<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                    FORM 10-Q



           [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2001

                                       OR

             [ ] 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 - Area Code 212-387-5400

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 [ ]


At October 31, 2001, the following shares of stock were outstanding:

      AT&T common stock - 3,538,030,557 shares
<PAGE>
                         PART I - FINANCIAL INFORMATION
                           AT&T CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (Dollars in Millions Except Per Share Amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                      For the Three                     For the Nine
                                                                       Months Ended                      Months Ended
                                                                        September 30,                    September 30,
                                                                    2001             2000             2001            2000
<S>                                                               <C>              <C>              <C>              <C>
Revenue                                                           $ 13,087         $ 14,176         $ 39,964         $41,623

Operating Expenses
Costs of services and products (excluding depreciation of
   $1,165, $956, $3,533 and $2,927 included below)                   3,476            3,282           10,458           9,249
Access and other connection                                          3,033            3,147            9,289          10,180
Selling, general and administrative                                  2,540            2,461            8,144           7,366
Depreciation and other amortization                                  1,682            1,568            5,116           4,204
Amortization of goodwill, franchise costs and other
   purchased intangibles                                               592              787            1,920           1,433
Net restructuring and other charges                                    399               24            1,494             797
Total operating expenses                                            11,722           11,269           36,421          33,229

Operating income                                                     1,365            2,907            3,543           8,394

Other (expense) income                                              (4,966)             365           (7,195)          1,358
Interest expense                                                       786              896            2,426           2,000
(Loss) income from continuing operations before income
   taxes, minority interest, (losses) earnings from equity
   investments and cumulative effect of accounting change           (4,387)           2,376           (6,078)          7,752
(Benefit) provision for income taxes                                (2,092)             939           (2,746)          2,532
Minority interest income                                               177              103            1,015              11
Equity earnings (losses) from Liberty Media Group                      111            1,756           (2,711)          2,965
Net losses from other equity investments                                88              222              423             615
(Loss) income from continuing operations before cumulative
   effect of accounting change                                      (2,095)           3,074           (5,451)          7,581
(Loss) income from discontinued operations (net of income
   taxes of $-, $14, $158 and $113)                                     --               (2)             150             208
Gain on disposition of discontinued operations                      13,503               --           13,503              --
Income before cumulative effect of accounting change                11,408            3,072            8,202           7,789
Cumulative effect of accounting change - (net of income
   taxes of $578)                                                       --               --              904              --
Net income                                                          11,408            3,072            9,106           7,789
Dividend requirements of preferred stock                               235               --              652              --
Premium on Wireless tracking stock exchange                             --               --               80              --

Net income available to common shareowners                        $ 11,173         $  3,072         $  8,374         $ 7,789

AT&T Common Stock Group - per basic share:
(Loss) earnings - continuing operations                           $  (0.69)        $   0.35         $  (0.94)        $  1.35
Earnings - discontinued operations                                      --               --             0.03            0.06
Gain on disposition of discontinued operations                        3.82               --             3.67              --
Cumulative effect of accounting change                                  --               --             0.10              --
AT&T Common Stock Group earnings                                  $   3.13         $   0.35         $   2.86         $  1.41

AT&T Common Stock Group - per diluted share:
(Loss) earnings - continuing operations                           $  (0.69)        $   0.35         $  (0.94)        $  1.34
Earnings - discontinued operations                                      --               --             0.03            0.06
Gain on disposition of discontinued operations                        3.82               --             3.67              --
Cumulative effect of accounting change                                  --               --             0.10              --
AT&T Common Stock Group earnings                                  $   3.13         $   0.35         $   2.86         $  1.40

Dividends declared                                                $ 0.0375         $   0.22         $ 0.1125         $  0.66

AT&T Wireless Group - per basic and diluted share:
(Loss) earnings from discontinued operations                      $     --         $  (0.01)        $   0.08         $  0.05

Liberty Media Group - per basic and diluted share:
Earnings (loss) - before cumulative effect of accounting
   change                                                         $   0.04         $   0.68         $  (1.05)        $  1.15
Cumulative effect of accounting change                                  --               --             0.21              --
Liberty Media Group earnings (loss)                               $   0.04         $   0.68         $  (0.84)        $  1.15
</TABLE>


                 See Notes to Consolidated Financial Statements
<PAGE>
                           AT&T CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                              (Dollars in Millions)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                 At                 At
                                                           September 30,        December 31,
                                                                2001                2000
<S>                                                        <C>                  <C>
ASSETS

Cash and cash equivalents                                      $  4,198            $     64

Accounts receivable, less allowances of $1,013 and
$1,185                                                            8,679               9,408

Other receivables                                                 1,344               1,645

Investments                                                          --               2,102

Deferred income taxes                                             1,623                 720

Other current assets                                                614                 781

TOTAL CURRENT ASSETS                                             16,458              14,720

Property, plant and equipment, net of accumulated
   depreciation of $31,164 and $28,129                           40,748              41,269
Franchise costs, net of accumulated amortization of
   $2,226 and $1,664                                             43,287              48,218
Goodwill, net of accumulated amortization of $1,130
   and $609                                                      24,774              26,782
Investment in Liberty Media Group and related
   receivables, net                                                  --              34,290

Other investments and related advances                           24,268              30,875

Prepaid pension costs                                             3,281               3,003

Other assets                                                      7,233               7,979

Net assets of discontinued operations                                --              27,224

TOTAL ASSETS                                                   $160,049            $234,360
</TABLE>


                                   (CONTINUED)
<PAGE>
                           AT&T CORP. AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS (CONT'D)
                              (Dollars in Millions)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                       At                    At
                                                                  September 30,         December 31,
                                                                      2001                  2000
<S>                                                               <C>                   <C>
LIABILITIES
Accounts payable                                                   $   4,848             $   5,382
Payroll and benefit-related liabilities                                1,592                 1,991
Debt maturing within one year                                         18,449                31,838
Liability under put options                                               --                 2,564
Other current liabilities                                              6,988                 6,200

TOTAL CURRENT LIABILITIES                                             31,877                47,975

Long-term debt                                                        30,007                33,089
Long-term benefit-related liabilities                                  3,506                 3,670
Deferred income taxes                                                 27,175                32,054
Other long-term liabilities and deferred credits                       6,946                 4,823
TOTAL LIABILITIES                                                     99,511               121,611

Minority Interest                                                      3,622                 4,841

Company-Obligated Convertible Quarterly Income
   Preferred Securities of Subsidiary Trust Holding
   Solely Subordinated Debt Securities of AT&T                         4,718                 4,710


SHAREOWNERS' EQUITY
Common Stock:
AT&T Common Stock, $1 par value, authorized
   6,000,000,000 shares; issued and outstanding
   3,535,801,018 shares (net of 851,731,351 treasury
   shares) at September 30, 2001 and 3,760,151,185
   shares (net of 416,887,452 treasury shares) at
   December 31, 2000                                                   3,536                 3,760
AT&T Wireless Group Common Stock, $1 par value,
   authorized 6,000,000,000 shares, issued and
   outstanding 361,802,200 shares at December 31, 2000                    --                   362
Liberty Media Group Class A Common Stock, $1 par value,
   authorized 4,000,000,000 shares, issued and
   outstanding 2,363,738,198 shares (net of 59,512,496
   treasury shares) at December 31, 2000                                  --                 2,364
Liberty Media Group Class B Common Stock, $1 par value,
   authorized 400,000,000 shares, issued and
   outstanding 206,221,288 shares (net of 10,607,776
   treasury shares) at December 31, 2000                                  --                   206
Additional paid-in capital                                            51,851                90,496
(Accumulated deficit)/Retained earnings                               (2,093)                7,408
Accumulated other comprehensive income                                (1,096)               (1,398)
TOTAL SHAREOWNERS' EQUITY                                             52,198               103,198
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY                          $ 160,049             $ 234,360
</TABLE>

                 See Notes to Consolidated Financial Statements
<PAGE>
                            AT&T CORP. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
                               (Dollars in Millions)
                                    (Unaudited)

<TABLE>
<CAPTION>
                                                             For the Nine Months Ended
                                                                    September 30,
                                                              2001                 2000
<S>                                                        <C>                  <C>
AT&T Common Shares
  Balance at beginning of year                              $  3,760             $  3,196
  Shares issued (acquired), net:
    Under employee plans                                          10                   --
    For acquisitions                                              44                  607
    Settlement of put option                                     155                   --
    For Wireless tracking stock exchange                        (372)                  --
    Other*                                                       (61)                 (49)
Balance at end of period                                       3,536                3,754

AT&T Wireless Group Common Stock
  Balance at beginning of year                                   362                   --
  Shares issued:                                                                      360
    Under employee plans                                           2                    1
    For Wireless tracking stock exchange                         438                   --
    Conversion of preferred stock                                406                   --
    AT&T Wireless Group split-off                             (1,208)                  --
Balance at end of period                                          --                  361

Liberty Media Group Class A Common Stock
  Balance at beginning of year                                 2,364                2,314
  Shares issued, net:
    For acquisitions                                              --                   61
    Other                                                         14                   (5)
  Liberty Media Group split-off                               (2,378)                  --
Balance at end of period                                          --                2,370

Liberty Media Group Class B Common Stock
  Balance at beginning of year                                   206                  217
  Shares issued (acquired), net                                    6                  (11)
  Liberty Media Group split-off                                 (212)                  --
Balance at end of period                                          --                  206

Additional Paid-In Capital
  Balance at beginning of year                                90,496               59,526
  Shares issued (acquired), net:
    Under employee plans                                         208                   15
    For acquisitions                                             827               22,769
    Settlement of put option                                   3,237                   --
    Other*                                                    (1,035)              (2,514)
  Proceeds in excess of par value from issuance
    of AT&T Wireless common stock                                 --                9,915
  Gain on issuance of common stock by affiliates                  20                  480

  Conversion of preferred stock                                9,631                   --
  AT&T Wireless Group split-off                              (20,955)                  --
  Liberty Media Group split-off                              (30,738)                  --
  Wireless tracking stock exchange                                14                   --
  Beneficial conversion value of preferred stock                 295                   --
  Dividends declared - AT&T Common Stock Group                  (133)                  --
  Other                                                          (16)                 153
Balance at end of period                                      51,851               90,344

Guaranteed ESOP Obligation
  Balance at beginning of year                                    --                  (17)
  Amortization                                                    --                   17
Balance at end of period                                          --                   --
</TABLE>


                                   (CONTINUED)
<PAGE>
                           AT&T CORP. AND SUBSIDIARIES
       CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY (CONT'D)
                              (Dollars in Millions)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                For the Nine Months
                                                                 Ended September 30,
                                                              2001                  2000
<S>                                                        <C>                  <C>
(Accumulated Deficit)/Retained Earnings
  Balance at beginning of year                                 7,408                 6,712
  Net income                                                   9,106                 7,789
  Dividends declared - AT&T Common Stock Group                  (275)               (2,344)
  Dividends accrued - preferred stock                           (652)                   --
  Premium on Wireless tracking stock exchange                    (80)                   --
  Treasury shares issued at less than cost                        (7)               (1,433)
  AT&T Wireless Group split-off                              (17,593)                   --
Balance at end of period                                      (2,093)               10,724

Accumulated Comprehensive Income
  Balance at beginning of year                                (1,398)                6,979
  Other comprehensive income                                     988                (4,630)
  AT&T Wireless Group split-off                                   72                    --
  Liberty Media Group split-off                                 (758)                   --
Balance at end of year                                        (1,096)                2,349
Total Shareowners' Equity                                   $ 52,198             $ 110,108

Summary of Total Comprehensive Income:
(Loss) income from continuing operations                    $ (5,451)            $   7,581
Income from discontinued operations                              150                   208
Gain on disposition of discontinued operations                13,503                    --
Cumulative effect of accounting change                           904                    --
Net income                                                     9,106                 7,789
Dividend requirements of preferred stock                         652                    --
Premium on Wireless tracking stock exchange                       80                    --
Net income available to common shareowners                  $  8,374             $   7,789
Net foreign currency translation adjustment (net
  of income taxes of $(135) and $(177))(1)                      (204)                 (305)
Net revaluation of securities:
  Unrealized gains (losses) (net of income taxes
  of $274 and $(1,775))(2)                                       363                (2,846)
  Recognition of previously unrealized losses
  (gains) on available-for-sale securities (net
  of income taxes of $513 and $(955))(3)                         829                (1,479)
Comprehensive Income                                        $  9,362             $   3,159
</TABLE>


AT&T accounts for treasury stock as retired stock. We have 100 million
authorized shares of preferred stock at $1 par value.

*Other activity in 2001 and 2000 represents AT&T stock received in exchange for
entities owning certain cable systems.

(1) Includes LMG's foreign currency translation adjustments totaling $(149) and
$(193), net of applicable income taxes for the year-to-date periods through July
31, 2001 and September 30, 2000, respectively.

(2) Includes LMG's unrealized gains (losses) on available-for-sale securities
totaling $1,286 and $(1,825), net of applicable income taxes for the
year-to-date periods through July 31, 2001 and September 30, 2000, respectively.

(3) See note (c) for a summary of the "Recognition of previously unrealized
losses (gains) on available-for-sale securities" and the income statement line
items impacted.

                 See Notes to Consolidated Financial Statements
<PAGE>
                           AT&T CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Dollars in Millions)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                             For the Nine Months
                                                                                              Ended September 30,
                                                                                           2001                 2000
<S>                                                                                      <C>                  <C>
OPERATING ACTIVITIES
Net income                                                                               $  9,106             $  7,789
Deduct: Income from discontinued operations                                                   150                  208
        Gain on disposition of discontinued operations                                     13,503                   --
(Loss) income from continuing operations                                                   (4,547)               7,581

Adjustments to reconcile (loss) income from continuing operations to net cash
   provided by operating activities of continuing operations:
    Cumulative effect of accounting change - net of income taxes                             (904)                  --
    Net gains on sales of businesses and investments                                         (689)                (885)
    Investment impairment charges                                                           4,208                   --
    Estimated loss on contractual obligations                                               2,418                   --
    Put option settlement loss and mark-to-market charge                                      838                   21
    Net restructuring and other charges                                                     1,386                  630
    Depreciation and amortization                                                           7,036                5,637
    Provision for uncollectible receivables                                                   850                  785
    Deferred income taxes                                                                  (4,865)                 198
    Net revaluation of trading securities                                                     779                   --
    Minority interest income                                                               (1,222)                 (89)
    Net equity losses (earnings) from Liberty Media Group                                   2,711               (2,965)
    Net losses from other equity investments                                                  725                1,034
    Increase in receivables                                                                   (49)              (2,081)
    Decrease in accounts payable                                                             (816)              (1,447)
    Net change in other operating assets and liabilities                                   (1,067)                  59
    Other adjustments, net                                                                    (51)                (364)
NET CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS
                                                                                            6,741                8,114

INVESTING ACTIVITIES
Capital expenditures and other additions                                                   (6,450)              (7,753)
Proceeds from sale or disposal of property, plant and equipment                                62                  547
Increase in other receivables                                                                (105)                (981)
Sales of marketable securities                                                                102                   35
Purchases of marketable securities                                                            (18)                  --
Equity investment distributions and sales                                                   1,845                  785
Equity investment contributions and purchases                                                (177)              (2,364)
Net dispositions (acquisitions) of businesses, net of cash
   disposed/acquired                                                                        4,827              (16,614)
Other investing activities, net                                                              (121)                 (91)
NET CASH USED IN INVESTING ACTIVITIES OF CONTINUING OPERATIONS                                (35)             (26,436)

FINANCING ACTIVITIES
Proceeds from long-term debt issuances                                                        195                  739
Retirement of long-term debt                                                               (1,618)              (1,954)
(Decrease) increase in short-term borrowings, net                                          (9,580)              17,363
Repayment of borrowings from AT&T Wireless                                                 (5,803)                  --
Issuance of convertible preferred securities and warrants                                   9,811                   --
Redemption of redeemable securities                                                            --                 (152)
Issuance of AT&T common shares                                                                133                   --
Issuance of AT&T Wireless Group common shares                                                  54               10,291
Net issuance (acquisition) of treasury shares                                                  23                 (588)
Dividends paid on common stock                                                               (416)              (2,221)
Dividends paid on preferred securities                                                       (190)                (147)
Other financing activities, net                                                               (41)                 (30)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES OF CONTINUING
  OPERATIONS                                                                               (7,432)              23,301

Net cash provided by (used in) discontinued operation                                       4,860               (5,686)
Net increase (decrease) in cash and cash equivalents                                        4,134                 (707)
Cash and cash equivalents at beginning of year                                                 64                1,018
Cash and cash equivalents at end of period                                               $  4,198             $    311
</TABLE>


     The notes are an integral part of the consolidated financial statements
<PAGE>
                           AT&T CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (Dollars in Millions Except Per Share Amounts)
                                   (Unaudited)

(a)      BASIS OF PRESENTATION

         The consolidated financial statements have been prepared by AT&T Corp.
         (AT&T) pursuant to the rules and regulations of the Securities and
         Exchange Commission (SEC) and, in the opinion of management, include
         all adjustments necessary for a fair presentation of the consolidated
         results of operations, financial position and cash flows for each
         period presented. The consolidated results for interim periods are not
         necessarily indicative of results for the full year. These financial
         results should be read in conjunction with AT&T's Form 10-K/A for the
         year ended December 31, 2000, AT&T's Form 8-K filed on September 24,
         2001, restating the company's financial results for the year ended
         December 31, 2000 to reflect AT&T Wireless as a discontinued operation,
         AT&T's Form 10-Q/A for the quarter ended March 31, 2001 and AT&T's Form
         10-Q for the quarter ended June 30, 2001. We have reclassified certain
         prior period amounts to conform with our current presentation.


(b)      RESTRUCTURING OF AT&T

         On October 25, 2000, AT&T announced a restructuring plan designed to
         fully separate or issue separately tracked stocks intended to reflect
         the financial performance and economic value of each of AT&T's four
         major operating units. If the plan is completed as announced, AT&T
         Wireless, AT&T Broadband, AT&T Business and AT&T Consumer would all be
         represented by asset-based or tracking stocks.

         On July 8, 2001, Comcast Corp. (Comcast) made an unsolicited offer to
         acquire AT&T Broadband. On July 18, AT&T's Board of Directors
         unanimously voted to reject Comcast's proposal to acquire AT&T
         Broadband. The Board has directed management to explore financial and
         strategic alternatives relating to AT&T Broadband, including the
         previously announced restructuring plans, with the goal to provide the
         greatest long-term value to shareowners. The Board also decided to
         delay finalizing and mailing to shareowners the proxy materials, filed
         preliminary with the SEC on July 3, 2001, for its current restructuring
         plans. However, AT&T remains committed to separate AT&T Consumer and
         AT&T Business from AT&T Broadband.

         Nevertheless, AT&T's restructuring plan is complicated and involves a
         substantial number of steps and transactions, including obtaining
         various conditions, such as Internal Revenue Service rulings. AT&T
         expects that transactions associated with AT&T's restructuring plan
         will be tax-free to U.S. shareowners. Future financial conditions,
         superior alternatives or other factors may arise or occur that make it
         inadvisable to proceed with part or all of AT&T's restructuring plans.
         Any or all of the elements of AT&T's restructuring plan may not occur
         as we currently expect or in the time frames that we currently
         contemplate, or at all. Alternative forms of restructuring, including
         sales of interests in these businesses, would reduce what is available
         for distribution to shareowners in the restructuring.

         On May 25, 2001, AT&T completed an exchange offer of AT&T common stock
         for AT&T Wireless stock. Under the terms of the exchange offer, AT&T
         issued 1.176 shares of AT&T Wireless Group tracking stock in exchange
         for each share of AT&T common stock validly tendered. A total of 372.2
         million shares of AT&T common stock were tendered in exchange for 437.7
         million shares of AT&T Wireless Group tracking stock.

         On July 9, 2001, AT&T completed the split-off of AT&T Wireless as a
         separate, independently-traded company (see note d).

         On August 10, 2001, AT&T completed the split-off of Liberty Media
         Corporation (LMC) as an independent, publicly-traded company (see note
         e).
<PAGE>
(c)      RECLASSIFICATION ADJUSTMENT OF OTHER COMPREHENSIVE INCOME

         AT&T has investment holdings classified as "available-for-sale" under
         the scope of Statement of Financial Accounting Standards (SFAS) No.
         115, "Accounting for Certain Investments in Debt and Equity
         Securities". These securities are carried at fair value with any
         unrealized gains or losses, net of income taxes, being included within
         other comprehensive income as a component of shareowners' equity. Under
         SFAS No. 115, when the "available-for-sale" securities are sold, the
         previously unrealized gains or losses shall be recognized in earnings.
         In addition, upon the adoption of SFAS No. 133, we reclassified certain
         securities to "trading", resulting in the recognition in earnings of
         previously unrealized losses (see note n). Following is a summary of
         the "Recognition of previously unrealized losses (gains) on
         available-for-sale securities" and the income statement line items
         impacted for the nine months ended September 30, 2001 and 2000.


<TABLE>
<CAPTION>
                                                                                  For the Nine Months Ended
                                                                                        September 30,
                                                                               2001                        2000
                                                                                      After-                        After-
                                                                       Pretax          tax         Pretax            tax
<S>                                                                   <C>            <C>           <C>             <C>
         AT&T Group:
          Other income:
            Reclassification of securities to "trading" in
            conjunction with the adoption of "SFAS No. 133"(1)        $ 1,154         $ 713         $    --         $    --
            Sale of various securities                                    159            98              --              --

         Liberty Media Group:
          Earnings (losses) from Liberty Media Group:
            Sale of various securities                                    173           105          (2,434)         (1,479)
          Cumulative effect of accounting change:(1)                     (144)          (87)             --              --

         Total recognition of previously unrealized losses
           (gains) on available-for-sale securities                   $ 1,342         $ 829         $(2,434)        $(1,479)


         (1)   See note (n) for further discussion.
</TABLE>

(d)      DISCONTINUED OPERATIONS

         Pursuant to AT&T's restructuring plan (see note b), AT&T completed the
         split-off of AT&T Wireless as a separate, independently-traded company
         on July 9, 2001. All AT&T Wireless tracking stock was converted into
         AT&T Wireless common stock on a one-for-one basis and 1,136 million
         shares of AT&T Wireless common stock, held by AT&T, were distributed to
         AT&T common shareowners on a basis of 0.3218 of a share of AT&T
         Wireless for each AT&T share outstanding. AT&T common shareowners
         received whole shares of AT&T Wireless and cash payments for fractional
         shares. The Internal Revenue Service (IRS) ruled that the transaction
         qualified as tax-free for AT&T and its shareowners for U.S. federal
         income tax purposes, with the exception of cash received for fractional
         shares. AT&T retained approximately $3 billion, or 7.3%, of AT&T
         Wireless common stock, about half of which was used in a
         debt-for-equity exchange in July and approximately $0.6 billion was
         monetized in October. We expect to either sell, exchange or monetize
         the remaining portion of these holdings by the end of 2001.

