest, Inc........Washington
AT&T Communications of Pennsylvania, Inc.................Pennsylvania
AT&T Communications of the South Central States, Inc.....Delaware
AT&T Communications of the Southern States, Inc..........New York
AT&T Communications of the Southwest, Inc................Delaware
AT&T Communications of Virginia, Inc.....................Virginia
AT&T Communications of Washington D.C., Inc..............New York
AT&T Communications of West Virginia, Inc................West Virginia
AT&T Communications of Wisconsin, Inc....................Wisconsin
AT&T Communications Services International Inc...........Delaware
AT&T Global Communications Services Inc..................Delaware
AT&T Istel...............................................United Kingdom
AT&T Solutions Inc.......................................Delaware
AT&T Global Network Services Inc.........................Delaware
AT&T of Puerto Rico, Inc.................................New York
AT&T Wireless Services, Inc..............................Delaware
LIN Broadcasting Corporation.............................Delaware
Teleport Communications Group Inc........................Delaware
Tele-Communications, Inc.................................Delaware

Exhibit 23a

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the registration
statements on Form S-3 for the Shareowner Dividend Reinvestment and Stock
Purchase Plan (Registration No. 333-00573), Forms S-8 for the AT&T Long Term
Savings and Security Plan (Registration Nos. 333-47257 and 33-34265), Forms S-8
for the AT&T Long Term Savings Plan for Management Employees (Registration Nos.
33-34264, 33-29256 and 33-21937), Form S-8 for the AT&T Retirement Savings and
Profit Sharing Plan (Registration No. 33-39708), Forms S-8 for Shares Issuable
Under the Stock Option Plan of the AT&T 1987 Long Term Incentive Program
(Registration Nos. 333-47251 and 33-56643), Form S-8 for the AT&T of Puerto
Rico, Inc. Long Term Savings Plan for Management Employees (Registration No.
33-50819), Form S-8 for the AT&T of Puerto Rico, Inc. Long Term Savings and
Security Plan (Registration No. 33-50817), and Post-Effective Amendment No. 1 on
Form S-8 to Form S-8 Registration Statement (Registration No. 33-54797) for the
AT&T 1996 Employee Stock Purchase Plan, Form S-8 for the AT&T Shares for Growth
Program (Registration No. 333-47255), Form S-8 for the AT&T 1997 Long Term
Incentive Program (Registration No. 33-28665), Form S-3 for the AT&T
$2,600,000,000 Notes and Warrants to Purchase Notes (Registration No. 33-49589),
Form S-3 for the AT&T $3,000,000,000 Notes and Warrants to Purchase Notes
(Registration No. 33-59495), Form S-4 for the AT&T 5,000,000 Common Shares
(Registration No. 33-57745), and in Post-Effective Amendment Nos. 1, 2 and 3 on
Form S-8 to Form S-4 Registration Statement (Registration No. 33-42150) for the
NCR Corporation 1989 Stock Compensation Plan (Registration No. 33-42150-01), the
NCR Corporation 1984 Stock Option Plan (Registration No. 33-42150-02) and the
NCR Corporation 1976 Stock Option Plan (Registration No. 33-42150-03),
respectively, and the Post-Effective Amendment Nos. 1, 2, 3 and 5 on Form S-8 to
Form S-4 Registration Statement (Registration No. 33-52119) for the McCaw
Cellular Communications, Inc. 1983 Non-Qualified Stock Option Plan (Registration
No. 33-52119-01), the McCaw Cellular Communications, Inc. 1987 Stock Option Plan
(Registration No. 33-52119-02), the McCaw Cellular Communications, Inc. Equity
Purchase Plan (Registration No. 33-52119-03) and the McCaw Cellular
Communications, Inc. Employee Stock Purchase Plan (Registration No.
33-52119-05), respectively, and Post-Effective Amendment No. 1 on Form S-8 to
Form S-4 Registration Statement (Registration No. 33-45302) for the Teradata
Corporation 1987 Incentive and Other Stock Option Plan (Registration No.
33-45302-01), Form S-8 for the AT&T Amended and Restated 1969 Stock Option Plan
for LIN Broadcasting Corp. (Registration No. 33-63195), and in Post Effective
Amendment Nos. 1, 2, 3, 4 and 5 on Form S-8 to Form S-4 Registration Statement
(Registration No. 333-49419) for the Teleport Communications Group Inc. 1993
Stock Option Plan (Registration No. 333-49419-01), Teleport Communications Group
Inc. 1996 Equity Incentive Plan (Registration No. 333-49419-02), ACC Corp.
Employee Long Term Incentive Plan (Registration No. 333-49419-03), ACC Corp.
Non-Employee Directors' Stock Option Plan (Registration No. 333-49419-04) and
ACC Corp. 1996 UK Sharesave Scheme (Registration No. 333-49419-05), and Form S-8
for AT&T Wireless Services, Inc. Employee Stock Purchase Plan (Registration No.
333-52757), and in Post-Effective Amendment Nos. 1 and 2 on Form S-8 and
Post-Effective Amendment No. 3 to Form S-4 Registration Statement (Registration
No. 333-70279) for the Tele-Communications, Inc. 1998 Incentive Plan, the
Tele-Communications, Inc. 1996 Incentive Plan (Amended and Restated), the
Tele-Communications, Inc. 1995 Employee Stock Incentive Plan (Amended and

<PAGE>

Restated), the Tele-Communications, Inc. 1994 Stock Incentive Plan (Amended and
Restated), the Tele-Communications, Inc. 1994 Nonemployee Director Stock Option
Plan, the Tele-Communications International, Inc., the 1996 Nonemployee Director
Stock Option Plan, the Tele-Communications International, Inc. 1995 Stock
Incentive Plan (Registration No. 333-70279-01), the Liberty Media 401(K) Savings
Plan, the TCI 401(K) Stock Plan (Registration No. 333-70279-02), Form S-3 for
the $13,080,000 Debt Securities and Warrants to Purchase Debt Securities
(Registration No. 333-71167) and Form S-4 for Vanguard Cellular Systems, Inc.
(Registration No. 333-75083) of AT&T Corp., and Form S-4 for Media One Corp.
(Registration No. 333-86019) of AT&T Corp., and Form S-4 for Four Media Corp.
(Registration No. 333-30250) of AT&T Corp., and Form S-8 for AT&T Long Term
Savings (Registration No. 333-87935) of AT&T Corp., of our report dated March 9,
2000 relating to the consolidated financial statements of AT&T Corp. and its
subsidiaries, which appears in the 1999 Annual Report to Shareholders, which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report dated March 9, 2000 relating to the
financial statement schedule, which appears in this Form 10-K.

PricewaterhouseCoopers LLP

New York, New York
March 27, 2000

<PAGE>
Exhibit 23b

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the following AT&T Corp.
registration statements of our report dated February 29, 2000, relating to the
combined balance sheets of Liberty Media Group ("New Liberty" or "Successor") as
of December 31, 1999, and of Liberty Media Group ("Old Liberty" or
"Predecessor") as of December 31, 1998, and the related combined statements of
operations and comprehensive earnings, combined equity and cash flows for the
period from March 1, 1999 to December 31, 1999 (Successor period) and from
January 1, 1999 to February 28, 1999 and for each of the years in the two-year
period ended December 31, 1998 (Predecessor periods), which appears as an
exhibit to this AT&T Corp. 1999 Annual Report on Form 10-K:
<TABLE>
<CAPTION>
Registration
Form Statement No. Description
- ---- ------------- -----------
<S> <C> <C>
S-3 333-00573 Shareowner Dividend Reinvestment and Stock Purchase
Plan
S-8 333-47257 and 33-34265 AT&T Long Term Savings and Security Plan
S-8 33-34264, 33-29256 and 33-21937 AT&T Long Term Savings Plan for Management Employees
S-8 33-39708 AT&T Retirement Savings and Profit Sharing Plan
S-8 333-47251 and 33-56643 Shares Issuable Under the Stock Option Plan of the AT&T 1987 Long Term
Incentive Program
S-8 33-50819 AT&T of Puerto Rico, Inc. Long Term Savings Plan for Management Employees
S-8 33-50817 AT&T of Puerto Rico, Inc. Long Term Savings and Security Plan
S-8 33-54797 (Post-Effective Amendment No. 1) AT&T 1996 Employee Stock Purchase Plan
S-8 333-47255 AT&T Shares for Growth Program
S-8 33-28665 AT&T 1997 Long Term Incentive Program
S-4 33-57745 AT&T 7,500,000 Common Shares
S-8 33-42150 (Post-Effective Amendment No. 1 to NCR Corporation 1989 Stock Compensation Plan
Form S-4, (33-42150-01))
S-8 33-42150 (Post-Effective Amendment No. 2 to NCR Corporation 1984 Stock Option Plan
Form S-4, (33-42150-02))
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Registration
Form Statement No. Description
- ---- ------------- -----------
<S> <C> <C>
S-8 33-42150 (Post-Effective Amendment No. 3 to NCR Corporation 1976 Stock Option Plan
Form S-4, (33-42150-03))
S-8 33-52119 (Post-Effective Amendment No. 1 to McCaw Cellular Communications, Inc. 1983 Non-Qualified
Form S-4, (33-52119-01) Stock Option Plan
S-8 33-52119 (Post-Effective Amendment No. 2 to McCaw Cellular Communications, Inc. 1987 Stock Option
Form S-4, (33-52119-02) Plan
S-8 33-52119 (Post-Effective Amendment No. 3 to McCaw Cellular Communications, Inc. Equity Purchase
Form S-4, (33-52119-03) Plan
S-8 33-52119 (Post-Effective Amendment No. 5 to McCaw Cellular Communications, Inc. Employee Stock
Form S-4, (33-52119-05) Purchase Plan
S-8 33-45302 (Post-Effective Amendment No. 1 to Teradata Corporation 1987 Incentive and Other Stock
Form S-4, (33-45302-01)) Option Plan
S-8 33-63195 AT&T Amended and Restated 1969 Stock Option Plan for
LIN Broadcasting Corp.
S-8 333-49419 (Post-Effective Amendment No. 1 to Teleport Communications Group Inc. 1993 Stock Option
Form S-4, (333-49419-01)) Plan
S-8 333-49419 (Post-Effective Amendment No. 2 to Teleport Communications Group Inc. 1996 Equity
Form S-4, (333-49419-02)) Incentive Plan
S-8 333-49419 (Post-Effective Amendment No. 3 to ACC Corp. Employee Long Term Incentive Plan
Form S-4, (333-49419-03))
S-8 333-49419 (Post-Effective Amendment No. 4 to ACC Corp. Non-Employee Directors' Stock Option Plan
Form S-4, (333-49419-04))
S-8 333-49419 (Post-Effective Amendment No. 5 to ACC Corp. 1996 UK Sharesave Scheme
Form S-4, (333-49419-05))
S-8 333-52757 AT&T Wireless Services, Inc. Employee Stock Purchase
Plan
S-8 333-70279 (Post-Effective Amendments Nos. 1 Tele-Communications, Inc. 1998 Incentive Plan
and 3 to Form S-4, (333-70279-01))
Tele-Communications, Inc. 1996 Incentive Plan (Amended
and Restated)
Tele-Communications, Inc. 1995 Employee Stock
Incentive Plan (Amended and Restated)
Tele-Communications, Inc. 1994 Stock Incentive Plan
(Amended and Restated)
Tele-Communications, Inc. 1994 Nonemployee Director
Stock Option Plan
Tele-Communications International, Inc. 1996
Nonemployee Director Stock Option Plan
Tele-Communications International, Inc. 1995 Stock
Incentive Plan
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Registration
Form Statement No. Description
- ---- ------------- -----------
<S> <C> <C>
S-8 333-70279 (Post-Effective Amendments No. 2 to Liberty Media 401(K) Savings Plan
Form S-4, (333-70279-02))
TCI 401(K) Stock Plan
S-3 333-71167 $13,080,000 Debt Securities and Warrants to Purchase
Debt Securities
S-4 333-75083 Vanguard Cellular Systems, Inc.
S-4 333-86019 Media One Corp.
S-4 333-30250 Four Media Corp.
S-8 333-87935 AT&T Long Term Savings
</TABLE>

KPMG LLP

Denver, Colorado
March 27, 2000

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, AT&T CORP., a New York corporation (hereinafter referred to as
the "Company"), proposes to file with the Securities and Exchange Commission,
under the provisions of the Securities Exchange Act of 1934, as amended, an
annual report on Form 10-K; and

WHEREAS, the undersigned is both a director and an officer of the
Company, as indicated below his signature:

NOW, THEREFORE, the undersigned hereby constitutes and appoints C. H.
NOSKI, N. S. CYPRUS AND M. J. WASSER and each of them, as attorney for him and
in his name, place and stead, and in his capacity as both a director and an
officer of the Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby giving and
granting to said attorneys, and each of them, full power and authority to do and
perform each and every act and thing whatsoever requisite and necessary to be
done in and about the premises, as fully, to all intents and purposes, as he
might or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ C. Michael Armstrong
-----------------------------
C. Michael Armstrong
Chairman of the Board and Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is both a director and an officer of the
Company, as indicated below his signature:

NOW, THEREFORE, the undersigned hereby constitutes and appoints C. H.
NOSKI, N. S. CYPRUS AND M. J. WASSER and each of them, as attorneys for him and
in his name, place and stead, and in his capacity as an officer of the Company,
to execute and file such annual report, and thereafter to execute and file any
amendments or amendments thereto, hereby giving and granting to said attorneys,
and each of them, full power and authority to do and perform each and every act
and thing whatsoever requisite and necessary to be done in and about the
premises, as fully, to all intents and purposes, as he might or could do if
personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do, or cause to be done, by virtue
hereof.

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ J. D. Zeglis
-----------------------------
J. D. Zeglis
President and Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is an officer of the Company, as indicated
below his signature:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ Charles H. Noski
-----------------------------
Charles H. Noski
Senior Executive Vice President
and Chief Financial Officer

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is an officer of the Company, as indicated
below her signature:

NOW, THEREFORE, the undersigned hereby constitutes and appoints C. H.
NOSKI, N. S. CYPRUS AND M. J. WASSER, and each of them, as attorneys for her and
in her name, place and stead, and in her capacity as an officer of the Company,
to execute and file such annual report, and thereafter to execute and file any
amendments or amendments thereto, hereby giving and granting to said attorneys,
and each of them, full power and authority to do and perform each and every act
and thing whatsoever requisite and necessary to be done in and about the
premises, as fully, to all intents and purposes, as she might or could do if
personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do, or cause to be done, by virtue
hereof.

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ Nicholas S. Cyprus
-----------------------------
Nicholas S. Cyprus
Vice President and Controller

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Company:

NOW, THEREFORE, the undersigned hereby constitutes and appoints C. H.
NOSKI, N. S. CYPRUS AND M. J. WASSER and each of them, as attorneys for him or
her and in his or her name, place and stead, and in his or her capacity as a
director of the Company, to execute and file such annual report, and thereafter
to execute and file any amendments or amendments thereto, hereby giving and
granting to said attorneys, and each of them, full power and authority to do and
perform each and every act and thing whatsoever requisite and necessary to be
done in and about the premises, as fully, to all intents and purposes, as he or
she might or could do if personally present at the doing thereof, hereby
ratifying and confirming all that said attorneys may or shall lawfully do, or
cause to be done, by virtue hereof.

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ Kenneth T. Derr
-----------------------------
Kenneth T. Derr
Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Company:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ M. Kathryn Eickhoff
-----------------------------
M. Kathryn Eickhoff
Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Company:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ Walter Y. Elisha
-----------------------------
Walter Y. Elisha
Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Company:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ George M. C. Fisher
-----------------------------
George M. C. Fisher
Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Company:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ Donald V. Fites
-----------------------------
Donald V. Fites
Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Company:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ Amos B. Hostetter, Jr.
-----------------------------
Amos B. Hostetter, Jr.
Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Company:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ Ralph S. Larsen
-----------------------------
Ralph S. Larsen
Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Company:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ John C. Malone
-----------------------------
John C. Malone
Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Company:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ Donald F. McHenry
-----------------------------
Donald F. McHenry
Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Company:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ Michael I. Sovern
-----------------------------
Michael I. Sovern
Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Company:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ Sanford I. Weill
-----------------------------
Sanford I. Weill
Director

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, the undersigned is a director of the Company:

IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 27th day of March, 2000.

