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, 1999

                                       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, 1999, the following shares of stock were outstanding:

         AT&T common stock - 3,195,346,865 shares
         Liberty Media Group Class A tracking stock - 1,156,753,606 shares
         Liberty Media Group Class B tracking stock - 108,421,114 shares

<PAGE>

                                                         AT&T Form 10-Q - Part I

                         PART I - FINANCIAL INFORMATION
                       CONSOLIDATED STATEMENTS OF INCOME
                 (Dollars in Millions Except Per Share Amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                 For the Three     For the Nine
                                                 Months Ended      Months Ended
                                                 September 30,     September 30,
                                                 1999     1998     1999     1998
<S>                                           <C>      <C>      <C>      <C>
Revenues...................................   $16,270  $13,653  $46,057  $39,695

Operating Expenses
Access and other interconnection...........     3,654    3,819   11,054   11,649
Network and other communications services..     3,869    2,648   10,515    7,746
Amortization of goodwill, franchise costs
 and other purchased intangibles...........       358       62      900      188
Depreciation and other amortization........     1,558    1,139    4,408    3,213
Selling, general and administrative........     3,442    3,146   10,060    9,771
Restructuring and other charges, net.......         -     (517)     702    2,827
Total operating expenses...................    12,881   10,297   37,639   35,394

Operating income ..........................     3,389    3,356    8,418    4,301

Equity losses from Liberty Media Group.....       217        -      818        -
Other income (expense).....................      (409)     156     (334)   1,169
Interest expense...........................       459      114    1,108      322
Income from continuing operations
 before income taxes.......................     2,304    3,398    6,158    5,148
Provision for income taxes.................       888    1,275    2,679    1,901
Income from continuing operations..........     1,416    2,123    3,479    3,247
Income from discontinued operations
 (net of taxes of $6)......................         -        -        -       10
Gain on sale of discontinued operations
 (net of taxes of $799)....................         -        -        -    1,290
Income before extraordinary loss ..........     1,416    2,123    3,479    4,547
Extraordinary loss (net of taxes of $80)...         -      137        -      137

Net income.................................   $ 1,416  $ 1,986  $ 3,479  $ 4,410

Per AT&T common share - basic:
 Income from continuing operations.........   $  0.51  $  0.79 $   1.41  $  1.21
 Income from discontinued
operations.......                                   -        -        -        -
 Gain on sale of discontinued operations...         -        -        -     0.48
 Extraordinary loss........................         -     0.05        -     0.05
 Net income................................   $  0.51  $  0.74  $  1.41  $  1.64

Per AT&T common share - diluted:
 Income from continuing operations.........   $  0.50  $  0.78  $  1.39  $  1.20
 Income from discontinued operations.......         -        -        -        -
 Gain on sale of discontinued operations...         -        -        -     0.47
 Extraordinary loss........................         -     0.05        -     0.05
 Net income................................   $  0.50  $  0.73  $  1.39  $  1.62

Dividends declared per AT&T common share...   $  0.22  $  0.22  $  0.66  $  0.66

Liberty Media Group loss per share:
 Basic and diluted.........................   $  0.17  $     -  $  0.65  $     -
</TABLE>


              See Notes to Consolidated Financial Statements

<PAGE>

                                                         AT&T Form 10-Q - Part I
<TABLE>
                           CONSOLIDATED BALANCE SHEETS
                   (Dollars in Millions Except Share Amounts)
                                   (Unaudited)
<CAPTION>
                                                    September 30,   December 31,
                                                           1999           1998
<S>                                                    <C>             <C>
ASSETS

Cash and cash equivalents ...........................  $      -        $ 3,160

Receivables, less allowances of $1,488 and $1,060....    10,629          9,055

Deferred income taxes................................     1,638          1,310

Other current assets.................................       773            593

TOTAL CURRENT ASSETS.................................    13,040         14,118

Property, plant and equipment, net of accumulated
  depreciation of $28,886 and $25,374................    36,475         26,903

Franchise costs, net of accumulated amortization
  of $509............................................    32,122              -

Licensing costs, net of accumulated amortization
  of $1,430 and $1,266...............................     8,353          7,948

Goodwill, net of accumulated amortization of
  $304 and $226......................................     7,214          2,205

Investment in Liberty Media Group and related
  receivables, net...................................    35,519              -

Other investments....................................    20,211          4,434

Prepaid pension costs................................     2,364          2,074

Other assets.........................................     6,508          1,868

TOTAL ASSETS.........................................  $161,806        $59,550
</TABLE>
                                    (CONT'D)

<PAGE>

                                                         AT&T Form 10-Q - Part I
<TABLE>
                       CONSOLIDATED BALANCE SHEETS (CONT'D)
                   (Dollars in Millions Except Share Amounts)
                                   (Unaudited)
<CAPTION>
                                                    September 30,   December 31,
                                                           1999         1998
<S>                                                    <C>           <C>
LIABILITIES

Accounts payable.....................................  $  5,915      $ 6,226
Payroll and benefit-related liabilities..............     2,278        1,986
Debt maturing within one year........................     8,856        1,171
Dividends payable....................................       703          581
Other current liabilities............................     5,763        5,478

TOTAL CURRENT LIABILITIES............................    23,515       15,442

Long-term debt.......................................    22,073        5,556
Long-term benefit-related liabilities................     4,248        4,255
Deferred income taxes................................    24,708        5,453
Other long-term liabilities and deferred credits.....     3,752        3,213

TOTAL LIABILITIES ...................................    78,296       33,919

Minority Interest in Equity of Consolidated
  Subsidiaries.......................................     2,401          109

Company-Obligated Convertible Quarterly Income
  Preferred Securities of Subsidiary Trust Holding
  Solely Subordinated Debt Securities of AT&T........     4,697            -

Subsidiary-Obligated Mandatorily Redeemable Preferred
  Securities of Subsidiary Trusts Holding Solely
  Subordinated Debt Securities of an AT&T
  Subsidiary.........................................     1,649            -

SHAREOWNERS' EQUITY
Common Stock:
AT&T Common Stock, $1 par value,  authorized
  6,000,000,000  shares;  issued and outstanding
  3,195,633,438  shares  (net of  287,528,136  treasury
  shares) at September  30,  1999 and  2,630,391,784
  shares (net of  80,222,341 treasury shares) at
  December 31, 1998..................................     3,196        2,630
Liberty Media Group Class A Tracking Stock, $1 par
  value, authorized 2,500,000,000 shares; issued
  and outstanding 1,156,751,950 shares at
  September 30, 1999.................................     1,157            -
Liberty Media Group Class B Tracking Stock, $1 par
  value, authorized 250,000,000 shares; issued
  and outstanding 108,421,708 shares at
  September 30, 1999.................................       108            -
Additional Paid-in Capital:
  AT&T Common Stock..................................    27,506       15,195
  Liberty Media Group Stock..........................    32,663            -
Guaranteed ESOP obligation...........................       (17)         (44)
Retained Earnings (Accumulated Deficit):
  AT&T Common Stock..................................     8,409        7,800
  Liberty Media Group Stock..........................      (818)           -
Accumulated other comprehensive income...............     2,559          (59)
TOTAL SHAREOWNERS' EQUITY............................    74,763       25,522

TOTAL LIABILITIES & SHAREOWNERS' EQUITY..............  $161,806      $59,550
</TABLE>

                 See Notes to Consolidated Financial Statements

<PAGE>
                                                         AT&T Form 10-Q - Part I
<TABLE>
<CAPTION>
Consolidated Statement of Shareowners' Equity                                                         (Dollars in Millions)
For the nine months ended September 30, 1999  (Unaudited)
                                                                                                  Accumulated   Total  Total
                                                       Additional      Guaranteed                  Other Comp-  Share- Compre-
                                                         Paid-in           ESOP       Retained      rehensive  owners  hensive
                          Common Shares                 Capital         Obligation    Earnings         Income  Equity  Income
                    AT&T     Liberty      Liberty     AT&T     Liberty             AT&T     Liberty
                   Common  Media Group  Media Group  Common  Media Group          Common  Media Group
                    Stock    Class A      Class B     Stock     Stock              Stock     Stock
                            Tracking     Tracking
                             Stock        Stock
<S>                <C>      <C>            <C>      <C>        <C>        <C>    <C>         <C>     <C>     <C>      <C>
Balance at
 Jan. 1, 1999      $2,630       -            -      15,195         -      (44)    7,800         -      (59)  $25,522
Shares issued
 (acquired), net:
   For employee plans   -       -            -          37         -        -         -         -        -        37
   For acquisitions*  565   1,140          110      11,359    32,265        -         -         -        -    45,439
   Other                1      17           (2)          -       339                                             355
Common stock warrants
 issued                 -       -            -         306         -        -         -         -        -       306
Gain on issuance of
 common stock by
 affiliates             -       -            -         484        50        -         -         -        -       534
Amortization            -       -            -           -         -       27         -         -        -        27
Net income (loss)       -       -            -           -         -        -     4,297      (818)       -     3,479  $3,479
Dividends
 declared               -       -            -           -         -        -    (2,104)        -        -    (2,104)
Treasury shares
 issued at less
 than cost              -       -            -           -         -        -    (1,584)        -        -    (1,584)
Other                   -       -            -         125         9        -         -         -                134
Other
 comprehensive
 income (net of
 taxes of $1,695)**     -       -            -           -         -        -         -         -    2,618     2,618   2,618
Balance at September
 30, 1999          $3,196   1,157          108      27,506    32,663      (17)    8,409      (818)   2,559   $74,763  $6,097
<FN>
    * AT&T accounts for treasury  stock as retired  stock,  and at September 30,
    1999, had 288 million treasury shares of which 216 million shares were owned
    by  Tele-Communications,  Inc.  (TCI)  subsidiaries  and 70  million  shares
    related to the  purchase of AT&T  shares  previously  held by Liberty  Media
    Group. ** Includes $2,408 ($3,974 pretax) of other comprehensive  income for
    Liberty Media Group.
</FN>
</TABLE>
                 See Notes to Consolidated Financial Statements

<PAGE>

                                                         AT&T Form 10-Q - Part I
<TABLE>
<CAPTION>
Consolidated Statement of Shareowners' Equity (Dollars in Millions) For the nine
months ended September 30, 1998 (Unaudited)

                                     AT&T         AT&T                      Accumulated
                        AT&T      Additional   Guaranteed       AT&T           Other          Total         Total
                       Common      Paid-in        ESOP        Retained     Comprehensive   Shareowners'  Comprehensive
                        Stock       Capital     Obligation    Earnings         Income         Equity        Income
<S>                    <C>          <C>           <C>           <C>              <C>         <C>            <C>
Balance at
 Jan. 1, 1998          $2,684       17,121        (70)          3,981            (38)        $23,678
Shares issued
 (acquired), net:
  For employee plans        3           65          -               -              -              68
  For acquisition         (56)      (2,110)         -               -              -          (2,166)
Amortization                -            -         26               -              -              26
Net income                  -            -          -           4,410              -           4,410        $4,410
Dividends
 declared                   -            -          -          (1,651)             -          (1,651)
Treasury shares
 issued at less
 than cost                  -            -          -            (289)             -            (289)
Other changes               -           94          -              21              -             115
Other
 comprehensive
 income (net of
 taxes of $57)              -            -          -               -            (28)            (28)          (28)
Balance at September
 30, 1998              $2,631       15,170        (44)          6,472            (66)        $24,163        $4,382
</TABLE>
    See Notes to Consolidated Financial Statements
<PAGE>

                                                         AT&T Form 10-Q - Part I

<TABLE>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Dollars in Millions)
                                   (Unaudited)
<CAPTION>
                                                   For the Nine
                                                   Months Ended
                                                   September 30,
                                                  1999      1998
<S>                                            <C>       <C>
Operating Activities
Net income...................................  $ 3,479   $ 4,410
Deduct: Income from discontinued
          operations.........................        -        10
        Gain on sale of discontinued
          operations.........................        -     1,290
Add:    Extraordinary loss on retirement
          of debt............................        -       137
Income from continuing operations............    3,479     3,247
Adjustments to reconcile net income to
  net cash provided by operating
  activities of continuing operations:
   Restructuring and other charges, net......      581     2,732
   Gains on sales............................     (351)     (770)
   Depreciation and amortization.............    5,308     3,401
   Provision for uncollectibles..............    1,077     1,050
   Equity losses from Liberty Media Group....      818         -
   Increase in accounts receivable...........   (2,529)   (1,414)
   Decrease in accounts payable..............     (318)     (366)
   Net decrease in other operating assets
     and liabilities.........................   (1,535)      (78)
 Other adjustments...........................      707      (804)

Net cash provided by operating
  activities of continuing operations........    7,237     6,998

Investing Activities
  Capital expenditures.......................   (8,770)   (5,136)
  Proceeds from sale or disposal of
    property, plant and equipment............      192        56
  Decrease in other receivables..............       11     6,403
  Net dispositions (acquisitions) of
    licenses.................................        1       (53)
  Sales of marketable securities.............        -     2,003
  Purchases of marketable securities.........        -    (1,696)
  Equity investment distributions and sales..      936     1,272
  Equity investment contributions and
    purchases................................   (6,878)      (86)
  (Acquisitions) dispositions of businesses
    including cash acquired in acquisitions..   (6,830)    4,119
  Other investing activities, net............      (15)      (74)

Net cash (used in) provided by investing
  activities of continuing operations........  (21,353)    6,808
</TABLE>
                                    (CONT'D)
<PAGE>
                                                         AT&T Form 10-Q - Part I
<TABLE>
                 CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
                              (Dollars in Millions)
                                   (Unaudited)
<CAPTION>
                                                   For the Nine
                                                   Months Ended
                                                   September 30,
                                                  1999      1998
<S>                                             <C>       <C>
Financing Activities
  Proceeds from long-term debt issuance.....     8,396        17
  Retirements of long-term debt.............    (2,124)   (2,230)
  Issuance of convertible securities........     4,638         -
  Issuance of common shares.................         -        32
  Acquisition of treasury shares............    (4,476)   (3,235)
  Dividends paid on common stocks...........    (2,009)   (1,608)
Increase (decrease) in short-term
    borrowings, net.........................     6,313    (3,030)
  Other financing activities, net...........       218        28

Net cash provided by (used in) financing
  activities of continuing operations.......    10,956   (10,026)

Net cash provided by discontinued
  operations................................         -        92

Net (decrease) increase in cash and
  cash equivalents..........................    (3,160)    3,872

Cash and cash equivalents
  at beginning of year......................     3,160       318

Cash and cash equivalents
  at end of period..........................   $     -   $ 4,190
</TABLE>
                 See Notes to Consolidated Financial Statements
<PAGE>

                                                         AT&T Form 10-Q - Part I

                   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 statement
              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, 1998, and
              AT&T's  previously  filed  Forms  10-Q.  AT&T's  Form 10-Q for the
              period ended June 30,  1999,  includes  the  financial  results of
              Liberty Media Group (LMG) and  Tele-Communications  Inc. (TCI) for
              the period  ended June 30,  1999,  attached as  exhibits  thereto.
              AT&T's Form 10-Q for the period ended March 31, 1999, includes the
              financial  results of LMG for the  period  ended  March 31,  1999,
              attached as an exhibit thereto.  These financial statements should
              also be read in  conjunction  with  TCI's  Form  10-K for the year
              ended  December  31, 1998,  TCI's Form 10-Q for the quarter  ended
              March 31, 1999, the financial statements of LMG for the year ended
              December 31, 1998,  included in AT&T's Form 8-K filed on March 22,
              1999, and the financial  statements of LMG and TCI for the quarter
              and  year-to-date  periods ended  September 30, 1999,  included as
              Exhibits  99.1 and  99.2,  respectively,  to this  AT&T  quarterly
              report on Form 10-Q.

              We have  reclassified  certain prior period  amounts to conform to
              our current  presentation  and have  restated  share and per share
              information  to reflect the first  quarter  three for two split of
              AT&T's common stock and the second quarter two for one stock split
              of Liberty Media Group tracking stock.

(b)           MERGER WITH TCI
              The merger with TCI (renamed AT&T broadband and Internet  services
              or  "AB&IS")  was  completed  on March 9,  1999,  in an  all-stock
              transaction  valued at  approximately  $52  billion.  AT&T  issued
              approximately  664  million  shares  of AT&T  common  stock in the
              transaction,  of which  approximately  149 million  were  treasury
              shares.  Also in the first quarter of 1999 in connection  with the
              merger  and the  formation  of LMG from TCI's  former  programming
              business  and  technology  investments  business,  AT&T  issued  a
              separate  tracking stock designed to reflect the separate economic
              performance  of LMG.  A total of 1,080  million  shares of Class A
              Liberty Media Group Tracking Stock and 110 million shares of Class
              B Liberty  Media Group  Tracking  Stock were issued by AT&T.  AT&T
              also  issued an  additional  60 million  shares of Class A Liberty
              Media Group  Tracking  Stock in connection  with the conversion of
              certain convertible notes.

