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 June 30, 2003

                                       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


                   One AT&T Way, Bedminster, New Jersey 07921

                       Telephone - Area Code 908-221-2000



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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) Yes .X No ...


At July 31, 2003, the following shares of stock were outstanding: AT&T common
stock - 788,059,730

<PAGE>

PART I - FINANCIAL INFORMATION

<TABLE>

                       AT&T CORP. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                               (UNAUDITED)
<CAPTION>
                                                                     ---------------------------------------------------------------
                                                                        For the Three Months Ended       For the Six Months Ended
                                                                                 June 30,                        June 30,
                                                                     ---------------------------------------------------------------
                                                                           2003           2002            2003            2002
                                                                     ---------------------------------------------------------------
                                                                           Dollars in millions (except per share amounts)
<S>                                                                  <C>            <C>            <C>             <C>
Revenue                                                              $    8,795     $    9,580     $    17,781     $    19,128

Operating Expenses
Access and other connection                                               2,708          2,747           5,406           5,535
Costs of services and products (excluding depreciation
  of $880, $865, $1,734 and $1,712 included below)                        1,958          2,086           3,969           4,100
Selling, general and administrative                                       1,837          1,942           3,758           3,879
Depreciation and amortization                                             1,197          1,213           2,383           2,388
Net restructuring and other charges                                          66              -              70               -
                                                                     ---------------------------------------------------------------
Total operating expenses                                                  7,766          7,988          15,586          15,902
                                                                     ---------------------------------------------------------------
Operating income                                                          1,029          1,592           2,195           3,226

Other income (expense), net                                                  86            (50)             96            (105)
Interest (expense)                                                         (296)          (336)           (628)           (732)
                                                                     ---------------------------------------------------------------
Income from continuing operations before income taxes,
  minority interest income, and net (losses) related to
  equity investments                                                        819          1,206           1,663           2,389
(Provision) for income taxes                                               (308)          (513)           (605)           (992)
Minority interest income                                                      -             33               1              53
Net earnings (losses) related to equity investments                          25           (123)              6            (401)
                                                                     ---------------------------------------------------------------
Income from continuing operations                                           536            603           1,065           1,049
Net (loss) from discontinued operations (net of income tax
  benefit of $0, $5,581, $0 and $5,806)                                       -        (13,433)              -         (13,998)
                                                                     ---------------------------------------------------------------
Income (loss) before cumulative effect of accounting changes                536        (12,830)          1,065         (12,949)
Cumulative effect of accounting changes [net of income taxes
  of $0, $0, $(26) and $530]                                                  -              -              42            (856)
                                                                     ---------------------------------------------------------------
Net income (loss)                                                    $      536     $  (12,830)    $     1,107     $   (13,805)
                                                                     ---------------------------------------------------------------
Per basic share:
Earnings from continuing operations                                  $     0.68     $     0.83     $      1.36     $      1.46
(Loss) from discontinued operations                                           -         (18.41)              -          (19.46)
Cumulative effect of accounting changes                                       -              -            0.05           (1.19)
                                                                     ---------------------------------------------------------------
Earnings (loss) per basic share                                      $     0.68     $   (17.58)    $      1.41     $    (19.19)
                                                                     ---------------------------------------------------------------

Per diluted share:
Earnings from continuing operations                                  $     0.68     $     0.80     $      1.36     $      1.41
(Loss) from discontinued operations                                           -         (17.91)              -          (18.81)
Cumulative effect of accounting changes                                       -              -            0.05           (1.15)
                                                                     ---------------------------------------------------------------
Earnings (loss) per diluted share                                    $     0.68     $   (17.11)    $      1.41     $    (18.55)
                                                                     ---------------------------------------------------------------

    The notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>

<TABLE>

                               AT&T CORP. AND SUBSIDIARIES
                               CONSOLIDATED BALANCE SHEETS
                                       (UNAUDITED)
<CAPTION>
                                                                                                    At              At
                                                                                                 June 30,      December 31,
                                                                                                   2003            2002
                                                                                    ------------------------------------------------
                                                                                                    Dollars in millions
                                                                                                (except per share amounts)
<S>                                                                                           <C>               <C>
ASSETS
Cash and cash equivalents                                                                     $     5,256       $     8,014
Accounts receivable, less allowances of $709 and $669                                               4,771             5,286
Deferred income taxes                                                                                 779               910
Other current assets                                                                                1,026             1,693
                                                                                    ------------------------------------------------
TOTAL CURRENT ASSETS                                                                               11,832            15,903

Property, plant and equipment, net of accumulated depreciation of
  $33,017 and $31,021                                                                              24,831            25,604
Goodwill                                                                                            4,727             4,626
Other purchased intangible assets, net of accumulated amortization
  of $280 and $244                                                                                    530               556
Prepaid pension costs                                                                               3,723             3,596
Other assets                                                                                        4,741             4,987
                                                                                    ------------------------------------------------
TOTAL ASSETS                                                                                  $    50,384       $    55,272
                                                                                    ------------------------------------------------
LIABILITIES
Accounts payable                                                                              $     3,300       $     3,819
Payroll and benefit-related liabilities                                                               963             1,519
Debt maturing within one year                                                                       3,915             3,762
Other current liabilities                                                                           2,895             2,924
                                                                                    ------------------------------------------------
TOTAL CURRENT LIABILITIES                                                                          11,073            12,024

Long-term debt                                                                                     13,563            18,812
Long-term benefit-related liabilities                                                               4,185             4,001
Deferred income taxes                                                                               5,047             4,739
Other long-term liabilities and deferred credits                                                    3,233             3,384
                                                                                     -----------------------------------------------
TOTAL LIABILITIES                                                                                  37,101            42,960

SHAREOWNERS' EQUITY
AT&T Common Stock, $1 par value, authorized 6,000,000,000 shares;
  issued and outstanding 787,543,059 shares (net of 171,760,068
  treasury shares) at June 30, 2003 and 783,037,580 shares
  (net of 171,801,716 treasury shares) at December 31, 2002                                           788               783
Additional paid-in capital                                                                         27,980            28,163
Accumulated deficit                                                                               (15,459)          (16,566)
Accumulated other comprehensive (loss)                                                                (26)              (68)
                                                                                    ------------------------------------------------
TOTAL SHAREOWNERS' EQUITY                                                                          13,283            12,312
                                                                                    ------------------------------------------------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY                                                     $    50,384       $    55,272
                                                                                    ------------------------------------------------

    The notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>

<TABLE>

                              AT&T CORP. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
                                      (UNAUDITED)
<CAPTION>
                                                                                              For the Six Months Ended
                                                                                                      June 30,
                                                                                                2003            2002
                                                                                           ------------------------------
                                                                                                 Dollars in millions
<S>                                                                                        <C>             <C>
AT&T Common Stock
  Balance at beginning of year                                                             $     783       $     708
  Shares issued, net:
    Under employee plans                                                                           4               4
    For funding AT&T Canada obligation                                                             -              46
    Redemption of TCI Pacific preferred stock                                                      -              10
    Other                                                                                          1               1
Balance at end of period                                                                         788             769

Additional Paid-In Capital
  Balance at beginning of year                                                                28,163          54,798
  Shares issued, net:
    Under employee plans                                                                          71             265
    For funding AT&T Canada obligation                                                             -           2,485
    Redemption of TCI Pacific preferred stock                                                      -           2,087
    Other                                                                                         16              21
  Dividends declared                                                                            (295)           (278)
  Other                                                                                           25              10
Balance at end of period                                                                      27,980          59,388

Accumulated deficit
  Balance at beginning of year                                                               (16,566)         (3,484)
  Net income (loss)                                                                            1,107         (13,805)
  Treasury shares issued at less than cost                                                         -               1
Balance at end of period                                                                     (15,459)        (17,288)

Accumulated Other Comprehensive (Loss)
  Balance at beginning of year                                                                   (68)           (342)
  Other comprehensive income                                                                      42             228
Balance at end of period                                                                         (26)           (114)

Total Shareowners' Equity                                                                  $  13,283       $  42,755

Summary of Total Comprehensive Income (Loss):
Income (loss) before cumulative effect of accounting changes                               $   1,065       $ (12,949)
Cumulative effect of accounting changes                                                           42            (856)
Net income (loss)                                                                              1,107         (13,805)
Other Comprehensive Income (Loss):
  Net foreign currency translation adjustment [net of income taxes
    of $(80) and $(31)]                                                                          128              49
  Net revaluation of certain financial instruments:
    Unrealized gains (losses) [net of income taxes of $(60) and $425]                             97            (688)
    Recognition of previously unrealized (gains) losses [net of income
      taxes of $110 and $(538)]*                                                                (177)            867
  Net minimum pension liability adjustment [net of income taxes of $3 and $0]                     (6)              -
Comprehensive Income (Loss)                                                                $   1,149       $ (13,577)

<FN>
*See note 4 for a summary of the "Recognition of previously unrealized (gains) losses."
</FN>
AT&T accounts for treasury stock as retired stock. We have 100 million authorized shares of preferred stock at $1 par value.

    The notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>

                                AT&T CORP. AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        (UNAUDITED)
<CAPTION>
                                                                                                   For the Six Months Ended
                                                                                                           June 30,
                                                                                                ------------------------------
                                                                                                     2003            2002
                                                                                                ------------------------------
                                                                                                     Dollars in millions
<S>                                                                                             <C>             <C>
OPERATING ACTIVITIES
Net income (loss)                                                                               $   1,107       $ (13,805)
Deduct:
  Loss from discontinued operations - net of income taxes                                               -         (13,998)
  Cumulative effect of accounting changes - net of income taxes                                        42            (856)
                                                                                                --------------------------
Income from continuing operations                                                                   1,065           1,049

Adjustments to reconcile income from continuing operations to net cash
  provided by operating activities of continuing operations:
    Net gains on sales of businesses and investments                                                  (37)            (13)
    Cost investment impairment charges                                                                  -             141
    Net restructuring and other charges                                                                70               -
    Depreciation and amortization                                                                   2,383           2,388
    Provision for uncollectible receivables                                                           406             485
    Deferred income taxes                                                                             376             430
    Net revaluation of certain financial instruments                                                    -              58
    Minority interest income                                                                           (1)            (53)
    Net pretax losses related to equity investments                                                   (33)            650
    Decrease in receivables                                                                           140             226
    Decrease in accounts payable                                                                     (308)           (298)
    Net change in other operating assets and liabilities                                              336            (916)
    Other adjustments, net                                                                            (44)           (128)
                                                                                                --------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS                                  4,353           4,019
                                                                                                --------------------------
INVESTING ACTIVITIES
Capital expenditures and other additions                                                           (1,629)         (1,964)
Proceeds from sale or disposal of property, plant and equipment                                        23             251
Investment sales and distributions                                                                    101               5
Net (acquisitions) dispositions of businesses, net of cash acquired                                  (158)             16
Increase in restricted cash                                                                           (30)           (413)
Other investing activities, net                                                                       (27)            (17)
                                                                                                --------------------------
NET CASH (USED IN) INVESTING ACTIVITIES OF CONTINUING OPERATIONS                                   (1,720)         (2,122)
                                                                                                --------------------------
FINANCING ACTIVITIES
Retirement of long-term debt, including redemption premiums                                        (4,039)           (509)
(Decrease) in short-term borrowings, net                                                           (1,270)         (6,029)
Issuance of AT&T common shares                                                                         64           2,593
Dividends paid on common stock                                                                       (294)           (267)
Proceeds from long-term debt issuances                                                                  -              57
Other financing activities, net                                                                       148               3
                                                                                                --------------------------
NET CASH (USED IN) FINANCING ACTIVITIES OF CONTINUING OPERATIONS                                   (5,391)         (4,152)
                                                                                                --------------------------
Net cash (used in) discontinued operations                                                              -          (2,776)
Net (decrease) in cash and cash equivalents                                                        (2,758)         (5,031)
Cash and cash equivalents at beginning of year                                                      8,014          10,680
                                                                                                --------------------------
Cash and cash equivalents at end of period                                                      $   5,256       $   5,649
                                                                                                --------------------------


    The notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>

                           AT&T CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.   BASIS OF PRESENTATION

     The consolidated financial statements have been prepared by AT&T Corp.
     (AT&T or the "Company") 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 for the year ended December 31,
     2002, and Form 10-Q for the quarter ended March 31, 2003. We have
     reclassified certain prior period amounts to conform to our current
     presentation including a restatement to reflect AT&T Broadband as a
     discontinued operation and a restatement of shares and earnings per share
     to reflect the November 18, 2002, 1-for-5 reverse stock split.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     STOCK-BASED COMPENSATION

     AT&T has a Long-Term Incentive Program under which AT&T grants stock
     options, performance shares, restricted stock and other awards in AT&T
     common stock. We also have an Employee Stock Purchase Plan (ESPP).
     Effective May 31, 2003, we suspended employee purchases of company stock
     under the ESPP. Effective January 1, 2003, we adopted the fair value
     recognition provisions of Statement of Financial Accounting Standards
     (SFAS) No. 123, "Accounting for Stock-Based Compensation" and we began to
     record stock-based compensation expense for all employee awards (including
     stock options) granted or modified after January 1, 2003. For awards issued
     prior to January 1, 2003, we applied Accounting Principals Board (APB)
     Opinion No. 25, "Accounting for Stock Issued to Employees," and related
     interpretations in accounting for our plans. Under APB No. 25, no
     compensation expense was recognized other than for our performance-based
     and restricted stock awards, stock appreciation rights (SARs), and certain
     occasions when we modified the terms of the stock option vesting schedule.

     If we had elected to recognize compensation costs based on the fair value
     at the date of grant of all awards, consistent with the provisions of SFAS
     No. 123, net income (loss) and earnings (loss) per share amounts would have
     been as follows:
<TABLE>
<CAPTION>
                                                                            For the Three Months          For the Six Months
                                                                               Ended June 30,               Ended June 30,
                                                                              2003        2002             2003        2002
                                                                            -------------------------------------------------
                                                                               Dollars in millions (except per share amounts)
<S>                                                                         <C>        <C>                <C>       <C>
        Net income (loss)                                                   $   536    $(12,830)          $1,107    $(13,805)
        Add:
          Stock-based employee compensation included in
          reported results from continuing operations, net of taxes              24          14               34          35

          Stock-based employee compensation included in
          reported results from discontinued operations, net of taxes             -           2                -           4

        Deduct:
          Total stock-based employee compensation expense
          determined under the fair value method for all awards
          relating to continuing operations, net of taxes                       (61)        (61)            (109)       (127)

          Total stock-based employee compensation expense
          determined under the fair value method for all awards
          relating to discontinued operations, net of taxes                       -         (17)               -         (34)
                                                                            -------------------------------------------------
        Pro forma net income (loss)                                         $   499    $(12,892)          $1,032    $(13,927)
                                                                            -------------------------------------------------
             Basic earnings (loss) per share                                $  0.68    $ (17.58)          $ 1.41    $ (19.19)
             Proforma basic earnings (loss) per share                       $  0.63    $ (17.66)          $ 1.31    $ (19.36)

             Diluted earnings (loss) per share                              $  0.68    $ (17.11)          $ 1.41    $ (18.55)
             Proforma diluted earnings (loss) per share                     $  0.63    $ (17.19)          $ 1.31    $ (18.71)
</TABLE>

     Pro forma earnings from continuing operations were $499 million and $556
     million for the three months ended June 30, 2003 and 2002, respectively,
     and were $990 million and $957 million for the six months ended June 30,
     2003 and 2002, respectively. Pro forma (loss) from discontinued operations
     was $(13,448) million and $(14,028) million for the three and six months
     ended June 30, 2002, respectively.

     Pro forma earnings (loss) per basic share from continuing operations was
     $0.63 and $0.77 for the three months ended June 30, 2003 and 2002,
     respectively, and was $1.26 and $1.33 for the six months ended June 30,
     2003 and 2002, respectively. Pro forma earnings (loss) per basic share from
     discontinued operations was $(18.43) and $(19.50) for the three and six
     months ended June 30, 2002, respectively.

     Pro forma earnings (loss) per diluted share from continuing operations was
     $0.63 and $0.74 for the three months ended June 30, 2003 and 2002,
     respectively, and was $1.26 and $1.29 for the six months ended June 30,
     2003 and 2002, respectively. Pro forma earnings (loss) per diluted share
     from discontinued operations was $(17.93) and $(18.85) for the three and
     six months ended June 30, 2002, respectively.

     For a detailed discussion of significant accounting policies, please refer
     to AT&T's Form 10-K for the year ended December 31, 2002.


3.   IMPACTS OF RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

     SFAS No. 143, "Accounting for Asset Retirement Obligations"

     Effective January 1, 2003, AT&T adopted SFAS No. 143. This standard
     requires that obligations that are legally enforceable and unavoidable, and
     are associated with the retirement of tangible long-lived assets, be
     recorded as liabilities when those obligations are incurred, with the
     amount of the liability initially measured at fair value. The offset to the
     initial asset retirement obligation is an increase in the carrying amount
     of the related long-lived asset. Over time, this liability is accreted to
     its future value, and the asset is depreciated over the useful life of the
     related asset. Upon settlement of the liability, an entity either settles
     the obligation for its recorded amount or incurs a gain or loss upon
     settlement.