/s/ Thomas H. Wyman
-----------------------------
Thomas H. Wyman
Director

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of AT&T Corp. at December 31, 1999, and the
consolidated statement of income for the twelve-month period ended December 31,
1999, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,024
<SECURITIES> 0
<RECEIVABLES> 11,960
<ALLOWANCES> 1,507
<INVENTORY> 0
<CURRENT-ASSETS> 13,884
<PP&E> 69,675
<DEPRECIATION> 30,057
<TOTAL-ASSETS> 169,406
<CURRENT-LIABILITIES> 28,207
<BONDS> 21,591
6,326
0
<COMMON> 4,461
<OTHER-SE> 74,466
<TOTAL-LIABILITY-AND-EQUITY> 169,406
<SALES> 0
<TOTAL-REVENUES> 62,391
<CGS> 0
<TOTAL-COSTS> 51,532
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,416
<INTEREST-EXPENSE> 1,651
<INCOME-PRETAX> 6,685
<INCOME-TAX> 3,257
<INCOME-CONTINUING> 3,428
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,428
<EPS-BASIC> 1.77
<EPS-DILUTED> 1.74

</TABLE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated balance sheet of AT&T Corp. at September 30, 1999, and
the unaudited consolidated statement of income for the nine-month period ended
September 30, 1999, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 12,117
<ALLOWANCES> 1,488
<INVENTORY> 0
<CURRENT-ASSETS> 13,040
<PP&E> 65,361
<DEPRECIATION> 28,886
<TOTAL-ASSETS> 161,806
<CURRENT-LIABILITIES> 23,515
<BONDS> 22,073
6,346
0
<COMMON> 4,461
<OTHER-SE> 70,302
<TOTAL-LIABILITY-AND-EQUITY> 161,806
<SALES> 0
<TOTAL-REVENUES> 46,057
<CGS> 0
<TOTAL-COSTS> 37,639
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,077
<INTEREST-EXPENSE> 1,108
<INCOME-PRETAX> 6,158
<INCOME-TAX> 2,679
<INCOME-CONTINUING> 3,479
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,479
<EPS-BASIC> 1.41
<EPS-DILUTED> 1.39

</TABLE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated balance sheet of AT&T Corp. at June 30, 1999, and the
unaudited consolidated statement of income for the six-month period ended June
30, 1999, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 418
<SECURITIES> 0
<RECEIVABLES> 11,257
<ALLOWANCES> 1,227
<INVENTORY> 0
<CURRENT-ASSETS> 12,946
<PP&E> 62,574
<DEPRECIATION> 27,580
<TOTAL-ASSETS> 145,238
<CURRENT-LIABILITIES> 21,577
<BONDS> 22,152
6,354
0
<COMMON> 4,461
<OTHER-SE> 69,027
<TOTAL-LIABILITY-AND-EQUITY> 145,238
<SALES> 0
<TOTAL-REVENUES> 29,787
<CGS> 0
<TOTAL-COSTS> 24,758
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 733
<INTEREST-EXPENSE> 649
<INCOME-PRETAX> 3,854
<INCOME-TAX> 1,791
<INCOME-CONTINUING> 2,063
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,063
<EPS-BASIC> 0.90
<EPS-DILUTED> 0.88

</TABLE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated balance sheet of AT&T Corp. at March 31, 1999, and the
unaudited consolidated statement of income for the three-month period ended
March 31, 1999, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,463
<SECURITIES> 0
<RECEIVABLES> 10,526
<ALLOWANCES> 1,143
<INVENTORY> 0
<CURRENT-ASSETS> 13,245
<PP&E> 59,539
<DEPRECIATION> 26,524
<TOTAL-ASSETS> 135,635
<CURRENT-LIABILITIES> 19,443
<BONDS> 22,488
1,660
0
<COMMON> 3,807
<OTHER-SE> 66,555
<TOTAL-LIABILITY-AND-EQUITY> 135,635
<SALES> 0
<TOTAL-REVENUES> 14,096
<CGS> 0
<TOTAL-COSTS> 11,980
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 386
<INTEREST-EXPENSE> 190
<INCOME-PRETAX> 2,017
<INCOME-TAX> 999
<INCOME-CONTINUING> 1,018
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,018
<EPS-BASIC> 0.39
<EPS-DILUTED> 0.38

</TABLE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of AT&T Corp. at December 31, 1998, and the
consolidated statement of income for the twelve-month period ended December 31,
1998, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,160
<SECURITIES> 0
<RECEIVABLES> 10,115
<ALLOWANCES> 1,060
<INVENTORY> 0
<CURRENT-ASSETS> 14,118
<PP&E> 52,277
<DEPRECIATION> 25,374
<TOTAL-ASSETS> 59,550
<CURRENT-LIABILITIES> 15,442
<BONDS> 5,556
0
0
<COMMON> 2,630
<OTHER-SE> 22,892
<TOTAL-LIABILITY-AND-EQUITY> 59,550
<SALES> 0
<TOTAL-REVENUES> 53,223
<CGS> 0
<TOTAL-COSTS> 45,736
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,389
<INTEREST-EXPENSE> 427
<INCOME-PRETAX> 8,307
<INCOME-TAX> 3,072
<INCOME-CONTINUING> 5,235
<DISCONTINUED> 1,300
<EXTRAORDINARY> (137)
<CHANGES> 0
<NET-INCOME> 6,398
<EPS-BASIC> 2.39
<EPS-DILUTED> 2.37

</TABLE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated balance sheet of AT&T Corp. at September 30, 1998, and
the unaudited consolidated statement of income for the nine-month period ended
September 30, 1998, and is qualified in its entirety by reference to such
financial statements.

</LEGEND>
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,190
<SECURITIES> 0
<RECEIVABLES> 10,412
<ALLOWANCES> 1,029
<INVENTORY> 0
<CURRENT-ASSETS> 15,563
<PP&E> 49,811
<DEPRECIATION> 24,718
<TOTAL-ASSETS> 58,318
<CURRENT-LIABILITIES> 14,723
<BONDS> 6,079
0
0
<COMMON> 2,631
<OTHER-SE> 21,533
<TOTAL-LIABILITY-AND-EQUITY> 58,318
<SALES> 0
<TOTAL-REVENUES> 39,695
<CGS> 0
<TOTAL-COSTS> 35,394
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,050
<INTEREST-EXPENSE> 322
<INCOME-PRETAX> 5,148
<INCOME-TAX> 1,901
<INCOME-CONTINUING> 3,247
<DISCONTINUED> 1,300
<EXTRAORDINARY> (137)
<CHANGES> 0
<NET-INCOME> 4,410
<EPS-BASIC> 1.64
<EPS-DILUTED> 1.62

</TABLE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated balance sheet of AT&T Corp. at June 30, 1998, and the
unaudited consolidated statement of income for the six-month period ended June
30, 1998, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 7,845
<SECURITIES> 123
<RECEIVABLES> 10,297
<ALLOWANCES> 1,044
<INVENTORY> 0
<CURRENT-ASSETS> 19,179
<PP&E> 48,059
<DEPRECIATION> 23,815
<TOTAL-ASSETS> 61,085
<CURRENT-LIABILITIES> 14,725
<BONDS> 7,161
0
0
<COMMON> 2,709
<OTHER-SE> 23,027
<TOTAL-LIABILITY-AND-EQUITY> 61,085
<SALES> 0
<TOTAL-REVENUES> 26,042
<CGS> 0
<TOTAL-COSTS> 25,097
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 714
<INTEREST-EXPENSE> 208
<INCOME-PRETAX> 1,750
<INCOME-TAX> 626
<INCOME-CONTINUING> 1,124
<DISCONTINUED> 1,300
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,424
<EPS-BASIC> 0.90
<EPS-DILUTED> 0.89

</TABLE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated balance sheet of AT&T Corp. at March 31, 1998, and the
unaudited consolidated statement of income for the three-month period ended
March 31, 1998, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 328
<SECURITIES> 245
<RECEIVABLES> 14,783
<ALLOWANCES> 1,020
<INVENTORY> 0
<CURRENT-ASSETS> 16,215
<PP&E> 46,663
<DEPRECIATION> 23,084
<TOTAL-ASSETS> 59,467
<CURRENT-LIABILITIES> 15,844
<BONDS> 7,342
0
0
<COMMON> 2,683
<OTHER-SE> 21,611
<TOTAL-LIABILITY-AND-EQUITY> 59,467
<SALES> 0
<TOTAL-REVENUES> 12,831
<CGS> 0
<TOTAL-COSTS> 11,427
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 362
<INTEREST-EXPENSE> 80
<INCOME-PRETAX> 2,030
<INCOME-TAX> 745
<INCOME-CONTINUING> 1,285
<DISCONTINUED> 10
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,295
<EPS-BASIC> 0.48
<EPS-DILUTED> 0.48

</TABLE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of AT&T Corp. at December 31, 1997, and the
consolidated statement of income for the twelve-month period ended December 31,
1997, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 318
<SECURITIES> 307
<RECEIVABLES> 15,347
<ALLOWANCES> 988
<INVENTORY> 0
<CURRENT-ASSETS> 16,777
<PP&E> 46,436
<DEPRECIATION> 22,233
<TOTAL-ASSETS> 61,095
<CURRENT-LIABILITIES> 17,317
<BONDS> 7,857
0
0
<COMMON> 2,684
<OTHER-SE> 20,994
<TOTAL-LIABILITY-AND-EQUITY> 61,095
<SALES> 0
<TOTAL-REVENUES> 51,577
<CGS> 0
<TOTAL-COSTS> 44,741
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,522
<INTEREST-EXPENSE> 307
<INCOME-PRETAX> 6,972
<INCOME-TAX> 2,723
<INCOME-CONTINUING> 4,249
<DISCONTINUED> 166
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,415
<EPS-BASIC> 1.65
<EPS-DILUTED> 1.65

</TABLE>

Overview of Liberty Media Group

Liberty Media Group, through Liberty Media Corporation and its
subsidiaries and affiliates, owns interests in a broad range of video
programming, communications and Internet businesses in the United States,
Europe, South America and Asia. The principal assets in the Liberty Media Group
include interests in Starz Encore Group LLC, Discovery Communications, Inc.,
Time Warner Inc., QVC, Inc., USA Networks, Inc., Telewest Communications, plc,
TV Guide, Inc., Motorola, Inc., Sprint PCS Group, The News Corporation Limited,
Teligent, Inc. and Liberty Digital, Inc.

Governance Structure

Substantially all of the businesses and assets included in the Liberty
Media Group are held by its primary operating unit, Liberty Media Corporation.
As a result of the TCI/AT&T Merger on March 9, 1999, Liberty Media Corporation
and several affiliated companies which make up the Liberty Media Group, are held
by wholly owned subsidiaries of AT&T. Liberty Media Group has a substantial
degree of managerial autonomy from AT&T as a result of its corporate governance
arrangement with AT&T, under which the board of directors and management of
Liberty Media Corporation control the business and affairs of the group. Liberty
Media Corporation's board of directors is controlled by persons designated by
Tele-Communications, Inc. ("TCI") prior to its acquisition by AT&T, and will
continue to be controlled by those persons, or others chosen by them, until at
least 2006. Liberty Media Corporation's management consists of individuals who
managed the businesses of TCI's Liberty Media Group and TCI Ventures Group prior
to the AT&T merger. The directors and officers of Liberty Media Corporation
serve in the same capacities with the affiliated companies included in the
Liberty Media Group. Liberty Media Corporation has entered into agreements with
AT&T which provide it with a level of financial and operational separation from
AT&T, define its rights and obligations as a member of AT&T's consolidated tax
group, enable it to finance its operations separately from those of AT&T and
provide it with certain programming rights with respect to AT&T's cable systems.

Recent Developments

On March 1, 1999, United Video Satellite Group, Inc. acquired Liberty
Media Group'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 from The News Corporation Limited, in exchange for cash and shares of
UVSG common stock, the stock of certain corporations that publish TV Guide
Magazine and other printed television program listing guides and distribute TV
Guide Online. Following this transaction UVSG, which changed its name to TV
Guide, Inc., became jointly controlled by Liberty Media Group and News Corp.
with each owning approximately 44% of its equity and 49% of its voting power. 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. This transaction is subject
to the approval of the shareholders of each company (which was received on March
17, 2000) as well as customary closing conditions.

<PAGE>

On March 22, 1999, Liberty Media Group 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 Media Group purchased a put option that gives it the right to
require its counterparty to buy 15 million Time Warner shares from Liberty
Media Group in approximately seven years for $67.45 per shares. Liberty Media
Group simultaneously sold a call option giving the counterparty the right to
buy the same shares from Liberty Media Group in approximately seven years for
$158.33 per share. Since the purchase price of the put option was equal to the
proceeds form the sale of the call option, the collar transaction had no cash
cost to Liberty Media Group.

On July 7, 1999, Liberty Media Group issued 7-7/8% Senior Notes due
2009, in the aggregate principal amount of $750 million, and 8-1/2% Senior
Debentures due 2029, in the aggregate principal amount of $500 million. Liberty
Media Group received net cash proceeds from these issuances of $741 million and
$494 million, respectively, which were used to repay outstanding borrowings
under certain credit facilities. On January 13, 2000, Liberty Media Group
completed a registered exchange offer for these securities that provided
tendering holders with identical securities "freely" transferable under the
Securities Act of 1933.

On July 15, 1999, Liberty Media Group 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 Media Group
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, as of March 1, 2000, Liberty Media Group owned
approximately 81.7 million ADRs representing preferred limited voting ordinary
shares of News Corp. or approximately 8% of News Corp.'s ordinary shares on a
fully diluted basis.

On September 9,1999, TCI Music, Inc. and Liberty Media Group completed
a transaction pursuant to which Liberty Media Group contributed to TCI Music
substantially all of its Internet content and interactive television assets,
certain rights with respect to access to AT&T cable systems for the provision
of interactive active services, and a combination of cash and notes receivable
equal to $150 million, in exchange for preferred and common stock of TCI Music.
Following this transaction, Liberty Media Group owned 95% of TCI Music which
changed its name to Liberty Digital, Inc. In addition, Liberty Media Group
adopted a policy that Liberty Digital would be its primary (but not exclusive)
vehicle to pursue corporate opportunities relating to interactive programming
and interactive content related services in the United States and Canada,
subject to certain exceptions.

On September 30, 1999, Liberty Media Group purchased 9.9 million class
B shares of UnitedGlobalCom, Inc. for approximately $493 million in cash.
UnitedGlobalCom is a 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 Media Group expects 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 joint content and distribution opportunities in Europe. Liberty Media

<PAGE>

Group would contribute to the joint venture its 9.9 million class B shares of
UnitedGlobalCom and United Pan-Europe would contribute 5.6 million class A
shares of UnitedGlobalCom. Liberty Media Group expects to assign 50% of its
interest in the joint venture to Microsoft Corporation. In addition to its 25%
interest (after the assignment to Microsoft), Liberty Media Group would receive
approximately $144 million of redeemable preferred interests in the joint
venture. When formed, the joint venture would own approximately 14.5% of the
total outstanding common shares of UnitedGlobalCom on a fully diluted basis.
The joint venture and its members would be bound by voting and standstill
agreements with UnitedGlobalCom and certain of its controlling shareholders.

On November 16, 1999, Liberty Media Group issued 4% Senior
Exchangeable Debentures due 2029, in the aggregate principal amount of $869
million. Liberty Media Group received net cash proceeds from this issuance of
$854 million. On February 9,2000, the resale of these debentures was registered
under the Securities Act of 1933.

On December 6, 1999, Liberty Media Group entered into an agreement
with Four Media Company with respect to a transaction pursuant to which Liberty
Media Group would acquire all of the outstanding common stock of Four Media In
exchange for approximately $123 million in cash, the issuance of approximately
3.2 million shares of AT&T Class A Liberty Media Group tracking stock and a
warrant to purchase approximately 350,000 shares of AT&T Class A Liberty Media
Group tracking stock at an exercise price of $46.00 per share. Four Media is a
provider of technical and creative services to owner, producers and
distributors of television programming, feature films and other 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 and is currently expected to close in the second
quarter of 2000.

On December 10, 1999, Liberty Media Group 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 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 and is currently
expected to close in the second quarter of 2000.

On December 30, 1999, Liberty Media Group entered into an agreement
with Soundelux Entertainment Group, Inc. with respect to a transaction pursuant
to which the Liberty Media Group would acquire approximately 55% of the
outstanding equity and 92% of the voting power of Soundelux in exchange for
approximately 2 million shares of AT&T 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, as
well as other customary closing conditions and is currently expected to close in
the second quarter of 2000.

<PAGE>

Following the acquisitions of majority interests in Todd and Soundelux
and 100% of the voting securities of Four Media, and subject to certain
conditions, the Liberty Media Group has agreed to 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 operation 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 be attributed to Liberty Media Group.

On December 15, 1999, a trust for Liberty Media Group's benefit entered
into a "cashless collar" with a financial institution with respect to 18
million shares of Sprint PCS stock-Series 1, secured by 18 million shares of
the trust's Sprint PCS stock-Series 2. The Sprint PCS stock-Series 2 is
convertible 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 18 million shares of Sprint PCS stock-Series 1 from the
trust in three tranches in approximately two years for $50 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
$65.23 per share. The put and the call options were equally priced, resulting in
no cash cost to the trust or Liberty Media Group. Share amounts and prices have
been adjusted to reflect a Sprint's February two-for-one stock split.

On January 5, 2000, General Instrument Corporation merged with
Motorola, Inc. As a result of this merger, Liberty Media Group's 21% interest in
GI was exchange for an approximate 3% interest in Motorola.

On January 14, 2000, the Liberty Media Group completed its acquisition
of The Associated Group, Inc. pursuant to a merger agreement among AT&T,
Liberty Media Group and Associated Group. Under the merger agreement, 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'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) all of the
outstanding shares of common stock of TruePosition, Inc., 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 assets and
businesses of Associated Group were transferred to Liberty Media Group. All of
the shares of AT&T common stock, AT&T Class A Liberty Media Group tracking stock
and AT&T Class B Liberty Media Group tracking stock previously held by
Associated Group were retired by AT&T.

On February 2, 2000, Liberty Media Group issued 8-1/4% Senior
Debentures due 2030, in the aggregate principal amount of $1 billion. Liberty
Media Group received net cash proceeds from this issuance of $983 million.

<PAGE>

Pursuant to a registration rights agreement entered into with the purchasers of
these debentures, Liberty Media Group is required to effect a registered
exchange offer for the debentures which will provide tendering holders with
identical securities "freely" transferable under the Securities Act of 1933.

On February 7, 2000, Liberty Media Group purchased 18 million shares of
Cendant Corporation 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 resulted in Liberty
Media Group having an approximate 6.5% ownership interest in Cendant. Liberty
Media Group paid $300 million in cash for the common stock and $100 million in
cash for the warrants. 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 service.

On February 10, 2000, Liberty Media Group issued 3-3/4% Senior
Exchangeable Debentures due 2030, in the aggregate principal amount of $750
million. Liberty Media Group received net cash proceeds from this issuance of
$735 million. On March 8, 2000, Liberty Media Group issued an additional $60
million principal amount of its 3-3/4% Senior Exchangeable Debentures due 2030.
Liberty Media Group received net cash proceeds from this issuance of $59
million. Pursuant to a registration rights agreement entered into with the
purchasers of these debentures, the resale of these debentures is required to be
registered under the Securities Act of 1933.

On February 27, 2000, Liberty Media Group entered into an agreement
with ICG Communication, Inc. pursuant to which Liberty Media Group would
purchase for $500 million (a) 500,000 shares of ICG Communications convertible
preferred stock, which are initially convertible into 17,857,142 shares of ICG
Communications common stock, and (b) warrants to purchase 6,666,667 shares of
ICG Communications common stock at an initial exercise price of $34.00 per
share. This transaction is subject to customer closing conditions.

On February 29, 2000 Liberty Media Group commenced a cash tender offer
for all of the outstanding common stock of Ascent Entertainment Group, Inc. at a
price of $15.25 per share. Pursuant to a merger agreement entered into with
Ascent on February 22, 2000, if a majority of the outstanding shares of Ascent
are tendered in the offer and the other conditions to the offer are satisfied or
waived, Liberty will acquire control of Ascent and, as soon as practicable
thereafter, will acquire the remaining Ascent shares by merging a subsidiary
into Ascent. This transaction is subject to approval of Ascent's shareholders,
as well as other customary closing conditions. If the merger is effected,
Liberty Media Group expects to pay approximately $460 million for the Ascent
stock. In addition, Ascent will have approximately $295 million in indebtedness
outstanding immediately after the merger. Ascent's principal business is
providing pay-per-view entertainment and information services through its
majority owned subsidiary, On Command Corporations. Ascent also provides
satellite service to the NBC television network and owns the National Basketball
Association's Denver Nuggets, the National Hockey League's Colorado Avalanche
and the Pepsi Center Denver's new entertainment facility which is home to both
the Nuggets and the Avalanche. If is acquires Ascent Liberty Media Group intends
to seek a buyer for the sports teams and the Pepsi Center.