         The consolidated financial statements of AT&T have been restated to
         reflect AT&T Wireless as a discontinued operation. Accordingly, the
         revenue, costs and expenses, assets and liabilities and cash flows of
         AT&T Wireless have been excluded from the respective captions in the
         Consolidated Statements of Operations, Consolidated Balance Sheets and
         Consolidated Statements of Cash Flows, and have been reported through
         June 30, 2001, the deemed effective split-off date for accounting
         purposes, as "Income from discontinued operations", net of applicable
         income taxes; as "Net assets of discontinued operations"; and as "Net
         cash provided by (used in) discontinued operations". The impact of the
         operating results from July 1 through July 9, 2001, were deemed
         immaterial to our consolidated results.
<PAGE>
         Revenue for discontinued operations was $6,592 for the year-to-date
         period ended September 30, 2001, and $2,799 and $7,474 for the quarter
         and year-to-date period ended September 30, 2000, respectively.

         At December 31, 2000, "Net Assets of Discontinued Operations" included
         assets of $35,087 and total liabilities of $7,822. Total assets were
         comprised primarily of licensing costs, property, plant and equipment,
         goodwill and investments at December 31, 2000. Total liabilities at
         December 31, 2000, were comprised primarily of deferred income taxes,
         accounts payable and other short-term liabilities. Net assets of
         discontinued operations also included minority interest of $41 at
         December 31, 2000.

         Interest expense of $153 for the year-to-date period ended September
         30, 2001, and $84 and $243 for the quarter and year-to-date period
         ended September 30, 2000, respectively, was allocated to discontinued
         operations based on the debt of AT&T Corp. that was attributable to
         AT&T Wireless. This debt was repaid to AT&T prior to June 30, 2001, in
         connection with the split-off of AT&T Wireless.

         In connection with the split-off of AT&T Wireless, AT&T wrote-up the
         net assets of AT&T Wireless to fair value. This resulted in a tax-free
         gain of $13.5  billion, which represents the difference between the
         fair value of the Wireless tracking stock at the date of the split-off
         and AT&T's book value in AT&T Wireless Services. This gain was
         recorded in the third quarter of 2001 as a "Gain on disposition of
         discontinued operations."

         The noncash impacts of the split-off of AT&T Wireless include the
         reduction of total assets of approximately $39.7 billion and reduced
         shareowners' equity of approximately $39.7 billion.

         In addition, AT&T used approximately $1.6 billion of the $3.0 billion
         of AT&T Wireless common stock we retained upon split-off, in a noncash
         debt-for-equity exchange in July 2001.


(e)      INVESTMENT IN LIBERTY MEDIA GROUP

         As a result of our merger with TCI in March 1999, we acquired Liberty
         Media Group (LMG). Although LMG was wholly-owned, we accounted for it
         under the equity method since we did not have a controlling financial
         interest. On August 10, 2001, AT&T completed the split-off of Liberty
         Media Corporation (LMC) as an independent, publicly-traded company.
         AT&T redeemed each outstanding share of Class A and Class B Liberty
         Media Group tracking stock for one share of Liberty Media
         Corporation's Series A and Series B common stock, respectively. The
         IRS ruled that the split-off of LMC qualified as a tax-free
         transaction for AT&T, Liberty Media and their shareowners. The
         operating results of LMG through July 31, 2001, the deemed effective
         split-off date for accounting purposes, and the three and nine months
         ended September 30, 2000, were reflected as "Equity earnings
         (losses) from Liberty Media Group" in the accompanying Consolidated
         Statements of Operations. The impact of the operating results from
         August 1 through August 10, 2001, were deemed immaterial to our
         consolidated results. Upon the split-off, AT&T paid LMG $0.8 billion
         related to TCI net operating losses generated prior to AT&T's merger
         with TCI. In addition, AT&T received approximately $0.1 billion from
         LMG related to taxes pursuant to a tax-sharing agreement between LMG
         and AT&T Broadband which existed prior to the TCI merger. At December
         31, 2000, this receivable was included in "Investment in Liberty Media
         Group and related receivables, net" in our consolidated balance sheet.

         The noncash impacts of the split-off of Liberty Media Group included
         the reduction of total assets of approximately $34.1 billion and
         reduced shareowners' equity of approximately $34.1 billion.


(f)      MERGER WITH MEDIAONE GROUP, INC.
<PAGE>
         On June 15, 2000, AT&T completed a merger with MediaOne Group, Inc.
         (MediaOne) in a cash and stock transaction valued at approximately $45
         billion. For each share of MediaOne stock, MediaOne shareowners
         received, in the aggregate, 0.95 of a share of AT&T common stock and
         $36.27 per share in cash, consisting of $30.85 per share as stipulated
         in the merger agreement and $5.42 per share based on AT&T's stock price
         preceding the merger, which was below a predetermined amount. AT&T
         issued approximately 603 million shares of common stock in the
         transaction, of which approximately 60 million were treasury shares.
         The AT&T shares had an aggregate market value of approximately $21
         billion and cash payments totaled approximately $24 billion.

         The merger was accounted for under the purchase method. Accordingly,
         the results of MediaOne have been included in the accompanying
         consolidated financial statements since the date of acquisition as part
         of AT&T Broadband.

         Approximately $17 billion of the purchase price of $45 billion has been
         attributed to agreements with local franchise authorities that allow
         access to homes in our broadband service areas ("franchise costs") and
         is being amortized on a straight-line basis over 40 years. Also
         included in the purchase price was approximately $22 billion related to
         nonconsolidated investments, including investments in Time Warner
         Entertainment Company, L.P. (TWE) and Vodafone Group plc (Vodafone),
         approximately $5 billion related to property, plant and equipment, and
         approximately $5 billion of other net assets. In addition, included was
         approximately $13 billion in deferred income tax liabilities,
         approximately $10 billion of MediaOne debt, and approximately $1
         billion of minority interest in Centaur Funding Corporation, a
         subsidiary of MediaOne. The purchase resulted in goodwill of
         approximately $20 billion, which is being amortized on a straight-line
         basis over 40 years.

         PRO FORMA RESULTS
         Following is a summary of the pro forma results of AT&T as if the
         merger with MediaOne had closed effective January 1, 2000:

<TABLE>
<CAPTION>
                                                             (Unaudited)
                                                         Shares in millions
                                                      For the Nine Months Ended
                                                          September 30,2000
<S>                                                   <C>
         Revenue                                               $42,948
         Income from continuing operations                       8,530

         Weighted-average AT&T common shares                     3,765
         Weighted-average AT&T common shares and
            potential common shares                              3,840
         Weighted-average Liberty Media Group shares
                                                                 2,573

         AT&T Common Stock Group earnings from
           continuing operations per common share:
            Basic                                              $  1.48
            Diluted                                            $  1.46

         Liberty Media Group earnings per common share:
            Basic and diluted                                  $  1.15
</TABLE>


         Pro forma data may not be indicative of the results that would have
         been obtained had these events actually occurred at the beginning of
         the periods presented, nor does it intend to be a projection of future
         results.
<PAGE>
(g)      OTHER ACQUISITIONS, EXCHANGES AND DISPOSITIONS

         CONCERT AND AT&T CANADA

         On October 16, 2001, AT&T announced a decision to unwind Concert, its
         global venture with British Telecommunications plc (BT). Under the
         agreement, each of the partners generally will reclaim the customer
         contracts and assets contributed to the joint venture. In addition,
         AT&T will assume certain other assets that BT originally contributed to
         the joint venture. AT&T also will acquire BT's 9% interest in AT&T
         Canada and assume BT's obligation to purchase a portion of the publicly
         owned shares of AT&T Canada. As a result of the agreement to dissolve
         the Concert venture, AT&T recorded a $3.5 billion pretax charge in the
         third quarter of 2001 included in "Other (expense) income" in the
         accompanying Consolidated Statement of Operations. Approximately $2.9
         billion of this charge primarily relates to the difference between the
         fair market value of the net assets AT&T will receive in the
         transaction and the carrying value of AT&T's investment in Concert. Our
         investment in Concert was accounted for as equity investment and
         included a note receivable from Concert of approximately $1.1 billion.
         The remaining carrying value of our investment in Concert was
         approximately $0.2 billion at September 30, 2001. The remaining $0.6
         billion of the charge relates to the assumption of BT's portion of the
         obligation to purchase the publicly owned shares of AT&T Canada. The
         agreement to dissolve Concert remains subject to regulatory approval in
         the United States, Europe and other jurisdictions and is expected to
         close by the middle of 2002. Also, AT&T recorded a $1.8 billion pretax
         charge reflecting an estimated loss on AT&T's existing obligation for
         the purchase of the publicly owned shares of AT&T Canada. The charge
         related to the AT&T Canada investment reflects the differences between
         the underlying value of AT&T Canada shares and the price AT&T has
         committed to pay for them. This charge was included in "Other (expense)
         income" in the accompanying Consolidated Statement of Operations. AT&T
         currently owns approximately 21% of the outstanding equity of AT&T
         Canada and has the right to acquire BT's 9% interest in the outstanding
         equity of AT&T Canada. Accordingly, AT&T does not currently consolidate
         AT&T Canada into its results. AT&T has agreed to purchase all the
         outstanding shares of AT&T Canada that it does not own in the event
         that Canadian foreign ownership restrictions are removed. Prior to such
         removal, AT&T also has the right at any time to trigger the purchase of
         such shares through a structure that complies with such ownership
         restrictions, including designating a Canadian investor to purchase
         such shares. In the event AT&T acquires more than 50% of the equity or
         vote of AT&T Canada, AT&T Canada's results will be consolidated into
         AT&T results.

         EXCITE@HOME

         On September 28, 2001, At Home Corporation filed for bankruptcy under
         Chapter 11 in the U.S. Bankruptcy Court, for the Northern District of
         California. It also signed a definitive agreement with AT&T to sell
         essentially all of its broadband Internet access businesses and related
         services to AT&T for $0.3 billion in cash. Excite@Home's results
         remained consolidated in AT&T's Consolidated Statements of Operations
         for the three and nine months ended September 30, 2001, however, the
         assets and liabilities were deconsolidated from AT&T's Consolidated
         Balance Sheet as of September 30, 2001.

         The noncash impacts of the deconsolidation of At Home Corporation
         primarily included a reduction to property, plant and equipment of
         approximately $0.3 billion, goodwill of approximately $0.3 billion and
         debt of approximately $1.0 billion. This resulted in the recording of a
         liability of approximately $0.4 billion as of September 30, 2001. This
         liability will continue to be evaluated as events related to
         Excite@Home's bankruptcy evolve. In addition, AT&T recorded a deferred
         tax benefit of $0.7 billion as a result of the deconsolidation.

         COMCAST

         On June 30, 2001, AT&T transferred its 99.75% interest in an entity
         owning the Baltimore Maryland cable-system serving approximately 115
         thousand customers to Comcast Corp. (Comcast) for approximately $0.5
         billion in cash. The transaction resulted in a pretax gain of $0.1
         billion.

         On April 30, 2001, AT&T received 63.9 million shares of AT&T common
         stock held by Comcast in exchange for an entity owning cable-systems
         which serves approximately 590 thousand customers in six states. The
         transaction resulted in a pretax loss of $0.3 billion.

         COX and COMCAST

         On May 18, 2001, AT&T, Cox Communications (Cox) and Comcast revised an
         agreement on the terms of the put options related to
<PAGE>
         Excite@Home. Under the new agreement, which was no longer a tax-free
         exchange, Cox and Comcast retained their stakes in Excite@Home and AT&T
         issued 75 million of AT&T common shares to Cox and more than 80 million
         of AT&T common shares to Comcast. We recorded an approximate $0.8
         billion loss in "Other (expense) income" for this put option settlement
         in the second quarter of 2001. The new agreement resulted in a tax
         benefit to AT&T, which essentially offset this loss.

         JAPAN TELECOM

         On April 27, 2001, AT&T completed the sale announced on February 27,
         2001, of our 10% stake in Japan Telecom Co. Ltd to Vodafone Group plc
         for $1.35 billion in cash. The proceeds from the transaction were split
         evenly between AT&T and AT&T Wireless Group since AT&T Wireless Group
         held approximately one-half of AT&T's investment. The transaction
         resulted in a pretax gain of approximately $0.5 billion recorded in
         "Other (expense) income" in AT&T's continuing operations and a pretax
         gain of approximately $0.5 billion recorded in "Income from
         discontinued operations."

         CABLEVISION

         On January 8, 2001, AT&T and Cablevision Systems Corporation
         (Cablevision) completed the transfer of cable-systems in which AT&T
         received cable-systems serving 358 thousand subscribers in Boston and
         Eastern Massachusetts. In exchange, Cablevision received cable-systems
         serving approximately 130 thousand subscribers in the northern New
         York suburbs, and 44 million shares of AT&T common stock valued at
         approximately $0.9 billion, and approximately $0.2 billion in cash.
         Cablevision recorded a gain as a result of the transaction. Due to
         AT&T's ownership interest in Cablevision, AT&T recorded an after-tax
         gain of approximately $0.1 billion included within "Net losses from
         other equity investments."

         INSIGHT COMMUNICATIONS COMPANY LP

         Effective January 1, 2001, AT&T sold to Insight Communications Company
         LP (Insight) several Illinois cable-systems serving approximately 98
         thousand customers for $0.4 billion. Insight subsequently contributed
         the purchased cable-system and additional cable-systems serving
         approximately 177 thousand customers to Insight Midwest L.P. in which
         AT&T has a 50% interest. AT&T also contributed entities owning
         cable-systems serving approximately 248 thousand customers in Illinois
         to Insight Midwest L.P. The transactions resulted in a pretax gain of
         $0.2 billion, which was deferred due to a debt support agreement with
         Insight Midwest, L.P.
<PAGE>
(h)      NET RESTRUCTURING AND OTHER CHARGES

         During the third quarter of 2001, $399 of net restructuring and other
         charges were recorded by Excite@Home. Included in these charges were
         $376 of asset impairment charges and $23 million of restructuring and
         exit costs, primarily due to continued weakness in the on-line media
         market and the recent bankruptcy filing. These charges included the
         write-off of goodwill and other intangible assets, warrants granted in
         connection with distributing the @Home service and fixed assets. The
         restructuring and exits costs, consisted of $4 for severance costs, $14
         related to facility closings and $5 primarily related to termination of
         contractual obligations. Since we consolidate, but only own
         approximately 23% of Excite@Home, a portion of the charges recorded by
         Excite@Home was not included as a reduction to AT&T's net income, but
         rather eliminated in our September 30, 2001 Consolidated Statement of
         Operations as a component of "Minority interest income (expense)."

         The severance costs, for approximately 860 employees, primarily
         resulted from continued cost reduction efforts by Excite@Home. Nearly
         79% of the affected employees have left their positions as of September
         30, 2001, and the remaining employees will leave the Company by the end
         of 2001.

         Net restructuring and other charges for the nine months ended September
         30, 2001, totaled $1,494. The charge includes $1,171 of asset
         impairment charges related to Excite@Home, $323 for restructuring and
         exits costs, which consisted of $151 for severance costs, $156 for
         facility closings and $16 primarily related to termination of
         contractual obligations.

         The asset impairment charges recorded during the nine months ended
         September 30, 2001 included $1,032 recorded by Excite@Home primarily
         due to continued weakness in the on-line media market and the recent
         bankruptcy filing. These charges included the write-down of goodwill
         and other intangible assets related to various acquisitions, primarily
         Excite, warrants granted in connection with distributing the @Home
         service, and fixed assets. In addition, AT&T recorded a related
         goodwill impairment charge of $139 associated with its acquisition
         goodwill of Excite@Home. Since we consolidate, but only own
         approximately 23% of Excite@Home, a portion of the charges recorded by
         Excite@Home was not included as a reduction to AT&T's net income, but
         rather eliminated in our September 30, 2001 Consolidated Statement of
         Operations as a component of "Minority interest income (expense)."

         The severance costs, for approximately 7,700 employees, primarily
         resulted from synergies created by the MediaOne merger as well as
         continued cost reduction efforts by Excite@Home. Approximately 36% of
         the affected employees are management employees and 64% are
         non-management employees. Nearly 84% of the affected employees have
         left their positions as of September 30, 2001, and the remaining
         employees will leave the Company by the end of 2001.

         The following table displays the activity and balances of the
         restructuring reserve account from January 1, 2001, to September 30,
         2001:


<TABLE>
<CAPTION>
                                                             Type of Cost
                                              Employee    Facility
                                            Separations    Closings      Other         Total
<S>                                         <C>           <C>            <C>           <C>
         Balance at January 1, 2001           $ 259         $ 173         $ 36         $ 468
         Additions                              151           156           16           323
         Deductions                            (281)         (172)         (20)         (473)
         Balance at September 30, 2001        $ 129         $ 157         $ 32         $ 318
</TABLE>

         Total deductions include $121 related to the deconsolidation of AT&T's
         investment in Excite@Home (see Note g) and also reflect cash payments
         of $265 related to employee separations, $68 related to facility
         closings and $10 related to litigation, as well as $9 noncash
         utilization associated with deferred payments primarily related to
         executives. The cash outlay for AT&T's restructuring was primarily
         funded through cash from operations.

         During the third quarter of 2000, AT&T recorded $24 of net
         restructuring and
<PAGE>
         other charges. The charge resulted from synergies associated with the
         MediaOne merger and related to cash termination benefits associated
         with the involuntary separation of approximately 490 employees.
         Approximately one-half of the individuals were management employees and
         one-half were nonmanagement employees.

         During the nine months ended September 30, 2000, AT&T recorded $797 of
         net restructuring and other charges, which included $706 of
         restructuring and exit costs primarily associated with AT&T's
         initiative to reduce costs by the end of 2000, and $91 related to the
         government-mandated disposition of AT&T Communications (U.K.) Ltd.,
         which would have competed directly with Concert.

         The charge for the nine months ended September 30, 2000 included cash
         termination benefits of $482 associated with the involuntary separation
         of approximately 6,700 employees. Approximately one-half of the
         individuals were management employees and one-half were non-management
         employees.

         The charge also included $62 of network lease and other contract
         termination costs associated with penalties incurred as part of
         notifying vendors of the termination of these contracts during the
         first quarter 2000 and $144 of benefit curtailment costs associated
         with employee separations as part of these exit plans.

         During the nine months ended September 30, 2000, AT&T also recorded
         an asset impairment charge of $18 related to the write-down of
         unrecoverable assets in certain businesses in which the carrying
         value was no longer supported by estimated future cash flows.


(i)      EARNINGS PER COMMON SHARE AND POTENTIAL COMMON SHARE

         (Loss) earnings attributable to the different classes of AT&T common
         stock are as follows:

<TABLE>
<CAPTION>
                                                         AT&T Common Stock           AT&T Wireless                 Liberty Media
                                                               Group                     Group                         Group
         For the three months ended
           September 30,                                2001           2000         2001        2000            2001           2000
<S>                                                <C>              <C>           <C>          <C>          <C>             <C>
         (Loss) income from continuing
              operations                            $ (2,206)        $1,318        $  --        $ --         $   111         $1,756
         Dividend requirements of preferred
              stock                                      235             --           --          --              --             --
         (Loss) income from continuing
              operations available to common
              shareowners                             (2,441)         1,318           --          --             111          1,756
         Income (loss) from discontinued
              operations                                  --              1           --          (3)             --             --
         Gain on disposition of
              discontinued operations                 13,503             --           --          --              --             --

         Net income (loss) available to
              common shareowners                    $ 11,062         $1,319        $  --        $ (3)        $   111         $1,756

<CAPTION>
         For the nine months ended
           September 30,                              2001           2000         2001        2000            2001           2000
<S>                                                <C>              <C>           <C>          <C>          <C>             <C>
         (Loss) income from continuing
              operations                            $ (2,740)        $4,616        $  --        $ --         $(2,711)        $2,965
         Dividend requirements of preferred
              stock                                      652             --           --          --              --             --
         Premium on Wireless tracking stock
              exchange                                    80             --           --          --              --             --
         (Loss) income from continuing
              operations available to common
              shareowners                             (3,472)         4,616           --          --          (2,711)         2,965
         Income from discontinued operations             115            189           35          19              --             --
         Gain on disposition of discontinued
              operations                              13,503             --           --          --              --             --
         Cumulative effect of accounting
              change                                     359             --           --          --             545             --

         Net income (loss) available to
              common shareowners                    $ 10,505         $4,805        $  35        $ 19         $(2,166)        $2,965
</TABLE>

         Basic earnings (loss) per share for AT&T Common Stock Group were
         computed by dividing AT&T Common Stock Group income by the
         weighted-average number of shares outstanding of 3,534 million and
         3,752 million for the three months ended
<PAGE>
         September 30, 2001 and 2000, respectively, and 3,677 million and 3,397
         million for the nine months ended September 30, 2001 and 2000,
         respectively.

         Since AT&T recorded a loss from continuing operations for the three and
         nine months ended September 30, 2001, the diluted loss per share is the
         same as basic, as any potentially dilutive securities would be
         antidilutive. There were 76 million potentially dilutive AT&T
         securities outstanding at September 30, 2001.

         Diluted earnings per share (EPS) for AT&T Common Stock Group for the
         three months and nine months ended September 30, 2000 were computed by
         dividing AT&T Common Stock Group income, adjusted for the conversion of
         securities, by the weighted-average number of shares and dilutive
         potential shares outstanding during the period, assuming conversion of
         the potential shares at the beginning of the periods presented. Shares
         issuable upon conversion of preferred stock of subsidiaries,
         convertible put options and stock options have been included in the
         diluted calculation of weighted-average shares to the extent that the
         assumed issuance of such shares would have been dilutive, as
         illustrated below.

         The convertible quarterly income preferred securities were antidilutive
         and were excluded from the computation of diluted EPS for the three and
         nine-month periods ended September 30, 2000. The dividends of these
         securities would have an after-tax impact to earnings of approximately
         $40 and $120 for the three and nine-month periods ended September 30,
         2001 and 2000, respectively. Assuming conversion of the securities, the
         dividends would no longer have to be included as a reduction to net
         income and the securities would convert into approximately 67 million
         shares of AT&T common stock.

         A reconciliation of the income and share components for diluted EPS
         calculations with respect to AT&T Common Stock Group is as follows:

<TABLE>
<CAPTION>
                                                    For the Three             For the Nine
                                                     Months Ended             Months Ended
                                                  September 30, 2000       September 30, 2000
<S>                                               <C>                      <C>
         AT&T Common Stock Group:
         Income from continuing operations              $1,318                 $4,616
         Income impact of assumed conversion
           of preferred stock of subsidiary                  8                     24
         Income impact of mark-to-market on
           convertible put options                          13                     13
         Income adjusted for conversion of
           securities                                   $1,339                 $4,653

         Shares (in millions)
         Weighted-average common shares                  3,752                  3,397
         Stock options                                      17                     23
         Preferred stock of subsidiary                      40                     40
         Convertible put options                            33                     11
         Weighted-average common shares and
           potential common shares                       3,842                  3,471
</TABLE>


         Basic earnings (loss) per share for LMG was computed by dividing the
         LMG income (loss) by the weighted-average number of shares outstanding
         of LMG of 2,588 million and 2,582 million, for the third quarter and
         the year-to-date periods through July 31, 2001, the deemed effective
         split-off date for accounting purposes (see note e), respectively, and
         2,578 million and 2,573 million for the three and nine months ended
         September 30, 2000, respectively.