     AT&T historically included in its group depreciation rates an amount
     related to the cost of removal for certain assets. However, such amounts
     are not legally enforceable or unavoidable; therefore, upon adoption of
     SFAS No. 143, AT&T reversed the amount accrued in accumulated depreciation.
     As of January 1, 2003, AT&T recorded net income of $42 million as the
     cumulative effect of a change in accounting principle primarily related to
     this reversal. The impact of no longer including the cost of removal in the
     group depreciation rates, partially offset by the cumulative effect impact
     on accumulated depreciation, will result in a decrease to depreciation
     expense in 2003. However, the costs incurred to remove these assets will be
     reflected as a cost in the period incurred as "Costs of services and
     products."


4.   SUPPLEMENTARY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                   AT&T               AT&T
                                                                 Business           Consumer             Total
                                                                 Services           Services              AT&T
                                                                 ---------------------------------------------
                                                                              Dollars in millions
<S>                                                              <C>                  <C>              <C>
        GOODWILL
        Balance at January 1, 2003                               $ 4,556              $ 70             $ 4,626
        Translation adjustment                                       101                 -                 101
                                                                 ---------------------------------------------
        Balance at June 30, 2003                                 $ 4,657              $ 70             $ 4,727
                                                                 ---------------------------------------------
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                                               Gross Carrying     Accumulated             Net
                                                                  Amount          Amortization     Intangible Assets
                                                               -----------------------------------------------------
                                                                              Dollars in millions
<S>                                                               <C>                <C>               <C>
        INTANGIBLE ASSETS
        Amortizable purchased intangible assets
          at June 30, 2003:
            Customer lists and relationships                      $ 565              $ 153             $ 412
            Other                                                   245                127               118
                                                               -----------------------------------------------------
        Total intangible assets                                   $ 810              $ 280             $ 530
                                                               -----------------------------------------------------
</TABLE>

     The amortization expense associated with purchased intangible assets for
     the three and six months ended June 30, 2003, was $17 million and
     $33 million, respectively. Amortization expense for purchased intangible
     assets is estimated to be approximately $70 million for the year ending
     December 31, 2003, $60 million for the year ending December 31, 2004,
     $55 million for each of the years ending December 31, 2005 and 2006, and
     $30 million for the year ending 2007.

     INCOME TAXES
     The current income taxes payable balance included in Other Current
     Liabilities on the Consolidated Balance Sheet at June 30, 2003 and December
     31, 2002 was $758 million and $362 million, respectively.

<TABLE>
     SUMMARY OF RECOGNITION OF PREVIOUSLY UNREALIZED LOSSES (GAINS) AND THE LINE ITEMS IMPACTED

<CAPTION>
     For the Six Months Ended June 30,                                          2003                      2002
                                                                           Pretax   After-tax        Pretax   After-tax
                                                                                        Dollars in millions
  <S>                                                                      <C>         <C>           <C>         <C>
          Other income/expense, net:
          Other-than-temporary investment impairments                      $   -       $   -         $  140      $ 86
          Sale/exchange of various securities                               (187)       (115)             -         -
          Other financial instrument activity                               (100)        (62)             -         -

          Income from discontinued operations                                  -           -          1,265       781
                                                                           ------------------------------------------
          Total recognition of previously unrealized (gains) losses        $(287)      $(177)        $1,405      $867
                                                                           ------------------------------------------
</TABLE>

5.   EARNINGS PER COMMON SHARE AND POTENTIAL COMMON SHARE

     On November 18, 2002, a 1-for-5 reverse stock split of AT&T common stock as
     approved by shareowners on July 10, 2002, was effected. Shares (except
     shares authorized) and per share amounts were restated to reflect the stock
     split on a retroactive basis.

     Basic earnings per common share (EPS) is computed by dividing net income by
     the weighted-average number of common shares outstanding for the period.
     Diluted EPS reflects the potential dilution (considering the combined
     income and share impact) that could occur if securities or other contracts
     to issue common stock were exercised or converted into common stock. The
     potential issuance of common stock is assumed to occur at the beginning of
     the year (or at time of issuance if later), and the incremental shares are
     included using the treasury stock method. The proceeds utilized in applying
     the treasury stock method consist of the amount, if any, the employee must
     pay upon exercise, the amount of compensation cost attributed to future
     service not yet recognized, and any tax benefits credited to
     paid-in-capital related to the exercise. These proceeds are then assumed to
     be used by the Company to purchase common stock at the average market price
     during the period. The incremental shares (difference between the shares
     assumed to be issued and the shares assumed to be purchased), to the extent
     they would have been dilutive, are included in the denominator of the
     diluted EPS calculation.



     A reconciliation of the share components for basic to diluted EPS is as
     follows:
<TABLE>
<CAPTION>
                                                                      For the Three Months     For the Six Months
                                                                         Ended June 30,          Ended June 30,
                                                                       2003(1)      2002(1)     2003(1)     2002(1)
                                                                      --------------------------------------------
                                                                                    Shares in millions
<S>                                                                   <C>          <C>         <C>         <C>
        Weighted-average common shares                                787          730         786         720
        Effect of dilutive securities:
          Stock options                                                 -            -           -           -
          Preferred stock of subsidiary                                 -            2           -           6
          Convertible quarterly income preferred securities             -           18           -          18
                                                                      ----------------------------------------
        Weighted-average common shares and potential common shares    787          750         786         744
                                                                      ----------------------------------------
<FN>
        (1) For 2003 and 2002 no adjustments were made to income for the computation of diluted EPS.
</FN>
</TABLE>

     Preferred Stock of Subsidiary
     Pursuant to the AT&T Broadband and Comcast merger agreement, AT&T was
     required to redeem the outstanding TCI Pacific Communications, Inc. Class A
     Senior Cumulative Exchangeable Preferred Stock (TCI Pacific preferred
     stock) for AT&T common stock. All outstanding shares of TCI Pacific
     preferred stock were either exchanged or redeemed for AT&T common stock
     during 2001 and 2002. Dividends were included in "Net (loss) from
     discontinued operations" for 2002.

     Convertible Quarterly Income Preferred Securities
     On June 16, 1999, AT&T Finance Trust I, a wholly owned subsidiary of AT&T,
     completed the private sale of 100 million shares of 5.0% cumulative
     quarterly income preferred securities (quarterly preferred securities) to
     Microsoft Corporation. Such securities were convertible into AT&T common
     stock during 2002. However, in connection with the AT&T Broadband spin-off,
     Comcast assumed the quarterly preferred securities and Microsoft agreed to
     convert these preferred securities into shares of Comcast common stock.
     Dividends were included in "Net (loss) from discontinued operations" for
     2002.


6.   NET RESTRUCTURING AND OTHER CHARGES

     In the second quarter of 2003, net restructuring and other charges of $66
     million reflected $57 million of separation costs and $9 million of benefit
     plan curtailment costs associated with the Company's management realignment
     efforts (impacting approximately 90 senior managers). Such management
     realignment efforts will continue throughout 2003 and will result in
     additional charges that are expected to be similar to or slightly higher
     than the charges recorded in the current quarter. Approximately 36% of
     affected employees have exited the business as of June 30, 2003, with the
     remainder expected to be off-roll by the end of 2003.

     The following table displays the activity and balances of the restructuring
     reserve account:
<TABLE>
<CAPTION>
                                                                  Type of Cost
                                                 --------------------------------------------------
                                                  Employee         Facility
                                                 Separations       Closings       Other       Total
                                                 --------------------------------------------------
                                                               Dollars in millions
<S>                                              <C>               <C>            <C>         <C>
        Balance at January 1, 2003               $ 379             $ 283          $ 3         $ 665
           Additions                                57                 -            -            57
           Deductions                             (199)              (40)          (1)         (240)
                                                 ---------------------------------------------------
        Balance at June 30, 2003                 $ 237             $ 243          $ 2         $ 482
                                                 ---------------------------------------------------
</TABLE>

     Deductions primarily reflect cash payments, which included cash termination
     benefits of $191 million, funded primarily through cash from operations.

     Relative to the business restructuring reserves recorded during the third
     and fourth quarters of 2002, approximately 64% of the employees affected by
     these exit plans have left their positions as of June 30, 2003, with the
     remaining reductions to occur throughout 2003.

     Net restructuring and other charges of $70 million for the six months ended
     June 30, 2003, primarily consisted of $66 million associated with the
     Company's management realignment.


7.   DISCONTINUED OPERATIONS

     AT&T BROADBAND

     AT&T Broadband, composed primarily of the AT&T Broadband segment, was
     spun-off to AT&T shareowners on November 18, 2002, and simultaneously
     combined with Comcast Corporation (Comcast). Pursuant to SFAS No. 144,
     "Accounting for the Impairment or Disposal of Long-Lived Assets," AT&T
     Broadband was accounted for as a discontinued operation. In accordance with
     SFAS No. 144, prior period financial statements have been restated to
     reflect AT&T Broadband as a discontinued operation in all periods. As a
     discontinued operation, the revenue, expenses and cash flows of AT&T
     Broadband have been excluded from the respective captions in the
     Consolidated Statements of Operations and Consolidated Statements of Cash
     Flows, and have been reported through the date of separation within "Net
     (loss) from discontinued operations" and as "Net cash (used in)
     discontinued operations."

     Revenue for AT&T's Broadband business was $2,526 million and $4,965 million
     for the three and six months ended June 30, 2002, respectively. Net (loss)
     from discontinued operations before income taxes was $(18,882) million
     [$(13,345) million after-tax] for the three months ended June 30, 2002, and
     $(19,672) million [$(13,910) million after-tax] for the six months ended
     June 30, 2002. For the three and six months ended June 30, 2002, interest
     expense of $103 million and $173 million, respectively, was allocated to
     discontinued operations based on the balance of intercompany debt between
     AT&T Broadband and AT&T.

     LUCENT TECHNOLOGIES INC.

     Net (loss) from discontinued operations for the three and six months ended
     June 30, 2002, included an estimated loss on a litigation settlement
     associated with the business of Lucent Technologies Inc. (Lucent), which
     was spun-off from AT&T in 1996. Sparks, et al. v. AT&T and Lucent. et al.,
     was a class action lawsuit filed in 1996 in Illinois state court. On August
     9, 2002, a settlement proposal was submitted to and accepted by the court.
     In accordance with the separation and distribution agreement between AT&T
     and Lucent, AT&T's estimated proportionate share of the settlement and
     legal costs recorded in the second quarter of 2002 totaled $132 million
     pretax ($88 million after-tax). (In the fourth quarter of 2002, this
     initial estimate was reduced to $45 million [$33 million after-tax]).
     Depending upon the number of claims submitted and accepted, the actual cost
     of the settlement to AT&T may be less than stated amounts, but it is not
     possible to estimate the amount at this time. While similar consumer class
     actions are pending in various state courts, the Illinois state court has
     held that the class it certified covers claims in the other state court
     class actions.


8.   INVESTMENTS

     AT&T CANADA

     AT&T had an approximate 31% ownership interest in AT&T Canada. Pursuant to
     a 1999 merger agreement, AT&T had a commitment to purchase, or arrange for
     another entity to purchase, the publicly-owned shares of AT&T Canada for
     the Back-end Price, which was the greater of a contractual floor price or
     the fair market value. The floor price accreted 4% each quarter, commencing
     on June 30, 2000.

     In 2001, AT&T recorded charges reflecting the difference between the
     underlying value of publicly owned AT&T Canada shares and the price AT&T
     had committed to pay for them, including the 4% accretion of the floor
     price. In the second quarter of 2002, AT&T recorded charges of $0.1 billion
     after-tax ($0.2 billion pretax) reflecting the accretion of the floor
     price. Included in the first half of 2002, were charges of $0.3 billion
     after-tax ($0.5 billion pretax) reflecting further deterioration in the
     underlying value of AT&T Canada as well as accretion of the floor price.
     The charges are included in "Net earnings (losses) related to equity
     investments."

     During 2002, AT&T arranged for third parties (Tricap Investment Corporation
     and CIBC Capital Partners) to purchase the remaining 69% equity in AT&T
     Canada. As part of this agreement, AT&T agreed to fund the purchase price
     on behalf of the third parties. On June 11, 2002, AT&T completed a public
     equity offering of 46 million shares of AT&T common stock for net proceeds
     of $2.5 billion, to satisfy a portion of this obligation. Tricap and CIBC
     Partners made a nominal payment to AT&T upon completion of the purchase in
     October, 2002. Although AT&T held an equity interest in AT&T Canada
     throughout 2002, it did not record equity earnings or losses since its
     investment balance was written down to zero largely through losses
     generated by AT&T Canada. During the first half of 2003, AT&T disposed of
     all of its AT&T Canada shares.

     At June 30, 2002, AT&T had a 31% ownership interest in AT&T Canada.
     Summarized financial information for the three and six months ended June
     30, 2002, for this investment accounted for under the equity method was as
     follows:

<TABLE>
<CAPTION>
                                                                   For the Three Months       For the Six Months
                                                                      Ended June 30,            Ended June 30,
                                                                           2002                      2002
                                                                   ---------------------------------------------
                                                                               (Dollars in millions)
<S>                                                                      <C>                        <C>
        Revenue                                                          $ 246                      $ 487
        Operating (loss)                                                  (841)                      (874)
        (Loss) from continuing operations before extraordinary
          items and cumulative effect of accounting changes               (953)                    (1,052)
        Net (loss)                                                      (1,932)                    (2,031)
</TABLE>

     CONCERT

     On April 1, 2002, Concert, our 50% owned joint venture with British
     Telecommunications plc (BT), was unwound and the venture's assets and
     customer accounts were distributed back to the parent companies, as agreed
     to in 2001. Under the partnership termination agreement, each of the
     partners generally reclaimed the customer contracts and assets that were
     initially contributed to the joint venture, including international
     transport facilities and gateway assets. In addition, AT&T assumed certain
     other assets that BT originally contributed to the joint venture. In
     conjunction with the unwind of Concert, AT&T paid BT $158 million in the
     first quarter of 2003. In the second quarter of 2003, a $28 million
     after-tax benefit ($45 million pretax) was recorded within "Net earnings
     (losses) related to equity investments" due to the favorable settlement of
     certain items in connection with the Concert unwind.

     AT&T had various related party transactions with Concert until the joint
     venture was unwound on April 1, 2002. Included in "Revenue" was $268
     million for services provided to Concert for the six months ended June 30,
     2002. Included in "Access and other connection" expense are charges from
     Concert representing costs incurred on our behalf to connect calls made to
     foreign countries (international settlements) and costs paid by AT&T to
     Concert for distributing Concert products totaling $491 million for the six
     months ended June 30, 2002.


     AT&T Wireless

     In February 2003, AT&T redeemed exchangeable notes that were indexed to
     AT&T Wireless common stock. The notes were settled with 78.6 million shares
     of AT&T Wireless common stock and $152 million in cash (see note 9).  Also
     in February, AT&T sold its remaining investment in AT&T Wireless
     (approximately 12.2 million shares) for $72 million, resulting in a gain of
     $22 million recorded in "Other income (expense), net."


9.   DEBT OBLIGATIONS

     LONG-TERM DEBT

     On January 31, 2003, AT&T completed the early retirement of approximately
     $1,152 million and $2,590 million long-term notes, with interest rates of
     6.375% and 6.50%, due in March 2004 and March 2013, respectively. The notes
     were repurchased with cash and resulted in a loss of $178 million recorded
     in "Other income (expense), net."

     EXCHANGEABLE NOTES

     During 2001, we issued long-term debt (exchangeable notes) that was indexed
     to AT&T Wireless common stock and, at AT&T's option, was mandatorily
     redeemable with a number of shares of AT&T Wireless common stock that was
     equal to the underlying shares multiplied by an exchange ratio, or its cash
     equivalent. The notes were accounted for as indexed debt instruments
     because the carrying value of the debt was dependent upon the fair market
     value of the underlying securities. In addition, the notes contained
     embedded derivatives, which were designated as cash flow hedges and
     required separate accounting. These designated options were carried at fair
     value with changes in fair value recorded, net of income taxes, within
     "Accumulated other comprehensive (loss)" as a component of shareowners'
     equity.

     The shares of AT&T Wireless common stock were accounted for as
     "available-for-sale" securities under SFAS No. 115, "Accounting for Certain
     Investments in Debt and Equity Securities," with changes in the carrying
     value of the underlying securities that are not "other-than-temporary"
     being recorded as unrealized gains or losses, net of income taxes, within
     "Accumulated other comprehensive (loss)" as a component of shareowners'
     equity.

     In February 2003, AT&T redeemed these exchangeable notes with 78.6 million
     shares of AT&T Wireless common stock and $152 million in cash. The
     settlement resulted in a pretax gain of approximately $176 million recorded
     in "Other income (expense), net." The noncash impacts of this transaction
     include the use of $0.5 billion of our investment in AT&T Wireless to
     settle long-term debt.


10.  FINANCIAL INSTRUMENTS

     In the normal course of business, we use various financial instruments,
     including derivative financial instruments, for purposes other than
     trading. These instruments include letters of credit, guarantees of debt
     and certain obligations of former affiliates, interest rate swap
     agreements, foreign currency exchange contracts, option contracts, equity
     contracts and warrants.

     We enter into interest rate swaps to manage our exposure to changes in
     interest rates. We enter into swap agreements to manage the fixed/floating
     mix of our debt portfolio in order to reduce aggregate risk to interest
     rate movements. These agreements involve the exchange of floating-rate for
     fixed-rate payments or the exchange of fixed-rate for floating-rate
     payments without the exchange of the underlying notional amount.
     Floating-rate payments and receipts are primarily tied to the LIBOR. In the
     second quarter of 2003, we entered into $1 billion of notional
     fixed-to-floating interest rate swaps, which we designated as fair value
     hedges in accordance with SFAS No. 133, "Accounting for Derivative
     Instruments and Hedging Activities." The weighted-average receive rate and
     pay rate for these swaps at June 30, 2003 was 4.23% and 2.57%,
     respectively.