<PAGE>

On March 16, 2000 Liberty Media Group purchased shares of cumulative
preferred stock in TCI Satellite Entertainment, Inc. ("TSAT") in exchange for
Liberty Media Group's economic interest in 5,084,745 shares of Sprint
Corporation PCS common stock, valued at $300 million. Liberty Media Group
received 150,000 shares of TSAT Series A 12% Cumulative Preferred Stock and
150,000 shares of TSAT Series B 8% Cumulative Convertible Voting Preferred
Stock. The Series A preferred stock does not have voting rights while the Series
B preferred stock gives Liberty Media Group approximately 85% of the voting
power of TSAT. As part of this transaction, Liberty Media Group and TSAT formed
a joint venture named Liberty Satellite, LLC to hold and manage interests in
entities engaged globally in the distribution of internet data and other content
via satellite and related businesses. Liberty Media Group contributed its
interests in XM Satellite Radio Holdings, Inc., iSKY, Inc., Astrolink
International LLC and Sky Latin America in exchange for an approximately 89%
interest in the joint venture. TSAT contributed its interest in JATO
Communications Corp. and General Motors Class H Common Stock in exchange for an
approximately 11% interest in the joint venture which will be managed by TSAT.
In a related transaction, TSAT paid Liberty Media Group $60 million in the form
of an unsecured promissory note in exchange for an approximately 14% interest in
a limited liability company with holdings in Astrolink International LLC. The
remaining 86% of the limited liability company is held by Liberty Satellite,
LLC.

Description of Business

The following table sets forth information concerning Liberty Media
Group's subsidiaries and business affiliates. Liberty Media Group's interests
are held either directly or indirectly through partnerships, joint ventures,
common stock investments or instruments convertible or exchangeable into common
stock. Ownership percentages in the table are approximate, calculated as of
March 1, 2000, and, where applicable and except as otherwise noted, assume
conversion to common equity by Liberty Media Group and, to the extent known by
Liberty Media Group, other holders. In some cases, Liberty Media Group's
interest may be subject to buy/sell procedures, repurchase rights or, under
certain circumstances, dilution.

<TABLE>
<CAPTION>
SUBSCRIBERS AT
12/31/99 ATTRIBUTED OWNERSHIP
ENTITY (000'S) YEAR LAUNCHED % AT 3/1/00
------ ------- ------------- -----------
VIDEO PROGRAMMING SERVICES
<S> <C> <C> <C>
BET Holdings II, Inc. 35%
BET Cable Network 58,600 1980
BET Action Pay-Per-View 10,000(1) 1990
BET on Jazz 7,000 1996
BET.com Online 1999 50%

Canales n 17(2) 1998 100%

Court TV 37,543 1991 50%

Discovery Communications, Inc. 49%
Discovery Channel 77,829 1985
The Learning Channel 72,175 1980
Animal Planet 54,018 1996
Discovery People 8,200 1997
Travel Channel 35,466 1987
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUBSCRIBERS AT
12/31/99 ATTRIBUTED OWNERSHIP
ENTITY (000'S) YEAR LAUNCHED % AT 3/1/00
------ ------- ------------- -----------
VIDEO PROGRAMMING SERVICES (CONTINUED)
<S> <C> <C> <C>
Discovery Digital Services 5,026(2)
Discovery Civilization 1996
Discovery Health 1998
Discovery Home & Leisure 1996
Discovery Kids 1996
Discovery Science 1996
Discovery Wings 1998
Discovery en Espanol 1998
Animal Planet Asia 6,445 1998 25%
Animal Planet Europe 6,328 1998
Animal Planet Latin America 6,774 1998 25%
Discovery Asia 37,712 1994
Discovery India 14,100 1996
Discovery Japan(3) 1,542 1996
Discovery Europe 19,155 1989
Discovery Turkey 600 1997
Discovery Germany 1,206 1996 25%
Discovery Italy/Africa 1,423 1996
Discovery Latin America 12,145 1996
Discovery Latin America Kids Network 8,490 1996
People & Arts (Latin America) 9,453 1995 25%
Discovery Channel Online Online 1995
Discovery Home & Leisure (Europe) 5,911

Starz Encore Group LLC 100%
Encore 13,745 1991
MOVIEplex 7,598 1995
Thematic Multiplex (aggregate units) 26,012(2) 1994
Love Stories
Westerns
Mystery
Action
True Stories
WAM! America's Kidz Network
STARZ! 10,240 1994
STARZ! Multiplex (aggregate units) 6,180(2)
STARZ! Theater 1996
BET Movies/STARZ!3 88%
STARZ! Family
STARZ! cinema 1997
E! Entertainment Television 59,318 1990 10%
Style 4,630 1998

Flextech p.l.c. (UK) 37%
(LN(4): FLXT)
Bravo 5,188 1985 37%
Challenge TV 5,383 1993 37%
HSN Direct International N/A 1994 42%
KinderNet 5,751 1988 12%
Living 6,175 1993 37%
SMG N/A 1957 7%
Trouble 5,164 1984 37%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUBSCRIBERS AT
12/31/99 ATTRIBUTED OWNERSHIP
ENTITY (000'S) YEAR LAUNCHED % AT 3/1/00
------ ------- ------------- -----------
VIDEO PROGRAMMING SERVICES (CONTINUED)
<S> <C> <C> <C>
TV Travel Shop 7,010 1998 37%
UK Arena (UKTV) 3,139 1997 18%
UK Gold (UKTV) 6,279 1992 18%
UK Gold Classics (UKTV) 1,993 1999 18%
UK Horizons (UKTV) 4,840 1997 18%
UK Style (UKTV) 3,191 1997 18%
UK Play (UKTV) 2,450 1998 18%

Fox Kids Worldwide, Inc. (5)

International Channel 8,558 1990 90%

Jupiter Programming Co., Ltd.
(Japan) 50%
Cable Soft Network 2,486 1989 50%
CNBC Japan/Nikkei N/A 1997 10%
Golf Network 2,076 1996 45%
Discovery Japan 1,601 1996 49%
J-Sports 697 1998 66%
Shop Channel 6,800 1996 41%

MacNeil/Lehrer Productions N/A N/A 67%

MultiThematiques, S.A. 30%
Canal Jimmy (France) 2,285 1991
Canal Jimmy (Italy) 700 1997
Cine Cinemas (France) 729 1991
Cine Cinemas (Italy) 144 1997
Cine Classics (France) 631 1991
Cine Classics (Spain) 225 1995 15%
Cine Classics (Italy) 144 1997
Forum Planete (France) 1,365 1997
Planete (France) 3,119 1988
Planete (Poland) 1,944 1996
Planete (Germany) 1,206 1997
Planete (Italy) 670 1997
Seasons (France) 106 1996
Seasons (Spain) 37 1997
Seasons (Germany) 35 1997
Seasons (Italy) 46 1997

The News Corporation Limited 8%
(NYSE: NWS.A; ASX(4): NCPDP)

Odyssey 26,920 1988 33%(6)

Pramer S.C.A. (Argentina) 100%
America Sports 2,360 1990
Big Channel 2,352 1992
Canal a 2,268 1996
Cineplaneta 2,038 1997
Magic Kids 3,858 1995
P&E 781 1996
Plus Satelital (fka CV SAT) 3,925 1988
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUBSCRIBERS AT
12/31/99 ATTRIBUTED OWNERSHIP
ENTITY (000'S) YEAR LAUNCHED % AT 3/1/00
------ ------- ------------- -----------
VIDEO PROGRAMMING SERVICES (CONTINUED)
<S> <C> <C> <C>
The Premium Movie Partnership 890 1995 20%
(Australia)

QVC Inc. 43%
QVC Network 66,702 1986
QVC-The Shopping Channel (UK) 7,867 1993 34%
QVC-Germany 16,726 1996
iQVC Online 1995

Telemundo Network (7) 50%
Telemundo Station Group (8) 25%

Time Warner Inc. (NYSE: TWX) 9%

Torneos y Competencias, S.A N/A N/A 40%

TV Guide, Inc. (Nasdaq: TVGIA) 44%(9)
TV Guide Channel 50,000 1988
TV Guide Interactive (2) 1998
TV Guide Sneak Prevue 34,000 1991 32%
UVTV 57,000(10) N/A
Superstar/Netlink 952 N/A 35%
TV Guide Magazine 11,000(11) N/A
TV Guide Online Online
The Television Games Network N/A 1999 43%
Infomedia SA N/A 1991 33%

USA Networks, Inc. (Nasdaq: USAI) 21%(12)
HSN 73,700(13) 1985
America's Store 6,800(13) 1986
Internet Shopping Network Online 1995
HSN en Espanol 2,700 11%
HOT (Germany) 29,000 1996 9%
Shop Channel (Japan) 3,370 1996 (3)
Sci-Fi Channel 59,700 1992
USA Network 77,200 1980
USA Broadcasting 37,500(14) 1986
Ticketmaster N/A
Studios USA N/A
USA Films N/A
Hotel Reservations Network Online 1991
(Nasdaq:ROOM)
Ticketmaster Online-City Search Online 1998 11%
(Nasdaq: TMCS)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOMES IN HOMES
SERVICE AREA PASSED BASIC SUBS ATTRIBUTED
12/31/99(15) 12/31/99(16) 12/31/99(17) PENETRATION OWNERSHIP
ENTITY (000) (000) (000) 12/31/99 AT 3/1/00
------ ----- ----- ----- -------- ---------
CABLE AND TELEPHONY

<S> <C> <C> <C> <C> <C>
Cable Management Ireland 130 97 60 62% 100%

TCI Chile L.P. 100%
Metropolis-Intercom, S.A 1,600 1,092 269 25% 30%

Cablevision S.A. 4,000 3,386 1,453 43% 28%
(Argentina)

Grupo Portatel 24%

Jupiter Telecommunications Co., Ltd.
(Japan)
4,830 3,709 536 14% 40%

Omnipoint Communications, Inc.
3%

Princes Holdings Limited (Ireland)
497 387 163 42% 50%

Sprint PCS Group 5,700 24%(18)
(NYSE: PCS)

Liberty Cablevision of Puerto Rico,
Inc. 442 288 108 38% 100%

Telewest Communications plc (UK)
6,074 4,444 1,156 26% 22%
(LN(4): TWT) (Nasdaq: TWSTY)

Teligent, Inc. 34%
(Nasdaq:TGNT)

UnitedGlobalCom, Inc. 10%
(Nasdaq: UCOMA)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ATTRIBUTED
OWNERSHIP
ENTITY BUSINESS DESCRIPTION AT 3/1/00
- ------ -------------------- ---------
SATELLITE COMMUNICATIONS SERVICES
<S> <C> <C>
Astrolink International LLC Will build a global telecom network using 4 ka-band 32%
geostationary satellites to provide broadband data
communications services. The first 2 satellites, to be
launched in 2002, will service customers in North and
South America, Europe and the Middle East. The third
and fourth spacecraft will extend the network worldwide.

iSKY, Inc. Will build a ka-band satellite network that will focus 19%
on providing broadband services to homes and small
offices in North America and Latin America.

Sky Latin America Satellite delivered television platform currently 10%
servicing Mexico, Brazil, Chile and Columbia

TCI Satellite Entertainment, Inc. Holds interests in certain communications assets 3% (19)
(Nasdaq:TSATA) including General Motors Class H stock (NYSE:GMH) which
tracks the performance of Hughes Electronics Corp.,
owner of DirecTV

XM Satellite Radio, Inc. Plans to transmit up to 100 national audio channels of 2%
(Nasdaq:XMSR) music, news, talk, sports and children's programming
from two satellites directly to vehicle, home and
portable radios

TECHNOLOGY AND MANUFACTURING

Antec Corporation Manufacturer of products for hybrid fiber/coaxial
(Nasdaq: ANTC) broadband networks 19%

Motorola, Inc. Provider of integrated communications solutions and 3%
(NYSE: MOT) embedded electronic solutions

TruePosition Provider of wireless location technology and services 100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ATTRIBUTED
OWNERSHIP
ENTITY BUSINESS DESCRIPTION AT 3/1/00
INTERNET/INTERACTIVE TELEVISION SERVICES
<S> <C> <C>
Broadband NOW, Inc. Provides high-speed Internet access and customized broadband content 5%
and applications to subscribers via a private IP network that can
connect such subscribers via multiple broadband technologies, including
DSL, cable modem, wireless and Ethernet

Geocast Network Systems, Inc. Building a new network that uses digital broadcast infrastructure to deliver 8%
rich media information and programming to the PC desktop

Liberty Digital, Inc. A diversified new media company with investments in Internet content and 94%
(Nasdaq: LDIG) infrastructure and interactive television

OTHER

Emmis Communications Emmis owns and operates 16 radio stations, including five in the markets 12%
Corporation of New York, Chicago and Los Angeles. Emmis also operates six
(Nasdaq:EMMS) television stations and six magazines.

Cendant Corporation Cendant is a franchiser of hotels, rental car agencies, tax preparation 7%
(NYSE:CD) services and real estate brokerage offices. In direct marketing,
Cendant provides access to insurance, travel, shopping, auto and other
services primarily through its buying clubs. Cendant also provides
vacation time share services, mortgage services and employee relocation.
It operates in over 100 countries.
</TABLE>

- -----------------------------------
(1) Number of subscribers to whom service is available.

(2) Digital services.

(3) Liberty Media Group's attributed ownership interest in this entity is
listed under Jupiter Programming Co., Ltd. ("Jupiter") of which Liberty
Media International, Inc. owns 50%.

(4) LN -- London Stock Exchange; ASX -- Australian Stock Exchange.

(5) Liberty Media Group's interest consists of shares of 30-year 9% preferred
stock which has a stated aggregate value of $345 million and is not
convertible into common stock.

(6) Odyssey will be contributed to Crown Media Holdings in exchange for an
approximate 18% interest in Crown Media Holdings.

(7) Telemundo Network is a 24-hour broadcast network serving 61 markets in
the United States, including the 37 largest Hispanic markets.

(8) Telemundo Station Group 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.

<PAGE>

(9) See "General Development of Business--Video Programming Services--TV
Guide, Inc." for proposed changes in ownership of TV Guide.

(10) Aggregate number of units. UVTV uplinks three superstations (WGN, WPIX,
KTLA) and six Denver broadcast stations. One household subscribing to six
services would be counted as six "units."

(11) Magazine circulation -- includes subscription and newsstand distribution.

(12) Liberty Media Group owns direct and indirect interests in various USAI
and Home Shopping Network, Inc. securities which may be converted or
exchanged for USAI common stock. Assuming the conversion or exchange of
such securities, the conversion or exchange of certain securities owned by
Universal Studios, Inc. and certain of its affiliates for USAI common
stock Liberty Media Group would own approximately 21% of USAI.

(13) Includes broadcast households and cable subscribers.

(14) A group of UHF and low power television stations which operate in 12 of
the country's top 22 broadcast markets, including in 7 of the top 10
markets, which reach approximately 31% of TV households in the U.S.

(15) Homes in Service Area: 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.

(16) Homes Passed: Homes that can be connected to a cable distribution system
without further extension of the distribution network.

(17) Basic Subscribers: A subscriber to a cable or other television
distribution system who receives the basic television service and who is
usually charged a flat monthly rate for a specific number of channels.

(18) Less than 1% of voting power. Liberty Media Group holds securities of
Sprint which are exercisable for or convertible into Sprint PCS
stock-Series 1, which is publicly traded.

(19) On March 16, 2000, Liberty Media Group acquired 85% voting power in TCI
Satellite Entertainment.

BUSINESS OPERATIONS

Liberty Media Group 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.

<PAGE>

The principal assets and consolidated subsidiaries of Liberty Media
Group are described in greater detail below.

VIDEO PROGRAMMING SERVICES

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.

Relationship with AT&T Broadband. Most of the networks affiliated with
Liberty Media Group have entered into affiliation agreements with Satellite
Services, Inc. ("SSI") a company within AT&T Broadband, the successor company to
TCI. SSI purchases programming services from programming suppliers and then
makes such services available to cable television systems owned by or affiliated
with AT&T Broadband ("SSI Affiliates"). Customers served by SSI Affiliates ("SSI
Subscribers") represented approximately 25% of U.S. households which received
cable or satellite delivered programming at December 31, 1999. Except as
described below, substantially all of the video programming services operated by
Liberty's subsidiaries and business affiliates received less than 25% of their
revenues from AT&T Broadband. Each of Starz Encore Group and Liberty Digital,
Inc. has entered into long term, fixed rate affiliation agreements with AT&T
Broadband pursuant to which AT&T Broadband pays monthly fixed amounts in
exchange for unlimited access to certain programming services of such companies.
For the year ended December 31, 1999, such fixed rate affiliation fees
represented approximately 37% and 28% of the total revenues of Starz Encore
Group and Liberty Digital, respectively.

STARZ ENCORE GROUP LLC

Starz Encore Group LLC provides 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 and its
four multiplex channels, six digital movie services programmed by theme ("Encore
Thematic Multiplex"), and MOVIEplex, a "theme-by-day" channel featuring a
different Encore or Encore Thematic Multiplex channel each day, on a weekly
rotation. Starz Encore Group currently has agreements in place with most of the
major program distributors and many smaller distributors to carry its Encore
Thematic Multiplex services in digital packages.

Starz Encore Group currently has access to approximately 5,700 movies
through long-term library licensing agreements. In addition, it has licensed the
exclusive rights to first-run output from Disney's Hollywood Pictures,
Touchstone and Miramax, Universal Studios, New Line and Fine Line, Sony's
Columbia Pictures and Sony Classics and other major studios. Starz Encore Group
also has exclusive rights to first run output from four independent studios. The
output agreements expire between 2003 and 2011. Unlike vertically integrated
programmers, Starz Encore 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, through long-term output or library agreements. Additionally,
Starz Encore Group is involved in several original programming productions.