         Since LMG recorded a loss for the year-to-date period through July 31,
         2001, the diluted loss per share is the same as basic, as any
         potentially dilutive securities would be antidilutive. Diluted earnings
         per share (EPS) for LMG for the third quarter of 2001 and for the
         quarter and the nine months ended September 30, 2000, were computed by
         dividing LMG income by the weighted-average number of shares
         outstanding during the period. Potentially dilutive securities,
         including fixed and nonvested performance awards and stock options,
         have not been factored
<PAGE>
         into the dilutive calculations because past history has indicated that
         these contracts are generally settled in cash.


(j)      CONVERTIBLE PREFERRED STOCK

         On January 22, 2001, NTT DoCoMo invested approximately $9.8 billion for
         812,511.778 shares of a new class of AT&T preferred stock with a par
         value of $1 per share; and five-year warrants to purchase the
         equivalent of an additional 41.7 million shares of AT&T Wireless Group
         tracking stock at $35 per share. The $9.8 billion of proceeds were
         recorded based on their relative fair values as $9.2 billion for the
         preferred shares, $0.3 billion for the warrants in other current
         liabilities and $0.3 billion for the amortizable beneficial conversion
         feature. Prior to the split-off of AT&T Wireless Group, the preferred
         shares, convertible at NTT DoCoMo's option, were economically
         equivalent to 406 million shares (a 16 percent interest) of AT&T
         Wireless Group tracking stock.

         On July 9, 2001, in conjunction with the split-off of AT&T Wireless
         Group, these preferred shares were converted into AT&T Wireless common
         stock. Upon conversion, AT&T reduced its portion of the financial
         performance and economic value in the AT&T Wireless Group by 178
         million shares, and the balance of the 406 million shares came from the
         issuance of 228 million new shares of AT&T Wireless common stock.

         Since NTT DoCoMo converted their preferred stock in connection with the
         Wireless Group split-off, we fully amortized, in the third quarter, the
         remaining beneficial conversion feature balance of $0.2 billion.

(k)      SECURITIZATION OF RECEIVABLES

         On June 22, 2001, AT&T initiated a 364-day accounts receivable
         securitization program providing for up to $2.2 billion of funding.
         Under the program, AT&T Business accounts receivable were sold on a
         discounted, revolving basis, to a special purpose, wholly-owned
         subsidiary of AT&T, which assigns interests in such receivables to
         unrelated third-party financing entities. The securitization proceeds
         of $2.1 billion were recorded as a borrowing and included in "Debt
         maturing within one year" in the accompanying Consolidated Balance
         Sheet at September 30, 2001. The interest payment for the associated
         loan was approximately $21 and $27 for the quarter and year-to-date
         period ending September 30, 2001, respectively. Interest is paid
         monthly based on a floating rate set by the corresponding agreements.
         At September 30, 2001, the borrowing was collateralized by $5.6 billion
         of accounts receivable.

         On June 20, 2001, AT&T amended an existing accounts receivable
         securitization program for a new 364-day term providing for up to $0.5
         billion of funding. Under the program, AT&T Consumer accounts
         receivable were sold on a discounted, revolving basis, to a special
         purpose, wholly-owned subsidiary of AT&T, which assigns interests in
         such receivables to unrelated third-party financing entities. The $0.5
         billion of proceeds were included in "Debt maturing within one year" in
         the accompanying Consolidated Balance Sheet at September 30, 2001. The
         interest payment for the associated loan was approximately $4 and $11
         for the quarter and year-to-date period ending September 30, 2001,
         respectively. Interest is paid monthly based on a floating rate set by
         the corresponding agreements. At September 30, 2001, the borrowing was
         collateralized by $1.0 billion of accounts receivable.
<PAGE>
(l)      SETTLEMENT OF EXCHANGEABLE NOTES

         In the third quarter of 2001, exchangeable notes that were indexed to a
         portion of our holdings of Vodafone securities matured. Prior to the
         settlement, the carrying value of the notes was $1.6 billion. These
         notes were settled with approximately 70 million shares of Vodafone
         ADR's and $252 in cash. Approximately 57 million shares of the Vodafone
         ADR's used in the settlement were accounted for as "trading" securities
         and the remainders were accounted for as "available-for-sale"
         securities under SFAS No. 115, "Accounting for Certain Investments in
         Debt and Equity Securities." The settlement resulted in a pretax loss
         of approximately $392, of which $394 was reclassified from other
         comprehensive income to other (expense) income in the Statement of
         Operations.


(m)      RELATED PARTY TRANSACTIONS

         AT&T has various related party transactions with Concert.

         Included in revenue was $0.3 billion for each of the three-month
         periods ended September 30, 2001 and 2000, and $0.8 billion for each of
         the nine-month periods ended September 30, 2001 and 2000, for services
         provided to Concert.

         Included in access and other connection expenses are charges from
         Concert representing costs incurred on our behalf to connect calls made
         to foreign countries (international settlements) and costs paid by AT&T
         to Concert for distributing Concert products. Such charges totaled $0.4
         billion and $1.5 billion, for the three and nine months ended September
         30, 2001, respectively, and $0.6 billion and $1.7 billion for the three
         and nine months ended September 30, 2000, respectively.

         Included in accounts receivable was $0.5 billion, at both September 30,
         2001 and December 31, 2000, related to transactions with Concert.
         Included in accounts payable was $0.5 billion at both September 30,
         2001 and December 31, 2000, respectively, related to transactions with
         Concert.

         Included in other receivables was $0.7 billion and $1.1 billion, at
         September 30, 2001 and December 31, 2000, respectively, related to
         transactions associated with Concert. Included in other current
         liabilities was $0.9 billion and $1.0 billion, at September 30, 2001
         and December 31, 2000, respectively, related to transactions associated
         with Concert.

         In addition, we had various related party transactions with Liberty
         Media Group(LMG). Included in "Costs of services and products" were
         programming expenses related to services from LMG. Those expenses
         amounted to $27 and $199, respectively, for the quarter and
         year-to-date periods through July 31, 2001, the deemed effective LMG
         split-off date for accounting purposes, and $69 and $171, respectively,
         for the quarter and year-to-date periods ended September 30, 2000.




(n)      STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133 "ACCOUNTING FOR
         DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES"

         Effective January 1, 2001, AT&T adopted SFAS No. 133, "Accounting for
         Derivative Instruments and Hedging Activities", and its corresponding
         amendments under SFAS No.138. SFAS No. 133 establishes accounting and
         reporting standards for derivative instruments, including certain
         derivative instruments embedded in other contracts and for hedging
         activities. All derivatives, whether designated in hedging
         relationships or not, are required to be recorded on the balance sheet
         at fair value. If the derivative is designated as a fair value hedge,
         the changes in the fair value of the derivative and of the hedged item
         attributable to the hedged risk are recognized in earnings. If the
         derivative is designated as a cash flow hedge, the effective portions
         of changes in the fair value of the derivative are recorded in other
         comprehensive income (OCI) and are recognized in the income statement
         when the hedged item affects earnings. Changes in fair values of
<PAGE>
         derivative instruments not designated as hedging instruments and
         ineffective portions of hedges, if any, are recognized in earnings in
         the current period.

         The adoption of SFAS No. 133 on January 1, 2001, resulted in a pretax
         cumulative-effect increase to income of $1.5 billion ($0.9 billion
         net-of-tax). $0.6 billion ($0.4 billion net-of-tax) and $0.9 billion
         ($0.5 billion net-of-tax) were attributable to AT&T Group (other than
         LMG) and Liberty Media Group, respectively.

         AT&T Group

         AT&T Group's cumulative-effect increase to net income of $0.4 billion
         was attributable primarily to equity based derivative instruments
         embedded in indexed debt instruments, and warrants held in both public
         and private companies.

         Included in the after-tax cumulative effect benefit of $0.4 billion,
         was a $0.2 billion benefit for the separation of embedded derivative
         instruments from the indexed debt instruments and $0.2 billion benefit
         for changes in the fair value of warrants.

         Upon adoption, AT&T Group, as permitted by SFAS No. 133, reclassified
         $9.3 billion of securities from "available-for-sale" to "trading." This
         reclassification resulted in the recognition, in the income statement,
         of losses previously recorded within accumulated OCI. A portion of the
         loss ($1.6 billion pretax; $1.0 billion net-of-tax) was recorded as
         part of the cumulative effect of adoption. This loss completely offset
         a gain for amounts also previously recorded within accumulated OCI on
         the indexed debt obligation that had been considered a hedge of
         Comcast, Microsoft and Vodafone available-for-sale securities. The
         reclassification of securities also resulted in a pretax charge of $1.2
         billion ($0.7 billion net-of-tax) recorded in other (expense) income.


         In addition, the adoption of SFAS No. 133 also resulted in a cumulative
         pretax charge to OCI of $10 ($6 net-of-tax) on cash flow hedges. The
         net derivative loss included in OCI as of January 1, 2001 will be
         reclassified into earnings over the life of the instruments, of which
         the last expires in February 2005.
<PAGE>
         Foreign Currency Risk

         We enter into foreign currency exchange contracts, including forward
         and option contracts, to manage our exposure to changes in currency
         exchange rates related to foreign-currency-denominated transactions. In
         third quarter 2001, this consisted primarily of the Euro, Japanese yen
         and Brazilian reais.

         Collars and Equity Securities Price Risk

         We enter into option agreements to hedge our exposure on debt that is
         collateralized by securities we own. From time to time, AT&T Group uses
         options and collars to manage the risk from changes in fair values and
         cash flows on certain equity securities, primarily on those being used
         to collateralize underlying debt instruments. The securities selected
         for hedging are determined by market conditions, up-front costs, and
         other relevant factors. Once established, the hedges are not
         dynamically managed or traded, and are generally not removed until
         maturity of the option contracts.


         Interest Rate Swap Agreements

         We enter into interest rate swaps to manage our exposure to changes in
         interest rates and to lower our overall costs of financing. We enter
         into swap agreements to manage the fixed/floating mix of our debt
         portfolio in order to reduce aggregate risk to interest rate movements.
         Interest rate swaps also allow us to raise funds at floating rates and
         effectively swap them into fixed rates that are lower than those
         available to us if fixed-rate borrowings were made directly. These
         agreements involve the exchange of floating-rate for fixed-rate
         payments, fixed-rate for floating-rate payments or floating-rate for
         other floating-rate payments without the exchange of the underlying
         principal amount.

         Other Derivatives

         In addition, AT&T Group may hold warrants to purchase securities of
         other companies. Warrants that can be net share settled are deemed
         derivative financial instruments and are generally not eligible to be
         designated as hedging instruments as there is no corresponding
         underlying exposure. This includes warrants held in both public and
         private companies.

         Hedge ineffectiveness, determined in accordance with SFAS No. 133, had
         no impact on earnings for the three and nine months ended September 30,
         2001. No fair value hedges or cash flow hedges were derecognized or
         discontinued for the three and nine months ended September 30, 2001.

         For the three and nine months ended September 30, 2001, "Other
         (expense) income" included net gains of $132 and $373, respectively,
         relating to ongoing fair value adjustments of derivatives and trading
         securities. The fair value adjustments for these periods included net
         gains of $980 and $1,964, respectively, for equity based derivative
         instruments embedded in indexed debt instruments, net gains (losses)
         of $(61) and $76, respectively, for changes in the fair value of
         warrants, swaps and foreign currency transactions, and losses of
         $(787) and $(1,667), respectively, for trading securities.

         For the three and nine-month periods ending September 30, 2001, we
         reclassified $19 and $60, respectively, from OCI (pretax) to interest
         expense representing the recognition of mark-to-market amounts on the
         prepaid interest rate swaps.

         Liberty Media Group (LMG)

         LMG's cumulative-effect increase to income of $0.5 billion was
         attributable primarily to separately recording the embedded call option
         obligations associated with LMG's senior exchangeable debentures. Also
         included in the cumulative-effect was $87 previously included in OCI
         related primarily to changes in the fair value of LMG's warrants and
         options to purchase certain available-for-sale securities.

         Derivative instruments:
<PAGE>
         LMG uses various derivative instruments including equity collars, put
         spread collars, interest rate swaps and forward foreign exchange
         contracts to manage fair value risk associated with certain
         investments, interest rate risk on certain indebtedness, and foreign
         exchange rate risk. Derivative instruments are generally not used for
         speculative purposes. The derivative instruments may involve elements
         of credit and market risk in excess of amounts recognized in the
         financial statements. LMG monitors its positions and the credit quality
         of counter-parties, consisting primarily of major financial
         institutions, and does not anticipate nonperformance by any
         counter-party.

         For derivatives designed either as fair value or cash flow hedges,
         changes in the time value of the derivatives are excluded from the
         assessment of hedge effectiveness and are recognized in earnings. Hedge
         ineffectiveness, determined in accordance with SFAS No. 133, had no
         impact on LMG's earnings for the quarter and the year-to-date period
         through July 31, 2001. No fair value hedges or cash flow hedges were
         derecognized or discontinued during the quarter and the year-to-date
         period through July 31, 2001.

         For the nine months ended September 30, 2001, included in "Equity
         earnings (losses) from LMG" was unrealized losses on financial
         instruments of $38 net loss related to call option obligations, a $440
         net loss for changes in the fair value of derivative instruments
         related to available-for-sale securities and other derivatives not
         designated as hedging instruments, and an $142 net gain for changes in
         the time value of options for fair value hedges.
<PAGE>
(o)      SEGMENT REPORTING

         AT&T's results are segmented according to the way we manage our
         business: AT&T Business, AT&T Consumer and AT&T Broadband. In
         connection with our corporate restructuring program set forth in late
         2000, our existing segments reflect certain managerial changes since
         the publication of our 2000 annual report. The changes are as follows:
         AT&T Business was expanded to include the results of international
         operations and ventures. In addition, certain corporate costs that were
         previously recorded within the Corporate and Other Group have been
         allocated to the respective segments in an effort to ultimately have
         the results of these businesses reflect all direct corporate costs as
         well as overhead for shared services. All prior period results have
         been restated to reflect these changes. Total assets for our reportable
         segments generally include all assets, except intercompany receivables.

         Reflecting the dynamics of our business, we continuously review our
         management model and structure, which may result in additional
         adjustments to our operating segments in the future.

<TABLE>
<CAPTION>
                                                     For the Three Months             For the Nine Months
                                                      Ended September 30,              Ended September 30,
                                                     2001             2000            2001             2000
<S>                                               <C>              <C>              <C>              <C>
         Revenue
            AT&T Business external revenue        $  6,750         $  7,022         $ 20,550         $ 21,172
            AT&T Business internal revenue             135              200              597              529
         Total AT&T Business revenue                 6,885            7,222           21,147           21,701
         AT&T Consumer external revenue              3,822            4,651           11,614           14,651
           AT&T Broadband external revenue           2,390            2,416            7,411            5,687
           AT&T Broadband internal revenue               3                4               12                6
         Total AT&T Broadband revenue                2,393            2,420            7,423            5,693

         Total reportable segments                  13,100           14,293           40,184           42,045

         Corporate and Other (a)                       (13)            (117)            (220)            (422)
         Total revenue                            $ 13,087         $ 14,176         $ 39,964         $ 41,623
</TABLE>

         (a) Includes revenue related to Excite@Home of $140 and $418 for the
         third quarter and year-to-date period of 2001, respectively, and $79
         for the quarter and year-to-date period ended September 30, 2000.
<PAGE>
         RECONCILIATION OF EARNINGS BEFORE INTEREST AND TAXES (EBIT) TO
         INCOME BEFORE INCOME TAXES

<TABLE>
<CAPTION>
                                                            For the Three                 For the Nine
                                                            Months Ended                  Months Ended
                                                            September 30,                 September 30,
                                                       2001            2000            2001            2000
<S>                                                  <C>             <C>             <C>             <C>
         AT&T Business                               $(4,377)        $ 1,690         $(1,933)        $ 4,428
         AT&T Consumer                                 1,282           1,806           3,817           5,271
         AT&T Broadband                                 (538)           (640)         (1,834)           (771)
           Total reportable segments                  (3,633)          2,856              50           8,928
         Corporate and Other (a)                         (21)            106          (3,505)           (297)
         Deduct: Pretax minority interest
            income (expense)                             171              64             922             (87)
         Add: Pretax losses from other equity
            investments                                  224             374             725           1,034
         Interest expense                                786             896           2,426           2,000
         Total (loss) income from
            continuing operations before
            income taxes                             $(4,387)        $ 2,376         $(6,078)        $ 7,752
</TABLE>


         (a) Includes $(294) and $(235) related to Excite@Home for the third
         quarter of 2001 and 2000, respectively. Also includes $(714) and $(699)
         related to Excite@Home for the nine months ended September 30, 2001 and
         2000, respectively.


         ASSETS

<TABLE>
<CAPTION>
                                                  At September 30,     At December 31,
                                                         2001               2000
<S>                                               <C>                  <C>
         AT&T Business                                $ 40,236           $ 42,747
         AT&T Consumer                                   2,555              3,150
         AT&T Broadband                                104,054            114,848
           Total reportable segments                   146,845            160,745

         Corporate and Other:
         Other segments                                  1,152              1,174
         Prepaid pension costs                           3,269              3,003
         Deferred income taxes                           1,362                406
         Other corporate assets (a)                      7,421              7,518
         Investment in Liberty Media Group and
           related receivables, net                         --             34,290
         Net assets of discontinued operations              --             27,224
         Total assets                                 $160,049           $234,360
</TABLE>

         (a) Includes $2,541 related to Excite@Home at December 31, 2000.
<PAGE>
(p)      GUARANTEE OF PREFERRED SECURITIES

         TCI Securities:

         Prior to the consummation of the TCI merger, TCI issued mandatorily
         redeemable preferred securities through subsidiary trusts that held
         subordinated debt securities of TCI. At September 30, 2001, $1,244 of
         the guaranteed redeemable preferred securities remained outstanding.

         MediaOne Securities:

         Prior to the consummation of the MediaOne merger, MediaOne issued
         mandatorily redeemable preferred securities through subsidiary trusts
         that held subordinated debt securities of MediaOne. At September 30,
         2001, $776 of the guaranteed redeemable preferred securities remained
         outstanding.

         AT&T provides a full and unconditional guarantee on the outstanding
         securities issued by TCI Communications Financing I, II and IV and the
         outstanding securities issued by MediaOne Financing I and II and
         MediaOne Finance II and III. The following are the condensed
         consolidating financial statements of AT&T Corp., which include the
         financial results of TCI and MediaOne for each of the corresponding
         periods. The results of MediaOne have been included in the financial
         results of AT&T since the date of acquisition on June 15, 2000, and the
         results of TCI have been included since the March 9, 1999, date of
         acquisition.
<PAGE>
                                   AT&T CORP.
                    CONSOLIDATING CONDENSED INCOME STATEMENTS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
                              (DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
                                GUARANTOR  GUARANTOR    GUARANTOR     TCI        TCI         TCI     MEDIAONE   MEDIAONE   MEDIAONE
                                   AT&T    SUBSIDIARY  SUBSIDIARY  FINANCING   FINANCING  FINANCING  FINANCING  FINANCING   FINANCE
                                  PARENT       TCI      MEDIAONE       I          II         IV          I         II         II
                                  ------       ---      --------       -          --         --          -         --         --
<S>                             <C>        <C>         <C>         <C>         <C>        <C>        <C>        <C>        <C>
Revenue.......................   $14,832    $     --    $     --    $     --    $    --    $    --    $    --    $     --   $    --

Operating Expenses
Costs of services and products     2,564                       1
Access and other connection...     4,948
Selling, general and
  administrative..............     1,583         246           2
Depreciation and other
  amortization................     1,284          44
Amortization of goodwill,
  franchise costs and other
  purchased intangibles.......        72           3         376
Net restructuring and other
  charges.....................
Total operating expenses......    10,451         293         379

Operating income (loss).......     4,381        (293)       (379)

Other income (expense)........       763          97       1,076          32         35         13          3          3         16
Interest expense (benefit)....     3,485       1,015         212          32         35         13          2          2         15
Income (loss) from continuing
  operations before income
  taxes, minority interest,
  earnings (losses) from
  equity investments and
  cumulative effect of
  accounting change...........     1,659      (1,211)        485                                            1          1          1

Provision (benefit) for
  income taxes................       619        (454)        329

Minority interest income
  (expenses)..................      (120)
Equity losses from Liberty
  Media Group.................                 2,711
Net earnings (losses) from
  other equity investments....       133      (1,896)     (1,839)
Income (loss) before cumulative
  effect of accounting change
  from continuing
  operations..................     1,053      (5,364)     (1,683)                                           1          1          1

Income (loss) from
  discontinued operations
  (net of income taxes).......
Gain on the disposition of
  discontinued operations.....    13,503
Income (loss) before
  cumulative effect of
  accounting change...........    14,556      (5,364)     (1,683)                                           1          1          1
Cumulative effect of
  accounting change...........       508         545         540
Net income (loss) ............    15,064      (4,819)     (1,143)                                           1          1          1
Dividend requirements on
  preferred stock.............       652
Premium on Wireless tracking
  stock exchange..............        80
Net income (loss) available
  to common shareowners.......   $14,332    $(4,819)    $(1,143)    $     --    $    --    $    --    $     1    $     1    $     1
</TABLE>


<TABLE>
<CAPTION>
                                  MEDIAONE                  ELIMINATION AND
                                   FINANCE   NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED
                                    III      SUBSIDIARIES     ADJUSTMENTS     AT&T CORP.
                                     ---     ------------     -----------     ----------
<S>                               <C>        <C>            <C>              <C>
Revenue.......................     $    --      $26,859         $(1,727)       $39,964

Operating Expenses
Costs of services and products                    9,411          (1,518)        10,458
Access and other connection...                    4,523            (182)         9,289
Selling, general and
  administrative..............                    6,317              (4)         8,144
Depreciation and other
  amortization................                    3,788                          5,116
Amortization of goodwill,
  franchise costs and other
  purchased intangibles.......                    1,469                          1,920
Net restructuring and other
  charges.....................                    1,494                          1,494
Total operating expenses......                   27,002          (1,704)        36,421

Operating income (loss).......                     (143)            (23)         3,543

Other income (expense)........          35       (6,709)         (2,559)        (7,195)
Interest expense (benefit)....          34          672          (3,091)         2,426
Income (loss) from continuing
  operations before income
  taxes, minority interest,
  earnings (losses) from
  equity investments and
  cumulative effect of
  accounting change...........           1       (7,524)            509         (6,078)