<PAGE>

                                                         AT&T Form 10-Q - Part I

              AT&T does not have a controlling  financial interest for financial
              accounting purposes in LMG, therefore AT&T's investment in LMG has
              been reflected as an equity method  investment in the accompanying
              consolidated financial statements. The amounts attributable to LMG
              are reflected in separate  line items "Equity  losses from Liberty
              Media Group" and  "Investment  in Liberty  Media Group and related
              receivables,  net",  in the  accompanying  consolidated  financial
              statements.  As a separate  tracking stock, all of the earnings or
              losses related to LMG are excluded from the earnings  available to
              the holders of AT&T common  stock.  AB&IS' cable and certain other
              operations,   including   its   ownership   interest  in  At  Home
              Corporation  were combined  with the existing  AT&T  operations to
              form the AT&T common stock group (AT&T Group).

              The merger was recorded as a purchase.  Accordingly, the operating
              results  of  AB&IS  have  been   included   in  the   accompanying
              consolidated  financial statements since March 1, 1999, the deemed
              effective date of acquisition for accounting purposes.  The impact
              of the  results  from March 1,  1999,  through  March 9, 1999,  is
              deemed  immaterial to our  consolidated  results.  The $52 billion
              aggregate  value  assigned to AB&IS' net assets was  comprised  of
              AT&T common stock of $27  billion,  Liberty  Media Group  tracking
              stock of $23 billion,  and  assumption  of  convertible  notes and
              preferred stock of $2 billion.

              As a result of the ongoing appraisal process, in the third quarter
              of 1999  approximately  $19 billion of the  purchase  price of $52
              billion has been allocated to a franchise  intangible and is being
              amortized  on a  straight-line  basis over 40 years.  Pursuant  to
              Financial  Accounting  Standards Board (SFAS) No. 109, "Accounting
              for Income  Taxes",  AT&T  recorded  an  approximate  $12  billion
              deferred  tax   liability  in  connection   with  this   franchise
              intangible which resulted in an increase to franchise costs. We do
              not expect that this  deferred  tax  liability  will ever be paid.
              This deferred tax liability is being  amortized on a straight-line
              basis over 40 years and is  included in the  provision  for income
              taxes.  Prior quarters'  amortization  and income tax expense have
              been  reclassified  for this  change  which  caused a decrease  to
              AT&T's  previously  reported 1999 effective tax rates. The benefit
              to the  provision  for income  taxes is offset by an  increase  in
              amortization  of franchise  costs which is recorded as a component
              of amortization  of goodwill,  franchise costs and other purchased
              intangibles,   resulting  in  no  impact  to  net  income.   Also,
              approximately  $11 billion of goodwill related to LMG was recorded
              as  part  of  our   investment   and  is  being   amortized  on  a
              straight-line  basis  over  20  years  as a  component  of  equity
              earnings  (losses)  from  Liberty  Media Group.  Approximately  $2
              billion of goodwill  related to our investment in Excite@Home  was
              recorded  in  other  investments  and  is  being  amortized  on  a
              straight-line basis over 7 years.

<PAGE>

                                                         AT&T Form 10-Q - Part I

              Following is a summary of the pro forma  results of AT&T as if the
              merger had closed effective January 1, 1998:
<TABLE>
<CAPTION>
                                                                Nine
                                                            Months Ended
                                                            September 30,
                                                           1999     1998
              <S>                                       <C>      <C>
              Revenues                                  $46,998  $44,370

              Income from continuing operations           2,896    1,732
              Income from continuing operations,
                available to AT&T Group shareowners       3,937    2,687
              Income from continuing operations,
                available to Liberty Media Group
                shareowners                              (1,041)    (955)
              Net income                                  2,896    2,895
              Income available to AT&T Group
                shareowners                               3,937    3,850
              Income available to Liberty Media
                Group shareowners                        (1,041)    (955)

              Weighted-average AT&T common shares
                (millions)                                3,177    3,144
              Weighted-average AT&T common shares
                and potential common shares
                (millions)                                3,288    3,248
              Weighted-average Liberty Media Group
                shares (millions)                         1,257    1,190

              Basic earnings per AT&T common share:
                Income from continuing operations       $  1.24  $  0.85
                Total income                            $  1.24  $  1.22
              Diluted earnings per AT&T common share:
                Income from continuing operations       $  1.22  $  0.83
                Total income                            $  1.22  $  1.19

              Basic and diluted loss per Liberty
                Media Group share                       $  0.82  $  0.80
</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>

                                                         AT&T Form 10-Q - Part I

(c)           OTHER MERGERS, ACQUISITIONS AND VENTURES
              On April 30,  1999,  AT&T  completed  its  acquisition  of the IBM
              Global Network  business  (renamed AT&T Global Network Services or
              "AGNS") and its assets in the United  States.  The  acquisition is
              occurring  in  phases  throughout  1999 as  legal  and  regulatory
              requirements  are met in each of the 59  countries  in  which  the
              business  operates.  As of the end of the  third  quarter,  we had
              completed  acquisitions  representing  approximately  95%  of  the
              revenues   generated  by  businesses   which  comprise  AGNS.  The
              acquisition has been accounted for as a purchase. Accordingly, the
              operating  results of AGNS have been included in the  accompanying
              consolidated  financial  statements since the date of acquisition.
              Intangible assets of approximately $4.1 billion including customer
              lists and the excess of the purchase  price over the fair value of
              net assets acquired are being  amortized on a straight-line  basis
              over periods  ranging from five to 30 years.  The pro forma impact
              of AGNS on historical AT&T results are not material.

              On  May  28,  1999,  At  Home  Corporation  consummated  a  merger
              agreement  with Excite,  Inc.  (Excite),  a global  Internet media
              company  that  offers  consumers  and  advertisers   comprehensive
              Internet  navigation   services  with  extensive   personalization
              capabilities.  Under the terms of the  merger  agreement,  At Home
              Corporation issued  approximately 116 million shares of its common
              stock for all of the  outstanding  common  stock of  Excite.  As a
              result,   AT&T's   economic   interest  in  At  Home   Corporation
              (Excite@Home)  decreased from 38% to 26% following the merger. Due
              to the  resulting  increase  in  Excite@Home's  equity  after  the
              merger,  net of the  dilution  of  AT&T's  ownership  interest  in
              Excite@Home,  AT&T  recorded  an increase  to  additional  paid-in
              capital of $488 at September  30, 1999.  In the fourth  quarter of
              1999,  Excite@Home  agreed  to  acquire  an online  greeting  card
              company.   Upon  completion  of  that  merger,  AT&T  will  record
              additional  amounts to its additional paid-in capital as the share
              of its ownership of Excite@Home is diluted. At September 30, 1999,
              AT&T owned 94.5 million shares of Excite@Home common stock and has
              an approximate 58% voting interest on certain matters.

<PAGE>

                                                         AT&T Form 10-Q - Part I

              On August 2, 1999,  AT&T  completed  its  acquisition  of Honolulu
              Cellular Telephone Company from BellSouth.

              In  August  1999,  AT&T and  British  Telecommunications  plc (BT)
              jointly   acquired  a  33.3%   stake  in  Rogers   Cantel   Mobile
              Communications  Inc.  (Rogers Cantel) in Canada for  approximately
              $934 in cash.  The  investment  is owned  equally  by AT&T and BT.
              Rogers  Cantel is  Canada's  largest  mobile  company  serving two
              million  customers from coast to coast.  Rogers Cantel  provides a
              complete range of wireless solutions  including  cellular,  paging
              and interactive messaging,  digital PCS and wireless data services
              marketed under the co-brand Cantel AT&T. Also in August 1999, AT&T
              sold 30% of its 31%  ownership  interest  in AT&T Canada to BT for
              approximately  $402  resulting  in a $110  pretax  gain  and a 22%
              beneficial  ownership by AT&T. AT&T and BT both contributed  their
              ownership  interest of AT&T Canada to a joint  venture that is 70%
              owned by AT&T and 30% owned by BT.

              On  September  2, 1999,  AT&T and BT acquired a 30% stake in Japan
              Telecom for $1.83 billion.

              The previously  announced  global venture  between AT&T and BT has
              received  approval  from  the  Federal  Communications  Commission
              (FCC),  the U.S. Justice  Department and the European  Commission.
              The  venture,   which  will  be  called   Concert,   will  combine
              transborder  assets and  operations  of each  company  and will be
              equally owned by both companies when operations begin. The venture
              is expected to be completed  in the fourth  quarter of 1999 and to
              begin operations on January 1, 2000.

<PAGE>

                                                         AT&T Form 10-Q - Part I
(d)           DEBT OFFERING
              On September  14, 1999, we completed a $450  all-minority  led and
              underwritten  bond  offering  in  connection  with a  registration
              statement  filed  with  the SEC on  January  26,  1999.  The  bond
              offering  consisted of  three-year  notes due  September 15, 2002,
              with a coupon rate of 6.5%. The proceeds were utilized for general
              corporate purposes.

              On October 30, 1999, we redeemed $350 of long-term  debt which was
              funded with cash from  operations.  The early  redemption  did not
              have a material impact on our financial results.

(e)           RESTRUCTURING AND OTHER CHARGES, NET
              Restructuring  and other  charges,  net for the three months ended
              September 30, 1998 were a net benefit of $517 pretax.  The benefit
              was  primarily  related  to a  $602  pretax  gain  related  to the
              settlement  of  pension   obligations  for  former  employees  who
              accepted  AT&T's  voluntary  retirement  incentive  program (VRIP)
              offer,  partially  offset by $85 of expenses  associated  with the
              merger with Teleport Communications Group Inc. (TCG), which closed
              in the third quarter of 1998.

              Restructuring   and  other  charges  for  the  nine  months  ended
              September 30, 1999, were $702 pretax.  Included in the $702 was an
              in-process  research  and  development  charge of $594  related to
              AB&IS as well as a $128 net charge  primarily  related to the exit
              of certain joint  ventures that would have competed  directly with
              Concert.  Additionally,  a $50 charge was  recorded  in the second
              quarter  related to a  contribution  agreement  AB&IS entered into
              with Phoenixstar,  Inc. (formerly Primestar,  Inc.). To the extent
              necessary,  AB&IS is required to satisfy  certain  liabilities  of
              Phoenixstar  owed  by  Phoenixstar  and  its  subsidiaries.  These
              charges  were  partially  offset  by a $70  gain  related  to  the
              settlement  of  pension   obligations  for  former  employees  who
              accepted AT&T's VRIP offer.

              Restructuring  and other  charges,  net, for the nine months ended
              September 30, 1998, were $2,827 pretax. The charge is comprised of
              a first quarter 1998 pretax charge of $601 which resulted from the
              decision not to pursue  Total  Service  Resale as a  local-service
              strategy,  a second  quarter  $2,743 net pretax  charge  primarily
              related to AT&T's  VRIP  offer,  and the third  quarter net pretax
              benefit as noted above.

<PAGE>

                                                         AT&T Form 10-Q - Part I

(f)           EARNINGS PER COMMON SHARE AND POTENTIAL COMMON SHARE
              Basic  earnings  per share  (EPS) for AT&T Group for the three and
              nine months ended  September  30, 1999 and 1998,  were computed by
              dividing income  attributable to AT&T Group common  shareowners by
              the  weighted-average  number of common shares outstanding of AT&T
              Group during the period.

              Diluted  EPS for AT&T  Group for the three and nine  months  ended
              September  30, 1999 and 1998,  was computed by dividing the income
              attributable  to AT&T Group common  shareowners,  adjusted for the
              conversion of securities, by the weighted-average number of common
              shares and dilutive  potential  common shares  outstanding of AT&T
              Group  during the period,  assuming  conversion  of the  potential
              common  shares at the beginning of the periods  presented.  Shares
              issuable  upon  conversion  of  preferred  stock of  subsidiaries,
              convertible  debt  securities  of  subsidiary,   quarterly  income
              preferred  securities,  stock options and other performance awards
              have been included in the diluted  calculation of weighted-average
              shares to the extent  that the  assumed  issuance  of such  shares
              would have been dilutive, as illustrated below.

              Income from  continuing  operations  for the three and  nine-month
              periods    ended    September    30,    1999,    of   $1,416   and
              $3,479, respectively,  include income from  continuing  operations
              attributable to AT&T Group of $1,633 and $4,297, respectively,  as
              well as losses from LMG of $217 and $818 respectively.

              A reconciliation  of the income and share components for the basic
              and diluted EPS calculations with respect to AT&T Group continuing
              operations is as follows:
<TABLE>
<CAPTION>
                                                          Three                Nine
                                                       Months Ended        Months Ended
                                                         Sept. 30,           Sept. 30,
                                                      1999     1998       1999     1998
              <S>                                   <C>      <C>        <C>      <C>
              Income from continuing
               operations attributable to AT&T
               Group                                $1,633   $2,123     $4,297   $3,247
              Income impact of assumed conversion:
               Preferred stock of subsidiary             8        -         18        -
               quarterly income preferred
               securities                               40        -         47        -
              Income from continuing
               operations attributable to AT&T
               Group adjusted for conversion of
               securities                           $1,681   $2,123     $4,362   $3,247
              AT&T Group weighted-average common
               shares (millions)                     3,195    2,686      3,045    2,692
              Stock options                             32       20         37       23
              Preferred stock of subsidiary             40        -         30        -
              Convertible quarterly income
               preferred securities                     67        -         26        -
              Convertible debt securities of
               subsidiary                                -        -          2        -
              AT&T Group weighted-average common
               shares and potential common
               shares (millions)                     3,334    2,706      3,140    2,715
</TABLE>
<PAGE>
                                                         AT&T Form 10-Q - Part I

              Basic  EPS for  LMG for the  third  quarter  of 1999  and  date of
              acquisition  through  September 30, 1999, was computed by dividing
              the income attributable to LMG shareowners by the weighted-average
              number of shares  outstanding  of LMG of 1.265  billion  and 1.257
              billion, respectively, for these periods. Since LMG had a loss for
              both periods,  the impact of any potential  shares would have been
              antidilutive,  and  therefore  are not  factored  into the diluted
              calculations.   There   were  52  million   potentially   dilutive
              securities outstanding at September 30, 1999.

              On September 27, 1999,  LMG announced  that the Board of Directors
              of AT&T  approved  the  repurchase  from time to time of up to 135
              million  shares of Liberty Media Group Class A or Class B tracking
              stock.


(g)           FINANCIAL INSTRUMENTS
              In  the  normal  course  of  business  we  use  various  financial
              instruments,   including  derivative  financial  instruments,  for
              purposes other than trading.  We do not use  derivative  financial
              instruments for speculative  purposes.  These instruments  include
              letters  of  credit,   guarantees  of  debt,  interest  rate  swap
              agreements and foreign currency exchange contracts.  Interest rate
              swap agreements and foreign currency  exchange  contracts are used
              to  mitigate   interest  rate  and  foreign  currency   exposures.
              Collateral   is   generally   not  required  for  these  types  of
              instruments.

<PAGE>

                                                         AT&T Form 10-Q - Part I

              For debt excluding  capital leases,  the carrying amounts and fair
              values were $30.6  billion  and $29.6  billion,  respectively,  at
              September 30, 1999.

 (h)          SEGMENT REPORTING
              AT&T's  results are  segmented  according to the way we manage our
              business:  business services, consumer services, wireless services
              and broadband & Internet  services.  Our existing segments reflect
              certain  managerial  changes  since  the  publication  of our 1998
              annual  results.  The  business  services  segment was expanded to
              include  the  results  of TCG and  the  business  portion  of AT&T
              WorldNet  Service;  the consumer  services segment was expanded to
              include the residential  portion of AT&T WorldNet  Service and the
              costs   associated   with  the   development   of  fixed  wireless
              technology.  All prior results have been restated to reflect these
              changes.  In  addition,   we  established  a  new  segment  called
              broadband  & Internet  services.  Broadband  &  Internet  services
              includes  the results  associated  with  traditional  analog video
              service  as  well  as new  services  such  as  Digital  Cable  and
              AT&T@Home,  a high-speed cable Internet service.  Also included in
              this segment are the  operations  associated  with  developing and
              refining the infrastructure that will support broadband telephony.