     In addition, we have combined interest rate, foreign currency swap
     agreements for foreign-currency-denominated debt, which hedge our risk to
     both interest rate and currency movements. The fair value of such
     arrangements has increased $530 million since December 31, 2002 to $1,190
     million at June 30, 2003, primarily due to the strength of the EURO
     currency compared with U.S. dollars.

     In connection with the combined interest rate swap agreements, as of June
     30, 2003, we had received $146 million of cash collateral (included in
     "Cash" in the Consolidated Balance Sheet) and $29 million of security
     collateral (included in "Other current assets" in the Consolidated Balance
     Sheet).


11.  EQUITY TRANSACTIONS

     Pursuant to the AT&T Broadband and Comcast merger agreement, AT&T was
     required to redeem the outstanding TCI Pacific Communications, Inc. Class A
     Senior Cumulative Exchangeable Preferred Stock for AT&T common stock. Each
     share of TCI Pacific preferred stock was exchangeable at the option of the
     holder for 1.673 shares of AT&T common stock. As of June 30, 2002, all
     outstanding shares (approximately 6.2 million) of TCI Pacific preferred
     stock were either exchanged or redeemed for approximately 10.4 million
     shares of AT&T common stock. No gain or loss was recorded on the
     exchange/redemption of the TCI Pacific preferred stock.

     During 2002, AT&T issued 2.9 million shares of AT&T common stock to certain
     current and former senior managers in settlement of their deferred
     compensation accounts. Approximately 2.8 million shares were issued in the
     second quarter of 2002 and 0.1 million shares in the third quarter of 2002.
     Pursuant to AT&T's deferred compensation plan, senior managers may defer
     short- and long-term incentive compensation awards. The impact of the
     issuance of these shares resulted in an increase to total shareowners'
     equity of $0.2 billion.

     In June 2002, AT&T completed a public equity offering of 46 million shares
     of AT&T common stock for net proceeds of $2.5 billion. AT&T utilized the
     proceeds from the offering to satisfy a portion of its obligation to AT&T
     Canada common shareholders (see note 8).


12.  COMMITMENTS AND CONTINGENCIES

     In connection with the separation of its former subsidiaries, AT&T has
     entered into a number of separation and distribution agreements that
     provide, among other things, for the allocation and/or sharing of certain
     costs associated with potential litigation liabilities. For example,
     pursuant to these agreements, AT&T shares in the cost of certain litigation
     (relating to matters while affiliated with AT&T) if the settlement exceeds
     certain thresholds. With the exception of one matter already reserved for
     (Sparks, et al. v. AT&T Lucent Technologies, see note 7) , we have assessed
     that none of the litigation liabilities allocated to former subsidiaries
     were probable of incurring costs in excess of the threshold above which we
     would be required to share in the costs. However, in the event these former
     subsidiaries were unable to meet their obligations with respect to these
     liabilities due to financial difficulties, AT&T could be held responsible
     for all or a portion of the costs, irrespective of the sharing agreements.


     In the normal course of business we are subject to proceedings, lawsuits
     and other claims, including proceedings under laws and regulations related
     to environmental and other matters. Such matters are subject to many
     uncertainties, and outcomes are not predictable with assurance.


     Consequently, we are unable to ascertain the ultimate aggregate amount of
     monetary liability or financial impact with respect to these matters at
     June 30, 2003. However, we believe that after final disposition, any
     monetary liability or financial impact to us beyond that provided for at
     June 30, 2003, would not be material to our annual consolidated financial
     statements.

13.  SEGMENT REPORTING

     AT&T's results are segmented according to the customers we service: AT&T
     Business Services and AT&T Consumer Services. AT&T evaluates performance
     based on several factors, of which the primary financial measure is
     operating income.

     Our existing segments reflect certain managerial changes that were
     implemented during 2003. The changes primarily include a redistribution of
     property, plant and equipment from the Corporate and Other group to AT&T
     Business Services and a transfer of deferred taxes from AT&T Consumer
     Services to the Corporate and Other group.

     AT&T Business Services provides a variety of communication services to
     various sized businesses and government agencies including long distance,
     international, toll-free and local voice, including wholesale transport
     services, as well as data services and Internet protocol and enhanced
     (IP&E) services, which includes the management of network servers and
     applications. AT&T Business Services also provides outsourcing solutions
     and other professional services.

     AT&T Consumer Services provides a variety of communication services to
     residential customers. These services include traditional long distance
     voice services such as domestic and international dial services (long
     distance or local toll calls where the number "1" is dialed before the
     call), calling card services and dial-up Internet. Transaction services,
     such as prepaid card and operator-assisted calls, are also offered.
     Collectively these services represent stand-alone long distance and are not
     offered in conjunction with any other service. AT&T Consumer Services also
     provides all distance services, which bundle long distance, local and local
     toll.

     The balance of AT&T's continuing operations is included in a "Corporate and
     Other" group. This group primarily reflects corporate staff functions and
     the elimination of transactions between segments.

     Total assets for our reportable segments include all assets, except
     intercompany receivables. AT&T prepaid pension assets, taxes and
     corporate-owned or leased real estate are held at the corporate level and
     therefore are included in the Corporate and Other group. Capital additions
     for each segment include capital expenditures for property, plant and
     equipment, additions to nonconsolidated investments and additions to
     internal-use software (which are included in "Other assets").

     AT&T Business Services sells services to AT&T Consumer Services at
     cost-based prices. Generally, AT&T Business Services accounts for these
     sales as contra-expense.

<TABLE>
<CAPTION>
     REVENUE                                                    For the Three Months               For the Six Months
                                                                   Ended June 30,                    Ended June 30,
                                                                2003            2002               2003           2002
                                                                ------------------------------------------------------
                                                                                Dollars in millions
<S>                                                             <C>             <C>             <C>            <C>
        AT&T Business Services external revenue                 $ 6,406         $ 6,650         $ 12,843       $ 13,095
        AT&T Business Services internal revenue                       -              92                -            175
                                                                -------------------------------------------------------
        Total AT&T Business Services revenue                      6,406           6,742           12,843         13,270
        AT&T Consumer Services external revenue                   2,376           2,911            4,912          5,997
                                                                -------------------------------------------------------
        Total reportable segments                                 8,782           9,653           17,755         19,267
        Corporate and Other                                          13             (73)              26           (139)
                                                                -------------------------------------------------------
        Total revenue                                           $ 8,795         $ 9,580         $ 17,781       $ 19,128
                                                                -------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
     RECONCILIATION OF OPERATING INCOME TO INCOME FROM CONTINUING
       OPERATIONS BEFORE INCOME TAXES, MINORITY INTEREST INCOME,
       AND NET EARNINGS (LOSSES) RELATED TO EQUITY INVESTMENTS

                                                               For the Three Months         For the Six Months
                                                                  Ended June 30,              Ended June 30,
                                                               2003           2002         2003          2002
                                                               ------------------------------------------------
                                                                              Dollars in millions
<S>                                                            <C>            <C>          <C>           <C>
        AT&T Business Services operating income                $  597         $  856       $1,197        $1,723
        AT&T Consumer Services operating income                   489            787        1,121         1,608
                                                               ------------------------------------------------
        Total reportable segments operating income              1,086          1,643        2,318         3,331
        Corporate and Other operating (loss)                      (57)           (51)        (123)         (105)
                                                               ------------------------------------------------
        Operating income                                        1,029          1,592        2,195         3,226
        Other income (expense), net                                86            (50)          96         (105)
        Interest (expense)                                       (296)          (336)        (628)        (732)
                                                               ------------------------------------------------
        Income from continuing operations before
          income taxes, minority interest income, and
          net earnings(losses) related to equity               $  819         $1,206       $1,663        $2,389
          investments                                          ------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
      ASSETS                                                                At                        At
                                                                         June 30,                December 31,
                                                                           2003                      2002
                                                                     ------------------------------------------
                                                                                Dollars in millions
<S>                                                                    <C>                       <C>
        AT&T Business Services                                         $   35,432                $  36,389
        AT&T Consumer Services                                              1,152                    1,390
                                                                     ------------------------------------------
        Total reportable segments                                          36,584                   37,779
        Corporate and Other assets*                                        13,800                   17,493
                                                                     ------------------------------------------
        Total assets                                                   $   50,384                $  55,272
                                                                     ------------------------------------------

<FN>
        *  Includes cash of $5.0 billion at June 30, 2003, and $7.8 billion at December 31, 2002.
</FN>
</TABLE>


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

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

14.  NEW ACCOUNTING PRONOUNCEMENTS

     In January 2003, the Financial Accounting Standards Board (FASB) issued
     Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest
     Entities--an Interpretation of Accounting Research Bulletin (ARB) No. 51."
     FIN 46, adopted by AT&T in July 2003, requires the primary beneficiary to
     consolidate a variable interest entity (VIE) if it has a variable interest
     that will absorb a majority of the entity's expected losses if they occur,
     receive a majority of the entity's expected residual returns if they occur,
     or both. FIN 46 applies immediately to VIEs created after January 31, 2003,
     and to VIEs in which the entity obtains an interest after that date. Based
     on the new standard, two entities that AT&T leases buildings from qualify
     as VIEs and therefore became subject to consolidation as of July 1, 2003.
     AT&T has no ownership interest in either entity, but provides guarantees of
     the residual values for the leased facilities with a maximum exposure of
     $427 million. FIN 46 will add $431 million of assets (principally the
     properties we lease) and $476 million of liabilities (principally debt
     secured by the properties) to our consolidated balance sheet. This will
     result in a charge of approximately $28 million, net of income taxes, as
     the cumulative effect of an accounting change in the third quarter of 2003.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
     Derivative Instruments and Hedging Activities." This standard amends and
     clarifies the accounting for derivative instruments, including certain
     derivative instruments embedded in other contracts, and hedging activities
     under SFAS No. 133, "Accounting for Derivative Instruments and Hedging
     Activities." This statement is effective prospectively for contracts
     entered into or modified after June 30, 2003, and for hedging relationships
     designated after June 30, 2003. SFAS No. 149 will not have an impact upon
     initial adoption and is not expected to have a material effect on our
     results of operations, financial position and cash flows.


     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
     Financial Instruments with Characteristics of both Liabilities and Equity."
     This statement establishes standards for how an issuer classifies and
     measures certain financial instruments with characteristics of both
     liabilities and equity. It requires issuers to classify financial
     instruments within its scope as liabilities (or an asset in some cases).
     Prior to SFAS No. 150, many of these instruments may have been classified
     as equity. This Statement is effective for financial instruments entered
     into or modified after May 31, 2003. For instruments issued prior to May
     31, 2003, this standard is to be implemented by reporting the cumulative
     effect of a change in accounting principle as of July 1, 2003. SFAS No. 150
     will not have an impact upon initial adoption and is not expected to
     materially impact AT&T's ongoing results of operations, financial position
     or cash flows.

     In November 2002, the Emerging Issues Task Force (EITF) reached a consensus
     on EITF 00-21, "Revenue Arrangements with Multiple Deliverables," related
     to the timing of revenue recognition for arrangements in which goods or
     services or both are delivered separately in a bundled sales arrangement.
     The EITF requires that when the deliverables included in this type of
     arrangement meet certain criteria they should be accounted for separately
     as separate units of accounting. This may result in a difference in the
     timing of revenue recognition but will not result in a change in the total
     amount of revenue recognized in a bundled sales arrangement. The allocation
     of revenue to the separate deliverables is based on the relative fair value
     of each item. If the fair value is not available for the delivered items
     then the residual method must be used. This method requires that the amount
     allocated to the undelivered items in the arrangement is their full fair
     value. This would result in the discount, if any, being allocated to the
     delivered items. This consensus is effective prospectively for arrangements
     entered into in fiscal periods beginning after June 15, 2003, which, for
     AT&T, is July 1, 2003. EITF 00-21 will not have an impact upon initial
     adoption and is not expected to have a material impact to AT&T's ongoing
     results of operations, financial position or cash flows.

     In May 2003, the EITF reached a consensus on EITF 01-8 "Determining Whether
     an Arrangement Contains a Lease," relating to new requirements on
     identifying leases contained in contracts or other arrangements that sell
     or purchase products or services. The evaluation of whether an arrangement
     contains a lease within the scope of SFAS No. 13 "Accounting for Leases,"
     should be based on the evaluation of whether an arrangement conveys the
     right to use property, plant and equipment. This may result in a difference
     in the timing of revenue recognition. The consensus requires sellers to
     report the revenue from the leasing component of the arrangement as leasing
     or rental income rather than revenue from product sales or services.
     Purchaser's arrangements which previously would have been considered
     service or supply contracts, but are now considered leases, could affect
     the timing of their expense recognition and the classification of assets
     and liabilities on their balance sheet as well as require footnote
     disclosure of lease terms and future minimum lease commitments. This
     consensus is effective prospectively for contracts entered into or
     significantly modified after July 1, 2003. EITF 01-8 will not have an
     impact upon initial adoption and based on arrangements in place today, will
     not have a material effect on our results of operations, financial position
     and cash flows.


15.  SUBSEQUENT EVENTS

     On August 6, 2003, AT&T received initial commitments from JP Morgan and
     Citigroup for a portion of a new bank facility of up to $2.0 billion. The
     banks have also agreed to act as lead arrangers to syndicate the balance of
     the 364-day credit facility. The proposed new bank facility will replace
     AT&T's existing undrawn $3.0 billion facility, which matures in October
     2003.

     On August 8, 2003,  AT&T employees  represented by the CWA  (Communications
     Workers of America) and the IBEW  (International  Brotherhood of Electrical
     Workers) ratified the extension of their current contracts through December
     10,  2005.  Those  contracts  include the  AT&T/CWA  Operations  agreement,
     AT&T/CWA Local Network Services agreement in Mesa,  Arizona,  Independence,
     Ohio  and  Maryland  Heights,   Missouri,   and  the  AT&T/IBEW  Operations
     Agreement.

<PAGE>

                           AT&T CORP. AND SUBSIDIARIES

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


OVERVIEW

AT&T Corp. (AT&T or the "Company") is among the world's communications leaders,
providing voice and data communications services to large and small businesses,
consumers and government agencies. We provide domestic and international long
distance, regional and local communications services, and data and Internet
communications services.


FORWARD-LOOKING STATEMENTS

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

These forward-looking statements, including, without limitation, those relating
to the future business prospects, revenue, working capital, liquidity, capital
needs, network build-out, interest costs and income, are necessary estimates
reflecting the best judgment of senior management that rely on a number of
assumptions concerning future events, many of which are outside AT&T's control,
and involve a number of risks and uncertainties that could cause actual results
to differ materially from those suggested by the forward-looking statements.
These forward-looking statements should, therefore, be considered in light of
various important factors that could cause actual results to differ materially
from estimates or projections contained in the forward-looking statements
including, without limitation:

|X|  the impact of existing and new competitors in the markets in which AT&T
     competes, including competitors that may offer less expensive products and
     services, desirable or innovative products, technological substitutes, or
     have extensive resources or better financing,

|X|  the impact of oversupply of capacity resulting from excessive deployment of
     network capacity,

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

|X|  the effects of vigorous competition in the markets in which the Company
     operates, which may decrease prices charged, increase churn and change
     customer mix and profitability,

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

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

|X|  the risks associated with technological requirements, wireless, Internet or
     other technology substitution and changes and other technological
     developments,

|X|  the results of litigation filed or to be filed against the Company, and

|X|  the possibility of one or more of the markets in which the Company competes
     being impacted by changes in political, economic or other factors, such as
     monetary policy, legal and regulatory changes or other external factors
     over which the Company has no control.

The words "estimate," "project," "intend," "expect," "believe," "plan" and
similar expressions are intended to identify forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date this document is filed. Moreover, in the future,
AT&T, through its senior management, may make forward-looking statements about
the matters described in this document or other matters concerning AT&T.

The discussion and analysis that follows provides information management
believes is relevant to an assessment and understanding of AT&T's consolidated
results of operations for the three and six months ended June 30, 2003, and
2002, and financial condition as of June 30, 2003, and December 31, 2002.


Critical Accounting Estimates and Judgments

AT&T's financial statements are prepared in accordance with accounting
principles that are generally accepted in the United States. The preparation of
these financial statements requires management to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenue and expenses as
well as the disclosure of contingent assets and liabilities. Management
continually evaluates its estimates and judgments including those related to
useful lives of plant and equipment, pension and other postretirement benefits,
income taxes and legal contingencies. Management bases its estimates and
judgments on historical experience and other factors that are believed to be
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions. For a detailed discussion
of significant accounting policies that may involve a higher degree of judgment,
please refer to AT&T's Form 10-K for the year ended December 31, 2002.


CONSOLIDATED RESULTS OF OPERATIONS

The comparison of 2003 results with 2002 results was impacted by the April 1,
2002 unwind of Concert, our joint venture with British Telecommunications plc
(BT). The venture's assets and customer accounts were distributed back to the
parent companies. Under the partnership termination agreement, each of the
partners generally reclaimed the customer contracts and assets that were
initially contributed to the joint venture, including international transport
facilities and gateway assets. In addition, AT&T assumed certain other assets
that BT originally contributed to the joint venture. As a result, the results
for the second quarter of 2002 and year-to-date 2003 include revenue and
expenses associated with these customers and businesses, while the period of
January 1, 2002 through March 31, 2002 includes our proportionate share of
Concert's earnings and related charges in "Net (losses) related to equity
investments."

