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



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

                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2002

                                       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

              900 Route 202/206 North, Bedminster, New Jersey 07921

                       Telephone - Area Code 800-257-7865

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


At October 31, 2002, the following shares of stock were outstanding:

AT&T common stock - 3,851,927,498 shares

<PAGE>
<TABLE>
<CAPTION>
                                                    PART I - FINANCIAL INFORMATION
                                                     AT&T CORP. AND SUBSIDIARIES
                                                CONSOLIDATED STATEMENTS OF OPERATIONS
                                           (Dollars in Millions Except Per Share Amounts)
                                                             (Unaudited)

                                                                             For the Three Months          For the Nine Months
                                                                              Ended September 30,          Ended September 30,
                                                                              2002          2001           2002          2001
   <S>                                                                    <C>           <C>            <C>           <C>
   Revenue                                                                $ 11,956      $ 13,035       $ 36,044      $ 39,773

   Operating Expenses
   Costs of services and products (excluding depreciation
     of $1,368, $1,165, $4,142 and $3,533 included below)                    3,333         3,476          9,962        10,458
   Access and other connection                                               2,696         3,033          8,267         9,289
   Selling, general and administrative                                       2,712         2,488          7,902         7,953
   Depreciation and amortization                                             1,981         2,274          5,835         7,036
   Net restructuring and other charges                                         (26)          399             30         1,494
   Goodwill and franchise impairment charges                                     -             -         16,479             -

   Total operating expenses                                                 10,696        11,670         48,475        36,230

   Operating income (loss)                                                   1,260         1,365        (12,431)        3,543

   Other income (expense), net                                                  56           320           (935)         (771)
   Interest (expense)                                                         (748)         (786)        (2,231)       (2,426)
   Income (loss) from continuing operations before income
     taxes, minority interest and dividends on subsidiary
     preferred stock, and net (losses) related to equity
     investments                                                               568           899        (15,597)          346
   (Provision) benefit for income taxes                                       (312)           70          4,053           288
   Minority interest and dividends on subsidiary preferred
     stock                                                                     (38)          177           (126)        1,015
   Net (losses) related to other equity investments                            (11)       (3,352)        (1,032)       (4,389)
   Equity earnings (losses) from Liberty Media Group                             -           111              -        (2,711)
   Income (loss) from continuing operations                                    207        (2,095)       (12,702)       (5,451)
   (Loss) income from discontinued operations (net of income taxes of
       $44 and $(158))                                                           -             -            (88)          150
   Gain on disposition of discontinued operations                                -        13,503              -             -
   Income (loss) before extraordinary gain and cumulative
      effect of accounting changes                                             207        11,408        (12,790)        8,202
   Extraordinary gain (net of income taxes of $(30))                             -             -             48             -
   Cumulative effect of accounting changes (net of income
     taxes of $530 and $(578))                                                   -             -           (856)          904
   Net income (loss)                                                           207        11,408        (13,598)        9,106
   Dividend requirements of preferred stock, net                                 -          (235)             -          (652)
   Premium on exchange of AT&T Wireless tracking stock                           -             -              -           (80)
   Income (loss) attributable to common shareowners                       $    207      $ 11,173       $(13,598)     $  8,374


   AT&T Common Stock Group - per basic and diluted share:
   Earnings (loss) from continuing operations                             $   0.05      $  (0.69)      $  (3.45)     $  (0.94)
   (Loss) earnings from discontinued operations                                  -             -          (0.02)         0.03
   Gain on disposition of discontinued operations                                -          3.82              -          3.67
   Extraordinary gain                                                            -             -           0.01             -
   Cumulative effect of accounting changes                                       -             -          (0.23)         0.10
   Earnings (loss)                                                        $   0.05      $   3.13       $  (3.69)     $   2.86

   Dividends declared                                                     $ 0.0375      $ 0.0375       $ 0.1125      $ 0.1125

   AT&T Wireless Group - per basic and diluted share:
   Earnings from discontinued operations                                  $      -      $      -       $      -      $   0.08

   Liberty Media Group - per basic and diluted share:
   Earnings (loss) before cumulative effect of accounting change          $      -      $   0.04       $      -      $  (1.05)
   Cumulative effect of accounting change                                        -             -              -          0.21
   Earnings (loss)                                                        $      -      $   0.04       $      -      $  (0.84)
<FN>
The notes are an integral part of the consolidated financial statements.
</FN>
</TABLE>

<TABLE>
<CAPTION>
                                              AT&T CORP. AND SUBSIDIARIES
                                              CONSOLIDATED BALANCE SHEETS
                                                 (Dollars in Millions)
                                                      (Unaudited)

                                                                                           At              At
                                                                                      September 30,    December 31,
                                                                                          2002             2001
<S>                                                                                 <C>                <C>
ASSETS
Cash and cash equivalents                                                           $  6,926           $ 10,592
Accounts receivable, less allowances of $800 and $827                                  6,882              7,736
Other receivables                                                                        402              1,645
Investments                                                                              459                668
Deferred income taxes                                                                  2,048              1,230
Other current assets                                                                     995                657
TOTAL CURRENT ASSETS                                                                  17,712             22,528

Property, plant and equipment, net of accumulated depreciation of
  $35,678 and $32,046                                                                 41,364             41,322
Goodwill, net of accumulated amortization of $1,307 in 2001                           20,517             24,675
Franchise costs, net of accumulated amortization of $2,501 in 2001                    29,084             42,819
Other purchased intangible assets, net of accumulated amortization
  of $846 and $647                                                                     2,003              2,222
Investments and related advances                                                      17,920             23,818
Prepaid pension costs                                                                  3,522              3,337
Other assets                                                                           5,916              4,561
TOTAL ASSETS                                                                        $138,038           $165,282

LIABILITIES
Accounts payable                                                                     $  4,342          $  4,744
Payroll and benefit-related liabilities                                                 1,599             2,084
Debt maturing within one year                                                           6,560            12,958
AT&T Canada obligation                                                                  3,525                 -
Other current liabilities                                                               4,652             5,641
TOTAL CURRENT LIABILITIES                                                              20,678            25,427

Long-term debt                                                                         36,371            40,527
Long-term benefit-related liabilities                                                   3,707             3,594
Deferred income taxes                                                                  24,452            28,160
Other long-term liabilities and deferred credits                                        3,868             7,614
TOTAL LIABILITIES                                                                      89,076           105,322

Minority Interest                                                                       1,371             3,560

Company-Obligated Convertible Quarterly Income Preferred
  Securities of Subsidiary Trust Holding Solely Subordinated Debt
  Securities of AT&T                                                                    4,728             4,720

SHAREOWNERS' EQUITY
Common Stock:
AT&T Common Stock, $1 par value, authorized 6,000,000,000 shares;
  issued and outstanding 3,851,084,978 shares (net of 858,888,662
  treasury shares) at September 30, 2002, and 3,542,405,744 shares
  (net of 851,746,431 treasury shares) at December 31, 2001                             3,851             3,542
Additional paid-in capital                                                             56,229            51,964
Accumulated (deficit)                                                                 (17,082)           (3,484)
Accumulated other comprehensive (loss)                                                   (135)             (342)
TOTAL SHAREOWNERS' EQUITY                                                              42,863            51,680
TOTAL LIABILTIES AND SHAREOWNERS' EQUITY                                             $138,038          $165,282
<FN>
The notes are an integral part of the consolidated financial statements.
</FN>
</TABLE>

<TABLE>
<CAPTION>
                                               AT&T CORP. AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
                                                  (Dollars in Millions)
                                                       (Unaudited)

                                                                                    For the Nine Months Ended
                                                                                          September 30,
                                                                                   2002                     2001
<S>                                                                           <C>                    <C>
AT&T Common Shares
  Balance at beginning of year                                                $  3,542               $   3,760
  Shares issued, net:
    Under employee plans                                                            24                      10
    For acquisitions                                                                 -                      44
    Settlement of put option                                                         -                     155
    Exchange of AT&T Wireless tracking stock                                         -                    (372)
    For funding AT&T Canada obligation                                             230                       -
    Redemption of TCI Pacific preferred stock                                       52                       -
    Other(1)                                                                         3                     (61)
Balance at end of period                                                         3,851                   3,536

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

Liberty Media Group Class A Common Stock
  Balance at beginning of year                                                       -                   2,364
  Shares issued, net                                                                 -                      14
  Liberty Media Group split-off                                                      -                  (2,378)
Balance at end of period                                                             -                       -

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

Additional Paid-In Capital
  Balance at beginning of year                                                  51,964                  90,496
  Shares issued, net:
    Under employee plans                                                           276                     208
    For acquisitions                                                                 -                     827
    For funding AT&T Canada obligation                                           2,301                       -
    Redemption of TCI Pacific preferred stock                                    2,045                       -
    Other(1)                                                                        31                  (1,035)
  Gain on issuance of common stock by affiliates                                     -                      20
  Exchange of AT&T Wireless tracking stock                                           -                      14
  Settlement of put option                                                           -                   3,237
  Conversion of preferred stock                                                      -                   9,631
  AT&T Wireless Group split-off                                                      -                 (20,955)
  Liberty Media Group split-off                                                      -                 (30,738)
  Beneficial conversion value of preferred stock                                     -                     295
  Dividends declared - AT&T Common Stock Group                                    (422)                   (133)
  Other                                                                             34                     (16)
Balance at end of period                                                        56,229                  51,851

(Accumulated Deficit)/Retained Earnings
  Balance at beginning of year                                                 (3,484)                   7,408
  Net (loss) income                                                           (13,598)                   9,106
  Dividends declared - AT&T Common Stock Group                                      -                     (275)
  Dividends accrued - preferred stock                                               -                     (652)
  Premium on exchange of AT&T Wireless tracking stock                               -                      (80)
  Treasury shares issued at less than cost                                          -                       (7)
  AT&T Wireless Group split-off                                                     -                  (17,593)
Balance at end of period                                                      (17,082)                  (2,093)
</TABLE>

<TABLE>
<CAPTION>
                                                       (CONTINUED)


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

                                                                                        For the Nine Months
                                                                                        Ended September 30,
                                                                                    2002                    2001
<S>                                                                          <C>                      <C>
Accumulated Comprehensive (Loss)
  Balance at beginning of year                                                   (342)                  (1,398)
  Other comprehensive income                                                      207                      988
  AT&T Wireless Group split-off                                                     -                       72
  Liberty Media Group split-off                                                     -                     (758)
Balance at end of period                                                         (135)                  (1,096)
Total Shareowners' Equity                                                    $ 42,863                 $ 52,198

Summary of Total Comprehensive (Loss) Income:
Net (loss) income                                                            $(13,598)                   9,106
Net foreign currency translation adjustment (net of income taxes of
         $(38) and $135)(2)                                                        61                     (204)
Net revaluation of securities and derivative instruments:
Unrealized gains (losses) (net of income taxes of $443 and $(274))(2)            (717)                     363
Recognition of previously unrealized losses (gains) (net of income taxes
         of $(535) and $(513))(3)                                                 863                      829
Comprehensive (Loss) Income                                                  $(13,391)                $ 10,094

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

(1)  Other activity in 2001 represents AT&T stock received in exchange for entities owning certain cable systems.

(2) In the first nine months of 2001, total comprehensive (loss) income included LMG's foreign currency translation adjustments
         totaling $(149), net of applicable income taxes and unrealized gains (losses) on available-for-sale securities totaling
         $1,286, net of applicable income taxes.

(3) See note (4) for a summary of the "Recognition of previously unrealized losses (gains)."

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

<TABLE>
<CAPTION>
                                                       AT&T CORP. AND SUBSIDIARIES
                                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                          (Dollars in Millions)
                                                               (Unaudited)
                                                                                                     For the Nine Months Ended
                                                                                                              September 30,
                                                                                                           2002            2001
     <S>                                                                                             <C>               <C>
     OPERATING ACTIVITIES
     Net (loss) income                                                                               $(13,598)         $ 9,106
     Deduct: (Loss) income from discontinued operations                                                   (88)             150
     Gain on disposition of discontinued operations                                                         -           13,503
     (Loss) from continuing operations                                                                (13,510)          (4,547)

     Adjustments to reconcile (loss) from continuing operations to net cash
       provided by operating activities of continuing operations:
         Cumulative effect of accounting changes - net of income taxes                                    856             (904)
         Goodwill and franchise impairment charges                                                     16,479                -
         Depreciation and amortization                                                                  5,835            7,036
         Net equity losses from Liberty Media Group                                                         -            2,711
         Net losses related to other equity investments                                                 1,671            7,149
         Cost method investment impairment charges                                                      1,411              203
         Provision for uncollectible receivables                                                          890              850
         Net restructuring and other charges                                                              (18)           1,386
         Deferred income taxes                                                                         (4,159)          (4,865)
         Net revaluation of certain financial instruments                                                (426)             779
         Net gains on sales of businesses and investments                                                 (12)            (689)
         Minority interest                                                                                (76)          (1,222)
         Extraordinary gain - net of income taxes                                                         (48)               -
         Put option mark-to-market charge                                                                   -              838
         Decrease (increase) in receivables                                                               123              (49)
         Decrease in accounts payable                                                                    (307)            (530)
         Net change in other operating assets and liabilities                                          (1,359)            (873)
         Other adjustments, net                                                                           338              (52)
     NET CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS                                 7,688            7,221

     INVESTING ACTIVITIES
     Capital expenditures and other additions                                                          (5,295)          (6,736)
     Investment contributions and purchases                                                               (23)            (371)
     Investment distributions and sales                                                                    26            1,845
     Proceeds from sale or disposal of property, plant and equipment                                      469               62
     Net dispositions of businesses, net of cash disposed                                                  17            4,827
     Increase in restricted cash                                                                         (418)               -
     Other investing activities, net                                                                      (27)            (142)
     NET CASH (USED IN) INVESTING ACTIVITIES OF CONTINUING OPERATIONS                                  (5,251)            (515)

     FINANCING ACTIVITIES
     Decrease in short-term borrowings, net                                                            (5,196)          (9,580)
     Repayment of borrowings from AT&T Wireless                                                             -           (5,803)
     Retirement of long-term debt                                                                      (3,008)          (1,618)
     Dividends paid on common stock                                                                      (411)            (416)
     Dividends paid on preferred securities                                                              (256)            (190)
     Proceeds from long-term debt issuances                                                               129              195
     Issuance of AT&T common shares                                                                     2,640              133
     Net issuance of treasury shares                                                                        -               23
     Issuance of convertible preferred securities and warrants                                              -            9,811
     Issuance of AT&T Wireless Group common shares                                                          -               54
     Other financing activities, net                                                                       (1)             (41)
     NET CASH (USED IN) FINANCING ACTIVITIES OF CONTINUING OPERATIONS                                  (6,103)          (7,432)

     Net cash provided by discontinued operations                                                           -            4,860
     Net (decrease) increase in cash and cash equivalents                                              (3,666)           4,134
     Cash and cash equivalents at beginning of year                                                    10,592               64
     Cash and cash equivalents at end of period                                                      $  6,926          $ 4,198
<FN>
The notes are an integral part of the consolidated financial statements.
</FN>
</TABLE>



                           AT&T CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (Dollars in Millions Except Per Share Amounts)
                                   (Unaudited)


1)       BASIS OF PRESENTATION

              The  consolidated financial statements have been  prepared by AT&T
         Corp.(AT&T) pursuant to the rules and regulations of the Securities and
         Exchange  Commission  (SEC) and, in the opinion of management,  include
         all  adjustments  necessary  for a fair  statement of the  consolidated
         results  of  operations,  financial  position  and cash  flows for each
         period presented.  The consolidated results for interim periods are not
         necessarily  indicative of results for the full year.  These  financial
         results should be read in  conjunction  with AT&T's Form 10-K/A for the
         year ended  December  31,  2001,  and AT&T's Form 10-Q for the quarters
         ended March 31, 2002, and June 30, 2002. We have  reclassified  certain
         prior period amounts to conform to our current presentation.


2)       RESTRUCTURING OF AT&T

              On October 25, 2000, AT&T announced a restructuring  plan designed
         to fully  separate  or issue  separately  tracked  stocks  intended  to
         reflect the financial  performance and economic value of each of AT&T's
         four major operating units.

              On July 9, 2001, AT&T completed  the split-off of AT&T Wireless as
         a separate,  independently  traded  company.  On August 10, 2001,  AT&T
         completed the split-off of Liberty Media Corporation as an independent,
         publicly traded company.

              On  July  10,  2002,   AT&T  and  Comcast  Corporation   (Comcast)
         shareowners  approved the proposed  merger  between AT&T  Broadband and
         Comcast. The merger still remains subject to certain regulatory reviews
         and approvals and certain other  conditions and is expected to close by
         the end of 2002.  Under the terms of the agreement,  AT&T will spin-off
         AT&T Broadband and simultaneously AT&T Broadband and Comcast will merge
         into   subsidiaries  of  a  new  company  to  be  called  AT&T  Comcast
         Corporation (AT&T Comcast). AT&T shareowners will receive approximately
         0.32 of a share of AT&T Comcast for each share of AT&T they own,  based
         on calculations using September 30, 2002 share prices. AT&T shareowners
         will own an approximate  55% economic stake and have an approximate 61%
         voting  interest in the new  company.  The  spin-off of AT&T  Broadband
         could result in the  recognition  of a gain or loss for the  difference
         between  the fair value of the  Comcast  shares to be  received by AT&T
         shareholders in the merger and the net book value of AT&T Broadband.

              On July 10, 2002,  AT&T shareholders also approved  a one-for-five
         reverse stock split.  The purpose of the reverse stock split is to seek
         to adjust the  trading  price of AT&T  common  stock  upward  following
         completion of the various  transactions to effect AT&T's  restructuring
         plan.  AT&T  anticipates  that the reverse stock split will be affected
         immediately  after the  consummation  of the AT&T  Comcast  transaction
         described above.


3)       SIGNIFICANT ACCOUNTING POLICIES

         STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 142, "GOODWILL
         AND OTHER INTANGIBLE ASSETS"

              Effective  January 1, 2002,  AT&T adopted  SFAS No. 142, "Goodwill
         and Other  Intangible  Assets." SFAS No. 142 requires that goodwill and
         indefinite-lived  intangible assets no longer be amortized, but instead
         be tested for impairment at least annually. Intangible assets that have
         finite  useful lives will  continue to be  amortized  over their useful
         lives. In addition,  the amortization period for intangible assets with
         finite lives will no longer be limited to 40 years.  We have determined
         that our franchise  costs are  indefinite-lived  assets,  as defined in
         SFAS No. 142, and therefore are not subject to  amortization  beginning
         in 2002.  In  accordance  with SFAS No.  142,  goodwill  was tested for
         impairment by comparing the fair value of our reporting  units to their
         carrying values. As of January 1, 2002, the fair value of the reporting
         units'  goodwill  exceeded  their  carrying  value,  and  therefore  no
         impairment  loss was  recognized  upon adoption.  Franchise  costs were
         tested for  impairment  as of January 1, 2002,  by  comparing  the fair
         value to the carrying value (at the market level).  An impairment  loss
         of $0.9 billion,  net of taxes of $0.5 billion,  or $0.23 per basic and
         diluted share, was recorded  relating to our AT&T Broadband  segment in
         the first  quarter of 2002 and is  included  in  "Cumulative  effect of
         accounting changes" in the Consolidated  Statement of Operations.  (See
         note (7) for  discussion  of interim  testing of goodwill and franchise
         costs.)

              The  following  tables present the  impact of SFAS No. 142 on  net
         income  (loss) and earnings  (loss) per share had the standard  been in
         effect on January 1, 2001.
<TABLE>
<CAPTION>
                                                      AT&T Common Stock     AT&T Wireless     Liberty Media
                                                             Group               Group             Group

                                                     ----------- ---------- -------- ------- -------- ---------
         <S>                                         <C>         <C>        <C>      <C>     <C>      <C>


         For the Three Months Ended September 30,       2002        2001      2002    2001     2002     2001
         Net income (loss):
         Reported income (loss) from continuing
           operations before extraordinary gain      $    207    $(2,206)   $    -   $    -  $   -    $   111
         Dividend requirements of preferred stock           -       (235)        -        -      -          -
         Reported income (loss) from continuing
             operations available to common
             shareowners                                  207     (2,441)        -        -      -        111
         Add back amortization, net of tax:
           Goodwill *                                       -        191         -        -      -         50
           Equity method excess basis                       -         14         -        -      -         24
           Franchise costs                                  -        181         -        -      -          1
         Adjusted income (loss) from continuing
             operations before extraordinary gain
             available to common shareowners         $    207    $(2,055)   $    -   $    -   $  -    $   186
         Gain on disposition of discontinued
           operations                                       -     13,503         -        -      -          -
         Adjusted net income available to common
           shareowners                               $    207    $11,448    $    -   $    -   $  -    $   186

         Basic and diluted earnings (loss) per
           share:
         Reported basic and diluted earnings
           (loss) per share from continuing
           operations before extraordinary gain      $   0.05    $(0.69)    $    -   $    -  $        $  0.04

         Add back amortization, net of tax:
           Goodwill *                                       -      0.06          -        -      -       0.02
           Equity method excess basis                       -         -          -        -      -       0.01
           Franchise costs                                  -      0.05          -        -      -          -
         Adjusted basic and diluted earnings
           (loss) per share from continuing
           operations before extraordinary gain      $   0.05    $(0.58)    $    -   $    -  $   -    $  0.07
         Gain on disposition                                -      3.82          -        -      -          -
         Adjusted basic and diluted earnings
           per share                                 $   0.05    $ 3.24     $    -   $    -  $   -    $  0.07
<FN>
         * Goodwill amortization is net of the At Home Corp. (Excite@Home) minority interest impact on goodwill.
</FN>
</TABLE>


<TABLE>
<CAPTION>
                                                        AT&T Common Stock      AT&T Wireless    Liberty Media
                                                              Group                Group            Group

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

         For the Nine Months Ended September 30,         2002        2001       2002    2001    2002    2001
         Net (loss) income:                          ------------ ----------- -------- ------- ------ ---------
         <S>                                         <C>          <C>         <C>      <C>    <C>     <C>


         Reported (loss) from continuing
           operations before extraordinary gain
           and cumulative effect of accounting
           changes                                   $  (12,702)  $ (2,740)   $    -   $   -   $  -   $(2,711)
         Dividend requirements of preferred stock             -       (652)        -       -                -
         Premium on exchange of AT&T Wireless
           tracking stock                                     -        (80)        -       -      -         -
         Reported (loss) from continuing operations
           available to common shareowners              (12,702)    (3,472)        -       -      -    (2,711)
         Add back amortization, net of tax:
           Goodwill *                                         -        596         -       -      -       350
           Equity method excess basis                         -        111         -       -      -       346
           Franchise costs                                    -        572         -       -      -         4
         Adjusted (loss) from continuing
           operations before extraordinary gain
           and cumulative effect of accounting
           changes                                   $  (12,702)  $ (2,193)   $    -   $   -   $  -   $(2,011)
         Reported (loss) income from discontinued
           operations                                       (88)       115         -      35      -         -
         Add back discontinued operations
           amortization, net of tax                           -        152         -      36      -         -
         Extraordinary gain                                  48          -         -       -      -         -
         Gain on disposition of discontinued
           operations                                         -     13,503         -       -      -         -
         Cumulative effect of accounting changes           (856)       359         -       -      -       545

         Adjusted net (loss) income available to
           common shareowners                        $  (13,598)  $ 11,936    $    -   $  71   $  -   $(1,466)

         Basic and diluted (loss) earnings per
           share:
         Reported basic and diluted (loss) per
           share from continuing operations
           before extraordinary gain and
           cumulative effect of accounting
           changes                                   $    (3.45)  $  (0.94)   $    -   $   -   $      $ (1.05)
         Add back amortization, net of tax:
           Goodwill *                                         -       0.16         -       -      -      0.14
           Equity method excess basis                         -       0.03         -       -      -      0.13
           Franchise costs                                    -       0.16         -       -      -         -
         Adjusted basic and diluted (loss) per
            share from continuing operations
            before extraordinary gain and
            cumulative effect of accounting
            changes                                  $    (3.45)  $  (0.59)   $    -   $   -   $  -   $ (0.78)
         Reported (loss) earnings from
           discontinued operations                        (0.02)      0.03         -    0.08      -         -
         Add back discontinued operations
           amortization, net of tax                           -       0.04         -    0.08      -         -
         Extraordinary gain                                0.01          -         -       -      -         -
         Gain on disposition of discontinued
           operations                                         -       3.67         -       -      -         -
         Cumulative effect of accounting changes          (0.23)      0.10         -       -      -      0.21

         Adjusted basic and diluted (loss)
           earnings per share                        $    (3.69)  $   3.25    $    -   $0.16   $  -   $ (0.57)
<FN>
         * Goodwill amortization is net of the Excite@Home minority interest impact on goodwill.
</FN>
</TABLE>



              At  September  30,  2002,  goodwill  declined  $4.2  billion  from
         December 31, 2001, primarily as a result of impairment charges recorded
         related to AT&T  Broadband in the second  quarter of 2002 (see note 7).
         Goodwill at September 30, 2002, by reportable segment is as follows:

                                     Carrying Amount
         AT&T Broadband                $  15,208
         AT&T Business Services            5,239
         AT&T Consumer Services               70
         Total Goodwill                $  20,517


         Identifiable intangible assets at September 30, 2002, are comprised of:

                                                   Gross Carrying    Accumulated
                                                       Amount       Amortization
         Non-amortizable intangible assets:
           Franchise costs                         $   29,084       $     -
         Amortizable other purchased intangible
         assets:
           Customer lists and relationships             2,743           787
           Other                                          106            59
         Total identifiable intangible assets      $   31,933       $   846

              The   amortization   expense   associated  with  other   purchased
         intangible  assets for the three and nine months  ended  September  30,
         2002, was $74 and $210,  respectively.  Amortization  expense for other
         purchased  intangible assets is estimated to be approximately  $280 for
         the year ended December 31, 2002,  $270 for the year ended December 31,
         2003,  $250 for the year ended  December 31, 2004, and $240 for each of
         the years ended December 31, 2005 and 2006.