Provision (benefit) for
  income taxes................                   (3,240)                        (2,746)
Minority interest income
  (expenses)..................                    1,135                          1,015
Equity losses from Liberty
  Media Group.................                                                   2,711
Net earnings (losses) from
  other equity investments....                       43           3,136           (423)
Income (loss) before cumulative
effect of accounting change
  from continuing
  operations..................           1       (3,106)          3,645         (5,451)

Income (loss) from
  discontinued operations
(net of income taxes).........                      178             (28)           150
Gain on the disposition of
  discontinued operations.....                                                  13,503
Income (loss) before
  cumulative effect of
  accounting change...........           1       (2,928)          3,617          8,202
Cumulative effect of
  accounting change...........                     (689)                           904
Net income (loss) ............           1       (3,617)          3,617          9,106
Dividend requirements on
  preferred stock.............                                                     652
Premium on Wireless tracking
  stock exchange                                                                    80
Net income (loss) available
  to common shareowners.......     $     1      $(3,617)        $ 3,617        $ 8,374
</TABLE>
<PAGE>
                                   AT&T CORP.
                    CONSOLIDATING CONDENSED INCOME STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
                              (DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
                                GUARANTOR  GUARANTOR    GUARANTOR     TCI        TCI         TCI     MEDIAONE   MEDIAONE   MEDIAONE
                                   AT&T    SUBSIDIARY  SUBSIDIARY  FINANCING   FINANCING  FINANCING  FINANCING  FINANCING   FINANCE
                                  PARENT       TCI      MEDIAONE       I          II         IV          I         II         II
                                  ------       ---      --------       -          --         --          -         --         --
<S>                             <C>        <C>         <C>         <C>         <C>        <C>        <C>        <C>        <C>
Revenue.......................   $ 4,847    $           $           $           $          $          $          $          $

Operating Expenses
Costs of services and products       876
Access and other connection...     1,610
Selling, general and
  administrative..............       522           2          (7)
Depreciation and other
  amortization................       444          15          (6)
Amortization of goodwill,
  franchise costs and other
  purchased intangibles.......        25                     123
Net restructuring and other
  charges.....................
Total operating expenses......     3,477          17         110

Operating income (loss).......     1,370         (17)       (110)

Other income (expense)........     1,336            8        (36)         10         12          4          1          1          6
Interest expense (benefit)....       956          150         57          10         12          4          1          1          5
Income (loss) before income
  taxes, minority interest,
  earnings (losses) from
  equity investments and
  cumulative effect of
  accounting change...........     1,750        (159)       (203)                                                                 1

Provision (benefit) for
  income taxes................       665          (59)       (31)
Minority interest income
  (expenses)..................      (40)
Equity earnings (losses) from
  Liberty Media Group.........                    111
Net earnings (losses) from
  other equity investments....    (2,284)       (424)       (273)
(Loss) income from continuing
  operations before
  cumulative effect of
  account change..............    (1,239)       (413)       (445)                                                                 1

Income (loss) from
  discontinued operations
  (net of income taxes)......
Gain on the disposition of
  discontinued operations
  (net of income taxes).......    13,503
Income (loss) before
  cumulative effect of
  accounting change...........    12,264        (413)       (445)                                                                 1
Cumulative effect of
  accounting change...........
Net income (loss) ............    12,264        (413)       (445)                                                                 1
Dividend requirements on
  preferred stock.............       235
Premium on Wireless tracking
  stock exchange
Net income (loss) available
  to common shareowners.......   $12,029    $   (413)   $   (445)   $           $          $          $          $          $     1
</TABLE>


<TABLE>
<CAPTION>
                                  MEDIAONE                  ELIMINATION AND
                                   FINANCE   NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED
                                    III      SUBSIDIARIES     ADJUSTMENTS     AT&T CORP.
                                     ---     ------------     -----------     ----------
<S>                               <C>        <C>            <C>              <C>
Revenue.......................     $            $ 8,743         $  (503)       $13,087

Operating Expenses
Costs of services and products                    3,040            (440)         3,476
Access and other connection...                    1,484             (61)         3,033
Selling, general and
  administrative..............                    2,025              (2)         2,540
Depreciation and other
  amortization................                    1,229                          1,682
Amortization of goodwill,
  franchise costs and other
  purchased intangibles.......                      444                            592
Net restructuring and other
  charges.....................                      399                            399
Total operating expenses......                    8,621            (503)        11,722

Operating income (loss).......                      122                          1,365

Other income (expense)........          12       (5,532)           (788)        (4,966)
Interest expense (benefit)....          11          367            (788)           786
Income (loss) before income
  taxes, minority interest,
  earnings (losses) from
  equity investments and
  cumulative effect of
  accounting change...........           1       (5,777)                        (4,387)

Provision (benefit) for
  income taxes................                   (2,667)                        (2,092)
Minority interest income
  (expenses)..................                      217                            177
Equity earnings (losses) from
  Liberty Media Group.........                                                     111
Net earnings (losses) from
  other equity investments....                      (88)          2,981            (88)
(Loss) income from continuing
  operations before
  cumulative effect of
  account change..............           1       (2,981)          2,981         (2,095)

Income (loss) from
  discontinued operations
  (net of income taxes)......
Gain on the disposition of
  discontinued operations
  (net of income taxes).......                                                  13,503
Income (loss) before
  cumulative effect of
  accounting change...........           1       (2,981)          2,981         11,408
Cumulative effect of
  accounting change...........
Net income (loss) ............           1       (2,981)          2,981         11,408
Dividend requirements on
  preferred stock.............                                                     235
Premium on Wireless tracking
  stock exchange
Net income (loss) available
  to common shareowners.......     $     1      $(2,981)        $ 2,981       $11,173
</TABLE>
<PAGE>
                                   AT&T CORP.
                     CONSOLIDATING CONDENSED BALANCE SHEETS
                            AS OF SEPTEMBER 30, 2001
                              (DOLLARS IN MILLIONS)


<TABLE>
<CAPTION>
                                GUARANTOR  GUARANTOR    GUARANTOR     TCI        TCI         TCI     MEDIAONE   MEDIAONE   MEDIAONE
                                   AT&T    SUBSIDIARY  SUBSIDIARY  FINANCING   FINANCING  FINANCING  FINANCING  FINANCING   FINANCE
                                  PARENT       TCI      MEDIAONE       I          II         IV          I         II         II
                                  ------       ---      --------       -          --         --          -         --         --
<S>                             <C>        <C>         <C>         <C>         <C>        <C>        <C>        <C>        <C>
ASSETS
Cash and cash equivalents....   $  3,595    $     --    $     --    $     --    $    --    $    --    $    --    $    --    $    --
Investments..................
Deferred income taxes........        568
Other current assets.........     14,691         668         152          11         12          4          1          1          6
TOTAL CURRENT ASSETS.........     18,854         668         152          11         12          4          1          1          6

Property, plant & equipment,
  net........................     10,091         102
Franchise costs, net.........      1,702          21
Goodwill, net................        152                  19,284
Investment in Liberty Media
  Group and related
  receivables, net...........
Other investments and
  related advances...........    132,536      13,230      25,262
Other assets.................      4,514          70                     527        513        204         51         44        230
TOTAL ASSETS.................   $167,849    $ 14,091    $ 44,698    $    538    $   525    $   208    $    52    $    45    $   236

LIABILITIES
Debt maturing within one year   $ 41,723    $    398    $     28    $     --    $    --    $    --    $    --    $    --    $    --

Other current liabilities....      8,472         522          66          11         12          4          1          1          6
TOTAL CURRENT LIABILITIES....     50,195         920          94          11         12          4          1          1          6

Long-term debt...............     14,920      11,162       1,307         527        513        204         30         28        214
Deferred income taxes........      1,016                     973
Other long-term liabilities
  and deferred credits.......      6,896          80           4
TOTAL LIABILITIES............     73,027      12,162       2,378         538        525        208         31         29        220

Minority Interest............
Company-Obligated
  Convertible Quarterly
  Income Preferred
  Securities of Subsidiary
  Trust Holding Solely
  Subordinated Debt
  Securities of AT&T.........      4,718

SHAREOWNERS' EQUITY
AT&T Common Stock............      3,536
AT&T Wireless Group common
  stock......................          0
Liberty Media Group Class A
  Common Stock...............          0
Liberty Media Group Class B
  Common Stock...............          0
Preferred Stock issued
  to subsidiaries............     10,559

Other shareowners' equity....     76,009       1,929      42,320                                           21         16         16
TOTAL SHAREOWNERS' EQUITY....     90,104       1,929      42,320                                           21         16         16
TOTAL LIABILITIES AND
  SHAREOWNERS' EQUITY........   $167,849    $ 14,091    $ 44,698    $    538    $   525    $   208    $    52    $    45    $   236
</TABLE>



<TABLE>
<CAPTION>
                                  MEDIAONE                  ELIMINATION AND
                                   FINANCE   NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED
                                    III      SUBSIDIARIES     ADJUSTMENTS     AT&T CORP.
                                     ---     ------------     -----------     ----------
<S>                               <C>        <C>            <C>              <C>
ASSETS
Cash and cash equivalents....      $    --      $   603       $      --       $  4,198
Investments..................                         0                              0
Deferred income taxes........                     1,055                          1,623
Other current assets.........           11       43,478         (48,398)        10,637
TOTAL CURRENT ASSETS.........           11       45,136         (48,398)        16,458

Property, plant & equipment,
  net........................                    30,555                         40,748
Franchise costs, net.........                    41,564                         43,287
Goodwill, net................                     5,338                         24,774
Investment in Liberty Media
  Group and related
  receivables, net...........
Other investments and
  related advances...........                    60,141        (206,901)        24,268
Other assets.................          516        8,882          (5,037)        10,514
TOTAL ASSETS.................      $   527     $191,616       $(260,336)      $160,049

LIABILITIES
Debt maturing within one year      $    --     $  9,702       $ (33,402)      $ 18,449

Other current liabilities....           11       13,011          (8,689)        13,428
TOTAL CURRENT LIABILITIES....           11       22,713         (42,091)        31,877

Long-term debt...............          504       10,587          (9,989)        30,007
Deferred income taxes........                    25,186                         27,175
Other long-term liabilities
  and deferred credits.......                     5,951          (2,479)        10,452
TOTAL LIABILITIES............          515       64,437         (54,559)        99,511

Minority Interest............                     3,622                          3,622
Company-Obligated
  Convertible Quarterly
  Income Preferred
  Securities of Subsidiary
  Trust Holding Solely
  Subordinated Debt
  Securities of AT&T.........                                                    4,718

  SHAREOWNERS' EQUITY
AT&T Common Stock............                                                    3,536
AT&T Wireless Group common
  stock......................
Liberty Media Group Class A
  Common Stock...............
Liberty Media Group Class B
  Common Stock...............
Preferred Stock issued to
  subsidiaries...............                                  (10,559)           --

Other shareowners' equity....           12      123,557       (195,218)         48,662
TOTAL SHAREOWNERS' EQUITY....           12      123,557       (205,777)         52,198
TOTAL LIABILITIES AND
  SHAREOWNERS' EQUITY........      $   527     $191,616       $(260,336)      $160,049
</TABLE>
<PAGE>
                                   AT&T CORP.
                CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
                              (DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
                                GUARANTOR  GUARANTOR    GUARANTOR     TCI        TCI         TCI     MEDIAONE   MEDIAONE   MEDIAONE
                                   AT&T    SUBSIDIARY  SUBSIDIARY  FINANCING   FINANCING  FINANCING  FINANCING  FINANCING   FINANCE
                                  PARENT       TCI      MEDIAONE       I          II         IV          I         II         II
                                  ------       ---      --------       -          --         --          -         --         --
<S>                             <C>        <C>         <C>         <C>         <C>        <C>        <C>        <C>        <C>
NET CASH PROVIDED BY (USED
  IN) OPERATING ACTIVITIES OF
  CONTINUING OPERATIONS.......    $2,367    $ (1,116)   $    746    $     --    $    --    $    --    $     1    $     1    $     1


INVESTING ACTIVITIES
Capital expenditures and
  other additions.............    (1,313)        (15)
Equity investment
  distributions and sales            694      19,048
Net dispositions
  (acquisitions) of
  businesses, net of cash
  disposed/acquired...........        14
Other.........................     3,658         162        (494)
NET CASH (USED IN) PROVIDED
  BY INVESTING ACTIVITIES OF
  CONTINUING OPERATIONS.......     3,053      19,195        (494)

FINANCING ACTIVITIES
Proceeds from long-term debt
  issuances...................
Proceeds from debt from AT&T..                 2,670
Retirement of long-term debt..      (976)                   (252)
Retirement of AT&T debt.......    (5,169)    (20,419)
Issuance of convertible
  preferred securities
  and warrants................     9,811
Repayment of borrowings
  from AT&T Wireless              (5,803)
(Decrease) increase in
  short-term borrowings, net..    (9,839)       (330)
Other.........................    10,151                                                                   (1)        (1)        (1)
NET CASH PROVIDED BY (USED
  IN) FINANCING ACTIVITIES OF
  CONTINUING OPERATIONS.......    (1,825)    (18,079)       (252)                                          (1)        (1)        (1)

Net cash provided by (used
  in) discontinued operations.

Net (decrease) increase in
  cash and cash equivalents...     3,595
Cash and cash equivalents at
  beginning of year...........
Cash and cash equivalents at
  end of period...............   $ 3,595    $     --    $     --    $     --    $    --    $    --    $    --    $    --    $    --
</TABLE>



<TABLE>
<CAPTION>
                                  MEDIAONE                  ELIMINATION AND
                                   FINANCE   NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED
                                    III      SUBSIDIARIES     ADJUSTMENTS     AT&T CORP.
                                     ---     ------------     -----------     ----------
<S>                               <C>        <C>            <C>              <C>
NET CASH PROVIDED BY (USED
  IN) OPERATING ACTIVITIES OF
  CONTINUING OPERATIONS.......     $     1      $ 4,624         $   116        $ 6,741


INVESTING ACTIVITIES
Capital expenditures and
  other additions.............                   (5,122)                        (6,450)
Equity investment
  distributions and sales                         1,151         (19,048)         1,845
Net dispositions
  (acquisitions) of
  businesses, net of cash
  disposed/acquired...........                    4,813                          4,827
Other.........................                    1,807          (5,390)          (257)
NET CASH (USED IN) PROVIDED
  BY INVESTING ACTIVITIES OF
  CONTINUING OPERATIONS.......                    2,649         (24,438)           (35)

FINANCING ACTIVITIES
Proceeds from long-term debt
  issuances...................                      195                            195
Proceeds from debt from AT&T..                                   (2,670)
Retirement of long-term debt..                     (390)                        (1,618)
Retirement of AT&T debt.......                      823          24,765
Issuance of convertible
  preferred securities
  and warrants................                                                   9,811
Repayment of borrowings
  from  AT&T Wireless                                                           (5,803)
(Decrease) increase in
  short-term borrowings, net..                    5,964          (5,375)        (9,580)
Other.........................          (1)     (18,025)          7,441           (437)
NET CASH PROVIDED BY (USED
  IN) FINANCING ACTIVITIES OF
  CONTINUING OPERATIONS.......          (1)     (11,433)         24,161         (7,432)

Net cash provided by (used
  in) discontinued operations.                    4,699             161          4,860
Net (decrease) increase in
  cash and cash equivalents...                      539                          4,134
Cash and cash equivalents at
  beginning of year...........                       64                             64
Cash and cash equivalents at
  end of period...............    $     --     $    603         $    --       $  4,198
</TABLE>
<PAGE>
                                   AT&T CORP.
                    CONSOLIDATING CONDENSED INCOME STATEMENTS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
                              (DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
                                GUARANTOR  GUARANTOR    GUARANTOR     TCI        TCI         TCI     MEDIAONE   MEDIAONE   MEDIAONE
                                   AT&T    SUBSIDIARY  SUBSIDIARY  FINANCING   FINANCING  FINANCING  FINANCING  FINANCING   FINANCE
                                  PARENT       TCI      MEDIAONE       I          II         IV          I         II         II
                                  ------       ---      --------       -          --         --          -         --         --
<S>                             <C>        <C>         <C>         <C>         <C>        <C>        <C>        <C>        <C>
Revenue.......................   $16,836    $     --    $     --    $     --    $    --    $    --    $    --    $    --    $    --

Operating Expenses
Costs of services and
  products....................     2,188
Access and other connection...     5,339
Selling, general and
  administrative..............     1,532          68          25
Depreciation and other
  amortization................     1,335          41           4
Amortization of goodwill,
  franchise costs and other
  purchased intangibles.......        36           4         121
Net restructuring and other
  charges.....................       663          40
Total operating expenses......    11,093         153         150

Operating income (loss).......     5,743        (153)       (150)

Other income (expense)........       752          14          64          32         35         13          1          1         6
Interest expense (benefit) ...     3,406       1,278          90          32         35         13          1          1         6
Income (loss) from continuing
  operations before income
  taxes, minority interest,
  earnings (losses) from
  equity investments..........     3,089      (1,417)       (176)

Provision (benefit) for
  income taxes................     1,129        (531)        (21)

Minority interest income
  (expense)...................      (120)
Equity Earnings from Liberty
  Media Group.................                 2,965
Net income (losses) from
  other equity investments....     4,681        (521)       (135)
Income (loss) from continuing
  operations..................     6,521       1,558        (290)

Income from discontinued
  operations (net of income
  taxes)......................
Net income (loss) ............     6,521       1,558        (290)
</TABLE>


<TABLE>
<CAPTION>
                                  MEDIAONE                  ELIMINATION AND
                                   FINANCE   NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED
                                    III      SUBSIDIARIES     ADJUSTMENTS     AT&T CORP.
                                     ---     ------------     -----------     ----------
<S>                               <C>        <C>            <C>              <C>
Revenue.......................     $    --      $26,209         $(1,422)       $41,623

Operating Expenses
Costs of services and
  products....................                    8,265          (1,204)         9,249
Access and other connection...                    5,026            (185)        10,180
Selling, general and
  administrative..............                    5,749              (8)         7,366
Depreciation and other
  amortization................                    2,824                          4,204
Amortization of goodwill,
  franchise costs and other
  purchased intangibles.......                    1,272                          1,433
Net restructuring and other
  charges.....................                       94                            797
Total operating expenses......                   23,230          (1,397)        33,229

Operating income (loss).......                    2,979             (25)         8,394

Other income (expense)........          13        3,446          (3,019)         1,358
Interest expense (benefit) ...          13          141          (3,016)         2,000
Income (loss) from continuing
  operations before income
  taxes, minority interest,
  earnings (losses) from
  equity investments..........                    6,284             (28)         7,752

Provision (benefit) for
  income taxes................                    1,955                          2,532
Minority interest income
  (expense)...................                      131                             11
Equity Earnings from Liberty
  Media Group.................                                                  2,965
Net income (losses) from
  other equity investments....                     (614)         (4,026)          (615)
Income (loss) from continuing
  operations..................                    3,846          (4,054)         7,581

Income from discontinued
  operations (net of income
  taxes)......................                      180              28           208
Net income (loss) ............                    4,026          (4,026)         7,789
</TABLE>
<PAGE>
                                   AT&T CORP.
                    CONSOLIDATING CONDENSED INCOME STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
                              (DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
                                GUARANTOR  GUARANTOR    GUARANTOR     TCI        TCI         TCI     MEDIAONE   MEDIAONE   MEDIAONE
                                   AT&T    SUBSIDIARY  SUBSIDIARY  FINANCING   FINANCING  FINANCING  FINANCING  FINANCING   FINANCE
                                  PARENT       TCI      MEDIAONE       I          II         IV          I         II         II
                                  ------       ---      --------       -          --         --          -         --         --
<S>                             <C>        <C>         <C>         <C>         <C>        <C>        <C>        <C>        <C>
Revenue.......................   $ 5,314    $           $           $           $          $          $          $          $

Operating Expenses
Costs of services and
  products....................       648
Access and other connection...     1,619
Selling, general and
  administrative..............       451          (5)         22
Depreciation and other
  amortization................       424          10           3
Amortization of goodwill,
  franchise costs and other
  purchased intangibles.......        14           1          99
Net restructuring and other
  charges.....................                    24
Total operating expenses......     3,156          30         124

Operating income (loss).......     2,158         (30)       (124)

Other income (expense)........       149           1          (2)         10         11          4          1          1          5
Interest expense (benefit)....     1,323         493          81          10         11          4          1          1          5
Income (loss) from continuing
  operations before income
  taxes, minority interest
  and earnings (losses) from
  equity investments .........       984        (522)       (207)

Provision (benefit) for
  income taxes................       377        (196)        (40)
Minority interest income
  (expense)...................      (39)           0
Equity Earnings from Liberty
  Media Group.................                 1,756
Net income (losses) from
  other equity investments....     1,511        (182)        (88)
Income (loss) from continuing
  operations..................     2,079       1,248        (255)

(Loss) income from
  discontinued operations
  (net of income taxes).......
Net income (loss) ............     2,079       1,248        (255)
</TABLE>


<TABLE>
<CAPTION>
                                   MEDIAONE                  ELIMINATION AND
                                    FINANCE   NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED
                                     III      SUBSIDIARIES     ADJUSTMENTS     AT&T CORP.
                                      ---     ------------     -----------     ----------
<S>                                <C>        <C>            <C>              <C>
Revenue.......................      $            $ 9,390         $  (528)       $14,176

Operating Expenses
Costs of services and
  products....................                     3,100            (466)         3,282
Access and other connection...                     1,578             (50)         3,147
Selling, general and
  administrative..............                     1,996              (3)         2,461
Depreciation and other
  amortization................                     1,131                          1,568
Amortization of goodwill,
  franchise costs and other
  purchased intangibles.......                       673                            787
Net restructuring and other
  charges.....................                         0                             24
Total operating expenses......                     8,478            (519)        11,269

Operating income (loss).......                       912              (9)         2,907

Other income (expense)........           11        1,333          (1,159)           365
Interest expense (benefit)....           11           97          (1,141)           896
Income (loss) from continuing
  operations before income
  taxes, minority interest
  and earnings (losses) from
  equity investments .........                     2,148             (27)         2,376

Provision (benefit) for
  income taxes................                       798                            939
Minority interest income
  (expense)...................                       142                            103
Equity Earnings from Liberty
  Media Group.................                                                   1,756
Net income (losses) from
  other equity investments....                      (221)         (1,242)          (222)
Income (loss) from continuing
  operations..................                     1,271          (1,269)         3,074

(Loss) income from
  discontinued operations
  (net of income taxes).......                       (29)             27             (2)
Net income (loss) ............                     1,242          (1,242)         3,072
</TABLE>
<PAGE>
                                   AT&T CORP.
                     CONSOLIDATING CONDENSED BALANCE SHEETS
                             AS OF DECEMBER 31, 2000
                              (DOLLARS IN MILLIONS)