<PAGE>

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
eight additional programming services in which it does not have an ownership
interest, including two of Argentina's four terrestrial broadcast stations,
throughout Argentina. Of the 16 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.

DISCOVERY COMMUNICATIONS, INC.

Discovery Communications, Inc. is the largest originator of documentary,
nonfiction programming in the world. Since its 1985 launch of Discovery Channel,
Discovery has grown into a global media enterprise with 1999 revenues of $1.4
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 three
business units:

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

- - Discovery Networks International, which extends Discovery's programming
globally and currently reaches more than 85 million subscribers in 147
foreign countries in 24 languages; and

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

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 Media Group's right of first refusal being
secondary under certain circumstances. In addition, Liberty Media Group 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.

<PAGE>

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."

Terms of Ownership. Liberty Media Group has the right to appoint two
members of Flextech's board of directors 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 Media Group's approval.

Liberty Media Group 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 the two
joint ventures that Flextech has formed with BBC Worldwide Limited. The
non-compete will terminate on March 31, 2007 or, if earlier, at such time as
Liberty Media Group's contingent funding obligation to the joint ventures
terminates or Liberty Media Group owns not more than 10% of the ordinary shares
of Flextech.

On March 7, 2000, Telewest offered to acquire Flextech at a purchase price
of approximately Pounds Sterling 2.76 billion. Pursuant to the offer by
Telewest, each share of Flextech would be exchanged for 3.78 new Telewest
shares. Liberty Media Group owns approximately a 37% equity interest in
Flextech and a 22% equity interest in Telewest. See "-Communications-Telewest
Communications plc" below. The proposed acquisition is subject to approval of
the shareholders of Telewest, acceptance of the offer by the shareholders of
Flextech and certain other conditions. Liberty Media Group, as a shareholder of
Flextech, has agreed to tender its Flextech shares, subject to certain
conditions. Otherwise, Liberty Media Group has agreed with Telewest not to
dispose of any of Liberty Media Group's interest in Flextech through March 31,
2000. Liberty Media Group, MediaOne and Microsoft as shareholders of
approximately 51% of Telewest, in the aggregate, have agreed to vote in favor
of resolutions put to Telewest shareholders in connection with the offer to the
extent applicable law and stock exchange rules permit them to do so. Because of
Liberty Media Group's holdings, the Listing Rules of the London Stock Exchange
require a separate vote by Telewest's shareholders, excluding Liberty Media
Group, to approve Telewest's acquisition of Liberty Media Group's interests in
Flextech in the merger. MediaOne and Microsoft have agreed to vote in favor of
this acquisition.

<PAGE>

THE NEWS CORPORATION LIMITED

New 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."

In July 1999, Liberty Media Group sold to News Corp. its 50% interest in
their jointly owned Fox/Liberty Networks sports 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 Media Group
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, as of March 1, 2000, Liberty Media Group owned
approximately 81.7 million ADRs representing preferred limited voting ordinary
shares of News Corp. or approximately 8% of News Corp.'s ordinary shares, on a
fully diluted basis.

Liberty Media Group's involvement in sports programming originated in 1988
when TCI began to pursue a strategy of creating regional sports networks. In
April 1996, Liberty Media Group and New Corp. formed Fox/Liberty Networks, a
joint venture to hold Liberty Media Group'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 Media Group 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 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 Media Group's interest in Fox/Liberty Networks, Liberty
Media Group and News Corp. agreed that, during a specified period following the
second anniversary of the closing date of this transactions, each will have the
right to cause News Corp. to acquire and Liberty Media Group to sell to News

<PAGE>

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 Media Group's interest in Fox/Liberty Networks and the sale of the
International Interests. Between the closing of the sale of Liberty Media
Group's interest in Fox/Liberty Networks and the sale of the International
Interests, Liberty Media Group 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 Media Group's interest in Fox/Liberty Networks, certain agreements were
entered into regarding Liberty Media Group's ability to transfer News Corp.
shares and other matters. Under these agreements, the ADRs and the underlying
News Corp. shares issued to Liberty Media Group 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 Media Group is entitled to
certain registration rights with respect to its News Corp. shares. In addition,
Liberty Media Group has agreed that it will not engage, directly or indirectly,
in any sports 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 transmission to subscribers. 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.

Terms of Ownership. Liberty Media Group owns approximately 43% of QVC, and
Comcast owns the remaining 57%. 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 Media Group'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 Media Group and Comcast are required to use their best
efforts to cause QVC to follow the direction of any resolution of the
management committee. Liberty Media Group also has veto rights with respect to
certain fundamental actions proposed to be taken by QVC.

Liberty Media Group has been granted a tag-along right that will apply if
Comcast proposes to transfer control of QVC and Comcast may require Liberty

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Media Group to sell its QVC stock as part of the transaction, under certain
circumstances and subject to certain conditions. In addition, under certain
circumstances, Liberty Media Group has the right to initiate a put/call
procedure with Comcast in respect of Liberty Media Group's interest in QVC.

Liberty Media Group 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, 1999, reached approximately 12.6 million
subscribers.

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

In connection with the 1996 Turner Broadcasting System/Time Warner merger,
Time Warner, Turner Broadcasting System, TCI and Liberty Media Group entered
into an Agreement Containing Consent Order (the "FTC Consent Decree") with the
Federal Trade Commission ("FTC"). The FTC Consent Decree effectively prohibits
Liberty Media Group 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 Media Group agreed to exchange
the shares of Time Warner common stock it was to receive in the Turner
Broadcasting System/Time Warner merger 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 Media Group 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 Media
Group'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 Media Group.
Further, while shares of ordinary Time Warner common stock are redeemable by

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action of the Time Warner board of directors under certain circumstances, to the
extent necessary to prevent the loss of certain types of governmental licenses
or franchises, shares of Series LMCN-V Common Stock are not redeemable under
these circumstances.

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
Series LMCN-V Common Stock of Time Warner held by Liberty Media Group would be
converted into 1.5 shares of a new Series LMCN-V Common Stock 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
Media Group. 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 named United Video Satellite Group, Inc., is a
media and communications company that provides print, passive and interactive
program listings guides to households, distributes programming to cable
television systems and direct-to-home satellite providers, and markets
satellite-delivered programming to C-band satellite dish owners. 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. 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-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 the United States. Its retail
subscriber base was approximately one million at December 31, 1999. In November

<PAGE>

1999, TV Guide announced an exclusive direct broadcast satellite marketing
alliance agreement with EchoStar to convert the existing and inactive C-band
customers of Superstar/Netlink to the high power (small satellite dish) DISH
Network Service. Under the conversion process, EchoStar will compensate
Superstar/Netlink Group on a per subscriber base, both upon successful
conversion and with residual payments over time. The United Video Group also
markets and distributes three independent superstations -- WGN (Chicago), KTLA
(Los Angeles) and WPIX (New York) -- and six Denver-based broadcast television
stations to cable television systems and other multi-channel video programming
distributors, and offers programming packages to satellite master antenna
television systems.

TV Guide is jointly controlled by Liberty Media Group and News Corp.,
with each owning approximately 44% of its equity and 49% of its voting power.
Liberty Media Group's interest in TV Guide began in January 1996 when TCI
acquired a controlling interest in Untied 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. 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 Media
Group'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.

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 common stock. 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 (which was
received on March 17, 2000) and the satisfaction of regulatory requirements. It
is anticipated that the transaction will close in the first 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.
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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 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 interactive 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 through the remote control. Gemstar's
common stock trades on the National Market tier of The Nasdaq Stock Market under
the symbol "GMST."

Terms of Ownership. Pursuant to a stockholders agreement between
Liberty Media Group 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 Media Group
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. In addition, Liberty Media
Group and News Corp. have mutual rights of first refusal, tag-along rights on
transfers of significant interests and registration rights. Liberty Media Group
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, through its subsidiaries, is a diversified media and
electronic commerce company that is engaged in seven principal areas of
business:

- - Networks and Television Production, which operates USA Network, a
general entertainment basic cable television network, 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.com, 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 includes the Internet Shopping Network, 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.

<PAGE>

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

Liberty Media Group's interest in USA Networks consists of shares of
USA Networks common stock held by Liberty Media Group and its subsidiaries,
shares of USA Networks common stock held by certain entities in which Liberty
Media Group 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 Media Group 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 Media Group's interest in USA Networks, as more fully
described below.

Terms of Ownership. USA Networks, Universal, Liberty Media Group and
Mr. Diller have 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 securities owned by Universal, Liberty Media Group and certain
of their affiliates for all matters except for certain fundamental changes.
However, each of Liberty Media Group, Universal and Mr. Diller has veto rights
with respect to certain fundamental changes relating to USA Networks and its
subsidiaries (including USANi LLC, which was formed to hold USA Networks'
non-broadcast businesses). If Mr. Diller and Universal agree to certain
fundamental changes that Liberty Media Group does not agree to, Universal will
be entitled to purchase Liberty Media Group'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 Media Group is not
currently permitted to have a designee on the board of directors of USA
Networks. However, at such time as Liberty Media Group is no longer subject to
such prohibition, Liberty Media Group will have the right to designate up to two
directors if its stock ownership in USA Networks remains at certain levels.
Liberty Media Group currently has the right to designate up to two directors to
the USANi 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 Media Group has a preemptive right with
respect to future issuances of USA Network's capital stock, subject to certain
limitations. Liberty Media Group has agreed to certain limitations on increases
in its percentage of ownership of USA Networks. Also, Liberty Media Group has
agreed not to propose to the board of directors of USA Networks the acquisition
by Liberty Media Group 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 Media Group 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 Media Group generally

<PAGE>

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 Media Group's rights in this regard are secondary to any
Universal right of refusal on transfers by Mr. Diller. Each of Liberty Media
Group 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 Media Group,
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.

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.

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. 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

<PAGE>

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.

LIBERTY CABLEVISION OF PUERTO RICO, INC.

Liberty 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.

On September 21, 1998, hurricane Georges struck Puerto Rico and caused
considerable property damage to the area in general, including Liberty
Cablevision of Puerto Rico's cable television systems. However, all of Liberty
Cablevision of Puerto Rico's systems have been rebuilt, and as of December 31,
1999, all of its pre-hurricane basic customers were receiving cable television
services.

As of December 31, 1999, approximately 85% of Liberty Cablevision of
Puerto Rico's network had been rebuilt utilizing 550 MHz bandwidth capacity,
with the remainder consisting of 450 MHz. At December 31, 1999, Liberty
Cablevision of Puerto Rico operated from five headends, and provided subscribers
with 63 channels.

A significant portion of Liberty Cablevision of Puerto Rico's cable
network consists of fiber-optic and coaxial cable. This infrastructure allows
Liberty Cablevision of Puerto Rico to offer enhanced entertainment, information
and telecommunications services and, when and to the extent permitted by law,
cable telephony services. Liberty 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, Liberty
Cablevision of Puerto Rico expects to aggressively market those products and
services to its subscribers in areas with sufficient bandwidth capacity. Liberty
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 2001.

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, 1999, Sprint, together with certain
affiliates, operated PCS systems in the majority of the metropolitan areas in
the U.S. At that date, Sprint served more than 4,000 cities and communities and
had approximately 5.7 million customers. Sprint attributes this business and its
assets to Sprint's "Sprint PCS Group." The Sprint PCS stock is a tracking stock
intended to reflect the performance of the Sprint PCS Group.
The Sprint PCS stock-Series 1 trades on the NYSE under the symbol "PCS."

On October 5, 1999, Sprint announced that it had entered into a
definitive merger agreement with MCI WorldCom, Inc. Under the merger agreement,
each share of Sprint's FON common stock would be exchanged for $76.00 of MCI

<PAGE>

WorldCom common stock, subject to a collar, and each share of Sprint PCS
stock-Series 1, Sprint PCS stock-Series 2 and Sprint PCS stock-Series 3 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. Upon consummation of the merger, the company is
expected to be renamed WorldCom and its board of directors is to have 16
members, 10 from MCI WorldCom and 6 from Sprint.

Liberty Media Group owns approximately 23% (on a fully diluted basis)
of the Sprint PCS stock through its ownership of shares of Sprint PCS
stock-Series 2 and certain warrants and shares of convertible preferred stock
exercisable for or convertible into these shares.

Liberty Media Group'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. In exchange for its approximate 30% limited partnership
interest in Sprint PCS, TCI received shares of limited-voting Sprint PCS
stock-Series 2, shares of Sprint PCS convertible preferred stock and warrants to
purchase shares of Sprint PCS stock-Series 2.

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 into a trust with an independent
trustee. Liberty Media Group 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 Media
Group 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 Media Group and provides that
all decisions regarding such divestiture will be made by the trustee without
discussion or consultation with AT&T or Liberty Media Group; however, the
trustee is required to consult with the board of directors of Liberty Media
Group (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 Media Group.

The trust agreement provides for the trustee to vote the Sprint
securities beneficially owned by Liberty Media Group 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 Media Group
of additional Sprint securities without the prior written consent of the
Department of Justice, subject to limited exceptions.

<PAGE>

Terms of Ownership. Liberty Media Group was granted registration rights
with respect to its Sprint PCS holdings. These registration rights are currently
exercisable by the trustee. If Liberty Media Group's shares of Sprint PCS
stock-Series 2 are transferred, the transferred shares become shares of full
voting Sprint PCS stock-Series 1.

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. 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 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 41 cable franchises. As of December 31,
1999, these owned and operated 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. As of December 31, 1999, the network in these
franchises passed approximately 4.7 million homes (approximately 4.4 million of
which had been passed and marketed) and Telewest had approximately 1.2 million
cable television customers, 1.6 million residential telephone lines and 306,000
business telephone lines. According to Telewest, approximately 62% of its
customers subscribe for both cable television and cable telephony services.

Ownership Interest. Liberty Media Group owns approximately a 22%
interest in Telewest through a limited liability company, which is 50% owned by
Liberty Media Group 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 7% interest in Telewest outside the
limited liability company.

Terms of Ownership. Liberty Media Group 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 Media
Group and 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
Media Group 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 Media Group and MediaOne together generally
will be able to influence materially the outcome of any matter requiring
shareholder approval. In addition, each of Liberty Media Group and MediaOne has

<PAGE>

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 Media Group and MediaOne has agreed that any proposed
transfer of its Telewest shares 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 Media Group 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 Media Group 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 Media Group 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, subject to certain modifications agreed to in
connection with the Telewest offer for Flextech.

On March 7, 2000, Telewest offered to acquire Flextech at a purchase
price of approximately (pound sterling)2.76 billion. Pursuant to the offer by
Telewest, each share of Flextech would be exchanged for 3.78 new Telewest
shares. Liberty Media Group owns approximately a 37% equity interest in Flextech
and a 22% equity interest in Telewest. The proposed acquisition is subject to
approval of the shareholders of Telewest, acceptance of the offer by the
shareholders of Flextech and certain other conditions. Liberty Media Group, as a
shareholder of Flextech, has agreed to tender its Flextech shares, subject to
certain conditions. Otherwise, Liberty Media Group has agreed with Telewest not
to dispose of any of Liberty Media Group's interest in Flextech through March
31, 2000. Liberty Media Group, MediaOne and Microsoft as shareholders of
approximately 51% of Telewest, in the aggregate, have agreed to vote in favor of
resolutions put to Telewet shareholders in connection with the offer to the
extent applicable law and stock exchange rules permit them to do so. Because of
Liberty Media Group's holdings, the Listing Rules of the London Stock Exchange
require a separate vote by Telewest's shareholders, excluding Liberty Media
Group, to approve Telewest's acquisition of Liberty Media Group's interests in
Flextech in the merger. MediaOne and Microsoft have agreed to vote in favor of
this acquisition.

<PAGE>
TELIGENT, INC.

Teligent, Inc. is a full-service, facilities-based communications
company which offers small and medium-sized business customers local and long
distance telephony, high-speed data and Internet access services over Teligent's
SmartWave(TM) local networks. The SmartWave(TM) local networks integrate
advanced fixed wireless technologies with traditional broadband wireline
technology. Teligent"s digital wireless technology provides many of the
advantages of fiber and can transport information within the network at up to
155 Megabits per second via a point-to-point radio. Teligent currently offers
commercial service using its SmartWave(TM) local networks in 40 major market
areas that comprise more than 580 cities and towns with a combined population of
more than 100 million.

INTERNET SERVICES AND TECHNOLOGY

LIBERTY DIGITAL, INC.

Liberty Digital, Inc. (formerly named 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 March 1, 2000, 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

ACTV, Inc.
(Nasdaq: IATV) 12%(1) Producer of tools for interactive programming for
television and Internet platforms

BET.com 5% Web site with content directed towards African Americans

CarsDirect.com, Inc. 1% Online car retailer

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
(Nasdaq: HOMG)

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

iFilm, Inc. 1% Metamediary for making, distributing and consuming film
entertainment

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

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

Kaleidoscope Interactive, LLC 50% Online provider of information and services related to
health concerns and disabilities
</TABLE>

<TABLE>
<CAPTION>
Liberty
Digital's
Ownership
Entity % Business
- ----------------------------------------- --------- -----------------------------------------------------------
<S> <C> <C>
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

The Lightspan Partnership, Inc. 11% Developer of educational programming
(Nasdaq:LSPN)

MedScholar Digital Network, LLC 50% Provider of continuous medical education services to
healthcare professionals

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

netLibrary, Inc. 2% Electronic library

Online Retail Partners 21% Creates e-commerce partnerships with brick-and-mortar
retailers

OpenTV Inc. 4% Provider of software to enable interactive television
(Nasdaq:OPTV)

OrderTrust, Inc. 9% Provider of total order life cycle management services

OurHouse.com 3% Ace Hardware co-branded vertical portal for online home
improvement products, services and information

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

<PAGE>

Quokka Sports, Inc.
(Nasdaq: QKKA) 3% Internet provider of live digital sports entertainment

Replay TV, Inc. 1%(2) 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

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

UGO Networks, Inc. 4% Online provider of underground entertainment news and
video games
</TABLE>

(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%.

(2) Discovery, Starz Encore and TV Guide each owns an additional 1% of
Replay.

An approximately 94% interest in Liberty Digital is attributed to the
Liberty Media Group.

Liberty Media Group'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 1997, TCI Music acquired The Box Worldwide, Inc., which programs and
distributes a subscriber selected 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 a joint venture 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
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. In connection with this transaction, TCI Music and Liberty Media Group
each agreed not to compete with MTVN Online in its online music video business
until July 15, 2000 or in the music video business generally until July 15,
2004, subject to certain exceptions.