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

              REVENUES
<TABLE>
<CAPTION>
                                                          Three               Nine
                                                       Months Ended       Months Ended
                                                         Sept. 30,          Sept. 30,
                                                      1999     1998      1999     1998
              <S>                                  <C>      <C>       <C>      <C>
              Business services external revenues  $ 5,849  $ 5,746   $17,663  $16,985
              Business services internal revenues      427      229     1,110      656
               Total business services revenues      6,276    5,975    18,773   17,641
              Consumer services external revenues    5,614    5,889    16,604   17,264
              Wireless services external revenues    2,050    1,420     5,490    3,897
              Broadband & Internet services
                external revenues                    1,442        -     3,344        -

              Total reportable segments             15,382   13,284    44,211   38,802

              Other and corporate revenues (a)         888      369     1,846      893
              Total revenues                       $16,270  $13,653   $46,057  $39,695
<FN>
              (a) Included in other and  corporate  revenues  are revenues  from
              AT&T  Solutions,  international  operations  and  ventures,  other
              smaller units and the elimination of internal revenues.
</FN>
</TABLE>
<PAGE>
                                                         AT&T Form 10-Q - Part I

<TABLE>
              RECONCILIATION OF SEGMENT EARNINGS BEFORE INTEREST AND TAXES
              (EBIT) TO INCOME BEFORE INCOME TAXES
<CAPTION>
                                                         Three               Nine
                                                      Months Ended       Months Ended
                                                        Sept. 30,          Sept. 30,
                                                     1999     1998      1999     1998
              <S>                                  <C>      <C>      <C>      <C>
              Business services                    $1,537   $1,359   $ 4,563  $ 3,602
              Consumer services                     2,176    1,764     5,893    4,609
              Wireless services                        69       47        93      261
              Broadband & Internet services          (530)       -    (1,763)       -
                Total reportable segments' EBIT     3,252    3,170     8,786    8,472
              Other and corporate EBIT               (272)     342      (702)  (3,002)
              Liberty Media Group equity losses      (217)       -      (818)       -
              Interest expense                        459      114     1,108      322
                Total income before income
                  taxes                            $2,304   $3,398   $ 6,158  $ 5,148

              ASSETS
<CAPTION>
                                                    At Sept. 30, At Dec. 31,
                                                        1999       1998
              <S>                                   <C>          <C>
              Business services                     $ 23,378     $21,415
              Consumer services                        6,907       6,561
              Wireless services                       21,938      19,115
              Broadband & Internet services           55,941           -
                Total reportable segments            108,164      47,091
              All other segments                      10,521       4,165
              Corporate assets:
                Investment in Liberty Media
                  Group and related
                  receivables, net                    35,519           -
                Prepaid pension costs                  2,364       2,074
                Deferred taxes                         1,188       1,156
                Other corporate assets                 4,050       5,064
              Total assets                          $161,806     $59,550
</TABLE>
<PAGE>

                                                         AT&T Form 10-Q - Part I
(i)           SUBSEQUENT EVENTS
              On  October 6, 1999,  AT&T and Dobson  Communications  Corporation
              (Dobson)  announced  the  signing  of a  definitive  agreement  to
              acquire  American  Cellular  Corporation  through a newly  created
              joint venture for $2.32 billion.  Dobson will be  responsible  for
              day to day management of the joint venture,  which will be equally
              owned and jointly  controlled by Dobson and AT&T. The  acquisition
              will be funded with  non-recourse  bank debt by the joint  venture
              and cash equity  contributions  of up to $370 from each of the two
              partners.  The Board of  Directors  of AT&T,  Dobson and  American
              Cellular have approved the transaction. The acquisition,  which is
              expected  to close in the first  quarter  of 2000,  is  subject to
              approval by American  Cellular's  shareowners,  as well as federal
              regulatory and certain other conditions.

              On  October  21,  1999,   shareowners  of  MediaOne  Group,   Inc.
              (MediaOne)  unanimously  voted  in favor  of the  proposed  merger
              between  AT&T  and  MediaOne,  pursuant  to  a  definitive  merger
              agreement  entered  into on May 6, 1999.  In  accordance  with the
              agreement,  AT&T will purchase each share of MediaOne common stock
              for $85.00 per share  consisting of 0.95 of a share of AT&T common
              stock plus $30.85 in cash. In addition, the agreement provides for
              an increase in the amount of cash  received  per share of MediaOne
              common  stock to the extent that AT&T's  stock price was less than
              $57.00  per  share.  The  additional  amount of cash  which may be
              received  is  limited  to $5.42  per  share.  AT&T  plans to issue
              approximately 613 million shares in the transaction.  Upon receipt
              of regulatory and other approvals, the merger is expected to close
              in the first quarter of 2000.

              On November 1, 1999, AT&T announced its plans to form a new public
              company,  to be named  AT&T  Latin  America,  that will  merge the
              operations of Netstream,  the competitive  local exchange  company
              AT&T is  acquiring  in Brazil,  and  FirstCom,  a publicly  traded
              company with competitive  telecommunications  operations in Chile,
              Columbia and Peru.  AT&T,  together  with Promon  Tecnologia,  its
              Brazilian partner, will contribute Netstream and $70 in cash. AT&T
              will own approximately 60% of the company,  owning Class B shares,
              with 10 votes per share. The transaction has been approved by both
              AT&T's  and  FirstCom's  Board  of  Directors.  Upon  approval  by
              FirstCom  shareowners as well as regulatory  and other  approvals,
              the transaction is expected to close in the first quarter of 2000.
              AT&T  Latin  America  intends  to apply for  listing on the NASDAQ
              stock market.

              On November 5, 1999,  WORLDxCHANGE  Communications  announced  the
              acquisition  of ACC in  Europe  (ACC)  from  AT&T.  The  agreement
              includes ACC's principal operations in the United Kingdom, as well
              as ACC's operating  companies in France,  Germany and Italy.  AT&T
              believes it will record a pretax loss in the range of $150 to $200
              on the sale.

<PAGE>

                                                         AT&T Form 10-Q - Part I

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

OVERVIEW
The merger with  Tele-Communications,  Inc.  (TCI,  renamed AT&T  broadband  and
Internet  services or "AB&IS") was  completed on March 9, 1999,  in an all stock
transaction valued at approximately $52 billion.  AT&T issued  approximately 664
million shares of AT&T common stock in the transaction,  of which  approximately
149 million shares were treasury shares.  Also in connection with the merger and
the  formation  of Liberty  Media  Group  (LMG) from  TCI's  former  programming
business and technology  investments  business,  AT&T issued a separate tracking
stock designed to reflect the separate  economic  performance of LMG. A total of
1,080  million  shares of Class A Liberty  Media  Group  Tracking  Stock and 110
million  shares of Class B Liberty  Media  Group  Tracking  Stock were issued by
AT&T.  AT&T  issued an  additional  60  million  shares in  connection  with the
conversion  of  certain  convertible  notes.  AT&T  does not have a  controlling
financial  interest for financial  accounting  purposes in LMG, therefore AT&T's
investment  in LMG has been  reflected  as an equity  method  investment  in the
accompanying consolidated financial statements.  The amounts attributable to LMG
are reflected in separate  line items  "Equity  losses from Liberty Media Group"
and  "Investment  in Liberty  Media Group and related  receivables,  net" in the
accompanying  consolidated  financial statements.  As a separate tracking stock,
all of the  earnings or losses  related to LMG are  excluded  from the  earnings
available to the holders of AT&T common stock.

The merger was recorded as a purchase.  Accordingly,  the  operating  results of
AB&IS have been included in the accompanying  consolidated  financial statements
since the date of acquisition. For accounting purposes the deemed effective date
of the acquisition is March 1, 1999,  since the impact of the results from March
1,  1999,  through  March 9,  1999,  is deemed  immaterial  to our  consolidated
results.  AB&IS' cable and certain  other  operations,  including  its ownership
interest in At Home Corporation (Excite@Home),  but excluding LMG, were combined
with the existing  operations  of AT&T to form the AT&T Common Stock Group (AT&T
Group).

We segment  our  results  based on how we manage  our  business.  The  following
businesses comprise AT&T Group: business services, consumer services,  broadband
& Internet services and wireless  services.  A fifth group, other and corporate,
includes the results of AT&T Solutions,  international  operations and ventures,
other corporate operations, overhead and eliminations. Results are discussed for
these five groups as well as for combined  AT&T Group.  The  discussion  for the
other and corporate group is further broken out to include  information for AT&T
Solutions  (which  includes the results of the Solutions  outsourcing  unit, the
internal AT&T Information  Technology Services unit, and the results of portions
of the IBM Global  Network which were acquired in the second and third  quarters
of 1999 and renamed  AT&T Global  Network  Services  (AGNS),  and  international
operations and ventures.

<PAGE>
                                                         AT&T Form 10-Q - Part I

Operating results are discussed  separately for AT&T Group and LMG. All lines of
the  accompanying  consolidated  statements of income except for "Equity  losses
from Liberty Media Group",  "Income from continuing operations" and "Net income"
reflect  the  results  of  AT&T  Group  only.  All  lines  of  the  accompanying
consolidated  balance sheet,  except for the  "Investment in Liberty Media Group
and related receivables,  net" and the components of shareowners' equity labeled
as relating to LMG are attributable to AT&T Group only. The liquidity, financial
condition,  risk  management and year 2000  discussion  pertain to  consolidated
AT&T, including our investment in LMG.

<PAGE>
                                                         AT&T Form 10-Q - Part I
FORWARD-LOOKING STATEMENTS
Except  for  the  historical   statements  and  discussions   contained  herein,
statements  contained  in this Report on Form 10-Q  constitute  "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the  Securities  Exchange Act of 1934.  Any Form  10-K/A,  Annual
Report to Shareowners, Form 10-Q or Form 8-K of AT&T may include forward-looking
statements,  including statements concerning future operating performance,  year
2000  compliance,  AT&T's share of new and existing  markets,  AT&T's short- and
long-term  revenue and earnings growth rates,  general industry growth rates and
AT&T's performance relative thereto. These forward-looking  statements rely on a
number of  assumptions  concerning  future  events,  including  the adoption and
implementation  of balanced and effective  rules and  regulations by the Federal
Communications  Commission (FCC) and the state public regulatory  agencies,  and
AT&T's ability to achieve a significant market penetration in new markets. These
forward-looking  statements are subject to a number of  uncertainties  and other
factors,  many of which are outside  AT&T's  control,  that could  cause  actual
results to differ materially from such statements.

For a more complete discussion of the factors that could cause actual results to
differ  materially  from such  forward-looking  statements,  see the  discussion
thereof contained under the heading "Forward-Looking  Statements" in AT&T's Form
10-K/A for the year ended  December 31, 1998.  Readers  should also consider the
factors  discussed  under the headings  "Results of  Operations"  and "Financial
Condition"  included  in  this  Form  10-Q.  AT&T  disclaims  any  intention  or
obligation  to update or revise  any  forward-looking  statements,  whether as a
result of new information, future events or otherwise.

<PAGE>                                                   AT&T Form 10-Q - Part I

CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
                                           For the Three      For the Nine
                                           Months Ended       Months Ended
                                             Sept. 30,           Sept. 30,
                                           1999     1998      1999     1998
<S>                                      <C>      <C>       <C>     <C>
Dollars in millions
(except per share amounts)

Income (loss) from continuing
operations attributable to common
shareowners:
   AT&T Group.........................   $1,633   $2,123    $4,297   $3,247
   Liberty Media Group................     (217)       -      (818)       -

Income (loss) attributable to common
shareowners:
   AT&T Group.........................   $1,633   $1,986    $4,297   $4,410
   Liberty Media Group................     (217)       -      (818)       -

Per AT&T common share - basic:
  Income from continuing operations...   $ 0.51   $ 0.79    $ 1.41   $ 1.21
  Income from discontinued operations.        -        -         -        -
  Gain on sale of discontinued
   operations.........................        -        -         -     0.48
  Extraordinary loss..................        -     0.05         -     0.05
  Total income........................   $ 0.51   $ 0.74    $ 1.41   $ 1.64

Per AT&T common share - diluted:
  Income from continuing operations...   $ 0.50   $ 0.78    $ 1.39   $ 1.20
  Income from discontinued operations.        -        -         -        -
  Gain on sale of discontinued
   operations.........................        -        -         -     0.47
  Extraordinary loss..................        -     0.05         -     0.05
  Total income........................   $ 0.50   $ 0.73    $ 1.39   $ 1.62

Liberty Media Group loss per share:
  Basic and diluted...................   $ 0.17   $    -    $ 0.65   $    -
</TABLE>
Earnings per share (EPS) from continuing operations  attributable to AT&T common
shareowners  were $0.50 on a diluted basis for the third  quarter of 1999,  down
from $0.78 in the third  quarter  of 1998.  Earnings  per share from  continuing
operations attributable to AT&T common shareowners were $1.39 on a diluted basis
in the first nine months of 1999,  compared with $1.20 on a diluted basis in the
first nine  months of 1998.  For the  quarterly  period,  the  decrease  was due
primarily to the impacts of AB&IS and AGNS,  the 1998 benefit for  restructuring
and other charges, net, and equity losses related to Excite@Home and Cablevision
Systems  Corp.  (Cablevision),  partially  offset by increased  income from core
operations  and a gain on the sale of a business  in 1999.  For the year to date
period,  the increase was due to increased income from core operations and lower
restructuring and other charges,  net,  partially offset by the impacts of AB&IS
and AGNS,  the equity  losses for the nine  months  ended  September  30,  1999,
related  to  Excite@Home  and  Cablevision  and  lower  gains  on the  sales  of
businesses in 1999.

<PAGE>

                                                         AT&T Form 10-Q - Part I

AT&T Group's operational earnings,  which excluded certain nonoperational items,
were $0.54 per diluted share for the third quarter of 1999, a decrease of 20.6%,
or $0.14, over the prior year period. Nonoperational items for the third quarter
were:
 ..Restructuring and other charges, net benefit of $0.10 in 1998
 ..Gain on sale of a business of $0.02 in 1999
 ..A loss of $0.06  reflecting  the  earnings impact of our investments in
  Excite@Home and Cablevision in 1999.

The decrease in operational  earnings for the third quarter was due primarily to
the impact of AB&IS.

Excluding  the  impacts  of both AB&IS and AGNS,  operational  EPS for the third
quarter of 1999 was $0.81,  an increase of 19.1%,  or $0.13,  compared  with the
third  quarter  of 1998.  The  increase  was  primarily  due to higher  revenues
combined with improving margins.

AT&T Group's operational earnings,  which excluded certain nonoperational items,
were $1.63 per diluted  share for the nine months  ended  September  30, 1999, a
decrease of 2.4%, or $0.04, over the prior year period. Nonoperational items for
the first nine months were:
 ..Restructuring and other charges, net, of $0.21 in 1999 and $0.64 in 1998
 ..Gains on sales of businesses of $0.07 in 1999 and $0.17 in 1998
 ..A $0.02  benefit in 1999 from changes in tax rules with respect to the
  utilization  of  acquired  net  operating  losses
 ..A  loss  of  $0.12  in 1999 reflecting the earnings impact of our investment
  in Excite@Home and Cablevision.

The decrease in  operational  earnings for the nine months ended  September  30,
1999 was due primarily to the impact of AB&IS.

Excluding  the  impacts  of both  AB&IS and AGNS,  operational  EPS for the nine
months ended  September  30, 1999,  was $2.23,  an increase of 33.5%,  or $0.56,
compared with the prior year period  primarily due to higher  revenues  combined
with improving margins.

LMG's loss per share was $0.17 for the quarter  ended  September  30, 1999,  and
$0.65 for the period from the date of acquisition through September 30, 1999.

The results of AT&T Group and our  investment  in LMG are  discussed  in further
detail below.

<PAGE>

                                                         AT&T Form 10-Q - Part I
<TABLE>
AT&T GROUP RESULTS OF OPERATIONS

REVENUES
<CAPTION>
                                            For the Three Months
                                             Ended September 30,     Change
                                               1999      1998       $      %
<S>                                         <C>       <C>       <C>     <C>
Dollars in millions
Business services.......................... $ 6,276   $ 5,975   $  301    5.0%
Consumer services..........................   5,614     5,889     (275)  (4.7%)
Wireless services..........................   2,050     1,420      630   44.2%
Broadband & Internet services..............   1,442         -    1,442      -
Other and corporate........................     888       369      519  141.9%
Total revenues............................. $16,270   $13,653   $2,617   19.2%
<CAPTION>
                                            For the Nine Months
                                             Ended September 30,     Change
                                               1999      1998       $      %
<S>                                         <C>       <C>      <C>      <C>
Dollars in millions
Business services.......................... $18,773   $17,641  $ 1,132    6.4%
Consumer services..........................  16,604    17,264     (660)  (3.8%)
Wireless services..........................   5,490     3,897    1,593   40.9%
Broadband & Internet services..............   3,344         -    3,344      -
Other and corporate........................   1,846       893      953  107.2%
Total revenues............................. $46,057   $39,695  $ 6,362   16.0%
</TABLE>
Total  revenues  on a reported  basis  increased  19.2% to $16,270  million  and
increased  16.0% to $46,057  million for the three and nine-month  periods ended
September 30, 1999,  respectively,  compared with the  corresponding  prior year
periods.  Excluding AB&IS and AGNS,  revenues  increased 5.3% to $14,372 million
for the third quarter of 1999 and increased 5.9% to $42,042 million for the nine
months  ended  September  30,  1999,  compared  with the  comparable  prior year
periods. The increases for both periods were due to growth in wireless services,
business services and AT&T Solution's outsourcing services,  partially offset by
lower consumer services  revenues.  Revenues on a pro forma basis, which include
the results of AB&IS  (adjusted  to exclude all closed  cable  partnerships  and
Excite@Home)  and the impact of the closed portions of AGNS for a full period in
both 1999 and 1998,  increased  5.6% for the third quarter of 1999 and increased
6.2%  for  the  nine  months  ended  September  30,  1999,   compared  with  the
corresponding prior year periods.