<TABLE>
<CAPTION>
                                GUARANTOR  GUARANTOR    GUARANTOR     TCI        TCI         TCI     MEDIAONE   MEDIAONE   MEDIAONE
                                   AT&T    SUBSIDIARY  SUBSIDIARY  FINANCING   FINANCING  FINANCING  FINANCING  FINANCING   FINANCE
                                  PARENT       TCI      MEDIAONE       I          II         IV          I         II         II
                                  ------       ---      --------       -          --         --          -         --         --
<S>                             <C>        <C>         <C>         <C>         <C>        <C>        <C>        <C>        <C>
ASSETS
Cash and cash equivalents.....  $     --    $     --    $     --    $     --    $    --    $    --    $    --    $    --    $    --
Receivables...................    11,424       2,577          78
Investments...................
Deferred income taxes.........       811
Other current assets..........     1,103          11
TOTAL CURRENT ASSETS..........    13,338       2,588          78

Property, plant & equipment,
  net.........................     9,463         102          22
Franchise costs, net..........       838          30
Goodwill, net.................       161                  19,786
Investment in Liberty Media
  Group and related
  receivables, net............                34,290
Other investments and related
  advances....................   164,844      32,650      27,712
Other assets..................     5,500         186                     528        514        204         51         44        230
Net assets of discontinued
  operations
TOTAL ASSETS..................  $194,144    $ 69,846    $ 47,598    $    528    $   514    $   204    $    51    $    44    $   230

LIABILITIES
Debt maturing within one
  year........................   $52,556        $664      $2,337    $           $          $          $          $          $
Liability under put options...
Other current liabilities.....     9,535       1,129          76
TOTAL CURRENT LIABILITIES.....    62,091       1,793       2,413

Long-term debt................    21,333      30,096       1,702         528        514        204         30         28        214
Deferred income taxes.........       569                     230
Other long-term liabilities
  and deferred credits........     7,341         773         129
TOTAL LIABILITIES.............    91,334      32,662       4,474         528        514        204         30         28        214

Minority Interest.............
Company-Obligated Convertible
  Quarterly Income Preferred
  Securities of Subsidiary
  Trust Holding Solely
  Subordinated Debt
  Securities of AT&T..........     4,710

SHAREOWNERS' EQUITY
AT&T Common Stock.............     4,176
AT&T Wireless Group common
  stock.......................       362
Liberty Media Group Class A
  Common Stock................     2,364
Liberty Media Group Class B
  Common Stock................       206
Other shareowners' equity.....    90,992      37,184      43,124                                           21         16         16
TOTAL SHAREOWNERS' EQUITY.....    98,100      37,184      43,124                                           21         16         16
TOTAL LIABILITIES AND
  SHAREOWNERS' EQUITY.........  $194,144    $ 69,846    $ 47,598    $    528    $   514    $   204    $    51    $    44    $   230
</TABLE>


<TABLE>
<CAPTION>
                                  MEDIAONE                  ELIMINATION AND
                                   FINANCE   NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED
                                    III      SUBSIDIARIES     ADJUSTMENTS     AT&T CORP.
                                     ---     ------------     -----------     ----------
<S>                               <C>        <C>            <C>              <C>
ASSETS
Cash and cash equivalents.....     $    --     $     64       $      --       $     64
Receivables...................                   48,896         (51,922)        11,053
Investments...................                    2,102                          2,102
Deferred income taxes.........                     (91)                            720
Other current assets..........                    (328)              (5)           781
TOTAL CURRENT ASSETS..........                   50,643         (51,927)        14,720

Property, plant & equipment,
  net.........................                   31,685              (3)        41,269
Franchise costs, net..........                   47,350                         48,218
Goodwill, net.................                    6,835                         26,782
Investment in Liberty Media
  Group and related
  receivables, net............                                                  34,290
Other investments and related
  advances....................                   19,673        (214,004)        30,875
Other assets..................         516       15,714         (12,505)        10,982
Net assets of discontinued
  operations                                     24,876            2,348        27,224
TOTAL ASSETS..................     $   516     $196,776       $(276,091)      $234,360

LIABILITIES
Debt maturing within one
  year........................     $           $  5,432       $ (29,151)      $ 31,838
Liability under put options...                    2,564                          2,564
Other current liabilities.....                   11,219          (8,386)        13,573
TOTAL CURRENT LIABILITIES.....                   19,215         (37,537)        47,975

Long-term debt................         504        2,558         (24,622)        33,089
Deferred income taxes.........                   31,255                         32,054
Other long-term liabilities
  and deferred credits........                      331             (81)         8,493
TOTAL LIABILITIES.............         504       53,359         (62,240)       121,611

Minority Interest.............                    4,841                          4,841
Company-Obligated Convertible
  Quarterly Income Preferred
  Securities of Subsidiary
  Trust Holding Solely
  Subordinated Debt
  Securities of AT&T..........                                                   4,710

SHAREOWNERS' EQUITY
AT&T Common Stock.............                     (416)                          3,760
AT&T Wireless Group common
  stock.......................                                                     362
Liberty Media Group Class A
  Common Stock................                                                   2,364
Liberty Media Group Class B
  Common Stock................                                                     206
Other shareowners' equity.....          12      138,992        (213,851)        96,506
TOTAL SHAREOWNERS' EQUITY.....          12      138,576        (213,851)       103,198
TOTAL LIABILITIES AND
  SHAREOWNERS' EQUITY.........     $   516     $196,776       $(276,091)      $234,360
</TABLE>
<PAGE>
                                   AT&T CORP.
                CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
                              (DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
                                  GUARANTOR  GUARANTOR    GUARANTOR     TCI        TCI         TCI     MEDIAONE   MEDIAONE
                                     AT&T    SUBSIDIARY  SUBSIDIARY  FINANCING   FINANCING  FINANCING  FINANCING  FINANCING
                                    PARENT       TCI      MEDIAONE       I          II         IV          I         II
                                    ------       ---      --------       -          --         --          -         --
<S>                               <C>        <C>         <C>         <C>         <C>        <C>        <C>        <C>
NET CASH PROVIDED BY (USED IN)
  OPERATING ACTIVITIES OF
  CONTINUING OPERATIONS..........  $   334    $ (3,634)   $    130    $     --    $    --    $    --    $    --    $    --

INVESTING ACTIVITIES
Capital expenditures and other
  additions......................     (762)        (53)
Equity investment contributions
  and purchases..................   (1,783)     (6,583)
Net dispositions (acquisitions)
  of businesses net of cash
  disposed/acquired.............   (23,839)
Other............................      956          (9)        839
NET CASH (USED IN) PROVIDED BY
  INVESTING ACTIVITIES OF
  CONTINUING OPERATIONS..........  (25,428)     (6,645)        839

FINANCING ACTIVITIES
Proceeds from long-term debt
  issuances......................      739
Proceeds from debt from AT&T.....    5,738      12,816         725
Retirement of long-term debt.....     (494)        (77)
Retirement of AT&T debt..........               (1,724)     (1,694)
Issuance of AT&T Wireless Group
  common shares                     10,291
Dividends paid on common stock...   (2,221)
(Decrease) increase in
  short-term borrowings, net....    16,248        (902)
Other............................   (5,207)        166
NET CASH PROVIDED BY (USED IN)
  FINANCING ACTIVITIES OF
  CONTINUING OPERATIONS..........   25,094      10,279        (969)

Net cash (used in) provided by
  discontinued operations
Net (decrease) in cash and
  cash equivalents...............
Cash and cash equivalents at
  beginning of year..............
Cash and cash equivalents at
  end of period.................   $    --    $     --    $     --    $     --    $    --    $    --    $    --    $    --
</TABLE>


<TABLE>
<CAPTION>
                                     MEDIAONE   MEDIAONE                  ELIMINATION AND
                                      FINANCE    FINANCE   NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED
                                        II        III      SUBSIDIARIES     ADJUSTMENTS     AT&T CORP.
                                        --         ---     ------------     -----------     ----------
<S>                                  <C>        <C>        <C>            <C>              <C>
NET CASH PROVIDED BY (USED IN)
  OPERATING ACTIVITIES OF
  CONTINUING OPERATIONS..........     $    --    $    --     $ 11,242        $     42        $ 8,114

INVESTING ACTIVITIES
Capital expenditures and other
  additions......................                              (6,938)                        (7,753)
Equity investment contributions
  and purchases..................                                (581)          6,583         (2,364)
Net dispositions (acquisitions)
  of businesses net of cash
  disposed/acquired..............                               7,225                        (16,614)
Other............................                              (9,414)          7,923            295
NET CASH (USED IN) PROVIDED BY
  INVESTING ACTIVITIES OF
  CONTINUING OPERATIONS..........                              (9,708)         14,506        (26,436)

FINANCING ACTIVITIES
Proceeds from long-term debt
  issuances......................                                                                739
Proceeds from debt from AT&T.....                                             (19,279)
Retirement of long-term debt.....                              (1,383)                        (1,954)
Retirement of AT&T debt..........                                               3,418
Issuance of AT&T Wireless Group
  common shares..................                                                             10,291
Dividends paid on common stock...                                                             (2,221)
(Decrease) increase in
  short-term borrowings, net....                                  662           1,355         17,363
Other............................                               4,194             (70)          (917)
NET CASH PROVIDED BY (USED IN)
  FINANCING ACTIVITIES OF
  CONTINUING OPERATIONS..........                               3,473         (14,576)        23,301

Net cash (used in) provided by
  discontinued operations                                      (5,714)             28         (5,686)
Net (decrease) in cash and
  cash equivalents...............                                (707)                          (707)
Cash and cash equivalents at
  beginning of year..............                               1,018                          1,018
Cash and cash equivalents at
  end of period.................      $    --    $    --      $   311        $     --        $   311
</TABLE>
<PAGE>
(q)      NEW ACCOUNTING PRONOUNCEMENTS

         In July 2001, the Financial Accounting Standards Board (FASB) issued
         SFAS No. 141, "Business Combinations," which supercedes Accounting
         Principles Board (APB) Opinion No. 16. SFAS No. 141 requires all
         business combinations initiated after June 30, 2001 be accounted for
         under the purchase method. In addition, SFAS No. 141 establishes
         criteria for the recognition of intangible assets separately from
         goodwill. These requirements are effective for fiscal years beginning
         after December 15, 2001, which for AT&T means January 1, 2002. AT&T
         does not expect that the adoption of SFAS No. 141 will have a material
         effect on AT&T's results of operations, financial position or cash
         flows.

         Also in July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
         Intangible Assets," which supercedes APB Opinion No. 17. Under SFAS No.
         142, goodwill and indefinite lived intangible assets will no longer be
         amortized, but rather will be tested for impairment upon adoption and
         at least annually thereafter. In addition, the amortization period of
         intangible assets with finite lives will no longer be limited to 40
         years. SFAS No. 142 is effective for fiscal years beginning after
         December 15, 2001, which for AT&T means the standard will be adopted
         on January 1, 2002. In connection with the adoption of this standard,
         AT&T's unamortized goodwill balance will no longer be amortized, but
         will continue to be tested for impairment. Therefore, we expect that
         this standard will have a significant impact on our future operating
         results. We are assessing the impact of the standard on other
         indefinite lived assets and the total impact, including adoption
         impairment impacts, if any, of such standard on our results of
         operations.

         In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
         Retirement Obligations." This standard requires that obligations
         associated with the retirement of tangible long-lived assets be
         recorded as liabilities when those obligations are incurred, with the
         amount of the liability initially measured at fair value. Upon
         initially recognizing a liability for an asset retirement obligation,
         an entity must capitalize the cost by recognizing an increase in the
         carrying amount of the related long-lived asset. Over time,this
         liability is accreted to its present value, and the capitalized cost is
         depreciated over the useful life of the related asset. Upon settlement
         of the liability, an entity either settles the obligation for its
         recorded amount or incurs a gain or loss upon settlement. SFAS No. 143
         is effective for financial statements issued for fiscal years
         beginning after June 15, 2002, which for AT&T means the standard will
         be adopted on January 1, 2003. AT&T does not expect that the adoption
         of this statement will have a material impact on AT&T's results of
         operations, financial position or cash flows.

         In October 2001, the FASB issued SFAS No. 144, "Accounting for the
         Impairment or Disposal of Long-Lived Assets," which supercedes SFAS No.
         121, "Accounting for the Impairment of Long-Lived Assets and for
         Long-Lived Assets to Be Disposed Of." SFAS No. 144 applies to all
         long-lived assets, including discontinued operations, and consequently
         amends APB 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." Based on SFAS No. 121, SFAS No. 144 develops one
         accounting model for long-lived assets that are to be disposed of by
         sale, as well as addresses the principal implementation issues. SFAS
         No. 144 requires that long-lived assets that are to be disposed of by
         sale be measured at the lower of book value or fair value less cost to
         sell. Additionally, SFAS No. 144 expands the scope of discontinued
         operations to include all
<PAGE>
         components of an entity with operations that (1) can be distinguished
         from the rest of the entity and (2) will be eliminated from the ongoing
         operations of the entity in a disposal transaction. SFAS No. 144 is
         effective for financial statements issued for fiscal years beginning
         after December 15, 2001, which for AT&T means the standard will be
         adopted on January 1, 2002. AT&T does not expect that the adoption of
         SFAS No. 144 will have a material impact on AT&T's results of
         operations, financial position or cash flows.


(r)      SUBSEQUENT EVENT

         On October 23, 2001, AT&T sold approximately 19.2 million shares of
         Cablevision NY Group Class A common stock and, through a trust, 23.4
         million shares of a mandatorily exchangeable trust security that will
         be exchangeable into up to 23.4 million shares of Cablevision NY Group
         Class A common stock at maturity in three years. The offering price was
         $36.05 per share for both the common shares and the exchangeable
         securities. The offerings generated approximately $1.3 billion of
         pretax proceeds, net of underwriting fees. The sale resulted in a
         pretax loss of approximately $0.2 billion. In addition, the
         underwriters' have exercised a portion of their over-allotment options,
         which resulted in the sale of an additional 3.5 million shares of the
         exchangeable securities through the trust. AT&T received additional
         proceeds of approximately $0.1 billion from this transaction.
<PAGE>
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

OVERVIEW

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

TRACKING STOCKS

A tracking stock is designed to provide financial returns to its holders based
on the financial performance and economic value of the assets it tracks.
Ownership of shares of AT&T common stock, AT&T Wireless Group tracking stock or
Liberty Media Class A or B tracking stock did not represent a direct legal
interest in the assets and liabilities of any of the groups, but an ownership of
AT&T in total. The specific shares represented an interest in the economic
performance of the net assets of each of the groups. AT&T Wireless and Liberty
Media Group were split off on July 9, 2001 and August 10, 2001, respectively.

AT&T Wireless Group was an integrated business of AT&T and Liberty Media Group
was a combination of certain assets and businesses of AT&T, neither of which was
a stand-alone entity prior to their split-off from AT&T.

RESTRUCTURING OF AT&T

On October 25, 2000, AT&T announced a restructuring plan designed to fully
separate or issue separately tracked stocks intended to reflect the financial
performance and economic value of each of AT&T's four major operating units. If
the plan is completed as announced, AT&T Wireless, AT&T Broadband, AT&T Business
and AT&T Consumer would all be represented by asset-based or tracking stocks.

On July 8, 2001, Comcast Corp. (Comcast) made an unsolicited offer to acquire
AT&T Broadband. On July 18, AT&T's Board of Directors unanimously voted to
reject Comcast's proposal to acquire AT&T Broadband. The Board has directed
management to explore financial and strategic alternatives relating to AT&T
Broadband, including the previously announced restructuring plans, with the goal
to provide the greatest long-term value to shareowners. The Board also decided
to delay finalizing and mailing to shareowners the proxy materials, filed
preliminary with the SEC on July 3, 2001, for its current restructuring plans.
However, AT&T remains committed to separate AT&T Consumer and AT&T Business from
AT&T Broadband.

Nevertheless, AT&T's restructuring plan is complicated and involves a
substantial number of steps and transactions, including obtaining various
conditions, such as Internal Revenue Service rulings. AT&T expects that the
transactions associated with AT&T's restructuring plan will be tax-free to U.S.
shareowners. Future financial conditions, superior alternatives or other factors
may arise or occur that make it inadvisable to proceed with part or all of
AT&T's restructuring plans. Any or all of the elements of AT&T's restructuring
plan may not occur as we currently expect or in the time frames that we
currently contemplate, or at all. Alternative forms of restructuring, including
sales of interests in these businesses, would reduce what is available for
distribution to shareowners in the restructuring.

On May 25, 2001, AT&T completed an exchange offer of AT&T common stock for AT&T
Wireless stock. Under the terms of the exchange offer, AT&T issued 1.176 shares
of AT&T Wireless Group tracking stock in exchange for each share
<PAGE>
of AT&T common stock validly tendered. A total of 372.2 million shares of AT&T
common stock were tendered in exchange for 437.7 million shares of AT&T Wireless
Group tracking stock.

On July 9, 2001, AT&T completed the split-off of AT&T Wireless as a separate,
independently-traded company. All AT&T Wireless tracking stock was converted
into AT&T Wireless common stock on a one-for-one basis and 1,136 million shares
of AT&T Wireless common stock, held by AT&T, were distributed to AT&T common
shareowners on a basis of 0.3218 of a share of AT&T Wireless for each AT&T share
outstanding. AT&T common shareowners received whole shares of AT&T Wireless and
cash payments for fractional shares. The Internal Revenue Service (IRS) ruled
that the transaction qualified as tax-free for AT&T and its shareowners for U.S.
federal income tax purposes, with the exception of cash received for fractional
shares. For accounting purposes, the deemed effective split-off date is June 30,
2001. AT&T retained approximately $3 billion, or 7.3%, of AT&T Wireless common
stock, about half of which was used in a debt-for-equity exchange in July and
approximately $0.6 billion was monetized in October. We expect to either sell,
exchange or monetize the remaining portion of these holdings by the end of 2001.
The split-off of AT&T Wireless resulted in a noncash tax-free gain of $13,503
million, which represents the difference between the fair value of the Wireless
tracking stock at the date of the split-off and AT&T's book value in AT&T
Wireless Services. This gain was recorded in the third quarter of 2001 as a
"Gain on disposition of discontinued operations."


On August 10, 2001, AT&T completed the split-off of Liberty Media Corporation as
an independent, publicly-traded company. AT&T redeemed each outstanding share of
Class A and Class B Liberty Media Group (LMG) tracking stock for one share of
Liberty Media Corporation's Series A and Series B common stock, respectively. In
the redemption, shares of Liberty Media Corporation were issued to former
holders of Liberty Media Group tracking stock in exchange for their shares of
Liberty Media Group tracking stock. The IRS ruled that the split-off of Liberty
Media Corporation qualified as a tax-free transaction for AT&T, Liberty Media
and their shareowners. For accounting purposes, the deemed effective split-off
date is July 31, 2001.
<PAGE>
FORWARD-LOOKING STATEMENTS

This document may contain forward-looking statements with respect to AT&T's
restructuring plan, financial condition, results of operations, cash flows,
dividends, financing plans, business strategies, operating efficiencies or
synergies, budgets, capital and other expenditures, network build out and
upgrade, competitive positions, availability of capital, growth opportunities
for existing products, benefits from new technologies, availability and
deployment of new technologies, plans and objectives of management, and other
matters.

These forward-looking statements, including, without limitation, those relating
to the future business prospects, revenue, working capital, liquidity, capital
needs, network build out, interest costs and income, are necessarily estimates
reflecting the best judgment of senior management 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 that could cause actual results to differ materially from estimates or
projections contained in the forward-looking statements including, without
limitation:

-  the risks associated with the implementation of AT&T's restructuring plan,
   which is complicated and involves a substantial number of different
   transactions each with separate conditions, any or all of which may not occur
   as we currently intend, or which may not occur in the timeframe we currently
   expect,

-  the risks associated with each of AT&T's main business units, operating as
   independent entities as opposed to as part of an integrated
   telecommunications provider following completion of AT&T's restructuring
   plan, including the inability of these groups to rely on the financial and
   operational resources of the combined company and these groups having to
   provide services that were previously provided by a different part of the
   combined company,

-  the impact of existing and new competitors in the markets in which these
   groups compete, including competitors that may offer less expensive products
   and services, desirable or innovative products, technological substitutes, or
   have extensive resources or better financing,

-  the impact of oversupply of capacity resulting from excessive deployment of
   network capacity,

-  the ongoing global and domestic trend towards consolidation in the
   telecommunications industry, which may have the effect of making the
   competitors of these entities larger and better financed and afford these
   competitors with extensive resources and greater geographic reach, allowing
   them to compete more effectively,

-  the effects of vigorous competition in the markets in which the company
   operates, which may decrease prices charged, increase churn and change
   customer mix, profitability and average revenue per user,

-  the ability to enter into agreements to provide, and the cost of entering new
   markets necessary to provide services,

-  the ability to establish a significant market presence in new geographic and
   service markets,

-  the availability and cost of capital and the consequences of increased
   leverage,
<PAGE>
-  the successful execution of plans to dispose of non-strategic assets as part
   of an overall corporate deleveraging plan,

-  the impact of any unusual items resulting from ongoing evaluations of the
   business strategies of the company,

-  the requirements imposed on the company or latitude allowed to competitors by
   the Federal Communications Commission (FCC) or state regulatory commissions
   under the Telecommunications Act of 1996 or other applicable laws and
   regulations,

-  the risks associated with technological requirements, technology substitution
   and changes and other technological developments,

-  the results of litigation filed or to be filed against the company,

-  the possibility of one or more of the markets in which the company competes
   being impacted by changes in political, economic or other factors, such as
   monetary policy, legal and regulatory changes or other external factors over
   which these groups have no control, and

-  the risks related to AT&T's joint ventures.

The words "estimate," "project," "intend," "expect," "believe," "plan" and
similar expressions are intended to identify forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date of this document. Moreover, in the future, AT&T,
through its senior management, may make forward-looking statements about the
matters described in this document or other matters concerning 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 three and nine months ended September 30, 2001 and
2000, and financial condition as of September 30, 2001 and December 31, 2000.
<PAGE>
CONSOLIDATED RESULTS OF OPERATIONS

The comparison of third quarter and year-to-date 2001 results with the
corresponding periods in 2000 was impacted by events, such as acquisitions and
dispositions, that occurred during these two years. For example, on June 15,
2000, we acquired MediaOne, which was included in our year-to-date 2001 results,
but was only included in our prior year results since the date of acquisition.

Year-over-year comparison was also impacted by the consolidation of At Home
Corporation (Excite@Home) beginning September 1, 2000, due to
corporate-governance changes, which gave AT&T a controlling interest. On
September 30, 2001, we had an approximate 23% economic interest and 74% voting
interest in Excite@Home. The consolidation of Excite@Home resulted in the
inclusion of 100% of its results in each line item of AT&T's Consolidated
Statement of Operations for the three and nine months ended September 30, 2001
and for the one month ended September 30, 2000. Losses attributable to the other
shareholders of Excite@Home were reflected within "Minority Interest Income
(Expense)" in the Consolidated Statement of Operations and "Minority Interest"
in the Consolidated Balance Sheet. As a result of the significant losses
incurred by Excite@Home, the minority interest balance was fully utilized,
therefore, in the third quarter of 2001 AT&T recognized more than its 23% of the
losses of Excite@Home. On September 28, 2001, Excite@Home filed for Chapter 11
bankruptcy protection. As a result, we no longer consolidated Excite@Home's
results in AT&T's Consolidated Balance Sheet as of September 30, 2001.