         EITF Issue 01-9, "Accounting for Consideration Given by a Vendor to a
         Customer"

              The Emerging Issues Task Force (EITF) reached a consensus on Issue
         01-9,  "Accounting for Consideration  Given by a Vendor to a Customer,"
         that cash incentives  given to customers  should be  characterized as a
         reduction of revenue when recognized in the income statement, unless an
         identifiable benefit is received in exchange.  Prior to this consensus,
         cash  incentives to acquire  customers were recorded as advertising and
         promotion expense within selling,  general and administrative expenses.
         These cash  incentives  are now  recorded as a reduction of revenue and
         prior periods have been reclassified to conform with this presentation.
         Total AT&T revenue and AT&T Consumer  Services revenue for the quarters
         ended March 31, 2002,  December 31, 2001,  September 30, 2001, June 30,
         2001,  and March 31, 2001,  was reduced by $39, $45, $52, $61, and $78,
         respectively. Net income was not affected by this reclassification.

         SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
         Assets"

              On January 1, 2002, AT&T adopted SFAS No. 144, "Accounting for the
         Impairment or Disposal of Long-Lived Assets," which supersedes SFAS No.
         121,  "Accounting  for the  Impairment  of  Long-Lived  Assets  and for
         Long-Lived  Assets to Be  Disposed  Of." SFAS No.  144  applies  to all
         long-lived assets, including discontinued operations,  and consequently
         amends Accounting Principles Board (APB) Opinion No. 30, "Reporting the
         Results of Operations-Reporting the Effects of Disposal of a Segment of
         a  Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring
         Events and Transactions."  SFAS No. 144 also amends Accounting Research
         Bulletin No. 51, "Consolidated  Financial  Statements" to eliminate the
         exception to consolidation for a subsidiary for which control is likely
         to be  temporary.  The  adoption  had no impact on  AT&T's  results  of
         operations, financial position or cash flows.

              For a detailed discussion of significant accounting polices, refer
         to AT&T's Form 10-K/A for the year ended December 31, 2001.


4)       SUMMARY OF RECOGNITION OF PREVIOUSLY UNREALIZED LOSSES (GAINS) IN OTHER
         COMPREHENSIVE INCOME

              AT&T  has investment  holdings classified  as "available-for-sale"
         under the scope of SFAS No. 115, "Accounting for Certain Investments in
         Debt and Equity Securities." These securities are carried at fair value
         with any  unrealized  gains or losses,  net of income  taxes,  included
         within  "Accumulated  other  comprehensive  (loss)" as a  component  of
         shareowners' equity. Under SFAS No. 115, when the  "available-for-sale"
         securities  are sold or when we  believe  a decline  in the  investment
         value is other  than  temporary,  the  previously  unrealized  gains or
         losses are recognized in earnings in "Other income  (expense),  net" in
         the Consolidated Statement of Operations.  If these securities are part
         of a hedging  relationship in accordance with SFAS No. 133, "Accounting
         for Derivative  Instruments and Hedging Activities," to the extent that
         there are  offsetting  amounts  generated  by the related  derivatives,
         these  amounts  are  also  recognized  in  earnings  in  "Other  income
         (expense),  net." In  addition,  upon the  adoption  of SFAS No. 133 in
         January  2001,  we  reclassified   certain   securities  to  "trading,"
         resulting  in the  recognition  in  earnings of  previously  unrealized
         losses.  Following  is a summary of the  previously  unrealized  losses
         (gains)  that  were  recognized  in  the  Consolidated   Statements  of
         Operations for the nine months ended September 30, 2002 and 2001.
<TABLE>
<CAPTION>
                                        Recognition of Previously Unrealized Losses (Gains)

         For the Nine Months Ended September 30,                                        2002                   2001
                                                                               ---------------------- ----------------------
         <S>                                                                    <C>       <C>          <C>       <C>
                                                                                Pretax    After-tax    Pretax    After-tax
         AT&T Group:
          Included in other income (expense), net:
            Other-than-temporary investment impairments                         $ 1,398   $  863       $     -   $    -
            Reclassification of securities to "trading"
              in conjunction with the adoption of SFAS No. 133                        -        -         1,154      713
            Sales of various securities                                               -        -           159       98

         Liberty Media Group:
          Included in equity earnings (losses) from Liberty Media Group:
            Sales of various securities                                               -        -           173      105
          Included in cumulative effect of accounting change                          -        -          (144)     (87)

         Total recognition of previously unrealized losses                      $ 1,398   $  863       $ 1,342   $  829
</TABLE>


5)       DISCONTINUED OPERATIONS

              Discontinued  operations  for  the  nine  months  ended  September
         30,  2002,  reflects an  estimated  loss on the  litigation  settlement
         associated  with the business of Lucent  Technologies  Inc.,  which was
         spun-off  from  AT&T  in  1996.  Sparks,  et al.  v.  AT&T  and  Lucent
         Technologies  Inc. et al., is 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
         recorded its proportionate  share of the settlement and estimated legal
         costs in the second  quarter of 2002,  which  totaled  $132 pretax ($88
         after-tax,  or $0.02 per share). (See note 13 for a complete discussion
         of this matter.)

              Pursuant  to   APB  Opinion  No. 30,  the  consolidated  financial
         statements of AT&T reflect the disposition of AT&T Wireless,  which was
         split-off  from  AT&T on  July 9,  2001,  as  discontinued  operations.
         Accordingly,  the revenue,  costs and expenses,  and cash flows of AT&T
         Wireless  through  June 30,  2001,  the  effective  split-off  date for
         accounting purposes, have been excluded from the respective captions in
         the  2001  Consolidated   Statements  of  Operations  and  Consolidated
         Statements of Cash Flows and have been reported as "(Loss)  income from
         discontinued  operations," net of applicable  income taxes; and as "Net
         cash provided by discontinued  operations."  Revenue from  discontinued
         operations  was $6.6  billion for the nine months ended  September  30,
         2001.  Interest  expense  of $0.2  billion  for the nine  months  ended
         September 30, 2001, was allocated to discontinued  operations  based on
         the debt of AT&T that was attributable to AT&T Wireless.

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


6)       CONCERT AND AT&T CANADA

              On  April  1,  2002,  Concert,  our  joint  venture  with  British
         Telecommunications  plc (BT), was officially  unwound and 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.

              At  September  30,  2002,  AT&T  had  an  approximate  31%  equity
         ownership in AT&T Canada. On June 25, 2002, under the terms of the 1999
         merger  agreement,  AT&T triggered the purchase of the remaining equity
         of AT&T  Canada for the  Back-end  Price,  which is the  greater of the
         floor price and the fair market value.  The floor price  accreted at 4%
         each  quarter,  commencing  on June 30,  2000.  In the first and second
         quarters  of 2002,  and the third and  fourth  quarters  of 2001,  AT&T
         recorded charges reflecting the difference between the underlying value
         of the AT&T Canada  shares and the price AT&T has  committed to pay for
         them, including the 4% accretion of the floor price. In the nine months
         ended  September  30,  2002,  and  September  30, 2001,  AT&T  recorded
         after-tax  charges  of $0.3  billion  ($0.5  billion  pretax)  and $1.5
         billion  ($2.4  billion  pretax),  respectively,  within "Net  (losses)
         related to other equity  investments" in the Consolidated  Statement of
         Operations.  At December  31, 2001,  the  liability of $3.0 billion was
         included in "Other long-term  liabilities and deferred  credits" in the
         Consolidated  Balance  Sheet.  At September 30, 2002,  the liability of
         $3.5 billion was reflected as "AT&T Canada obligation."

              On October 8, 2002, Tricap Investments Corporation, a wholly owned
         subsidiary of Brascan Financial  Corporation,  purchased an approximate
         63% equity interest in AT&T Canada and CIBC Capital  Partners  acquired
         an  approximate  6%  equity  interest  in AT&T  Canada.  AT&T  paid the
         purchase  price for the AT&T Canada shares on behalf of Tricap and CIBC
         Capital  Partners.  AT&T funded the  purchase  price of the AT&T Canada
         shares  partly with the net  proceeds  of  approximately  $2.5  billion
         received  from the sale of 230 million  shares of AT&T common  stock on
         June 11, 2002.  The remaining  portion of the  obligation  was financed
         through  short-term  sources.  Tricap and CIBC  Partners made a nominal
         payment to AT&T upon completion of the  transaction.  AT&T continues to
         hold a 31% ownership interest in AT&T Canada.


7)       IMPAIRMENT CHARGES

         Goodwill and Franchise Impairment Charges

              SFAS No. 142  requires that  goodwill  and  intangible  assets not
         subject to  amortization  be tested for  impairment  annually,  or more
         frequently  if events or changes  in  circumstances  indicate  that the
         asset  might be  impaired.  The  impairment  test  shall  consist  of a
         comparison of the fair value of the intangible  asset/goodwill with its
         carrying  amount.  AT&T has determined that its annual testing date for
         these assets will be in the fourth quarter of each year.

              In the second quarter of 2002, we noted significant changes in the
         general business  climate as evidenced by the severe downward  movement
         in the U.S.  stock market  (including the decline in values of publicly
         traded cable  industry  stocks).  At June 30,  2002,  five of our cable
         competitors as a group  experienced an average  decline in total market
         capitalization  of over  20%  since  January  1,  2002.  We  have  also
         witnessed corporate bankruptcies. We believe these factors coupled with
         the pending merger of AT&T Broadband and Comcast (which was approved by
         both  companies'  shareholders  on July 10,  2002)  created a  "trigger
         event" for our AT&T Broadband  segment,  which necessitated the testing
         of goodwill and  franchise  costs for  impairment  as of the end of the
         second quarter.

              We assessed our impairment on  the same principles employed during
         the  initial  adoption of SFAS No. 142.  Such  testing  resulted in the
         recognition of a $12.3 billion  franchise cost impairment  charge and a
         $4.2 billion goodwill  impairment charge  (aggregating to $11.8 billion
         after-tax)  recorded in "Goodwill and franchise  impairment charges" in
         the Consolidated Statement of Operations.


         Investment Impairment Charges

              In accordance with SFAS No. 115 and APB Opinion No. 18 "The Equity
         Method of Accounting for Investments in Common Stock," we evaluated our
         portfolio of investments  for potential  impairments.  SFAS No. 115 and
         APB Opinion No. 18 both require the recognition in earnings of declines
         in value of cost and equity  method  securities  which are "other  than
         temporary."

              Given the significant decline in stock prices,  the length of time
         these  investments had been below market and industry  specific issues,
         we believed that certain  investments  would not recover our cost basis
         in the  foreseeable  future.  Accordingly,  we believed the declines in
         value were "other than temporary" and, as a result, AT&T recorded total
         investment  impairment  charges of $2.4 billion  pretax  ($1.5  billion
         after-tax)  in the  first  nine  months  of 2002.  The  following  is a
         breakout  of the  investment  impairment  charges  recorded  by type of
         investment.


         Cost Method Investments

              In  the  first  nine  months  of  2002,   we  recorded  investment
         impairment  charges on cost method  investments  of $1.4 billion pretax
         ($0.9 billion after-tax),  within "Other income (expense),  net" in the
         Consolidated   Statement  of  Operations.   These  charges  related  to
         securities  that  were  classified  as  "available-for-sale"  and  were
         marked-to-market through "Other comprehensive income" as a component of
         shareowners' equity. The majority of these charges were recorded in the
         second   quarter  and  primarily   consisted  of   impairments  on  our
         investments in Cablevision  Systems  Corporation  ($0.6 billion pretax,
         $0.4 billion  after-tax),  Comcast ($0.3 billion  pretax,  $0.2 billion
         after-tax) and Microsoft Corporation ($0.2 billion pretax, $0.1 billion
         after-tax).

              Our investment in  Cablevision stock is monetized by debt which is
         indexed  to the  value of  Cablevision  shares.  The debt  contains  an
         embedded  derivative which is designated as a cash-flow hedge under the
         provisions  of SFAS  No.  133 and is  marked-to-market  through  "Other
         comprehensive    income."    At   the    time   we    recognized    the
         other-than-temporary  decline in the value of the Cablevision  stock as
         an  expense,  as  permitted  by SFAS No. 133,  we also  recognized,  in
         earnings,  the  unrealized  gain on the  embedded  derivative  that was
         previously recorded in "Other  comprehensive  income," resulting in the
         $0.6 billion pretax impairment discussed above.

         Equity Method Investments

              In  the   nine  months  ended  September  30,  2002,  we  recorded
         investment  impairment  charges on equity  method  investments  of $1.0
         billion pretax ($0.6 billion after-tax) within "Net (losses) related to
         other equity investments" in the Consolidated  Statement of Operations.
         These  charges  consisted  of  impairments  of our cable  partnerships,
         primarily Texas Cable Partners,  LP ($0.4 billion pretax,  $0.2 billion
         after-tax),  Insight  Midwest LP ($0.2  billion  pretax,  $0.1  billion
         after-tax),  Kansas City Cable  Partners  ($0.2  billion  pretax,  $0.1
         billion after-tax),  Parnassos Communications,  LP ($0.1 billion pretax
         and  after-tax) and  Century-TCI  California  Communications,  LP ($0.1
         billion  pretax  and  after-tax).  Parnassos  Communications,   LP  and
         Century-TCI   California   Communications,   LP   represent   the  only
         partnership   investments   we  have   with   Adelphia   Communications
         Corporation.   Adelphia  Communications  Corporation  and  subsidiaries
         (including  Parnassos  Communications,  LP and  Century-TCI  California
         Communications, LP) filed for Chapter 11 bankruptcy on June 25, 2002.


8)       RESTRUCTURE OF TIME WARNER ENTERTAINMENT COMPANY L.P.

              AT&T  currently   holds  a  27.64%   interest   in   Time   Warner
         Entertainment  L.P.  (TWE)  through  its  AT&T  Broadband  segment.  In
         February 2001,  AT&T requested that TWE begin the process of converting
         the limited  partnership  into a  corporation  with  registered  equity
         securities.  On August  21,  2002,  AT&T and  Comcast  entered  into an
         agreement  with AOL  Time  Warner  for the  restructuring  of TWE.  The
         restructuring  agreement  is intended to provide for a more orderly and
         timely  disposition  of  AT&T's  entire  stake  in TWE  than  would  be
         available  under  the  registration   rights   provisions  of  the  TWE
         partnership  agreement.  Under the restructuring  agreement,  AT&T will
         receive $2.1 billion in cash,  $1.5 billion in common stock of AOL Time
         Warner  Inc.  (valued at the time of the closing and subject to certain
         limitations)  and an  effective  21% passive  equity  interest in a new
         cable company, to be named Time Warner Cable, which will consist of all
         of AOL Time Warner's cable properties,  including those already in TWE.
         Upon  consummation  of the merger of AT&T Broadband with Comcast,  AT&T
         Comcast  will  assume  all  of  AT&T's  interest  in  TWE  and  in  the
         restructuring  agreement,  and AT&T  Broadband  will have  registration
         rights enabling it to dispose of its shares in Time Warner Cable and in
         AOL Time  Warner.  The TWE  restructuring  is  expected to close in the
         first half of 2003.

              In connection  with the  transactions,  AT&T Broadband and Comcast
         have also reached a three-year  non-exclusive  agreement  with AOL Time
         Warner  under  which AOL  High-Speed  Broadband  service  would be made
         available on certain of AT&T's, or AT&T Comcast's, cable systems, which
         pass approximately 10 million homes.

              The TWE restructuring is subject to receipt of  certain regulatory
         approvals  and other closing  conditions,  certain of which are outside
         the control of AT&T and  Comcast.  There can be no  assurance  that the
         transaction  contemplated  by the TWE  restructuring  agreement will be
         consummated.  If the restructuring agreement is terminated, the parties
         will  return  to  the   registration   rights  process  under  the  TWE
         partnership agreement.

              If the merger of Comcast and AT&T Broadband is terminated, the TWE
         restructuring  agreement will remain in place between AT&T and AOL Time
         Warner,  although certain changes would be made to the Internet service
         provider carriage agreement.


9)       NET RESTRUCTURING AND OTHER CHARGES

              In the third quarter of 2002,  AT&T recorded a net reversal of $26
         of  net   restructuring   and  other  charges.   In  light  of  current
         unprecedented industry conditions,  including the bankruptcy of several
         significant  competitors,  AT&T's  management  reevaluated the business
         restructuring  plan  established  in the  fourth  quarter  of 2001  and
         determined  that the plan needed to be modified  primarily  for certain
         areas of AT&T  Business  Services,  including  network  services.  As a
         result,  approximately $137 of net restructuring and other charges were
         reversed  which  primarily  consisted of $110 for  employee  separation
         costs.  In addition,  the  reversals  included $12 of sales  obligation
         liabilities associated with the government-mandated disposition of AT&T
         Communications (U.K.) Ltd. that were never incurred.  However, in order
         to continue to properly  manage our cost structure,  AT&T's  management
         developed  a new exit plan in other  areas of AT&T  Business  Services,
         including network services, totaling $111. This plan primarily consists
         of $91 for employee  separation  costs related to  approximately  1,400
         employees (slightly more than half of which are management) and $16 for
         facility  closings related to buildings  becoming vacant as a result of
         previously announced restructuring plans.

              Net  restructuring  and  other charges for  the nine  months ended
         September  30,  2002,  totaled  $30 which  primarily  represents  costs
         associated with AT&T  Broadband's  efforts to reorganize and streamline
         certain  centralized  and  field  functions,  partially  offset  by the
         reversal of reserves primarily for AT&T Business Services' initiatives.

              The $30  is comprised  of new exit  plans totaling  $207 primarily
         consisting of $133 associated with employee separation costs and $66 in
         connection with facility closings. These charges were largely offset by
         total  reversals  of $177 which  were  primarily  comprised  of $127 of
         employee  separation  costs and $26 related to excess vintage  facility
         closing restructuring reserves. In addition, the reversals included $12
         from the third quarter  relating to sales  obligations  associated with
         AT&T  Communications  (U.K.) Ltd. The  reversals  were due primarily to
         management's  reevaluation of the restructuring plan established in the
         fourth quarter of 2001 for certain areas of AT&T Business Services,  as
         discussed  above, as well as the  redeployment of certain  employees to
         different functions within the company.

              Approximately  2,300  employees will  be separated  in conjunction
         with the exit  plans  implemented  in 2002  (about 17% of which will be
         leaving  voluntarily),  with  more  than  60%  of the  total  employees
         impacted being management employees. Approximately 34% of the employees
         affected by these exit plans have left their  positions as of September
         30, 2002, with the remaining reductions expected to be completed by the
         end of the first quarter of 2003. Termination benefits of $38 were paid
         to employees  through the third  quarter of 2002 relative to these exit
         plans.

              The  following  table  displays  the activity and  balances of the
         restructuring  reserve  account from January 1, 2002,  to September 30,
         2002:
<TABLE>
<CAPTION>
                                                                             Type of Cost
                                                        Employee          Facility
                                                       Separations        Closings        Other          Total
         <S>                                              <C>               <C>            <C>          <C>
         Balance at January 1, 2002                       $ 508             $ 316          $  19        $  843
         Additions                                          133                66              4           203
         Deductions                                        (423)              (84)           (18)         (525)
         Balance at September 30, 2002                    $ 218             $ 298          $   5        $  521
</TABLE>

              Deductions  reflect  total  cash  payments of  $375, of which $306
         represents cash termination benefits funded primarily through cash from
         operations.  Deductions  also reflect  reversals of $160.  In addition,
         deductions  include  non-cash  activity  of   $10  primarily due to the
         issuance of common stock to satisfy  restricted stock  obligations that
         vested upon  separation,  primarily  to  executives.  Offsetting  these
         deductions is a $20 transfer into the restructuring  reserve related to
         the third  quarter  2002  reversal  for  separation  payments  that was
         originally anticipated to be funded through AT&T's pension assets.

              During  the third quarter  of 2001, $399 of  net restructuring and
         other charges were recorded by Excite@Home,  primarily asset impairment
         charges due to continued  weakness in the on-line  media market and the
         bankruptcy filing of Excite@Home.  These charges included the write-off
         of goodwill and other intangible assets, warrants granted in connection
         with distributing the @Home service and fixed assets.

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

              The severance costs, for  approximately 7,700 employees, primarily
         resulted  from  synergies  created  by the  MediaOne  merger as well as
         continued  cost  reduction  efforts  by  Excite@Home.   These  business
         restructuring plans were substantially completed by March 31, 2002.



10)      EARNINGS PER COMMON SHARE AND POTENTIAL COMMON SHARE

              Net  income (loss) attributable  to the different  classes of AT&T
         common stock are as follows:
<TABLE>
<CAPTION>
                                                           AT&T Common Stock        AT&T Wireless        Liberty Media
                                                                 Group                  Group                 Group

         For the Three Months Ended September 30,          2002         2001       2002      2001       2002        2001
         <S>                                           <C>          <C>            <C>    <C>         <C>        <C>

         Income (loss) from continuing operations      $    207     $ (2,206)      $   -  $    -      $   -      $   111
         Dividend requirements of preferred stock             -         (235)          -       -          -            -
         Income (loss) from continuing operations
           attributable to common shareowners               207       (2,441)          -       -          -          111
         Gain on disposition of discontinued
           operations                                         -       13,503           -       -          -            -
         Net income (loss) attributable to common
           shareowners                                 $    207     $ 11,062       $   -  $    -      $   -      $   111


         For the Nine Months Ended September 30,           2002         2001       2002      2001       2002        2001
         (Loss) from continuing operations             $(12,702)    $ (2,740)      $   -  $    -      $   -      $(2,711)
         Dividend requirements of preferred stock             -         (652)          -       -          -            -
         Premium on exchange of AT&T Wireless
           tracking stock                                     -          (80)          -       -          -            -
         (Loss) from continuing operations
           attributable to common shareowners           (12,702)      (3,472)          -       -          -       (2,711)
         (Loss) income from discontinued
           operations                                       (88)         115           -      35          -            -
         Gain on disposition of discontinued
           operations                                                 13,503
         Extraordinary gain                                  48            -           -       -          -            -
         Cumulative effect of accounting changes           (856)         359           -       -          -          545
         Net (loss) income attributable to common
           shareowners                                 $(13,598)     $10,505       $   -  $   35      $   -      $(2,166)
</TABLE>


              Basic earnings (loss) per share for AT&T Common Stock Group was
         computed by dividing  AT&T Common  Stock Group  earnings  (loss) by the
         weighted-average  number of shares  outstanding  of 3,848  million  and
         3,534 million,  for the three months ended September 30, 2002 and 2001,
         respectively,  and 3,681  million and 3,677 million for the nine months
         ended September 30, 2002 and 2001, respectively.