OPERATING EXPENSES

                                            Three                 Nine
                                         Months Ended          Months Ended
                                         September 30,          September 30,
Dollars in millions                     1999     1998         1999     1998
Access and other interconnection..... $3,654   $3,819      $11,054  $11,649

Access and other  interconnection  expenses decreased $165 million,  or 4.3%, to
$3,654  million in the third  quarter of 1999 compared with the third quarter of
1998. Access and other interconnection expenses decreased $595 million, or 5.1%,
to $11,054 million in the first nine months of 1999 compared with the first nine
months of 1998.  The declines were  primarily  driven by mandated  reductions in
per-minute access charges and lower negotiated  international  settlement rates.
These  declines were  partially  offset by total long distance  volume growth of
8.9% for the quarter and 8.5% on a year-to-date basis. For the quarterly period,
increased  per-line  charges (Primary  Interexchange  Carrier Charges or "PICC")
also partially offset the declines.

<PAGE>

                                                         AT&T Form 10-Q - Part I

                                            Three                  Nine
                                         Months Ended          Months Ended
                                          September 30,        September 30,
Dollars in millions                     1999     1998         1999     1998
Network and other communications
  services........................... $3,869   $2,648      $10,515   $7,746

Network and other communications  services expenses increased $1,221 million, or
46.1%,  to $3,869  million in the third  quarter of 1999  compared with the same
period last year. Network and other  communications  services expenses increased
$2,769  million,  or 35.7%,  to $10,515 million in the first nine months of 1999
compared  with the same  period  last year.  Excluding  the impacts of AB&IS and
AGNS, network and other communications services expenses increased 3.6% and 6.2%
for the three and  nine-month  periods ended  September 30, 1999,  respectively,
compared with the same periods last year.  These increases were primarily driven
by the growing wireless  subscriber base largely  attributable to the success of
AT&T  Digital One Rate  service  which  resulted in higher  off-network  roaming
charges,  higher  costs and volume of handsets and an  increased  provision  for
uncollectibles.  A  portion  of the  increase  was  also due to  growth  in AT&T
Solutions.  These  increases  were  partially  offset by  network  cost  control
initiatives,  lower per call compensation  expense due to a favorable FCC ruling
in the first  quarter  of 1999,  and a lower  provision  for  uncollectibles  in
consumer  services.  For the  year to  date  period,  the  increases  were  also
partially   offset  by  lower   nonincome   taxes  and  a  lower  provision  for
uncollectibles in business services.

                                            Three                  Nine
                                         Months Ended          Months Ended
                                         September 30,         September 30,
Dollars in millions                     1999     1998         1999     1998
Amortization of goodwill, franchise
 costs and other purchased
 intangibles..........................$  358   $   62       $  900   $  188

Amortization  of  goodwill,  franchise  costs  and other  purchased  intangibles
increased $296 million,  or 471.4%, from the third quarter of 1998 and increased
$712 million,  or 378.0%, for the nine months ended September 30, 1999, compared
with  the  same  periods  last  year.   Franchise   costs  represent  the  value
attributable to the agreement with local  authorities that allow access to homes
in AB&IS'  service  areas.  Other  purchased  intangibles  arising from business
combinations  primarily include customer lists and licenses.  The increases were
primarily  driven by AB&IS.  AT&T also has  amortization of goodwill  associated
with  nonconsolidated  investments  recorded  as a  component  of  other  income
(expense)  amounting  to  $164  million  and  $356  million  for the  three  and
nine-month periods ended September 30, 1999,  respectively,  and $14 million and
$43 million for the three and  nine-month  periods  ended  September  30,  1998,
respectively.

<PAGE>
                                                         AT&T Form 10-Q - Part I

                                            Three                  Nine
                                         Months Ended          Months Ended
                                         September 30,       September 30,
Dollars in millions                     1999     1998         1999     1998
Depreciation and other amortization.. $1,558   $1,139       $4,408   $3,213

Depreciation and other amortization  expenses increased $419 million,  or 36.9%,
in the third  quarter of 1999 and increased  $1,195  million,  or 37.2%,  in the
first nine months of 1999  compared with the  corresponding  prior year periods.
Excluding AB&IS and AGNS, depreciation and other amortization expenses increased
14.7% and 19.2% for the three and nine-month  periods ended  September 30, 1999,
respectively,  compared with the corresponding prior year periods. The increases
were  primarily due to growth in AT&T Group's  depreciable  asset base resulting
from the continued  infrastructure  investment throughout 1998 and 1999. Capital
expenditures,  including  AB&IS and AGNS, were $3.6 billion for the three months
ended  September 30, 1999, and $7.9 billion for the nine months ended  September
30, 1999. The capital expenditures for both periods focused on cable operations,
data services, wireless services and business local services.

                                            Three                  Nine
                                        Months Ended          Months Ended
                                          September,           September,
Dollars in millions                     1999     1998         1999     1998
Selling, general and administrative.. $3,442   $3,146      $10,060   $9,771

Selling,  general and administrative  (SG&A) expenses increased $296 million, or
9.4%, to $3,442 million in the third quarter of 1999 and increased $289 million,
or 3.0%,  to $10,060  million  for the nine months  ended  September  30,  1999,
compared with the  corresponding  prior year periods.  Excluding AB&IS and AGNS,
SG&A expenses  declined 2.4% for the third quarter of 1999 and declined 5.3% for
the nine months ended September 30, 1999,  versus the  corresponding  prior year
periods. These reductions reflect reduced marketing and sales expenses resulting
primarily from  reductions in consumer  acquisition  program  spending and other
cost-control  initiatives.  These  reductions were partially offset by increased
spending in the company's growth businesses,  including wireless services due to
increased subscribers and customer care spending,  and for the quarterly period,
the AT&T Solutions  outsourcing unit. Including AB&IS and AGNS, SG&A expenses as
a  percentage  of  revenues  were  21.2% and 21.8% for the three and  nine-month
periods ended September 30, 1999, respectively, compared with 23.0% and 24.6% in
the prior year  periods.  SG&A  expenses  excluding  wireless  services  and the
consumer local business as a percentage of revenues were 18.8% and 19.7% for the
three and nine-month periods ended September 30, 1999.

<PAGE>

                                                         AT&T Form 10-Q - Part I

                                            Three                  Nine
                                         Months Ended          Months Ended
                                         September 30,         September 30,
Dollars in millions                     1999     1998         1999     1998
Restructuring and other charges, net. $    -    $(517)      $  702   $2,827

Restructuring  and other charges,  net for the three months ended  September 30,
1998,  were a net benefit of $517  million  pretax.  The  benefit was  primarily
related to a $602  million  pretax  gain  related to the  settlement  of pension
obligations  for former  employees  who  accepted  AT&T's  voluntary  retirement
incentive  program  (VRIP)  offer,  partially  offset by $85 million of expenses
associated with the merger with Teleport  Communications Group Inc. (TCG), which
closed in the third quarter of 1998.

Restructuring  and other  charges for the nine months ended  September 30, 1999,
were  $702  million  pretax.  Included  in the $702  million  was an  in-process
research and  development  charge of $594 million  related to AB&IS as well as a
$128 million net charge primarily  related to the exit of certain joint ventures
that would have competed directly with Concert,  the global venture that AT&T is
forming with British  Telecommunications plc (BT).  Additionally,  a $50 million
charge was recorded in the second quarter  related to a  contribution  agreement
AB&IS entered into with Phoenixstar,  Inc.  (formerly  Primestar,  Inc.). To the
extent  necessary,   AB&IS  is  required  to  satisfy  certain   liabilities  of
Phoenixstar  owed  by  Phoenixstar  and its  subsidiaries.  These  charges  were
partially  offset by a $70 million  gain  related to the  settlement  of pension
obligations for former employees who accepted AT&T's VRIP offer.

The in-process  research and development  projects  related to AB&IS' efforts to
offer voice over Internet  protocol,  cost savings  efforts for cable  telephony
implementation and product integration efforts for advanced set-top devices that
would enable AB&IS to offer next-generation digital services. Although there are
significant  technological issues to overcome in order to successfully  complete
the acquired  in-process  research  and  development,  AT&T  expects  successful
completion.  AT&T  currently  anticipates  that (i) it will deploy  equipment to
offer voice over  Internet  protocol to two cities in the year 2001,  (ii) field
deployable  devices  will be  available  by the end of the year with  respect to
AT&T's cost savings efforts for cable telephony implementation,  and (iii) field
trials will begin in mid-year 2000 for  next-generation  digital  services.  If,
however,  AT&T is unable to establish  technological  feasibility  and produce a
commercially viable  product/service,  then anticipated  incremental future cash
flows attributable to expected profits from such new  product/service may not be
realized.

Restructuring  and other  charges,  net for the nine months ended  September 30,
1998,  were $2,827  million  pretax.  The charge is comprised of a first quarter
1998 pretax  charge of $601  million  which  resulted  from the  decision not to
pursue Total Service  Resale as a  local-service  strategy,  the second  quarter
$2,743 million net pretax charge primarily related to AT&T's VRIP offer, and the
third quarter net pretax benefit as noted above.

<PAGE>

                                                         AT&T Form 10-Q - Part I

                                            Three                  Nine
                                         Months Ended          Months Ended
                                         September 30,         September 30,
Dollars in millions                     1999     1998         1999     1998
Other income (expense)............... $ (409)  $  156       $ (334)  $1,169

For the three months ended September 30, 1999, other income (expense)  decreased
$565  million,  or  360.7%,  to an expense of $409  million  compared  with $156
million of income in the third quarter of 1998. The decrease  primarily resulted
from  higher  equity  losses  and  goodwill  amortization  associated  with  our
nonconsolidated  investments,  largely due to Excite@Home and Cablevision.  Also
contributing to the decrease were  distributions on trust preferred  securities,
as well as higher interest income in 1998 on the proceeds received from the sale
of Universal Card Services  (UCS).  Partially  offsetting  these decreases was a
1999  third  quarter  pretax  gain of $110  million  on the sale of a portion of
AT&T's ownership interest in AT&T Canada.

Other income  (expense)  decreased $1,503 million,  or 128.6%,  to an expense of
$334 million for the nine months ended September 30, 1999,  compared with $1,169
million  of income in the first  nine  months of 1998.  The  decrease  primarily
resulted from higher equity losses and goodwill amortization associated with our
nonconsolidated  investments,  largely due to Excite@Home and Cablevision.  Also
contributing  to the decrease  were first quarter 1998 pretax gains on the sales
of AT&T Solutions  Customer Care (ASCC) of $350 million,  LIN  Television  Corp.
(LIN-TV) of $317 million, and a second quarter 1998 gain on the sale of SmarTone
Telecommunications Holdings Limited (SmarTone) of $103 million. In addition, the
decline  reflects higher  interest income in 1998 on the proceeds  received from
the sale of UCS.  Partially  offsetting these decreases was a first quarter 1999
pretax gain on the sale of the AT&T Language Line  Services  business  (Language
Line) of $153 million,  a second quarter 1999 pretax gain on the sale of WOOD-TV
of $88 million, and a third quarter 1999 pretax gain on the sale of a portion of
our ownership interest in AT&T Canada of $110 million.

<PAGE>

                                                         AT&T Form 10-Q - Part I

                                            Three                  Nine
                                         Months Ended          Months Ended
                                         September 30,         September 30,
Dollars in millions                     1999     1998         1999     1998
Earnings Before Interest and Taxes
 (EBIT)...............................$2,980   $3,512       $8,084   $5,470

EBIT decreased $532 million, or 15.2%, to $2,980 million,  for the third quarter
of 1999 compared with the third quarter of 1998 and increased $2,614 million, or
47.8%, to $8,084 million for the nine months ended September 30, 1999,  compared
with the nine months ended September 30, 1998. Excluding AB&IS and AGNS, as well
as  restructuring  and other  charges,  net,  and certain  gains on the sales of
businesses,  EBIT increased $464 million,  or 15.5%, to $3,459 million,  for the
third  quarter of 1999  compared  with the third  quarter of 1998 and  increased
$2,124 million,  or 28.2%, to $9,651 million for the nine months ended September
30,  1999,  compared  with the nine  months  ended  September  30,  1998.  These
increases  were due  primarily to revenue  increases  combined with an improving
cost structure,  partially offset by lower interest income and  distributions on
trust preferred  securities  issued in 1999. AT&T remains  committed to reducing
the cost of doing  business  by  cutting $2 billion in costs by the end of 2000.
However, as we continue to invest in growth businesses, total operating expenses
are expected to increase.

AT&T calculates EBIT as operating income plus other income and is a measure used
by our chief operating  decision-makers to measure AT&T's consolidated operating
results and to measure segment  profitability.  Interest and taxes are generally
not allocated to our segments because debt is managed and serviced and taxes are
managed and calculated on a centralized basis.  Trends in interest and taxes are
discussed  separately on a  consolidated  basis.  Management  believes EBIT is a
meaningful  measure to disclose to investors because it provides  investors with
an analysis  of  operating  results  using the same  measures  used by the chief
operating  decision-makers  of AT&T,  provides a return on total  capitalization
measure,  and allows investors a means to evaluate the financial results of each
segment in relation to consolidated AT&T. Our calculation of EBIT may or may not
be consistent with the calculation of EBIT by other public  companies,  and EBIT
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.

                                            Three                  Nine
                                         Months Ended          Months Ended
                                         September 30,         September 30,
Dollars in millions                     1999     1998         1999     1998
Interest expense..................... $  459   $  114       $1,108   $  322

Interest expense increased $345 million, or 301.4%, in the third quarter of 1999
compared with the third quarter of 1998. For the nine months ended September 30,
1999, interest expense increased $786 million, or 244.1%, compared with the nine
months ended  September 30, 1998.  These  increases were  primarily  driven by a
higher level of average debt outstanding  associated with our acquisitions.  For
the  quarterly  period,  the increase was  partially  offset by a lower  average
interest rate.

<PAGE>
                                                         AT&T Form 10-Q - Part I

                                            Three                  Nine
                                         Months Ended          Months Ended
                                         September 30,          September 30,
Dollars in millions                     1999     1998         1999     1998
Provision for income taxes............ $ 888   $1,275       $2,679   $1,901

The provision for income taxes decreased $387 million, or 30.4%, to $888 million
in the third  quarter  of 1999  compared  with the third  quarter of 1998 due to
lower earnings before income taxes and a lower effective tax rate. Effective tax
rates for the third quarter of 1999 and 1998 were 35.2% and 37.5%, respectively.
The decrease in the effective tax rate was due primarily to the pooling of TCG's
historical   operating   results   which  did  not  include   tax   benefits  on
pre-acquisition  losses in 1998 and certain foreign legal entity  restructurings
in 1999.

The  provision for income taxes  increased  $778  million,  or 40.9%,  to $2,679
million for the nine months ended  September  30, 1999,  compared  with the nine
months ended  September  30, 1998,  due primarily to higher income before income
taxes. Effective tax rates for the nine months ended September 30, 1999 and 1998
were 38.4% and 36.9%,  respectively.  In the first  quarter of 1999,  AT&T Group
recorded a non-tax deductible  in-process  research and development  charge, and
accordingly,  no tax benefit was recorded.  During the second quarter of 1999, a
change in the net operating loss utilization tax rules resulted in a $75 million
reduction in the second quarter  income tax provision.  Excluding the impacts of
the  in-process  research  and  development  charge  and the  change  in the net
operating  loss  utilization  tax rules in 1999,  the effective tax rate for the
nine months ended September 30, 1999, was 36.4%. The change in the effective tax
rate was impacted by the pooling of TCG's historical operating results which did
not  include  tax  benefits on  pre-acquisition  losses in 1998,  the impacts of
certain  1998   investment   dispositions   and  certain  foreign  legal  entity
restructurings in both periods.

Other Items
In April 1998 AT&T sold UCS for $3,500  million,  resulting in an after-tax gain
of $1,290  million,  or $0.47 per diluted  share,  reflected as "Gain on Sale of
Discontinued Operations" in the accompanying consolidated statements of income.