Effective July 1, 2000, the Federal Communication Commission (FCC) eliminated
Primary Interexchange Carrier Charges (PICC or per-line charges) that AT&T pays
for residential and single-line businesses. The elimination of these per-line
charges resulted in lower access expense as well as lower revenue, since AT&T
has historically billed its customers for these charges.

REVENUE

<TABLE>
<CAPTION>
                          For the Three Months Ended            For the Nine Months
                                  September 30,                 Ended September 30,
Dollars in Millions           2001             2000            2001             2000
<S>                        <C>              <C>              <C>              <C>
AT&T Business              $  6,885         $  7,222         $ 21,147         $ 21,701
AT&T Consumer                 3,822            4,651           11,614           14,651
AT&T Broadband                2,393            2,420            7,423            5,693
Corporate and Other             (13)            (117)            (220)            (422)
Total revenue              $ 13,087         $ 14,176         $ 39,964         $ 41,623
</TABLE>

Total revenue for the three months ended September 30, 2001 decreased 7.7%, or
$1.1 billion, compared with the corresponding prior year period. The decline was
primarily driven by lower revenue resulting from accelerating declines in long
distance voice revenue of approximately $1.5 billion and decreased revenue of
approximately $0.3 billion primarily due to the impact of net dispositions and
the consolidation of Excite@Home. Partially offsetting the decrease was
increased revenue primarily from telephony and high speed data at AT&T Broadband
and increased revenue primarily from data and Internet protocol (IP) services
within AT&T Business.

Total revenue for the nine months ended September 30, 2001 decreased 4.0%, or
$1.7 billion, compared with the corresponding prior year period. The decline was
largely driven by accelerating declines in long distance voice revenue of
approximately $4.4 billion. Partially offsetting the decline was growth
primarily from data and Internet protocol (IP) within AT&T Business and
increased revenue primarily from telephony and high speed data at AT&T
Broadband. Also offsetting the decline was revenue of approximately $0.9 billion
largely due to net acquisitions, primarily MediaOne, the consolidation of
Excite@Home and the elimination of PICC.
<PAGE>
We expect long distance revenue to continue to be negatively impacted by ongoing
competition and product substitution.

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

OPERATING EXPENSES

<TABLE>
<CAPTION>
                                            For the Three             For the Nine
                                            Months Ended              Months Ended
                                            September 30,             September 30,
Dollars in Millions                      2001          2000        2001           2000
<S>                                   <C>           <C>           <C>            <C>
Costs of services and products        $ 3,476       $ 3,282       $10,458        $ 9,249
</TABLE>

Costs of services and products increased $0.2 billion, or 5.9%, in the third
quarter of 2001 compared with the third quarter of 2000. Approximately $0.4
billion of the increase was due to higher costs associated with our growth
businesses, primarily data/IP, local voice services and broadband services, and
a higher pension credit in 2000, primarily driven by a higher pension trust
asset base resulting from increased investment returns. Partially offsetting the
increase was $0.2 billion of lower costs associated with lower revenue,
primarily long distance voice and $0.1 billion due to the net impact of net
dispositions and the consolidation of Excite@Home.

Costs of services and products increased $1.2 billion, or 13.1%, for the nine
months ended September 30, 2001 compared with the same period in 2000.
Approximately $0.9 billion of the increase was driven by the net acquisitions,
primarily MediaOne and the consolidation of Excite@Home. Also contributing to
the increase was approximately $0.8 billion of higher costs associated with our
growth businesses, primarily at AT&T Broadband and our outsourcing business, as
well as a higher pension credit in 2000. Partially offsetting these increases
were $0.3 billion of lower costs associated with lower volumes, primarily from
our international ventures, AT&T Consumer long distance and lower payphone
compensation costs, $0.1 billion of lower costs associated with lower long
distance revenue from AT&T Business and $0.1 billion of our cost reduction
efforts.

<TABLE>
<CAPTION>
                                       For the Three                For the Nine
                                        Months Ended                Months Ended
                                        September 30,              September 30,
Dollars in Millions                  2001          2000          2001          2000
<S>                                <C>           <C>           <C>           <C>
Access and other connection        $ 3,033       $ 3,147       $ 9,289       $10,180
</TABLE>

Access and other connection expenses decreased 3.6% in the third quarter of 2001
compared with the third quarter of 2000. Approximately $0.2 billion of this
reduction was due to lower international connection rates, per-line charges for
multi-line business customers and per minute access rates. These reductions were
partially offset by a $0.1 billion increase due to overall volume growth
primarily related to local service.

Access and other connection expenses decreased 8.8% for the nine months ended
September 30, 2001, compared with the same period in 2000. Approximately $1.3
billion of the decrease was due to lower per-line charges and mandated
reductions in per minute access rates. In July 2000 per line charges that AT&T
paid for residential and single-line business customers were eliminated by the
FCC. These reductions were offset by a $0.4 billion increase due to overall
volume growth primarily related to local service and higher universal service
fund contributions.
<PAGE>
<TABLE>
<CAPTION>
                                                 For the Three     For the Nine
                                                 Months Ended      Months Ended
                                                 September 30,     September 30,
Dollars in Millions                              2001     2000     2001     2000
<S>                                            <C>       <C>     <C>       <C>
Selling, general and administrative            $2,540    $2,461  $8,144    $7,366
</TABLE>

Selling, general and administrative (SG&A) expenses increased $0.1 billion, or
3.2%, in the third quarter of 2001, compared with the third quarter of 2000.
Increased customer care, advertising, sales and other general and administrative
expenses in support of growth businesses, primarily data/IP, local voice and
broadband services drove approximately $0.2 billion of the increase. Lower
pension credit resulting from decreased return on plan assets accounted for
approximately $0.1 billion of the increase. Partially offsetting these increases
were lower costs associated with the impact of decreased long distance voice
volume and cost control efforts of approximately $0.3 billion primarily from
AT&T Consumer and AT&T Broadband.

Selling, general and administrative (SG&A) expenses increased $0.8 billion, or
10.5%, for the nine months ended September 30, 2001 as compared with the
corresponding prior year period. Approximately $0.3 billion of the increase was
due to net acquisitions, primarily MediaOne and the consolidation of
Excite@Home. Increased customer care, sales, advertising and other general and
administrative expenses in support of growth businesses, primarily data/IP,
local voice and broadband services drove approximately $0.5 billion of the
increase. In addition, costs associated with the exchange offer of AT&T common
stock for AT&T Wireless stock, combined with a lower pension credit resulting
from decreased return on plan assets accounted for approximately $0.3 billion of
the increase. Partially offsetting these increases were lower costs associated
with the impact of decreased long distance voice volume and cost control efforts
of approximately $0.5 billion primarily from AT&T Consumer and AT&T Broadband.

<TABLE>
<CAPTION>
                                                 For the Three     For the Nine
                                                 Months Ended      Months Ended
                                                 September 30,     September 30,
Dollars in Millions                              2001     2000     2001     2000
<S>                                            <C>       <C>     <C>       <C>
Depreciation and other amortization            $1,682    $1,568  $5,116    $4,204
</TABLE>

Depreciation and other amortization expenses increased $0.1 billion, or 7.3%, in
the third quarter of 2001 compared with the corresponding prior year period. The
increase was largely due to a higher asset base primarily resulting from
infrastructure investment in 2000 and 2001, as well as the consolidation of
Excite@Home, partially offset by cable system dispositions. Capital expenditures
were $1.7 billion and $2.7 billion for the third quarter of 2001 and 2000,
respectively. The primary focus of capital spending continues to be on the
growth areas of broadband, data and IP, and local.

Depreciation and other amortization expenses increased $0.9 billion, or 21.7%,
for the nine months ended September 30, 2001 compared with the corresponding
prior year period. Approximately one-half of the increase was due to the
acquisition of MediaOne. The remaining increase was largely due to a higher
asset base primarily resulting from infrastructure investment in 2000 and 2001,
as well as the consolidation of Excite@Home. Capital expenditures were $6.0
billion and $7.0 billion for the nine months ended September 30, 2001 and 2000,
respectively. The primary focus for capital expenditures continues to be on the
growth areas of broadband, data and IP, and local.
<PAGE>
<TABLE>
<CAPTION>
                                                 For the Three     For the Nine
                                                 Months Ended      Months Ended
                                                 September 30,     September 30,
Dollars in Millions                              2001     2000     2001     2000
<S>                                              <C>      <C>    <C>       <C>
Amortization of goodwill, franchise costs and
   other purchased intangibles                   $592     $787   $1,920    $1,433
</TABLE>

Amortization of goodwill, franchise costs and other purchased intangibles
decreased $0.2 billion, or 24.7%, in the third quarter of 2001 compared with the
corresponding prior year period. This decrease was primarily due to lower
goodwill associated with Excite@Home resulting from an impairment of goodwill
recorded subsequent to September 30, 2000.

Amortization of goodwill, franchise costs and other purchased intangibles
increased $0.5 billion, or 34.0%, for the nine months ended September 30, 2001
compared with the nine months ended September 30, 2000. This increase was
primarily due to the acquisition of MediaOne.

<TABLE>
<CAPTION>
                                                 For the Three     For the Nine
                                                 Months Ended      Months Ended
                                                 September 30,     September 30,
Dollars in Millions                              2001     2000     2001     2000
<S>                                             <C>       <C>     <C>       <C>
Net restructuring and other charges             $399      $24     $1,494    $797
</TABLE>

During the third quarter of 2001, $399 of net restructuring and other charges
were recorded by Excite@Home. Included in these charges were $376 of asset
impairment charges and $23 million of restructuring and exit costs, primarily
due to continued weakness in the on-line media market and the recent bankruptcy
filing. These charges included the write-off of goodwill and other intangible
assets, warrants granted in connection with distributing the @Home service and
fixed assets. The restructuring and exits costs, consisted of $4 for severance
costs, $14 related to facility closings and $5 primarily related to termination
of contractual obligations. The severance costs, for approximately 860
employees, primarily resulted from continued cost reduction efforts by
Excite@Home. Since we consolidate, but only own approximately 23% of
Excite@Home, a portion of the charges recorded by Excite@Home was not included
as a reduction to AT&T's net income, but rather eliminated in our September 30,
2001 Consolidated Statement of Operations as a component of "Minority interest
income (expense)."


Net restructuring and other charges for the nine months ended September 30,
2001, totaled $1,494 million. The charge includes $1,171 million of asset
impairment charges related to Excite@Home, $323 million for restructuring and
exit costs which consisted of $151 million for severance costs, $156 million for
facility closings and $16 million primarily related to termination of
contractual obligations.

The asset impairment charges recorded during the nine months ended September 30,
2001 included $1,032 recorded by Excite@Home primarily due to continued weakness
in the on-line media market and the recent bankruptcy filing. These charges
included the write-down of goodwill and other intangible assets related to
various acquisitions, primarily Excite, warrants granted in connection with
distributing the @Home service, and fixed assets. In addition, AT&T recorded a
related goodwill impairment charge of $139 associated with its acquisition
goodwill of Excite@Home. Since we consolidate, but only own approximately 23% of
Excite@Home, a portion of the charges recorded by Excite@Home was not included
as a reduction to AT&T's net income, but rather eliminated in our September 30,
2001 Consolidated Statement of Operations as a component of "Minority interest
income (expense)."
<PAGE>
The severance costs, for approximately 7,700 employees, primarily resulted from
synergies created by the MediaOne merger as well as continued cost reduction
efforts by Excite@Home. Approximately 36% of the affected employees are
management employees and 64% are non-management employees.

This restructuring initiative is projected to yield cash savings of
approximately $1 million in 2001 (net of severance benefit pay-outs of
approximately $151 million) and approximately $260 million per year thereafter.
The initiative will yield no EBIT savings, net of restructuring charges in 2001,
and is projected to yield approximately $260 million per year thereafter. The
cost savings, primarily attributable to reduced personnel-related expenses, will
be realized in costs of services and products and SG&A expenses.

During the third quarter of 2000, AT&T recorded $24 million of net restructuring
and other charges. The charge resulted from synergies associated with the
MediaOne merger and related to cash termination benefits associated with the
involuntary separation of approximately 490 employees. Approximately one-half of
the individuals were management employees and one-half were nonmanagement
employees.

During the nine months ended September 30, 2000, AT&T recorded $797 million of
net restructuring and other charges, which included $706 million of
restructuring and exit costs primarily associated with AT&T's initiative to
reduce costs by the end of 2000, and $91 million related to the
government-mandated disposition of AT&T Communications (U.K.) Ltd., which would
have competed directly with Concert.

The charge for the nine months ended September 30, 2000 included cash
termination benefits of $482 million associated with the involuntary separation
of approximately 6,700 employees. Approximately one-half of the individuals were
management employees and one-half were non-management employees.

The charge also included $62 million of network lease and other contract
termination costs associated with penalties incurred as part of notifying
vendors of the termination of these contracts during the first quarter 2000 and
$144 million of benefit curtailment costs associated with employee separations
as part of these exit plans.

During the nine months ended September 30, 2000, AT&T also recorded an asset
impairment charge of $18 million related to the write-down of unrecoverable
assets in certain businesses in which the carrying value was no longer
supported by estimated future cash flows.

As a result of AT&T's commitment to managing and reducing costs across all areas
of the business to remain cost competitive, we expect to record a restructuring
charge in the fourth quarter of 2001. This restructuring charge is primarily
associated with a series of cost-control initiatives being undertaken largely in
AT&T Business.

<TABLE>
<CAPTION>
                                           For the Three       For the Nine
                                            Months Ended       Months Ended
                                           September 30,       September 30,
Dollars in Millions                       2001       2000       2001      2000
<S>                                      <C>        <C>        <C>       <C>
Operating income                         $1,365     $2,907     $3,543    $8,394
</TABLE>

Operating income decreased $1.5 billion, or 53.0%, in the third quarter of 2001
compared with the third quarter of 2000. Approximately $0.2 billion of the third
quarter decrease was due to the consolidation of Excite@Home and the impact of
net dispositions. The remaining decrease largely reflects declines in long
distance voice revenue and spending in growth areas as well as higher
restructuring and other charges recorded by Excite@Home. The decrease was
partially offset by lower amortization of goodwill and lower
<PAGE>
access and connection rates we paid to connect domestic calls on the facilities
of other service providers. A portion of the impact of the operating loss
generated by Excite@Home was offset in minority interest income (expense),
reflecting the interest of Excite@Home we do not own.

Operating income decreased $4.9 billion, or 57.8%, for the nine months ended
September 30, 2001, compared with the same period in 2000. Approximately $2.0
billion of the decrease was due to the consolidation of Excite@Home, the net
acquisitions, primarily MediaOne. The remaining decrease reflects declines in
long distance voice business and spending in growth areas. The decrease was
partially offset by the impact of lower access and connection rates, lower
restructuring and other charges and lower amortization of goodwill. A majority
of the impact of the operating loss generated by Excite@Home was offset in
minority interest income (expense), reflecting the portion of Excite@Home we do
not own.

<TABLE>
<CAPTION>
                                       For the Three Months   For the Nine Months
                                       Ended September 30,    Ended September 30,
Dollars in Millions                      2001        2000       2001       2000
<S>                                    <C>           <C>      <C>         <C>
Other (expense) income                 $(4,966)      $365     $(7,195)    $1,358
</TABLE>

Other (expense) income for the third quarter of 2001 was an expense of $5.0
billion, an increase in expense of $5.3 billion from the third quarter of 2000.
The increase in expense was primarily driven by a charge of $3.5 billion related
to the discontinuation of Concert, our global joint venture with BT, including
approximately $0.6 billion associated with an agreement with BT in which AT&T
will assume BT's ownership in AT&T Canada and certain other obligations. In
addition, we recorded a $1.8 billion charge related to the estimated loss on
AT&T's commitment to purchase the remaining public shares of AT&T Canada. Also
contributing to the higher expense was a $0.4 billion mark-to-market loss on
Vodaphone ADRs, which were used to settle exchangeable notes that matured during
the third quarter of 2001. These expenses were partially offset by a $0.5
billion tax-free gain associated with the disposal of a portion of AT&T's
retained interest in AT&T Wireless in a debt-for-equity exchange.

Other (expense) income for the nine months ended September 30, 2001 was an
expense of $7.2 billion, an increase in expense of $8.6 billion compared with
the same period in 2000. The higher expense was in part driven by $5.3 billion
of charges associated with the discontinuation of Concert and our obligation to
purchase the public shares of AT&T Canada and impairment charges of
approximately $1.3 billion primarily relating to our investment in Net2Phone. In
addition, effective January 1, 2001, in conjunction with the adoption of SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities", we
reclassified certain investment securities, which support debt that is indexed
to those securities, from "available-for-sale" to "trading." As a result, we
recorded a charge of $0.8 billion reflecting the initial reclassification impact
of the adoption of SFAS No. 133 as well as the ongoing investment and derivative
revaluation. Also contributing to the higher expense was a $0.8 billion loss on
the Excite@Home put obligation settlement with Cox and Comcast and $0.2 billion
of lower net gains on the sales and dispositions of businesses and investments.

<TABLE>
<CAPTION>
                                       For the Three Months   For the Nine Months
                                       Ended September 30,    Ended September 30,
Dollars in Millions                      2001        2000       2001       2000
<S>                                    <C>         <C>       <C>       <C>
Interest expense                         $786        $896      $2,426    $2,000
</TABLE>

Interest expense decreased 12.2%, or $0.1 billion, in the third quarter of 2001
compared with the same period in 2000. The decrease was primarily due to the
lower average debt balance reflecting the Company's debt reduction efforts in
2001.
<PAGE>
Interest expense increased 21.3%, or $0.4 billion, for the nine months ended
September 30, 2001, compared with the same period in 2000. The increase was
largely due to the higher average debt balance primarily as a result of our June
2000 acquisition of MediaOne, including outstanding debt of MediaOne and debt
issued to fund the MediaOne acquisition. The impact of MediaOne was partially
offset by the Company's debt reduction efforts in 2001. Also contributing to the
increase was the higher average interest rate for the nine months ended
September 30, 2001 versus the same period in 2000.


<TABLE>
<CAPTION>
                                       For the Three Months   For the Nine Months
                                       Ended September 30,    Ended September 30,
Dollars in Millions                      2001        2000       2001       2000
<S>                                   <C>            <C>      <C>        <C>
(Benefit) provision for income
taxes                                 $(2,092)       $939     $(2,746)   $2,532
</TABLE>

The provision for income taxes decreased $3.0 billion to a benefit of $2.1
billion in the third quarter of 2001 compared with a provision of $0.9 billion
in the third quarter of 2000. The decrease was primarily due to a loss before
income taxes in the third quarter of 2001, compared with earnings before income
taxes in the third quarter of 2000. The effective tax rate for the third quarter
of 2001 was 47.7%, compared with 39.5% for the prior year third quarter. The
third quarter effective tax benefit rate was favorably impacted by a significant
net tax benefit related to Excite@Home, including a benefit from the
deconsolidation, partially offset by the prior consolidation of its operating
losses, for which the company was unable to record tax benefits. Also favorably
impacting the effective tax benefit rate was the tax-free gain associated with
the disposal of a portion of AT&T's retained interest in AT&T Wireless in a
debt-for-equity exchange.

The provision for income taxes decreased $5.3 billion, or 208.5%, to a benefit
of $2.7 billion for the nine months ended September 30, 2001 compared with a
provision of $2.5 billion for the same period in 2000. The decrease was
primarily due to a loss before income taxes for the nine months ended September
30, 2001, compared with earnings before income taxes for the same prior year
period. The effective tax rate for the nine months ended September 30, 2001 was
45.2%, compared with 32.7% for the same period in 2000. The 2001 effective tax
rate was favorably impacted by a significant net tax benefit related to
Excite@Home, including a benefit from the deconsolidation and the put obligation
settlement with Cox and Comcast, partially offset by the prior consolidation of
its operating losses, for which the company was unable to record tax benefits.
Also favorably impacting the effective tax benefit rate was the redemption of
AT&T stock held by Comcast in exchange for certain cable systems and the
tax-free gain associated with the disposal of a portion of AT&T's retained
interest in AT&T Wireless in a debt-for-equity exchange. These impacts were
partially offset by higher non tax-deductible goodwill amortization. The 2000
effective tax rate was positively impacted by a tax-free gain resulting from an
exchange of AT&T stock for an entity owning certain cable systems and other
assets with Cox and the benefit of the write-off of the related deferred tax
liability.

<TABLE>
<CAPTION>
                                                For the Three      For the Nine
                                                 Months Ended      Months Ended
                                                September 30,      September 30,
Dollars in Millions                             2001      2000     2001     2000
<S>                                            <C>       <C>     <C>       <C>
Minority interest income (expense)              $177      $103    $1,015    $11
</TABLE>

Minority interest income, which is recorded net of income taxes, represents an
adjustment to AT&T's income to reflect the less than 100% ownership of
consolidated subsidiaries as well as dividends on preferred stock issued by
subsidiaries of AT&T. The Company recorded $0.2 billion of minority interest
income in the third quarter of 2001 and $0.1 billion of minority interest
expense in the third quarter of 2000. Minority interest income was $1.0 billion
of income for the nine months ended September 30, 2001 and $11 million
<PAGE>
of income for the nine months ended September 30, 2000. The increase in both
periods is primarily due to the consolidation of Excite@Home effective September
1, 2000. The minority interest income in both periods primarily reflects a loss
generated by Excite@Home, including business restructuring and asset impairment
charges, that were attributable to the other shareholders of Excite@Home. The
income tax benefit recorded on minority interest income was $6 million and $39
million for the third quarter of 2001 and 2000, respectively. The income tax
benefit recorded on minority interest income was $93 million and $98 million for
the nine months ended September 30, 2001 and September 30, 2000, respectively.

<TABLE>
<CAPTION>
                                                For the Three      For the Nine
                                                 Months Ended      Months Ended
                                                September 30,      September 30,
Dollars in Millions                             2001      2000     2001     2000
<S>                                             <C>      <C>     <C>       <C>
Equity earnings (losses) from Liberty Media
  Group                                         $111     $1,756  $(2,711)  $2,965
</TABLE>

Equity earnings (losses) from Liberty Media Group (LMG), which is recorded net
of income taxes, decreased $1.6 billion for the third quarter of 2001 compared
with the third quarter of 2000. The decrease largely reflects lower gains on
dispositions in the third quarter of 2001, partially offset by earnings of
affiliates in 2001 compared with losses in 2000 as well as the write-down of
impaired investments in 2000.

Equity earnings (losses) from LMG, which is recorded net of income taxes,
decreased $5.7 billion for the year-to-date period through July 31, 2001,
compared with the year-to-date period ended September 30, 2000. The decrease
largely reflects lower gains on dispositions, higher losses of affiliates and
higher unrealized losses on financial instruments of LMG.