              Diluted  earnings  per  share  for  AT&T  Common  Stock Group  was
         computed  by  dividing   AT&T  Common  Stock  Group   earnings  by  the
         weighted-average   number  of  shares  and  dilutive  potential  shares
         outstanding  of 3,850 million for the three months ended  September 30,
         2002. At September 30, 2002,  the 2 million  share  difference  between
         basic and  diluted  shares is  attributable  to the shares  potentially
         issuable for stock options.  Since AT&T recorded a loss from continuing
         operations for the three months ended  September 30, 2001, and the nine
         months ended September 30, 2002 and 2001, the diluted loss per share is
         the  same  as  basic  loss  per  share,  as  any  potentially  dilutive
         securities would be antidilutive to continuing operations.

              Basic and diluted earnings per share from  discontinued operations
         for  AT&T  Wireless  Group  for the  year-to-date  period  through  its
         split-off date were computed by dividing  income  attributable  to AT&T
         Wireless Group by the weighted-average  number of shares outstanding of
         AT&T Wireless  Group of 438 million.  AT&T Wireless was split-off  from
         AT&T in July 2001.

              Basic and diluted loss per share for LMG  was computed by dividing
         the loss attributable to LMG by the  weighted-average  number of shares
         outstanding  of LMG of 2,588 million for the third quarter of 2001, and
         2,582 million for the year-to-date  period in 2001 though its split-off
         date. LMG was split-off from AT&T in August 2001.


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 8.365  shares of AT&T  common  stock.  All
         outstanding shares (approximately 6.2 million) of TCI Pacific preferred
         stock  with a  carrying  value of $2.1  billion at  December  31,  2001
         (included in Minority  Interest  in the  Consolidated  Balance  Sheet),
         were either exchanged or redeemed for approximately 51.8 million shares
         of  AT&T  common   stock.   No  gain  or  loss  was   recorded  on  the
         exchange/redemption of the TCI Pacific preferred stock.

              In  the nine  months ended  September 30, 2002,  AT&T  issued 14.7
         million  shares of AT&T  common  stock to  certain  current  and former
         senior managers in settlement of their deferred compensation  accounts.
         Pursuant to AT&T's  deferred  compensation  plan,  senior  managers may
         defer short- and long-term incentive  compensation awards. The issuance
         of these shares resulted in an increase to total shareowners' equity of
         $0.2 billion.

              In  September 2002, AT&T offered  to exchange certain  outstanding
         employee  AT&T stock  options for  restricted  stock units or cash at a
         discount to the Black-Scholes  option value. Each restricted stock unit
         represents  a right to  receive a share of  AT&T's  common  stock  upon
         vesting.   On  October  29,  2002,  the  offer  closed,   resulting  in
         approximately  75  million  options   cancelled  and  the  issuance  of
         approximately  13 million  restricted  stock units and cash payments of
         approximately $4.

              In June of 2002,  AT&T completed a  public equity  offering of 230
         million  shares of AT&T common stock at a price of $11.25 per share 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 6).

              On  January  22, 2001,  NTT  DoCoMo  invested  approximately  $9.8
         billion for 812,512 shares of a new class of AT&T preferred  stock with
         a par value of $1 per share.  On July 9, 2001, in conjunction  with the
         split-off of AT&T Wireless Group, these preferred shares were converted
         into AT&T  Wireless  common  stock.  In the three and nine months ended
         September 30, 2001, we recorded dividend requirements on this preferred
         stock of $0.2 billion and $0.7  billion,  respectively.  The  preferred
         stock  dividend  represented  interest  in  connection  with the DoCoMo
         preferred  stock  as well as  accretion  of the  beneficial  conversion
         feature associated with this preferred stock. The beneficial conversion
         feature  was  recorded  upon the  issuance of the  preferred  stock and
         represented the excess of the fair value of the preferred shares issued
         over the proceeds received.


12)      DEBT OBLIGATIONS

              During  2001,  AT&T   initiated  a  364-day   accounts  receivable
         securitization  program  providing  for up to $2.7  billion of funding,
         limited by monthly  eligible  receivables.  Under the program,  certain
         AT&T Business Services' and AT&T Consumer Services' accounts receivable
         can be sold on a discounted,  revolving  basis,  to a special  purpose,
         wholly-owned  subsidiary  of  AT&T,  which  assigns  interests  in such
         receivables  to  unrelated  third-party  financing  entities.  AT&T has
         renewed  both its AT&T  Business  Services and AT&T  Consumer  Services
         customer accounts receivable  securitization  facilities.  The terms of
         these  facilities  have been extended to June (AT&T Business  Services)
         and July (AT&T Consumer  Services) of 2003.  Together the programs,  as
         renewed, provide up to $2.0 billion of available financing,  limited by
         the eligible receivables balance, which varies from month to month. The
         securitization  proceeds  were  recorded as a borrowing and included in
         "Debt maturing within one year" in the Consolidated  Balance Sheets. At
         September 30, 2002 and December 31, 2001, such short-term notes totaled
         $1.5 billion and $2.3 billion, respectively.

              In the first nine months of 2002,  AT&T called $1.5 billion of TCI
         Communications Financing I, II and IV, MediaOne Financing Trust A and B
         and MediaOne Finance II preferred securities for early redemption. This
         redemption resulted in a gain on early  extinguishment of debt recorded
         as an  extraordinary  gain of $48 net of taxes ($78  pretax).  The gain
         represents  the  difference  between the carrying value of the debt and
         the cash paid to extinguish the debt.

              In  June  2002,  AT&T  registered  $7.0  billion  of  the  private
         placement  notes sold in  November  2001 and  commenced a tender of the
         private notes for registered  notes. The note exchange was completed on
         August 2, 2002. The terms of the registered  notes are identical to the
         private notes.

              As  of September 30, 2002, AT&T had  approximately $0.8 billion in
         private  debt  outstanding  that  was  partially   collateralized  with
         restricted cash of approximately  $0.4 billion.  The restricted cash is
         recorded in "Other assets" in the Consolidated Balance Sheet.

              On  August  12, 2002,  in  connection  with  the  proposed  merger
         between AT&T Broadband and Comcast, AT&T filed a preliminary prospectus
         contemplating  a  potential  offer to exchange  an  aggregate  of $11.8
         billion of AT&T's existing debt securities. The exchange offer involves
         two types of  transactions.  The first  involves an exchange of certain
         series  of AT&T  notes  for new  notes  that  would  ultimately  become
         obligations  of AT&T  Broadband  Corp., a newly formed company to which
         AT&T will  spin-off its AT&T  Broadband  unit prior to  completing  the
         merger.  AT&T Comcast and certain of its  subsidiaries  would guarantee
         these obligations upon completion of the merger. The second involves an
         exchange of other  series of AT&T notes for new notes that would remain
         obligations  of AT&T.  The new notes will have revised  maturity  dates
         and/or interest rates.

              Neither AT&T,  AT&T Broadband, nor any other entity  would receive
         any proceeds from the issuance of the new notes in the exchange  offer.
         The new notes would  represent  a new  offering  with  respect to those
         notes that  ultimately  become  obligations of AT&T Broadband and would
         reduce the amount that AT&T  Broadband  would  otherwise be required to
         pay to AT&T upon  completion of the merger with Comcast.  The new notes
         would  represent a refinancing  with respect to those notes that remain
         obligations of AT&T after the merger.

              On October 4, 2002, AT&T and Comcast commenced the exchange offer.
         On November 8, 2002, the exchange offer was closed with $3.5 billion of
         AT&T debt  exchanged for AT&T  Broadband  debt and $4.7 billion of debt
         exchanged for new AT&T debt.

              At  December 31, 2001,  AT&T had  exchangeable  notes outstanding,
         which were indexed to 9.8 million  shares of Rainbow Media Group common
         stock. On August 20, 2002,  Cablevision Systems  Corporation  exchanged
         each share of Rainbow  Media Group common  stock for 1.19093  shares of
         Cablevision  NY Group  (Cablevision)  common stock.  As a result of the
         exchange,  AT&T's exchangeable notes outstanding at September 30, 2002,
         are now indexed to 11.7 million  shares of  Cablevision  common  stock,
         with a put price of $18.89  per  share and a call  price of $23.05  per
         share. All other provisions of the exchangeable notes remain the same.


13)      COMMITMENTS AND CONTINGENCIES

              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.  However,  management  makes its best  estimate of the
         outcome of these matters based on all available  facts and records loss
         contingencies as appropriate.  Consequently, we are unable to ascertain
         the ultimate aggregate amount of monetary liability or financial impact
         with respect to these  matters at September  30,  2002.  These  matters
         could affect the operating  results of any one quarter when resolved in
         future periods.  However, we believe that after final disposition,  any
         monetary  liability or financial  impact to us beyond that provided for
         at September 30, 2002, would not be material to our annual consolidated
         financial statements.

              Sprint PCS, a wireless  carrier,  sued AT&T for access charges for
         AT&T long  distance  calls  terminated  on Sprint PCS'  network and for
         toll-free  calls that Sprint PCS  customers  originated  and which were
         terminated on AT&T's  network.  AT&T refused to pay Sprint PCS based on
         longstanding  industry  practice  that wireless  carrier-long  distance
         carrier  interconnection  is on a bill and keep basis and that wireless
         carriers  charged their  customers for calls they received.  On July 3,
         2002,  the FCC ruled that wireless  carriers such as Sprint PCS are not
         prohibited  from  charging AT&T access  charges,  but that AT&T was not
         required to pay such charges absent a contractual  obligation to do so.
         The FCC further held that the question whether the parties entered into
         a contract  concerning an access payment  obligation is not a matter of
         federal communications law but rather should be determined by the court
         that had  referred the issue to the FCC.  Because  there was no express
         contract  between AT&T and Sprint PCS, the court will need to determine
         whether an  implied-in-fact  contract  can be  inferred in light of the
         parties' conduct and their tacit understanding. Petitions of Sprint PCS
         and AT&T Corp. for Declaratory Ruling Regarding CMRS Access Charges, WT
         Docket No. 01-316,  Declaratory  Ruling, FCC 02-203, rel. July 3, 2002.
         The FCC  remanded  the matter to the  federal  district  court,  Sprint
         Spectrum,   L.P.  v.  AT&T  Communications,   Inc.,  Civil  Action  No.
         00-0973-CV-W-5  (W.D. Mo.). AT&T has petitioned for review of the FCC's
         ruling  in the U.S.  Court of  Appeals  for the  District  of  Columbia
         Circuit, AT&T Corp. v. FCC et al., No. 02-1240 (D.C. Cir. filed Aug. 1,
         2002),  and has  requested a  continuance  of the stay from the federal
         district  court  in  Missouri  pending  appellate  review.  An  adverse
         decision in the present  litigation  may result in additional  wireless
         carriers seeking similar compensation from AT&T. AT&T believes the case
         is  without  merit and  intends  to defend it  vigorously,  but  cannot
         predict the outcome of any such proceedings.

              Sparks, et al. v. AT&T  and  Lucent Technologies Inc. et al., is a
         class action  lawsuit  filed in 1996 in Illinois  state court under the
         name of Crain v. Lucent  Technologies.  The complaint sought damages on
         behalf of present and former  customers  based on a claim that the AT&T
         Consumer  Products  business  (which became part of Lucent in 1996) and
         Lucent had  defrauded  and  misled  customers  who  leased  telephones,
         resulting in payments in excess of the cost to purchase the telephones.
         AT&T and Lucent have denied any wrongdoing,  but settled this matter to
         avoid the uncertainty and expense of protracted  litigation.  The court
         has given final approval to the settlement.  Pursuant to the separation
         and distribution  agreement  between Lucent and AT&T, AT&T recorded its
         proportionate  share of the settlement and estimated legal costs in the
         second  quarter of 2002,  which  totaled  $132 pretax ($88  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.

              In light of recent  publicly  reported  developments,  AT&T is
         examining the impact to it if various telecommunications  companies and
         vendors are unable to satisfy their agreement with AT&T,  including the
         separation agreements between AT&T and Lucent Technologies,  Inc. While
         AT&T has not completed  its review and can not quantify the impact,  if
         any, it is possible that under certain circumstances any such inability
         by telecommunications companies and vendors, including the inability of
         Lucent  to meet its  obligations  under  such  agreements,  could  have
         negative  financial  and  operational  impacts  on AT&T,  which  may be
         material.

              On March 13, 2002, AT&T Broadband  informed CSG Systems, Inc. that
         it  was  considering  the  initiation  of an  arbitration  against  CSG
         relating to a Master  Subscriber  Management  System Agreement that the
         two companies  entered into in 1997.  Pursuant to the Master Agreement,
         CSG provides  billing support to AT&T Broadband.  On May 10, 2002, AT&T
         Broadband  filed a  demand  for  arbitration  against  CSG  before  the
         American  Arbitration  Association.  On May 31, 2002, CSG answered AT&T
         Broadband's  arbitration demand and asserted various counterclaims.  On
         June 21,  2002,  CSG filed a lawsuit  against  Comcast  Corporation  in
         federal court located in Denver,  Colorado  asserting claims related to
         the Master Agreement and the pending  arbitration,  which complaint was
         withdrawn without prejudice on November 1, 2002. In the event that this
         process  results  in the  termination  of the  Master  Agreement,  AT&T
         Broadband  may  incur   significant   costs  in  connection   with  its
         replacement  of  these  customer  care  and  billing  services  and may
         experience temporary disruptions to its operations.


14)      RELATED PARTY TRANSACTIONS

              AT&T had various related party transactions with Concert until the
         joint venture was officially unwound on April 1, 2002.

              Included in "Revenue" in the Consolidated Statements of Operations
         for the nine months ended September 30, 2002, was $0.3 billion, and for
         the three and nine months ended  September  30, 2001,  was $0.3 billion
         and $0.8 billion, respectively, for services provided to Concert.

              Included   in   "Access  and  other  connection  expense"  in  the
         Consolidated   Statements  of  Operations  were  charges  from  Concert
         representing  costs  incurred  on our behalf to  connect  calls made to
         foreign countries (international settlements) and costs paid by AT&T to
         Concert for distributing  Concert  products.  Such charges totaled $0.5
         billion for the nine months ended  September 30, 2002, and $0.4 billion
         and $1.5  billion,  respectively  for the three and nine  months  ended
         September 30, 2001.

              Included  in  "Accounts receivable"  in  the Consolidated  Balance
         Sheet  at   December   31,   2001,   was  $0.4   billion   related   to
         telecommunications  transactions  with  Concert.  Included in "Accounts
         payable" in the  Consolidated  Balance Sheet at December 31, 2001,  was
         $0.2 billion related to transactions with Concert.

              Included  in  "Other  receivables"  in  the  Consolidated  Balance
         Sheet at December 31, 2001, was $0.8 billion related to  administrative
         transactions performed on behalf of Concert. Included in "Other current
         liabilities"  in the  Consolidated  Balance Sheet at December 31, 2001,
         was $0.9 billion related to  administrative  transactions  performed by
         Concert on our behalf.

              During 2001,  we had various related party transactions  with LMG.
         Included  in "Costs  of  services  and  products"  in the  Consolidated
         Statement of Operations were  programming  expenses related to services
         from  LMG  while  owned by AT&T of $27 and  $199  for the  quarter  and
         year-to-date  periods  ended July 31, 2001,  the deemed  effective  LMG
         split-off date for accounting purposes.


15)      SEGMENT REPORTING

              AT&T's  results are  segmented  according to the way we manage our
         business:  AT&T  Business  Services,  AT&T  Consumer  Services and AT&T
         Broadband.

              Our existing segments reflect certain managerial changes that were
         implemented  during 2002. The changes  primarily include the following:
         revenue  previously  recorded by the AT&T Business  Services segment as
         "Internal  Revenue" for services  provided to certain  other AT&T units
         and then eliminated within the Corporate & Other group, is now recorded
         as a contra-expense by AT&T Business  Services;  the results of certain
         units  previously   included  in  the  Corporate  &  Other  group  were
         transferred  to the AT&T  Business  Services  segment and the financial
         impacts of SFAS No. 133 that were previously  recorded in the Corporate
         &  Other  group  were  transferred  to  the  appropriate  segments.  In
         addition,   AT&T   Consumer   Services   and  total  AT&T  revenue  was
         reclassified  in  accordance  with EITF  issue  01-9,  "Accounting  for
         Consideration  Given by a Vendor to a Customer,"  which  requires  cash
         incentives  given to customers  previously  recorded as advertising and
         promotion  expense now to be recorded  as a reduction  of revenue  when
         recognized in the income statement,  unless an identifiable  benefit is
         received in exchange (see note 3). All prior periods have been restated
         to reflect these changes.

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


                                                                          For the Three Months       For the Nine Months
              Revenue                                                      Ended September 30,       Ended September 30,
                                                                            2002         2001         2002         2001
              <S>                                                        <C>          <C>          <C>          <C>
              AT&T Business Services external revenue                    $  6,602     $  6,746     $ 19,697     $ 20,536
              AT&T Business Services internal revenue                          98           61          273          378
                Total AT&T Business Services revenue                        6,700        6,807       19,970       20,914

              AT&T Consumer Services external revenue                       2,794        3,770        8,791       11,423

              AT&T Broadband external revenue                               2,546        2,390        7,506        7,411
              AT&T Broadband internal revenue                                   1            3            6           12
                Total AT&T Broadband revenue                                2,547        2,393        7,512        7,423

              Total reportable segments                                    12,041       12,970       36,273       39,760

              Corporate and Other (a)                                         (85)          65         (229)          13
              Total revenue                                              $ 11,956     $ 13,035     $ 36,044     $ 39,773
<FN>
              (a) Includes revenue related to Excite@Home of $140 and $418 for the three and nine months ended September 30, 2001.
</FN>
</TABLE>

<TABLE>
<CAPTION>

               RECONCILIATION OF EARNINGS BEFORE INTEREST AND TAXES (EBIT) TO INCOME BEFORE INCOME TAXES

                                                                         For the Three Months       For the Nine Months
                                                                         Ended September 30,        Ended September 30,
                                                                          2002         2001          2002          2001
              <S>                                                        <C>         <C>         <C>            <C>
              AT&T Business Services EBIT                                $  826      $(4,390)    $  1,969       $(1,985)
              AT&T Consumer Services EBIT                                   618        1,282        2,252         3,817
              AT&T Broadband EBIT                                            45         (789)     (18,840)       (3,150)
                Total reportable segments' EBIT                           1,489       (3,897)     (14,619)       (1,318)
              Corporate and Other EBIT (a)                                 (253)         243         (618)       (2,137)
              Deduct:
                Pretax minority interest and dividends on
                  subsidiary preferred stock                                (62)         171         (200)          922
                Pretax (losses) related to other equity
                  investments                                               (18)      (5,510)      (1,671)       (7,149)
              Interest (expense)                                           (748)        (786)      (2,231)       (2,426)
              Income (loss) from continuing operations before
                income taxes, minority interest and dividends on
                subsidiary preferred stock, and net (losses)
                related to equity investments                            $  568      $   899     $(15,597)      $   346
<FN>
              (a) Includes $(294) and $(714) related to Excite@Home for the three and nine months ended September 30, 2001,
              respectively.
</FN>
</TABLE>




              ASSETS
                                             At September 30,    At December 31,
                                                   2002                2001
              AT&T Business Services            $ 38,621            $ 40,316
              AT&T Consumer Services               1,762               2,141
              AT&T Broadband                      81,933             103,060
                Total reportable segments        122,316             145,517

              Corporate and Other:
              Other segments                         857               1,145
              Prepaid pension costs                3,522               3,329
              Deferred income taxes                1,784                 960
              Other corporate assets (a)           9,559              14,331
              Total assets                     $ 138,038            $165,282

              (a) 2002 and 2001 amounts include cash of $6.7 billion and $10.4
              billion, respectively.


16)      GUARANTEE OF PREFERRED SECURITIES

              Prior  to   AT&T's  acquisition  of  TCI  and  MediaOne,  TCI  and
         MediaOne issued  mandatorily  redeemable  preferred  securities through
         subsidiary  trusts that held  subordinated  debt  securities of TCI and
         MediaOne.

              In  the  first  nine  months  of  2002,  AT&T  called  mandatorily
         redeemable preferred securities issued by TCI Communications  Financing
         I, II and IV, MediaOne  Financing A and B, and MediaOne  Finance II for
         early  redemption.  As of September 30, 2002,  AT&T provided a full and
         unconditional  guarantee on outstanding  securities  issued by MediaOne
         Finance  III. At  September  30,  2002,  $504 of  MediaOne  Finance III
         securities were outstanding.

<TABLE>
<CAPTION>
                                                              AT&T CORP.
                                                 CONSOLIDATING CONDENSED BALANCE SHEET
                                                       AS OF SEPTEMBER 30, 2002



                             Guarantor    Guarantor              Media-One                 Elimination and
                               AT&T      Subsidiary               Finance   Non-Guarantor   Consolidation    Consolidated
                              Parent      MediaOne      TCI         III     Subsidiaries     Adjustments      AT&T Corp.
<S>                           <C>         <C>            <C>       <C>        <C>           <C>              <C>
ASSETS
Cash and cash equivalents...  $  6,644    $     -     $     2      $    -     $    280      $       -        $  6,926
Receivables.................    20,469                                          48,870        (62,055)          7,284
Investments.................                                                       459                            459
Deferred income taxes.......     1,939                                             413           (304)          2,048
Other current assets........       359      2,288          96         516       (1,375)          (889)            995
TOTAL CURRENT ASSETS........    29,411      2,288          98         516       48,647        (63,248)         17,712

Property, plant & equipment,
   net   ...................     8,992                    160                   32,212                         41,364
Franchise costs, net........                               14                   29,070                         29,084
Goodwill, net...............        70      2,554                               17,893                         20,517
Investments and related
   advances.................   120,143     32,584      12,046                   39,602       (186,455)         17,920
Other assets................     6,537                    182                   12,923         (8,201)         11,441
TOTAL ASSETS................  $165,153    $37,426      12,500      $  516     $180,347      $(257,904)       $138,038

LIABILITIES
Debt maturing within one
   year.....................  $ 35,851    $   350     $ 1,819      $    -     $  7,094      $ (38,554)       $  6,560
Other current liabilities...    10,798        590         471                   13,328        (11,069)         14,118
TOTAL CURRENT LIABILITIES...    46,649        940       2,290                   20,422        (49,623)         20,678

Long-term debt..............    23,328      2,191      12,682         504       14,404        (16,738)         36,371
Deferred income taxes.......     1,191                                          23,261                         24,452
Other long-term liabilities
   and deferred credits.....     6,389         10         128                    2,258         (1,210)          7,575
TOTAL LIABILITIES...........    77,557      3,141      15,100         504       60,345        (67,571)         89,076

Minority Interest...........                                                     1,371                          1,371
Company-Obligated
   Convertible Quarterly
   Income Preferred
   Securities of Subsidiary
   Trust Holding Solely
   Subordinated Debt
   Securities of AT&T.......     4,728                                                                          4,728

SHAREOWNERS' EQUITY
AT&T Common Stock...........     3,851                                         (11,459)        11,459           3,851
Preferred stock issued to
   subsidiaries.............    10,559                                                        (10,559)              -
Other shareowners' equity...    68,458     34,285      (2,600)         12      130,090       (191,233)         39,012
TOTAL SHAREOWNERS' EQUITY...    82,868     34,285      (2,600)         12      118,631       (190,333)         42,863
TOTAL LIABILITIES AND
   SHAREOWNERS' EQUITY......  $165,153    $37,426     $12,500      $  516     $180,347      $(257,904)       $138,038
</TABLE>

<TABLE>
<CAPTION>
                                                              AT&T CORP.
                                            CONSOLIDATING CONDENSED STATEMENTS OF OPERATION
                                             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002



                       Guarantor    Guarantor                 Media-One                    Elimination and
                         AT&T       Subsidiary                 Finance    Non-Guarantor     Consolidation    Consolidated
                        Parent      MediaOne         TCI         III       Subsidiaries      Adjustments     AT&T Corp.
<S>                       <C>        <C>           <C>         <C>           <C>               <C>             <C>
Revenue                   $4,043     $  -          $   -       $  -          $8,245            $  (332)        $11,956

Operating Expenses
Costs of services
   and   products.....       729                                              2,925               (321)          3,333
Access and other
   connection.........     1,423                                              1,280                 (7)          2,696
Selling, general and
   administrative.....       697        2            186                      1,831                 (4)          2,712
Depreciation and
   amortization.......       518                      20                      1,443                              1,981
Net restructuring and
   other charges......         4                                                (30)                               (26)
Total operating
   expenses...........     3,371        2            206                      7,449               (332)         10,696

Operating income
   (loss).............       672       (2)          (206)                       796                              1,260