During 2002, AT&T's interest in AT&T Latin America was fully consolidated in
AT&T's results. In December 2002, AT&T signed a non-binding term-sheet for the
sale of its 69% economic interest (95% voting interest) in AT&T Latin America
and began accounting for AT&T Latin America as an asset held for sale (the
operations of AT&T Latin America did not qualify for treatment as a discontinued
operation). As a result of this action, in the fourth quarter of 2002 we wrote
down AT&T Latin America's assets and liabilities to fair value and reclassified
these assets and liabilities to "Other current assets" and "Other current
liabilities" at December 31, 2002. The operating losses of AT&T Latin America
for the first half of 2003 are reflected in "Net restructuring and other
charges." On April 21, 2003, AT&T Latin America filed for Chapter 11 bankruptcy
and on June 30, 2003, the AT&T appointed members of the AT&T Latin America Board
of Directors resigned. They were replaced with three new independent directors.
This action resulted in the deconsolidation of AT&T Latin America as of June 30,
2003.

The consolidated financial statements of AT&T reflect AT&T Broadband as a
discontinued operation. AT&T Broadband was spun-off to AT&T shareowners on
November 18, 2002, and simultaneously combined with Comcast Corporation.
Accordingly, the revenue, expenses and cash flows of AT&T Broadband have been
excluded from the respective captions in the Consolidated Statements of
Operations and Consolidated Statements of Cash Flows, and have been reported as
"Net (loss) from discontinued operations" and as "Net cash (used in)
discontinued operations" for all applicable periods.

<TABLE>
<CAPTION>
Revenue                                                            For the Three Months          For the Six Months
                                                                      Ended June 30,                Ended June 30,
                                                                  2003            2002           2003           2002
                                                                --------------------------------------------------------
                                                                                  Dollars in millions
<S>                                                               <C>             <C>            <C>            <C>
AT&T Business Services                                            $ 6,406         $ 6,742        $ 12,843       $ 13,270
AT&T Consumer Services                                              2,376           2,911           4,912          5,997
Corporate and Other                                                    13             (73)             26           (139)
                                                                ---------------------------------------------------------
Total revenue                                                     $ 8,795         $ 9,580        $ 17,781       $ 19,128
                                                                ---------------------------------------------------------
</TABLE>
Total revenue decreased $0.8 billion, or 8.2%, in the second quarter of 2003
compared with the second quarter of 2002, and decreased $1.3 billion, or 7.0%,
in the six months ended June 30, 2003, compared with the six months ended June
30, 2002. The declines were driven by the continued declines in stand-alone long
distance voice revenue, totaling approximately $1.1 billion for the second
quarter, and $1.9 billion for the six months ended June 30, 2003, compared with
the respective prior year periods. The declines in stand-alone long distance
revenue reflect competition, the impact of substitution by consumers, as well as
pricing pressures and a decline in business retail, partially offset by strength
in business wholesale. Total long distance volumes (including long distance
volumes sold as part of a bundled product) increased as growth in lower-priced
business wholesale and consumer prepaid volumes more than offset the declines in
business retail and traditional consumer long distance volumes.

Partially offsetting the decreases in stand-alone long distance voice revenue
were increases in bundled services revenue (local and long distance) at AT&T
Consumer Services of approximately $0.2 billion for the second quarter, and $0.4
billion for the six months ended June 30, 2003, compared with the respective
prior year periods. In addition, AT&T Business Services experienced increases in
local services revenue of $0.1 billion for the quarter, and $0.2 billion for the
six months ended June 30, 2003, compared with the respective prior year periods.

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

<TABLE>
<CAPTION>
Operating Expenses                                        For the Three Months           For the Six Months
                                                             Ended June 30,                Ended June 30,
                                                         -----------------------------------------------------
                                                          2003            2002           2003           2002
                                                         -----------------------------------------------------
                                                                         Dollars in millions
<S>                                                       <C>             <C>            <C>            <C>
Access and other connection                               $ 2,708         $ 2,747        $ 5,406        $ 5,535
Costs of services and products                              1,958           2,086          3,969          4,100
Selling, general and administrative                         1,837           1,942          3,758          3,879
Depreciation and amortization                               1,197           1,213          2,383          2,388
Net restructuring and other charges                            66               -             70              -
                                                          -----------------------------------------------------
Total operating expenses                                  $ 7,766         $ 7,988        $15,586        $15,902
                                                          -----------------------------------------------------
Operating income                                          $ 1,029         $ 1,592        $ 2,195        $ 3,226
Operating margin                                            11.7%           16.6%          12.3%          16.9%
</TABLE>

Included within access and other connection expenses are costs we pay to connect
calls using the facilities of other service providers, as well as the Universal
Service Fund contributions and per-line charges mandated by the FCC. Costs paid
to telephone companies outside of the United States to connect international
calls are also included within access and other connection expenses.

Access and other connection expenses decreased 1.4%, or $39 million, in the
second quarter of 2003 and declined 2.3%, or $129 million, for the first half of
2003 compared with the same periods of 2002, primarily driven by reductions in
domestic access charges of $0.2 billion for the second quarter and $0.3 billion
for the first half of 2003. The declines in domestic access charges were
primarily due to lower Universal Service Fund contributions and per-line charges
of $0.1 billion for the quarter and $0.2 billion for the year-to-date period
primarily resulting from the decline in long distance voice revenue, as well as
more efficient network usage and product mix aggregating $0.1 billion for the
second quarter and $0.2 billion for the year-to-date period, partially offset by
higher costs of $0.1 billion for the quarter and year-to-date period as a result
of overall long distance volume growth. Also contributing to the decline in
access expense for the year-to-date period were lower international connection
charges of $0.1 billion as a result of lower rates as well as the reintegration
of customers and assets from the unwind of Concert. These declines were
partially offset by an increase in local connectivity costs of $0.1 billion for
the quarter and $0.2 billion for the first half of 2003, primarily as a result
of new state entries and subscriber increases.

Since most of the Universal Service Fund contributions, and per-line charges are
passed through to the customer, these reductions generally result in a
corresponding reduction in revenue.

Costs of services and products include costs of operating and maintaining our
networks, costs to support our outsourcing contracts, the provision for
uncollectible receivables and other service-related costs, including cost of
equipment sold.

Costs of services and products decreased $128 million, or 6.2%, in the second
quarter of 2003 and $131 million, or 3.2%, in the first six months of 2003,
compared with comparable prior year periods. The declines were primarily driven
by the overall impact of lower revenue and the related costs. The decrease for
the six months ended June 30, 2003 was partially offset by increased costs as a
result of the reintegration of customers and assets from the unwind of Concert.

Selling, general and administrative (SG&A) expenses decreased $105 million, or
5.4%, in the second quarter of 2003 and $121 million, or 3.1%, in the first six
months of 2003 compared with the comparable prior year periods. The decreases
were driven by approximately $0.1 billion for the quarter and $0.3 billion for
the year-to-date period of lower expenses due to lower long distance and brand
advertising and promotional spending, cost control efforts, as well as reduced
volumes at AT&T Consumer Services resulting from a reduction in the number of
residential customers. In addition, expenses decreased approximately $30 million
for the quarter and $50 million for the year-to-date period due to transaction
costs associated with AT&T's restructuring recorded during 2002. Such decreases
were partially offset by approximately $0.1 billion for the quarter and $0.2
billion for the year-to-date period of increased spending by AT&T Business
Services for sales and customer development costs as well as increased marketing
and sales expenses associated with new local service offerings by AT&T Consumer
Services. The declines were also partially offset by approximately $25 million
for the quarter and $70 million for the year-to-date period of lower pension
credits (income) and higher postretirement benefit costs resulting from a lower
expected long-term rate of return and the effects of lower actual plan assets.

Depreciation and amortization expenses decreased $16 million, or 1.4%, in the
second quarter of 2003, compared with the second quarter of 2002, and decreased
$5 million, or 0.2%, in the first six months of 2003 compared with the first six
months of 2002. The decreases were primarily due to the adoption of Statement of
Financial Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement
Obligations," coupled with lower depreciation associated with our AT&T Latin
America subsidiary which was classified as an asset held for sale in December
2002. These declines were largely offset by an increase in the asset base. Total
capital expenditures were $0.8 billion and $1.0 billion for the three months
ended June 30, 2003 and 2002, respectively, and were $1.5 billion and $1.6
billion for the six months ended June 30, 2003 and 2002, respectively. We
continue to focus the majority of our capital spending on our growth businesses
of Internet protocol & enhanced services (IP&E services) and data services, both
of which include managed services, as well as local voice services.

In the second quarter of 2003, net restructuring and other charges of $66
million reflected $57 million of separation costs and $9 million of benefit plan
curtailment costs associated with the company's management realignment efforts
(impacting approximately 90 senior managers). Such management realignment
efforts will continue throughout 2003 and will result in additional charges that
are expected to be similar to or slightly higher than the charges recorded in
the current quarter. Approximately 36% of affected employees exited the business
as of June 30, 2003, with the remainder expected to be off roll by the end of
2003. The exit plan is not expected to yield cash savings (net of severance
benefit payouts) or a benefit to operating income (net of the restructuring
charge recorded) in 2003, however, we expect to realize approximately $50
million of cash savings and benefit to operating income in subsequent years,
when the exit plan is completed.

Net restructuring and other charges of $70 million for the six months ended June
30, 2003 primarily consisted of $66 million associated with the company's
management realignment.

AT&T's operating income in the second quarter of 2003 decreased $0.6 billion, or
35.3%, compared with the second quarter of 2002. In the first half of 2003,
AT&T's operating income decreased $1.0 billion, or 31.9%, compared with the
first half of 2002. AT&T's operating margin was 11.7% in the second quarter of
2003 compared with 16.6% in the second quarter of 2002 and 12.3% in the first
half of 2003, compared with 16.9% in the first half of 2002. The margin declines
in 2003 compared with the prior quarter and year-to-date periods were primarily
due to the decline in revenue coupled with a lower rate of decline in operating
expenses as compared with the revenue rate of decline. The operating margin
decline reflects pricing pressures, product substitution and a shift from
higher-margin retail long distance services to lower-margin wholesale long
distance service and other lower-margin services.

                                For the Three Months        For the Six Months
                                   Ended June 30,             Ended June 30,
                                ----------------------------------------------
                                 2003          2002        2003         2002
                                ----------------------------------------------
                                             Dollars in millions
Other income (expense), net      $ 86          $ (50)      $ 96         $ (105)


Other income (expense), net, in the second quarter of 2003 was income of $86
million compared with expense of $50 million in the second quarter of 2002. The
favorable variance of $136 million was primarily due to greater
investment-related income, lower investment impairment charges, primarily driven
by impairment charges for Time Warner Telecom recorded in the second quarter of
2002, and lower losses related to mark-to-market adjustments on financial
instruments.

Other income (expense), net, in the first half of 2003 was income of $96 million
compared with expense of $105 million in the first half of 2002. The favorable
variance of $201 million was primarily due to $0.1 billion of lower investment
impairment charges, primarily driven by impairment charges for Time Warner
Telecom recorded in the first half of 2002. Also contributing to the favorable
variance were lower losses related to mark-to-market adjustments on financial
instruments and increased gains on the sales of businesses and investments,
primarily AT&T Wireless, totaling $0.1 billion. Partially offsetting these
improvements was a $0.1 billion reserve recorded in 2003 related to certain
leases of aircraft which are accounted for as leveraged leases. Also included in
other income (expense), net, in the first half of 2003 was a $0.2 billion loss
associated with the early repurchase of $3.7 billion of long-term debt. This
loss was offset by a $0.2 billion gain, also in the first half of 2003,
associated with the early retirement of exchangeable notes that were indexed to
AT&T Wireless common stock.

We continue to hold investments in leveraged leases of commercial aircraft,
which we lease to domestic airlines as well as aircraft related companies.
Should the financial difficulties in the U. S. airline industry lead to further
bankruptcies or lease restructurings, AT&T could be expected to record
additional losses associated with its aircraft lease portfolio.

                                 For the Three Months       For the Six Months
                                     Ended June 30,           Ended June 30,
                                 -----------------------------------------------
                                 2003          2002        2003          2002
                                 -----------------------------------------------
                                              Dollars in millions
Interest (expense)               $ (296)       $ (336)     $ (628)       $ (732)


Interest (expense) decreased 12.1%, or $40 million, in the second quarter of
2003 compared with the second quarter of 2002, and decreased 14.2%, or $104
million, in the first half of 2003 compared with the first half of 2002. The
decrease was primarily due to a lower average debt balance in 2003 compared with
2002, reflecting our debt reduction efforts, slightly offset by interest rate
step-ups within our existing debt portfolio.

                                 For the Three Months       For the Six Months
                                     Ended June 30,           Ended June 30,
                                 -----------------------------------------------
                                 2003          2002        2003          2002
                                 -----------------------------------------------
                                              Dollars in millions
(Provision) for income taxes     $ (308)       $ (513)     $ (605)       $ (992)
Effective tax rate                 37.7%         42.6%       36.4%         41.5%


The (provision) for income taxes decreased $205 million in the second quarter of
2003 compared with the second quarter of 2002. This decrease was primarily due
to lower income before income taxes and the impact of a lower effective tax rate
in the second quarter of 2003. The effective tax rate in the second quarter of
2003 was 37.7%, compared with 42.6% in the prior year quarter. The effective tax
rate in 2002 was negatively impacted by the consolidation of AT&T Latin America
losses, for which the Company was unable to record tax benefits.

The (provision) for income taxes decreased $387 million in the first half
of 2003 compared with the same period of 2002. This decrease was primarily due
to lower income before income taxes and the impact of a lower effective tax rate
in the first half of 2003. The effective tax rate in the first half of 2003 was
36.4%, compared with 41.5% for the same period of 2002. The effective tax rate
in 2003 was positively impacted by the recognition of tax benefits in connection
with the exchange and sale of AT&T's remaining interest in AT&T Wireless common
stock. The effective tax rate in 2002 was negatively impacted by the
consolidation of higher AT&T Latin America losses, for which the Company was
unable to record tax benefits.


                             For the Three Months            For the Six Months
                                 Ended June 30,                 Ended June 30,
                             ---------------------------------------------------
                             2003            2002            2003          2002
                             ---------------------------------------------------
                                              Dollars in millions

Minority interest income     $ -             $ 33            $ 1           $ 53


Minority interest income represents an adjustment to AT&T's income to reflect
the less than 100% ownership of consolidated subsidiaries.  Minority interest
income decreased $33 million in the second quarter of 2003 compared with the
second quarter of 2002, and decreased $52 million in the first half of 2003
compared with the first half of 2002. The decreases were primarily due to our no
longer recording minority interest income related to AT&T Latin America.  In
December 2002, AT&T fully utilized the minority interest balance related to AT&T
Latin America.

                             For the Three Months            For the Six Months
                                 Ended June 30,                 Ended June 30,
                             ---------------------------------------------------
                             2003            2002            2003        2002
                             ---------------------------------------------------
                                              Dollars in millions

Net earnings (losses)
  related to equity
  investments                $ 25            $ (123)         $ 6         $ (401)


Net earnings (losses) related to equity investments, which are recorded net of
income taxes, were earnings of $25 million in the second quarter of 2003
compared with losses of $123 million in the second quarter of 2002. The
favorable variance was driven primarily by a $105 million after-tax charge ($169
million pretax) recorded in the second quarter of 2002 due to the accretion of
the floor price of AT&T's obligations to purchase the shares of AT&T Canada not
owned by AT&T. Also contributing to the variance was a $28 million after-tax
favorable settlement in 2003 ($45 million pretax) of certain items in connection
with the unwind of the Concert joint venture.

For the six months ended June 30, 2003, net earnings (losses) related to equity
investments were earnings of $6 million compared with losses of $401 million for
the six months ended June 30, 2002. The favorable variance was driven primarily
by after-tax charges of $313 million ($507 million pretax) recorded in the first
half of 2002 related to the estimated loss on AT&T's commitment to purchase the
shares of AT&T Canada not owned by AT&T. The charges reflected further
deterioration in the underlying value of AT&T Canada as well as accretion of the
floor price of AT&T's obligation to purchase AT&T Canada shares. The variance
was also positively impacted by equity losses from the Concert joint venture
recorded in 2002 (prior to the unwind on April 1, 2002), combined with a
favorable settlement in the second quarter of 2003 related to the unwind of the
Concert joint venture, totaling $84 million after-tax ($136 million pretax).

                                For the Three Months         For the Six Months
                                   Ended June 30,              Ended June 30,
                                ------------------------------------------------
                                2003        2002          2003        2002
                                ------------------------------------------------
                                               Dollars in millions

Net (loss) from discontinued
  operations, net of income
  taxes                         $ -         $ (13,433)    $ -         $ (13,998)



Net (loss) from discontinued operations, net of income taxes, primarily
represents the operating results of AT&T Broadband, which AT&T disposed of on
November 18, 2002. Accordingly, the revenue and expenses of AT&T Broadband have
been excluded from the respective captions in the Consolidated Statements of
Operations.

The operating results for AT&T Broadband for the three months ended June 30,
2002, was a loss of $13,345 million after-tax ($18,882 million pretax). For the
six months ended June 30, 2002, AT&T Broadband's operating loss was $13,910
million after-tax ($19,672 million pretax).