<TABLE>
<CAPTION>
                                               For the Three       For the Nine
                                                Months Ended       Months Ended
                                               September 30,       September 30,
Dollars in Millions                            2001      2000      2001     2000
<S>                                            <C>       <C>       <C>     <C>
Net losses from other equity investments       $88       $222      $423    $615
</TABLE>

Net losses from other equity investments, recorded net of income taxes, were
$0.1 billion in the third quarter of 2001 and $0.2 billion for the same period
of 2000, a decrease of 60.3%. The decrease in losses is primarily due to lower
losses related to Time Warner Entertainment (TWE) and Cablevision Systems
Corporation (Cablevision) as a result of these investments being accounted for
under the equity method in third quarter of 2000 and the cost method in the
third quarter of 2001. TWE was reclassified to an asset held for sale in the
fourth quarter of 2000, and accordingly earnings or losses, including
amortization of goodwill, were no longer recorded. Likewise, in the second
quarter of 2001, AT&T began accounting for its investment in Cablevision as a
cost method investment as a result of AT&T no longer having representation on
the board of directors. In addition, Excite@Home also contributed to the
decrease. These decreases were partially offset by higher losses related to
Concert. The income tax benefit recorded on net losses from other equity
investments was $136 million and $152 million for the third quarter of 2001 and
2000, respectively. Also included in this line is amortization of goodwill
associated with non-consolidated investments. This totaled $23 million and $233
million for the third quarter of 2001 and 2000, respectively.

Net losses from other equity investments were $0.4 billion for the nine months
ended September 30, 2001, a decrease of $0.2 billion, or 31.3%, compared with
the same period of 2000. This decrease was primarily due to the consolidation of
Excite@Home and higher earnings relating to Cablevision, primarily reflecting a
gain associated with the sale of cable properties. In addition, the change in
accounting treatment for TWE from an equity method investment to a cost method
investment also contributed to the decrease. These decreases
<PAGE>
were partially offset by higher equity losses from Concert and Net2Phone. The
income tax benefit recorded on net losses from other equity investments for the
first nine months of 2000 was $302 million and $419 million for the same period
of 2000. Amortization of goodwill associated with non-consolidated investments,
recorded as a reduction of income, totaled $179 million and $458 million for the
nine months ended September 30, 2001 and 2000, respectively.

<TABLE>
<CAPTION>
                                                For the Three      For the Nine
                                                 Months Ended      Months Ended
                                                September 30,      September 30,
Dollars in Millions                             2001     2000      2001     2000
<S>                                           <C>      <C>       <C>      <C>
Gain on disposition of discontinued
operations                                    $13,503  $  --     $13,503  $  --
</TABLE>

The gain on disposition of discontinued operations represents the difference
between the fair value of the Wireless tracking stock on July 9, 2001, the date
of the split-off, and AT&T's book value in AT&T Wireless Services.


<TABLE>
<CAPTION>
                                                For the Three      For the Nine
                                                 Months Ended      Months Ended
                                                September 30,      September 30,
Dollars in Millions                             2001     2000      2001     2000
<S>                                             <C>      <C>       <C>      <C>
Cumulative effect of accounting change          $  --    $  --     $904     $  --
</TABLE>

Cumulative effect of accounting change, net of applicable income taxes, is
comprised of $0.4 billion for AT&T Group (other than LMG) and $0.5 billion for
LMG for the nine months ended September 30, 2001. The $0.4 billion recorded by
AT&T, excluding LMG represents fair value adjustments of debt instruments
including those acquired in conjunction with the MediaOne merger, as well as to
our warrant portfolio due to the adoption of SFAS No. 133.

The $0.5 billion recorded by Liberty Media Group represents the impact of
separately recording the embedded call option obligations associated with LMG's
senior exchangeable debentures due to the adoption of SFAS No. 133.

<TABLE>
<CAPTION>
                                                For the Three      For the Nine
                                                 Months Ended      Months Ended
                                                September 30,      September 30,
Dollars in Millions                             2001     2000      2001     2000
<S>                                           <C>      <C>        <C>     <C>
Dividend requirements of preferred stock      $ 235    $  --      $652    $   --
</TABLE>

Dividend requirements of preferred stock were $0.2 billion in the third quarter
of 2001 and $0.7 billion for the nine months ended September 30, 2001. The
preferred stock dividend represented interest in connection with convertible
preferred stock issued to NTT DoCoMo in January of 2001 as well as accretion of
the beneficial conversion feature. On July 9, 2001, in conjunction with the
split-off of AT&T Wireless Group, these preferred shares were converted into
AT&T Wireless common stock. As a result, we fully amortized, in the third
quarter, the remaining beneficial conversion feature balance of $0.2 billion.

<TABLE>
<CAPTION>
                                                For the Three      For the Nine
                                                 Months Ended      Months Ended
                                                September 30,      September 30,
Dollars in Millions                             2001     2000      2001     2000
<S>                                             <C>     <C>        <C>     <C>
Premium on wireless tracking stock exchange     $  --   $  --      $ 80    $  --
</TABLE>

The premium on the wireless tracking stock exchange was $80 million for the nine
months ended September 30, 2001. The premium represents the excess of fair value
of the Wireless tracking stock issued over the fair value of the
<PAGE>
AT&T common stock exchanged and was calculated based on the closing share prices
of AT&T common stock and AT&T Wireless tracking stock on May 25, 2001.


<TABLE>
<CAPTION>
                                                              For the Three                      For the Nine
                                                               Months Ended                      Months Ended
                                                               September 30,                     September 30,
(Dollars in Millions, except per share amounts)            2001             2000             2001             2000
<S>                                                      <C>              <C>              <C>              <C>
AT&T Common Stock Group - per basic share:
(Loss) earnings - continuing operations                  $  (0.69)        $   0.35         $  (0.94)        $   1.35
Earnings - discontinued operations                             --               --             0.03             0.06
Gain on disposition of discontinued operations               3.82               --             3.67               --
Cumulative effect of accounting change                         --               --             0.10               --
AT&T Common Stock Group earnings                         $   3.13         $   0.35         $   2.86         $   1.41

AT&T Common Stock Group - per diluted share:
(Loss) earnings - continuing operations                  $  (0.69)        $   0.35         $  (0.94)        $   1.34
Earnings - discontinued operations                             --               --             0.03             0.06
Gain on disposition of discontinued operations               3.82               --             3.67               --
Cumulative effect of accounting change                         --               --             0.10               --
AT&T Common Stock Group earnings                         $   3.13         $   0.35         $   2.86         $   1.40

AT&T Wireless Group- per basic and diluted share:
Earnings (loss) from discontinued operations             $     --         $  (0.01)        $   0.08         $   0.05

Liberty Media Group - per basic and diluted
share:
Earnings (loss) - before cumulative effect of
   accounting change                                     $   0.04         $   0.68         $  (1.05)        $   1.15
Cumulative effect of accounting change                         --               --             0.21               --
Liberty Media Group earnings (loss)                      $   0.04         $   0.68         $  (0.84)        $   1.15
</TABLE>


The loss from continuing operations per diluted share attributable to the AT&T
Common Stock Group was $0.69 in the third quarter of 2001 compared with earnings
per share (EPS) on a diluted basis of $0.35 in the third quarter of 2000. The
year over year decline was largely driven by charges recorded in conjunction
with our agreement to unwind our Concert joint venture and AT&T's obligation to
purchase the public shares of AT&T Canada. Also contributing to the decline was
lower operating income, the acceleration of the amortization of the beneficial
conversion feature associated with conversion of NTT DoCoMo preferred stock, as
well as a mark-to-market loss recorded in conjunction with the settlement of
certain exchangeable notes that matured during the quarter. These losses were
partially offset by a tax free gain associated with the disposal of a portion of
AT&T's retained interest in AT&T Wireless Services and the net impact of the
deconsolidation of Excite@Home.

The loss from continuing operations per diluted share attributable to the AT&T
Common Stock Group was $0.94 for the nine months ended September 30, 2001
compared with earnings per diluted share of $1.35 for the nine months ended
September 30, 2000. The year over year loss was primarily driven by lower
operating income, charges relating to the agreement to unwind our Concert joint
venture and AT&T's obligation to purchase the public shares of AT&T Canada. In
addition, the decline reflects an impairment charge reflecting an other than
temporary decline on our investment in Net2Phone, a charge relating to the
initial reclassification impact of the adoption of SFAS No. 133 which revalued
certain securities reclassified from "available-for-sale" to "trading", and
dividends and associated amortization of the beneficial conversion feature on
NTT DoCoMo preferred stock, partially offset by the net impact of the
deconsolidation of Excite@Home.

The Consolidated Financial Statements of AT&T reflect AT&T Wireless as a
discontinued operation. Accordingly, for periods prior to the split-off of AT&T
Wireless, revenue, costs and expenses of AT&T Wireless have been excluded from
the respective captions in the Consolidated Statements of Operations, and have
been reported as "Income from discontinued operations" for all periods
presented. Earnings from discontinued operations per diluted share attributable
to the AT&T Common Stock Group were $0.03 for the year-to-date
<PAGE>
period through June 30, 2001, the deemed effective AT&T Wireless split-off date
for accounting purposes and $0.06 for the nine months ended September 30, 2000.
Upon the split-off of AT&T Wireless Group in the third quarter 2001, AT&T
recorded $13.5 billion, or $3.82 per diluted share, as "Gain on the disposition
of discontinued operations".

The earnings (loss) per share from discontinued operations attributable to AT&T
Wireless Group for the year-to-date period through June 30, 2001, the deemed
effective AT&T Wireless group split-off date for accounting purposes, the third
quarter of 2000 and from April 27, 2000, the date of the stock offering, through
September 30, 2000, were $0.08, $(0.01) and $0.05, respectively.

The earnings (loss) per diluted share attributable to Liberty Media Group (LMG)
were earnings of $0.04 and a loss of $0.84 for the third quarter and year to
date periods through July 31, 2001, the deemed effective LMG split-off date for
accounting purposes, respectively. This compares with earnings of $0.68 and
$1.15 in the third quarter and nine months ended September 30, 2000,
respectively.


SEGMENT RESULTS

In support of the services we provide, we segment our results by the business
units that support our primary lines of business: AT&T Business, AT&T Consumer
and AT&T Broadband. The balance of AT&T's continuing operations, excluding LMG
is included in a Corporate and Other category. Although not a segment, we also
discuss the results of LMG prior to its split-off as an independent company.

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 (loss) income plus net pretax
losses from equity investments, pretax minority interest income (expense) and
other income. In addition, management also uses EBITDA as a measure of segment
profitability and performance, and is defined as EBIT, excluding minority
interest (expense) income other than Excite@Home's minority interest (expense)
income, plus depreciation and amortization. Interest and taxes are not factored
into the segment profitability measure used by the chief operating decision
makers; therefore, trends for these items are discussed on a consolidated basis.
Management believes EBIT and EBITDA are meaningful to investors because they
provide analysis of operating results using the same measures used by AT&T's
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 total AT&T. EBIT for AT&T was a deficit of $3,654 million and
earnings of $2,962 million, and EBITDA was a deficit of $1,347 million and
earnings of $5,430 million for the three months ended September 30, 2001 and
2000, respectively. EBIT was a deficit of $3,455 million and earnings of $8,631
million, and EBITDA was earnings of $3,705 million and $14,757 million for the
first nine months of 2001 and 2000, respectively. 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 as well as interest
and taxes which can affect cash flow.

The discussion of segment results includes revenue, EBIT, EBITDA, total assets
and capital additions. The discussion of EBITDA for AT&T Broadband is modified
to exclude other income and net losses from equity investments. Total assets for
each segment includes 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 Corporate and Other
group. Capital additions for each segment include capital expenditures for
<PAGE>
property, plant and equipment, additions to nonconsolidated investments,
increases in franchise costs and additions to internal-use software.

In connection with our corporate restructuring program set forth in late 2000,
our existing segments reflect certain managerial changes since the publication
of our 2000 annual report. The changes are as follows: AT&T Business was
expanded to include the results of international operations and ventures. In
addition, certain corporate costs that were previously recorded within the
Corporate and Other Group have been allocated to the respective segments in an
effort to ultimately have the results of these businesses reflect all direct
corporate costs as well as overhead for shared services. All prior period
results have been restated to reflect these changes.

Reflecting the dynamics of our business, we continuously review our management
model and structure, which may result in additional adjustments to our operating
segments in the future.

AT&T BUSINESS
AT&T Business 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.
AT&T Business is also a provider of voice, data and IP transport to service
resellers (wholesale services).

AT&T Business includes AT&T Solutions, the company's professional-services
outsourcing business, which provides seamless solutions that maximize the
competitive advantage of networking-based electronic applications for global
clients. AT&T Business also includes the results of International ventures and
operations.

<TABLE>
<CAPTION>
                                 Three months ended                 Nine months ended
                                   September 30,                      September 30,
Dollars in millions            2001             2000              2001              2000
<S>                          <C>               <C>             <C>                <C>
External revenue             $ 6,750           $7,022          $ 20,550           $21,172
Internal revenue                 135              200               597               529
Total revenue                  6,885           $7,222            21,147           $21,701

EBIT                          (4,377)           1,690            (1,933)            4,428
EBITDA                        (3,352)           2,737             1,145             7,548

OTHER ITEMS
Capital additions            $ 1,105           $1,821          $  3,808           $ 4,642
</TABLE>


<TABLE>
<CAPTION>
                               At September 30, 2001       At December 31, 2000
<S>                            <C>                         <C>
Total assets                          $40,236                    $42,747
</TABLE>


REVENUE

AT&T Business revenue decreased $0.3 billion, or 4.7%, in the third quarter of
2001, and declined $0.6 billion, or 2.5%, for the nine months ended September
30, 2001, compared with the same periods in 2000. The decreases were primarily
due to a decline in long distance voice revenue of approximately $0.6 billion
and $1.6 billion in the third quarter of 2001 and the first nine months of 2001,
respectively. The decreases were partially offset by growth in data/IP of
approximately $0.2 billion and $0.9 billion for the third quarter of 2001 and
the first nine months of 2001, respectively.

Long distance voice services revenue decreased at a mid-teen percentage rate in
the third quarter of 2001 and a low-teen percentage for the nine months ended
September 30, 2001. These declines were due to a declining average price per
minute reflecting the competitive forces within the industry that are expected
to continue. Long distance voice minute volumes were relatively flat for the
third quarter of 2001 and grew at a low single-digit percentage
<PAGE>
for the nine months ended September 30, 2001, compared to the corresponding
prior year periods.

Data services, which represent the transportation of data, rather than voice,
along our network, grew at a high single-digit percentage rate in the third
quarter of 2001 and nearly 14% for the nine months ended September 30, 2001.
Growth was led by the strength of packet services, which includes frame relay,
IP and Asynchronous Transfer Mode (ATM) services during both of these periods.
In addition, data services revenue during the nine months ended September 30,
2001, was positively impacted by growth in high-speed private line services.

Local voice services revenue grew at a high-teen percentage rate in the third
quarter of 2001 and a low-20 percentage rate in the nine months ended September
30, 2001, compared with the same prior year periods. The prior year-to-date
period included an unfavorable adjustment related to legal rulings concerning
compensation payable to other carriers for call completion; excluding this
adjustment, local voice grew approximately 18%. AT&T added approximately 170,000
and over 450,000 access lines for the quarter and year-to-date periods,
respectively, bringing total access lines in service as of September 30, 2001 to
over 2.7 million, an increase of 29.9% compared with September 30, 2000. AT&T
served nearly 6,300 buildings on-net at September 30, 2001, representing a 2.0%
increase compared with September 30, 2000.

AT&T Business Services internal revenue decreased $65 million, or 32.6%, for the
third quarter of 2001 and increased $68 million, or 12.8%, for the year-to-date
period compared with the same periods in 2000. The decrease for the quarter was
due to the split-off of AT&T Wireless on July 9, 2001, as these sales are now
reported as external revenue, partially offset by greater sales of services to
other AT&T units that resell such services to their external customers,
primarily AT&T Broadband. The increase for the year-to-date period was due to
greater sales of services to other AT&T units, primarily AT&T Broadband and
Excite@Home, partially offset by lower internal revenue, primarily from AT&T
Wireless, as a result of the split-off.

EBIT/EBITDA

EBIT declined $6.1 billion, or 359.0%, in the third quarter of 2001 and $6.4
billion, or 143.7%, for the nine months ended September 30, 2001, compared with
the same periods in 2000. EBITDA declined $6.1 billion, or 222.5%, and $6.4
billion, or 84.8%, respectively, in the third quarter and the first nine months
of 2001. These declines primarily reflect the $5.3 billion of charges recorded
during the third quarter of 2001 related to Concert and AT&T Canada. These
declines also reflect the impact of pricing pressure within the long distance
voice business as well as the shift from higher margin long distance services to
lower margin growth services and the impact of higher equity losses recorded for
Concert. Partially offsetting the year-to-date EBIT decline was a gain of
approximately $0.5 billion recorded on the sale of our stake in Japan Telecom in
the second quarter of 2001. Additionally, the year-to-date comparisons also
reflect restructuring charges of $0.4 billion recorded in the first quarter of
2000.


OTHER ITEMS

Capital additions decreased 39.3% in the third quarter of 2001 and 18.0% in the
first nine months of 2001, compared with the same prior year periods. These
decreases reflect lower capital expenditures for network assets that support all
services provided by AT&T Business.

Total assets decreased $2.5 billion, or 5.9%, at September 30, 2001, compared
with December 31, 2000. The decrease reflects lower other investments and
related advances resulting from the write-down of AT&T Business' investment in
Concert, higher equity losses from Concert and the sale of Japan Telecom.
<PAGE>
AT&T CONSUMER
AT&T Consumer provides a variety of communications services including long
distance, local toll (intrastate calls outside the immediate local area) and
Internet access to residential customers. In addition, AT&T Consumer provides
transaction services, such as prepaid calling card and operator-handled calling
services. Local phone service is also provided in certain areas.

<TABLE>
<CAPTION>
                                Three months ended              Nine months ended
                                  September 30,                    September 30,
Dollars in millions            2001            2000             2001             2000
<S>                          <C>             <C>             <C>              <C>
Revenue                      $3,822          $4,651          $11,614          $14,651
EBIT                          1,282           1,806            3,817            5,271
EBITDA                        1,331           1,849            3,962            5,394

OTHER ITEMS
Capital additions            $   43          $   41          $    96          $   104
</TABLE>


<TABLE>
<CAPTION>
                              At September 30, 2001       At December 31, 2000
<S>                           <C>                         <C>
Total assets                          $2,555                    $3,150
</TABLE>


REVENUE

AT&T Consumer revenue declined 17.8%, or $0.8 billion, in the third quarter of
2001 and declined 20.7%, or $3.0 billion, for the first nine months of 2001
compared with the corresponding periods in 2000. The revenue decline in both
periods reflects the impacts of volume reductions, primarily in traditional
voice services due to the acceleration of wireless and e-mail substitution, the
impacts of ongoing competition and the continued migration of customers to
lower-priced products and optional calling plans. The revenue decline in the
third quarter of 2001 was slightly offset by an increase in the level of call
volumes related to the events of September 11th. Long distance calling volumes
declined at a low double-digit rate in both the third quarter and the first nine
months of 2001. In addition, the revenue decline for the nine months ended
September 30, 2001, reflects the elimination of per-line charges in July 2000 of
approximately $0.5 billion.

EBIT/EBITDA

EBIT and EBITDA declined 29.0% and 28.0%, respectively, in the third quarter of
2001 compared with the prior year quarter. EBIT and EBITDA declined 27.6% and
26.5%, respectively, for the first nine months of 2001 compared with the same
period in 2000. The decline in both periods was primarily driven by the impact
of the revenue declines partially offset by cost-control initiatives. With
impact of wireless and e-mail substitution continuing to increase and as the
local exchange carriers continue their entry into the Consumer Long Distance
business, EBIT and EBITDA are likely to continue to decline.

EBIT and EBITDA margins were 33.5% and 34.8%, respectively, for the third
quarter of 2001 and were 38.8% and 39.7%, respectively, for the third quarter of
2000. EBIT and EBITDA margins were 32.9% and 34.1%, respectively, and 36.0% and
36.8%, respectively, for the nine months ended September 30, 2001 and 2000.

OTHER ITEMS

Capital additions were about the same in the third quarter of 2001 compared with
the third quarter of 2000 and decreased slightly for the first nine months of
2001 compared with the corresponding period in 2000.

Total assets declined $0.6 billion to $2.6 billion at September 30, 2001
compared to $3.2 billion at December 31, 2000. The decline was primarily driven
by lower receivables, reflecting lower revenue.
<PAGE>
AT&T BROADBAND

AT&T Broadband offers a variety of services through our cable broadband network,
including traditional analog video and advanced services such as digital video
service, high-speed data service and broadband telephony service.

<TABLE>
<CAPTION>
                                    Three months ended                  Nine months ended
                                       September 30,                      September 30,
Dollars in Millions               2001              2000              2001              2000
<S>                             <C>               <C>               <C>               <C>
Revenue                         $ 2,393           $ 2,420           $ 7,423           $ 5,693
EBIT                               (538)             (640)           (1,834)             (771)
EBITDA excluding other
income*                             602               498             1,496             1,196

OTHER ITEMS
Capital additions               $   782           $ 1,252           $ 2,641           $ 3,586
</TABLE>

<TABLE>
<CAPTION>
                                At September 30, 2001       At December 31, 2000
<S>                             <C>                         <C>
Total assets                          $104,054                    $114,848
</TABLE>

* EBITDA for AT&T Broadband excludes net losses from equity investments and
other income

The results of operations for the three and nine months ended September 30, 2001
and the three months ended September 30, 2000 include a full period of MediaOne
operations, while the nine months ended September 30, 2000, includes only 3
months and two weeks of operations for MediaOne.

REVENUE

Broadband revenue declined $27 million, or 1.1%, for the three months ended
September 30, 2001 compared with the corresponding prior year period. This
decrease in revenue was impacted by the net dispositions of cable systems of
approximately $0.3 billion, almost entirely offset by revenue growth from new
services (broadband telephony and high-speed data) of approximately $0.2 billion
and revenue growth from other video services, primarily expanded basic cable and
digital video, of approximately $0.1 billion. AT&T Broadband revenue grew $1.7
billion, or 30.4%, for the nine months ended September 30, 2001, compared with
the corresponding prior year period. Approximately $1.0 billion of the increase
was due to the acquisition of MediaOne offset by the net dispositions of cable
systems. In addition, the increase was attributable to revenue growth from new
services of approximately $0.4 billion and growth in other video services,
primarily expanded basic cable and digital video, of approximately $0.2 billion.

At September 30, 2001, Broadband serviced approximately 13.7 million basic cable
customers, passing approximately 24.6 million homes, compared with 16.1 million
basic cable customers, passing approximately 28.0 million homes at September 30,
2000. At September 30, 2001, we provided digital video service to approximately
3.2 million customers, high-speed data service to approximately 1.4 million
customers and broadband telephony service to approximately 0.9 million
customers. This compares with 2.5 million digital-video customers, approximately
0.9 million high-speed data customers, and 0.3 million broadband telephony
customers at September 30, 2000.