Other income
   (expense), net.....       301       47             11         12             696             (1,011)             56
Interest (expense)....      (912)     (45)          (196)       (11)           (595)             1,011            (748)
Income (loss) from
   continuing
   operations before
   income taxes,
   minority interest,
   and dividends on
   subsidiary
   preferred stock,
   and net (losses)
   related to other
   equity investments.        61                    (391)         1             897                                568

(Provision) benefit
   for income taxes...       (27)                    149                       (434)                              (312)

Minority interest and
   dividends on
   subsidiary
   preferred stock....       (40)                                                 2                                (38)
 Net (losses)
   earnings related
   to other equity
   investments........      (200)     (49)           703                        (11)              (454)            (11)
Income (loss) from
   continuing
   operations.........      (206)     (49)           461          1             454               (454)            207

(Loss) income before
   extraordinary gain
   and cumulative
   effect of
   accounting changes.      (206)     (49)           461          1             454               (454)            207
Net income (loss).....    $ (206)    $(49)         $ 461       $  1          $  454              $(454)        $   207
</TABLE>





<TABLE>
<CAPTION>
                                                              AT&T CORP.
                                            CONSOLIDATING CONDENSED STATEMENTS OF OPERATION
                                             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002




                           Guarantor     Guarantor               Media-One                   Elimination and
                              AT&T       Subsidiary               Finance    Non-Guarantor    Consolidation     Consolidated
                             Parent       MediaOne     TCI          III      Subsidiaries      Adjustments       AT&T Corp.
<S>                        <C>          <C>          <C>           <C>       <C>              <C>               <C>
Revenue                    $ 12,065     $     -      $    -        $  -      $ 25,168         $(1,189)          $ 36,044

Operating Expenses
Costs of services and
   products.............      2,066                                             9,054          (1,158)             9,962
Access and other
   connection...........      4,168                                             4,126             (27)             8,267
Selling, general and
   administrative.......      1,958          (7)        543                     5,412              (4)             7,902
Depreciation and
   amortization.........      1,479                      64                     4,292                              5,835
Net restructuring and
   other charges........          4                                                26                                 30
Goodwill and franchise
   cost impairment
   charges                                                                     16,479                             16,479
Total operating expenses      9,675          (7)        607                    39,389          (1,189)            48,475

Operating income (loss).      2,390           7        (607)                  (14,221)                           (12,431)

Other income (expense),
   net..................        689         396          33          35           646          (2,734)              (935)
Interest (expense)......     (2,566)       (159)       (532)        (34)       (1,674)          2,734             (2,231)
Income (loss) from
   continuing
   operations before
   income taxes,
   minority interest,
   and dividends on
   subsidiary preferred
   stock, and net
   (losses) related to
   other equity
   investments..........        513         244      (1,106)          1       (15,249)                           (15,597)

(Provision) benefit for
   income taxes.........       (196)        (93)        423                     3,919                              4,053
Minority interest and
   dividends on
   subsidiary preferred
   stock................       (120)                                               (6)                              (126)
 Net earnings (losses)
   related to other
   equity investments...        228      (8,162)     (5,290)                   (1,001)         13,193             (1,032)
Income (loss) from
   continuing operations        425      (8,011)     (5,973)          1       (12,337)         13,193            (12,702)

(Loss) from
   discontinued
   operation (net of
   income taxes)........        (88)                                                                                 (88)
(Loss) income before
   extraordinary gain...        337      (8,011)     (5,973)          1       (12,337)         13,193            (12,790)
Extraordinary gain (net
   of income taxes).....                                 48                                                           48
Cumulative effect of
   accounting changes
   (net of income taxes)                                                         (856)                              (856)
Net (loss) income.......   $    337     $(8,011)     $(5,925)      $  1      $(13,193)        $13,193           $(13,598)
</TABLE>

<TABLE>
<CAPTION>
                                                               AT&T CORP.
                                            CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
                                             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002



                                                                                          Elimination
                          Guarantor    Guarantor               Media-One                      and
                            AT&T       Subsidiary               Finance    Non-Guarantor Consolidation  Consolidated
                           Parent       MediaOne      TCI         III      Subsidiaries   Adjustments   AT&T Corp.
<S>                           <C>           <C>        <C>       <C>         <C>           <C>            <C>
NET CASH (USED IN)
   PROVIDED BY
   OPERATING
   ACTIVITIES OF
   CONTINUING
   OPERATIONS..........       $  (925)    $  (576)   $  (526)                $ 9,715                    $ 7,688

INVESTING ACTIVITIES
Capital expenditures
     and other
     additions.........        (1,497)                  (166)                 (3,632)                    (5,295)
Other                          (5,973)        726     (3,207)                 (6,972)       15,470           44
NET CASH (USED IN)
   PROVIDED BY
   INVESTING
   ACTIVITIES OF
   CONTINUING
   OPERATIONS..........        (7,470)        726     (3,373)                (10,604)       15,470       (5,251)

FINANCING ACTIVITIES
Proceeds from debt
   from AT&T...........         1,933       1,413      6,406                                (9,752)
Proceeds from
   long-term debt                                                                129                        129
Retirement of
   long-term debt......        (2,900)        (28)      (454)                    374                     (3,008)
Retirement of AT&T debt                    (1,547)    (2,051)                                3,598
(Decrease) increase in
   short-term
   borrowings, net.....        (4,442)                                          (754)                    (5,196)
Increase (decrease) in
   short-term
   borrowings from
   AT&T, net                    6,837                                                       (6,837)
Issuance of AT&T
   common shares                2,640                                                                     2,640
Other                             556                                          1,255        (2,479)        (668)
NET CASH PROVIDED BY
   (USED IN) FINANCING
   ACTIVITIES OF
   CONTINUING
   OPERATIONS..........         4,624        (162)     3,901                   1,004       (15,470)      (6,103)

Net (decrease)
   increase in cash
   and cash equivalents        (3,771)        (12)         2                     115                     (3,666)
Cash and cash
   equivalents at
   beginning of year...        10,415          12                                165                     10,592
Cash and cash
   equivalents at end
   of period...........       $ 6,644                $     2                 $   280                    $ 6,926
</TABLE>

<TABLE>
<CAPTION>
                                                              AT&T CORP.
                                                 CONSOLIDATING CONDENSED BALANCE SHEET
                                                        AS OF DECEMBER 31, 2001





                    Guaran-   Guaran-  Guaran-    TCI     TCI     TCI   Media Media Media Media    Non-     Elimi-    Consoli-
                      tor      tor       tor     Finan-  Finan-  Finan- -One  -One  -One  -One     Guar-    nation    dated
                     AT&T      Sub-      Sub-     cing    cing    cing  Finan-Finan-Finan-Finan-   antor     and       AT&T
                    Parent   sidiary   sidiary     I       II      IV    cing  ce    ce    ce      Sub-     Con-       Corp.
                               TCI     MediaOne                           A     B    II    III     sid-     soli-
                                                                                                   iaries   dation
                                                                                                            Adjust-
                                                                                                            ments
<S>                 <C>       <C>      <C>       <C>     <C>     <C>    <C>  <C>  <C>   <C>      <C>       <C>         <C>
ASSETS
Cash and cash
  equivalents...... $ 10,415  $     -  $    12   $  -    $  -    $  -   $ -  $ -  $  -   $  -    $    165  $       -   $ 10,592
Receivables........   11,682                                                                       44,516    (46,817)     9,381
Investments........                                                                                   668                   668
Deferred income
  taxes............      729                                                                          501                 1,230
Other current
  assets...........      302       71      689    527     513     204    31   29   220     11         (45)    (1,895)       657
TOTAL CURRENT
  ASSETS...........   23,128       71      701    527     513     204    31   29   220     11      45,805    (48,712)    22,528

Property, plant &
  equipment, net...    8,580      135                                                              32,607                41,322
Franchise costs,
  net..............                20                                                              42,799                42,819
Goodwill, net......       70             2,526                                                     22,079                24,675
Investments and
  related advances.  130,219   12,747   41,413                                                     63,996   (224,557)    23,818
Other assets.......    5,445       91                                    21   16    16    516       8,835     (4,820)    10,120
TOTAL ASSETS....... $167,442  $13,064  $44,640   $527    $513    $204   $52  $45  $236   $527    $216,121  $(278,089)  $165,282

LIABILITIES
Debt maturing
  within one year..  $34,195     $616     $753   $527    $513    $204   $30  $28  $214           $  8,985  $ (33,107)  $ 12,958
Other current
  liabilities......    8,763      597       59                            1    1     6     11      11,419     (8,388)    12,469
TOTAL CURRENT
  LIABILITIES......   42,958    1,213      812    527     513     204    31   29   220     11      20,404    (41,495)    25,427

Long-term debt.....   23,810    9,866      676                                            504      14,640     (8,969)    40,527
Deferred income
  taxes............    1,147               934                                                     26,079                28,160
Other long-term
  liabilities and
  deferred credits.    6,850       45       23                                                      7,378     (3,088)    11,208
TOTAL LIABILITIES..   74,765   11,124    2,445    527     513     204    31   29   220    515      68,501    (53,552)   105,322

Minority Interest..                                                                                 3,560                 3,560
Company-Obligated
  Convertible
  Quarterly Income
  Preferred
  Securities of
  Subsidiary Trust
  Holding Solely
  Subordinated
  Debt Securities
  of AT&T..........    4,720                                                                                              4,720

SHAREOWNERS' EQUITY
AT&T Common Stock..    3,542                                                                                              3,542
Preferred stock
  issued to
  subsidiaries.....   10,559                                                                                 (10,559)         -
Other shareowners'
  equity...........   73,856    1,940   42,195                           21   16    16     12     144,060   (213,978)    48,138
TOTAL SHAREOWNERS'
  EQUITY...........   87,957    1,940   42,195                           21   16    16     12     144,060   (224,537)    51,680
TOTAL LIABILITIES
  AND SHAREOWNERS'
  EQUITY........... $167,442  $13,064  $44,640   $527    $513    $204   $52  $45  $236   $527    $216,121  $(278,089)  $165,282
</TABLE>


<TABLE>
<CAPTION>
                                                              AT&T CORP.
                                               CONSOLIDATING CONDENSED INCOME STATEMENTS
                                             For the three months ended September 30, 2001


                               Guarantor    Guarantor     Guarantor       TCI         TCI         TCI
                                 AT&T       Subsidiary   Subsidiary    Financing   Financing   Financing
                                Parent         TCI        MediaOne         I           II         IV
<S>                               <C>         <C>           <C>         <C>        <C>         <C>
Revenue.......................    $4,795      $   -         $  -        $  -       $  -        $ -

Operating Expenses
Costs of services and products       876
Access and other connection...     1,610
Selling, general and
  administrative..............       470          2           (7)
Depreciation and amortization.       469         15           18
Net restructuring and other
  charges.....................
Total operating expenses......     3,425         17           11

Operating income (loss).......     1,370        (17)         (11)

Other income (expense)........     1,336          8          (36)         10         12          4
Interest (expense)............      (956)      (150)         (57)        (10)       (12)        (4)
Income (loss) from continuing
  operations before income
  taxes, minority interest
  and (losses) from equity
  investments ................     1,750       (159)        (104)

(Provision) benefit for
  income taxes................      (665)        59           31
Minority interest and
  dividends on subsidiary
  preferred stock.............       (40)
Equity (losses) from Liberty
  Media Group.................                  111
Net (losses) earnings from
  other equity investments....    (2,284)      (424)        (372)
Income (loss) from continuing
  operations..................    (1,239)      (413)        (445)

Gain on sale of discontinued
  operations..................    13,503
Net income (loss) ............    12,264       (413)        (445)
Dividend requirements of
  preferred stock.............      (235)
Net income (loss) available
  to common shareowners.......   $12,029      $(413)       $(445)        $ -        $ -        $ -
</TABLE>

<TABLE>
<CAPTION>
                                                              AT&T CORP.
                                               CONSOLIDATING CONDENSED INCOME STATEMENTS
                                             For the three months ended September 30, 2001


(Continued from above)

                                   MediaOne    MediaOne    MediaOne    MediaOne                     Elimination and
                                   Financing   Financing   Finance     Finance     Non-Guarantor     Consolidation     Consolidated
                                       I          II          II         III       Subsidiaries       Adjustments       AT&T Corp.
<S>                                <C>         <C>         <C>         <C>            <C>               <C>              <C>

Revenue.......................     $ -         $ -         $ -         $ -            $8,743            $(503)           $13,035

Operating Expenses
Costs of services and products                                                         3,040             (440)             3,476
Access and other connection...                                                         1,484              (61)             3,033
Selling, general and
  administrative..............                                                         2,025               (2)             2,488
Depreciation and amortization.                                                         1,772                               2,274

Net restructuring and other
  charges.....................                                                           399                                 399
Total operating expenses......                                                         8,720             (503)            11,670
Operating income (loss).......                                                            23                -              1,365
Other income (expense)........       1           1           6          12              (246)            (788)               320
Interest (expense)............      (1)         (1)         (5)        (11)             (367)             788               (786)
Income (loss) from continuing
  operations before income
  taxes, minority interest
  and (losses) from equity
  investments ................                               1           1              (590)                                899


(Provision) benefit for
  income taxes................                                                           645                                  70
Minority interest and
  dividends on subsidiary
  preferred stock.............                                                           217                                 177
Equity (losses) from Liberty
  Media Group.................                                                                                               111
Net (losses) earnings from
  other equity investments....                                                        (3,352)           3,080             (3,352)
Income (loss) from continuing
  operations..................                               1           1            (3,080)           3,080             (2,095)
Gain on sale of discontinued
  operations..................                                                                                            13,503
Net income (loss) ............                               1           1            (3,080)           3,080             11,408
Dividend requirements of
  preferred stock.............                                                                                              (235)
Net income (loss) available
  to common shareowners.......     $ -         $ -         $ 1         $ 1           $(3,080)          $3,080            $11,173
</TABLE>

<TABLE>
<CAPTION>
                                                              AT&T CORP.
                                               CONSOLIDATING CONDENSED INCOME STATEMENTS
                                             For the nine months ended September 30, 2001

                               Guarantor      Guarantor       Guarantor         TCI            TCI            TCI
                                 AT&T         Subsidiary     Subsidiary      Financing      Financing      Financing
                                Parent           TCI          MediaOne           I              II            IV
<S>                              <C>            <C>            <C>           <C>            <C>            <C>
Revenue.......................   $14,641        $     -        $     -       $  -           $  -           $  -

Operating Expenses
Costs of services and products     2,564                             1
Access and other connection...     4,948
Selling, general and
  administrative..............     1,392            246              2
Depreciation and other
  amortization................     1,356             47             54
Net restructuring and other
  charges.....................         -
Total operating expenses......    10,260            293             57

Operating income (loss).......     4,381           (293)           (57)

Other income (expense)........       763             97          1,076         32             35             13
Interest (expense) ...........    (3,485)        (1,015)          (212)       (32)           (35)           (13)
Income (loss) from continuing
  operations before income
  taxes, minority interest,
  (losses) from equity
  investments and cumulative
  effect of accounting change.     1,659         (1,211)           807

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

Minority interest and
  dividends on subsidiary
  preferred stock.............      (120)
Equity (losses) from Liberty
  Media Group.................                   (2,711)
Net earnings (losses) from
  other equity investments....       133         (1,896)        (2,161)
Income (loss) from continuing
  operations..................     1,053         (5,364)        (1,683)

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

<TABLE>
<CAPTION>
                                                             AT&T CORP.
                                               CONSOLIDATING CONDENSED INCOME STATEMENTS
                                             For the nine months ended September 30, 2001


(Continued from above)

                                 MediaOne     MediaOne     MediaOne    MediaOne                     Elimination and
                                 Financing    Financing    Finance     Finance     Non-Guarantor    Consolidation       Consolidated
                                    I            II          II          III        Subsidiaries    Adjustments         AT&T Corp.
<S>                              <C>          <C>          <C>         <C>          <C>             <C>                 <C>
Revenue.......................   $   -        $  -         $   -       $  -         $26,859         $(1,727)            $39,773
Operating Expenses
Costs of services and products                                                        9,411          (1,518)             10,458
Access and other connection...                                                        4,523            (182)              9,289
Selling, general and
  administrative..............                                                        6,317              (4)              7,953
Depreciation and other
  amortization................                                                        5,579                               7,036
Net restructuring and other
  charges.....................                                                        1,494                               1,494
Total operating expenses......                                                       27,324          (1,704)             36,230

Operating income (loss).......                                                         (465)            (23)              3,543

Other income (expense)........       3           3            16         35            (285)         (2,559)               (771)
Interest (expense) ...........      (2)         (2)          (15)       (34)           (672)          3,091              (2,426)
Income (loss) from continuing
  operations before income
  taxes, minority interest,
  (losses) from equity
  investments and cumulative
  effect of accounting change.       1           1             1          1          (1,422)            509                 346

(Provision) benefit for
  income taxes................                                                          782                                 288

Minority interest and
  dividends on subsidiary
  preferred stock.............                                                        1,135                               1,015
Equity (losses) from Liberty
  Media Group.................                                                                                           (2,711)
Net earnings (losses) from
  other equity investments....                                                       (3,923)          3,458              (4,389)
Income (loss) from continuing
  operations..................       1            1            1          1          (3,428)          3,967              (5,451)

Income from discontinued
  operations (net of income
  taxes) .....................                                                          178             (28)                150
Gain on sale of discontinued
  operations..................                                                                                           13,503
Cumulative effect of
  accounting change (net of
  income taxes)...............                                                         (689)                                904
Net income (loss) ............       1            1            1          1          (3,939)          3,939               9,106
Dividend requirements of
  preferred stock.............                                                                                             (652)
Premium on exchange of AT&T
  Wireless tracking stock....                                                                                               (80)
Net income (loss) available
  to common shareowners.......   $   1        $   1        $   1       $  1         $(3,939)         $3,939               8,374
</TABLE>

<TABLE>
<CAPTION>
                                                              AT&T CORP.
                                           CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS
                                             For the nine months ended September 30, 2001


                               Guarantor  Guarantor   Guarantor     TCI        TCI        TCI
                                 AT&T     Subsidiary Subsidiary  Financing  Financing  Financing
                                Parent       TCI      MediaOne       I          II        IV
<S>                              <C>        <C>         <C>         <C>        <C>       <C>



NET CASH PROVIDED BY (USED
  IN) OPERATING ACTIVITIES OF
  CONTINUING OPERATIONS.......  $ 2,367     $ (1,116)   $ 746       $  -       $  -      $  -

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

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

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

<TABLE>
<CAPTION>
                                                              AT&T CORP.
                                           CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS
                                             For the nine months ended September 30, 2001

(Continued from above)

                                 MediaOne     MediaOne     MediaOne    MediaOne                     Elimination and
                                 Financing    Financing    Finance     Finance     Non-Guarantor    Consolidation       Consolidated
                                    I            II           II         III        Subsidiaries    Adjustments         AT&T Corp.
<S>                              <C>          <C>          <C>         <C>          <C>             <C>                 <C>


NET CASH PROVIDED BY (USED
  IN) OPERATING ACTIVITIES OF
  CONTINUING OPERATIONS.......   $  1         $  1         $ 1         $ 1          $  5,104        $    116            $ 7,221

INVESTING ACTIVITIES
Capital expenditures and
  other additions.............                                                        (5,408)                            (6,736)
Equity investment
  distributions and sales.....                                                         1,151         (19,048)             1,845
Net dispositions
  (acquisitions) of
  businesses, net of cash
  disposed/acquired...........                                                         4,813                              4,827
Other.........................                                                         1,613          (5,390)              (451)
NET CASH PROVIDED BY (USED
  IN) INVESTING ACTIVITIES OF
  CONTINUING OPERATIONS.......                                                         2,169         (24,438)              (515)

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

Net cash provided by
  discontinued operations.....                                                         4,699             161              4,860

Net increase (decrease) in
  cash and cash equivalents...                                                           539                              4,134
Cash and cash equivalents at
  beginning of year...........                                                            64                                 64
Cash and cash equivalents at
  end of period...............   $   -        $  -         $ -         $ -          $    603        $      -            $ 4,198
</TABLE>






17)      RECENT ACCOUNTING PRONOUNCEMENTS

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

              On April 30, 2002,  the FASB issued SFAS No. 145,  "Rescission  of
         SFAS  Statements No. 4, 44, and 64,  Amendment of SFAS Statement No. 13
         and Technical Corrections." SFAS No. 145 eliminates the requirement (in
         SFAS No. 4) that gains and losses from the  extinguishments  of debt be
         aggregated and classified as  extraordinary  items,  net of the related
         income tax. An entity is not prohibited from classifying such gains and
         losses as extraordinary items, as long as they meet the criteria of APB
         Opinion  No.  30. In  addition,  SFAS No. 145  requires  sale-leaseback
         treatment for certain  modifications  of a capital lease that result in
         the lease being  classified as an operating  lease.  The  rescission of
         SFAS No. 4 is effective for fiscal years  beginning after May 15, 2002,
         which  for AT&T  would be  January  1,  2003.  Earlier  application  is
         encouraged.  Any  gain or  loss on  extinguishment  of  debt  that  was
         previously classified as an extraordinary item would be reclassified to
         other  income  (expense),  net.  The  remainder  of  the  statement  is
         generally effective for transactions occurring after May 15, 2002. AT&T
         does not expect that the  adoption of SFAS No. 145 will have a material
         impact on AT&T's  results of  operations,  financial  position  or cash
         flows.

              On June 28,  2002,  the FASB issued SFAS No. 146,  "Accounting for
         Exit or Disposal Activities." This statement addresses the recognition,
         measurement  and reporting of costs that are  associated  with exit and
         disposal   activities.   This  statement   includes  the  restructuring
         activities  that are  currently  accounted for pursuant to the guidance
         set forth in EITF 94-3,  "Liability  Recognition  for Certain  Employee
         Termination  Benefits  and Other Costs to Exit an  Activity  (including
         Certain  Costs  Incurred  in  a   Restructuring),"   costs  related  to
         terminating a contract that is not a capital lease and one-time benefit
         arrangements  received by employees who are involuntarily  terminated -
         nullifying  the guidance  under EITF 94-3.  Under SFAS No. 146 the cost
         associated  with an exit or  disposal  activity  is  recognized  in the
         periods in which it is  incurred  rather  than at the date the  company
         committed to the exit plan.  This  statement  is effective  for exit or
         disposal  activities  initiated  after December 31, 2002,  with earlier
         application encouraged. Previously issued financial statements will not
         be restated.  The  provisions of EITF 94-3 shall  continue to apply for
         exit  plans   initiated   prior  to  the  adoption  of  SFAS  No.  146.
         Accordingly,  the  initial  adoption  of SFAS No.  146 will not have an
         effect on AT&T's  results of  operations,  financial  position  or cash
         flows.  However,  liabilities  associated with future exit and disposal
         activities will not be recognized until actually incurred.


18)      SUBSEQUENT EVENTS

              On  November  5,  2002,   AT&T   was  served  with  a  shareholder
         lawsuit  filed on October  29,  2002,  in the Court of  Chancery of the
         State of Delaware.  The lawsuit names AT&T and each member of the board
         of  directors of AT&T Latin  America  (ALA) as  defendants,  asserting,
         among other things,  that AT&T as a majority  shareholder and the named
         directors  breached  fiduciary  duties  to ALA.  AT&T  will  vigorously
         contest the allegations set forth in the lawsuit.

              On November 7, 2002,  certain creditors of At Home Corp. (At Home)
         filed a class action against AT&T in California  state court  asserting
         claims relating to the conduct of AT&T and its designees on the At Home
         board  of  directors  in  connection  with  At  Home's  declaration  of
         bankruptcy and subsequent  efforts to dispose of some of its businesses
         or  assets,  as well as in  connection  with  other  aspects  of AT&T's
         relationship  with At Home.  As described in the joint proxy  statement
         and prospectus of AT&T and Comcast,  dated May 14, 2002,  liability (if
         any) arising from this lawsuit would be shared equally between AT&T and
         AT&T  Broadband,  and then  following  the merger of  Comcast  and AT&T
         Broadband,  any such liability would be shared equally between AT&T and
         AT&T Comcast.



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

         OVERVIEW

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


         RESTRUCTURING OF AT&T

              On October 25, 2000, AT&T announced a restructuring  plan designed
         to fully  separate  or issue  separately  tracked  stocks  intended  to
         reflect the financial  performance and economic value of each of AT&T's
         four major operating units.

              On July 9, 2001,  AT&T completed the split-off of AT&T Wireless as
         a separate,  independently  traded  company.  On August 10, 2001,  AT&T
         completed the split-off of Liberty Media Corporation as an independent,
         publicly traded company.