In September 1999, TCI Music and Liberty Media Group completed a
transaction pursuant to which Liberty Media Group and certain of its affiliates
contributed to TCI Music substantially all of their respective Internet content

<PAGE>

and interactive television assets, certain rights with respect to access to AT&T
cable systems for the provision of interactive video services, and a combination
of cash and notes receivable equal to $150 million, in exchange for preferred
and common stock of TCI Music. Following this transaction, TCI Music changed its
name to Liberty Digital, Inc. In addition, Liberty Media Group adopted a policy
that Liberty Digital would be its primary (but not exclusive) vehicle to pursue
corporate opportunities relating to interactive programming and interactive
content related services in the United States and Canada, subject to certain
exceptions.

MOTOROLA, INC. (SUCCESSOR TO GENERAL INSTRUMENT CORPORATION)

Liberty Media Group'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 solutions for
local telephone companies. GI also had audio and Internet/data-delivery systems
among its product lines.

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
Media Group entered into an agreement with Motorola, pursuant to which Liberty
Media Group agreed to vote its shares of GI common stock in favor of the
transaction and Motorola granted to Liberty Media Group certain registration
rights with respect to the shares of Motorola common stock acquired by Liberty
Media Group 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."

<PAGE>

Liberty Media Group currently holds common stock representing a 2.5%
interest in Motorola, excluding vested warrants to purchase common stock in
Motorola. Liberty Media Group 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 Media Group 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 Media Group's exercise of such vested
warrants, its ownership interest in Motorola would increase to 3.3%.

Liberty Media Group'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 Media Group. In April 1999, Liberty Media
Group acquired an additional 10 million shares of GI from Forstmann Little & Co.
for $280 million. This purchase by Liberty Media Group increased Liberty Media
Group's ownership in GI to approximately 21% and made Liberty Media Group the
largest stockholder of GI.

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 Media Group 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.

<PAGE>

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 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 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 Media Group 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.

<PAGE>

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 Media Group'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 Media Group 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 Media Group 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 Media Group 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 Act, satellite carriers
previously paid a monthly fee of 27 cents per subscriber for the secondary

<PAGE>

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 Media Group'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

<PAGE>

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 Media Group 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 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 Media Group
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 Media Group'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 Media Group 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.

<PAGE>

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 Media Group 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 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.

<PAGE>

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 Media Group 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 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.

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
AT&T Corp.:

We have audited the accompanying combined balance sheets of Liberty Media Group
(a combination of certain assets of AT&T Corp., as defined in note 1) ("New
Liberty" or "Successor") as of December 31, 1999, and of Liberty Media Group (a
combination of certain assets of Tele-Communications, Inc., as defined in note
1) ("Old Liberty" or "Predecessor") as of December 31, 1998, and the related
combined statements of operations and comprehensive earnings, combined equity,
and cash flows for the periods from March 1, 1999 to December 31, 1999
(Successor period) and from January 1, 1999 to February 28, 1999 and for each of
the years in the two-year period ended December 31, 1998 (Predecessor periods).
These combined financial statements are the responsibility of management. Our
responsibility is to express an opinion on these combined 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.

The combined financial statements of Liberty Media Group are presented for
purposes of additional analysis of the consolidated financial statements of AT&T
Corp. As more fully described in note 1, the combined financial statements of
Liberty Media Group are intended to reflect the performance of the businesses of
AT&T Corp., that produce, acquire and distribute entertainment, educational and
informational programming services. The combined financial statements of Liberty
Media Group should be read in conjunction with the consolidated financial
statements of AT&T Corp.

In our opinion, the aforementioned Successor combined financial statements
present fairly, in all material respects, the financial position of New Liberty
as of December 31, 1999, and the results of their operations and their cash
flows for the Successor period, in conformity with generally accepted accounting
principles. Further, in our opinion, the aforementioned Predecessor combined
financial statements present fairly, in all material respects, the financial
position of Old Liberty as of December 31, 1998, and the results of their
operations and their cash flows for the Predecessor periods, in conformity with
generally accepted accounting principles.

As discussed in note 1, effective March 9, 1999, AT&T Corp., the owner of the
assets comprising New Liberty, acquired Tele-Communications, Inc., the owner of
the assets comprising Old Liberty, in a business combination accounted for as a
purchase. As a result of the acquisition, the combined financial information for
the periods after the acquisition is presented on a different cost basis than
that for the periods before the acquisition and, therefore, is not comparable.

KPMG LLP

Denver, Colorado
February 29, 2000

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

COMBINED BALANCE SHEETS

December 31, 1999 and 1998

<TABLE>
<CAPTION>
New Liberty Old Liberty
1999 1998
------------------- -----------
(note 2)
amounts in millions
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,714 407
Short-term investments 378 124
Trade and other receivables, net 134 185
Prepaid expenses and committed program rights 406 263
Deferred income tax assets 750 216
Other current assets 5 21
------- ------
Total current assets 3,387 1,216
------- ------
Investments in affiliates, accounted for under the equity method, and
related receivables (note 6) 15,922 3,079
Investments in available-for-sale securities and others (note 7)
28,601 14,383
Property and equipment, at cost 162 935
Less accumulated depreciation 19 350
------- ------
143 585
------- ------
Intangible assets:
Excess cost over acquired net assets 9,973 1,030
Franchise costs 273 109
------- ------
10,246 1,139
Less accumulated amortization 454 164
------- ------
9,792 975
------- ------
Other assets, at cost, net of accumulated amortization 839 326
------- ------
Total assets $58,684 20,564
======= ======
</TABLE>
(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

COMBINED BALANCE SHEETS
December 31, 1999 and 1998

<TABLE>
<CAPTION>
New Liberty Old Liberty
1999 1998
--------------- -----------
(note 2)
amounts in millions
<S> <C> <C>
Liabilities and Combined Equity
Current liabilities:
Accounts payable $ 44 78
Accrued liabilities 201 204
Accrued stock compensation 2,405 126
Program rights payable 166 156
Customer prepayments -- 134
Current portion of debt 554 578
------- ------
Total current liabilities 3,370 1,276
------- ------
Long-term debt (note 11) 2,723 2,318
Deferred income tax liabilities (note 12) 14,107 4,674
Other liabilities 23 423
------- ------
Total liabilities 20,223 8,691
------- ------
Minority interests in equity of attributed subsidiaries (notes 8 and 9) 1 545
Obligation to redeem common stock -- 17
Combined equity (note 13):
Combined equity 31,876 6,896
Accumulated other comprehensive earnings, net of taxes (note 14) 6,557 3,718
------- ------
38,433 10,614
Due to related parties 27 697
------- ---
Total combined equity 38,460 11,311
------- ------
Commitments and contingencies (note 15)
Total liabilities and combined equity $58,684 20,564
======= ======
</TABLE>

See accompanying notes to combined financial statements.

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS

<TABLE>
<CAPTION>
New Liberty Old Liberty
-------------- -------------------------------------
Ten months Two months
ended ended Years ended
December 31, February 28, December 31,
1999 1999 1998 1997
-------------- ------------ -------- ----------
amounts in millions
(note 2)
<S> <C> <C> <C> <C>
Unaffiliated parties $ 549 239 1,301 1,104
Related parties (note 13) 180 43 258 195
------- ------- ------- -------
729 282 1,559 1,299
------- ------- ------- -------
Operating costs and expenses:
Operating 343 136 882 682
Selling, general and administrative 229 89 427 348
Charges from related parties (note 13) 24 2 28 75
Cost of distribution agreements (note 10) -- -- 50 --
Stock compensation 1,785 183 518 296
Depreciation and amortization 562 47 243 196
------- ------- ------- -------
2,943 457 2,148 1,597
------- ------- ------- -------
Operating loss (2,214) (175) (589) (298)
Other income (expense):
Interest expense (287) (27) (116) (57)
Interest expense to related parties, net (note 13) (1) (1) (10) (12)
Dividend and interest income 243 12 100 57
Share of losses of affiliates, net (note 6) (904) (66) (1,034) (850)
Minority interests in losses of attributed subsidiaries 46 4 102 25
Gains on dispositions, net (notes 6 and 7) 3 14 4,738 420
Gains on issuance of equity by affiliates and subsidiaries
(notes 6, 8 and 10) -- 389 357 172
Other, net (5) -- 6 2
------- ------- ------- -------
(905) 325 4,143 (243)
------- ------- ------- -------
Earnings (loss) before income taxes (3,119) 150 3,554 (541)
Income tax benefit (expense) (note 12) 1,097 (209) (1,397) 130
------- ------- ------- -------
Net earnings (loss) $(2,022) (59) 2,157 (411)
------- ------- ------- -------
<PAGE>

Other comprehensive earnings, net of taxes:
Foreign currency translation adjustments 60 (15) 3 (22)
Unrealized holding gains arising during the period, net of
reclassification adjustments 6,497 971 2,947 749
------- ------- ------- -------
Other comprehensive earnings (loss) 6,557 956 2,950 727
------- ------- ------- -------
Comprehensive earnings (note 14) $ 4,535 897 5,107 316
======= ======= ======= =======
Basic and diluted loss per share (note 4):
Loss attributable to common stockholders $(2,022)
=======
Basic and diluted loss per share attributable to common
stockholders $ (1.61)
=======
Weighted average common shares 1,259
=======
</TABLE>

See accompanying notes to combined financial statements.

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

COMBINED STATEMENTS OF EQUITY
Years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
Accumulated
other Due to
comprehensive (from) Total
Combined earnings, related combined
equity net of tax parties equity
--------- ------------- ------- --------
amounts in millions
<S> <C> <C> <C> <C>
Balance at January 1, 1997 $ 5,038 41 (134) 4,945
Net loss (411) -- -- (411)
Foreign currency translation adjustments -- (22) -- (22)
Unrealized gains on available-for-sale securities -- 749 -- 749
Contribution to combined equity for issuance of common stock
to TCI Employee Stock Purchase Plan
2 -- -- 2
Repurchase of common stock (625) -- -- (625)
Excess of consideration paid over carryover basis of net assets
acquired from related party (note 9) (219) -- -- (219)
Gain in connection with issuance of stock of affiliate (note 6) 66 -- -- 66
Issuance of stock by attributed subsidiary 19 -- -- 19
Issuance of common stock (note 8) 30 -- -- 30
Excess of cash received over carryover basis of SUMMITrak
Assets 30 -- -- 30
Other transfers from related parties, net 81 -- 664 745
------- ------- ------- -------
Balance at December 31, 1997 4,011 768 530 5,309
Net earnings 2,157 -- -- 2,157
Foreign currency translation adjustments -- 3 -- 3
Unrealized gains on available-for-sale securities -- 2,947 -- 2,947
Payments for call agreements (140) -- -- (140)
Repurchase of common stock (30) -- -- (30)
Premium received in connection with put obligation 2 -- -- 2
Reclassification of redemption amount of common stock
subject to put obligation (17) -- -- (17)
Gain in connection with issuance of stock of affiliates and
attributed subsidiaries (note 6) 70 -- -- 70
Issuance of common stock (note 8) 777 -- (5) 772
Transfer of net liabilities to related party 50 -- -- 50
Assignment of option contract from related party 16 -- (16) --
Other transfers from related parties, net -- -- 188 188
------- ------- ------- -------
Balance at December 31, 1998 6,896 3,718 697 11,311
Net loss (59) -- -- (59)
Foreign currency translation adjustments -- (15) -- (15)
Unrealized gains on available-for-sale securities -- 971 -- 971
Reversal of reclassification of redemption amount of common
stock subject to put obligation 8 -- -- 8
Transfer of net liabilities to related party, net of taxes 99 -- -- 99

<PAGE>

Excess paid on settlement of preferred stock conversion (18) -- -- (18)
Other transfers to related parties, net -- -- (24) (24)
------- ------- ------- -------
Balance at February 28, 1999 $ 6,926 4,674 673 12,273
======= ======= ======= =======
</TABLE>

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

COMBINED STATEMENTS OF EQUITY

Years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
Accumulated
other Due to
comprehensive (from) Total
Combined earnings, related combined
equity net of tax parties equity
-------- ------------- ------- --------
amounts in millions
<S> <C> <C> <C> <C>
Balance at February 28, 1999 $ 6,926 4,674 673 12,273
======== ======== ======== ========
Balance at March 1, 1999 33,515 -- 197 33,712
Net loss (2,022) -- -- (2,022)
Foreign currency translation adjustments -- 60 -- 60
Recognition of previously unrealized losses on
available-for-sale securities, net -- 7 -- 7
Unrealized gains on available-for-sale securities -- 6,490 -- 6,490
AT&T Liberty Media Group Tracking Stock issued for
conversion of debentures (note 11) 354 -- -- 354
Reversal of reclassification of redemption amount of common
stock subject to put obligation 9 -- -- 9
Gain in connection with the issuance of common stock of affiliates and
attributed subsidiaries (note 9) 108 -- -- 108
Utilization of net operating losses of Liberty Media Group
by AT&T (note 12) (88) -- -- (88)
Other transfers to related parties, net -- -- (170) (170)
-------- -------- -------- --------
Balance at December 31, 1999 $ 31,876 6,557 27 38,460
======== ======== ======== ========
</TABLE>

See accompanying notes to combined financial statements.

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------ ----------------------------------
Ten months Two months
ended ended Years ended
December 31, February 28, December 31,
1999 1999 1998 1997
------------ ------------ ---- ----
amounts in millions
Cash flows from operating activities: (note 5)
<S> <C> <C> <C> <C>
Net earnings (loss) $(2,022) (59) 2,157 (411)
Adjustments to reconcile net earnings (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 562 47 243 196
Stock compensation 1,785 183 518 296
Payments of stock compensation (111) (126) (58) (75)
Share of losses of affiliates, net 904 66 1,034 850
Deferred income tax (benefit) expense (1,025) 205 1,393 16
Intergroup tax allocation (75) -- (2) (159)
Cash payment from AT&T pursuant to tax sharing agreement 1 -- -- --
Minority interests in losses of attributed subsidiaries (46) (4) (102) (25)
Gains on issuance of equity by affiliates and subsidiaries -- (389) (357) (172)
Gains on disposition of assets, net (3) (14) (4,738) (420)
Noncash interest 153 -- -- --
Other noncash charges 3 9 55 32
Changes in operating assets and liabilities, net of the effect of
acquisitions and dispositions:
Change in receivables 7 (19) (49) 9
Change in prepaid expenses and committed program rights (119) (10) (39) (3)
Change in payables, accruals and customer prepayments 119 4 11 38
------- ------- ------- -------
Net cash provided (used) by operating activities
133 (107) 66 172
------- ------- ------- -------
Cash flows from investing activities:
Cash paid for acquisitions (109) -- (92) (41)
Capital expended for property and equipment (40) (21) (144) (168)
Cash balances of deconsolidated subsidiaries -- (53) -- (39)
Investments in and loans to affiliates and others (2,596) (45) (1,404) (683)
Purchases of marketable securities (7,757) (132) (124) --
Sales and maturities of marketable securities 5,725 34 -- --
Return of capital from affiliates 7 -- 12 5
Collections on loans to affiliates and others -- -- -- 133
Cash proceeds from dispositions 130 43 423 302
Other, net (18) (9) (29) (6)
------- ------- ------- -------
Net cash used by investing activities (4,658) (183) (1,358) (497)
------- ------- ------- -------
<PAGE>

Cash flows from financing activities:
Borrowings of debt 3,187 156 2,428 667
Repayments of debt (2,211) (148) (622) (348)
Net proceeds from issuance of stock by subsidiaries 123 -- 75 148
Payments for call agreements -- -- (140) --
Cash transfers (to) from related parties (159) 132 (216) 310
Repurchase of common stock -- -- (30) (625)
Repurchase of stock of subsidiaries -- (45) (24) (42)
Other, net (20) (1) 4 (5)
------- ------- ------- -------
Net cash provided by financing activities 920 94 1,475 105
------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents (3,605) (196) 183 (220)
Cash and cash equivalents at beginning of year 5,319 407 224 444
------- ------- ------- -------
Cash and cash equivalents at end of year $ 1,714 211 407 224
======= ======= ======= =======
</TABLE>

See accompanying notes to combined financial statements.

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

December 31, 1999, 1998 and 1997

(1) Basis of Presentation

The accompanying combined financial statements include the accounts of
the subsidiaries and assets of AT&T Corp. ("AT&T") that are attributed
to Liberty Media Group, as defined below. On March 9, 1999, AT&T
acquired Tele-Communications, Inc. ("TCI"), the former owner of the
assets attributed to Liberty Media Group, in a merger transaction (the
"AT&T Merger"). See note 2. The AT&T Merger has been accounted for
using the purchase method. Accordingly, Liberty Media Group's assets
and liabilities have been recorded at their respective fair market
values therefore, creating a new cost basis. For financial reporting
purposes the AT&T Merger and related restructuring transactions
described in note 2 are deemed to have occurred on March 1, 1999.
Accordingly, for periods prior to March 1, 1999 the assets and
liabilities attributed to Liberty Media Group and the related combined
financial statements are sometimes referred to herein as "Old Liberty",
and for periods subsequent to February 28, 1999 the assets and
liabilities attributed to Liberty Media Group and the related combined
financial statements are sometimes referred to herein as "New Liberty".
The "Company" and "Liberty Media Group" refer 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 restructuring transactions and the
consummation of the AT&T Merger and the opening summary balance sheet
of New Liberty subsequent to the restructuring transactions and the
consummation of 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 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 $ 211 5,319
Other current assets 648 451
Investments in affiliates 3,971 17,116
Investment in Time Warner 7,361 7,832
Investment in Sprint 3,381 3,681
Investment in AT&T 3,856 --
Other investments 1,257 1,587
Property and equipment, net 532 125
Intangibles and other assets 817 11,159
------- -------
$22,034 47,270
======= =======
<PAGE>

Liabilities and Equity:
Current liabilities $ 1,446 1,675
Long-term debt 2,319 1,845
Deferred income taxes 5,369 9,971
Other liabilities 168 19
------- -------
Total liabilities 9,302 13,510
------- -------
Minority interests in equity of
attributed subsidiaries 450 39
Obligation to redeem common stock 9 9
Equity 12,273 33,712
------- -------
$22,034 47,270
======= =======
</TABLE>

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

The following table reflects the recapitalization resulting from the
AT&T Merger (amounts in millions):

<TABLE>
<S> <C>
Total combined equity of Old Liberty $12,273
Net contribution resulting from the restructuring transactions 2,334
Purchase accounting adjustments 19,105
-------
Initial combined equity of New Liberty subsequent to the AT&T
Merger $33,712
=======
</TABLE>

The following unaudited condensed results of operations for the years
ended December 31, 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>
Years ended
December 31,
---------------------
1999 1998
---- ----
(amounts in millions)
<S> <C> <C>
Revenue $964 1,361
Net loss $(2,246) (302)
Loss per share $ (1.78) (0.25)
</TABLE>

At December 31, 1999, Liberty Media Group consisted principally of the
following:

- AT&T's assets and 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, including multimedia products;

- AT&T's assets and businesses engaged in electronic retailing, direct
marketing, advertising sales relating to programming services,
infomercials and transaction processing;

<PAGE>

- certain of AT&T's assets and businesses engaged in international cable,
telephony and programming businesses; and,

- AT&T's holdings in a class of tracking stock of Sprint Corporation (the
"Sprint PCS Group Stock").