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

<PAGE>

                                                         AT&T Form 10-Q - Part I


                                             Three                 Nine
                                          Months Ended         Months Ended
                                          September 30,        September 30,
Dollars in millions                      1999     1998        1999     1998
Income available to AT&T shareowners.  $1,633   $1,986      $4,297   $4,410

Income available to AT&T shareowners decreased $353 million, or 17.7%, to $1,633
million in the third quarter of 1999,  driven  primarily by the impacts of AB&IS
and AGNS, the 1998 benefit in restructuring  and other charges,  net, and equity
losses for the third  quarter of 1999 related to  Excite@Home  and  Cablevision,
partially offset by increased income from core operations, an extraordinary loss
on the  extinguishment  of debt  recognized in the third quarter of 1998 and the
gain on the sale of a business in 1999.  Income  available  to AT&T  shareowners
decreased $113 million,  or 2.6%, to $4,297 million for the first nine months of
1999 driven  primarily by the 1998 gain on the sale of discontinued  operations,
the  impacts of AB&IS and AGNS,  the equity  losses  for the nine  months  ended
September 30, 1999,  related to Excite@Home  and  Cablevision and lower gains on
the  sales of  businesses  in 1999.  These  declines  were  partially  offset by
increased income from core operations, lower restructuring and other charges and
an  extraordinary  loss on the  extinguishment  of debt  recognized in the third
quarter of 1998.

<PAGE>
                                                         AT&T Form 10-Q - Part I

AT&T GROUP SEGMENT RESULTS

Business Services
The business  services  segment results reflect sales of long distance and local
voice  and  data  services  to  business  customers,   including:  domestic  and
international;   inbound  and  outbound;   intra-LATA  toll;  calling  card  and
operator-handled services, and other network enabled services. This segment also
includes electronic commerce and  Internet-protocol  (IP) for business customers
such as Web site hosting and AT&T WorldNet business Internet access.

Consumer Services
The   consumer    services   segment   includes   the   results   of   providing
telecommunications  services to  residential  customers  including  domestic and
international long distance services, intra-LATA toll services, calling-card and
operator-handled  calling services, and prepaid calling cards. In addition, this
segment  includes AT&T WorldNet  residential  Internet access service,  noncable
local services  provided to residential  customers and the costs associated with
the development of fixed wireless technology.

Wireless Services
The  results  of this  segment  are  comprised  primarily  of sales of  wireless
services and products to customers in AT&T Group's 850 MHz  (cellular)  and 1900
MHz (PCS) markets.  The results of AT&T's former messaging business are included
in 1998 results through October 2, when the unit was sold.

Broadband & Internet Services
AB&IS includes the results associated with traditional analog video service,  as
well as new services,  such as Digital Cable and AT&T@Home,  a high-speed  cable
Internet  access  service.  AT&T@Home,  along with  several  other  large  cable
operators,  has a  contract  with  Excite@Home,  the  operator  of  an  Internet
"backbone",  over which we can provide  high-speed cable Internet service.  Also
included in this  segment are the  operations  associated  with  developing  and
refining the infrastructure that will support broadband telephony.

Other and Corporate
This  group   includes  the  results  of  AT&T   Solutions   (including   AGNS),
international operations and ventures, other corporate operations,  overhead and
eliminations.

The above segments  reflect  certain changes since the publication of our annual
results due to changes in the way we manage our business.  The business services
segment was expanded to include the results of TCG and the  business  portion of
AT&T WorldNet Service; the consumer services segment was expanded to include the
residential  portion of AT&T WorldNet  Service and the costs associated with the
development of fixed wireless  technology.  All prior results have been restated
to reflect these changes.

<PAGE>
                                                         AT&T Form 10-Q - Part I

The discussion of segment  results for AT&T Group generally  includes  revenues;
earnings  before  interest and taxes,  including  other income (EBIT);  earnings
before interest,  taxes,  depreciation and amortization,  including other income
(EBITDA);  capital additions and total assets. The discussion of EBITDA for AT&T
Group's wireless services and broadband & Internet services segments is modified
to exclude other income.

AT&T calculates EBIT as operating income plus other income and is a measure used
by our chief operating  decision-makers to measure AT&T's consolidated operating
results and to measure segment  profitability.  Interest and taxes are generally
not allocated to our segments because debt is managed and serviced and taxes are
managed and calculated on a centralized basis.  Trends in interest and taxes are
discussed  separately on a  consolidated  basis.  Management  believes EBIT is a
meaningful  measure to disclose to investors because it provides  investors with
an analysis  of  operating  results  using the same  measures  used by the chief
operating  decision-makers  of AT&T,  provides a return on total  capitalization
measure,  and allows investors a means to evaluate the financial results of each
segment in relation to consolidated AT&T. Our calculation of EBIT may or may not
be consistent with the calculation of EBIT by other public  companies,  and EBIT
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.

EBITDA is also used by  management  as a measure of segment  performance  and is
defined as EBIT plus depreciation and amortization.  We believe it is meaningful
to investors as a measure of each  segment's  liquidity and allows  investors to
evaluate a segment's  liquidity using the same measure that is used by the chief
operating  decision-makers  of AT&T.  Consolidated  EBITDA is also  provided for
comparison purposes. Our calculation of EBITDA may or may not be consistent with
the calculation of EBITDA by other public  companies and should not be viewed by
investors  as an  alternative  to  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 effect changes
in certain assets and liabilities which can affect cash flow.

Total  assets  for  each  segment  include  all  assets,   except   inter-entity
receivables.  Deferred taxes,  prepaid pension assets,  and  corporate-owned  or
leased real estate are generally  held at the corporate  level and therefore are
primarily  included in the other and corporate group.  Shared network assets are
allocated to the segments and reallocated  each January,  based on the prior two
years' volumes of minutes used.

Capital  additions  for each segment  include  additions to property,  plant and
equipment and other long-lived assets including licenses, investments, franchise
costs and capitalized software.

<PAGE>
                                                         AT&T Form 10-Q - Part I
<TABLE>
BUSINESS SERVICES
<CAPTION>
                                            Three months
                                               ended
                                            September 30,              Change
Dollars in millions                     1999         1998         $        %
<S>                                  <C>          <C>         <C>        <C>
External revenues................... $ 5,849      $ 5,746     $  103      1.8%
Internal revenues...................     427          229        198     86.7%
Total revenues......................   6,276        5,975        301      5.0%

EBIT................................   1,537        1,359        178     13.0%
EBITDA..............................   2,257        1,983        274     13.8%

OTHER ITEMS
Capital additions................... $ 1,821      $ 1,509     $  312     20.7%
<CAPTION>
                                           Nine months
                                              ended
                                          September 30,             Change
Dollars in millions                     1999         1998         $        %
<S>                                  <C>          <C>         <C>        <C>
External revenues................... $17,663      $16,985     $  678      4.0%
Internal revenues...................   1,110          656        454     69.1%
Total revenues......................  18,773       17,641      1,132      6.4%

EBIT................................   4,563        3,602        961     26.7%
EBITDA..............................   6,715        5,346      1,369     25.6%

OTHER ITEMS
Capital additions................... $ 4,316      $ 3,685     $  631     17.1%

                                    At Sept. 30,   At Dec. 31,     Change
                                        1999         1998        $        %
Total assets........................ $23,378      $21,415     $1,963     9.2%
</TABLE>

REVENUES
Business  services  revenues  increased  5.0% in the third quarter of 1999,  and
increased 6.4% for the nine months ended  September 30, 1999,  compared with the
prior year.  The  increase  for the quarter was  primarily  driven by  continued
strength in data services which  includes  Internet  Protocol (IP) services,  as
well as increases  in local voice  services.  The increase for the  year-to-date
period was primarily  driven by data  services,  domestic  long  distance  voice
services  and local voice  services.  Total  calling  volumes for both  periods,
including  local services,  increased  about 25% over the prior year;  excluding
local services, volumes increased at a mid-teens growth rate for the quarter and
year-to-date periods.

Data services  revenues grew at a mid-teens  rate for the third quarter of 1999.
The  increase  was led by  continued  growth in frame relay as well as growth in
international and high-speed  private line services.  Data services for the 1999
year-to-date period grew in the high-teens, due primarily to continued growth in
frame relay and high-speed private line services. The data revenues growth rates
were negatively impacted by 1998 billing  adjustments.  The data services growth
was augmented by significant growth in IP services,  such as AT&T WorldNet,  for
both  periods.  Packet  services  (frame  relay,  ATM and IP) grew over 50% on a
combined  basis  for the  quarter  and  approximately  65% for the  year-to-date
period.

<PAGE>

                                                         AT&T Form 10-Q - Part I

Long  distance  voice  revenues  grew at a  low-single-digit  rate for the third
quarter and for the nine months  ended  September  30, 1999,  compared  with the
prior year periods. Strong volume increases were partially offset by a declining
average  price per  minute.  The  average  price per minute has been  negatively
impacted  by the  competitive  forces  within  the  industry  which we expect to
continue.  In  addition,  the price per minute has been  negatively  impacted by
changes in product mix, largely attributable to an increase in wholesale,  which
has a lower rate per minute.

Local voice service  revenues,  which  included  domestic ACC revenues since its
acquisition  in April 1998,  grew nearly 70% in the third quarter and first nine
months of 1999,  compared  with the  corresponding  prior year  periods.  AT&T's
integrated  business  local  operations,  including  AT&T  Digital  Link,  added
approximately  164 thousand  access lines in the third  quarter and total access
lines in service as of September 30, 1999, reached  approximately 1.1 million on
a restated  basis.  The number of access lines was restated and now represents a
more  comprehensive view of our bundled strategy as it now includes all channels
capable  of  providing  local  traffic.  Prior  period  amounts  have  also been
restated.  AT&T serves 32,809  buildings in 87  metropolitan  statistical  areas
(MSAs), with over 17% of the buildings on-network.

Internal revenues  increased 86.7% and 69.1% for the three and nine months ended
September  30, 1999,  respectively.  The  increases  were due to higher sales of
business long distance  services to other AT&T units,  primarily  AT&T Solutions
(including  the  impact  of AGNS)  and  wireless  services,  for  resale to AT&T
Solutions and wireless services customers.

EBIT/EBITDA
EBIT and EBITDA for  business  services  increased  13.0% to $1,537  million and
13.8% to $2,257  million,  respectively,  in the third  quarter of 1999 compared
with the prior year  quarter.  EBIT and EBITDA for business  services  increased
26.7% to $4,563 million and 25.6% to $6,715 million,  respectively, for the nine
months ended September 30, 1999,  compared with the prior year. The improvements
were driven by the growth in revenues  and margin  improvement.  EBIT and EBITDA
margins were  positively  impacted by an improved cost  structure as a result of
cost control initiatives in 1999. The EBIT and EBITDA growth rates have declined
from the prior quarter due to increased costs associated with volume  increases,
price  declines  and strong  third  quarter 1998 results due to the reduced cost
structure due to headcount reductions associated with VRIP.

OTHER ITEMS
Capital  additions  for  business  services  were  $1,821  million for the third
quarter of 1999 and were $4,316 million for the nine months ended  September 30,
1999.  Capital  additions  were $1,509 million for the third quarter of 1998 and
were $3,685  million for the nine months ended  September 30, 1998.  Spending in
both 1999 and 1998 was primarily  directed  towards the long  distance  network,
including SONET, as well as spending on the local network.  In 1998 spending was
also directed towards circuit switch equipment.

Total assets increased $1,963 million,  or 9.2%, to $23,378 million at September
30, 1999,  compared  with  December 31,  1998,  primarily  due to an increase in
property, plant and equipment as a result of capital additions.

<PAGE>
                                                         AT&T Form 10-Q - Part I
<TABLE>
CONSUMER SERVICES
<CAPTION>
                                          Three months
                                              ended
                                           September 30,             Change
Dollars in millions                      1999         1998         $        %
<S>                                   <C>          <C>         <C>       <C>
Revenues............................. $ 5,614      $ 5,889     $ (275)    (4.7)%
EBIT.................................   2,176        1,764        412     23.3%
EBITDA...............................   2,393        1,948        445     22.9%

OTHER ITEMS
Capital additions.................... $   191      $   130     $   61     45.8%
<CAPTION>
                                            Nine months
                                              ended
                                           September 30,             Change
Dollars in millions                      1999         1998         $        %
<S>                                   <C>          <C>         <C>       <C>
Revenues............................. $16,604      $17,264     $ (660)    (3.8)%
EBIT.................................   5,893        4,609      1,284     27.9%
EBITDA...............................   6,535        5,144      1,391     27.0%

OTHER ITEMS
Capital additions.................... $   449      $   329     $  120     36.3%
<CAPTION>
                                    At Sept. 30,   At Dec. 31,       Change
                                         1999         1998         $        %
<S>                                   <C>          <C>         <C>         <C>
Total assets......................... $ 6,907      $ 6,561     $  346      5.3%
</TABLE>

REVENUES
Consumer services revenues  decreased 4.7% and 3.8% for the three and nine-month
periods ended September 30, 1999,  respectively,  compared with the same periods
last year. Excluding AT&T WorldNet Service, revenues were down 5.1% and 4.3% for
the three and nine-month  periods ended September 30, 1999,  respectively.  Long
distance calling volumes declined at a  mid-single-digit  rate for both periods.
These  results  reflect the  competitive  nature of the consumer  long  distance
industry.  Lower revenues reflect the company's strategy to migrate higher-usage
customers to optional  calling  plans in order to optimize the customer base for
future growth.

In August 1999, AT&T introduced One Rate 7sm, a simple,  convenient calling plan
that allows  consumers to make long distance  calls 24 hours a day, seven days a
week for seven-cents a minute.  The plan requires a monthly fee of $5.95 that is
reduced to $4.95 for  customers  who select AT&T as their  intra-LATA  provider.
Initial customer response to One Rate 7 has exceeded expectations.  In the first
five  weeks,  nearly 2 million  customers  subscribed  to the plan with over 60%
choosing  AT&T  for  intra-LATA  service.  New  and  existing  Personal  Network
subscribers also receive the seven-cent rate on long distance calling as part of
the bundled package.

Consumer WorldNet Service revenues  increased 44.3% in the third quarter of 1999
over the prior year quarter to $79  million.  Revenues  increased  46.7% for the
nine months ended  September  30, 1999,  to $220 million  compared with the nine
months ended  September 30, 1998.  AT&T WorldNet  Service now serves 1.5 million
residential subscribers, an increase of 44.8% from a year ago.

<PAGE>
                                                         AT&T Form 10-Q - Part I
EBIT/EBITDA
EBIT and EBITDA for consumer services  increased 23.3% and 22.9%,  respectively,
in the third  quarter of 1999  compared with the third quarter of the prior year
and increased 27.9% and 27.0%, respectively, for the nine months ended September
30, 1999,  compared  with the nine months  ended  September  30, 1998.  EBIT and
EBITDA for consumer  services  excluding the first quarter 1999 gain on the sale
of Language Line increased  24.5% and 24.1%,  respectively,  for the nine months
ended  September 30, 1999,  over the same period last year. The increase for the
quarter  was driven  primarily  by lower  negotiated  settlement  rates and cost
reduction  efforts,  primarily  in  marketing  spending.  The  increase  for the
year-to-date period, excluding the gain on the sale of Language Line, was driven
primarily by cost reduction  efforts,  primarily in marketing spending and lower
negotiated settlement rates.

OTHER ITEMS
Capital  additions for consumer services were $191 million for the third quarter
of 1999 and were $449  million for the nine months  ended  September  30,  1999.
Capital  additions were $130 million for the third quarter of 1998 and were $329
million for the nine months ended September 30, 1998. Spending in both years was
primarily directed towards the long distance network.

Total assets  increased  $346  million,  or 5.3%,  to $6,907  million  primarily
associated  with the  purchase of SmarTalk  in the first  quarter of 1999.  Also
contributing  to  the  increase  was  capital  additions,  partially  offset  by
increased accumulated depreciation.