              On  July  10,  2002,   AT&T   and  Comcast  Corporation  (Comcast)
         shareowners  approved the proposed  merger  between AT&T  Broadband and
         Comcast. The merger still remains subject to certain regulatory reviews
         and approvals and certain other  conditions and is expected to close by
         the end of 2002.  Under the terms of the agreement,  AT&T will spin-off
         AT&T Broadband and simultaneously AT&T Broadband and Comcast will merge
         into   subsidiaries  of  a  new  company  to  be  called  AT&T  Comcast
         Corporation (AT&T Comcast). AT&T shareowners will receive approximately
         0.32 of a share of AT&T Comcast for each share of AT&T they own,  based
         on calculations using September 30, 2002 share prices. AT&T shareowners
         will own an approximate  55% economic stake and have an approximate 61%
         voting  interest in the new  company.  The  spin-off of AT&T  Broadband
         could result in the  recognition  of a gain or loss for the  difference
         between  the fair value of the  Comcast  shares to be  received by AT&T
         shareholders in the merger and the net book value of AT&T Broadband.

              On  July  10, 2002, AT&T shareholders also approved a one-for-five
         reverse stock split.  The purpose of the reverse stock split is to seek
         to adjust  upward the  trading  price of AT&T  common  stock  following
         completion of the various  transactions to effect AT&T's  restructuring
         plan.  AT&T  anticipates  that the reverse stock split will be affected
         immediately  after the  consummation  of the AT&T  Comcast  transaction
         described above.


         TRACKING STOCKS

              In 2001,  AT&T had  tracking stocks  that reflected  the financial
         performance of Liberty Media Group (LMG) and AT&T Wireless  Group.  The
         shares  initially  issued  tracked  100% and  approximately  16% of the
         performance of LMG and AT&T Wireless Group, respectively.

              In  2001,  the earnings  attributable  to  AT&T Wireless Group are
         excluded from the earnings available to AT&T Common Stock Group and are
         reflected  as "(Loss)  income  from  discontinued  operations,"  net of
         applicable   taxes  in  the   Consolidated   Statement  of  Operations.
         Similarly, the earnings and losses related to LMG are excluded from the
         earnings available to AT&T Common Stock Group. The remaining results of
         operations  of  AT&T,  including  the  financial  performance  of  AT&T
         Wireless Group not represented by the tracking  stock,  are referred to
         as the AT&T  Common  Stock  Group and are  represented  by AT&T  common
         stock.  The earnings of AT&T Wireless  Group  attributable  to the AT&T
         Common Stock Group for 2001 are also  reflected as "(Loss)  income from
         discontinued operations," net of applicable taxes.

              We  did  not have  a  controlling  financial  interest in  LMG for
         financial  accounting  purposes;  therefore,  our  ownership in LMG was
         reflected as an  investment  accounted  for under the equity  method in
         AT&T's consolidated  financial statements.  The amounts attributable to
         LMG  are  reflected  in  the  accompanying  Consolidated  Statement  of
         Operations  and Cash Flows as "Equity  earnings  (losses)  from Liberty
         Media Group" prior to its split-off from AT&T.

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


         FORWARD-LOOKING STATEMENTS

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

              These forward-looking statements,  including,  without limitation,
         those  relating  to the future  business  prospects,  revenue,  working
         capital,  liquidity,  capital needs,  network build out, interest costs
         and income,  are necessary  estimates  reflecting  the best judgment of
         management and involve a number of risks and  uncertainties  that could
         cause actual results to differ  materially  from those suggested by the
         forward-looking  statements.  These forward-looking  statements should,
         therefore,  be  considered in light of various  important  factors that
         could cause  actual  results to differ  materially  from  estimates  or
         projections  contained  in the  forward-looking  statements  including,
         without limitation:

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

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

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

         o     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,

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

         o     the  risks  associated   with   possible    disruptions   to  the
               telecommunications  industry  related to the  bankruptcy of major
               telecommunications providers and vendors,

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

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

         o     the  availability  and  cost  of capital  and the consequences of
               increased leverage,

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

         o     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,

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

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

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

         o     the risks related to AT&T's investments and joint ventures.

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

              The  discussion  and analysis  that follows  provides  information
         management  believes is relevant to an assessment and  understanding of
         AT&T's consolidated results of operations for the three and nine months
         ended  September  30,  2002  and  2001,  respectively,   and  financial
         condition as of September 30, 2002, and December 31, 2001.


         Critical Accounting Policies, 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 revenue recognition,
         allowances for doubtful accounts,  the carrying values and useful lives
         of property, plant and equipment,  internal use software and intangible
         assets,   investments,   derivative   contracts,   pension   and  other
         postretirement   benefits  and  income  taxes.   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 polices
         that may involve a higher  degree of judgment or  complexity,  refer to
         AT&T's Form 10-K/A for the year ended December 31, 2001.


         CONSOLIDATED RESULTS OF OPERATIONS

              The  comparison of results for the third  quarter  and nine months
         ended  September 30, 2002, with the  corresponding  periods in 2001 was
         impacted  by  events,  such as net  cable  dispositions,  which  affect
         comparability.  For  example,  in 2001,  we disposed  of several  cable
         systems,  which were  therefore not included in 2002 results,  but were
         included in the prior period results until the date of disposition.

              Year-over-year   comparisons   were    also   impacted   by    the
         deconsolidation of At Home Corp.  (Excite@Home).  In 2001,  Excite@Home
         was  fully  consolidated  for  the  period  January  1,  2001,  through
         September  28,  2001,  the  date  Excite@Home   filed  for  Chapter  11
         bankruptcy protection.  As a result of the bankruptcy and AT&T removing
         its members from the  Excite@Home  board of  directors,  AT&T no longer
         consolidated Excite@Home as of September 30, 2001.

              The  comparison  of   2002  results  with   2001 results were also
         affected  by the unwind of  Concert,  our joint  venture  with  British
         Telecommunications plc (BT) on April 1, 2002. As a result of the unwind
         of Concert, the venture's assets and customer accounts were distributed
         back to the parent  companies.  AT&T  combined  these  assets  with its
         existing international  networking and other assets and began recording
         revenue  from  multinational   customers  and  foreign-billed   revenue
         previously  recorded by Concert.  In 2001,  charges  from  Concert were
         recorded as access and other connection expenses. Effective April 2002,
         as AT&T took back the assets and customer  relationships  from Concert,
         we began  recording  the  expenses in each line based on how the assets
         and  customers  are served and managed.  As a result,  beginning in the
         second quarter of 2002, access and other connection  expenses are lower
         than  2001 as the costs  associated  with  managing  these  assets  and
         customer  relationships  are  recorded on other  expense  lines such as
         costs of services and  products,  depreciation  and  amortization,  and
         selling,  general and  administrative  expenses.  In  addition,  in the
         second quarter of 2002, AT&T ceased  recording equity losses related to
         Concert.


         REVENUE
                                   For the Three Months     For the Nine Months
                                   Ended September 30,      Ended September 30,
        (Dollars in Millions)       2002         2001        2002        2001

        AT&T Business Services   $ 6,700      $ 6,807     $19,970      $20,914
        AT&T Consumer Services     2,794        3,770       8,791       11,423
        AT&T Broadband             2,547        2,393       7,512        7,423
        Corporate and Other          (85)          65        (229)          13
        Total Revenue            $11,956      $13,035     $36,044      $39,773

              Total  revenue  for  the  three  months ended  September 30, 2002,
         decreased 8.3%, or $1.1 billion, compared with the same period in 2001.
         The decline was  primarily  driven by declines in long  distance  voice
         revenue   of  $1.3   billion   and  a  $0.1   billion   impact  of  the
         deconsolidation  of Excite@Home and net cable  dispositions.  Partially
         offsetting the decline was increased  revenue of $0.3 billion primarily
         from growth in data/Internet Protocol (IP)/managed services within AT&T
         Business Services and AT&T Broadband's  advanced  services  (telephony,
         high-speed data and digital video). In addition, revenue increased as a
         result of the  reintegration of customers and assets from the unwind of
         Concert.

              Total revenue  for  the first nine  months of 2002 decreased 9.4%,
         or $3.7 billion, compared with the same period in 2001. The decline was
         primarily  driven by declines in long  distance  voice  revenue of $4.2
         billion and a $0.9  billion  impact of net cable  dispositions  and the
         deconsolidation  of Excite@Home.  Partially  offsetting the decline was
         increased  revenue  of $1.0  billion  from  AT&T  Broadband's  advanced
         services  (telephony,  high-speed data and digital video) and growth in
         data/IP/managed  services within AT&T Business  Services.  In addition,
         revenue  increased as a result of the  reintegration  of customers  and
         assets from the unwind of Concert.

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


         OPERATING EXPENSES

                                 For the Three Months   For the Nine Months
                                 Ended September 30,    Ended September 30,
         (Dollars in Millions)    2002         2001      2002        2001

         Costs of services and    $3,333       $3,476    $9,962      $10,458
           products

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

              Costs of services and products  decreased $0.1  billion,  or 4.1%,
         in the third quarter of 2002 and decreased  $0.5 billion,  or 4.7%, for
         the nine months ended September 30, 2002,  compared with the comparable
         periods  in 2001.  Approximately  $0.1  billion  of the  third  quarter
         decrease and $0.7 billion of the year-to-date  decrease was due to 2001
         net cable  dispositions  and the  deconsolidation  of  Excite@Home.  In
         addition,  approximately $0.2 billion of the third quarter decrease and
         $0.3 billion of the year-to-date decrease was due to the overall impact
         of lower revenue and related  costs at AT&T Business  Services and AT&T
         Consumer  Services.  These decreases were partially offset by increased
         costs of  approximately  $0.1  billion  in the third  quarter  and $0.2
         billion in the  year-to-date  period  resulting from increased costs at
         AT&T Broadband,  primarily higher cable programming costs due to higher
         rates.  In  addition,  costs of services  and  products  increased as a
         result of the  reintegration of customers and assets from the unwind of
         Concert.  AT&T Business  Services also had a  year-to-date  increase of
         $0.1 billion  related to the  provision for  uncollectibles  due to the
         weak economy.

                                       For the Three Months  For the Nine Months
                                       Ended September 30,   Ended September 30,
         (Dollars in Millions)          2002         2001     2002        2001

         Access and other connection   $2,696       $3,033   $8,267      $9,289

              Access and other connection  expenses  decreased $0.3 billion,  or
         11.1%,  in the third quarter of 2002 compared with the third quarter of
         2001. Included within access and other connection expenses are costs we
         pay to connect calls on the facilities of other service  providers,  as
         well  as  the  Universal  Service  Fund  contributions  and  multi-line
         per-line charges mandated by the FCC. The decrease was primarily due to
         lower access rates, Universal Service Fund contributions, international
         connection   rates  and  per-line   charges  for  multi-line   business
         customers.  Access and other  connection  expenses also  decreased as a
         result of the  reintegration of customers and assets from the unwind of
         Concert. These decreases were partially offset by slightly higher local
         connectivity costs.

              Access  and other  connection expenses  decreased $1.0 billion, or
         11.0%, for the nine months ended September 30, 2002,  compared with the
         same period in 2001. The decrease was primarily due to lower  Universal
         Service Fund  contributions,  access  rates,  international  connection
         rates and per-line charges for multi-line  business  customers.  Access
         and  other  connection  expenses  also  decreased  as a  result  of the
         reintegration of customers and assets from the unwind of Concert. These
         decreases were partially  offset by slightly higher local  connectivity
         costs.



                                For the Three Months        For the Nine Months
                                 Ended September 30,         Ended September 30,
         (Dollars in Millions)    2002        2001            2002        2001

         Selling, general and
           administrative        $2,712      $2,488          $7,902      $7,953

              Selling, general and administrative (SG&A) expenses increased $0.2
         billion, or 9.0%, in the third quarter of 2002, compared with the third
         quarter  of 2001.  The  increase  was  primarily  due to lower  pension
         credits of $0.1 billion resulting from a lower expected  long-term rate
         of return and decreased returns on plan assets,  increased  advertising
         expense by AT&T Consumer  Services for new local  service  offerings of
         approximately $0.1 billion,  and $0.1 billion of Comcast merger related
         costs recorded in 2002. SG&A expenses also increased as a result of the
         reintegration of customers and assets from the unwind of Concert. These
         increases  were  partially  offset by cost control  efforts within AT&T
         Business Services and AT&T Broadband, as well as lower costs associated
         with decreased  volumes at AT&T Consumer Services due to a reduction in
         the number of customers, of approximately $0.2 billion.

              Selling,  general   and   administrative  expenses  decreased $0.1
         billion,  or 0.6%,  for the  nine  months  ended  September  30,  2002,
         compared  with the same period in 2001.  Approximately  $0.1 billion of
         the decrease was due to expenses associated with net cable dispositions
         for the nine months ended  September 30, 2001, and the  deconsolidation
         of Excite@Home.  Also  contributing to the decrease were lower costs of
         approximately  $0.6 billion as a result of cost control efforts at AT&T
         Business  Services and AT&T Broadband,  as well as decreased volumes at
         AT&T  Consumer  Services due to a reduction in the number of customers.
         Partially   offsetting  these  decreases  were  lower  pension  credits
         resulting from a lower expected  long-term rate of return and decreased
         returns on plan assets,  and higher  transaction  costs associated with
         AT&T's restructuring announced in October of 2000 of approximately $0.4
         billion.  In addition,  increased  advertising expense by AT&T Consumer
         Services for new local service offerings and AT&T Broadband, as well as
         increased AT&T Broadband  customer care expenses of approximately  $0.3
         billion partially offset the decrease.  SG&A expenses also increased as
         a result of the  reintegration  of customers and assets from the unwind
         of Concert.

              We expect that SG&A,  and to a lesser extent costs of services and
         products,  will be  unfavorably  impacted  in the  future due to higher
         compensation  costs  associated  with  changes  in the  accounting  for
         certain benefit plans as well as lower pension credits resulting from a
         lower expected long-term rate of return on plan assets in 2003 than the
         9% rate used in 2002 and a lower return on plan assets.

              The changes in accounting for  benefit  plans include the decision
         to expense  stock option  grants,  commencing  with options  granted in
         2003,  the expense  associated  with restricted  stock units issued  in
         exchange for the cancellation of employee stock options, as well as the
         mark-to-market impacts of those stock options eligible for exchange but
         not cancelled.



                               For the Three Months         For the Nine Months
                                Ended September 30,          Ended September 30,
         (Dollars in Millions)  2002         2001            2002        2001

         Depreciation and
           amortization        $1,981       $2,274          $5,835      $7,036

              Depreciation and amortization  expenses  declined $0.3 billion and
         $1.2 billion,  or 12.8% and 17.1%,  in the third quarter and first nine
         months of 2002,  respectively,  compared with the corresponding periods
         in 2001.  The decline in both periods was primarily due to the adoption
         of  Statement  of  Financial   Accounting  Standards  (SFAS)  No.  142,
         "Goodwill  and Other  Intangible  Assets" as of January 1, 2002,  which
         eliminated the  amortization  of goodwill and franchise  costs.  In the
         third  quarter and first nine months of 2001,  we recorded $0.5 billion
         and $1.6 billion, respectively, of amortization expense on goodwill and
         franchise  costs.  The  deconsolidation  of  Excite@Home  and net cable
         dispositions  also  contributed  to the  declines.  The  declines  were
         partially  offset by  increased  depreciation  expense  due to a higher
         asset base resulting from continued  infrastructure  investment.  Total
         capital  expenditures  were $2.1 billion and $2.0 billion for the three
         months ended September 30, 2002 and 2001,  respectively,  and were $5.3
         billion  and $6.6  billion  for the first nine months of 2002 and 2001,
         respectively.  We  continue  to focus the vast  majority of our capital
         spending on our growth  businesses  of  broadband  and  data/IP/managed
         services.



                                For the Three Months        For the Nine Months
                                Ended September 30,         Ended September 30,
         (Dollars in Millions)   2002        2001            2002        2001

         Net restructuring and
           other charges        $ (26)       $399            $30        $1,494

              In the third quarter of 2002,  AT&T recorded a net reversal of $26
         million of net  restructuring  and other  charges.  In light of current
         unprecedented industry conditions,  including the bankruptcy of several
         significant  competitors,  AT&T's  management  reevaluated the business
         restructuring  plan  established  in the  fourth  quarter  of 2001  and
         determined  that the plan needed to be modified  primarily  for certain
         areas of AT&T  Business  Services,  including  network  services.  As a
         result,  approximately  $137  million  of net  restructuring  and other
         charges were  reversed  which  primarily  consisted of $110 million for
         employee  separation  costs.  In addition,  the reversals  included $12
         million   of  sales   obligation   liabilities   associated   with  the
         government-mandated disposition of AT&T Communications (U.K.) Ltd. that
         were never incurred.  However,  in order to continue to properly manage
         our cost  structure,  AT&T's  management  developed  a new exit plan in
         other areas of AT&T  Business  Services,  including  network  services,
         totaling $111 million.  This plan primarily consists of $91 million for
         employee  separation  costs related to  approximately  1,400  employees
         (slightly more than half of which are management),  and $16 million for
         facility  closings related to buildings  becoming vacant as a result of
         previously announced restructuring plans.

              Net  restructuring  and  other  charges for  the nine months ended
         September  30, 2002,  totaled $30 million  which  primarily  represents
         costs  associated  with AT&T  Broadband's  efforts  to  reorganize  and
         streamline certain centralized and field functions, partially offset by
         the  reversal  of  reserves   primarily  for  AT&T  Business  Services'
         initiatives.

              The  $30  million  is comprised of  new exit plans  totaling  $207
         million primarily  consisting of $133 million  associated with employee
         separation costs and $66 million in connection with facility  closings.
         These  charges were largely  offset by total  reversals of $177 million
         which were primarily  comprised of $127 million of employee  separation
         costs and $26  million  related  to  excess  vintage  facility  closing
         restructuring reserves. In addition, the reversals included $12 million
         from the third quarter  relating to sales  obligations  associated with
         AT&T  Communications  (U.K.) Ltd. The  reversals  were due primarily to
         management's  reevaluation of the restructuring plan established in the
         fourth quarter of 2001 for certain areas of AT&T Business Services,  as
         discussed  above, as well as the  redeployment of certain  employees to
         different functions within the company.

              Approximately  2,300 employees  will  be separated  in conjunction
         with the exit  plans  implemented  in 2002  (about 17% of which will be
         leaving  voluntarily),  with  more  than  60%  of the  total  employees
         impacted being management employees. Approximately 34% of the employees
         affected by these exit plans have left their  positions as of September
         30, 2002, with the remaining reductions expected to be completed by the
         end of the first quarter of 2003.  Termination  benefits of $38 million
         were paid to employees  through the third  quarter of 2002  relative to
         these exit plans.

              The  restructuring  and  exit plan  recorded in  the first quarter
         of 2002 is expected to yield cash savings of  approximately  $4 million
         (net of severance  benefit  payouts) in 2002. In subsequent  years, the
         net cash savings will continue to increase, due to the timing of actual
         separations and associated  payments,  until the completion of the exit
         plan at which time we expect to yield approximately $65 million of cash
         savings per year.  There will be no benefit to operating income (net of
         restructuring  charges  recorded) in 2002.  In  subsequent  years,  the
         operating  income benefit will continue to increase,  due to the timing
         of actual  separations,  until the completion of the exit plan at which
         time we expect a benefit  to  operating  income  of  approximately  $74
         million  per year.  The net  impact of the new  restructuring  and exit
         plans and reversals  recorded  during the second and third  quarters of
         2002  materially  offset  with  respect to total cash  savings  and any
         benefit to operating income.

              During   the  third   quarter   of  2001,  $399  million   of  net
         restructuring and other charges were recorded by Excite@Home, primarily
         asset impairment charges due to continued weakness in the on-line media
         market and the recent bankruptcy  filing of Excite@Home.  These charges
         included  the  write-off  of  goodwill  and  other  intangible  assets,
         warrants granted in connection with  distributing the @Home service and
         fixed assets.

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

              The severance costs, for  approximately 7,700 employees, primarily
         resulted  from  synergies  created  by the  MediaOne  merger as well as
         continued  cost  reduction  efforts  by  Excite@Home.   These  business
         restructuring plans were substantially completed by March 31, 2002.

              Almost 90% of the employees affected by the restructuring and exit
         plan  recorded  in the  fourth  quarter of 2001 (as  adjusted  by third
         quarter 2002  reversals)  have left their positions as of September 30,
         2002, and it is anticipated that  substantially all affected  employees
         will have left their  positions  by December  31, 2002. A total of $221
         million of termination  benefits have been paid to employees associated
         with this exit plan through September 30, 2002.


                                For the Three Months         For the Nine Months
                                Ended September 30,          Ended September 30,
         (Dollars in Millions)   2002         2001            2002        2001

         Goodwill and franchise
           impairment charges    $-           $-              $16,479     $-

              In the second quarter of 2002, we noted significant changes in the
         general business  climate as evidenced by the severe downward  movement
         in the U.S.  stock market  (including the decline in values of publicly
         traded cable  industry  stocks).  At June 30,  2002,  five of our cable
         competitors as a group  experienced an average  decline in total market
         capitalization  of over  20%  since  January  1,  2002.  We  have  also
         witnessed corporate bankruptcies. We believe these factors coupled with
         the pending merger of AT&T Broadband and Comcast (which was approved by
         both  companies'  shareholders  on July 10,  2002)  created a  "trigger
         event" for our AT&T Broadband  segment,  which necessitated the testing
         of goodwill and  franchise  costs for  impairment  as of the end of the
         second quarter.

              We  assessed  our  impairment  using the same  principles employed
         during the initial  adoption of SFAS No. 142. Such testing  resulted in
         the recognition of a $12.3 billion franchise cost impairment charge and
         a $4.2 billion goodwill impairment charge (aggregating to $11.8 billion
         after-tax).


                                   For the Three Months    For the Nine Months
                                   Ended September 30,     Ended September 30,
         (Dollars in Millions)      2002         2001       2002        2001

         Operating income (loss)   $1,260       $1,365     $(12,431)   $3,543

              Operating income (loss) decreased  $0.1 billion and  $16.0 billion
         in the third  quarter of 2002 and the nine months ended  September  30,
         2002, respectively, compared with the same periods in 2001. The decline
         in the third  quarter of 2002  compared  with the third quarter of 2001
         was  primarily  attributable  to a decline in the long  distance  voice
         business,  and  Comcast  merger-related  costs  recorded  in the  third
         quarter  of  2002,   partially   offset  by  the   deconsolidation   of
         Excite@Home, and lower amortization expense due to the adoption of SFAS
         No. 142,  "Goodwill  and Other  Intangible  Assets." The  September 30,
         2002,   year-to-date   decrease  was  primarily   attributable  to  the
         recognition of a $12.3 billion  franchise cost impairment  charge and a
         $4.2 billion goodwill  impairment charge recorded in the second quarter
         of 2002 by our AT&T Broadband segment.  Also impacting the year-to-date
         decline was the decline in the long distance voice business,  partially
         offset by the  deconsolidation  of Excite@Home,  and lower amortization
         expense.


                                   For the Three Months      For the Nine Months
                                   Ended September 30,       Ended September 30,
         (Dollars in Millions)     2002         2001         2002        2001

         Other income (expense),
           net                     $ 56         $ 320       $(935)      $(771)

              Other  income (expense),  net  for  the third  quarter of 2002 was
         income of $56  million,  a decrease of $0.3 billion  compared  with the
         third quarter of 2001. The decrease was primarily due to impairments of
         $0.2 billion in the third  quarter of 2002 related to leveraged  leases
         of airplanes associated with certain carriers. Also contributing to the
         decrease was lower net gains on sales of businesses and  investments of
         $0.1  billion.  These were  partially  offset by higher  income of $0.1
         billion related to the revaluation of certain financial instruments.

              Other income (expense),  net for the first nine months of 2002 was
         $0.9  billion of  expense,  an  increase  in  expense  of $0.2  billion
         compared  with the  same  period  of  2001.  The  increase  in  expense
         primarily  resulted from higher cost investment  impairment  charges of
         $1.2 billion in the first nine months of 2002 primarily  related to our
         investments in Cablevision Systems Corporation,  Comcast, Vodafone plc,
         Microsoft and Time Warner Telecom,  as well as lower net gains on sales
         of businesses and investments of $0.7 billion. In addition, we recorded
         impairments  of $0.2  billion in 2002  related to  leveraged  leases of
         airplanes associated with certain carriers.  Partially offsetting these
         was  the  adoption  of  SFAS  No.  133,   "Accounting   for  Derivative
         Instruments  and Hedging  Activities" in 2001. In conjunction  with the
         adoption, we reclassified certain investment securities,  which support
         debt that is indexed to those securities,  from "available-for-sale" to
         "trading," resulting in a pretax charge of $1.2 billion.  Also in 2001,
         we recorded a $0.8 billion  charge on the  Excite@Home  put  obligation
         settlement with Cox Communications, Inc. (Cox) and Comcast.