All significant intercompany accounts and transactions have been
eliminated. The combined financial statements of Liberty Media Group
are presented for purposes of additional analysis of the consolidated
financial statements of AT&T and should be read in conjunction with
such consolidated financial statements.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

(2) Merger with AT&T

As a result of the AT&T Merger, holders of shares of TCI's then
outstanding Liberty Media Group tracking stock and TCI Ventures Group
tracking stock were issued shares of a new targeted stock of AT&T. Each
share of TCI's then outstanding Liberty Media Group Series A tracking
stock was converted into 2 shares of a newly created class of AT&T
tracking stock, the AT&T Liberty Media Group Class A tracking stock,
each share of TCI's then outstanding Liberty Media Group Series B
tracking stock was converted into 2 shares of a newly created class of
AT&T tracking stock, the AT&T Liberty Media Group Class B tracking
stock, each share of TCI's then outstanding TCI Ventures Group Series A
tracking stock was converted into 1.04 shares of AT&T Liberty Media
Group Class A tracking stock and each share of TCI's then outstanding
TCI Ventures Group Series B tracking stock was converted into 1.04
shares of AT&T Liberty Media Group Class B tracking stock.

Effective with the AT&T Merger, each share of TCI's Convertible
Preferred Stock Series C-Liberty Media was converted into 112.5 shares
of AT&T Liberty Media Group Class A tracking stock and each share of
TCI's Redeemable Convertible Liberty Media Group Preferred Stock,
Series H was converted into 1.18125 shares of AT&T Liberty Media Group
Class A tracking stock. In general, the holders of shares of AT&T
Liberty Media Group Class A tracking stock and the holders of shares of
AT&T Liberty Media Group Class B tracking stock will vote together as a
single class with the holders of shares of AT&T common stock on all
matters presented to such stockholders, with the holders being entitled
to three-fortieths (3/40th) of a vote for each share of AT&T Liberty
Media Group Class A tracking stock held, three-fourths (3/4th) of a
vote for each share of AT&T Liberty Media Group Class B tracking stock
held and 1 vote per share of AT&T common stock held.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

The shares of AT&T Liberty Media Group Tracking Stock issued in the
AT&T Merger are intended to reflect the separate performance of the
businesses and assets attributed to Liberty Media Group. Immediately
prior to the AT&T Merger, certain assets previously attributed to Old
Liberty (including, among others, the shares of AT&T Common Stock
received in the merger of AT&T and Teleport Communications Group, Inc.
("Teleport") (see note 7), Old Liberty's interests in At Home
Corporation ("@Home"), the National Digital Television Center, Inc.
("NDTC") and Western Tele-Communications, Inc.) were attributed to "TCI
Group" (a group of TCI's assets, which, prior to the AT&T Merger, was
comprised primarily of TCI's domestic cable and communications
business) in exchange for approximately $5.5 billion in cash (the
"Asset Transfers"). Also, upon consummation of the AT&T Merger, through
a new tax sharing agreement between Liberty Media Group and AT&T,
Liberty Media Group is entitled to the benefit of approximately $2
billion in 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. Such net operating loss carryforwards are subject to
adjustment by the Internal Revenue Service ("IRS") and are subject to
limitations on usage which may affect the ultimate amount utilized.
Additionally, certain warrants to purchase shares of General
Instruments Corporation ("GI Warrants") previously attributed to TCI
Group were attributed to Liberty Media Group in exchange for
approximately $176 million in cash. See note 7. Certain agreements
entered into at the time of the AT&T Merger provide, among other
things, for preferred vendor status to Liberty Media Group for digital
basic distribution on AT&T's systems of new programming services
created by Liberty Media Group and for a renewal of existing
affiliation agreements. Pursuant to amended corporate governance
documents for the entities included in Liberty Media Group and certain
agreements among AT&T and TCI, the business of Liberty Media Group will
continue to be managed by certain persons who were members of TCI's
management prior to the AT&T Merger.

(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, 1999 and 1998 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
the film is available for airing less prepayments. These amounts are
amortized on a film-by-film basis over the anticipated number of
exhibitions.

(continued)
<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

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 combined 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.
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.

Subsequent to the AT&T Merger, changes in the Company's proportionate
share of the underlying equity of an attributed subsidiary or equity
method investee, which result from the issuance of additional equity
securities by such attributed subsidiary or equity investee, generally
are recognized as gains or losses in the Company's combined statements
of combined equity.

Property and Equipment

Property and equipment, including significant improvements, is stated
at cost. Depreciation is computed on a straight-line basis using
estimated useful lives of 3 to 20 years for support equipment and 10 to
40 years for buildings and improvements.

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 generally amortized on a
straight-line basis over 20 years.

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.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

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 attributed
subsidiaries is generally limited to the amount of such minority
interests' allocable portion of the common equity of those attributed
subsidiaries. Further, the minority interests' share of losses is not
recognized if the minority holders of common equity of attributed
subsidiaries have the right to cause the Company to repurchase such
holders' common equity.

Preferred stock (and accumulated dividends thereon) of attributed
subsidiaries are included in minority interests in equity of attributed
subsidiaries. Dividend requirements on such preferred stocks are
reflected as minority interests in earnings of attributed subsidiaries
in the accompanying combined 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 attributed foreign
subsidiary and foreign equity method investee. In this regard, the
functional currency of certain of the Company's attributed foreign
subsidiaries and foreign equity investees is the Argentine peso, the
United Kingdom ("UK") pound sterling ("pound sterling" or "pounds"),
the French franc ("FF") and the Japanese yen ("yen"). Assets and
liabilities of attributed foreign subsidiaries and foreign equity
investees are translated at the spot rate in effect at the applicable
reporting date, and the combined 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 combined
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
combined statements of operations and comprehensive earnings as
unrealized (based on the applicable period end exchange rate) or
realized upon settlement of the transactions.

(continued)
<PAGE>
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

Unless otherwise indicated, convenience translations of foreign
currencies into U.S. dollars are calculated using the applicable spot
rate at December 31, 1999, as published in The Wall Street Journal.

Derivative Instruments and Hedging Activities

Liberty Media Group has entered into "cashless collar" transactions
with respect to certain securities attributed to Liberty Media Group.
The cashless collar provides Liberty Media Group with a put option that
gives it the right to require its counterparty to buy designated shares
at a designated price per share and simultaneously provides the
counterparty a call option giving it the right to buy the same number
of shares at a designated price per share.

As Liberty Media Group's cashless collars are designated to specific
shares of stock attributed to Liberty Media Group 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 designated to specific shares which are accounted for
as available-for-sale securities are reported as a component of
comprehensive earnings (in unrealized gains) along with the changes in
the fair value of the underlying securities.

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
combined results of operations and financial position, management does
not expect that the impact of Statement 133 will be significant,
however, there can be no assurances that the impact 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.

(continued)
<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

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 Media Group continues to account
for stock-based compensation pursuant to Accounting Principles Board
Opinion No. 25. Liberty Media Group estimates that compensation expense
would not be materially different under Statement 123.

Reclassifications

Certain prior period amounts have been reclassified for comparability
with the 1999 presentation.

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.

(4) Loss Per Common Share

Basic earnings or loss per share ("EPS") is measured as the income or
loss attributable to common stockholders divided by the weighted
average outstanding common shares for the period. Diluted EPS is
similar to basic EPS but presents the dilutive effect on a per share
basis of potential common shares as if they had been converted at the
beginning of the periods presented. Potential common shares that have
an anti-dilutive effect are excluded from diluted EPS.

The basic and diluted loss attributable to Liberty Media Group common
stockholders per common share for the ten months ended December 31,
1999 was computed by dividing the net loss attributable to Liberty
Media Group common stockholders by the weighted average number of
common shares outstanding of AT&T Liberty Media Group tracking stock
during the period. Potential common shares were not included in the
computations of weighted average shares outstanding because their
inclusion would be anti-dilutive.

At December 31, 1999, there were 48 million potential common shares
consisting of fixed and nonvested performance awards, stock options and
convertible securities that could potentially dilute future EPS
calculations in periods of net earnings. No material changes in the
weighted average outstanding shares or potential common shares occurred
after December 31, 1999.

(continued)
<PAGE>
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

(5) Supplemental Disclosures to Combined Statements of Cash Flows

Cash paid for interest was $93 million, $32 million, $112 million and $60
million for the ten months ended December 31, 1999, the two months ended
February 28, 1999 and the years ended December 31, 1998 and 1997,
respectively. Cash paid for income taxes during the ten months ended
December 31, 1999 and the two months ended February 28, 1999 was not
material. Cash paid for income taxes during the years ended December 31,
1998 and 1997 was $29 million and $35 million, respectively.

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------ ----------------------------------------
Ten months Two months
ended ended Years ended
December 31, February 28, December 31,
------------ ------------ ---------------------
1999 1999 1998 1997
------------ ------------ ---- ----
amounts in millions
<S> <C> <C> <C> <C>
Cash paid for acquisitions:
Fair value of assets acquired $ 122 -- 162 452

Net liabilities assumed (13) -- (107) (209)
Debt issued to related parties
and others -- -- -- (404)
Deferred tax asset recorded in
acquisition -- -- -- 112

Minority interest in equity of
acquired attributed
subsidiaries -- -- 39 (129)

Excess consideration paid over
carryover basis of net
assets acquired from related
party -- -- -- 219

Gain in connection with the
issuance of stock by
attributed subsidiary -- -- (2) --
----- ------- ---- ----

Cash paid for acquisitions $ 109 -- 92 41
===== ======= ==== ====

</TABLE>

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

Significant noncash investing and financing activities are as follows:

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>
<CAPTION>
<S> <C>
Cash and cash equivalents prior to the AT&T Merger $ 211
Cash received in the Asset Transfers, net of cash balances transferred
5,284
Cash paid to TCI Group for GI Warrants (176)
-------
Cash and cash equivalents subsequent to the AT&T Merger $ 5,319
=======
</TABLE>
(continued)
<PAGE>
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

Liberty Media Group ceased to include TV Guide, Inc. ("TV Guide") in its
combined financial results and began to account for TV Guide using the equity
method of accounting, effective March 1, 1999 (see note 8). Liberty Media Group
ceased to include Flextech p.l.c. ("Flextech") and Cablevision S.A.
("Cablevision") in its combined 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 Media Group's ownership interests in these
investments from the consolidation method to the equity method are summarized
below:

<S> <C> <C> <C> <C>
Assets (other than cash and cash
equivalents) reclassified to
investments in affiliates $ -- (200) -- (596)

Liabilities reclassified to
investments in affiliates -- 190 -- 484
Minority interests in equity of
attributed subsidiaries
reclassified to investments in
affiliates -- 63 -- 151
----- ---- ---- ----

Decrease in cash and cash
equivalents $ -- 53 -- 39
===== ==== ==== ====
</TABLE>

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

(6) Investments in Affiliates Accounted for under the Equity Method

Liberty Media Group has various investments accounted for under the equity
method. The following table includes Liberty Media Group's carrying amount
and percentage ownership of the more significant investments in affiliates
at December 31, 1999 and the carrying amount at December 31, 1998:

<TABLE>
<CAPTION>
New Liberty Old Liberty
--------------------------------------- -----------------
December 31, 1999 December 31, 1998
--------------------------------------- -----------------
Percentage
Ownership Carrying Amount Carrying Amount
---------- --------------- ---------------
amounts in millions
<S> <C> <C> <C>
USA Networks, Inc. ("USAI") and
related investments 21% $ 2,699 1,042
Telewest Communications plc
( "Telewest ") 22% 1,996 515
Discovery Communications, Inc.
("Discovery") 49% 3,441 49
TV Guide 44% 1,732 --
QVC Inc. ( "QVC ") 43% 2,515 197
Flextech 37% 727 320
UnitedGlobalCom, Inc.
("UnitedGlobalCom") 10% 505 --
Jupiter Telecommunications Co., Ltd.
("Jupiter") 40% 399 143
Various foreign equity investments
(other than Telewest, Flextech and
Jupiter)
various 1,064 518
Other various 844 295
------- -----
$15,922 3,079
======= =====
</TABLE>

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

The following table reflects Liberty Media Group's share of earnings
(losses) of affiliates:

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------ --------------------------------------------
Ten months Two months
ended ended Years ended
December 31, February 28, December 31,
1999 1999 1998 1997
------------ ------------ ------- --------
amounts in millions
<S> <C> <C> <C> <C>
USAI and related investments $ (20) 10 30 5
Telewest (222) (38) (134) (145)
Discovery (269) (8) (39) (29)
TV Guide (46) -- -- --
QVC (11) 13 64 30
Flextech (41) (5) (21) (16)
Fox/Liberty Networks LLC
("Fox/Liberty Networks") (48) (1) (83) --
UnitedGlobalCom 23 -- -- --
Jupiter (54) (7) (26) (23)
Other foreign investments (113) (15) (99) (80)
Teleport -- -- (32) (66)
Sprint Spectrum Holding Company,
L.P., MinorCo, L.P. and
PhillieCo Partnership I, L.P.
(the "PCS Ventures") (note 7)

-- -- (629) (493)
Other (103) (15) (65) (33)
------------- ------ ------ ----
$ (904) (66) (1,034) (850)
============= ====== ====== ====
</TABLE>

Summarized unaudited combined financial information for affiliates is as
follows:

<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
------- -------
amounts in millions
<S> <C> <C>
Combined Financial Position
Investments $ 1,415 2,003
Property and equipment, net 8,885 8,147
Other intangibles, net 19,778 14,395
Other assets, net 9,207 7,553
------- -------
Total assets $39,285 32,098
======= =======

<PAGE>
Debt $17,210 15,264
Other liabilities 12,645 11,620
Owners' equity 9,430 5,214
------- -------
Total liabilities and equity $39,285 32,098
======= =======
</TABLE>

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------- ------------------------------------------------------
Ten months Two months
ended ended Years ended
December 31, February 28, December 31,
1999 1999 1998 1997
------------ ------------ -------- --------
amounts in millions
<S> <C> <C> <C> <C>
Combined Operations
Revenue $ 10,492 2,341 14,062 7,107
Operating expenses (9,066) (1,894) (13,092) (7,635)
Depreciation and amortization (1,461) (353) (2,629) (1,152)
-------- -------- -------- --------
Operating income (loss) (35) 94 (1,659) (1,680)
Interest expense (886) (281) (1,728) (656)
Other, net (151) (127) (166) (443)
-------- -------- -------- --------
Net loss $ (1,072) (314) (3,553) (2,779)
======== ======== ======== ========
</TABLE>

USAI owns and operates businesses in network and television production,
television broadcasting, electronic retailing, ticketing operations, and
internet services. At December 31, 1999, Liberty Media Group directly and
indirectly held 66.5 million shares of USAI's common stock (as adjusted for
a subsequent two-for-one stock split). Liberty Media Group also held shares
directly in certain subsidiaries of USAI which are exchangeable into 79.0
million shares of USAI common stock (as adjusted for the two-for-one stock
split). Liberty Media Group'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 Media Group obtains permission from the
FCC. If the exchange of subsidiary stock into USAI common stock was
completed at December 31, 1999, Liberty Media Group would own 145.5 million
shares (as adjusted for the two-for-one stock split) or approximately 21%
(on a fully-diluted basis) of USAI common stock. USAI's common stock had a
closing market value of $27.63 per share (as adjusted for the two-for-one
stock split) on December 31, 1999. Liberty Media Group 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 its
subsidiaries issued shares in connection with the acquisition of certain
assets from Universal Studios, Inc. (the "Universal Transaction"). Liberty
Media Group recorded an increase to its investment in USAI of $54 million
and an increase to combined equity 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

<PAGE>

Transaction"). Liberty Media Group recorded an increase to its investment
in USAI of $52 million and an increase to combined equity of $31 million
(after deducting deferred income taxes of $21 million) as a result of this
share issuance. No gain was recognized in the combined statement of
operations and comprehensive earnings for either the Universal Transaction
or the Ticketmaster Transaction due primarily to Liberty Media Group's
intention to purchase additional equity interests in USAI.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

In connection with the Universal Transaction, Liberty Media Group 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.

Telewest currently operates and constructs cable television and telephone
systems in the UK. At December 31, 1999 Liberty Media Group indirectly
owned 506 million of the issued and outstanding Telewest ordinary shares.
The reported closing price on the London Stock Exchange of Telewest
ordinary shares was $5.34 per share at December 31, 1999.

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 New Telewest shares and cash. Based upon
Telewest's closing price of $1.51 per share on April 14, 1998, the General
Cable Merger was valued at approximately $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 $1.57 per share (the "Telewest Offer").
Liberty Media Group subscribed to 85 million Telewest ordinary shares at an
aggregate cost of $133 million in connection with the Telewest Offer. In
connection with the General Cable Merger, Liberty Media Group 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 Media Group's ownership interest in Telewest decreased to
22%. In connection with the increase in Telewest's equity, net of the
dilution of Liberty Media Group's interest in Telewest, that resulted from
the General Cable Merger, Liberty Media Group recorded a non-cash gain of
$60 million (before deducting deferred income taxes of $21 million) during
1998.

The Class A common stock of TV Guide is publicly traded. At December 31,
1999, Liberty Media Group held 58 million shares of TV Guide Class A common
stock (as adjusted for a two-for-one stock split) and 75 million shares of
TV Guide Class B common stock (as adjusted for a two-for-one stock split).
See note 8. 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 $43.00 per share on December 31, 1999.