Also included in the three and six months ended June 30, 2002 results was an
estimated loss on a litigation settlement associated with the business of Lucent
Technologies Inc. (Lucent), which was spun-off from AT&T in 1996. Sparks, et al.
v. AT&T and Lucent Technologies Inc. et al., was a class action lawsuit filed in
1996 in Illinois state court. On August 9, 2002, a settlement proposal was
submitted to and accepted by the court. In accordance with the separation and
distribution agreement between AT&T and Lucent, AT&T's estimated proportionate
share of the settlement and legal costs recorded in the second quarter of 2002
totaled $88 million after-tax ($132 million pretax). (In the fourth quarter of
2002, this initial estimate was reduced to $33 million after-tax [$45 million
pretax]). Depending upon the number of claims submitted and accepted, the actual
cost of the settlement to AT&T may be less than stated amounts, but it is not
possible to estimate the amount at this time. While similar consumer class
actions are pending in various state courts, the Illinois state court has held
that the class it certified covers claims in the other state court class
actions.

                              For the Three Months            For the Six Months
                                 Ended June 30,                 Ended June 30,
                              --------------------------------------------------
                              2003           2002           2003         2002
                              --------------------------------------------------
                                              Dollars in millions

Cumulative effect of
  accounting changes          $ -            $ -            $ 42         $ (856)


Effective January 1, 2003, we adopted SFAS No. 143, "Accounting for Asset
Retirement Obligations," resulting in $42 million of income, net of income taxes
of $26 million, as the cumulative effect of this accounting principle. This
standard requires that obligations that are legally enforceable and unavoidable,
and are associated with the retirement of tangible long-lived assets, be
recorded as liabilities when those obligations are incurred, with the amount of
the liability initially measured at fair value. AT&T historically included in
its group depreciation rates an amount related to the cost of removal for
certain assets. However, such amounts are not legally enforceable or
unavoidable; therefore, the cumulative effect impact primarily reflects the
reversal of such amounts accrued in accumulated depreciation.

Effective January 1, 2002, we adopted SFAS No. 142, "Goodwill and Other
Intangible Assets." In accordance with SFAS No. 142, franchise costs were tested
for impairment as of January 1, 2002, by comparing the fair value to the
carrying value (at the market level). As a result of this test, an impairment
loss (related to discontinued operations) of $0.9 billion, net of income taxes
of $0.5 billion, was recorded in 2002.

Earnings Per Share
                                   For the Three Months      For the Six Months
                                      Ended June 30,           Ended June 30,
                                   ---------------------------------------------
                                     2003        2002       2003         2002
                                   ---------------------------------------------

Earnings from continuing
  operations per basic share         $ 0.68      $ 0.83     $ 1.36       $ 1.46
Total earnings (loss) per basic
  share                                0.68      (17.58)      1.41       (19.19)

Earnings from continuing
  operations per diluted share       $ 0.68      $ 0.80     $ 1.36       $ 1.41
Total earnings (loss) per diluted
  share                                0.68      (17.11)      1.41       (18.55)


Earnings per diluted share (EPS) from continuing operations declined $0.12 to
$0.68 in the second quarter of 2003 compared with $0.80 per diluted share in the
second quarter of 2002. For the six months ended June 30, 2003, EPS from
continuing operations declined $0.05 to $1.36 compared with $1.41 for the six
months ended June 30, 2002. The decline in both periods was primarily driven by
lower operating income. Also contributing to the decline in both periods was
higher average shares primarily resulting from AT&T common stock issued in
conjunction with various equity transactions that took place during 2002 (see
note 11). The decline in both periods was partially offset by favorable
variances in net earnings related to equity investments, other income (expense)
and interest expense.

In the second quarter of 2002, the total diluted loss per share of $17.11
included income from continuing operations as discussed above of $0.80 and a
loss from discontinued operations of $17.91. Total EPS of $1.41 for the six
months ended June 30, 2003, included earnings from continuing operations as
discussed above of $1.36 and income related to the cumulative effect of an
accounting change of $0.05. For the six months ended June 30, 2002, the total
diluted loss per share of $18.55 included income from continuing operations as
discussed above of $1.41, a loss from discontinued operations of $18.81, and a
loss related to the cumulative effect of an accounting change of $1.15.


SEGMENT RESULTS

AT&T's results are segmented according to the customers we service: AT&T
Business Services and AT&T Consumer Services. The balance of AT&T's continuing
operations is included in a "Corporate and Other" group. This group primarily
reflects corporate staff functions and the elimination of transactions between
segments. The discussion of segment results includes revenue, operating income,
capital additions and total assets.

Operating income is the primary measure used by AT&T's chief operating decision
makers to measure AT&T's operating results and to measure segment profitability
and performance.

Total assets for each segment generally include all assets, except intercompany
receivables. Prepaid pension assets, taxes and corporate-owned or leased real
estate are generally held at the corporate level, and therefore are included in
the Corporate and Other group. The (loss) from discontinued operations is not
reflected in the Corporate and Other group. Capital additions for each segment
include capital expenditures for property, plant and equipment, additions to
nonconsolidated investments and additions to internal-use software.

Our existing segments reflect certain managerial changes that were implemented
during 2003. The changes primarily include a redistribution of property, plant
and equipment from the Corporate and Other group to AT&T Business Services and a
transfer of deferred taxes from AT&T Consumer Services to the Corporate and
Other group.

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


AT&T BUSINESS SERVICES

AT&T Business Services provides a variety of global communications services to
small and medium-sized businesses, large domestic and multinational businesses
and government agencies. AT&T Business' services include long distance,
international, toll-free and local voice, including wholesale transport services
(sales of services to service resellers), as well as data services and Internet
protocol and enhanced (IP&E) services, which includes the management of network
servers and applications. Data services and IP&E services are broad categories
of services in which data (i.e., e-mail, video or computer files) is transported
from one location to another. Data services includes bandwidth services
(dedicated private line services through high-capacity optical transport),
packet services and managed data services. In packet services, data is divided
into efficiently sized components and transported between packet switches until
it reaches its final destination, where it is reassembled. Packet services
includes frame relay and Asynchronous Transfer Mode (ATM). IP&E services
includes all services that ride on the IP common backbone or that use IP
technology, including managed IP services, as well as application services
(e.g., hosting or security). Managed services delivers end-to-end enterprise
networking solutions by managing networks, servers and applications. AT&T
Business Services also provides outsourcing solutions and other professional
services.

                              For the Three Months       For the Six Months
                                  Ended June 30,           Ended June 30,
                              --------------------------------------------------
                              2003         2002          2003           2002
                              --------------------------------------------------
                                            Dollars in millions

Services revenue*             $ 6,336      $ 6,650       $ 12,703       $ 13,080
Equipment and product sales        70           92            140            190
                              --------------------------------------------------
Total revenue                 $ 6,406      $ 6,742       $ 12,843       $ 13,270
                              --------------------------------------------------
Operating income                $ 597        $ 856        $ 1,197        $ 1,723
Capital additions                 763          930          1,401          1,506


                                 At            At
                               June 30,    December 31,
                                2003          2002
                              ---------    ------------
Total assets                  $ 35,432     $ 36,389


*For the three and six months ended June 30, 2002, services revenue included $92
 million and $175 million, respectively, of sales to AT&T Broadband, which were
 recorded as internal revenue through the November 18, 2002, date of
 disposition.  Currently, sales to AT&T Broadband, now Comcast Corporation, are
 recorded as external revenue.

REVENUE

AT&T Business Services revenue decreased $336 million, or 5.0%, in the second
quarter of 2003 and $427 million, or 3.2%, in the first half of 2003, compared
with the same prior year periods. The decreases were primarily driven by
declining long distance voice services, lower outsourcing contract revenue and
related equipment and product sales and decreased data services, partially
offset by growth in local voice services and IP&E services. The year to date
growth rate was favorably impacted by the reintegration of Concert businesses on
April 1, 2002. Additionally, both the quarter and year to date period growth
rates were negatively impacted by AT&T Latin America being accounted for as an
asset held for sale in 2003 (versus consolidated in 2002).

Long distance voice revenue for the second quarter of 2003 declined $351
million, or 10.9 %, to $2.9 billion and $438 million, or 7.0%, to $5.8 billion
in the first half of 2003, compared with the same prior year periods. The
declines were driven by a decrease in the average price per minute in both the
retail and wholesale businesses compounded by a negative mix shift where volume
declines in the retail business, are more than offset by strength in lower
priced wholesale volumes. These factors are expected to continue to negatively
impact revenue throughout 2003. Long distance volumes grew approximately 12% in
both the second quarter and year to date periods of 2003 compared with 2002.

Data services revenue declined 4.1%, or $84 million, to $2.0 billion, compared
with the second quarter of 2002, and declined 2.5%, or $102 million, to $4.0
billion, for the six months ended June 30, 2003, compared with the six months
ended June 30, 2002. The declines were primarily due to the continued decline in
private line services (a service in which the connection is dedicated to the
customer) driven by pricing and volume weakness. Excluding equipment and product
sales, data services revenue declined 3.7% in the second quarter of 2003
compared with the second quarter of 2002, and declined 2.6% in the six months
ended June 30, 2003, compared with the six months ended June 30, 2002.

IP&E services revenue increased $53 million, or 13.1%, to $459 million in the
second quarter of 2003 compared with the second quarter of 2002 driven by
increases in managed internet access, hosting and related equipment and product
sales. For the six months ended June 30, 2003, IP&E services revenue increased
$90 million, or 11.1% to $904 million, compared with the six months ended June
30, 2002, driven primarily by increases in managed internet access and hosting.
Excluding equipment and product sales, IP&E services revenue increased 9.9% in
the second quarter of 2003 compared with the second quarter of 2002, and
increased 10.7% in the six months ended June 30, 2003, compared with the six
months ended June 30, 2002.

Local voice services revenue grew $107 million, or 38.7%, to $384 million in the
second quarter of 2003, and grew $174 million, or 31.9%, to $719 million in the
six months ended June 30, 2003, compared with the same prior year periods. This
growth reflects our continued focus on increasing the utilization of our
existing footprint. There were approximately 4.2 million access lines in service
at June 30, 2003, an increase of approximately 135 thousand since the end of the
first quarter of 2003, after taking into account approximately 300 thousand
broadband access lines not previously included in AT&T's total access lines.
AT&T had approximately 3.3 million access lines in service at June 30, 2002.

OPERATING INCOME

Operating income declined $0.3 billion, or 30.3%, in the second quarter of 2003
compared with the second quarter of 2002, and declined $0.5 billion, or 30.5%,
in the six months ended June 30, 2003, compared with the six months ended June
30, 2002. The declines were primarily due to the decrease in the long distance
voice business resulting primarily from the impact of pricing pressures, volume
declines due to weak demand in the retail business, as well as a shift from
higher-margin long distance services to lower-margin growth services, which
include wholesale services.

OTHER ITEMS

Capital additions were $763 million in the second quarter of 2003, and were $1.4
billion for the six months ended June 30, 2003. We continue to concentrate the
majority of capital spending on our growth businesses, focusing on improving the
customer experience and AT&T's overall cost structure.

Total assets declined $957 million, or 2.6%, at June 30, 2003, compared with
December 31, 2002, primarily driven by lower net property, plant and equipment,
a decrease in accounts receivable resulting from improved cash collections and
lower revenue and a decrease in other current assets as a result of the
deconsolidation of AT&T Latin America as of June 30, 2003. These declines were
partially offset by favorable foreign currency adjustments and higher
internal-use software.


AT&T CONSUMER SERVICES

AT&T Consumer Services provides a variety of communication services to
residential customers. These services include traditional long distance voice
services such as domestic and international dial services (long distance or
local toll calls where the number "1" is dialed before the call), calling card
services and dial-up Internet. Transaction services, such as prepaid card and
operator-assisted calls, are also offered. Collectively, these services
represent stand-alone long distance and are not offered in conjunction with any
other service. In addition, AT&T Consumer Services provides all distance
services, which bundle long distance, local and local toll.

                             For the Three Months         For the Six Months
                                Ended June 30,              Ended June 30,
                             ---------------------------------------------------
                             2003          2002           2003           2002
                             ---------------------------------------------------
                                            Dollars in millions
Revenue                      $ 2,376       $ 2,911        $ 4,912        $ 5,997
Operating income                 489           787          1,121          1,608
Capital additions                 19            33             41             61


                              At            At
                            June 30,    December 31,
                             2003          2002
                            ------------------------
Total assets                $ 1,152      $ 1,390


REVENUE

AT&T Consumer Services revenue declined $0.5 billion, or 18.4%, in the second
quarter of 2003 and declined $1.1 billion, or 18.1%, in the first half of 2003,
compared with the same prior year periods. The decline in both periods was
primarily due to a decline in stand-alone long distance voice services, which
declined $0.7 billion to $1.8 billion in the second quarter of 2003 and declined
$1.5 billion to $3.9 billion in the first half of 2003, largely due to the
impact of ongoing competition, which has led to a loss of market share, and
substitution. In addition, these services have been negatively impacted by the
continued migration of customers to lower priced optional calling plans and
other products offered by AT&T such as bundled services. Partially offsetting
these declines was an increase in bundled revenue of $0.2 billion to $0.5
billion for the second quarter of 2003, and an increase of $0.4 billion to $0.9
billion for the first half of 2003, reflecting an increase in subscribers
primarily due to new markets entered into since June 30, 2002, including
California, New Jersey, Indiana, Virginia, Maryland and Massachusetts as well as
penetration in existing markets. The increase in bundled revenue includes
amounts previously incorporated in stand-alone long distance voice revenue for
existing customers that migrated to bundled offers. Total long distance calling
volumes declined approximately 17% in the second quarter of 2003 and declined
approximately 14% for the first half of 2003, compared with the same periods of
2002, as a result of competition and wireless and Internet substitution,
partially offset by an increase in prepaid card usage. We expect product
substitution, competition (including the continued entry of the Regional Bell
Operating Companies (RBOC's) into the long distance market) and customer
migration to lower-priced calling plans and products to continue to negatively
impact AT&T Consumer Services revenue throughout 2003.

OPERATING INCOME

Operating income declined $0.3 billion, or 37.9%, in the second quarter of 2003
and declined $0.5 billion, or 30.3%, in the six months ended June 30, 2003,
compared with the same periods in 2002. The declines were primarily due to the
decline in the stand-alone long distance business.

Operating margin declined to 20.6% in the second quarter of 2003 from 27.0% in
the second quarter of 2002, and declined to 22.8% in the first half of 2003 from
26.8% in the first half of 2002. The declining margins primarily reflect the
revenue declines in these periods coupled with a lower rate of decline in SG&A.

OTHER ITEMS

Capital additions decreased $14 million, or 41.1%, in the second quarter of
2003, and declined $20 million, or 33.2%, for the first half of 2003 compared
with the same periods of 2002.

Total assets declined $0.2 billion to $1.2 billion at June 30, 2003, from
December 31, 2002. The decline was primarily due to lower accounts receivable,
reflecting lower revenue and improved cash collections.

CORPORATE AND OTHER

This group primarily reflects the results of corporate staff functions, brand
licensing fee revenue and the elimination of transactions between segments.

                             For the Three Months         For the Six Months
                                  Ended June 30,             Ended June 30,
                             ---------------------------------------------------
                             2003           2002          2003           2002
                             ---------------------------------------------------
                                            Dollars in millions

Revenue                      $ 13           $ (73)        $ 26           $ (139)
Operating (loss)              (57)            (51)        (123)            (105)
Capital additions               8              14           12               24


                              At             At
                           June 30,     December 31,
                             2003           2002
                           -------------------------
Total assets               $ 13,800     $ 17,493


REVENUE

For the second quarter of 2003, Corporate and Other revenue was $13 million,
compared with negative $73 million for the second quarter of 2002. For the six
months ended June 30, 2003, Corporate and Other revenue was $26 million,
compared with negative $139 million for the six months ended June 30, 2002. The
year-over-year changes were primarily due to lower eliminations of internal
revenue in 2003 as a result of the split-off of AT&T Broadband in November 2002.

OPERATING INCOME

For the second quarter of 2003, the operating loss grew $6 million to $57
million, compared with the second quarter of 2002. For the six months ended June
30, 2003, the operating loss grew $18 million to a loss of $123 million,
compared with the six months ended June 30, 2002. The increased operating loss
in 2003 compared with 2002 for both the quarter and year-to-date periods was
primarily due to a lower pension credit (income) primarily driven by a lower
long-term expected rate of return and the effects of lower actual plan assets
and higher postretirement expense primarily driven by revised actuarial
estimates and assumptions, partly offset by transaction costs associated with
AT&T's restructuring recorded during 2002. Also somewhat offsetting the
year-to-date increase in losses was an asset impairment charge recorded in 2002.

OTHER ITEMS

Capital additions decreased $6 million in the second quarter of 2003 and
declined $12 million in the first half of 2003, compared with the same periods
in 2002.

Total assets decreased $3.7 billion to $13.8 billion at June 30, 2003, from
December 31, 2002. The decrease was primarily driven by a lower cash balance at
June 30, 2003.