              In   conjunction  with   our  annual  review  of  leveraged  lease
         residual  values,  and in light of the recent problems with the airline
         industry,  we may record an impairment  charge in the fourth quarter of
         2002  associated  with the  residual  values  on  leveraged  leases  of
         airplanes, which may be material.


                                For the Three Months         For the Nine Months
                                Ended September 30,          Ended September 30,
         (Dollars in Millions)  2002         2001            2002        2001

         Interest (expense)    $(748)       $(786)          $(2,231)    $(2,426)

              Interest  expense  decreased 4.7%, or  $38 million,  in  the third
         quarter of 2002 compared with the third quarter of 2001,  and decreased
         8.0%,  or $0.2 billon,  in the first nine months of 2002  compared with
         the first  nine  months  of 2001.  The  decrease  in both  periods  was
         primarily  due to a lower  average debt balance in 2002  compared  with
         2001,  reflecting our debt  reduction  efforts,  partially  offset by a
         higher average interest rate primarily driven by our $10 billion global
         bond offering in November 2001.


                                    For the Three Months    For the Nine Months
                                    Ended September 30,     Ended September 30,
         (Dollars in Millions)      2002            2001    2002           2001

         (Provision) benefit for
           income taxes            $ (312)         $ 70    $ 4,053        $ 288

              The  (provision)  benefit   for   income   taxes  increased   $0.4
         billion to a  provision  of $0.3  billion in the third  quarter of 2002
         compared  with a benefit of $0.1 billion in the third  quarter of 2001.
         The  increase  was  primarily  due to the impact of the  effective  tax
         rates,  partially  offset by lower  income  before  income taxes in the
         third  quarter of 2002  compared  with the third  quarter of 2001.  The
         effective  tax rate for the third  quarter of 2002 was 55.0%,  compared
         with negative  7.9% for the prior year quarter.  The third quarter 2002
         effective tax rate was  unfavorably  affected by the impacts of charges
         we recorded in connection with certain  investments in leveraged leases
         for which a limited tax benefit was  recorded.  The third  quarter 2001
         negative effective tax rate was favorably impacted by a significant net
         tax  benefit  related  to  Excite@Home,  including  a benefit  from the
         deconsolidation,  partially  offset by the prior  consolidation  of its
         operating losses, for which we were unable to record tax benefits. Also
         favorably  impacting  the negative  effective tax rate was the tax-free
         gain  associated  with the  disposal  of a portion  of AT&T's  retained
         interest in AT&T Wireless in a debt-for-equity exchange.

              The benefit for income taxes  increased  $3.8  billion in the nine
         months ended September 30, 2002, compared with the same period in 2001.
         The increase  was  primarily  due to a loss before  income taxes in the
         nine months ended  September  30,  2002,  compared  with income  before
         income taxes in the same period in 2001, partially offset by the impact
         of the effective tax rates.  The effective tax rate for the nine months
         ended  September 30, 2002, was 26.0%,  compared with negative 83.6% for
         the prior year period. The effective tax rate for the nine months ended
         September  30, 2002,  was  unfavorably  impacted by non  tax-deductible
         expenses,  primarily the AT&T Broadband goodwill impairment charge. The
         2001  negative   effective  tax  rate  was  favorably   impacted  by  a
         significant net tax benefit related to Excite@Home, including a benefit
         from the deconsolidation and the put obligation settlement with Cox and
         Comcast,  partially offset by the prior  consolidation of its operating
         losses, for which we were unable to record tax benefits. Also favorably
         impacting the negative  effective tax rate was the tax-free  redemption
         of AT&T stock held by Comcast in exchange for an entity owning  certain
         cable systems and the tax-free gain  associated  with the disposal of a
         portion  of  AT&T's   retained   interest   in  AT&T   Wireless   in  a
         debt-for-equity  exchange.  These impacts were partially  offset by non
         tax-deductible goodwill amortization.


                                   For the Three Months    For the Nine Months
                                   Ended September 30,     Ended September 30,
         (Dollars in Millions)     2002        2001        2002        2001

         Minority interest and
           dividends on subsidiary
           preferred stock         $(38)       $177        $(126)      $1,015

              Minority  interest and  dividends on  subsidiary  preferred stock,
         which is recorded  net of income  taxes,  was $38 million of expense in
         the third  quarter of 2002  compared with $0.2 billion of income in the
         third  quarter of 2001 and was $0.1  billion  of  expense  for the nine
         months ended  September  30, 2002,  compared with $1.0 billon of income
         for the nine months ended September 30, 2001.  These variances were due
         to income  recorded in the three and nine months  ended  September  30,
         2001, primarily relating to losses generated by Excite@Home,  including
         asset   impairment   charges  that  were   attributable  to  the  other
         shareholders of Excite@Home. In 2002, Excite@Home was not consolidated;
         therefore we no longer  recorded  minority  interest  income  (expense)
         related to Excite@Home.


                                   For the Three Months   For the Nine Months
                                    Ended September 30,   Ended September 30,
         (Dollars in Millions)         2002     2001        2002        2001

         Net (losses) related to
           other equity investments    $(11)    $(3,352)    $(1,032)    $(4,389)

              Net (losses)  related  to  other  equity  investments,  which  are
         recorded net of income taxes,  were $11 million in the third quarter of
         2002  compared  with $3.4  billion  in the  third  quarter  of 2001,  a
         decrease in net losses of $3.3  billion.  The  decrease  was  primarily
         driven by a $1.8  billion  after-tax  charge  related  to the unwind of
         Concert and a $1.5 billion  after-tax  charge  related to the estimated
         loss on AT&T's  commitment to purchase the  remaining  public shares of
         AT&T Canada recorded in the third quarter of 2001.

              The  after-tax  amortization   of  excess  basis  associated  with
         nonconsolidated investments, recorded as a reduction of income, totaled
         $14 million in the third quarter of 2001. Effective January 1, 2002, in
         accordance  with the provisions of SFAS No. 142, we no longer  amortize
         excess basis related to nonconsolidated investments.

              Net  (losses)  related  to  other  equity  investments  were  $1.0
         billion for the nine months ended  September 30, 2002, and $4.4 billion
         for the same period in 2001, a decrease in net losses of  approximately
         $3.4 billion.  The decrease in net losses was due to after-tax  charges
         of $1.8 billion  related to the unwind of Concert,  $1.2 billion higher
         after-tax  charges related to the estimated losses on AT&T's obligation
         to purchase  the  remaining  shares of AT&T  Canada and a $0.7  billion
         after-tax  impairment of our investment in Net2Phone  recorded in 2001.
         These decreases in net losses were partially offset by higher after-tax
         cable partnership impairment charges of $0.6 billion recorded in 2002.

              The  after-tax  amortization  of  excess   basis  associated  with
         nonconsolidated investments, recorded as a reduction of income, totaled
         $111 million in the first nine months of 2001.


                                       For the Three Months  For the Nine Months
                                       Ended September 30,   Ended September 30,
         (Dollars in Millions)          2002        2001      2002      2001

         Equity income (losses) from
           Liberty Media Group          $ -         $ 111     $ -       $(2,711)

              As a  result  of the  split-off of  LMG on  August 10, 2001, we no
         longer record the results of LMG.


                                       For the Three Months  For the Nine Months
                                       Ended September 30,   Ended September 30,
         (Dollars in Millions)           2002      2001       2002       2001

         (Loss) income from discontinued
             operations                  $ -       $ -        $ (88)     $ 150

              The loss from  discontinued operations  for the  nine months ended
         September  30,  2002,  reflects  an  estimated  loss on the  litigation
         settlement  associated with the business of Lucent  Technologies  Inc.,
         which was spun-off from AT&T in 1996. Sparks, et al. v. AT&T and Lucent
         Technologies  Inc. et al., is a class action  lawsuit  filed in 1996 in
         Illinois state court. The complaint sought damages on behalf of present
         and former  customers based on a claim that the AT&T Consumer  Products
         business (which became part of Lucent in 1996) and Lucent had defrauded
         and misled  customers who leased  telephones,  resulting in payments in
         excess of the cost to purchase  the  telephones.  As a result of recent
         negotiations,  a settlement  proposal was  submitted to and accepted by
         the court on August 9, 2002.  In  accordance  with the  separation  and
         distribution  agreement  between  AT&T and Lucent,  AT&T  recorded  its
         proportionate  share of the settlement and estimated legal costs, which
         totaled $132 million pretax ($88 million after-tax).

              Income  from  discontinued  operations   in  2001  represents  the
         results of AT&T Wireless  Group,  which was split-off from AT&T on July
         9, 2001.


                                   For the Three Months     For the Nine Months
                                   Ended September 30,      Ended September 30,
         (Dollars in Millions)       2002      2001           2002      2001

         Gain on disposition of
            discontinued operations  $ -       $ 13,503       $ -       $ 13,503

              In 2001,  we realized  a gain on  the disposition  of discontinued
         operations of $13.5 billion,  representing  the difference  between the
         fair value of the AT&T  Wireless  tracking  stock on July 9, 2001,  the
         date of the split-off, and AT&T's book value in AT&T Wireless Services.


                                   For the Three Months   For the Nine Months
                                   Ended September 30,    Ended September 30,
         (Dollars in Millions)      2002        2001       2002        2001

         Extraordinary gain - net
           of income taxes          $ -         $ -        $ 48        $ -

              The year-to-date gain of $48 million, net of $30 million of income
         taxes, relates to $1.5 billion of trust originated preferred securities
         called  for  early  redemption  in the  first  half of 2002.  The gains
         represent the difference between the carrying value of the debt and the
         cash paid to extinguish the debt.


                                   For the Three Months      For the Nine Months
                                   Ended September 30,       Ended September 30,
         (Dollars in Millions)      2002        2001          2002        2001

         Cumulative effect of
           accounting changes - net
           of income taxes          $ -         $ -           $ (856)     $ 904

              Cumulative  effect of accounting changes, net of applicable income
         taxes,  was a loss of $0.9 billion in the nine months  ended  September
         30, 2002, compared with a gain of $0.9 billion in the nine months ended
         September 30, 2001. Effective January 1, 2002, we adopted SFAS No. 142,
         and 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 of $0.9 billion,  net of income taxes of $0.5 billion,
         was recorded in 2002.

              In the nine months ended September 30, 2001, the cumulative effect
         of  accounting  changes  related  to the  adoption  of  SFAS  No.  133,
         "Accounting for Derivative Instruments and Hedging Activities," and was
         comprised  of $0.4  billion  for AT&T Group  (other  than LMG) and $0.5
         billion  for  LMG.  The  $0.4  billion   recorded  by  AT&T  Group  was
         attributable  primarily to fair value  adjustments of equity derivative
         instruments  related to indexed debt  instruments  and warrants held in
         public  and  private  companies.  The  $0.5  billion  recorded  by  LMG
         represented the impact of separately recording the embedded call option
         obligations associated with LMG's senior exchangeable debentures.


                                   For the Three Months     For the Nine Months
                                   Ended September 30,      Ended September 30,
         (Dollars in Millions)      2002        2001         2002        2001

         Dividend requirements of
           preferred stock, net     $ -         $(235)       $ -         $(652)

              Dividend  requirements of preferred stock were $0.2 billion in the
         third  quarter  of 2001 and $0.7  billion  for the  nine  months  ended
         September 30, 2001. The preferred stock dividend  represented  interest
         in connection with convertible  preferred stock issued to NTT DoCoMo in
         January  of  2001 as well as  accretion  of the  beneficial  conversion
         feature.  On July 9, 2001,  in  conjunction  with the split-off of AT&T
         Wireless  Group,  these  preferred  shares  were  converted  into  AT&T
         Wireless common stock and accordingly were no longer outstanding.  As a
         result, we fully amortized the remaining beneficial  conversion feature
         balance of $0.2 billion in the third quarter of 2001.


                                      For the Three Months   For the Nine Months
                                      Ended September 30,    Ended September 30,
         (Dollars in Millions)         2002        2001       2002        2001

         Premium on exchange of AT&T
           Wireless tracking stock     $ -         $ -        $ -         $(80)


              The premium on exchange of AT&T  Wireless tracking  stock was $0.1
         billion for the nine  months  ended  September  30,  2001.  The premium
         represents  the excess of fair  value of the  Wireless  tracking  stock
         issued over the fair value of the AT&T common stock  exchanged  and was
         calculated  based on the closing  share prices of AT&T common stock and
         AT&T Wireless tracking stock on May 25, 2001.


                                       For the Three Months  For the Nine Months
                                       Ended September 30,   Ended September 30,
                                         2002     2001       2002      2001
         AT&T Common Stock Group - per
           basic and diluted share:
            Earnings (loss) - continuing
              operations                 $ 0.05   $ (0.69)   $ (3.45)  $ (0.94)
            Total earnings (loss)        $ 0.05   $  3.13    $ (3.69)  $  2.86

              In  the  third  quarter of  2002,  AT&T  Common  Stock  Group  had
         earnings  from  continuing  operations  per  diluted  share  of  $0.05,
         compared with a loss per diluted share of $0.69 in the third quarter of
         2001.  The improved  earnings from  continuing  operations  per diluted
         share in the third  quarter of 2002  compared with the third quarter of
         2001 was primarily  attributable  to lower net losses  related to other
         equity investments  primarily due to the impact of charges recorded for
         Concert and AT&T Canada.  These  improvements  were partially offset by
         lower other income (expense), net (on an after-tax basis). For the nine
         months ended  September  30,  2002,  AT&T Common Stock Group had a loss
         from continuing  operations of $3.45 per diluted share, compared with a
         loss of $0.94 per diluted share in 2001. The increased loss in the nine
         months ended  September  30, 2002,  compared  with the same  prior-year
         period,  was  primarily  driven by goodwill  and  franchise  impairment
         charges  recorded in the second quarter of 2002, as well as lower other
         income (expense),  net (on an after-tax basis).  These negative impacts
         were  partially  offset by lower net  losses  related  to other  equity
         investments,  primarily  due to the impact of charges  for  Concert and
         AT&T Canada.

              In the third quarter of 2002, the total earnings per diluted share
         of AT&T Common  Stock Group of $0.05  equaled the loss from  continuing
         operations per diluted  share.  In the third quarter of 2001, the total
         earnings per diluted share of $3.13  included the loss from  continuing
         operations of $0.69, as discussed above, as well as a gain of $3.82 per
         diluted share from the disposition of AT&T Wireless Group.

              The total loss per diluted  share of AT&T  Common  Stock Group for
         the nine months ended  September 30, 2002,  of $3.69  included the loss
         from continuing operations of $3.45, as discussed above, a loss related
         to the cumulative  effect of accounting change of $0.23 and a loss from
         discontinued  operations of $0.02, partially offset by an extraordinary
         gain of $0.01. In the first nine months of 2001, the total earnings per
         diluted  share of AT&T Common  Stock Group of $2.86  included  the loss
         from continuing  operations of $0.94, as discussed  above,  income from
         discontinued  operations of $0.03, a gain from the  disposition of AT&T
         Wireless Group of $3.67, and income related to the cumulative effect of
         accounting change of $0.10.

              The  earnings (loss) per  diluted  share  attributable to  Liberty
         Media  Group  (LMG) were  earnings of $0.04 and a loss of $0.84 for the
         third  quarter and  year-to-date  periods  through July 31,  2001,  the
         deemed   effective  LMG  split-off   date  for   accounting   purposes,
         respectively.

              AT&T Wireless Group reported income of $0.08 per diluted share for
         the year-to-date  period ended June 30, 2001, the deemed effective AT&T
         Wireless Group split-off date for accounting purposes.


         SEGMENT RESULTS

              In support of the services we provide,  we segment our results  by
         the operating  units that support our primary  lines of business:  AT&T
         Business  Services,  AT&T  Consumer  Services and AT&T  Broadband.  The
         balance of AT&T's operations, excluding LMG, is included in a corporate
         and other category. LMG was split-off from AT&T in August 2001.

              EBIT  is  the  primary  measure  used  by AT&T's  chief  operating
         decision  makers to measure  AT&T's  operating  results  and to measure
         segment   profitability  and  performance.   AT&T  calculates  EBIT  as
         operating income (loss) plus other income (expense),  minority interest
         and dividends on  subsidiary  preferred  stock and net pretax  (losses)
         related to other equity  investments.  In addition to EBIT, we also use
         EBITDA,  excluding other income,  to measure AT&T  Broadband's  segment
         profitability and performance. EBITDA, excluding other income, for AT&T
         Broadband is defined as EBIT,  excluding  other income  (expense),  net
         pretax (losses) related to other equity investments,  the 2002 goodwill
         and  franchise  cost  impairment  charges  and  minority  interest  and
         dividends  on  subsidiary   preferred  stock,   plus  depreciation  and
         amortization.  Interest  expense and income taxes are not factored into
         the segment  profitability measure used by the chief operating decision
         makers;   therefore,   trends  for  these  items  are  discussed  on  a
         consolidated  basis.  Management  believes EBIT, and EBITDA,  excluding
         other income,  for AT&T Broadband,  are meaningful to investors because
         they provide analyses of operating results using the same measures used
         by AT&T's chief operating decision makers. In addition, we believe that
         EBIT allows investors a means to evaluate the financial results of each
         segment in relation to total AT&T. EBIT for AT&T was $1,236 million and
         a deficit of $3,654  million for the three months ended  September  30,
         2002 and 2001, respectively.  EBIT was a deficit of $15,237 million and
         a deficit of $3,455  million for the nine months  ended  September  30,
         2002 and 2001,  respectively.  Our  calculations  of EBIT,  and EBITDA,
         excluding  other  income,  for  AT&T  Broadband,  may  or  may  not  be
         consistent  with the  calculation  of these  measures  by other  public
         companies.  EBIT and  EBITDA,  excluding  other  income,  should not be
         viewed by investors as an alternative to generally accepted  accounting
         principles  (GAAP) measures of income as a measure of performance or to
         cash flows from  operating,  investing  and  financing  activities as a
         measure of liquidity. In addition, EBITDA, excluding other income, does
         not take into account changes in certain assets and liabilities as well
         as interest,  income taxes and other income  (expense)  that can affect
         cash flows.

              The  discussion   of  segment  results   includes  revenue,  EBIT,
         capital additions and total assets. In addition, for AT&T Broadband, we
         include EBITDA,  excluding other income.  Total assets for each segment
         generally include all assets, except intercompany receivables.  Prepaid
         pension assets and  corporate-owned or leased real estate are generally
         held  at  the  corporate  level,  and  therefore  are  included  in the
         Corporate and Other group. The income 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,   internal-use   software,   additions  to   nonconsolidated
         investments and increases in franchise costs.

              Our existing segments reflect certain managerial changes that were
         implemented  during 2002. The changes  primarily include the following:
         revenue  previously  recorded by the AT&T Business  Services segment as
         "Internal  Revenue" for services  provided to certain  other AT&T units
         and then  eliminated  within  the  Corporate  and Other  group,  is now
         recorded as a contra-expense by AT&T Business Services;  the results of
         certain units previously included in the Corporate and Other group were
         transferred  to the  AT&T  Business  Services  segment;  the  financial
         impacts of SFAS No. 133 that were previously  recorded in the Corporate
         and Other  group  were  transferred  to the  appropriate  segments.  In
         addition, AT&T Consumer Services and total AT&T revenue was restated in
         accordance with EITF issue 01-9, "Accounting for Consideration Given by
         a Vendor  to a  Customer,"  which  requires  cash  incentives  given to
         customers  previously recorded as advertising and promotion expense now
         to be recorded as a reduction of revenue when  recognized in the income
         statement,  unless an identifiable benefit is received in exchange. All
         prior periods have been restated to reflect these changes.

              Reflecting the  dynamics  of  our business, we continuously review
         our  management  model  and  structure,  and  make  adjustments  to our
         operating segments accordingly.


         AT&T BUSINESS SERVICES

              AT&T Business Services offers 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;  data  and  IP  networking;   managed  networking  services  and
         outsourcing  solutions;  and  wholesale  transport  services  (sales of
         services to service resellers).

                                    For the Three Months     For the Nine Months
                                     Ended September 30,     Ended September 30,
         Dollars in millions         2002         2001      2002         2001
         External revenue
           Service revenue        $ 6,518    $   6,675    $  19,423    $  20,329
           Equipment and product
             sales revenue             84           71          274          207
         Total external revenue     6,602        6,746       19,697       20,536
         Internal revenue              98           61          273          378
         Total revenue            $ 6,700    $   6,807    $  19,970    $  20,914

         EBIT                     $   826    $  (4,390)   $   1,969    $ (1,985)


         OTHER ITEMS
         Capital additions        $   912    $   1,104    $   2,418    $   3,800

                                   At September 30, 2002   At December 31, 2001
         Total assets                    $ 38,621                $ 40,316

         REVENUE

              AT&T Business  Services total revenue  decreased $0.1 billion,  or
         1.6%, in the third quarter of 2002, and declined $0.9 billion, or 4.5%,
         for the nine months ended  September  30, 2002,  compared with the same
         periods in 2001.  The decreases were primarily due to a decline in long
         distance voice revenue of  approximately  $0.3 billion and $1.4 billion
         in the  third  quarter  of 2002  and the  first  nine  months  of 2002,
         respectively.   The  decreases  were  partially  offset  by  growth  in
         data/IP/managed  services,  including  equipment and product sales, and
         local voice services of approximately $0.2 billion and $0.6 billion for
         the  third  quarter  of  2002  and  the  first  nine  months  of  2002,
         respectively.

              Long distance voice services revenue  decreased  approximately  8%
         in the third quarter of 2002 and  approximately 13% for the nine months
         ended  September 30, 2002.  The decreases  were  primarily  driven by a
         lower average price per minute reflecting the competitive forces within
         the  industry.  Also  impacting  the  decreases  was a  change  in  the
         wholesale-retail  product  mix,  which was largely  attributable  to an
         increase in our wholesale  business sales,  which had a lower price per
         minute.  Long distance voice minutes grew slightly in the third quarter
         of 2002 and were flat for the nine months ended  September 30, 2002, as
         wholesale  minute  growth  was  essentially  offset  by  retail  minute
         declines.

              Data/IP/managed services, excluding  equipment and  product sales,
         increased  approximately  6% for the third quarter of 2002 and the nine
         months  ended  September  30, 2002,  compared  with the same periods in
         2001.  When we include  equipment  and product  sales,  these  services
         increased  approximately  7% in both  periods.  Growth  was  driven  by
         increased  sales of packet  services (IP, frame relay and  Asynchronous
         Transfer Mode, or "ATM")  partially offset by a decline in private line
         services,  reflecting  an industry  trend of customers  migrating  from
         private line services to the more cost  effective  and  technologically
         advanced packet services.

              Local voice  services revenue  grew approximately  5% in the third
         quarter  of  2002  and  approximately  9% for  the  nine  months  ended
         September 30, 2002, compared with the same periods in 2001. This growth
         reflects our  continued  focus on  increasing  the  utilization  of our
         existing footprint.  AT&T added  approximately  170,000 access lines in
         the third  quarter of 2002 and had  approximately  3.4  million  access
         lines in service at  September  30,  2002.  Access lines enable AT&T to
         provide local service to customers by allowing  direct  connection from
         customer equipment to the AT&T network.

              AT&T Business  Services internal revenue increased $37 million and
         decreased  $0.1  billion in the third  quarter and first nine months of
         2002 compared with the same periods in the prior year. Internal revenue
         is included in the revenue by product  discussions  above. The increase
         for the quarter was primarily due to greater sales of services to other
         AT&T units that  resell  these  services to their  external  customers,
         particularly  AT&T Broadband.  The year-to-date  decrease was primarily
         due to the  split-off of AT&T  Wireless on July 9, 2001, as these sales
         are now reported as external  revenue,  partially offset by an increase
         in sales to AT&T Broadband.