<PAGE>
                                                         AT&T Form 10-Q - Part I
<TABLE>
WIRELESS SERVICES
<CAPTION>
                                          Three months
                                             ended
                                          September 30,             Change
Dollars in millions                     1999         1998         $        %
<S>                                  <C>          <C>          <C>      <C>
Revenues............................ $ 2,050      $ 1,420      $  630    44.2%
EBIT................................      69           47          22    48.1%
EBITDA excluding other income.......     404          264         140    53.3%

OTHER ITEMS
Capital additions................... $   676      $   208      $  468   226.2%
<CAPTION>
                                           Nine months
                                             ended
                                          September 30,             Change
Dollars in millions                     1999         1998         $        %
<S>                                  <C>          <C>          <C>      <C>
Revenues............................ $ 5,490      $ 3,897      $1,593    40.9%
EBIT................................      93          261        (168)  (64.3)%
EBITDA excluding other income.......     935          750         185    24.7%

OTHER ITEMS
Capital additions................... $ 1,493      $   603      $  890   147.7%
<CAPTION>
                                    At Sept. 30,   At Dec. 31,      Change
                                        1999         1998         $        %
<S>                                  <C>          <C>          <C>       <C>
Total assets........................ $21,938      $19,115      $2,823    14.8%
</TABLE>

REVENUES
Wireless  services'  revenues  increased  $630 million,  or 44.2%,  in the third
quarter of 1999, and increased  $1,593  million,  or 40.9%,  for the nine months
ended  September  30,  1999,  compared  with same  periods  last year.  Wireless
services' 1999 results include Vanguard  Cellular  Systems  (Vanguard) since its
acquisition  on May 3, 1999,  and 1998 results  include our  messaging  business
until the sale date of October 2, 1998.  Adjusted to exclude  both  Vanguard and
our  messaging  business,  revenues  grew  40.9%  and  41.1%  for the  three and
nine-month  periods ended  September 30, 1999,  respectively,  compared with the
prior year  periods.  The growth for both  periods  was driven by the  continued
successful  execution of AT&T's  wireless  strategy of targeting  and  retaining
high-value subscribers,  expanding the national wireless footprint,  focusing on
digital service, and offering simple rate plans, which has resulted in increased
subscribers and rising average revenue per subscriber.

<PAGE>

                                                         AT&T Form 10-Q - Part I

AT&T  continues  to  experience  growth in  wireless  subscribers.  Consolidated
subscribers grew 34.8% from a year ago to approximately 9.2 million at September
30, 1999, including  approximately 700 thousand subscribers from our acquisition
of Vanguard and approximately  125 thousand  subscribers from our acquisition of
Honolulu Cellular  Telephone  Company  (Honolulu) in August 1999. Net subscriber
additions  totaled 269 thousand  during the third  quarter,  down 17.4% from the
prior year quarter. Net subscriber additions declined as a result of a reduction
in  acquisition  marketing  efforts  in some  markets  due to  network  capacity
challenges and a supply shortage of digital multi-network phones in the quarter.
Total subscribers,  including  partnership  markets in which AT&T does not own a
controlling interest,  were nearly 12 million at the end of the third quarter of
1999.

AT&T's  focus on  high-value  subscribers  has helped  generate  rising usage by
customers and increased  quarterly average revenue per user (ARPU).  ARPU across
all of AT&T's  wireless  markets was $67.9 in the third quarter,  an increase of
14.9% from the third quarter of 1998 and a 2.6% increase from the second quarter
of 1999. This represents the fourth consecutive  quarter ARPU has increased over
the prior year.

The  company   continues  to  rapidly  migrate  customers  to  digital  service,
generating more efficient use of the network while also reducing  customer churn
compared to analog  service.  At the end of the third quarter of 1999,  73.2% of
AT&T's nearly 9.2 million  consolidated  subscribers were on digital service, up
from 52.7% one year ago and up from 69.0% one quarter ago.

EBIT/EBITDA EXCLUDING OTHER INCOME
EBIT was $69 million for the quarter,  an increase of $22 million over the prior
year period. The increase is primarily due to higher revenues,  partially offset
by increased costs from higher off-network roaming expenses,  increased customer
care and  customer  acquisition  costs and lower equity  earnings.  EBIT was $93
million for the nine months ended  September  30, 1999, a decrease of 64.3% over
the prior year  period.  Excluding  the second  quarter 1998 gain on the sale of
SmarTone,  EBIT  decreased  41.1% for the nine months ended  September 30, 1999,
compared  with the prior  year  period.  The EBIT  decline  for the  period  was
primarily due to increased costs from higher off-network  roaming expenses,  and
increased customer care and customer  acquisition costs associated with the high
growth of subscriber  additions.  In addition,  EBIT was also impacted by higher
depreciation  and  amortization  as a result  of a larger  asset  base and lower
equity  earnings in the current period.  EBITDA  excluding other income was $404
million and $935  million,  for the three and nine months  ended  September  30,
1999,  respectively,  representing  increases  of 53.3% and 24.7% over the prior
year periods.  The improvement for both periods was the result of revenue growth
and an improving cost structure.  These improvements  occurred despite increased
costs from higher off-network roaming and increased customer care spending.

<PAGE>

                                                         AT&T Form 10-Q - Part I


Off-network  roaming expenses  continued to negatively impact results,  but at a
declining rate compared to earlier quarters, as initiatives have been introduced
to  aggressively  capture  more  minutes  on the AT&T  network as well as reduce
intercarrier  roaming rates. AT&T continues to address off-network usage through
capital  expansion,  acquisitions and affiliate  launches.  Capital expansion is
underway  within  existing and new markets,  including  Columbus,  Ohio;  Omaha,
Nebraska; San Diego, California;  and certain Connecticut cities. In April 1999,
we acquired  Bakersfield  Cellular.  In May 1999, AT&T completed its merger with
Vanguard,  adding  more than 700  thousand  subscribers  and  increasing  AT&T's
wireless  coverage  in  suburban  and  rural  markets  in the  Ohio  Valley  and
Northeastern  U.S. In August 1999,  AT&T completed its  acquisition of Honolulu,
adding approximately 125 thousand customers and providing its mainland customers
with  wireless  services in Honolulu  and Maui.  Partnership  affiliations  with
Cincinnati  Bell  Wireless,  Triton PCS Holdings,  Inc.,  Telecorp PCS, Inc. and
Tritel  Inc.  further  expand  AT&T's  Time  Division   Multiple  Access  (TDMA)
footprint.  Intercarrier  roaming  rates have also declined  significantly  as a
result of  renegotiated  roaming  agreements  and the  deployment of Intelligent
Roaming  Database  (IRDB)  technology,  which assists in  identifying  favorable
roaming  partners in areas not  included in our wireless  network.  All of these
efforts have resulted in a 20% and 10% reduction in average  incollect  rate per
minute for the third  quarter of 1999 and for nine months  ended  September  30,
1999, respectively, compared with the same periods last year.

OTHER ITEMS
Capital  additions  increased $468 million,  or 226.2%,  in the third quarter of
1999,  compared with the third quarter of 1998. Capital additions increased $890
million,  or 147.7%, for the nine months ended September 30, 1999, compared with
the nine months ended  September 30, 1998.  These  increases  were the result of
additional  spending to upgrade and increase  capacity in existing  markets,  as
well as to expand our national footprint.

Total assets increased $2,823 million, or 14.8%, to $21,938 million at September
30,  1999,  from  December  31,  1998,  primarily  due to increases in goodwill,
licensing  costs  and  property,   plant  and  equipment   associated  with  our
acquisitions of Vanguard, Honolulu and Bakersfield Cellular. In addition, higher
net  property,  plant and  equipment  as a result of  capital  expenditures  and
increased accounts  receivable  associated with higher revenues also contributed
to the increase in assets.

<PAGE>
                                                         AT&T Form 10-Q - Part I

BROADBAND & INTERNET SERVICES

                                                         Date of
                                    Three months       acquisition
                                       ended             through
                                    September 30,      September 30,
Dollars in millions                     1999               1999
Revenues............................  $1,442            $ 3,344
EBIT................................    (530)            (1,763)
EBITDA excluding other income.......     389                263

OTHER ITEMS
Capital additions...................  $1,007            $ 2,155

                                         At September 30,
                                               1999
Total assets........................         $55,941

REVENUES
Revenues  were  $1,442  million  for the third  quarter of 1999 and were  $3,344
million from the date of acquisition through September 30, 1999.

Broadband & Internet  services ended the third quarter of 1999 with 11.4 million
basic cable customers  passing 19.4 million homes.  AT&T had  approximately  1.7
million  Digital  Cable  customers.   The  high-speed  cable  Internet  service,
AT&T@Home,  had approximately  113,600 customers at the end of the third quarter
compared with approximately 82,800 at the end of the second quarter.

AT&T holds equity  interests in Excite@Home  and  Cablevision.  At September 30,
1999, AT&T owned 94.5 million shares of Excite@Home, representing an approximate
26% economic interest,  and 48.9 million shares of Cablevision,  representing an
approximate 32% economic  interest.  In the fourth quarter of 1999,  Excite@Home
agreed to  acquire an online  greeting  card  company.  Upon  completion  of the
merger,  it is expected that AT&T's  economic  interest in  Excite@Home  will be
further diluted.

EBIT/EBITDA EXCLUDING OTHER INCOME
EBIT was a deficit of $530  million for the third  quarter of 1999 and a deficit
of $1,763  million since  acquisition in early March of 1999.  EBITDA  excluding
other  income was $389  million for the third  quarter of 1999 and $263  million
since  acquisition.  Included in AB&IS  year-to-date  results was a $594 million
first quarter 1999 charge for in-process  research and  development and a second
quarter 1999 charge of $50 million related to a contribution  agreement  entered
into by AB&IS to satisfy certain liabilities of Phoenixstar.

OTHER ITEMS
Total assets were $55,941 million at September 30, 1999.

Capital  additions  of $1,007  million for the third  quarter of 1999 and $2,155
million since the date of  acquisition  through  September  30, 1999,  comprised
primarily of spending on cable  distribution  systems which focused primarily on
upgrading the plant bandwidth.

<PAGE>

                                                         AT&T Form 10-Q - Part I
<TABLE>
OTHER AND CORPORATE
<CAPTION>
                                           Three months
                                              ended
                                           September 30,           Change
Dollars in millions                     1999        1998         $        %
<S>                                  <C>         <C>         <C>      <C>
Revenues............................ $   888     $   369     $  519    141.9%
EBIT................................    (272)        342       (614)  (179.2)%
EBITDA..............................     (81)        462       (543)  (117.5)%

OTHER ITEMS
Capital additions................... $   944     $   167     $  777    471.2%
<CAPTION>
                                           Nine months
                                             ended
                                          September 30,            Change
Dollars in millions                     1999        1998         $        %
<S>                                  <C>         <C>         <C>       <C>
Revenues............................ $ 1,846     $   893     $  953    107.2%
EBIT................................   (702)     (3,002)     2,300     76.6%
EBITDA..............................   (221)     (2,646)     2,425     91.7%

OTHER ITEMS
Capital additions................... $ 1,489     $   425     $1,064    250.6%
<CAPTION>
                                    At Sept. 30, At Dec. 31,      Change
                                        1999        1998        $        %
<S>                                  <C>         <C>         <C>        <C>
Total assets........................ $18,209     $12,459     $5,750     46.1%
</TABLE>

REVENUES
Revenues  increased  $519  million,  or  141.9%,  in the third  quarter  of 1999
compared  with the same  quarter  last  year.  Excluding  the  impacts  of AGNS,
revenues for the third quarter of 1999 were $432  million,  an increase of 17.8%
from the same quarter a year ago.  Revenue  growth was primarily  driven by AT&T
Solutions as a result of the  continued  strength of the  outsourcing  business.
These  increases  were  partially  offset by an increase in the  elimination  of
intercompany revenues.  Revenues increased $953 million, or 107.2%, for the nine
months  ended  September  30,  1999,  compared  with the same  period last year.
Excluding the impacts of AGNS,  revenues  increased $282 million,  or 31.9%, for
the nine months ended  September 30, 1999,  compared with the same period in the
prior year.  The increase was primarily  driven by the growth in AT&T  Solutions
and international operations and ventures. These increases were partially offset
by an increase in the elimination of intercompany  revenues and the sale of ASCC
in 1998.

<PAGE>

                                                         AT&T Form 10-Q - Part I

The elimination of revenues and profit generated by the sale of services between
segments is primarily a result of the sale of business long distance services to
other AT&T units.  Revenues  eliminated  in the quarter  were $427  million,  an
increase of 93.6% from the third quarter of 1998.  Revenues  eliminated  through
September 30, 1999,  year-to-date were $1,124 million, an increase of 57.0% from
the prior year.  The  increase in  eliminated  revenues is  primarily  due to an
increase in business  services sales to AT&T Solutions,  including the impact of
AGNS, and wireless services.

EBIT/EBITDA
EBIT and EBITDA decreased $614 million,  or 179.2%, and $543 million, or 117.5%,
in the third quarter of 1999 compared with the prior year quarter. Excluding the
third  quarter 1999 gain on the sale of a portion of AT&T's  equity  interest in
AT&T Canada and the third quarter 1998  restructuring  and other charge benefit,
EBIT and EBITDA  decreased $207 million and $136 million,  or 118.7% and 248.6%,
respectively,  from the third quarter of 1998. The decline was primarily  driven
by  higher  interest  income  in  1998  and  distributions  on  trust  preferred
securities  in 1999.  In  addition,  EBIT was  negatively  impacted  and  EBITDA
positively impacted by AGNS.

EBIT and EBITDA improved $2,300 million,  or 76.6% and $2,425 million, or 91.7%,
respectively,  for the nine months ended  September 30, 1999,  compared with the
same period last year.  Excluding the restructuring and other charges,  the 1999
gains on the sales of a portion of AT&T's  ownership  in AT&T Canada and WOOD-TV
and the first quarter 1998 gains on the sales of ASCC and LIN-TV,  EBIT was flat
for the nine months  ended  September  30, 1999,  compared  with the nine months
ended  September 30, 1998, and EBITDA improved $125 million,  or 26.0%,  for the
same period.  Savings from cost control  initiatives and lower equity losses for
international  operations and ventures were offset by lower interest  income and
distributions on trust preferred  securities.  In addition,  EBIT was negatively
impacted and EBITDA was positively impacted by AGNS.

<PAGE>

                                                         AT&T Form 10-Q - Part I

OTHER ITEMS
Capital  additions  increased $777 million,  or 471.2%,  in the third quarter of
1999 compared with the third quarter of last year.  Capital additions  increased
$1,064 million, or 250.6% for the nine months ended September 30, 1999, compared
with the nine months  ended  September  30,  1998,  primarily  due to  increased
investment   in   international   operations   and   ventures'   nonconsolidated
subsidiaries.

Total assets at September 30, 1999, were $18,209  million  compared with $12,459
million at December 31, 1998,  which  represents a 46.1% increase.  The increase
was primarily due to goodwill  associated with AGNS.

AT&T SOLUTIONS
AT&T Solutions is our outsourcing,  network-management and professional-services
business.  AT&T  Solutions is comprised of the Solutions  outsourcing  unit, the
internal AT&T Information  Technology  Services unit, and the recently  acquired
AGNS.  During the third quarter of 1999, AT&T completed  additional  portions of
the  acquisition  in Canada,  New Zealand,  Korea,  Hong Kong,  South Africa and
Isreal.  The results of AT&T  Solutions  are included in the other and corporate
group.
<TABLE>
<CAPTION>
                                          Three months
                                             ended
                                          September 30,             Change
Dollars in millions                     1999         1998         $       %
<S>                                   <C>          <C>        <C>      <C>
Revenues............................  $  983       $  285     $  698    245.1%
EBIT................................     (23)          18        (41)  (222.7)%
EBITDA..............................     117           88         29     32.3%

OTHER ITEMS
Capital additions...................  $  152       $   51     $  101    199.8%
<CAPTION>
                                          Nine months
                                             ended
                                          September 30,             Change
Dollars in millions                     1999         1998         $       %
<S>                                   <C>          <C>        <C>      <C>
Revenues............................  $1,989       $  765     $1,224    159.9%
EBIT................................     (30)          14        (44)  (312.4)%
EBITDA..............................     296          219         77     35.1%

OTHER ITEMS
Capital additions...................  $  228       $  108     $  120    112.5%
<CAPTION>
                                    At Sept. 30,   At Dec. 31,      Change
                                        1999         1998         $       %
<S>                                   <C>          <C>        <C>       <C>
Total assets........................  $6,774       $1,023     $5,751    562.1%
</TABLE>

REVENUES
AT&T Solutions grew revenues 245.1% for the third quarter of 1999 and 159.9% for
the nine months ended  September 30, 1999,  to $983 million and $1,989  million,
respectively,  compared with the corresponding prior year periods. Excluding the
impact of AGNS,  revenues  grew 47.8% for the  quarter  and 49.5%,  for the nine
months  ended   September  30,  1999,  to  $421  million  and  $1,144   million,
respectively.  The  growth  for both  periods  was the  result of new  contracts
signings and growth from existing clients.  In addition,  AT&T Solutions manages
AT&T's internal network infrastructure and generated  approximately $421 million
in internal billings in the third quarter and $1,273 million for the nine months
ended September 30, 1999,  which were recorded as a reduction to AT&T Solutions'
expenses (cost recovery).