FINANCIAL CONDITION

                                                 At                   At
                                               June 30,           December 31,
                                                2003                 2002
                                               -------------------------------
                                                     Dollars in millions

Total assets                                   $ 50,384            $ 55,272
Total liabilities                                37,101              42,960
Total shareowners' equity                        13,283              12,312


Total assets decreased $4.9 billion, or 8.8%, to $50.4 billion at June 30, 2003,
compared with December 31, 2002. This decrease was largely driven by a $2.8
billion decrease in cash and cash equivalents. Property, plant and equipment
declined $0.8 billion as a result of depreciation during the period, partially
offset by capital expenditures. Other current assets declined $0.7 billion
primarily due to a reduction in income taxes receivable as a result of the
receipt of tax refunds, and due to the deconsolidation of AT&T Latin America,
partially offset by mark-to-market adjustments on financial instruments. In
addition, accounts receivable decreased by $0.5 billion, primarily driven by
improved collections and lower revenue. Other assets declined by $0.2 billion,
primarily due to the disposal of our interest in AT&T Wireless common stock,
which had a carrying amount of $0.5 billion at December 31, 2002, a portion of
which was used to redeem exchangeable notes that were indexed to AT&T Wireless
common stock and the remaining interest was sold, partially offset by increased
mark-to-market adjustments on financial instruments.

Total liabilities decreased $5.9 billion, or 13.6%, to $37.1 billion at June 30,
2003, from $43.0 billion at December 31, 2002. This decrease was primarily the
result of $5.1 billion in lower debt, reflecting the early retirement of $3.7
billion in long-term debt, the $1.3 billion repayment of one-year notes and
commercial paper, and the early redemption of exchangeable notes that were
indexed to the AT&T Wireless common stock we owned, which had a carrying value
of $0.5 billion at December 31, 2002. These reductions in debt were partially
offset by a $0.4 billion increase to debt as a result of mark-to-market
adjustments. Also contributing to the decline in total liabilities were lower
payroll and benefit-related liabilities of $0.6 billion, as payments for salary
and other compensation accruals were made during the period and lower accounts
payable of $0.5 billion as payments were made against year-end capital
expenditures and other accruals.

Total shareowners' equity increased $1.0 billion, or 7.9%, to $13.3 billion at
June 30, 2003, from $12.3 billion at December 31, 2002. This increase was
primarily due to $1.1 billion of net income, somewhat offset by dividends
declared.


LIQUIDITY

Cash Flows                                    For the Six Months Ended June 30,
                                                  2003                 2002
                                              ---------------------------------
                                                      Dollars in millions

Provided by operating activities of
  continuing operations                           $ 4,353              $ 4,019
(Used in) investing activities of
  continuing operations                            (1,720)              (2,122)
(Used in) financing activities of
  continuing operations                            (5,391)              (4,152)
(Used in) discontinued operations                       -               (2,776)
                                                  -----------------------------
Net (decrease) in cash and cash equivalents       $(2,758)             $(5,031)
                                                  -----------------------------

Net cash provided by operating activities of AT&T's continuing operations of
$4.4 billion for the six months ended June 30, 2003, was generated primarily by
$4.2 billion of income from continuing operations, adjusted to exclude noncash
income items and net gains on sales of businesses and investments. Also
contributing to the source of cash was a net change in other assets and
liabilities of $0.3 billion due to tax refunds partially offset by lower payroll
and benefit related liabilities due to payments of accruals. In addition,
accounts receivable decreased $0.1 billion reflecting cash collections.
Partially offsetting these sources of cash was a $0.3 billion decrease in
accounts payable due to payments of year-end operating accruals.

Net cash provided by operating activities of continuing operations of $4.0
billion for the six months ended June 30, 2002, primarily included $5.0 billion
of income from continuing operations, adjusted to exclude noncash income items
and net gains on sales of businesses and investments. Also contributing to the
source of cash from operating activities was a decrease in accounts receivable
of $0.2 billion primarily due to the collection of a receivable from Liberty
Media Corporation and improved cash collections. Partially offsetting these
sources of cash were net changes in other operating assets and liabilities of
$0.9 billion due to decreases in payroll and benefit-related liabilities and
other short-term liabilities and a decrease of $0.3 billion in accounts payable,
both of which were attributable to payments made against year-end accruals.

AT&T's investing activities resulted in a net use of cash of $1.7 billion in the
first six months of 2003, compared with $2.1 billion in the first six months of
2002. During the first six months of 2003, AT&T spent $1.6 billion on capital
expenditures, made payments of $0.2 billion to BT primarily associated with
assets assumed by AT&T that BT originally contributed to the Concert joint
venture, and received $0.1 billion of proceeds from the sale of its remaining
AT&T Wireless shares. During the first six months of 2002, AT&T spent $2.0
billion on capital expenditures, had an increase in restricted cash of $0.4
billion as a result of the posting of a cash-collateralized letter of credit
associated with certain private debt, and received $0.3 billion from the sale of
fixed assets.

During the first half of 2003, net cash used in financing activities was
$5.4 billion, compared with $4.2 billion in the first half of 2002. During the
first half of 2003, AT&T made net payments of $5.3 billion to reduce debt,
including early termination of debt (see "Financial Condition" discussion
above), paid dividends of $0.3 billion and received $0.1 billion of cash
collateral related to favorable positions of certain combined interest rate swap
agreements. During the first half of 2002, AT&T made net payments of $6.5
billion to reduce debt, paid dividends of $0.3 billion, and received $2.6
billion from the issuance of AT&T common stock, primarily due to the sale of 46
million shares in the second quarter of 2002, the proceeds of which were used in
October, 2002 to settle a portion of AT&T's obligation to the AT&T Canada
shareholders.

Working Capital and Other Sources of Liquidity

At June 30, 2003, our working capital ratio (current assets divided by current
liabilities) was 1.07.

At June 30, 2003, we had a $3.0 billion 364-day credit facility available to us
that was entered into on October 9, 2002. The credit facility contains a
financial covenant that requires AT&T to meet a net debt-to-EBITDA ratio (as
defined in the credit agreement) not exceeding 2.25 to 1.00 for four consecutive
quarters ending on the last day of each fiscal quarter. It also contains a
covenant that requires AT&T to maintain $1.27 billion in unencumbered cash, cash
equivalents or marketable securities. At June 30, 2003, we were in compliance
with these covenants.

In July 2003, AT&T renewed its AT&T Consumer Services 364-day customer accounts
receivable securitization facility and entered into a new AT&T Business Services
364-day customer accounts receivable securitization facility. Together the
programs provide up to $1.65 billion of available financing, limited by the
eligible receivables balance, which varies from month to month. Proceeds from
the securitizations are recorded as borrowings and included in short term debt.
At June 30, 2003, approximately $0.2 billion was outstanding. The new facilities
do not include the provision that previously required the outstanding balances
to be paid by the collection of the receivables in the event AT&T's ratings were
downgraded below investment grade. In addition, the new facilities require AT&T
to meet a net debt-to-EBITDA ratio (as defined in the agreements) not exceeding
2.25 to 1.00.

We anticipate continuing to fund our operations in 2003 primarily with cash and
cash equivalents on hand as well as cash from operations. If economic conditions
worsen or do not improve and/or competition and product substitution accelerate
beyond current expectations, our cash flow from operations would decrease,
negatively impacting our liquidity. However, we believe our access to the
capital markets is adequate to provide the flexibility in funding our operations
that we desire. Sources of liquidity include the commercial paper market, $2.4
billion remaining under a universal shelf registration, an up to $1.65 billion
securitization program (limited by eligible receivables) and the $3.0 billion
credit facility. However, we cannot provide any assurances that any or all of
these sources of funding will be available at the time they are needed or in the
amounts required.

Credit Ratings and Related Debt Implications

In July 2003, AT&T's long-term credit ratings were lowered by both Standard and
Poor's and Fitch to BBB from BBB+. Standard and Poor's (S&P) has removed the
ratings from CreditWatch. The Company's short term credit and commercial paper
ratings were affirmed by S&P and Fitch at A-2 and F-2, respectively. The rating
action by S&P triggered a 25 basis point interest rate step-up on $11 billion of
debt, $1.7 billion of which matures in November 2003.  This step-up will result
in an increase in interest expense of approximately $25 million in 2004.  On
July 24, 2003, Moody's affirmed AT&T's current ratings at Baa2 for long term and
P-2 for short term. Moody's continues to hold AT&T's outlook at negative. The
table below reflects the most recent actions of the rating agencies as described
above:

                              Short-Term      Long-Term
Credit Rating Agency          Rating          Rating           Outlook

Standard & Poor's             A-2             BBB              Stable
Fitch                         F-2             BBB              Negative
Moody's                       P-2             Baa2             Negative

Further debt rating downgrades could require AT&T to pay higher rates on certain
existing debt, prepay certain operating leases and post cash collateral for
certain interest-rate and equity swaps if we are in a net payable position.

If AT&T's debt ratings are further downgraded, AT&T's access to the capital
markets may be restricted and/or such replacement financing may be more costly
or have additional covenants than we had in connection with our debt at June 30,
2003.  In addition, the market environment for financing in general, and within
the telecommunications sector in particular, has been adversely affected by
economic conditions and bankruptcies of other telecommunication providers.  If
the financial markets become more cautious regarding the industry/ratings
category we operate in, our ability to obtain financing would be further
reduced.

Cash Requirements

Our cash needs for 2003 will be primarily related to capital expenditures,
repayment of debt and payment of dividends. We expect our capital expenditures
for 2003 to be approximately $3 billion. On January 31, 2003, we completed the
repurchase, with cash, of $3.7 billion of notes with interest rates of 6.375%
and 6.5% and maturities of 2004 and 2013. In addition, in connection with the
early retirement in February 2003 of exchangeable notes that were indexed to
AT&T Wireless common stock, we made cash payments of $152 million to the debt
holders, funded in part by $72 million of proceeds from the sale of our
remaining AT&T Wireless shares. These transactions are expected to save over
$200 million of interest expense in 2003.

In July 2003, the Board of Directors stated its intention to increase the
quarterly dividend by $0.05 per share, starting with the third quarter dividend
payable in November 2003. The actual declaration of the third quarter dividend
has not yet taken place and will be subject to the usual review of the financial
condition of the Company and other relevant factors by the Board of Directors at
the time of the declaration. Additionally, in July 2003, the Board of Directors
authorized the repurchase of up to $2 billion in debt. The timing and method of
any such repurchases will depend on various market conditions and all other
relevant factors and may take the form of tender offers, open market purchases
or calls, potentially including make-whole calls.

Contractual Cash Obligations

Prior to the spin-off of AT&T Broadband, AT&T had guaranteed various obligations
of AT&T Broadband, including operating leases for real estate, surety bonds, and
equity hedges, which we continue to provide. The notional amount of such
guarantees totaled $458 million at December 31, 2002, and have decreased to $237
million as of June 30, 2003, primarily resulting from third parties releasing us
from guarantees we provided for surety bonds. Comcast continues to provide
indemnifications for the full amount of the remaining guarantees.


RISK MANAGEMENT

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


NEW ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities--an
Interpretation of Accounting Research Bulletin (ARB) No. 51." FIN 46, adopted by
AT&T in July 2003, requires the primary beneficiary to consolidate a variable
interest entity (VIE) if it has a variable interest that will absorb a majority
of the entity's expected losses if they occur, receive a majority of the
entity's expected residual returns if they occur, or both. FIN 46 applies
immediately to VIEs created after January 31, 2003, and to VIEs in which the
entity obtains an interest after that date. Based on the new standard, two
entities that AT&T leases buildings from qualify as VIEs and therefore became
subject to consolidation as of July 1, 2003. AT&T has no ownership interest in
either entity, but provides guarantees of the residual values for the leased
facilities with a maximum exposure of $427 million. FIN 46 will add $431 million
of assets (principally the properties we lease) and $476 million of liabilities
(principally debt secured by the properties) to our consolidated balance sheet.
This will result in a charge of approximately $28 million, net of income taxes,
as the cumulative effect of an accounting change in the third quarter of 2003.

In April 2003, the FASB issued Statement of Financial Standards (SFAS) No. 149,
"Amendment of Statement 133 on Derivative Instruments and Hedging Activities."
This standard amends and clarifies the accounting for derivative instruments,
including certain derivative instruments embedded in other contracts, and
hedging activities under SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement is effective prospectively for contracts
entered into or modified after June 30, 2003, and for hedging relationships
designated after June 30, 2003. SFAS No. 149 will not have an impact upon
initial adoption and is not expected to have a material effect on our results of
operations, financial position and cash flows.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This Statement
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires issuers to classify financial instruments within its scope as
liabilities (or an asset in some cases). Prior to SFAS No. 150, many of these
instruments may have been classified as equity. This Statement is effective for
financial instruments entered into or modified after May 31, 2003. For
instruments issued prior to May 31, 2003, this standard is to be implemented by
reporting the cumulative effect of a change in accounting principle as of July
1, 2003. SFAS No. 150 will not have an impact upon initial adoption and is not
expected to materially impact AT&T's ongoing results of operations, financial
position or cash flows.

In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on
EITF 00-21, "Revenue Arrangements with Multiple Deliverables," related to the
timing of revenue recognition for arrangements in which goods or services or
both are delivered separately in a bundled sales arrangement. The EITF requires
that when the deliverables included in this type of arrangement meet certain
criteria they should be accounted for separately as separate units of
accounting. This may result in a difference in the timing of revenue recognition
but will not result in a change in the total amount of revenue recognized in a
bundled sales arrangement. The allocation of revenue to the separate
deliverables is based on the relative fair value of each item. If the fair value
is not available for the delivered items then the residual method must be used.
This method requires that the amount allocated to the undelivered items in the
arrangement is their full fair value. This would result in the discount, if any,
being allocated to the delivered items. This consensus is effective
prospectively for arrangements entered into in fiscal periods beginning after
June 15, 2003, which, for AT&T, is July 1, 2003. EITF 00-21 will not have an
impact upon initial adoption and is not expected to have a material impact to
AT&T's ongoing results of operations, financial position or cash flows.

In May 2003, the EITF reached a consensus on EITF 01-8 "Determining Whether an
Arrangement Contains a Lease," relating to new requirements on identifying
leases contained in contracts or other arrangements that sell or purchase
products or services. The evaluation of whether an arrangement contains a lease
within the scope of SFAS No. 13 "Accounting for Leases" should be based on the
evaluation of whether an arrangement conveys the right to use property, plant
and equipment. This may result in a difference in the timing of revenue
recognition. The consensus requires sellers to report the revenue from the
leasing component of the arrangement as leasing or rental income rather than
revenue from product sales or services. Purchaser's arrangements which
previously would have been considered service or supply contracts, but are now
considered leases, could affect the timing of their expense recognition and the
classification of assets and liabilities on their balance sheet as well as
require footnote disclosure of lease terms and future minimum lease commitments.
This consensus is effective prospectively for contracts entered into or
significantly modified after July 1, 2003. EITF 01-8 will not have an impact
upon initial adoption based on arrangements in place today, will not have a
material effect on our results of operations, financial position and cash flows.

SUBSEQUENT EVENTS

On August 6, 2003, AT&T received initial commitments from JP Morgan and
Citigroup for a portion of a new bank facility of up to $2.0 billion. The banks
have also agreed to act as lead arrangers to syndicate the balance of the
364-day credit facility. The proposed new bank facility will replace AT&T's
existing undrawn $3.0 billion facility, which matures in October 2003.

On August 8, 2003, AT&T employees represented by the CWA (Communications Workers
of America)  and the IBEW  (International  Brotherhood  of  Electrical  Workers)
ratified the extension of their  current  contracts  through  December 10, 2005.
Those  contracts  include the  AT&T/CWA  Operations  agreement,  AT&T/CWA  Local
Network Services  agreement in Mesa,  Arizona,  Independence,  Ohio and Maryland
Heights, Missouri, and the AT&T/IBEW Operations Agreement.

<PAGE>

Item 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we completed an evaluation,
under the supervision and with the participation of our management including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures are effective in alerting them timely to material information
required to be included in our Exchange Act filings. There have not been any
significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the date of the evaluation.

<PAGE>

PART II - OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security-Holders.

(a)  The annual meeting of the shareholders of the registrant was held on June
     11, 2003.

(b)  Election of Directors
                                                        Votes
                                                      (Millions)
        Nominee                              For                      Withheld

        Kenneth T. Derr                      640                         30
        David W. Dorman                      640                         30
        M. Kathryn Eickhoff                  616                         53
        Frank C. Herringer                   617                         53
        Amos B. Hostetter, Jr.               616                         53
        Shirley Ann Jackson                  640                         29
        Jon C. Madonna                       617                         53
        Donald F. McHenry                    616                         53
        Tony L. White                        640                         30

(c)     Holders of common shares voted at this meeting on the following matters,
        which were set forth in the registrant's proxy statement dated April 17,
        2003.

        (i) Ratification of Auditors
                                                  For       Against      Abstain
        Ratification of the firm of
        PricewaterhouseCoopers, LLP
        as the independent auditors to            614          45           11
        audit the registrant's financial        (93.13%)     (6.87%)
        statements for the year 2003. (*)

        (ii) Shareholders' Proposals                                       Non-
                                             For     Against    Abstain    Vote
        Establish Term Limit For
          Directors(*)                        41         491         14     124
                                            (7.63%)    (92.37%)
        Equal Opportunity Statement (*)       17         487         42     124
                                            (3.31%)    (96.69%)
        Executive Compensation (*)            40         491         14     124
                                            (7.56%)    (92.44%)
        Employee Pension Plan (*)             45         484         16     124
                                            (8.59%)    (91.41%)

        *Percentages are based on the total common shares voted. Approval of
         this proposal required a majority of the votes.