         EBIT

              EBIT increased $5.2 billion,  or 118.8%,  in the third quarter  of
         2002 and $4.0 billion,  or 199.2%,  for the nine months ended September
         30, 2002,  compared with the same periods in 2001. The increase in both
         periods was  primarily  due to higher  equity losses of $5.4 billion in
         the third  quarter of 2001 and $5.2  billion for the nine months  ended
         September  30,  2001,  primarily  related  to charges  associated  with
         Concert and the estimated  losses on AT&T's  obligation to purchase the
         remaining  shares of AT&T Canada.  These increases were slightly offset
         by lower operating  income of $0.1 billion in the third quarter of 2002
         and  $0.7  billion  for the  nine  months  ended  September  30,  2002,
         resulting  from the impact of lower  prices  within  the long  distance
         business,  which reflects  competitive  pricing  pressures as well as a
         shift  from  higher  margin  long  distance  services  to lower  margin
         products.  In addition,  the year-to-date increase was partially offset
         by a gain of  approximately  $0.5  billion  recorded on the sale of our
         stake in Japan Telecom in the second quarter of 2001.

         OTHER ITEMS

              Capital additions decreased  $0.2 billion, or 17.4%,  in the third
         quarter of 2002 and declined $1.4 billion,  or 36.4%, in the first nine
         months of 2002 compared with the same periods in 2001 as we continue to
         maintain  a  disciplined  focus on  capital  spending.  These  declines
         reflect  significantly  lower capital  expenditures  for network assets
         that support all services provided by AT&T Business.

              Total  assets  decreased  $1.7 billion,  or 4.2%, at September 30,
         2002,  compared with  December 31, 2001.  The decrease  reflects  lower
         receivables  primarily  driven by the  settlement of  receivables  from
         Concert in connection  with the Concert  unwind and lower long distance
         revenue.


         AT&T CONSUMER SERVICES

              AT&T  Consumer  Services  provides  a  variety  of  communications
         services to residential  customers including domestic and international
         long   distance;    transaction-based    long    distance,    such   as
         operator-assisted service and prepaid phone cards; local and local toll
         (intrastate  calls  outside  the  immediate  local  area);  and dial-up
         Internet.

                              For the Three Months       For the Nine Months
                               Ended September 30,        Ended September 30,
         Dollars in millions    2002         2001          2002         2001
         Revenue                $2,794       $3,770        $8,791       $11,423
         EBIT                   $  618       $1,282        $2,252       $ 3,817


         OTHER ITEMS
         Capital additions      $   34       $   43        $   95       $    96

                               At September 30, 2002      At December 31, 2001
         Total assets                 $ 1,762                     $2,141

         REVENUE

              AT&T  Consumer  Services   revenue  decreased   $1.0 billion,   or
         25.9%,  in the third quarter of 2002, and $2.6 billion,  or 23.0%,  for
         the nine  months  ended  September  30,  2002,  compared  with the same
         periods in 2001.  The  revenue  decline in both  periods  reflects  the
         impact of long distance  volume  reductions,  primarily in  traditional
         long distance  voice services such as domestic and  international  dial
         services (long distance calls where the number "1" is dialed before the
         call), and domestic calling card services.  Calling volumes declined at
         a mid-teens  percentage rate for the three and nine-month periods ended
         September  30,  2002,  as a result  of  competition  and  wireless  and
         Internet  substitution,  partially  offset by prepaid  card usage.  The
         traditional   long  distance  voice  services  revenue  was  negatively
         impacted by substitution and the impact of ongoing  competition,  which
         has led to a loss of market share. In addition, the continued migration
         of customers to optional  calling plans and  lower-priced  products has
         also negatively impacted revenue.

         EBIT

              EBIT declined $0.7 billion, or 51.7%, in the third quarter of 2002
         compared with the third quarter of 2001. EBIT declined $1.6 billion, or
         41.0%, for the nine months ended September 30, 2002,  compared with the
         same period in 2001.  The decline in both periods was  primarily due to
         the revenue declines in the long distance business.

              EBIT  margin declined  to 22.1% in the third  quarter of 2002 from
         34.0% in the third quarter of 2001.  EBIT margin  declined to 25.6% for
         the nine  months  ended  September  30,  2002,  from 33.4% for the nine
         months ended  September 30, 2001. The declining EBIT margins  primarily
         reflect the impact of customers who  substitute  long distance  calling
         with wireless and Internet  services and remain AT&T Consumer  Services
         customers generating less revenue,  while their billing,  customer care
         and fixed costs remain. The declining EBIT margins also reflect calling
         volume  declines,  primarily  due  to the  migration  of  customers  to
         optional  calling  plans as well as  declining  long  distance  prices,
         including  prepaid cards.  EBIT margin in the third quarter of 2002 was
         also  negatively  impacted by the  recording of an estimated  loss on a
         long-term contract.


         OTHER ITEMS

              Capital additions were about the same in the third quarter of 2002
         and the nine months ended  September  30, 2002,  compared with the same
         periods in 2001.

              Total  assets   declined   $0.4   billion   to  $1.8   billion  at
         September  30, 2002,  compared  with $2.1 billion at December 31, 2001.
         The decline was primarily due to lower accounts receivable,  reflecting
         lower revenue and slightly improved cash collections.


         AT&T BROADBAND

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

                               For the Three Months      For the Nine Months
                                Ended September 30,       Ended September 30,
         Dollars in Millions    2002         2001        2002          2001
         External revenue       $ 2,546      $ 2,390     $  7,506       $ 7,411
         Internal revenue             1            3            6            12
         Total revenue          $ 2,547      $ 2,393     $  7,512       $ 7,423

         EBIT                   $    45      $  (789)    $(18,840)      $(3,150)
         EBITDA, excluding
           other income         $   569      $   602     $  1,575       $ 1,496

         OTHER ITEMS
         Capital additions      $ 1,092      $   782     $  2,799       $ 2,641

                                At September 30, 2002    At December 31, 2001
         Total assets                 $ 81,933                $ 103,060


         REVENUE

              AT&T Broadband  revenue  increased $0.2 billion,  or 6.4%, for the
         three months ended September 30, 2002,  compared with the corresponding
         prior  year  period  primarily  due  to  growth  in  advanced  services
         (broadband  telephony,  HSD and  digital  video) and a basic cable rate
         increase on January 1, 2002,  partially offset by a decline due to 2001
         net cable dispositions and a loss of basic subscribers.

              AT&T Broadband  revenue  increased $0.1 billion,  or 1.2%, for the
         nine months  ended  September  30, 2002,  compared  with the first nine
         months of 2001  primarily  due to $0.5 billion of growth from  advanced
         services  (broadband  telephony,  HSD  and  digital  video)  and a $0.1
         billion  increase in other basic video services.  The increase in basic
         video  services was  primarily due to a basic cable rate  increase,  as
         well as  increased  advertising  and  pay-per-view  revenue,  partially
         offset by subscriber losses.  These were largely offset by a decline in
         revenue of $0.6 billion due to 2001 net cable dispositions.

              AT&T Broadband continues to experience a decline in the number  of
         basic  subscribers   primarily   reflecting  the  impact  of  increased
         competition  and, to a lesser extent,  current economic  conditions.  A
         continued loss of basic subscribers could have a significant  impact on
         projected growth in revenue, EBIT, and EBITDA,  excluding other income.
         Growth in revenue,  EBIT, and EBITDA,  excluding other income,  is also
         largely  dependent  on  AT&T  Broadband's  ability  to  offer  advanced
         services,  and the completion of AT&T  Broadband's  plant upgrade is an
         important  factor in offering such  services.  Failure to complete AT&T
         Broadband's  plant  upgrade as  anticipated  could  have a  significant
         impact  on  future  growth  in  revenue,  EBIT,  and EBITDA,  excluding
         other income.

              At September 30, 2002, AT&T  Broadband serviced 13.1 million basic
         cable customers, passing 25.1 million homes, compared with 13.7 million
         basic cable  customers,  passing 24.6 million  homes,  at September 30,
         2001. At September  30, 2002, we provided  digital video service to 4.2
         million  customers,  HSD service to 1.9 million customers and broadband
         telephony  service to 1.3 million  customers.  This  compares  with 3.2
         million  digital-video  customers,  1.4 million HSD customers,  and 0.9
         million broadband telephony customers at September 30, 2001.

         EBIT/EBITDA, Excluding Other Income

              EBIT  increased   $0.8   billion  in  the  third  quarter  of 2002
         compared with the third quarter of 2001 primarily as a result of higher
         other  income  due to  lower  losses  of $0.4  billion  on the  sale of
         businesses and  investments  and lower  depreciation  and  amortization
         expenses of $0.3 billion  primarily as a result of the adoption of SFAS
         No. 142. In addition,  higher contributions from advanced services also
         contributed to the EBIT  improvement.  These were  partially  offset by
         $0.1 billion of Comcast merger related costs recorded in 2002.

              EBIT declined  $15.7  billion  for  the first  nine months of 2002
         compared  with the same period of 2001  primarily  due to goodwill  and
         franchise  impairment  charges of $16.5 billon,  higher cost and equity
         method investment impairment charges of $2.2 billion and Comcast merger
         related costs of $0.2 billion  recorded in 2002.  These were  partially
         offset by a $1.2 billion  charge taken in the first quarter of 2001 due
         to the adoption of SFAS No. 133 and lower depreciation and amortization
         expenses of $1.0 billion  primarily as a result of the adoption of SFAS
         No. 142. In  addition,  EBIT was  positively  impacted by higher  other
         income of $0.7 billion due to lower losses on sales of  businesses  and
         investments  and  higher  income  due to  the  revaluation  of  certain
         financial instruments.  Higher contributions from advanced services, as
         well as lower  restructuring  charges of $0.1 billion,  also  partially
         offset the EBIT decline.

              EBITDA, excluding other income, declined $33 million, or 5.6%,  in
         the third  quarter  of 2002  compared  with the third  quarter  of 2001
         primarily due to Comcast  merger related costs recorded in 2002 as well
         as decreased  contributions  from video services,  partially  offset by
         higher  contributions  from advanced  services.  EBITDA excluding other
         income  increased  $0.1 billion,  or 5.3%, for the first nine months of
         2002  compared  with the same  period of 2001  primarily  due to higher
         contributions  from advanced services,  as well as lower  restructuring
         charges.  These were  partially  offset by Comcast merger related costs
         recorded in 2002, and a decline  related to net cable  dispositions  in
         2001.

         OTHER ITEMS

              Capital additions  increased $0.3 billion, or 39.6%, for the three
         months ended  September 30, 2002, and increased $0.2 billion,  or 6.0%,
         for the first nine months of 2002,  compared  with the same  periods of
         2001.  The capital  spending in both periods was  primarily  related to
         support of advanced services and network construction and upgrade.

              Total assets at  September 30, 2002,  were $81.9  billion compared
         with $103.1  billion at December 31, 2001. The decrease in total assets
         was primarily due to a $13.7 billion  decrease in franchise costs and a
         $4.2  billion   decrease  in  goodwill,   primarily   reflecting  asset
         impairment  charges  including  the impact of adopting SFAS No. 142. In
         addition, we recorded  approximately $2.3 billion of impairment charges
         on investments.

              AT&T  Broadband and  Bresnan  Broadband  Holdings, LLC ("Bresnan")
         continue  efforts toward closing the  transactions  contemplated by the
         Asset Purchase  Agreement dated as of April 5, 2002,  pursuant to which
         AT&T  Broadband  will sell to  Bresnan  cable  systems in the States of
         Colorado, Wyoming, Montana and Utah. Closing is subject to satisfaction
         of specified conditions,  including a requirement that the systems have
         no fewer than 305,000 subscribers, that certain consents of franchising
         authorities and other third parties have been obtained,  and that there
         has  not  occurred  (a) a  material  adverse  change  in the  business,
         operations,  financial condition, results of operations or prospects of
         the systems or the business, (b) a material market disruption, or (c) a
         material  change in the  financial,  banking,  capital  or  syndication
         markets.  The  management  of  AT&T  Broadband  does  not  believe  the
         transaction  will close prior to the closing of the merger between AT&T
         Broadband and Comcast.


         CORPORATE AND OTHER

              This group reflects the results of corporate staff  functions, the
         elimination of transactions between segments, as well as the results of
         Excite@Home in 2001.

                               For the Three Months       For the Nine Months
                                Ended September 30,        Ended September 30,
         Dollars in millions    2002          2001        2002         2001

         External revenue       $   14        $  129      $  50        $   403
         Internal revenue          (99)          (64)      (279)          (390)
         Total revenue          $  (85)       $   65      $(229)       $    13

         EBIT                   $ (253)       $  243      $(618)       $(2,137)


         OTHER ITEMS
         Capital additions      $   23        $   51      $  47        $   311

                               At September 30, 2002     At December 31, 2001
         Total assets                 $15,722                   $19,765

         REVENUE

              Revenue  for Corporate  and Other  decreased  $0.2 billion in  the
         third  quarter  of 2002  compared  with the third  quarter  of 2001 and
         decreased  $0.2  billion in the nine months ended  September  30, 2002,
         compared  with the same  prior  year  period.  The  deconsolidation  of
         Excite@Home  contributed  $0.1 billion and $0.3 billion to the external
         revenue   decrease   for  the   quarter   and   year-to-date   periods,
         respectively.  Partially  offsetting  the  decline in  revenue  for the
         year-to-date  period was lower internal  revenue  eliminations  of $0.1
         billion primarily as a result of the split-off of AT&T Wireless on July
         9, 2001.

         EBIT

              EBIT  declined  $0.5  billion  in  the third  quarter of 2002 to a
         deficit of $0.3  billion,  and improved $1.5 billion in the nine months
         ended  September 30, 2002, to a deficit of $0.6 billion,  compared with
         the corresponding  periods in 2001. The decline in the third quarter of
         2002 was primarily due to a $0.5 billion  tax-free gain recorded in the
         third  quarter of 2001  associated  with the  disposal  of a portion of
         AT&T's  retained   interest  in  AT&T  Wireless  in  a  debt-for-equity
         exchange.  Also  contributing  to the EBIT  decline was a $0.2  billion
         impairment charge recorded in 2002 of certain leases of aircraft, which
         are accounted for as leveraged  leases,  and a lower pension  credit of
         $0.1 billion,  primarily  driven by a lower long-term  expected rate of
         return  and  decreased  returns on plan  assets.  These  declines  were
         partially offset by $0.3 billion from the impact of the deconsolidation
         of  Excite@Home.  The  improvement  in EBIT for the nine  months  ended
         September 30, 2002,  was largely due to lower losses  related to equity
         investments of  approximately  $1.2 billion,  primarily  related to the
         impairment  of our  investment  in Net2Phone  in the second  quarter of
         2001. The improvement was also the result of a $0.8 billion loss on the
         second quarter 2001 Excite@Home put obligation  settlement with Cox and
         Comcast,  the  impact of the  deconsolidation  of  Excite@Home  of $0.7
         billion,  and lower transaction  costs of $0.1 billion  associated with
         AT&T's   restructuring   announced   in  October  of  2000.   The  EBIT
         improvements  were partially offset by the $0.5 billion gain associated
         with the  disposal  of a portion of AT&T's  retained  interest  in AT&T
         Wireless as noted above, a $0.2 billion decline related to the on-going
         valuation  activity of certain financial  instruments,  a lower pension
         credit of $0.3 billion,  primarily driven by a lower long-term expected
         rate of return and decreased returns on plan assets, and a $0.2 billion
         impairment  charge recorded in 2002 of certain leases of aircraft which
         are accounted for as leveraged leases.


         OTHER ITEMS

              Capital  additions  decreased  $28 million,  or 56.1% in the third
         quarter of 2002 and $0.3  billion,  or 85.1%,  in the nine months ended
         September 30, 2002,  compared with the corresponding 2001 periods.  The
         decrease in both periods was  primarily  attributable  to the impact of
         the deconsolidation of Excite@Home.

              Total  assets  decreased  $4.0  billion   at  September  30, 2002,
         compared with December 31, 2001. The decrease was primarily driven by a
         lower cash balance held at September 30, 2002.


         LIQUIDITY
<TABLE>
<CAPTION>
                                                                              For the Nine Months Ended
                                                                                       September 30,
                                                                                  2002           2001
         <S>                                                                  <C>           <C>

         (Dollars in Millions)
         CASH FLOWS:
           Provided by operating activities of continuing operations          $ 7,688       $   7,221
           Used in investing activities of continuing operations               (5,251)           (515)
           Used in financing activities of continuing operations               (6,103)         (7,432)
           Provided by discontinued operations                                      -           4,860
</TABLE>


              Net  cash   provided   by  operating   activities  of   continuing
         operations  of $7.7  billion for the nine months  ended  September  30,
         2002,  was  primarily  from  $9.2  billion  of income  from  continuing
         operations,  excluding  non-cash income items.  This source of cash was
         partially   offset  by  net  changes  in  other  operating  assets  and
         liabilities of $1.4 billion  primarily due to lower payroll and benefit
         related liabilities and income taxes payable.  Also offsetting the cash
         source was a decrease in  accounts  payable of $0.3  billion.  Net cash
         provided by  operating  activities  of  continuing  operations  of $7.2
         billion for the nine months ended  September  30, 2001,  was  primarily
         from income from continuing operations, excluding non-cash income items
         and the  adjustment  for net  gains  on  sales  of  businesses  of $8.7
         billion.  These cash sources were  partially  offset by a net change in
         other operating assets and liabilities of $0.9 billion primarily due to
         payments to Liberty  Media  Group,  partially  offset by higher  income
         taxes  payable.  Also  offsetting  the source of cash was a decrease in
         accounts payable of $0.5 billion.

              AT&T's investing activities of continuing  operations resulted  in
         a net use of cash of $5.3 billion for the nine months  ended  September
         30, 2002, compared with $0.5 billion for the comparable period in 2001.
         In the first nine  months of 2002,  AT&T spent $5.3  billion on capital
         expenditures.  For the nine months ended September 30, 2001, AT&T spent
         approximately  $6.7  billion  on  capital   expenditures  and  received
         approximately $4.8 billion primarily from the net dispositions of cable
         systems  and  approximately  $1.8  billion  from  the  sale of  various
         investments.

              For  the  nine months  ended September 30, 2002,  net cash used in
         financing  activities  of  continuing   operations  was  $6.1  billion,
         compared  with $7.4  billion for the nine months  ended  September  30,
         2001. In the first nine months of 2002,  AT&T made net payments of $8.1
         billion to reduce debt and  received  $2.6 billion from the issuance of
         AT&T  common  stock.  In the first nine  months of 2001,  AT&T made net
         payments of $11.0  billion to reduce debt and paid AT&T  Wireless  $5.8
         billion  to  settle  an  intercompany  loan  in  conjunction  with  its
         split-off  from AT&T. In addition,  AT&T received $9.8 billion from the
         issuance of convertible preferred stock and warrants to NTT DoCoMo.

              At September 30, 2002, we had current  assets of $17.7 billion and
         current liabilities of $20.7 billion. The current assets were primarily
         comprised  of trade and other  receivables  of $7.3 billion and cash of
         $6.9 billion.  The current liabilities were primarily comprised of debt
         maturing within one year of $6.6 billion,  other current liabilities of
         $4.7 billion,  accounts  payable of $4.3 billion and AT&T's  obligation
         for AT&T  Canada of $3.5  billion.  We  expect  to fund our  operations
         primarily with cash from operations, cash on hand, commercial paper and
         our  securitization  program.  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.

              In   June  2002,    AT&T  registered   $7.0  billion   of  private
         placement  notes issued in November 2001 in conjunction  with our $10.0
         billion  global  bond  offering  and  commenced a tender on the private
         notes for registered  notes.  The note exchange was completed on August
         2, 2002. Due to certain rating  downgrades  described below, the coupon
         on the entire $10.0 billion global bond offering  increased by 50 basis
         points primarily effective with the interest payment period that begins
         after the November 15, 2002,  interest  payment is due. The  additional
         interest  expense  associated  with this increase is estimated to be $8
         million in 2002 and $50 million in 2003.

              On  October  9,  2002,   we   closed  a $4.0   billion  syndicated
         364-day  credit  facility led by Citibank,  Credit Suisse First Boston,
         Goldman  Sachs and JP Morgan that  replaced our  existing  undrawn $8.0
         billion  credit  facility.  The new  facility  is expected to remain in
         effect  following  the spin-off of AT&T  Broadband and the close of its
         proposed  merger with Comcast.  The new facility is also expected to be
         adequate to back up any AT&T commercial  paper or other short-term debt
         maturing over the course of the next year. The previous credit facility
         contained a financial  covenant  that  required  AT&T to maintain a net
         debt-to-EBITDA ratio (as defined in the credit agreement) not exceeding
         3.00 to 1.00 for four  consecutive  quarters  ending on the last day of
         each fiscal quarter.  At September 30, 2002, we were in compliance with
         this covenant.  The new 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 3.75 to 1.00 for four  consecutive
         quarters  ending  on the last day of each  fiscal  quarter.  After  the
         Broadband spin-off,  the net debt-to-EBITDA  requirement will change to
         2.25 to 1.00 and the facility amount will reduce to $3.0 billion.

              The  holders of  certain  private debt with an outstanding balance
         of $0.8  billion at September  30, 2002,  have an annual right to cause
         AT&T to repay the debt upon payment of an exercise fee. In exchange for
         the   elimination   of  this  put  right  for  2002,   AT&T   posted  a
         cash-collateralized   letter  of  credit  totaling  $0.4  billion.  The
         creditor could  accelerate  repayment of the debt if unfavorable  local
         law changes were to occur in its country of operation.

              During the second and third  quarters of 2002,  AT&T  renewed both
         its AT&T Business Services and AT&T Consumer Services customer accounts
         receivable securitization facilities.  Together the programs provide up
         to  $2.0  billion  of  available  financing,  limited  by the  eligible
         receivables  balance,  which varies from month to month.  Proceeds from
         the  securitization  are  recorded  as  a  borrowing  and  included  in
         short-term debt. At September 30, 2002,  approximately $1.5 billion was
         outstanding.  The terms of these  facilities have been extended to June
         (AT&T Business Services) and July (AT&T Consumer Services) of 2003.

              In June  2002, AT&T sold 230 million  shares of AT&T  common stock
         receiving  net  proceeds  of $2.5  billion.  On October 8, 2002,  these
         funds,  along  with  funds from  other  short-term  sources,  which are
         reflected  in the cash  balance at  September  30,  2002,  were used to
         satisfy AT&T's obligation to the AT&T Canada shareholders.

              On  May 29, 2002,  Moody's  lowered  its  rating of long-term debt
         issued or  guaranteed by AT&T to Baa2 from A3.  Moody's also  confirmed
         AT&T's  short-term  rating as  Prime-2.  On October  8,  2002,  Moody's
         confirmed  AT&T's  Baa2 rating on senior long term debt with a negative
         outlook.  Moody's ratings outlook for AT&T remains negative but AT&T is
         not  currently on review for any  additional  downgrade by Moody's.  On
         June 3, 2002,  Fitch  Ratings also  downgraded  AT&T's  long-term  debt
         rating to BBB+  from A-,  with the  rating  remaining  on Rating  Watch
         Negative pending completion of the AT&T Comcast transaction. On October
         4, 2002,  Fitch  reiterated  the BBB+ rating on AT&T and  indicated the
         rating  outlook would be stable.  AT&T's  long-term debt ratings remain
         BBB+ and Credit Watch with negative  implications  by Standard & Poor's
         Ratings  Group  (Standard & Poor's).  On October 10,  2002,  Standard &
         Poor's  confirmed AT&T's BBB+ rating and stated that following the AT&T
         Comcast  transaction,  Standard & Poor's  expects AT&T to have a stable
         outlook.  Additional debt rating  downgrades  could require AT&T to pay
         higher  rates on certain  existing  debt and pay higher rates or prepay
         certain   operating   leases.  If  our  ratings  are  downgraded  below
         investment  grade by Standard & Poors or Moody's,  there are provisions
         in our  securitization  programs  which could  require the  outstanding
         balances to be paid by the collection of the receivables.  In addition,
         there are provisions in several of our debt instruments that require us
         to pay the  present  value of up to $0.6  billion  of  future  interest
         payments if our credit ratings are downgraded below  investment  grade.
         As of September 30, 2002,  this amount would be $0.2 billion  excluding
         the debt  expected  to go to AT&T  Broadband  in  conjunction  with the
         spin-off.  We do not  believe  downgrades  below  investment  grade are
         likely to occur.