<PAGE>
                                                         AT&T Form 10-Q - Part I


AT&T  Solutions,  with more  than  30,000  clients,  including  IBM,  CitiGroup,
McGraw-Hill, Bank One, United Health Group, Textron, J.P. Morgan, Merrill Lynch,
and  MasterCard  International,  has the  potential for more than $11 billion in
outsourcing revenues over the life of the signed contracts.

EBIT/EBITDA
EBIT and EBITDA were a deficit of $23 million and income of $117 million for the
third quarter of 1999,  respectively,  including AGNS. For the nine months ended
September 30, 1999,  EBIT and EBITDA were a deficit of $30 million and income of
$296 million, respectively. Excluding the impact of AGNS, EBIT and EBITDA were a
positive   $24  million  and  $94  million  for  the  third   quarter  of  1999,
respectively,  an  improvement  over $18 million and $88 million,  respectively,
reported  in the  corresponding  prior year  quarter.  EBIT and EBITDA  were $45
million and $260 million on this basis for the nine months ended  September  30,
1999, an improvement over $14 million and $219 million for the nine months ended
September  30,  1998.  Excluding  AGNS,  the  improvement  for both  periods was
primarily due to revenue  growth in AT&T  Solutions'  outsourcing  unit combined
with improving margins.  On a year-to-date  basis, the improvement was partially
offset by a lower EBIT margin on internal services billed.

OTHER ITEMS
Capital  additions for the third quarter of 1999 were $152 million,  an increase
of 199.8% over the third quarter of 1998.  Capital additions for the nine months
ended  September  30, 1999,  were $228  million,  an increase of 112.5% over the
corresponding  prior  year  period.  The  increases  were  primarily  due to the
addition of client support equipment.

Total assets  increased $5,751 million,  or 562.1%,  from December 31, 1998, due
primarily to goodwill and other intangible  assets  associated with AGNS as well
as higher accounts receivable.

INTERNATIONAL OPERATIONS AND VENTURES
International  operations and ventures include  consolidated  foreign operations
such as frame relay services in the UK, ACC, the company's international carrier
services  businesses and international  online services.  The equity earnings or
losses of AT&T's  nonconsolidated  international  joint  ventures and alliances,
such as Alestra in Mexico,  AT&T Canada  Corp.,  Rogers Cantel and Japan Telecom
are also  included.  The results of  international  operations  and ventures are
included in the other and corporate group.
<TABLE>
<CAPTION>
                                         Three months
                                            ended
                                        September 30,               Change
Dollars in millions                     1999         1998         $        %
<S>                                   <C>          <C>          <C>     <C>
Revenues............................  $  316       $  288       $ 28      9.8%
EBIT................................      84          (48)       132    273.7%
EBITDA..............................      99          (31)       130    423.7%

OTHER ITEMS
Capital additions...................  $  690       $   39       $651      NMF

<PAGE>
                                                         AT&T Form 10-Q - Part I
<CAPTION>
                                           Nine months
                                              ended
                                          September 30,             Change
Dollars in millions                     1999         1998         $        %
<S>                                   <C>          <C>          <C>      <C>
Revenues............................  $  941       $  739       $202     27.4%
EBIT................................    (105)        (174)        69     39.7%
EBITDA..............................     (52)        (119)        67     56.5%

OTHER ITEMS
Capital additions...................  $1,047       $  104       $943      NMF
<CAPTION>
                                    At Sept. 30,   At Dec. 31,      Change
                                        1999         1998         $        %
<S>                                   <C>          <C>          <C>      <C>
Total assets........................  $2,538       $1,915       $623     32.6%
</TABLE>

REVENUES
Revenues  grew 9.8% in the third  quarter of 1999 to $316 million and grew 27.4%
to $941 million for the nine months ended September 30, 1999,  compared with the
corresponding  periods  in 1998.  Revenue  growth  for both  periods  was led by
international  carrier  services  and  frame  relay  services  due to  increased
volumes.  A decline in ACC  revenues  due to the merger of ACC Canada  with AT&T
Canada  Corp.,  which is now accounted  for as an equity  investment,  partially
offset the increase in revenues for the quarter.  Revenue growth rates have also
been impacted by the divestment of certain nonstrategic businesses.

EBIT/EBITDA
EBIT and EBITDA  improved in the third  quarter of 1999 by $132 million and $130
million, respectively,  compared with the same period in 1998 due primarily to a
gain on the sale of a portion of AT&T's ownership interest of AT&T Canada to BT.
Excluding  this gain,  EBIT and EBITDA  improved in the third quarter of 1999 by
$22  million  and $20  million,  respectively,  due  primarily  to an  improving
financial  performance  in ventures and  alliances.  The  divestment  of certain
nonstrategic  businesses  and  improved  performance  in  international  carrier
services and frame relay  services also  contributed to the  improvement.  These
increases were partially offset by costs related to the preparation of Concert.

<PAGE>

                                                         AT&T Form 10-Q - Part I

EBIT and EBITDA  improved for the nine months ended  September  30, 1999, by $69
million  to a deficit  of $105  million  and by $67  million to a deficit of $52
million,  respectively,  compared  with the same period in 1998.  Excluding  the
third quarter gain on the sale of a portion of AT&T's ownership interest in AT&T
Canada and the  year-to-date  net charge  related to the exit of joint  ventures
that would have competed directly with Concert,  EBIT and EBITDA improved during
the period by $87 million and $85 million, respectively,  primarily driven by an
improving  financial  performance in ventures and  alliances.  The divestment of
certain  nonstrategic  businesses  and improved  performance  in frame relay and
international  carrier  services  also  contributed  to the  improvement.  These
increases were partially offset by costs related to the preparation of Concert.

OTHER ITEMS
Capital additions increased $651 million to $690 million in the third quarter of
1999 and  increased  $943  million to $1,047  million for the nine months  ended
September 30, 1999, compared with the same periods last year. The increases were
primarily due to increased investments in nonconsolidated subsidiaries.

Total assets were $2,538  million at September  30, 1999,  compared  with $1,915
million at December 31, 1998.  The increase was  primarily  driven by additional
investments in nonconsolidated  subsidiaries  partially offset by the divestment
of certain nonstrategic businesses.

<PAGE>

                                                         AT&T Form 10-Q - Part I

LIBERTY MEDIA GROUP RESULTS
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.  Although  LMG is wholly owned by AT&T,  it is  accounted  for as an
equity investment in the accompanying  consolidated  financial  statements since
AT&T does not have a  controlling  financial  interest for  financial  reporting
purposes in LMG.  Equity losses from LMG were $217 million for the third quarter
of 1999 and $818  million  for the period from the date of  acquisition  through
September 30, 1999.

On July 7, 1999,  Liberty  Media  Corporation  (a company in the  Liberty  Media
Group) and The Associated  Group, Inc.  (Associated)  signed a definitive merger
agreement  pursuant  to  which  LMG will  acquire  Associated  in an  all-stock,
tax-free  transaction  valued at approximately $3 billion.  Under the agreement,
Associated  shareowners  would receive an aggregate of approximately  51,778,920
shares of Class A Liberty Media Group tracking stock, subject to adjustment, and
an aggregate of approximately  19,719,274  shares of AT&T common stock. The AT&T
common  stock  issued is equal to the number of AT&T shares  held by  Associated
that will be  dividended  to AT&T and will be retired.  In addition,  Associated
also owns 23.4  million  shares of LMG Class A  tracking  stock and 5.3  million
shares of Class B  tracking  stock  that will  become  treasury  stock.  A proxy
statement/prospectus  was filed with the SEC on October 29, 1999.  Upon approval
of the stockholders of Associated, as well as the FCC and other authorities, the
transaction is expected to be completed during the first quarter of 2000.

On  September  28,  1999,  LMG  announced  that the Board of  Directors  of AT&T
approved the repurchase from time to time of up to 135 million shares of Liberty
Media Group Class A or Class B tracking stock.

<PAGE>
                                                         AT&T Form 10-Q - Part I
<TABLE>
LIQUIDITY
<CAPTION>
                                                       Nine months
                                                          ended
                                                       September 30,
Dollars in millions                                   1999      1998
<S>                                               <C>       <C>
CASH FLOW OF CONTINUING OPERATIONS:
  Provided by operating activities..............  $  7,237  $  6,998
  (Used in) provided by investing activities....   (21,353)    6,808
  Provided by (used in) financing activities....    10,956   (10,026)

EBITDA* ........................................  $ 13,748  $  8,914
<FN>
         *  Earnings  before  interest,  taxes,  depreciation  and  amortization
         (EBITDA)  for the  nine  months  ended  September  30,  1999,  includes
         restructuring and other charges,  net, of $702 million,  a $153 million
         pretax gain on the sale of Language Line, a $110 million pretax gain on
         the sale of a portion of AT&T's equity interest in AT&T Canada,  an $88
         million  pretax  gain on the  sale of  WOOD-TV  and the  equity  losses
         associated  with our  nonconsolidated  investments in  Excite@Home  and
         Cablevision.  EBITDA for the nine  months  ended  September  30,  1998,
         includes  restructuring  and other  charges,  net,  of $2,827  million,
         pretax  gains  from the sales of ASCC of $350  million,  LIN-TV of $317
         million and SmarTone of $103  million.  EBITDA  excludes the results of
         LMG.
</FN>
</TABLE>
Net cash provided by operating activities of continuing  operations for the nine
months ended September 30, 1999, was $7,237 million. This represents an increase
of $239 million  compared  with the nine months ended  September  30, 1998.  The
increase was driven  primarily by an increase in operating net income  excluding
depreciation and amortization,  offset by an increase in the 1999 tax payment of
approximately  $1.4 billion primarily related to the gain on the sale of UCS and
an increase in accounts receivable.

AT&T's investing activities resulted in a net use of cash of $21,353 million for
the nine months ended September 30, 1999,  compared with a net source of cash of
$6,808  million for the nine months ended  September  30, 1998.  During the nine
months  ended   September   30,  1999,   AT&T  used  $8.8  billion  for  capital
expenditures,  transferred  $5.5 billion of cash to LMG,  purchased  portions of
AGNS for $4.9 billion and loaned $1.5 billion to MediaOne Group, Inc. (MediaOne)
to pay termination fees to Comcast Corporation (Comcast). During the nine months
ended  September  30,  1998,  we  received  $5.7  billion as a  settlement  of a
receivable  in  conjunction  with  the  sale of UCS as well as $3.5  billion  in
proceeds  from the sale.  Also in 1998,  we received a total of $1.6  billion in
proceeds from the sales of LIN-TV,  ASCC and SmarTone.  Our capital  spending of
$5.1 billion was the primary use of cash during the nine months ended  September
30, 1998.

<PAGE>
                                                         AT&T Form 10-Q - Part I

During the nine  months  ended  September  30,  1999,  the net cash  provided by
financing  activities was $10,956  million  compared with cash used in financing
activities  of $10,026  million for the nine months  ended  September  30, 1998.
During the first nine months of 1999,  AT&T  received  $8.4 billion of cash from
1999 bond  issuances,  $6.3 billion from the  issuance of  commercial  paper and
short-term  debt, and $5.0 billion from the issuance of  convertible  securities
and warrants to Microsoft Corporation (Microsoft). Significant uses of cash were
$3.9  billion  to fund the share  repurchase  program,  $2.1  billion  to retire
commercial paper and other short-term debt, and $2.0 billion to pay dividends on
common  stock.  In the  first  nine  months  of  1998,  cash  used in  financing
activities  was largely  attributable  to the pay down of  commercial  paper and
debt, and the repurchase of approximately $3 billion of AT&T common stock.

EBITDA  is a  measure  of our  ability  to  generate  cash  flow and  should  be
considered  in  addition  to, but not as a  substitute  for,  other  measures of
financial  performance reported in accordance with generally accepted accounting
principles.  EBITDA  increased $333 million,  or 7.0%, to $5,060 million for the
third quarter of 1999 compared with the same period last year.  EBITDA increased
$4,834 million, or 54.2%, to $13,748 million for the nine months ended September
30, 1999,  compared with the same period in 1998.  Excluding  AB&IS,  AGNS,  the
restructuring  and other  charges,  and gains on sales of businesses in 1999 and
1998, EBITDA increased 25.1% to $13,723 million in the first nine months of 1999
from  $10,971  million  for the first  nine  months of 1998.  The  increase  was
primarily due to increased  revenues and improved  margins in business  services
and cost reductions in consumer services.



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

<PAGE>
                                                         AT&T Form 10-Q - Part I

FINANCIAL  CONDITION Total assets  increased  $102,256  million,  or 171.7%,  to
$161,806  million at September 30, 1999,  compared  with December 31, 1998.  The
increase  in total  assets  was due  primarily  to the  impact of  AB&IS,  which
resulted in franchise costs, an investment in LMG,  increased other  investments
including  Cablevision,  Excite@Home and Lenfest  Communications,  Inc., and the
addition of over $6 billion to property,  plant and equipment.  In addition,  we
recognized  goodwill  related  to AGNS.  Other  assets  increased  $1.5  billion
representing  the  Comcast  break-up  fee  loaned  to  MediaOne  by AT&T.  These
increases  were  partially  offset by a net decrease in cash,  which was used to
partially  fund  capital  expenditures  during the period and the first  quarter
share repurchase, as well as AGNS.

Total liabilities  increased  $44,377 million,  or 130.8%, to $78,296 million at
September  30, 1999,  compared  with  December  31,  1998.  The increase was due
primarily  to AB&IS,  particularly  deferred  income  taxes  and debt,  the $8.5
billion in bond  offerings and the issuance of $6.3 billion of short-term  debt.
These  increases  were  partially  offset by the  retirement  of $2.1 billion of
long-term debt.

Included within  "Minority  Interest in Equity of Consolidated  Subsidiaries" is
Class  A  Senior  Cumulative   Exchangeable   Preferred  Stock  of  TCI  Pacific
Communications, Inc. (Pacific) and TCI Class B Preferred Stock. At September 30,
1999,  the amount of preferred  stock and  accumulated  dividends of Pacific and
Class B  preferred,  respectively,  were an  aggregate  $2.1  billion  and  $149
million.

In addition,  AT&T issued $5.0 million of quarterly convertible income preferred
securities (recorded net of a $0.3 million discount) to Microsoft.

Total  shareowners'  equity  increased  $49,241 million,  or 192.9%,  to $74,763
million at September 30, 1999, compared with December 31, 1998. The increase was
due primarily to the issuance of shares  related to AB&IS,  partially  offset by
shares repurchased.

<PAGE>
                                                         AT&T Form 10-Q - Part I

AT&T Group's  ratio of total debt to total  capital at September  30, 1999,  was
42.6% compared with 20.9% at December 31, 1998.  Equity  includes the $5 billion
convertible  securities  issued to Microsoft  and debt  includes $1.6 billion of
non-convertible  securities issued by TCI's subsidiary  trusts. The increase was
primarily  driven by an increase in debt  associated with AB&IS and $8.5 billion
of bond  issuances  in 1999,  partially  offset by a higher  equity  base.  AT&T
Group's net debt-to-operational EBITDA was 1.69X at September 30, 1999, compared
with 0.24X at December 31, 1998.

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 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,  1999,  the
potential  loss for changes in fair value of unhedged  debt would have been $1.0
billion.

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

<PAGE>
                                                         AT&T Form 10-Q - Part I

YEAR 2000
AT&T is  preparing  its systems and  applications  for the year 2000 (Y2K).  The
issue our Y2K program  addresses is the use of a two-digit year field instead of
a  four-digit  year  field in  computer  systems.  If  computer  systems  cannot
distinguish  between the year 1900 and the year 2000,  system  failures or other
computer  errors could  result.  The potential for failures and errors spans all
aspects of our business,  including  computer systems,  voice and data networks,
and   building   infrastructures.    We   are   also   faced   with   addressing
interdependencies  with our suppliers,  connecting carriers and major customers,
all of whom face the same issue.

AT&T's company-wide Y2K program is focused on four interrelated categories which
are   critical  to   maintaining   uninterrupted   service  to  our   customers:
AT&T-developed  applications  and  their  external  interfaces,  AT&T  networks,
information-technology (IT) platforms that support the applications,  and non-IT
infrastructure.

AT&T's  progress in our Y2K program is  measured  by certain key  milestones  or
phases common to each category of systems.  These  milestones  are:  assessment,
repair/remediation,  testing and  certification.  AT&T  monitors  and tracks the
progress  of our Y2K program  through a series of  scorecards  that  capture the
activities related to the Y2K process phases.