Item 6. Exhibits and Reports on Form 8-K

        (a)  Exhibits

             Exhibit Number
             3(a)         Restated Certificate of Incorporation of the
                          registrant filed July 17, 2003
             10(iii)(A)1  Form of Special Incentive Agreement between AT&T Corp.
                          and Hossein Eslambolchi dated June 2, 2003.
             12           Computation of Ratio of Earnings to Fixed Charges
             99.1         CEO Certification of Periodic Financial Reports
             99.2         CFO Certification of Periodic Financial Reports

        (b) Reports on Forms 8-K

        Form 8-K dated April 23, 2003 was furnished pursuant to Item 7 and
        Item 9 on April 23, 2003. Form 8-K dated June 4, 2003 was furnished
        pursuant to Item 9 on June 5, 2003. Form 8-K dated June 11, 2003 was
        furnished pursuant to Item 9 on June 16, 2003.

<PAGE>

                                   SIGNATURES


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



                                       AT&T Corp.


                                       /s/  N. S. Cyprus
                                       -------------------------------

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

Date:    August 11, 2003

<PAGE>

       Chief Executive Officer and Chief Financial Officer Certifications

                                   AT&T Corp.

                    Certifications Pursuant To Section 302 of
                         The Sarbanes-Oxley Act of 2002

                                  CERTIFICATION

I, David W. Dorman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of AT&T ;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

c) disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting ; and

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Date:  August 11, 2003

                                       /s/   David W. Dorman
                                       ---------------------------
                                             David W. Dorman
                                             Chief Executive Officer

<PAGE>

                                  CERTIFICATION


I, Thomas W. Horton, certify that:

1. I have reviewed this quarterly report on Form 10-Q of AT&T ;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

c) disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting ; and

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.




Date:  August 11, 2003

                                       /s/   Thomas W. Horton
                                       -----------------------------
                                             Thomas W. Horton
                                             Chief Financial Officer

<PAGE>

Exhibit Index

Exhibit
Number

3(a)            Restated Certificate of Incorporation of the registrant filed
                July 17, 2003
10(iii)(A)1     Form of Special Incentive Agreement between AT&T Corp. and
                Hossein Eslambolchi dated June 2, 2003.
12              Computation of Ratio of Earnings to Fixed Charges
99.1            CEO Certification of Periodic Financial Reports
99.2            CFO Certification of Periodic Financial Reports

<PAGE>
                                                                    Exhibit 3(a)

                                   AT&T CORP.



                                   ----------



                              RESTATED CERTIFICATE
                                       OF
                           INCORPORATION OF AT&T CORP.
                               FILED JULY 17, 2003




                                   ----------

<PAGE>

                                    RESTATED
                          CERTIFICATE OF INCORPORATION
                                       OF
                                   AT&T CORP.
                        UNDER SECTION 807 OF THE BUSINESS
                                 CORPORATION LAW


        We, the undersigned, being a Vice President and an Assistant Secretary,
respectively, of AT&T Corp., do hereby certify as follows:

        1.     The name of the corporation is AT&T Corp.

        2.     The Certificate of Incorporation of the corporation was filed in
the office of the Secretary of State of New York on March 3, 1885.

        3.     The text of the Certificate of Incorporation is  hereby restated
without amendments to read as herein set forth in full:


                FIRST.   The name assumed to distinguish such association and to
be used in its dealings, and by which it may sue and be sued, is AT&T Corp.


                SECOND.  The purposes for which the corporation is formed are to
engage in any lawful act or activity  for which  corporations  may be  organized
under the Business  Corporation Law of the State of New York,  provided that the
corporation  is not formed to engage in any act or activity  which  requires the
consent or approval of any New York state official, department, board, agency or
other body, without such consent or approval first being obtained.

                THIRD.

        PART A.  The  aggregate  number  of  shares  which  the  corporation  is
authorized to issue is two billion six hundred million  (2,600,000,000)  shares,
consisting of one hundred million  (100,000,000)  preferred  shares having a par
value of $1.00  per share  ("Preferred  Stock")  and two  billion  five  hundred
million  (2,500,000,000)  common  shares  having a par  value of $1.00 per share
("Common Stock").


        PART B.  The Preferred Stock may  be issued from time to time  in one or
more series.  All shares of Preferred Stock of all series shall rank equally and
be identical in all respects except that the Board of Directors is authorized to
fix the number of shares in each series, the designation thereof and, subject to
the  provisions of this Article  Third,  the relative  rights,  preferences  and
limitations  of each series and the variations in such rights,  preferences  and
limitations as between series and specifically is authorized to fix with respect
to each series:

                  (a) the dividend rate on the shares of such series and the
         date or dates from which dividends shall be cumulative;

                  (b) the times when, the prices at which, and all other terms
         and conditions upon which, shares of such series shall be redeemable;

                  (c) the amounts which the holders of shares of such series
         shall be entitled to receive upon the liquidation, dissolution or
         winding up of the corporation, which amounts may vary depending on
         whether such liquidation, dissolution or winding up is voluntary or
         involuntary and, if voluntary, may vary at different dates;

                  (d) whether or not the shares of such series shall be subject
         to the operation of a purchase, retirement or sinking fund and, if so,
         the extent to and manner in which such purchase, retirement or sinking
         fund shall be applied to the purchase or redemption of the shares of
         such series for retirement or for other corporate purposes and the
         terms and provisions relative to the operation of the said fund or
         funds;

                  (e) whether or not the shares of such series shall be
         convertible into or exchangeable for shares of any other class or
         series or for any class of common shares and, if so, the price of
         prices or the rate or rates of conversion or exchange and the method,
         if any, of adjusting the same;

                  (f) the restrictions, if any, upon the payment of dividends or
         making of other distributions on, and upon the purchase or other
         acquisition of, common shares;

                  (g) the restrictions, if any, upon the creation of
         indebtedness, and the restrictions, if any, upon the issue of any
         additional shares ranking on a parity with or prior to the shares of
         such series in addition to the restrictions provided for in this
         Article Third;

                  (h) the voting powers, if any, of the shares of such series in
         addition to the voting powers provided for in this Article Third; and

                  (i) such other rights, preferences and limitations as shall
         not be inconsistent with this Article Third.

        All shares of any  particular series shall rank equally and be identical
in all respects  except that shares of any one series issued at different  times
may differ as to the date from which dividends shall be cumulative.

        Dividends  on  shares  of  Preferred  Stock  of  each  series  shall  be
cumulative from the date or dates fixed with respect to such series and shall be
paid or declared or set apart for payment for all past dividend  periods and for
the current dividend period before any dividends  (other than dividends  payable
in common  shares)  shall be declared or paid or set apart for payment on common
shares.  Whenever,  at any time, full cumulative dividends for all past dividend
periods and for the current dividend period shall have been paid or declared and
set apart for payment on all then outstanding  shares of Preferred Stock and all
requirements  with respect to any purchase,  retirement or sinking fund or funds
for all series of Preferred  Stock shall have been complied  with,  the Board of
Directors may declare dividends on the common shares and the shares of Preferred
Stock shall not be entitled to share therein.

        Upon any liquidation, dissolution or winding  up of the corporation, the
holders of shares of Preferred Stock of such series shall be entitled to receive
the  amounts to which such  holders are  entitled as fixed with  respect to such
series,  including all dividends  accumulated to the date of final distribution,
before any payment or distribution of assets of the corporation shall be made to
or set apart for the holders of common shares and after such payments shall have
been made in full to the holders of shares of  Preferred  Stock,  the holders of
common  shares  shall be entitled to receive any and all assets  remaining to be
paid or distributed to shareholders and the holders of shares of Preferred Stock
shall not be entitled to share therein. For the purposes of this paragraph,  the
voluntary sale, conveyance,  lease, exchange or transfer of all or substantially
all the property or assets of the  corporation or a  consolidation  or merger of
the  corporation  with  one or  more  other  corporations  (whether  or not  the
corporation is the corporation surviving such consolidation or merger) shall not
be  deemed  to  be a  liquidation,  dissolution  or  winding  up,  voluntary  or
involuntary.

        The aggregate amount which all shares of  Preferred Stock outstanding at
any time shall be entitled to receive on involuntary liquidation, dissolution or
winding up shall not exceed $8,000,000,000.

        So  long   as  any  shares  of  Preferred  Stock  are  outstanding,  the
corporation  will not (a) without the affirmative vote or consent of the holders
of at  least  66  2/3%  of all  the  shares  of  Preferred  Stock  at  the  time
outstanding,  (i)  authorize  shares  of stock  ranking  prior to the  shares of
Preferred Stock, or (ii) change any provision of this Article Third so to affect
adversely the shares of Preferred  Stock;  (b) without the  affirmative  vote or
consent of the holders of at least 66 2/3% of any series of  Preferred  Stock at
the time  outstanding,  change  any of the  provisions  of such  series so as to
affect adversely the shares of such series;  (c) without the affirmative vote or
consent of the  holders of at least a  majority  of all the shares of  Preferred
Stock at the time  outstanding,  (i) increase the authorized number of shares of
Preferred Stock or (ii) increase the authorized number of shares of any class of
stock ranking on a parity with the Preferred Stock.

        Whenever,  at  any  time  or  times,  dividends  payable  on  shares  of
Preferred  Stock shall be in default in an aggregate  amount  equivalent  to six
full  quarterly  dividends  on  any  series  of  Preferred  Stock  at  the  time
outstanding, the number of directors then constituting the Board of Directors of
the corporation shall ipso facto be increased by two, and the outstanding shares
of Preferred  Stock  shall,  in addition to any other  voting  rights,  have the
exclusive right,  voting  separately as a class and without regard to series, to
elect two directors of the corporation to fill such newly created  directorships
and such right shall  continue  until such time as all dividends  accumulated on
all shares of  Preferred  Stock to the latest  dividend  payment date shall have
been paid or declared and set apart for payment.

        No  holder of shares of  Preferred Stock of any series, irrespective  of
any voting or other right of shares of such series,  shall have, as such holder,
any  preemptive  right to purchase  any other shares of the  corporation  or any
securities  convertible  into or  entitling  the holder to  purchase  such other
shares.

        If in any case the amounts  payable with respect to any requirements to
retire shares of Preferred  Stock are not paid in full in the case of all series
with  respect  to which  such  requirements  exist,  the  number of shares to be
retired in each series shall be in  proportion to the  respective  amounts which
would be payable on account of such  requirements  if all amounts  payable  were
paid in full.

        PART C.  The   following  provision  states  the  number,   designation,
relative  rights,  preferences and limitations of a series of the  corporation's
authorized  preferred  shares  designated as Subsidiary  Exchangeable  Preferred
Stock (the "Subsidiary Preferred Stock").

        (A) Number and Designation.  2,000,000 shares  of  the  Preferred  Stock
of the corporation shall constitute a series designated as Subsidiary  Preferred
Stock.

        (B) Dividends and Distributions.

        (1)(i) Subject  to  the  rights  of  the  holders of  any  shares of any
series of Preferred  Stock (or any similar  stock) ranking prior and superior to
the Subsidiary Preferred Stock with respect to dividends,  the holders of shares
of Subsidiary  Preferred Stock, in preference to the holders of Common Stock (as
defined  in  Article  THIRD  of  the  Certificate  of   Incorporation)   of  the
corporation,  and of any other junior stock, shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally  available for
the  purpose,  quarterly  dividends  payable  in cash on the first day of March,
June,  September  and  December  in each year (each such date being  referred to
herein  as a  "Quarterly  Dividend  Payment  Date"),  commencing  on  the  first
Quarterly  Dividend Payment Date after the first issuance of a share or fraction
of a share of Subsidiary Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of:

                (a) $1 or

                (b) subject  to  the  provision  for  adjustment  set  forth  in
paragraph  (A)(ii)  below,  (1) 1000 times the aggregate per share amount of all
cash  dividends,  and (2) 1000 times the aggregate per share amount  (payable in
kind) of all non-cash dividends or other distributions  (including  dividends or
other  distributions of common shares other than Common Stock),  declared on the
Common Stock since the immediately preceding Quarterly Dividend Payment Date or,
with  respect to the first  Quarterly  Dividend  Payment  Date,  since the first
issuance  of any share or  fraction  of a share of  Subsidiary  Preferred  Stock
provided however that in lieu of any dividends payable in shares of Common Stock
or  payable as a result of a  subdivision  of the  outstanding  shares of Common
Stock (by  reclassification  or otherwise),  the  adjustments  set forth in this
Certificate of Designations shall be made.

        (ii) In  the event the corporation shall at any time declare or  pay any
dividend  on the Common  Stock  payable in shares of Common  Stock,  or effect a
subdivision or combination or consolidation of the outstanding  shares of Common
Stock (by  reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount to which holders of shares of Subsidiary  Preferred
Stock were  entitled  immediately  prior to such event  under  clause (b) of the
preceding  paragraph  (A)(i) shall be adjusted by  multiplying  such amount by a
fraction,  the  numerator  of which is the  number of  shares  of  Common  Stock
outstanding  immediately  after such event and the  denominator  of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

        (2) The  corporation  shall  declare a  dividend  or distribution on the
Subsidiary  Preferred  Stock as provided  in  paragraph  (A)(i) of this  Section
immediately  after it declares a dividend or  distribution  on the Common  Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or  distribution  shall have been declared on the Common Stock
during the period  between  any  Quarterly  Dividend  Payment  Date and the next
subsequent  Quarterly  Dividend  Payment Date, a dividend of $1 per share on the
Subsidiary  Preferred  Stock shall  nevertheless  be payable on such  subsequent
Quarterly Dividend Payment Date.

        (3) Dividends  shall begin to accrue and  be cumulative  on  outstanding
shares of Subsidiary  Preferred Stock from the Quarterly  Dividend  Payment Date
next  preceding  the date of issue of such  shares,  unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such  shares,  or unless the date of issue is a  Quarterly  Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Subsidiary Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly  Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative  from such Quarterly  Dividend
Payment Date.  Accrued but unpaid  dividends shall not bear interest.  Dividends
paid on the  shares of  Subsidiary  Preferred  Stock in an amount  less than the
total  amount of such  dividends  at the time accrued and payable on such shares
shall be allocated pro rata on a  share-by-share  basis among all such shares at
the time  outstanding.  The  Board of  Directors  may fix a record  date for the
determination  of holders of shares of Subsidiary  Preferred  Stock  entitled to
receive payment of a dividend or  distribution  declared  thereon,  which record
date  shall be the same date as that fixed for the  determination  of holders of
Common  Stock  entitled  to receive  payment of the  corresponding  dividend  or
distribution,  or if there is no  corresponding  dividend or distribution on the
Common Stock, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.

        (C) Voting Rights.  The  holders of shares of Subsidiary Preferred Stock
shall have the following voting rights:

        (1)  Subject to the provision for adjustment hereinafter set forth, each
share of Subsidiary  Preferred  Stock shall  entitle the holder  thereof to 1000
votes on all matters submitted to a vote of the stockholders of the corporation.
In the event the  corporation  shall at any time  declare or pay any dividend on
the Common Stock payable in shares of Common Stock,  or effect a subdivision  or
combination  or  consolidation  of the  outstanding  shares of Common  Stock (by
reclassification  or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common  Stock,  then in each
such case the number of votes per share to which holders of shares of Subsidiary
Preferred Stock were entitled  immediately prior to such event shall be adjusted
by multiplying  such number by a fraction,  the numerator of which is the number
of shares of Common  Stock  outstanding  immediately  after  such  event and the
denominator  of  which is the  number  of  shares  of  Common  Stock  that  were
outstanding immediately prior to such event.

        (2) Except  as  otherwise provided  herein, in any other Certificate of
Designations  creating a series of Preferred  Stock or any similar stock,  or by
law,  the  holders of shares of  Subsidiary  Preferred  Stock and the holders of
shares of Common Stock and any other  capital  stock of the  corporation  having
general voting rights shall vote together as one class on all matters  submitted
to a vote of stockholders of the corporation. (3) Except as set forth herein, or
as otherwise  provided by law, holders of Subsidiary  Preferred Stock shall have
no special voting rights and their consent shall not be required  (except to the
extent  they are  entitled  to vote with  holders  of Common  Stock as set forth
herein) for taking any corporate action.

        (D) Certain Restrictions.

        (1) Whenever  quarterly  dividends or other dividends  or distributions
payable  on the  Subsidiary  Preferred  Stock as  provided  in  Section 2 are in
arrears  (which for purposes of  clarification  shall not include any failure to
make any payment as a result of a waiver by the holders thereof), thereafter and
until all  accrued  and  unpaid  dividends  and  distributions,  whether  or not
declared,  on shares of Subsidiary  Preferred Stock  outstanding shall have been
paid in full, the corporation shall not:

First: declare or pay dividends, or make any other distributions,  on any shares
of stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Subsidiary Preferred Stock;

Second: declare or pay dividends, or make any other distributions, on any shares
of stock  ranking  on a parity  (either  as to  dividends  or upon  liquidation,
dissolution or winding up) with the Subsidiary Preferred Stock, except dividends
paid  ratably on the  Subsidiary  Preferred  Stock and all such parity  stock on
which  dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;

Third:  redeem or purchase or otherwise acquire for consideration  shares of any
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Subsidiary Preferred Stock, provided that the corporation may
at any time  redeem,  purchase or  otherwise  acquire  shares of any such junior
stock in  exchange  for shares of any stock of the  corporation  ranking  junior
(either as to dividends or upon  dissolution,  liquidation or winding up) to the
Subsidiary Preferred Stock; or

Fourth:  redeem or purchase or otherwise acquire for consideration any shares of
Subsidiary  Preferred Stock, or any shares of stock ranking on a parity with the
Subsidiary  Preferred Stock,  except in accordance with a purchase offer made in
writing or by  publication  (as  determined  by the Board of  Directors)  to all
holders  of such  shares  upon  such  terms  as the  Board of  Directors,  after
consideration of the respective  annual dividend rates and other relative rights
and  preferences of the respective  series and classes,  shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.