Flextech develops and sells a variety of television programming in the UK.
At December 31, 1999, Liberty Media Group indirectly owned 58 million
Flextech ordinary shares. The reported closing price on the London Stock
Exchange of the Flextech ordinary shares was $18.58 per share at December
31, 1999.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

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 Media Group's economic ownership interest in Flextech from 46.2% to
36.8%. Liberty Media Group continues to maintain a voting interest in
Flextech of approximately 50%. As a result of such dilution, Liberty Media
Group recorded a $152 million increase to the carrying amount of Liberty
Media Group's investment in Flextech, a $53 million increase to deferred
income tax liability, a $66 million increase to combined equity and a $33
million increase to minority interests in equity of attributed
subsidiaries. No gain was recognized in the combined statement of
operations and comprehensive earnings due primarily to certain contingent
obligations of Liberty Media Group with respect to one of the BBC Joint
Ventures (see note 15).

Liberty Media Group and The News Corporation Limited ("News Corp.") each
previously owned 50% of Fox/Liberty Networks, which operates national and
regional sports networks. Prior to the first quarter of 1998, Liberty Media
Group had no obligation, nor intention, to fund Fox/Liberty Networks.
During 1998, Liberty Media Group made the determination to provide funding
to Fox/Liberty Networks based on specific transactions consummated by
Fox/Liberty Networks. Consequently, Liberty Media Group's share of losses
of Fox/Liberty Networks for the year ended December 31, 1998 included
previously unrecognized losses of Fox/Liberty Networks of approximately $64
million. Losses for Fox/Liberty Networks were not recognized in prior
periods due to the fact that Liberty Media Group's investment in
Fox/Liberty Networks was less than zero. During 1999, News Corp. acquired
Liberty Media Group's 50% interest in Fox/Liberty Networks (see note 7).

On September 30, 1999, Liberty Media Group purchased 9.9 million class B
shares of UnitedGlobalCom 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. At December 31, 1999, Liberty Media Group owned an
approximate 10% economic ownership interest representing an approximate 36%
voting interest in UnitedGlobalCom. The closing price for UnitedGlobalCom
Class A common stock was $70.63 per share on December 31, 1999. The
UnitedGlobalCom Class B common stock is convertible, on a one-for-one
basis, into UnitedGlobalCom Class A common stock.

During the year ended December 31, 1997, Teleport issued 6.6 million shares
of its Class A common stock for certain acquisitions and consummated a
public offering of 7.3 million shares of its Class A common stock. As a
result of the increase in Teleport's equity, net of the dilution of Liberty
Media Group's ownership interest in Teleport that resulted from these
transactions, Liberty Media Group recognized non-cash gains aggregating
$112 million (before deducting deferred income tax expense of $43 million).

On April 22, 1998, Teleport completed a merger transaction with ACC Corp.
As a result, Liberty Media Group's interest in Teleport was reduced to
approximately 26%. In connection with the increase in Teleport's equity,
net of the dilution of Liberty Media Group's interest in Teleport, that
resulted from the merger, Liberty Media Group recorded a non-cash gain of
$201 million (before deducting deferred income tax expense of $71 million).

(continued)
<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

On October 9, 1997, Liberty Media Group sold a portion of its 51% interest
in Cablevision to unaffiliated third parties. In connection with such sale
and certain related transactions, Liberty Media Group recognized a gain of
$49 million. Liberty Media Group's equity interest in Cablevision was 28%
at December 31, 1999.

The $13 billion aggregate excess of Liberty Media Group's aggregate
carrying amount in its affiliates over Liberty Media Group's proportionate
share of its affiliates' net assets is being amortized over estimated
useful life of 20 years.

Certain of Liberty Media Group'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.

(7) Investments in Available-for-sale Securities and Others

Investments in available-for-sale securities and others are summarized as
follows:

<TABLE>
<CAPTION>
New Liberty Old Liberty
------------ -----------
December 31,
--------------------------------
1999 1998
------------ -----------
amounts in millions
<S> <C> <C>
Sprint Corporation ("Sprint") (a) $ 10,186 2,446
Time Warner, Inc. ("Time Warner") (b) 8,202 7,083
News Corp. (c) 2,403 --
General Instrument Corporation ("General Instrument") (d) 3,430 396
Other available-for-sale securities 3,773 283
AT&T (e) -- 3,556
Other investments, at cost, and related receivables (f)
985 743
--------- -------
28,979 14,507
Less short-term investments 378 124
--------- -------
$ 28,601 14,383
========= =======
</TABLE>

(a) Pursuant to a final judgment (the "Final Judgment ") agreed to by
Liberty Media Corporation, AT&T and the United States Department of
Justice (the "DOJ ") on December 31, 1998, Liberty Media Group
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,
would require the Trustee, on or before May 23, 2002, to dispose of a
portion of the Sprint Securities sufficient to cause Liberty Media
Group 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 Media Group.

(continued)

<PAGE>
"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

The Final Judgment requires that the Trustee vote the Sprint Securities
beneficially owned by Liberty Media Group 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 of Liberty Media
Group of additional Sprint Securities, with certain exceptions, without the
prior written consent of the DOJ.

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 Media Group. The partners of
PhillieCo were subsidiaries of Sprint, Cox and Liberty Media Group. Liberty
Media Group had a 30% partnership interest in each of the Sprint PCS
partnerships and a 35% partnership interest in PhillieCo.

On November 23, 1998, Liberty Media Group, 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
then 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 Media Group, 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 Media Group
accounted for its interest in the PCS Ventures using the equity method of
accounting; however, as a result of the PCS Exchange, Liberty Media Group's
less than 1% voting interest in Sprint and the Final Judgment, Liberty
Media Group no longer exercises significant influence with respect to its
investment in the PCS Ventures. Accordingly, Liberty Media Group accounts
for its investment in the Sprint PCS Group Stock as an available-for-sale
security.

As a result of the PCS Exchange, Liberty Media Group 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 Media Group's interest in the PCS Ventures
and the fair value of the Sprint Securities received.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

In September 1999, a trust for Liberty Media Group's benefit entered into a
four and one-half year "cashless collar" with a financial institution with
respect to 35 million shares of Sprint PCS Group Stock (as adjusted for a
two-for-one stock split), secured by 35 million shares of such stock (as
adjusted for a two-for-one stock split). The collar provides the trust with
a put option that gives it the right to require its counterparty to buy 35
million shares of Sprint PCS Group Stock from the trust in five tranches in
approximately four and one-half years for a weighted average price of
$27.62 per share (as adjusted for a two-for-one stock split). Liberty Media
Group simultaneously sold a call option giving the counterparty the right
to buy the same shares of stock from the trust in five tranches in
approximately four and one-half years for a weighted average price of
$57.42 per share (as adjusted for a two-for-one stock split).

Additionally, on December 15, 1999, the trust entered into a "cashless
collar" with a financial institution with respect to 18 million shares of
Sprint PCS Group Stock (as adjusted for a two-for-one stock split). The
collar consists of a put option that gives the trust the right to require
its counterparty to buy 18 million shares of Sprint PCS Group Stock (as
adjusted for a two-for-one stock split) from the trust in three tranches in
approximately two years for $50.00 per share (as adjusted for a two-for-one
stock split). 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 $65.23 per share (as adjusted for a two-for-one
stock split). The put and the call options of each of these collars were
equally priced, resulting in no cash cost to the trust or Liberty Media
Group.

(b) Liberty Media Group 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. Liberty Media Group accounts for its investment in Time Warner as an
available-for-sale security.

On June 24, 1997, Liberty Media Group granted Time Warner an option to
acquire the business of Southern Satellite Systems, Inc. (the "Southern
Business") from Liberty Media Group. Liberty Media Group received 6.4
million shares of TW Exchange Stock valued at $306 million in consideration
for the grant. Pursuant to the option, Time Warner acquired the Southern
Business, effective January 1, 1998, for $213 million in cash. Liberty
Media Group recognized a $515 million pre-tax gain in connection with such
transaction in the first quarter of 1998.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

In March 1999, Liberty Media Group 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 TW Exchange
Stock. This cashless collar provides Liberty Media Group with a put option
that gives it the right to require its counterparty to buy 15 million Time
Warner shares from Liberty Media Group in approximately seven years for
$67.45 per share. Liberty Media Group simultaneously sold a call option
giving the counterparty the right to buy the same number of Time Warner
shares from Liberty Media Group in approximately seven years for $158.33
per share. The put and the call options were equally priced, resulting in
no cash cost to Liberty Media Group.

(c) On July 15, 1999, News Corp. acquired Liberty Media Group'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. 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 Media Group 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 Media
Group acquired from News Corp. 28.1 million additional ADRs representing
preferred limited voting ordinary shares of News Corp. for approximately
$695 million. Liberty Media Group accounts for its investment in News Corp.
as an available-for-sale security, with the exception of the Restricted
Shares and the Escrow Shares.

(d) On July 17, 1998, TCI acquired 21.4 million shares of restricted stock of
General Instrument in exchange for (i) certain of the assets of the NDTC's
set-top authorization business, (ii) the license of certain related
software to General Instrument, (iii) a $50 million promissory note from
TCI to General Instrument and (iv) a nine year revenue guarantee from TCI
in favor of General Instrument. In connection therewith, NDTC also entered
into a service agreement pursuant to which it will provide certain
postcontract services to General Instrument's set-top authorization
business. The 21.4 million shares of General Instrument common stock were,
in addition to other transfer restrictions, originally restricted as to
their sale by Liberty Media Group for a three year period. Liberty Media
Group recorded its investment in such shares at fair value which included a
discount attributable to the above-described liquidity restriction.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

On January 5, 2000, Motorola, Inc. completed the acquisition of General
Instrument through a merger of General Instrument with a wholly owned
subsidiary of Motorola. In the merger, each outstanding share of General
Instrument common stock was converted into the right to receive 0.575
shares of Motorola common stock. In connection with the merger Liberty
Media Group received 18 million shares and warrants to purchase 12 million
shares of Motorola common stock in exchange for its holdings in General
Instrument. Subsequent to the merger, the Motorola securities are no longer
subject to the three year restriction and accordingly, Liberty Media Group
accounted for its investment in General Instrument as an available-for-sale
security at December 31, 1999. Liberty Media Group has agreed not to
transfer or encumber the Motorola securities for a specified period which
is less than one year.

Liberty Media Group's ability to exercise warrants to purchase 6.1 million
shares of Motorola common stock are subject to AT&T satisfying the terms of
a purchase commitment in 2000. AT&T has agreed to pay Liberty Media Group
$14.35 for each warrant that does not vest as a result of the purchase
commitment not being met.

(e) During July 1998, Teleport was acquired by AT&T and Liberty Media Group
received in exchange for all of its interest in Teleport approximately 70.4
million shares of AT&T common stock. Liberty Media Group recognized a $2.3
billion gain (excluding related tax expense of $883 million) on such
transaction during the third quarter of 1998 based on the difference
between the carrying value of Liberty Media Group's interest in Teleport
and the fair value of the AT&T common stock received.

(f) On August 1, 1997, Liberty IFE, Inc., a wholly-owned subsidiary of Liberty
Media Group, 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. As a result of the exchange, Liberty Media Group recognized a
pre-tax gain of approximately $304 million during the third quarter of
1997.

Investments in available-for-sale securities are summarized as follows:

<TABLE>
<CAPTION>
New Liberty Old Liberty
----------- -----------
December 31,
------------------------------
1999 1998
----------- -----------
amounts in millions
<S> <C> <C>
Equity securities:
Fair value $ 24,472 13,243
Gross unrealized holding gains 11,457 4,875
Gross unrealized holding losses (646) --
Debt securities:
Fair value $ 1,995 --
Gross unrealized holding losses (22) --
</TABLE>

(continued)
<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

Management of Liberty Media Group 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 Media Group's investments
in available-for-sale securities and others aggregated $29.2 billion and
$11.2 billion at December 31, 1999 and December 31, 1998, respectively. No
independent appraisals were conducted for those assets.

(8) Acquisitions and Dispositions

During July 1997, the 10% minority interest in Encore Media Corporation
("EMC") was purchased by Liberty Media Group for approximately 2.4 million
shares of TCI's then outstanding Liberty Media Group tracking stock. Such
10% interest in EMC was accounted for as an acquisition of a minority
interest and resulted in an increase of $30 million in combined equity.

On January 12, 1998, Liberty Media Group acquired from a minority
shareholder of TV Guide, formerly named United Video Satellite Group, Inc.
("UVSG"), 49.6 million shares of UVSG Class A common stock (as adjusted for
a two-for-one stock split) in exchange for shares of TCI's then outstanding
Liberty Media Group tracking 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. As a result of such transaction,
Liberty Media Group increased its ownership in the equity of UVSG to
approximately 73% and the voting power increased to 93%. In connection with
the issuance of TCI's then outstanding Liberty Media Group tracking stock
in such transaction, Liberty Media Group recorded the total purchase price
of $346 million as an increase to combined equity.

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 Media Group's ownership interest in SNG decreased to approximately
80%. In connection with the increase in SNG's equity, net of the dilution
of Liberty Media Group's ownership interest in SNG, that resulted from such
transaction, Liberty Media Group 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.

On August 24, 1998, Liberty Media Group 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
included with those of Liberty Media Group since August 24, 1998. The $101
million excess cost over acquired net assets is being amortized over ten
years.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

On November 19, 1998, Liberty Media Group exchanged, in a merger
transaction, 10.1 million shares of TCI's then outstanding Liberty Media
Group tracking stock for shares of Tele-Communications International, Inc.
("TINTA") common stock not beneficially owned by Liberty Media Group. Such
transaction was accounted for by Liberty Media Group as an acquisition of
minority interest in equity of attributed subsidiaries. The aggregate value
assigned to the shares issued by Liberty Media Group was based upon the
market value of the Liberty Media Group Series A tracking stock at the time
the merger was announced. In connection with the issuance of TCI's then
outstanding Liberty Media Group tracking stock in such merger transaction,
Liberty Media Group recorded the total purchase price of $426 million as an
increase to combined equity.

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
Media Group. As a result of these transactions, and another transaction
completed on the same date, News Corp, Liberty Media Group 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 Media Group 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 dilution of Liberty Media Group's ownership interest in TV
Guide, Liberty Media Group recognized a gain of $372 million (before
deducting deferred income taxes of $147 million). Upon consummation,
Liberty Media Group began accounting for its interest in TV Guide under the
equity method of accounting.

(9) Liberty Digital, Inc.

Effective July 11, 1997, a wholly-owned subsidiary of Liberty Digital (then
named TCI Music) was merged with and into DMX, Inc. with DMX as the
surviving corporation (the "DMX Merger"). As a result of the DMX Merger,
stockholders of DMX became stockholders of TCI Music.

In connection with the DMX Merger, 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").

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's then
outstanding TCI Group Series A tracking 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.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

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 Media Group 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 were owned by Liberty Media Group) of TCI Music Series A common
stock and issuing an $80 million promissory note (the "Music Note") to TCI.
Liberty Media Group recorded its contingent obligation to purchase such
shares under the Rights Agreement as a component of minority interest in
equity of attributed subsidiaries in the accompanying combined financial
statements. TCI Music was included in the combined financial results of
Liberty Media Group as of the date of the DMX 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 Media Group from TCI was reflected as a decrease in
combined equity. The Music Note was repaid during 1999.

Prior to the July 1998 expiration of the Rights, Liberty Media Group was
notified of the tender of 4.9 million shares of TCI Music Series A common
stock and associated Rights. On August 27, 1998, Liberty Media Group 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 attributed subsidiaries.

On September 9, 1999, Liberty Media Group and TCI Music completed a
transaction (the "Liberty Digital Transaction") pursuant to which Liberty
Media Group contributed to TCI Music 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, TCI Music issued common stock and convertible preferred stock to
Liberty Media Group and was renamed Liberty Digital, Inc.

During 1999, Liberty Digital issued approximately 4.8 million shares of
common stock in connection with the conversion of its preferred stock and
approximately 2.8 million shares of common stock in connection with the
exercise of certain employee stock options. In connection with the increase
in Liberty Digital's equity, net of the dilution of Liberty Media Group's
interest in Liberty Digital, that resulted from such stock issuances,
Liberty Media Group recorded a $108 million increase to combined equity.

(10) At Home Corporation

During 1998, @Home completed a public offering of @Home common stock and
issued 1.2 million shares of common stock in certain acquisitions. As a
result of the increase in @Home's equity in connection with these stock
issuances, net of the dilution of Liberty Media Group's ownership interest
in @Home, Liberty Media Group recognized a gain of $51 million.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

During 1997, @Home issued shares of convertible preferred stock and
completed its initial public offering of @Home common stock. In connection
with the increase in @Home's equity, net of the dilution of Liberty Media
Group's ownership interest in @Home resulting from these stock issuances,
Liberty Media Group recognized a gain of $60 million during the third
quarter of 1997.

In connection with exclusive distribution agreements entered into between
@Home and certain cable operators, @Home issued warrants to such cable
operators to purchase shares of @Home's common stock. Of these warrants,
warrants to purchase 11.2 million shares were exercisable as of December
31, 1998. During the year ended December 31, 1998, @Home recorded non-cash
charges of $50 million to operations based on the fair value of 1 million
shares which were underlying warrants which became exercisable during the
period. Such charges are included in "cost of distribution agreements" in
the accompanying combined statements of operations.

(11) Long-Term Debt

Debt is summarized as follows:

Weighted
average
interest December 31,
rate ------------------
1999 1999 1998
-------- ---- ----
amounts in millions
<S> <C> <C> <C>
Parent company debt:
Bank credit facilities 5.7% $ 390 529
Senior notes (a) 7.875% 741 --
Senior debentures (a) 8.5% 494 --
Senior exchangeable debentures (b) 4.0% 1,022 --
------ -----
2,647 529
Debt of subsidiaries:
Bank credit facilities 6.2% 573 1,500
Convertible subordinated debentures (c) -- -- 574
Other debt, at varying rates 57 293
------ -----
630 2,367
------ -----
Total debt 3,277 2,896
Less current maturities 554 578
------ -----
Total long-term debt $ 2,723 2,318
====== =====
</TABLE>

(a) On July 7, 1999, Liberty Media Group 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, which are stated net of unamortized discount of $9
million, have an aggregate principal amount of $750 million and the
Senior Debentures, which are stated net of unamortized discount of $6
million, 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 Media Group's credit facilities,
which were subsequently canceled.