As  of  September  30,  1999,   AT&T's  network   services  and   AT&T-developed
applications and their external  interfaces are year 2000 compliant.  This means
they have been assessed for year 2000 impacts, repaired if necessary, tested and
fully  deployed.  Within  the  IT-infrastructure   category,  some  non-critical
desktops  remain  to be  certified  and a small  number  of sites  remain  to be
certified  in the  non-IT  infrastructure  category.  The  certification  of the
remaining  desktops and sites is expected to be completed in November  1999. The
status of AB&IS' Y2K program is  discussed  separately  from the  existing  AT&T
program.  All targets cited herein also exclude  information  regarding  pending
acquisitions,   whose  programs   continue  to  be  evaluated  and  planned  for
integration into the overall AT&T Y2K program.

Program Status
AT&T now has over 3,500  applications that (1) directly support AT&T's voice and
data  telecommunications  services  (including  wired  and  wireless);  (2)  are
critical  to  the   provisioning,   administration,   maintenance  and  customer
service/support related to our telecommunications  services; and (3) support our
sales  and   marketing   organizations,   other  AT&T   services   and  internal
administrative functions. These applications represent over 385 million lines of
code. As of September 30, 1999, these applications are 100% complaint.

With respect to external (third-party) interface assessment, formal letters were
sent to about 2,000  domestic  telecommunications  companies  and  international
telecommunications  authorities  to request  information  on their Y2K plans and
targets  for  compliance.  We have  identified  over  1,000  different  types of
third-party  interfaces and about 10,000 total  instances of those types.  As of
September 30, 1999,  AT&T is 100% complete  with Y2K  certification  of external
interfaces.

<PAGE>
                                                         AT&T Form 10-Q - Part I

The AT&T network is critical to providing top-quality,  reliable service to AT&T
customers.  As of September 30, 1999, the assessment,  repair and  certification
phases  of the  operation-support  systems  (OS) were  100%  complete  and these
systems are now fully deployed.  In addition to the AT&T-developed  applications
supporting  the  network,   AT&T  has  inventoried   about  2,000  unique  types
(manufactured/model  combinations) of externally purchased network elements (NE)
including switches, routers,  network-control points and signal-transfer points.
Additional Y2K testing is conducted to  independently  verify supplier claims of
compliance.  All of the NEs are now  certified.  After  OS/NE  certification  is
complete,  AT&T performs  integration testing to verify Y2K certification of NEs
in conjunction with the associated OS applications.  Such integration testing is
100% completed, and all of the NEs are fully deployed.

The IT infrastructure  category addresses not only the computing  platforms that
are critical to the  AT&T-developed  applications,  but also the common modules,
communications  protocols,  the internal AT&T wide-area and local-area networks,
desktop  hardware/software  and the internal voice network.  As of September 30,
1999,  AT&T was 100%  compliant in computing  platforms,  about 95% compliant in
desktops,  100%  compliant in voice systems and adjuncts,  and 100% compliant in
data  networks.  The desktops that still remain to be validated as Y2K compliant
are not in  customer-affecting  areas. Based on the experience with the desktops
already verified as compliant,  it is likely that many of the remaining desktops
may only require software "patches" or minimal upgrades to be made compliant. We
anticipate  that we will complete the validation  process by the end of November
1999.

The non-IT  infrastructure  focuses on the  energy-  and  environment-management
systems  that are  critical  to  various  computer  systems,  as well as safety,
security and operations.  This aspect of the Y2K program  encompasses  more than
18,000 sites,  including  thousands of repeater huts,  radio towers and wireless
cell sites. As of September 30, 1999, 100% of all sites completed  inventory and
assessment  and about 97% are compliant (or not  impacted).  The small number of
sites that still  remain to be  certified as  compliant  are  anticipated  to be
completed by mid-November 1999.

In addition, AT&T has virtually completed network  interoperability tests with a
variety of domestic and international  testing partners,  with the remaining two
tests  scheduled  to be  completed  in  November.  These  tests are  designed to
exercise the network  across a range of our vendors,  and across a range of AT&T
voice, private line, and data services.  We have also completed testing with key
customer and industry segments,  including the financial  community,  insurance,
power  utilities,  the federal  government and others.  All test results to date
have been positive.

Similar to AT&T's Y2K program,  the AB&IS program has a four-phased  approach to
determining the readiness of systems for Y2K, namely:  assessment,  remediation,
testing and  implementation.  As of September 30, 1999,  critical cable delivery
systems and customer services are Y2K compliant. We anticipate completion of all
remaining phases of AB&IS' program by mid-November. AB&IS is also continuing its
efforts to verify  the year 2000  readiness  of its  significant  suppliers  and
vendors and  continue to  communicate  with  significant  business  partners and
affiliates to assess such partners' and affiliates' Y2K status.

<PAGE>
                                                         AT&T Form 10-Q - Part I

Costs
We have  expended  approximately  $675  million  since  inception in 1997 on all
phases of the Y2K project.  This figure  included  approximately  $76 million of
costs  incurred  during the third  quarter of 1999, of which  approximately  $11
million represented  capital spending for upgrading and replacing  non-compliant
computer  systems  and  network  components.  Less than  half of the 1999  costs
incurred to date represent  internal IT resources that have been redeployed from
other projects and are expected to return to these  projects upon  completion of
the Y2K  project.  We  anticipate  remaining  Y2K costs for 1999,  inclusive  of
approximately $25 million projected expenditures  associated with completing the
AB&IS program,  will be  approximately  $64 million.  This  projection  includes
approximately  $21  million  of  capitalized  costs.  The  remaining   projected
expenditures  will consist primarily of continued  independent  verification and
validation;  contingency  planning  testing;  completion  of document  retention
requirements and continued communications expansion and enhancement.

Risk Assessment
We have  assessed our business  exposure that would result from a failure of our
Y2K program,  as well as those of our suppliers,  connecting  carriers and major
customers.  Such  failures  would  result in  business  consequences  that could
include failure to be able to serve  customers,  loss of network  functionality,
inability to render accurate bills, lost revenues, harm to the AT&T brand, legal
and regulatory exposure, and failure of management controls. Although we believe
that internal Y2K compliance will be achieved by December 31, 1999, there can be
no assurance that the Y2K problem will not have a material adverse effect on our
business, financial condition or results of operations.

<PAGE>

                                                         AT&T Form 10-Q - Part I

Contingency Plans
AT&T's  contingency  planning program focuses on 38 critical business  processes
and many more that are designated as "important" or "support". The plans address
all    facets    of    business    continuity,    including    key    suppliers,
systems/applications,  IT infrastructure and work centers.  Specific examples of
AT&T's contingency plan initiatives include the following:

Plans are under way to engineer additional network capacity and to position AT&T
personnel  on site at  critical  locations  to  monitor  operations  and  manage
increases in work and call volumes.

Agreements  are being  negotiated  with  contractors  and  vendors to ensure the
availability of on-site technical support.  This coverage  includes,  but is not
limited to, network centers and sites, customer-care centers and data centers.

We are planning to proactively stage supplemental  power, fuel, water,  heating,
air-conditioning and ventilation sources to support critical business operations
and personnel requirements.

Alternate  procedures  and  processes  are being  developed to support  critical
customer functions,  including alternative procedures for rapid repair, recovery
and restoration of critical technology components by business resumption teams.

Procedures to perform database backups,  hardcopy printouts,  data retention and
recovery are being established for business critical data.

Risk Management
In  addition  to the  contingency  planning  program,  AT&T has  implemented  an
Independent Verification and Validation program for applications to validate the
quality  of  application  remediation  and  testing,  as well as the  continuing
compliance  of systems  put back into  production.  We also  continue to conduct
independent audits across critical areas of the Y2K program.

AT&T  continues  to monitor the progress of over 50  countries  who  represent a
significant  revenue  source.  Based on  assessments  aggregated  by the Network
Reliability  and  Interoperability  Council,  the outlook for Y2K  readiness for
these   countries   and   their   carriers   continues   to   improve.   Network
interoperability testing results also support this view.

To  maintain  a  state  of  readiness  and  further  protect  against  potential
Y2K-related  service  disruptions,  AT&T is instituting a special "quiet period"
from  December 1, 1999  through  January 15, 2000.  During this  period,  no new
software or hardware  will be  introduced  into the network or support  systems.
Provisioning and scheduled maintenance will also be limited.

<PAGE>

                                                         AT&T Form 10-Q - Part I

OTHER  MATTERS On April 30, 1999,  AT&T  completed  its  acquisition  of the IBM
Global Network business (renamed AT&T Global Network Services or "AGNS") and its
assets in the United States.  The acquisition is occurring in phases  throughout
1999 as legal and regulatory requirements are met in each of the 59 countries in
which  the  business  operates.  As of  the  end of the  third  quarter,  we had
completed acquisitions representing  approximately 95% of the revenues generated
by businesses  which comprise AGNS. The  acquisition has been accounted for as a
purchase.  Accordingly,  the operating results of AGNS have been included in the
accompanying  consolidated  financial  statements since the date of acquisition.
Intangible assets of approximately $4.1 billion including customer lists and the
excess of the  purchase  price over the fair value of net  assets  acquired  are
being  amortized on a  straight-line  basis over periods ranging from five to 30
years. The pro forma impact of AGNS on historical AT&T results are not material.

On May 28, 1999, At Home Corporation consummated a merger agreement with Excite,
Inc.  (Excite),  a global  Internet  media  company  that offers  consumers  and
advertisers   comprehensive   Internet   navigation   services  with   extensive
personalization  capabilities.  Under the terms of the merger agreement, At Home
Corporation issued  approximately 116 million shares of its common stock for all
of the outstanding common stock of Excite. As a result, AT&T's economic interest
in At Home  Corporation  (Excite@Home)  decreased  from 38% to 26% following the
merger. Due to the resulting increase in Excite@Home's  equity after the merger,
net of the dilution of AT&T's ownership  interest in Excite@Home,  AT&T recorded
an increase to additional paid-in capital of $488 million at September 30, 1999.
In the fourth quarter of 1999,  Excite@Home agreed to acquire an online greeting
card  company.  Upon  completion  of that  merger,  AT&T will record  additional
amounts  to its  additional  paid-in  capital as the share of its  ownership  of
Excite@Home is diluted. At September 30, 1999, AT&T owned 94.5 million shares of
Excite@Home  common stock and has an approximate  58% voting interest on certain
matters.

On August 2, 1999, AT&T completed its acquisition of Honolulu Cellular Telephone
Company from BellSouth.

In August 1999, AT&T and British  Telecommunications plc (BT) jointly acquired a
33.3% stake in Rogers  Cantel  Mobile  Communications  Inc.  (Rogers  Cantel) in
Canada for  approximately  $934 million in cash. The investment is owned equally
by AT&T and BT. Rogers Cantel is Canada's  largest  mobile  company  serving two
million  customers from coast to coast.  Rogers Cantel provides a complete range
of wireless  solutions  including  cellular,  paging and interactive  messaging,
digital PCS and wireless data services  marketed under the co-brand Cantel AT&T.
Also in August 1999, AT&T sold 30% of its 31% ownership  interest in AT&T Canada
to BT for approximately $402 million resulting in a $110 million pretax gain and
a 22% beneficial ownership by AT&T. AT&T and BT both contributed their ownership
interest  of AT&T  Canada to a joint  venture  that is 70% owned by AT&T and 30%
owned by BT.

On  September  2, 1999,  AT&T and BT  acquired a 30% stake in Japan  Telecom for
$1.83 billion.

The  previously  announced  global  venture  between  AT&T  and BT has  received
approval  from the Federal  Communication  Commission  (FCC),  the U.S.  Justice
Department  and the  European  Commission.  The  venture,  which  will be called
Concert, will combine transborder assets and operations of each company and will
be  equally  owned by both  companies  when  operations  begin.  The  venture is
expected to be completed in the fourth  quarter of 1999 and to begin  operations
on January 1, 2000.

<PAGE>

                                                         AT&T Form 10-Q - Part I

SUBSEQUENT EVENTS
On  October  6,  1999,  AT&T  and  Dobson  Communications  Corporation  (Dobson)
announced  the signing of a definitive  agreement to acquire  American  Cellular
Corporation through a newly created joint venture for $2.32 billion. Dobson will
be responsible  for day to day  management of the joint  venture,  which will be
equally owned and jointly controlled by Dobson and AT&T. The acquisition will be
funded  with  non-recourse  bank  debt by the  joint  venture  and  cash  equity
contributions of up to $370 million from each of the two partners.  The Board of
Directors of AT&T,  Dobson and American  Cellular have approved the transaction.
The  acquisition,  which is expected to close in the first  quarter of 2000,  is
subject to  approval  by  American  Cellular's  shareowners,  as well as federal
regulatory and certain other conditions.

On October 21, 1999,  shareowners of MediaOne Group, Inc. (MediaOne) unanimously
voted in favor of the proposed  merger between AT&T and MediaOne,  pursuant to a
definitive  merger agreement entered into on May 6, 1999. In accordance with the
agreement, AT&T will purchase each share of MediaOne common stock for $85.00 per
share consisting of 0.95 of a share of AT&T common stock plus $30.85 in cash. In
addition,  the agreement provides for an increase in the amount of cash received
per share of MediaOne  common  stock to the extent  that AT&T's  stock price was
less than $57.00 per share. The additional  amount of cash which may be received
is limited to $5.42 per share.  AT&T plans to issue  approximately  613  million
shares in the transaction.  Upon receipt of regulatory and other approvals,  the
merger is expected to close in the first quarter of 2000.

On November 1, 1999, AT&T announced its plans to form a new public  company,  to
be named AT&T Latin America,  that will merge the  operations of Netstream,  the
competitive local exchange company AT&T is acquiring in Brazil, and FirstCom,  a
publicly traded company with competitive telecommunications operations in Chile,
Columbia and Peru. AT&T, together with Promon Tecnologia, its Brazilian partner,
will contribute  Netstream and $70 million in cash. AT&T will own  approximately
60% of the  company,  owning  Class B  shares,  with 10  votes  per  share.  The
transaction has been approved by both AT&T's and FirstCom's  Board of Directors.
Upon approval by FirstCom shareowners as well as regulatory and other approvals,
the  transaction  is expected to close in the first quarter of 2000.  AT&T Latin
America intends to apply for listing on the NASDAQ stock market.

On November 5, 1999,  WORLDxCHANGE  Communications  announced the acquisition of
ACC in Europe (ACC) from AT&T. The agreement includes ACC's principal operations
in the United Kingdom, as well as ACC's operating  companies in France,  Germany
and  Italy.  AT&T  believes  it will  record a pretax  loss in the range of $150
million to $200 million on the sale.

LEGISLATIVE  AND  REGULATORY  DEVELOPMENTS  On  October  8,  1999,  the  Federal
Communications  Commission  (FCC) adopted  amendments  to its cable  attribution
rules which eased restrictions on its horizontal ownership limitations.  In 1993
the FCC had adopted  rules which  limited the number of  households  passed by a
single cable operator to 30% of households  passed by all cable  operators.  The
amendments  affirmed the 30% limit but changed the applicable  measurement  from
households  passed to  subscribers.  In  addition,  the FCC expanded the base of
total  subscribers  to include those served by  alternative  multichannel  video
programming  distributors,  such as direct broadcast  satellite.  The FCC stated
that the 30% limit on total subscribers  equated to 36.7% of cable  subscribers.
In  addition,  the  FCC  also  exempted  from a  cable  operator's  attributable
subscribers  those served by systems that the cable  operator  overbuilds  in an
incumbent cable franchise territory after October 20, 1999. The FCC retained the
5% voting equity threshold for attribution, and adopted a rule which would treat
as  attributable  any interest that exceeds 33% of the total asset value (equity
plus debt) of the entity.  The FCC stayed enforcement of the new rules until the
D.C.  Circuit Court of Appeals  decides upon the pending  challenge to the cable
attribution rules.

<PAGE>

                                                        AT&T Form 10-Q - Part II

                           PART II - OTHER INFORMATION


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

(a)           Exhibits

              Exhibit Number

                      12       Computation of Ratio of Earnings to Fixed Charges

                      27       Financial Data Schedule

                      99.1     Liberty Media Group Financial Results for the
                               Quarter and Year-to-Date Periods Ended September
                               30, 1999

                      99.2     Tele-Communications, Inc. Financial Results for
                               the Quarter and Year-to-Date Periods Ended
                               September 30, 1999

(b)           Reports on Form 8-K

              Form 8-K dated  September  2, 1999,  was filed  pursuant to Item 5
              (Other Events) and Item 7 (Financial  Statements and Exhibits).

<PAGE>

                                                                  AT&T Form 10-Q



                                     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 12, 1999

<PAGE>
                                                                  AT&T Form 10-Q



                                  Exhibit Index


Exhibit
Number



12                             Computation of Ratio of Earnings to Fixed Charges

27                             Financial Data Schedule

99.1                           Liberty Media Group Financial Results for the
                               Quarter and Year-to-Date Periods Ended September
                               30, 1999

99.2                           Tele-Communications, Inc. Financial Results for
                               the Quarter and Year-to-Date Periods Ended
                               September 30, 1999