        (2) The corporation shall not permit any  subsidiary of  the corporation
to purchase or otherwise  acquire for  consideration  any shares of stock of the
corporation unless the corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

        (E) Liquidation, Dissolution or Winding Up.  Subject to  the  provisions
of the Certificate of Incorporation  (including  limitations on distributions to
Preferred  Stock),  upon  any  liquidation,  dissolution  or  winding  up of the
corporation, no distribution shall be made (1) to the holders of shares of stock
ranking  junior  (either as to dividends  or upon  liquidation,  dissolution  or
winding up) to the Subsidiary Preferred Stock unless, prior thereto, the holders
of shares of Subsidiary  Preferred  Stock shall have  received  $1000 per share,
plus an amount equal to accrued and unpaid dividends and distributions  thereon,
whether or not declared, to the date of such payment,  provided that the holders
of  shares of  Subsidiary  Preferred  Stock  shall be  entitled  to  receive  an
aggregate amount per share, subject to the provision for adjustment  hereinafter
set forth,  equal to 1000 times the aggregate amount to be distributed per share
to holders of shares of Common Stock,  provided,  further,  that on  involuntary
liquidation,  dissolution or winding up of the corporation, the aggregate amount
that all shares of  Subsidiary  Preferred  Stock  shall be  entitled  to receive
(prior to  shares  of stock  ranking  junior  to it)  shall be no  greater  than
$500,000,000,  with  holders  of  Subsidiary  Preferred  Stock  entitled  to any
shortfall  or any amount  otherwise  payable on a pro rata basis with holders of
Common  Stock or (2) to the  holders  of  shares  of stock  ranking  on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Subsidiary  Preferred Stock, except distributions made ratably on the Subsidiary
Preferred  Stock and all such parity stock in proportion to the total amounts to
which the  holders  of all such  shares  are  entitled  upon  such  liquidation,
dissolution  or  winding  up.  In the event  the  corporation  shall at any time
declare  or pay any  dividend  on the Common  Stock  payable in shares of Common
Stock,  or  effect  a  subdivision  or  combination  or   consolidation  of  the
outstanding  shares of Common Stock (by  reclassification  or otherwise  than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock,  then in each such case the aggregate amount to which
holders of shares of Subsidiary  Preferred Stock were entitled immediately prior
to such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying  such amount by a fraction the numerator of which is the
number of shares of Common Stock  outstanding  immediately  after such event and
the  denominator  of which is the  number of shares  of Common  Stock  that were
outstanding immediately prior to such event.

        (F) Consolidation, Merger, etc.   In case  the  corporation  shall enter
into any  consolidation,  merger,  combination or other transaction in which the
shares  of  Common  Stock are  exchanged  for or  changed  into  other  stock or
securities,  cash and/or any other property, then in any such case each share of
Subsidiary  Preferred  Stock shall at the same time be  similarly  exchanged  or
changed  into an amount  per  share,  subject to the  provision  for  adjustment
hereinafter  set  forth,  equal to 1000  times  the  aggregate  amount of stock,
securities,  cash and/or any other property  (payable in kind),  as the case may
be, into which or for which each share of Common Stock is changed or  exchanged.
In the event the  corporation  shall at any time  declare or pay any dividend on
the Common Stock payable in shares of Common Stock,  or effect a subdivision  or
combination  or  consolidation  of the  outstanding  shares of Common  Stock (by
reclassification  or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common  Stock,  then in each
such case the amount set forth in the  preceding  sentence  with  respect to the
exchange or change of shares of Subsidiary  Preferred Stock shall be adjusted by
multiplying  such amount by a fraction,  the numerator of which is the number of
shares  of  Common  Stock  outstanding  immediately  after  such  event  and the
denominator  of  which is the  number  of  shares  of  Common  Stock  that  were
outstanding immediately prior to such event.

        (G) Redemption.

        (1) At any time, the Board of Directors may redeem shares of Subsidiary
Preferred  Stock for Common  Stock at a ratio of 1000 shares of Common Stock per
share of Subsidiary  Preferred Stock. In the event the corporation  shall at any
time declare or pay any dividend on the Common Stock payable in shares of Common
Stock,  or  effect  a  subdivision  or  combination  or   consolidation  of  the
outstanding  shares of Common Stock (by  reclassification  or otherwise  than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the number of shares of Common
Stock set forth in the  preceding  sentence  with respect to the  redemption  of
shares of  Subsidiary  Preferred  Stock shall be adjusted  by  multiplying  such
amount by a fraction,  the  numerator of which is the number of shares of Common
Stock  outstanding  immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding  immediately prior to
such event.

        (2) At any  time following  the first issuance  of a class  or series of
common stock of the corporation intended to represent the financial  performance
of the corporation's  broadband business  ("Broadband Group Common Stock"),  the
Board of Directors may redeem shares of Subsidiary Preferred Stock for Broadband
Group Common Stock at a ratio to be determined  by the Board of Directors  based
on the fair  market  values of  Broadband  Group  Common  Stock  and  Subsidiary
Preferred   Stock,   as  determined   by  the  Board  of  Directors.   All  such
determinations  shall be in the sole  discretion of the Board of Directors,  and
all such determinations shall be final and binding.

        (3) Any  redemption  pursuant  to  this Section 7 shall  be  pursuant to
notice and other procedures as determined by the Board of Directors.

        (H) Rank.  The Subsidiary  Preferred Stock  shall rank, with  respect to
the payment of dividends and the distribution of assets, junior to all series of
any other class of the corporation's Preferred Stock.

        (I) Amendment.  The  Certificate  of  Incorporation of  the  corporation
shall not be amended in any manner  which would  materially  alter or change the
powers, preferences or special rights of the Subsidiary Preferred Stock so as to
affect them adversely  without the  affirmative  vote of the holders of at least
two-thirds of the  outstanding  shares of  Subsidiary  Preferred  Stock,  voting
together as a single class.

        FOURTH. The number of directors shall be as provided for in the By-Laws.

        FIFTH. The duration of the corporation shall be perpetual.

        SIXTH. The  office of the corporation  is located in  the County of  New
York, State of New York.

        SEVENTH. The Secretary of State of  the State of New York is  designated
as agent of the corporation upon whom process against it may be served. The post
office  address to which the Secretary of State shall mail a copy of any process
served upon him as agent of the  corporation is CT Corporation  System,  111 8th
Avenue, New York, New York, 10011.

        EIGHTH. No  holder of  common  shares  shall  have, as such  holder, any
preemptive right to purchase any shares or other securities of the corporation.

        NINTH. No director shall  be personally liable to the Corporation or any
of its shareholders for damages for any breach of duty as a director;  provided,
however,  that the  foregoing  provision  shall not  eliminate  or limit (i) the
liability of a director if a judgment or other final adjudication adverse to him
or her  establishes  that  his or her  acts or  omissions  were in bad  faith or
involved intentional  misconduct or a knowing violation of law or that he or she
personally  gained in fact a financial  profit or other advantage to which he or
she was not legally entitled or that his or her acts violated Section 719 of the
New York Business  Corporation  Law; or (ii) the liability of a director for any
act or omission prior to the adoption of this Article NINTH by the  shareholders
of the Corporation.

        TENTH. (a) The  required  vote for  authorization by  shareholders of  a
merger or  consolidation  of the  corporation,  pursuant  to Section  903 of the
Business  Corporation Law, shall be a majority of the votes of the shares of the
corporation  entitled  to vote  thereon.  Such vote shall be in  addition to any
class vote that may be required by Section 903 of the Business Corporation Law.

        (b) The  required vote  for approval by  shareholders of  a sale, lease,
exchange  or other  disposition  of all or  substantially  all the assets of the
corporation, pursuant to Section 909 of the Business Corporation Law, shall be a
majority of the votes, of all outstanding shares of the corporation  entitled to
vote thereon.

        (c) The required vote for authorization by shareholders of a dissolution
of the  corporation,  pursuant to Section 1001 of the Business  Corporation Law,
shall be a majority of the votes of all  outstanding  shares of the  corporation
entitled to vote thereon.


        4.  The  manner  in  which  this  restatement  of  the  Certificate   of
Incorporation  was  authorized  was by a resolution of the Board of Directors of
the corporation.

<PAGE>

In Witness Whereof, we have signed and verified this Restated Certificate of
Incorporation of AT&T Corp. this 16th day of July 2003.



                                  /s/ Robert S. Feit
                                  ---------------------------
                                  By: Robert S. Feit
                                      Vice President - Law
                                        and Secretary



                                  /s/ John W. Thomson
                                  ---------------------------
                                  By:  John W. Thomson
                                       Assistant Secretary

<PAGE>
                                                             Exhibit 10(iii)(A)1


                                                               [GRAPHIC OMITTED]


June 2, 2003

Mr. Hossein Eslambolchi


RE:  Special Incentive Agreement

Dear Hossein:

         The purpose of this letter agreement ("Agreement") is to detail a
special incentive agreement AT&T Corp. ("The Company"/"AT&T") has developed for
you. The payout criteria, amounts, forfeiture and distribution of the incentive
payments shall be in accordance with the following terms and conditions.

         You will be eligible to receive up two (2) special incentive payments,
approved by the Compensation Committee of the Board of Directors and the
Chairman and Chief Executive Officer, subject to the performance, terms and
conditions contained in Attachment A. These special cash payments ("Special
Payment") will be made within thirty (30) business days following confirmation
of the attainment of meeting the performance metrics following the close of each
performance year:

              Amount                Performance Period Dates
             $600,000               12/31/2003
             $600,000               12/31/2004

         If, prior to any scheduled payment, you resign from the Company or, at
any time, you are terminated for "Cause", as defined below, all payments shall
be forfeited. In the event of your Long Term Disability as defined below, your
death, or a Company initiated termination not for Cause (pursuant to the Senior
Officer Separation Plan (SOSP) or its successor) prior to December 31, 2004, a
pro-rated portion of the remaining incentive payment shall be distributed to you
or your named beneficiary (or your estate if no beneficiary has been named), in
a lump sum payment. Such pro-rated amounts shall equal to the entire amount of
the remaining payments multiplied by a fraction, (a) the numerator of which is
the number of days you are employed by the Company from May 1, 2003, up to a
maximum of 365 days, and (b) the denominator of which is 365 days.

         In the event of your Long Term Disability or death, the lump sum
payment will be made as soon as administratively feasible in the calendar
quarter in which your Long Term Disability or death occurs. In the event of your
termination under the SOSP or its successor, the payment will be made as soon as
administratively possible following the revocation period of the waiver and
release that you will be required to sign as a condition of receiving benefits
under the SOSP or its successor. Notwithstanding any contrary provisions in the
SOSP or its successor, the remaining incentive payment will be prorated in
accordance with the terms of this Agreement.

         The Special Cash Payments referred to in this Agreement are subject to
IRS rules and regulations with respect to withholding and taxation. Moreover,
these Special Cash Payments will not be included in your compensation base for
purposes of calculating any employee benefits.

         Further, in the event of your violation of the Non-Competition
Guideline prior to the full distribution of the final incentive amount, any
unpaid incentives and all prior amounts paid to you under the Agreement shall be
deemed forfeitable. The Company shall provide you with a letter, within five (5)
business days of the violation, detailing the total amount you will be required
to pay back to the Company within fifteen (15) days following the receipt of
such letter.

         For purposes of this Agreement:

         (a)  "Long Term Disability"  shall mean termination  of your employment
               with  the  Company  with  eligibility  to  receive  a  disability
               allowance  under any long term  disability plan of the Company or
               any affiliate of the Company;

         (b)  "Cause" shall mean:

               i.    commission of a crime, or conviction of a crime (including
                     a plea of guilty or nolo contendere) involving theft,
                     fraud, dishonesty or moral turpitude;

               ii.   intentional or grossly negligent disclosure of confidential
                     or trade secret information of the Company to anyone not
                     entitled to such information;

               iii.  omission or dereliction of any statutory or common law duty
                     of loyalty to the Company;

               iv.   violation of the Non-Competition Guideline (attached
                     hereto) or violation of the Company's Code of Conduct or
                     any other written Company policy; or

               v.    repeated failure to carry out the Executive's duties
                     despite specific instruction to do so.

         In the event the Company determines that there is Cause for termination
of employment, the Company shall provide you with written notice specifying the
grounds upon which its determination is based.

         This Agreement may not be amended or waived, unless the amendment or
waiver is in writing signed by you and AT&T's Executive Vice President - Human
Resources.

         This Agreement contains the entire agreement regarding the terms and
conditions of this special retention arrangement and fully supersede all prior
written or oral agreements or understandings pertaining to the subject matter
hereof. You represent and acknowledge that in signing this Agreement you have
not relied upon any representation or statement not set forth herein made by the
Company or Company's agents, representatives, or attorneys with regard to the
subject matter of this Agreement. Furthermore, the construction, interpretation
and performance of this Agreement shall be governed by the laws of the state of
New Jersey, without regard to its conflict of laws rule.

         It is agreed and understood that you will not talk about, write about,
or otherwise disclose the terms or existence of this Agreement or any fact
concerning its execution or implementation unless required by law or to enforce
the terms of this agreement. You may, however, discuss its contents with your
spouse, your legal and/or financial consultant, provided that you advise them of
your obligations of confidentiality and that any disclosures made by any of them
may be treated by the Company as disclosures made by you for purposes of this
provision.

         This Agreement is not an Employment Contract and should not be
construed nor interpreted as containing any guarantee of continued employment.
The employment relationship at AT&T is by mutual consent ("Employment at Will").
This means that managers have the right to terminate employment at any time and
for any reason. Likewise, the Company reserves the right to discontinue your
employment with or without cause at any time and for any reason.

         By acceptance of this offer, you further understand that these terms
shall apply to the Company and its successors. The Company specifically reserves
the right to assign th terms of this agreement to any successor, whether the
successor is the result of a sale, purchase, merger, consolidation, asset sale,
divestiture or spin-off or any combination or form thereof. No sale, purchase,
merger, consolidation, asset sale, divestiture or spin-off any combination or
form thereof by the Company shall be construed as a termination of your
employment and will not trigger the Company's obligation to make payments under
this Agreement.

         Payments from the Special Incentive Award are in addition to and not in
lieu (nor will it or anything in these agreements postpone, reduce or negate
impact) of qualified or non-qualified pension, savings, or other retirement
plan, program or arrangement covering you. The payments provided under this
Agreement are subject to payroll tax withholding and reporting, and amounts paid
are not included in the base for calculating benefits (nor shall such amounts
offset any benefits) under any employee or Senior Management benefit plan,
program or practice.

         Hossein, I am happy to present this special incentive arrangement to
you. It recognizes the extraordinary contribution you have made to our business.
If you agree with the terms and conditions detailed herein, please sign this
Agreement in the space provided below, prior to June 16, 2003, make a copy for
your records and return the executed copy to me.

                                       Sincerely,




                                       /s/   Mirian M. Graddick-Weir
                                       ---------------------------------
                                             Mirian M. Graddick-Weir
                                             Executive Vice President -
                                               Human Resources

Attachments




/s/  H. Eslambolchi                    July 24, 2003
-----------------------------          -------------------------
Agreed and Accepted                    Date
H. Eslambolchi

<PAGE>

                                                                      Exhibit 12

                          AT&T Corp.
       Computation of Ratio of Earnings to Fixed Charges
                          (Unaudited)
                     (Dollars in millions)
                                                    For the Six Months Ended
                                                         June 30, 2003
                                                    ------------------------
Income from continuing operations before
  income taxes                                               $ 1,663
Add distributions of less than 50% owned
  affiliates                                                       5
Add fixed charges, excluding capitalized
  interest                                                       710
                                                    ------------------------
Total earnings from continuing operations
  before income taxes and fixed charges                      $ 2,378
                                                    ------------------------

Fixed Charges:
Total interest expense                                           628
Capitalized interest                                              18
Interest portion of rental expense                                82
                                                    ------------------------
Total fixed charges                                          $   728
                                                    ------------------------

Ratio of earnings to fixed charges                               3.3

<PAGE>

                                                                    Exhibit 99.1


                   CERTIFICATION OF PERIODIC FINANCIAL REPORTS



I, David W. Dorman, Chairman of the Board and Chief Executive Officer of AT&T
Corp., certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)      the Quarterly Report on Form 10-Q for the quarterly period ended June
         30, 2003 (the "Periodic Report") which this statement accompanies fully
         complies with the requirements of Section 13(a) or 15(d) of the
         Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and

(2)      information contained in the Periodic Report fairly presents, in all
         material respects, the financial condition and results of operations of
         AT&T Corp.



Dated:  August 11, 2003


                                       /s/   David W. Dorman
                                       -----------------------------
                                             David W. Dorman


A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.

<PAGE>

                                                                    Exhibit 99.2

                   CERTIFICATION OF PERIODIC FINANCIAL REPORTS



I, Thomas W. Horton, Senior Executive Vice President, Chief Financial Officer of
AT&T Corp., certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:

(1)      the Quarterly Report on Form 10-Q for the quarterly period ended June
         30, 2003 (the "Periodic Report") which this statement accompanies fully
         complies with the requirements of Section 13(a) or 15(d) of the
         Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and

(2)      information contained in the Periodic Report fairly presents, in all
         material respects, the financial condition and results of operations of
         AT&T Corp.



Dated:  August 11, 2003

                                       /s/   Thomas W. Horton
                                       ----------------------------
                                             Thomas W. Horton




A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.