(continued)
<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

(b) On November 16, 1999, Liberty Media Group received net cash proceeds
of $854 million from the issuance of 4% Senior Exchangeable Debentures
due 2030. The exchangeable debentures have an aggregate principal
amount of $869 million. Each debenture has a $1,000 face amount and is
exchangeable at the holder's option for the value of 22.9486 shares of
Sprint PCS Group Stock (as adjusted for a two-for-one stock split).
This amount will be paid only in cash until the later of December 31,
2001 and the date the direct and indirect ownership level of Sprint
PCS Group Stock owned by Liberty Media Group falls below a designated
level, after which, at Liberty Media Group's election, Liberty Media
Group may pay the amount in cash, Sprint PCS Group Stock or a
combination thereof. Interest on these exchangeable debentures is
payable on May 15 and November 15 of each year. The carrying amount of
the exchangeable debentures in excess of the principal amount (the
"Contingent Portion) is based on the fair value of the underlying
Sprint PCS Group Stock. The increase or decrease in the Contingent
Portion is recorded as an increase or decrease to interest expense in
the combined statement of operations and comprehensive earnings.

(c) On April 8, 1999, Liberty Media Group redeemed all of its outstanding
4-1/2% Convertible Subordinated Debentures due February 15, 2005 with
a principal amount of $345 million. 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
Media Group recorded a $354 million increase to combined equity.

At December 31, 1999, Liberty Media Group had approximately $160 million in
unused lines of credit under its bank credit facilities. The bank credit
facilities of Liberty Media Group generally contain restrictive covenants
which require, among other things, the maintenance of certain financial
ratios, and include limitations on indebtedness, liens, encumbrances,
acquisitions, dispositions, guarantees and dividends. Liberty Media Group
was in compliance with its debt covenants at December 31, 1999.
Additionally, Liberty Media Group 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.

The U.S. dollar equivalent of the annual maturities of Liberty Media
Group's debt for each of the next five years are as follows: 2000: $554
million; 2001: $72 million; 2002: $80 million; 2003: $99 million and 2004:
$145 million.

Based on quoted market prices, the fair value of Liberty Media Group's debt
at December 31, 1999 is as follows (amounts in millions):

<TABLE>
<CAPTION>
<S> <C>
Senior Notes $ 742
Senior Debentures 506
4% Senior Exchangeable Debentures 1,088
</TABLE>

Liberty Media Group believes that the carrying amount of the remainder of
its debt approximated its fair value at December 31, 1999.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

(12) Income Taxes

Subsequent to the AT&T Merger, Liberty Media Group 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 Media Group
calculates its respective tax liability on a separate return basis. The
income tax provision for Liberty Media Group 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 Media Group.

Under the AT&T Tax Sharing Agreement, Liberty Media Group 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 Media Group 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 Media Group
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 Media Group generates federal taxable income, AT&T
has agreed to satisfy such tax liability on Liberty Media Group's behalf up
to a certain amount. The reduction of such computed tax liabilities will be
accounted for by Liberty Media Group as an addition to combined equity. The
total amount of future federal tax liabilities of Liberty Media Group 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 Media Group is required to make cash
payments to AT&T for federal tax liabilities of Liberty Media Group.

To the extent AT&T utilizes existing net operating losses of Liberty Media
Group, such amounts will be accounted for by Liberty Media Group as a
reduction of combined equity. During the ten month period ending December
31, 1999, AT&T utilized net operating losses of Liberty Media Group with a
tax effected carrying value of $88 million.

Liberty Media Group 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.

Prior to the AT&T Merger, Liberty Media Group was included in TCI's
consolidated tax return and was a party to the TCI tax sharing agreements.

Liberty Media Group'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
Media Group deconsolidates from the AT&T income tax return. Liberty Media
Group'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 combined equity by Liberty Media Group in
connection with the AT&T Merger.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

Income tax benefit (expense) consists of:

<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
amounts in millions
<S> <C> <C> <C>
Ten months ended December 31, 1999:
State and local income tax (expense) benefit, including
intercompany tax allocation $ (3) 152 149
Federal income tax benefit, including intercompany tax
allocation 75 873 948
------- ------- -------
$ 72 1,025 1,097
======= ======= =======

Two months ended February 28, 1999:
State and local income tax expense, including intercompany
tax allocation $ (1) (36) (37)
Federal income tax expense, including intercompany tax
allocation (3) (169) (172)
------- ------- -------
$ (4) (205) (209)
======= ======= =======
Year ended December 31, 1998:
State and local income tax expense, including intercompany
tax allocation $ (2) (200) (202)
Federal income tax expense, including intercompany tax
allocation (1) (1,190) (1,191)
Foreign income tax expense (1) (3) (4)
------- ------- -------
$ (4) (1,393) (1,397)
======= ======= =======
Year ended December 31, 1997:
State and local income tax expense, including intercompany
tax allocation $ (3) (32) (35)
Federal income tax benefit, including intercompany tax
allocation 158 12 170
Foreign income tax (expense) benefit (9) 4 (5)
------- ------- -------
$ 146 (16) 130
======= ======= =======
</TABLE>

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

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>
New Liberty Old Liberty
--------------- ----------------------------------------------------
Ten months Two months
ended ended Years ended
December 31, February 28, December 31,
--------------- -------------- --------------
1999 1999 1998 1997
------------- ------------- ------------- -------------
amounts in millions
<S> <C> <C> <C> <C>
Computed expected tax benefit
(expense) $ 1,092 (53) (1,244) 189
Dividends excluded for income tax
purposes 11 6 16 8
Minority interest in equity of
attributed subsidiaries 16 3 33 3
Amortization not deductible for
income tax purposes (122) (4) (21) (10)
State and local income taxes, net of
federal income taxes 102 (29) (132) (23)
Recognition of difference in income
tax basis of investments in
attributed subsidiaries -- (133) (1) (10)
Increase in valuation allowance -- -- (44) (26)
Gain on sale of attributed
subsidiaries' stock -- -- 18 21
Effect of deconsolidations on
deferred tax expense -- -- -- (11)
Other, net (2) 1 (22) (11)
-------- -------- -------- --------
$ 1,097 (209) (1,397) 130
======== ======== ======== ========
</TABLE>

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1999 and 1998 are presented below:

<TABLE>
<CAPTION>
New Liberty Old Liberty
----------- -----------
December 31,
-----------------------------
1999 1998
-------- --------
amounts in millions
<S> <C> <C>
Deferred tax assets:
Net operating and capital loss carryforwards $ 43 188
Future deductible amount attributable to accrued stock
compensation and deferred compensation 749 215
Recognized gain on sale of assets -- 147
Other future deductible amounts due principally to
non-deductible accruals 37 16
-------- --------
Deferred tax assets 829 566
Less valuation allowance 50 139
-------- --------
Net deferred tax assets 779 427
-------- --------

Deferred tax liabilities:
Investments in affiliates, due principally to the application of
purchase accounting and losses of affiliates recognized for
income tax purposes in excess of losses recognized for financial
statement purposes 13,915 4,825
Intangibles, principally due to differences in
amortization 200 --
Other, net 21 60
-------- --------
Deferred tax liabilities 14,136 4,885
-------- --------

Net deferred tax liabilities $13,357 4,458
======== ========
</TABLE>

At December 31, 1999, Liberty Media Group had net operating and capital
loss carryforwards for income tax purposes aggregating approximately $94
million which, if not utilized to reduce taxable income in future periods,
will expire as follows: 2004: $18 million; 2005: $14 million; 2006: $14
million; 2007: $13 million; 2008: $12 million; and $23 million between 2009
and 2010. These net operating losses are subject to certain rules limiting
their usage.

(13) Combined Equity

Stock Repurchase and Issuances

In conjunction with a stock repurchase program or similar transaction, the
issuer may elect to sell put options on its own common stock. Proceeds from
any sales of puts with respect to TCI's then outstanding TCI Ventures Group
tracking stock and TCI's then outstanding Liberty Media Group tracking
stock have been reflected as an increase to combined equity, and an amount
equal to the maximum redemption amount under unexpired put options with
respect to such tracking stocks was reflected as an "obligation to redeem
common stock" in the accompanying combined balance sheets. At December 31,
1999 no amounts were outstanding under such arrangements.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

During the year ended December 31, 1998, pursuant to a stock repurchase
program, Liberty Media Group repurchased 239,450 shares of TCI's then
outstanding TCI Ventures Group tracking stock and 766,783 shares of TCI's
then outstanding Liberty Media Group tracking stock at an aggregate cost of
approximately $30 million.

During the year ended December 31, 1997, pursuant to a stock repurchase
program, Liberty Media Group repurchased 916,500 shares of TCI's then
outstanding Liberty Media Group tracking stock and 338,196 shares of TCI's
then outstanding TCI Ventures Group tracking stock in open market
transactions and 219,937 shares of TCI's then outstanding Liberty Media
Group tracking stock from the spouse of an officer and director of TCI at
an aggregate cost of $22 million.

Effective July 31, 1997, TCI merged Kearns-Tribune Corporation into a
wholly-owned TCI subsidiary attributed to TCI Group. TCI exchanged 47.2
million shares of TCI's then outstanding TCI Group Series A tracking stock
for shares of Kearns-Tribune Corporation which held 17.9 million shares of
TCI's then outstanding TCI Group tracking stock and 10.1 million shares of
TCI's then outstanding Liberty Media Group tracking stock. Liberty Media
Group purchased from TCI Group the 10.1 million shares of TCI's then
outstanding Liberty Media Group tracking stock that were acquired in such
transaction for $168 million.

During the third quarter of 1997, Liberty Media Group commenced a tender
offer (the "Liberty Tender Offer") to purchase up to an aggregate of 22.5
million shares of TCI's then outstanding Liberty Media Group tracking stock
at a price of $20 per share through October 3, 1997. During the fourth
quarter of 1997, Liberty Media Group repurchased 21.7 million shares of
TCI's then outstanding Liberty Media Group Series A tracking stock and
82,074 shares of TCI's then outstanding Liberty Media Group Series B
tracking stock at an aggregate cost of approximately $435 million pursuant
to the Liberty Tender Offer. All of the above described purchases are
reflected as a reduction of combined equity in the accompanying combined
financial statements.

Transactions with Officers and Directors

Prior to the AT&T Merger, a limited liability company owned by Dr. John C.
Malone (Liberty Media Corporation's Chairman) acquired, from certain
attributed subsidiaries of Liberty Media Group, for $17 million, working
cattle ranches located in Wyoming. No gain or loss was recognized on such
acquisition. The purchase price was paid by such limited liability company
in the form of a 12-month note in the amount of $17 million having an
interest rate of 7%. Such note was repaid in March 2000.

In connection with the AT&T Merger, Liberty Media Group paid two of its
directors and one other individual, all three of whom were 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 combined statements of operations and comprehensive earnings.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

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 that entitle the holder to cast more than one vote per share
(the "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
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 Media Group.

Transactions with AT&T (formerly transactions with TCI), and Other Related
Parties

Certain AT&T corporate general and administrative costs are charged to
Liberty Media Group 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 ten months ended December 31, 1999, the
two months ended February 28, 1999 and the years ended December 31, 1998
and 1997 Liberty Media Group was allocated less than $1 million, $2
million, $13 million and $13 million, respectively, in corporate general
and administrative costs by AT&T. These costs are included in charges from
related parties in the accompanying combined statements of operations and
comprehensive earnings.

Subsidiaries of Liberty Media Group lease satellite transponder facilities
from a subsidiary of AT&T. Charges for such arrangements and other related
operating expenses for the ten months ended December 31, 1999 aggregated
$20 million and are included in charges from related parties in the
accompanying combined statements of operations and comprehensive earnings.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

During 1999, 1998 and 1997, Liberty Media Group made marketing support
payments to AT&T. Charges by AT&T for such arrangements for the ten months
ended December 31, 1999, the two months ended February 28, 1999 and the
years ended December 31, 1998 and 1997 aggregated $4 million, less than $1
million, $5 million and $19 million, respectively, and are included in
charges from related parties in the accompanying combined statements of
operations and comprehensive earnings.

The Puerto Rico Subsidiary purchases programming services from AT&T. The
charges, which approximate AT&T's cost and are based on the aggregate
number of subscribers served by the Puerto Rico Subsidiary, aggregated $6
million and $1 million during the ten months ended December 31, 1999, the
two months ended February 28, 1999, respectively, and $6 million for each
of the years ended December 31, 1998 and 1997, and are included in
operating expenses in the accompanying combined 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 Media Group. On April 13,
1999, AT&T purchased these warrants from Liberty Media Group 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
Media Group must repurchase the unvested warrants from AT&T, with interest
at 6% from April 12, 1999. Accordingly, Liberty Media Group has recorded
the unvested CSG warrants as deferred income until such time as the CSG
warrants vest.

During September 1998, TCI assigned its obligation under an option contract
to Liberty Media Group. As a result of such assignment, Liberty Media Group
recorded a $16 million reduction to the intercompany amount due to TCI and
a corresponding increase to combined equity.

Cablevision purchases programming services from certain Liberty Media Group
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 Media Group. 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 were
included in operating costs in the accompanying combined statements of
operations and comprehensive earnings.

During July 1997, AT&T entered into a 25 year affiliation agreement with
Starz Encore Group (the "EMG Affiliation Agreement") pursuant to which AT&T
will pay monthly fixed amounts in exchange for unlimited access to all of
the existing Encore and STARZ! services.

Liberty Digital and AT&T entered into an Amended and Restated Contribution
Agreement to be effective as of July 11, 1997 which provides, among other
things, for AT&T to deliver, or cause certain of its subsidiaries to
deliver to Liberty Digital fixed monthly payments (subject to inflation and
other adjustments) through 2017.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

During the third quarter of 1997, Liberty Media Group sold certain assets
(the "SUMMITrak Assets") to 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 Media Group 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 combined equity.

During the fourth quarter of 1997, Liberty Media Group'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 Media Group 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>
New Liberty Old Liberty
----------- -----------
December 31,
------------------------------
1999 1998
----------- -----------
amounts in millions
<S> <C> <C>
Notes payable to TCI, including accrued interest
$ -- 141
Intercompany account 27 556
----- ------
$ 27 697
===== ======
</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.

Amounts outstanding at December 31, 1998 under notes payable to TCI had
varying rates of interest. During the second quarter of 1998, TCI made a
contribution to Liberty Media Group of $5 million, which was used to reduce
the amount due under the Music Note.

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

(14) Other Comprehensive Earnings

Accumulated other comprehensive earnings included in Liberty Media Group's
combined balance sheets and combined statements of 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>
Accumulated
Foreign other
currency Unrealized comprehensive
translation gains on earnings, net
adjustments securities of taxes
----------- ---------- -------------
amounts in millions
<S> <C> <C> <C>
Balance at January 1, 1997 $ 25 16 41
Other comprehensive earnings (loss) (22) 749 727
------------ ------------- ----------
Balance at December 31, 1997 3 765 768
Other comprehensive earnings 3 2,947 2,950
------------ ------------- ----------
Balance at December 31, 1998 6 3,712 3,718
Other comprehensive earnings (loss) (15) 971 956
------------ ------------- ----------
Balance at February 28, 1999 $ (9) 4,683 4,674
============ ============= ==========

Balance at March 1, 1999 $ -- -- --
Other comprehensive earnings 60 6,497 6,557
------------ ------------- ----------
Balance at December 31, 1999 $ 60 6,497 6,557
============ ============= ==========
</TABLE>

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

The components of other comprehensive earnings are reflected in Liberty
Media Group's combined 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>
Ten months ended December 31, 1999:
Foreign currency translation adjustments $ 99 (39) 60
------------- -------- ------------

Unrealized gains on securities:
Unrealized holding gains arising during period
10,736 (4,246) 6,490
Less: reclassification adjustment for losses realized in
net loss 12 (5) 7
------------- -------- ------------
Net unrealized gains 10,748 (4,251) 6,497
------------- -------- ------------
Other comprehensive earnings $ 10,847 (4,290) 6,557
============= ======== ============

Two months ended February 28, 1999:
Foreign currency translation adjustments $ (25) 10 (15)
Unrealized gains on securities:
Unrealized holding gains arising during period
1,606 (635) 971
------------- -------- ------------
Other comprehensive earnings $ 1,581 (625) 956
============= ======== ============
Year ended December 31, 1998:
Foreign currency translation adjustments $ 5 (2) 3
Unrealized gains on securities:
Unrealized holding gains arising during period
4,875 (1,928) 2,947
------------- -------- ------------
Other comprehensive earnings $ 4,880 (1,930) 2,950
============= ======== ============

Year ended December 31, 1997:
Foreign currency translation adjustments $ (36) 14 (22)
Unrealized gains on securities:
Unrealized holding gains arising during period
1,239 (490) 749
------------- -------- ------------
Other comprehensive earnings $ 1,203 (476) 727
============= ======== ============
</TABLE>

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

(15) Commitments and Contingencies

Starz Encore Group provides premium programming distributed by cable,
direct satellite, TVRO and other distributors throughout the United States.
Starz Encore 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,
1999, these agreements require minimum payments aggregating approximately
$900 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 (pound sterling)88 million and, subject to certain
restrictions, a standby credit facility of (pound sterling)30 million. As
of December 31, 1999, the Principal Joint Venture had borrowed (pound
sterling)53 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 Media Group
assume all of Flextech's funding obligations to the Principal Joint
Venture.

Liberty Media Group has guaranteed various loans, notes payable, letters of
credit and other obligations (the "Guaranteed Obligations") of certain
affiliates. At December 31, 1999, the Guaranteed Obligations aggregated
approximately $655 million. Currently, Liberty Media Group is not certain
of the likelihood of being required to perform under such guarantees.

Liberty Media Group 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 $30
million, $18 million, $98 million and $84 million for the ten months ended
December 31, 1999, the two months ended February 28, 1999 and the years
ended December 31, 1998 and 1997, respectively.

A summary of future minimum lease payments under noncancelable operating
leases as of December 31, 1999 follows (amounts in millions):

<TABLE>
<CAPTION>
Years ending December 31:
<S> <C>
2000 $ 21
2001 18
2002 16
2003 16
2004 13
Thereafter 21
</TABLE>

(continued)

<PAGE>

"LIBERTY MEDIA GROUP"
(a combination of certain assets, as defined in notes 1 and 2)

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 2000.

Liberty Media Group has contingent liabilities related to legal proceedings
and other matters arising in the ordinary course of business. Although it
is reasonably possible Liberty Media Group 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 combined financial statements.