EBIT/EBITDA

EBIT for the third quarter of 2001 was a deficit of $0.5 billion, an improvement
of $0.1 billion from the comparable prior year period. This improvement was
primarily due to the impacts associated with the growth in new services of
approximately $0.1 billion, growth in other video services, primarily expanded
basic cable and digital video, of approximately $0.1 billion and lower pretax
equity losses of $0.1 billion. Partially offsetting this increased EBIT was the
impacts of net dispositions of cable systems of
<PAGE>
approximately $0.1 billion and $0.1 billion of higher net loss on the sales of
businesses and investments.

The EBIT deficit for the nine months ended September 30, 2001 increased $1.1
billion from the comparable prior year period deficit of $0.8 billion. This
increase was largely due to the impacts of the acquisition of MediaOne and the
net dispositions of cable systems of approximately $0.7 billion as well as
higher restructuring and other charges and increased depreciation and
amortization, programming and advertising expenses of approximately $0.7
billion. In addition, the increase was attributable to $0.5 billion of lower net
gains on sales of businesses and investments. These increases were offset by
$0.4 billion of lower pretax equity losses, impacts associated with the growth
in new services of approximately $0.2 billion and growth in other video
services, primarily expanded basic cable and digital video, of approximately
$0.2 billion.

EBITDA, which excludes net losses from equity investments and other income, was
$0.6 billion for the three months ended September 30, 2001, an improvement of
$0.1 billion, or 20.9%, from the comparable prior year period. This improvement
was primarily due to the impacts associated with the growth in new services of
approximately $0.1 billion and growth in other video services, primarily
expanded basic cable and digital video, of approximately $0.1 billion. Partially
offsetting this increased EBITDA were the impacts of net dispositions of cable
systems of approximately $0.1 billion.

EBITDA, for the nine months ended September 30, 2001 was $1.5 billion, an
improvement of $0.3 billion, or 25.1%, from $1.2 billion in the comparable prior
year period. This improvement was primarily due to the acquisition of MediaOne
of $0.4 billion and the impacts associated with the growth in new services of
approximately $0.2 billion and growth in other video services, primarily
expanded basic cable and digital video, of approximately $0.2 billion. Partially
offsetting this improvement was increased programming and advertising expenses
of $0.2 billion, the impact of net dispositions of cable systems of $0.2 billion
and higher restructuring and other charges of $0.1 billion.

OTHER ITEMS

Capital additions decreased 37.5% to $0.8 billion for the three months ended
September 30, 2001 from $1.3 billion for the comparable prior year period. This
decrease was primarily driven by reductions in plant upgrades and launches of
advanced services. Capital additions decreased 26.3% to $2.6 billion for the
nine months ended September 30, 2001 from $3.6 billion for the comparable prior
year period. This decrease was primarily driven by a $0.5 billion decrease in
contributions to various non-consolidated investments.

Total assets at September 30, 2001, were $104.1 billion compared with $114.8
billion at December 31, 2000. The decrease in total assets at September 30, 2001
is primarily due to cable-system sales.
<PAGE>
CORPORATE AND OTHER

This group reflects the results of corporate staff functions, the elimination of
transactions between segments, as well as the results of Excite@Home.

<TABLE>
<CAPTION>
                                Three months ended                 Nine months ended
                                    September 30,                    September 30,
Dollars in millions           2001              2000             2001              2000
<S>                          <C>             <C>               <C>               <C>
Revenue                      $ (13)          $  (117)          $  (220)          $  (422)
EBIT                           (21)              106            (3,505)             (297)
EBITDA                         118               338            (3,019)              225

OTHER ITEMS
Capital additions            $  50           $ 1,489           $   303           $ 1,573
</TABLE>

<TABLE>
<CAPTION>
                               At September 30, 2001       At December 31, 2000
<S>                            <C>                         <C>
Total assets                          13,204                     $12,101
</TABLE>

REVENUE

Revenue for corporate and other for the third quarter of 2001 primarily includes
the elimination of intercompany revenue of negative $171 million (a $39 million
decrease from prior year) and revenue from Excite@Home of $140 million (a $61
million increase from prior year). Revenue for corporate and other for the first
nine months of 2001 primarily includes the elimination of intercompany revenue
of negative $696 million ($155 million increase from prior year) and revenue
from Excite@Home of $418 million (a $339 million increase from prior year). The
increase was primarily driven by the consolidation of Excite@Home, partially
offset by decline in Excite@Home revenue in September 2001 and lower elimination
of internal revenue as a result of the split-off of AT&T Wireless on July 9,
2001, which was partially offset by increased sales from Excite@Home to AT&T
Broadband and from AT&T Business Services to AT&T Broadband.

EBIT/EBITDA

EBIT and EBITDA declined $0.1 billion and $0.2 billion, respectively, to a
deficit of $21 million and income of $0.1 billion, respectively, in the third
quarter of 2001 compared with the third quarter of 2000. The decline was
primarily due to a $0.4 billion mark-to-market loss on Vodaphone ADRs, which
were used to settle exchangeable notes that matured during the third quarter of
2001 and $0.1 billion lower gains on sales of various other investments. Also
contributing to the decline was lower investment-related income of $0.1 billion,
higher Excite@Home loss of $0.1 billion and a lower pension credit of $0.1
billion, primarily due to unfavorable investment performance. These declines
were partially offset by a $0.5 billion tax-free gain associated with the
disposal of a portion of AT&T's retained interest in AT&T Wireless in a
debt-for-equity exchange and a $0.1 billion gain for the ongoing investment and
derivative revaluation.

EBIT and EBITDA declined $3.2 billion to deficits of $3.5 billion and $3.0
billion, respectively, for nine months ended September 30, 2001, compared with
the same prior year period. The decline was primarily due to a $1.1 billion
investment impairment charge related to Net2Phone and a $0.8 billion loss on the
Excite@Home put obligation settlement with Cox Communications, Inc. and Comcast
Corporation. Also contributing to the decline was $0.8 billion loss associated
with the adoption of SFAS No. 133 as well as the related ongoing investment
revaluation. The decline was also driven by lower investment-related income of
$0.2 billion, lower pension credit of $0.1 billion, primarily due to unfavorable
investment performance, higher costs associated with the AT&T Wireless stock
exchange offer of $0.1 billion and lower gains on sales of investments of $0.1
billion. These were partially offset by lower net restructuring and other
charges of $0.3 billion.

OTHER ITEMS

Capital additions declined $1.4 billion, or 96.6%, in the third quarter of 2001
compared with the third quarter of 2000. Capital additions declined $1.3
billion, or 80.7%, in the first nine months of 2001 compared with the same
period in 2000. The decline in both periods was primarily driven by our
investment in Net2Phone made in the third quarter of 2000.
<PAGE>
Total assets increased $1.1 billion, to $13.2 billion at September 30, 2001. The
increase was primarily driven by a higher cash balance held at September 30,
2001, our retained interest in AT&T Wireless and higher deferred tax assets as a
result of the unwind of our Concert joint venture and settlement of
exchangeable notes. These increases were partially offset by the
deconsolidation of Excite@Home, the write-down of our investment in Net2Phone
and the transfer of a loan to Concert to the AT&T Business segment, which was
written off in the third quarter of 2001.


LIBERTY MEDIA GROUP RESULTS

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. LMG was split off from AT&T on August
10, 2001. The operating results of LMG for the third quarter and year-to-date
period ended July 31, 2001 (the deemed effective LMG split-off date for
accounting purposes) and three and nine months ended September 30, 2000, were
reflected as "Equity earnings (losses) from Liberty Media Group" in the
accompanying Consolidated Statements of Operations. The investment in LMG was no
longer included in AT&T's Consolidated Balance Sheet at September 30, 2001.
Equity earnings (losses) from LMG decreased $1.6 billion for the third quarter
of 2001 compared with the third quarter of 2000. The decrease largely reflects
lower gains on dispositions in the third quarter of 2001, partially offset by
earnings of affiliates in 2001 compared with losses in 2000 as well as the
write-down of impaired investments in 2000. Equity earnings (losses) from LMG
decreased $5.7 billion for the year-to-date period through July 31, 2001,
compared with the year-to-date period ended September 30, 2000. The decrease
largely reflects lower gains on dispositions, higher losses of affiliates and
higher unrealized losses on financial instruments of LMG.


LIQUIDITY

<TABLE>
<CAPTION>
                                                     For the Nine months ended
                                                           September 30,
   (Dollars in Millions)                                 2001         2000
<S>                                                  <C>          <C>
   CASH FLOWS:
     Provided by operating activities                $ 6,741      $    8,114
     Used in investing activities                        (35)        (26,436)
     Provided by financing activities                 (7,432)         23,301
     Provided by (used in) discontinued
       Operations                                      4,860          (5,686)
</TABLE>

Net cash provided by operating activities of $6.7 billion for the nine months
ended September 30, 2001 was primarily due to the loss from continuing
operations, excluding non-cash income items and the adjustment for net gains on
sales of businesses and investments, of $8.7 billion, partially offset by net
changes in other operating assets and liabilities of $1.1 billion and a decrease
in accounts payable of $0.8 billion. Net cash provided by operating activities
of $8.1 billion for the nine months ended September 30, 2000 was primarily due
to income from continuing operations, excluding non-cash income items and the
adjustment for net gains on sales of businesses and investments, of $11.6
billion, partially offset by an increase in accounts receivable of $2.1 billion
and a decrease in accounts payable of $1.4 billion.

AT&T's investing activities resulted in a net use of cash of $35 million for the
nine months ended September 30, 2001, compared with $26.4 billion for the
comparable period in 2000. For the nine months ended September 30, 2001, AT&T
spent $6.5 billion on capital expenditures and received approximately $4.8
billion, primarily from the net dispositions of cable systems, and approximately
$1.8 billion from the sale of investments. For the nine months
<PAGE>
ended September 30, 2000, AT&T spent approximately $16.6 billion for
acquisitions of businesses, primarily MediaOne, $7.8 billion on capital
expenditures, $2.4 billion for non-consolidated investments, including Net2Phone
and infusions into existing cable investments, and loaned $1.0 billion to
Concert. In addition, AT&T received approximately $0.8 billion primarily from
the sale of investments.

For the nine months ended September 30, 2001, net cash used in financing
activities was $7.4 billion, compared with net cash provided by financing
activities of $23.3 billion for the nine months ended September 30, 2000. During
the nine months ended September 30, 2001, AT&T made net payments of $11.0
billion to reduce debt, paid AT&T Wireless $5.8 billion to settle an
intercompany loan in conjunction with its split-off from AT&T and paid
dividends of $0.4 billion. In addition, AT&T received $9.8 billion from the
issuance of convertible preferred stock to NTT DoCoMo. During the nine months
ended September 30, 2000, AT&T received $16.1 billion from the net issuance of
debt and $10.3 billion from the AT&T Wireless tracking stock offering. In
addition, AT&T paid dividends of $2.2 billion and $0.6 billion for net
acquisitions of treasury shares and redeemed securities for $0.2 billion.

For the nine months ended September 30, 2001, net cash provided by discontinued
operations was $4.9 billion, compared with a net use of cash of $5.7 billion
during the nine months ended September 30, 2000. During the nine months ended
September 30, 2001, AT&T Wireless issued $6.5 billion of bonds, partially offset
by spending of $2.3 billion on capital expenditures, and was split-off from AT&T
on July 9, 2001. For the nine months ended September 30, 2000, AT&T Wireless
made net expenditures of $3.2 billion to acquire businesses and spent $3.0
billion on capital expenditures.

At September 30, 2001, we had current assets of $16.5 billion and current
liabilities of $32.0 billion. The current assets were primarily comprised of
trade and other receivables of $10.0 billion and cash of $4.2 billion. A
significant portion of the current liabilities, $18.4 billion, related to
short-term notes, the majority of which were commercial paper or debt with an
original maturity of one year or less.

We expect that we will retire a portion of the short-term debt with other
financing arrangements, including the monetization of publicly-held securities
and sales of certain non-strategic assets and investments.

On February 28, 2001, we exercised our registration rights in TWE and formally
requested TWE to begin the process of converting the limited partnership into a
corporation with registered equity securities. On May 14, 2001, we named Credit
Suisse First Boston as our investment banker for the registration process under
the TWE partnership agreement.

In October 2001, we sold 19.2 million shares of Cablevision NY Group Class A
common stock and, through a trust, 26.9 million shares of a mandatorily
exchangeable trust security that will be exchangeable into up to 26.9 million
shares of Cablevision NY Group Class A common stock at maturity in three years.
The offering generated approximately $1.4 billion of pretax net proceeds. In
addition, Cablevision has agreed to file a registration statement for the sale
of some or all of AT&T's Rainbow Media Group tracking stock holdings.

In connection with the split-off of AT&T Wireless on July 9, 2001, we retained
approximately 185 million shares of AT&T Wireless Services valued at
approximately $3.0 billion and immediately exchanged $1.6 billion of those
shares to retire debt. Subsequent to September 30, 2001, we monetized a portion
of our remaining interest in AT&T Wireless and received approximately $600
million in proceeds. We expect to either sell, exchange or monetize the
remaining portion of these holdings by the end of 2001.

Since the announced restructuring plans to create four new businesses, AT&T's
debt ratings have been under review by the applicable rating agencies. As a
<PAGE>
result of this review, AT&T's long-term and short-term ratings have been
downgraded and the long-term ratings put on credit watch with a negative
outlook. These actions will result in an increased cost of future borrowings and
will limit our access to the capital markets.

AT&T is pursing various measures to reduce its debt level. However, there can be
no assurance that we will be able to obtain financing on terms that are
acceptable to us. If these efforts cannot be completed successfully or on terms
and within the timeframe contemplated, AT&T's financial condition would be
materially adversely affected. Some of these adverse conditions include the
company's ability to pursue acquisitions or make capital expenditures to expand
its network and cable plant, or pay dividends.

On December 28, 2000, we entered into a 364-day, $25 billion revolving-credit
facility syndicated to 39 banks which has subsequently been reduced as a result
of the NTT DoCoMo investment, the AT&T Wireless bond offering, the sale of Japan
Telecom and the sale of various cable-systems and the sale of Cablevision common
stock. AT&T currently has $14.3 billion in bank credit facilities available to
it.

On October 31, 2001, AT&T's Board of Directors approved the sale of senior notes
for private placement. The sale is expected to occur in mid-November, the
proceeds of which will be utilized to retire short-term indebtedness and for
general corporate purposes.


FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                             September 30,    December 31,
Dollars in Millions                              2001            2000
<S>                                          <C>              <C>
Total assets                                  $160,049         $234,360
Total liabilities                               99,511          121,611
Total shareowners' equity                       52,198          103,198
</TABLE>


Total assets decreased $74.3 billion, or 31.7%, to $160.0 billion at September
30, 2001 from $234.4 billion at December 31, 2000. This decrease was primarily
due to the split-off of Liberty Media Group in August 2001 and AT&T Wireless in
July 2001. In addition, the decrease was due to lower investments and related
advances resulting from the write-down of Concert and Net2Phone, and unfavorable
mark-to-market adjustments on certain investments as well as the sale of other
investments; lower franchise costs as a result of the net disposition of cable
systems and amortization; lower investments from the exchange of our investment
in Vodaphone for the settlement of debt. Partially offsetting these decreases
was a higher cash balance.

Total liabilities decreased $22.1 billion, or 18.2%, to $99.5 billion at
September 30, 2001 from $121.6 billion at December 31, 2000. This decrease was
primarily a result of the repayment of debt, a reduction in deferred income
taxes, primarily resulting from deferred tax assets from the write-down of
Concert and Net2Phone and the recording of our obligation to purchase all of the
outstanding shares of AT&T Canada, as well as the deconsolidation of
Excite@Home. Partially offsetting this decrease was an increase in other
long-term liabilities and deferred credits primarily associated with our
obligation to purchase all of the outstanding shares of AT&T Canada.

Minority interest decreased $1.2 billion, or 25.2%, to $3.6 billion at September
30, 20001 from $4.8 billion at December 31, 2000. This decrease was primarily
due to Excite@Home.

Total Shareowners' Equity decreased $51.0 billion, or 49.4%, to $52.2 billion at
September 30, 2001 from $103.2 billion at December 31, 2000. This decrease is
primarily due to the split-off of Liberty Media Group, the impacts of the
split-off of AT&T Wireless and net losses from continuing operations. The
decrease was partially offset by the issuance of stock to settle the Excite@Home
put obligation with Cox and Comcast. In September 2001, when AT&T
<PAGE>
declared its quarterly dividend to the AT&T Common Stock Group shareowners of
$133 million, the company was in an accumulated deficit position primarily as a
result of the split-off of AT&T Wireless. As a result, the company reduced
additional paid-in capital for the entire amount of the dividend declared.

Net debt-to-annualized EBITDA for AT&T's continuing operations was 6.25x at
September 30, 2001 as compared with 3.80x at December 31, 2000, reflecting lower
EBITDA partially offset by lower debt, primarily the result of the company's
debt reduction efforts.

The debt ratio for AT&T's continuing operations (debt of continuing operations
divided by total debt of continuing operations and equity excluding discontinued
operations) was 45.1% at September 30, 2001 as compared with 57.2% at December
31, 2000. For purposes of this calculation, equity includes the convertible
quarterly trust preferred securities and redeemable preferred stock of
subsidiary and excludes the equity of discontinued operations at December 31,
2000. This decrease was primarily driven by the repayment of debt as well as
increased equity.

In addition, included in debt of continuing operations are approximately $5.8
billion of notes, which are exchangeable into or collateralized by securities we
own. Excluding this debt, the debt ratio for AT&T's continuing operations at
September 30, 2001 was 42.0%.


RISK MANAGEMENT

We are exposed to market risk from changes in interest and foreign exchange
rates. 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.

Assuming a 10% downward shift in interest rates at September 30, 2001, the fair
value of unhedged debt would have increased by approximately $1.4 billion.


NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, "Business Combinations," which supercedes Accounting Principles Board (APB)
Opinion No. 16. SFAS No. 141 requires all business combinations initiated after
June 30, 2001 be accounted for under the purchase method. In addition, SFAS No.
141 establishes criteria for the recognition of intangible assets separately
from goodwill. These requirements are effective for fiscal years beginning after
December 15, 2001, which for AT&T means January 1, 2002. AT&T does not expect
that the adoption of SFAS No. 141 will have a material effect on AT&T's results
of operations, financial position or cash flows.

Also in July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which supercedes APB Opinion No. 17. Under SFAS No. 142, goodwill and
indefinite lived intangible assets will no longer be amortized, but rather will
be tested for impairment upon adoption and at least annually thereafter. In
addition, the amortization period of intangible assets with finite lives will
no longer be limited to 40 years. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001, which for AT&T means the standard will be
adopted on January 1, 2002. In connection with the adoption of this standard,
AT&T's unamortized goodwill balance will no longer be amortized, but will
continue to be tested for impairment. Therefore, we expect that this standard
will have a significant impact on our future operating results. We are
assessing the impact of the standard on other indefinite lived assets and the
total impact, including adoption impairment impacts, if any, of such standard
on our results of operations.
<PAGE>
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This standard requires that obligations associated with the
retirement of tangible long-lived assets be recorded as liabilities when those
obligations are incurred, with the amount of the liability initially measured
at fair value. Upon initially recognizing a liability for an asset retirement
obligation, an entity must capitalize the cost by recognizing an increase in
the carrying amount of the related long-lived asset. Over time, this liability
is accreted to its present value, and the capitalized cost is depreciated over
the useful life of the related asset. Upon settlement of the liability, an
entity either settles the obligation for its recorded amount or incurs a gain
or loss upon settlement. SFAS No.143 is effective for financial statements
issued for fiscal years beginning after June 15, 2002, which for AT&T means the
standard will be adopted on January 1, 2003. AT&T does not expect that the
adoption of this statement will have a material impact on AT&T's results of
operations, financial position or cash flows.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which supercedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." SFAS No. 144 applies to all long-lived assets, including discontinued
operations, and consequently amends APB 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."
Based on SFAS No. 121, SFAS No. 144 develops one accounting model for long-lived
assets that are to be disposed of by sale, as well as addresses the principal
implementation issues. SFAS No. 144 requires that long-lived assets that are to
be disposed of by sale be measured at the lower of book value or fair value less
cost to sell. Additionally, SFAS No. 144 expands the scope of discontinued
operations to include all components of an entity with operations that (1) can
be distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. SFAS No. 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001, which for AT&T means the standard will be adopted on January
1, 2002. AT&T does not expect that the adoption of SFAS No. 144 will have a
material impact on AT&T's results of operations, financial position or cash
flows.


SUBSEQUENT EVENT

On October 23, 2001, AT&T sold approximately 19.2 million shares of Cablevision
NY Group Class A common stock and, through a trust, 23.4 million shares of a
mandatorily exchangeable trust security that will be exchangeable into up to
23.4 million shares of Cablevision NY Group Class A common stock at maturity in
three years. The offering price was $36.05 per share for both the common shares
and the exchangeable securities. The offerings generated approximately $1.3
billion of pretax proceeds, net of underwriting fees. The sale resulted in a
pretax loss of approximately $0.2 billion. In addition, the underwriters' have
exercised a portion of their over-allotment options, which resulted in the sale
of an additional 3.5 million shares of the exchangeable securities through the
trust. AT&T received additional proceeds of approximately $0.1 billion from this
transaction.
<PAGE>
                           PART II - OTHER INFORMATION


Item 2. Changes in Securities

         As previously reported in this Form 10-Q, AT&T redeemed the AT&T
         Wireless Group and Liberty Media Group tracking stocks in accordance
         with their terms. In addition, in conjunction with the split-off of
         ATT&T Wireless Group, the convertible preferred stocks were converted
         into AT&T Wireless common stock at the option of NTT DoCoMo.

Item 6. Exhibits and Reports on Form 8-K.

(a)           Exhibits

              Exhibit Number

              12       Computation of Ratio of Earnings to Fixed Charges


(b)            Reports on Form 8-K

               Form 8-K dated July 8, 2001 was filed pursuant to Item 5 and Item
               7 on July 19, 2001. Form 8-K dated July 9, 2001 was filed
               pursuant to Item 2, Item 5 and Item 7 was filed on July 24, 2001.
               Form 8-K dated September 24, 2001 was filed pursuant to Item 5
               and Item 7 on September 24, 2001.
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                   AT&T Corp.



                                   /s/ N. S. Cyprus
                                   ------------------------------
                                   By:  N. S. Cyprus
                                        Vice President and Controller
                                       (Principal Accounting Officer)



Date:  November 13, 2001
<PAGE>
                                  Exhibit Index


<TABLE>
<CAPTION>
Exhibit
Number
<S>             <C>
12              Computation of Ratio of Earnings to Fixed Charges
</TABLE>