              On  February 27, 2002,  AT&T signed an  agreement with  AT&T Latin
         America (ALA) that  restructured  ALA's  short-term and long-term debt,
         preferred  stock and interest  dividends held by AT&T. At September 30,
         2002,  $0.9  billion  was  outstanding,  which  included  interest  and
         dividends. ALA's senior secured vendor financing of $0.3 billion became
         effective  on March 27,  2002.  The  AT&T-provided  debt and  preferred
         facilities are subordinated to the ALA senior secured vendor financing.
         The agreement between AT&T and ALA, which also took effect on March 27,
         2002,  extends the  maturity and  redemption  dates of all ALA debt and
         preferred stock payable to AT&T to October 2008. ALA may be required to
         make earlier  prepayments of debt or redemptions of preferred stock out
         of the net proceeds of certain  future  equity and debt  offerings.  In
         addition,  while the vendor  financing is  outstanding,  the  agreement
         defers interest payments on all AT&T debt and dividend payments on AT&T
         preferred stock until October 2008.

              On  October  21,  2002,  ALA   announced  that  it  anticipates  a
         liquidity  shortfall  commencing in the fourth  quarter of 2002.  ALA's
         current  situation  has no  impact  on AT&T's  ability  to meet  global
         business  customers'  needs  whether those  operations  are based in or
         extend to the Latin America  region.  ALA is  consolidated  with AT&T's
         operations,  however, on an unconsolidated  basis, AT&T's investment in
         ALA currently has a book value of approximately  $1.2 billion including
         the financing and preferred stock discussed  above.  The recorded value
         of AT&T's  investment  could be impacted by actions  taken by ALA. AT&T
         holds a 69%  economic  stake  and a 95%  voting  stake  in  AT&T  Latin
         America.

              If  the  proposed  spin-off of AT&T Broadband  occurs as currently
         structured,  the debt of TCI and  MediaOne  will be included in the net
         assets  spun-off  and will be included in AT&T  Comcast.  The amount of
         this  third-party  debt at September 30, 2002, was $15.0  billion.  The
         amount of intercompany  debt of AT&T Broadband  payable to AT&T that is
         outstanding at the time of the spin-off will be paid immediately  prior
         to the spin-off. At September 30, 2002, such intercompany debt amounted
         to  approximately  $7.8 billion.  On October 4, 2002,  AT&T and Comcast
         announced an exchange  offer of an aggregate of $11.8 billion of AT&T's
         existing debt securities as part of the planned  combination of Comcast
         and AT&T  Broadband.  The  exchange  closed on  November  8, 2002,  and
         involved two kinds of  exchanges.  In the first kind of exchange,  AT&T
         exchanged  $3.5  billion for notes that,  upon  completion  of the AT&T
         Comcast transaction,  will  become  new  Broadband  notes  and  will be
         unconditionally  guaranteed by AT&T Comcast  Corporation and certain of
         its subsidiaries.  The new Broadband notes reduced the amount that AT&T
         Broadband was required to pay to AT&T upon the spin-off.  In the second
         kind of exchange,  AT&T  exchanged $4.7 billion for new AT&T notes that
         will remain solely  obligations of AT&T and upon completion of the AT&T
         Comcast   transaction,   will  have  revised  terms  described  in  the
         prospectus,  including the revised  maturity date and/or interest rate.
         In addition,  AT&T's quarterly convertible income preferred securities,
         which had a book value of $4.7 billion at September  30, 2002,  will be
         included in the net assets  spun-off  and will be  transferred  to AT&T
         Comcast.  These  securities  will be  settled by being  converted  into
         shares of AT&T  Broadband,  which will then be converted into shares of
         AT&T  Comcast.  If the transfer to AT&T Comcast does not occur within a
         specified period as prescribed in the merger agreement,  AT&T Broadband
         will pay AT&T an  amount  equal  to the fair  value of the  securities,
         determined pursuant to an appraisal process.

              In August 2002, AT&T and Comcast Corporation  reached an agreement
         with AOL Time Warner to restructure the Time Warner Entertainment (TWE)
         partnership.  As part of the  AT&T  Broadband  merger  agreement,  AT&T
         Comcast  will  assume  AT&T's  interest  in TWE upon the closing of the
         merger of AT&T  Broadband with Comcast.  Under the TWE agreement,  AT&T
         Broadband  will receive  $2.1  billion in cash,  $1.5 billion in common
         stock of AOL Time  Warner,  Inc. and an  effective  21% passive  equity
         interest in a new cable company. This agreement is expected to close in
         the first half of 2003.

              AT&T owns a 49% economic  interest in Alestra S. de R.L.  de C.V.,
         a telecommunications  company in Mexico. Alestra announced that it will
         not be able to make a $35 million  bond  payment  due on  November  15,
         2002, and that it is working with Morgan Stanley in  restructuring  its
         capital  structure  of the company.  Alestra is  currently  seeking SEC
         approval on a  Registration  Statement  and hopes to launch an offer to
         its bondholders in late  November/early  December.  Standard and Poor's
         had  downgraded  Alestra's  corporate  credit  rating and said it would
         likely  default on its debt  obligations  during  financial  year 2002,
         probably by way of a bond  restructuring.  Moody's also  downgraded all
         rating of Alestra  stating  that  "based  upon  current  long  distance
         network asset valuations, Moody's considers that unsecured debt holders
         face poor  recovery  prospects  in a distress  scenario."  AT&T  cannot
         predict  what the impact of these  developments  will be. If Alestra is
         able to restructure its debt, AT&T may provide funding to Alestra.

              If AT&T's debt  ratings are further downgraded or any of the risks
         or covenants noted above are triggered,  AT&T may not be able to obtain
         sufficient financing in the timeframe required, and/or such replacement
         financing may be more costly or have  additional  covenants than we had
         in connection  with our debt at September  30, 2002.  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.  This could  negatively  impact our
         ability to pursue acquisitions, make capital expenditures to expand our
         network and cable plant or to pay dividends.

              In  light  of  recent  publicly  reported  developments,  AT&T  is
         examining the impact to it if various telecommunications  companies and
         vendors are unable to satisfy their agreement with AT&T,  including the
         separation agreements between AT&T and Lucent Technologies,  Inc. While
         AT&T has not completed  its review and can not quantify the impact,  if
         any, it is possible that under certain circumstances any such inability
         by telecommunications companies and vendors, including the inability of
         Lucent  to meet its  obligations  under  such  agreements,  could  have
         negative  financial  and  operational  impacts  on AT&T,  which  may be
         material.

         Contractual Cash Obligations

              At  September  30,  2002,  AT&T  had  an  approximate  31%  equity
         ownership in AT&T Canada. On June 25, 2002, under the terms of the 1999
         merger  agreement,  AT&T triggered the purchase of the remaining equity
         of AT&T  Canada for the  Back-end  Price,  which is the  greater of the
         floor  price  and the fair  market  value.  AT&T  arranged  for  Tricap
         Investments Corporation, a wholly owned subsidiary of Brascan Financial
         Corporation,  to purchase an  approximate  63% equity  interest in AT&T
         Canada and CIBC Capital  Partners to acquire an  approximate  6% equity
         interest in AT&T  Canada.  As part of this  agreement,  which closed on
         October 8, 2002,  AT&T  agreed to pay the  purchase  price for the AT&T
         Canada  shares  on behalf of  Tricap  Invetments  Corporation  and CIBC
         Capital  Partners.  AT&T funded the purchase  price partly with the net
         proceeds  of  approximately  $2.5  billion  raised  in the  sale of 230
         million  shares of AT&T common  stock on June 11, 2002.  The  remaining
         portion of the  obligation  was financed  through  short-term  sources.
         Tricap and CIBC Partners made a nominal payment to AT&T upon completion
         of the transaction.  AT&T continues to hold a 31% ownership interest in
         AT&T Canada. The liability at September 30, 2002, of $3.5 billion,  was
         reflected  as "AT&T  Canada  Obligation"  in the  Consolidated  Balance
         Sheet.

              AT&T  has  contractual obligations  to utilize  network facilities
         from local  exchange  carriers with terms greater than one year.  These
         contracts are based on volumes and have penalty fees if certain  volume
         levels are not met. We assessed our minimum exposure based on penalties
         to exit the  contracts.  At December 31, 2001,  penalties to exit these
         contracts  in any given year totaled  approximately  $1.5  billion.  At
         September  30, 2002,  this amount has increased to  approximately  $2.1
         billion,  primarily as a result of the company entering into additional
         contracts.


         FINANCIAL CONDITION

                                           September 30,       December 31,
                                                   2002               2001
         Dollars in Millions
         Total assets                       $ 138,038          $ 165,282
         Total liabilities                     89,076            105,322
         Total shareowners' equity             42,863             51,680

              Total  assets  decreased  $27.2  billion,   or  16.5%,  to  $138.0
         billion at September 30, 2002,  compared  with December 31, 2001.  This
         decrease was largely  driven by a $13.7  billion  decrease in franchise
         costs and a $4.2 billion decrease in goodwill, primarily reflecting the
         asset  impairment  charges  related  to  our  AT&T  Broadband  segment,
         including  the impact of adopting  SFAS No. 142. The decrease in assets
         was also due to $6.1 billion of lower  investments and related advances
         resulting  from  unfavorable  mark-to-market  adjustments  on monetized
         investments and permanent  impairments on certain investments,  as well
         as a $3.7 billion reduction in cash.

              Total  liabilities  decreased  $16.2 billion,  or 15.4%,  to $89.1
         billion at  September  30,  2002,  from $105.3  billion at December 31,
         2001.  This  decrease was  primarily a result of $10.6 billion in lower
         debt,  primarily reflecting the pay down of short-term debt, as well as
         favorable mark-to-market adjustments on certain derivatives embedded in
         debt that are  indexed  to  various  investments,  partially  offset by
         unfavorable  mark-to-market  adjustments on foreign debt resulting from
         fluctuations  in  exchange  rates.  The  decrease in  liabilities  also
         includes  $3.7  billion  of  lower  deferred  income  taxes,  primarily
         resulting from the deferred tax benefits associated with the impairment
         of franchise  costs and certain  investments,  partially  offset by the
         reclassification of the tax liabilities associated with our AT&T Canada
         obligation  to current  deferred  income tax asset and the recording of
         deferred  tax   liabilities   associated   with   deductible  2002  tax
         depreciation  in excess of  depreciation  recorded in  accordance  with
         generally accepted accounting principles.  Although not impacting total
         liabilities,  our  obligation  related to AT&T Canada was  reclassified
         from other long-term liabilities and deferred credits to the short-term
         liability,  AT&T Canada obligation,  as a result of our satisfaction of
         the obligation in October 2002.

              Minority  interest  decreased  $2.2  billion,  or  61.5%, to  $1.4
         billion at September 30, 2002,  from $3.6 billion at December 31, 2001.
         This decrease was  primarily due to the exchange and  redemption of all
         TCI Pacific preferred shares for AT&T common shares.

              Total  shareowners' equity  decreased  $8.8 billion,  or 17.1%, to
         $42.9 billion at September 30, 2002, from $51.7 billion at December 31,
         2001. This decrease was primarily due to an increase in the accumulated
         deficit resulting from net losses of $13.6 billion,  which were largely
         driven by the asset impairments  recorded related to our AT&T Broadband
         segment,  partially  offset by a $2.5  billion  increase in  additional
         paid-in  capital and AT&T  common  stock  resulting  from our June 2002
         common stock offering and $2.1 billion  resulting from the exchange and
         redemption of all TCI Pacific preferred shares for AT&T common shares.

              During the first three  quarters of 2002,  when AT&T  declared its
         quarterly  dividends  to the AT&T Common Stock Group  shareowners,  the
         company  was in an  accumulated  deficit  position.  As a  result,  the
         company reduced additional paid-in capital by $0.4 billion,  the entire
         amount of the dividends declared.

              The  ratio  of  total  debt to total  capital for AT&T (total debt
         divided by total debt and  equity)  was 47.4% at  September  30,  2002,
         compared  with  47.7%  at  December  31,  2001.  For  purposes  of this
         calculation, equity includes the convertible trust preferred securities
         and subsidiary  redeemable  preferred  stock. In addition,  included in
         total debt was approximately  $5.4 billion and $8.6 billion of notes at
         September  30, 2002,  and December  31, 2001,  respectively,  which are
         exchangeable  into or  collateralized  by securities we own.  Excluding
         this debt,  the debt ratio at September 30, 2002,  was 44.0%,  compared
         with 43.4% at December 31, 2001.

              Given  the  decline in   the value of  equity  holdings  in AT&T's
         pension trust,  we expect that the market value of these pension assets
         at December 31, 2002,  will be lower than previously  anticipated,  and
         may be lower than the accumulated benefit obligation (ABO) for the AT&T
         Management Pension Plan. Under SFAS No. 87, "Employer's  Accounting for
         Pensions,"  a company  is  required  to record  an  additional  minimum
         liability equal to the amount of the unfunded ABO. This liability would
         be offset by an  intangible  asset equal to the amount of  unrecognized
         prior service cost,  and a charge to equity,  net of taxes.  The actual
         2002 minimum  liability will be calculated on the next measurement date
         of the plan, which is December 31, 2002, and is dependent on plan asset
         values at that time,  as well as  assumptions  used to measure  pension
         obligations and could result in a net charge to equity.


         RISK MANAGEMENT

              We are exposed to market risk from changes in interest and foreign
         exchange  rates.  In  addition,  we are  exposed  to  market  risk from
         fluctuations  in the prices of securities,  some of which are monetized
         through  the  issuance  of debt.  On a limited  basis,  we use  certain
         derivative  financial  instruments,   including  interest  rate  swaps,
         options,  forwards,  equity  hedges and other  derivative  contracts to
         manage these risks. We do not use financial  instruments for trading or
         speculative purposes.  All financial instruments are used in accordance
         with board-approved policies.

              We have entered into combined  interest rate forward contracts  to
         hedge  foreign-currency-denominated debt. Assuming a 10% downward shift
         in interest  rates,  the fair value of the  contracts at September  30,
         2002, would have changed by $2 million.

              We have  certain  notes which are  indexed to the market  price of
         equity  securities  we own.  Certain of these  notes  contain  embedded
         derivatives,  while  other  debt was  issued  in  conjunction  with net
         purchased  options.  Changes in the market  prices of these  securities
         result in  changes in the fair value of the  derivatives.  Assuming  an
         upward  10% change in the market  price of these  securities,  the fair
         value of the combined  collars and  underlying  debt would  increase by
         $342 million at September 30, 2002. The change in fair value referenced
         above does not represent the actual change in fair value we would incur
         under normal market  conditions  because all  variables  other than the
         equity prices were held constant in the calculations.


         RECENT ACCOUNTING PRONOUNCEMENTS

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

              On April 30, 2002,  the FASB issued SFAS No. 145,  "Rescission  of
         SFAS  Statements No. 4, 44, and 64,  Amendment of SFAS Statement No. 13
         and Technical Corrections." SFAS No. 145 eliminates the requirement (in
         SFAS No. 4) that gains and losses from the  extinguishments  of debt be
         aggregated and classified as  extraordinary  items,  net of the related
         income tax. An entity is not prohibited from classifying such gains and
         losses as extraordinary items, as long as they meet the criteria of APB
         No. 30. In addition,  SFAS No. 145 requires  sale-lease  back treatment
         for certain  modifications  of a capital lease that result in the lease
         being classified as an operating lease. The rescission of SFAS No. 4 is
         effective for fiscal years beginning after May 15, 2002, which for AT&T
         would be January 1, 2003. Earlier  application is encouraged.  Any gain
         or loss on extinguishment of debt that was previously  classified as an
         extraordinary item would be reclassified to other income (expense). The
         remainder  of the  statement is generally  effective  for  transactions
         occurring after May 15, 2002. AT&T does not expect that the adoption of
         SFAS  No.  145  will  have a  material  impact  on  AT&T's  results  of
         operations, financial position or cash flows.

              On June 28,  2002,  the FASB issued SFAS No. 146,  "Accounting for
         Exit or Disposal Activities". This statement addresses the recognition,
         measurement  and reporting of costs that are  associated  with exit and
         disposal   activities.   This  statement   includes  the  restructuring
         activities  that are  currently  accounted for pursuant to the guidance
         set forth in EITF 94-3,  "Liability  Recognition  for Certain  Employee
         Termination  Benefits  and Other Costs to Exit an  Activity  (including
         Certain  Costs  Incurred  in  a   Restructuring),"   costs  related  to
         terminating a contract that is not a capital lease and one-time benefit
         arrangements  received by employees who are  involuntarily  terminated-
         nullifying  the guidance  under EITF 94-3.  Under SFAS No. 146 the cost
         associated  with an exit or  disposal  activity  is  recognized  in the
         periods in which it is  incurred  rather  than at the date the  company
         committed to the exit plan.  This  statement  is effective  for exit or
         disposal  activities  initiated  after December 31, 2002,  with earlier
         application encouraged. Previously issued financial statements will not
         be restated.  The  provisions of EITF 94-3 shall  continue to apply for
         exit  plans   initiated   prior  to  the  adoption  of  SFAS  No.  146.
         Accordingly,  the  initial  adoption  of SFAS No.  146 will not have an
         effect on AT&T's  results of  operations,  financial  position  or cash
         flows.  Liabilities associated with future exit and disposal activities
         will not be recognized until actually incurred.


         SUBSEQUENT EVENTS

              On  November  5,  2002,   AT&T   was  served  with  a  shareholder
         lawsuit  filed on October  29,  2002,  in the Court of  Chancery of the
         State of Delaware.  The lawsuit names AT&T and each member of the board
         of  directors of AT&T Latin  America  (ALA) as  defendants,  asserting,
         among other things,  that AT&T as a majority  shareholder and the named
         directors  breached  fiduciary  duties  to ALA.  AT&T  will  vigorously
         contest the allegations set forth in the lawsuit.

              On November 7, 2002,  certain creditors of At Home Corp. (At Home)
         filed a class action against AT&T in California  state court  asserting
         claims relating to the conduct of AT&T and its designees on the At Home
         board  of  directors  in  connection  with  At  Home's  declaration  of
         bankruptcy and subsequent  efforts to dispose of some of its businesses
         or  assets,  as well as in  connection  with  other  aspects  of AT&T's
         relationship  with At Home.  As described in the joint proxy  statement
         and prospectus of AT&T and Comcast,  dated May 14, 2002,  liability (if
         any) arising from this lawsuit would be shared equally between AT&T and
         AT&T  Broadband,  and then  following  the merger of  Comcast  and AT&T
         Broadband,  any such liability would be shared equally between AT&T and
         AT&T Comcast.


Item 4. CONTROLS AND PROCEDURES

              Within 90 days prior to the date of 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.


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
         July 10, 2002.

(b)      Election of Directors
                                                  Votes
                                                (Millions)
              Nominee                 For                      Withheld
        C. Michael Armstrong         2,978                        162
        J. Michael Cook              2,995                        145
        Kenneth T. Derr              2,994                        146
        David W. Dorman              2,996                        144
        M. Kathryn Eickhoff          2,994                        146
        George M. C. Fisher          3,006                        134
        Frank C. Herringer           3,007                        133
        Amos B. Hostetter, Jr.       2,999                        141
        Shirley A. Jackson           3,004                        136
        Donald F. McHenry            2,993                        147
        Charles H. Noski             3,005                        136
        Louis A. Simpson             3,006                        134
        Michael I. Sovern            2,993                        147
        Sanford I. Weill             3,002                        138
        Tony L. White                2,995                        146

(c)     Holders of common shares voted at this meeting on the following matters,
        which were set forth in the registrant's proxy statement dated May 14,
        2002.
<TABLE>
<CAPTION>
     (i) Ratification of Auditors

                                                                            For          Against      Abstain
        <S>                                                              <C>             <C>             <C>
        Ratification of the firm of PricewaterhouseCoopers, LLP as
        the independent auditors to audit the registrant's financial       2,935           117
        statements for the year 2002. (*)                                (96.18%)        (3.82%)         89
</TABLE>

<TABLE>
<CAPTION>
     (ii) Directors' Proposals:
                                                                            For          Against      Abstain    Non-Vote
        <S>                                                              <C>            <C>           <C>        <C>
        Approve the merger of AT&T Broadband and Comcast Corp.(**)         2,523            86           38      493
                                                                         (70.12%)        (2.40%)      (1.05%)
        Approve the AT&T Comcast Charter (*)                               2,431           177           39      493
                                                                         (91.85%)        (6.69%)      (1.46%)
        Approve the creation of Consumer Services Group Tracking           2,218           384           45      493
        Stock (**)                                                       (61.65%)       (10.66%)      (1.26%)
        Approve the Consumer Services Incentive Plan(*)                    2,139           439           69      493
                                                                         (82.98%)       (17.02%)
        Approve an amendment to the Employee Stock Purchase Plan (*)       2,393           194           60      493
                                                                         (92.49%)        (7.51%)
        Approve the Reverse Stock Split (**)                               2,913           165           63
                                                                         (80.96%)        (4.57%)      (1.75%)
</TABLE>

<TABLE>
<CAPTION>
     (iii) Shareholders' Proposals
                                                                            For          Against      Abstain    Non-Vote
        <S>                                                            <C>            <C>            <C>         <C>

        Equal Opportunity Statement (*)                                  293           2,254         100         493
                                                                       (11.50%)       (88.50%)
        Employee Pension Plan (*)                                        255           2,301          90         493
                                                                       (9.97%)        (90.03%)
        Future Restructuring Matter (*)                                 1,049          1,507          91         493
                                                                       (41.06%)       (58.94%)
        Severance Contracts (*)                                          546           1,987         114         493
                                                                       (21.55%)       (78.45%)
        Executive Compensation (*)                                        397          2,140         110         493
                                                                       (15.64%)       (84.36%)

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

     ** Percentages are based on the total number of outstanding common shares. Approval of this proposal required a majority of the
     outstanding shares of AT&T common stock.
</FN>
</TABLE>

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  Exhibit Number

                  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 August 23, 2002, was filed pursuant to Item 5 and
           Item 7 on August 23, 2002.
         Form 8-K dated August 14, 2002, was filed pursuant to Item 9 on
           August 14, 2002.
         Form 8-K dated August 13, 2002, was filed pursuant to Item 5 and
           Item 7 on August 13, 2002.
         Form 8-K dated August 13, 2002, was filed pursuant to Item 9 on
           August 13, 2002.
         Form 8-K dated August 12, 2002, was filed pursuant to Item 5 and
           Item 7 on August 12, 2002.
         Form 8-K dated July 30, 2002, was filed pursuant to Item 5 on
           July 30, 2002.
         Form 8-K dated July 23, 2002, was filed pursuant to Item 5 and
           Item 7 on July 29, 2002.
         Form 8-K dated July 17, 2002, was filed pursuant to Item 5 and
           Item 7 on July 22, 2002.
         Form 8-K dated July 10, 2002, was filed pursuant to Item 5 and
           Item 7 on July 11, 2002.
         Form 8-K dated July 1, 2002, was filed pursuant to Item 5 on
           July 3, 2002.



                                   SIGNATURES


         Pursuant to the  requirements  of the Securities  Exchange Act of 1034,
         the  registrant  has duly caused this report to be signed on its behalf
         by the undersigned thereunto duly authorized.



                                   AT&T Corp.


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


Date:    November 12, 2002

                                 CERTIFICATIONS

I, C. Michael Armstrong, 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 quarterly  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 quarterly report;

4. The   registrant's   other certifying   officers and   I are  responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such disclosure  controls  and procedures  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  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  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 in  the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or  not material,  that  involves  management or  other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other certifying  officers and  I have indicated  in  this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:  November 12, 2002

                            /s/    C. Michael Armstrong
                            ---------------------------
                                   Chief Executive Officer


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 quarterly  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 quarterly report;

4. The  registrant's  other  certifying  officers  and  I  are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls  and procedures  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  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  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 in  the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or  not  material,  that  involves  management or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other certifying  officers and  I have  indicated in  this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:  November 12, 2002

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




Exhibit Index


Exhibit
Number



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





                                                                      Exhibit 12




              AT&T's  loss  for  the nine  months ended  September 30, 2002, was
         inadequate to cover fixed charges,  dividend requirements on subsidiary
         preferred  stock and  interest  on trust  preferred  securities  in the
         amount of $16.0 billion.


                                                                    Exhibit 99.1

                   CERTIFICATION OF PERIODIC FINANCIAL REPORTS



I,  C. Michael  Armstrong,  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
         September  30,  2002  (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:  November 12, 2002


                            /s/   C. Michael Armstrong
                            ----------------------------
                                  C. Michael Armstrong


                                                                    Exhibit 99.2

                   CERTIFICATION OF PERIODIC FINANCIAL REPORTS



I, Thomas W. Horton, 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
         September  30,  2002  (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:  November 12, 2002


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