<PAGE>
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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-K

<TABLE>
<C>            <S>                                                          <C>
     /X/           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                             SECURITIES EXCHANGE ACT OF 1934

                       FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                                            OR

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

                    FOR THE TRANSITION PERIOD FROM                 TO
</TABLE>

                           COMMISSION FILE NO. 1-8611

                              MEDIAONE GROUP, INC.

<TABLE>
<S>                                    <C>
      A DELAWARE                       I.R.S. EMPLOYER IDENTIFICATION
     CORPORATION                               NO. 84-0926774

               188 INVERNESS DRIVE WEST, COLORADO 80112
                   TELEPHONE NUMBER (303) 858-3000
</TABLE>

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

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

<TABLE>
<CAPTION>
                                                              NAME OF EACH EXCHANGE ON
                    TITLE OF EACH CLASS                           WHICH REGISTERED
                    -------------------                       ------------------------
<S>                                                           <C>
MediaOne Group, Inc. Common Stock                             New York Stock Exchange
($0.01 per share, par value)                                  Pacific Stock Exchange
7.96% Trust Originated Preferred Securities                   New York Stock Exchange
(Liquidation Amount $25 per Preferred Security)
8.25% Trust Originated Preferred Securities                   New York Stock Exchange
(Liquidation Amount $25 per Preferred Security)
9.30% Trust Originated Preferred Securities                   New York Stock Exchange
(Liquidation Amount $25 per Preferred Security)
9.50% Trust Originated Preferred Securities                   New York Stock Exchange
(Liquidation Amount $25 per Preferred Security)
9.04% Trust Originated Preferred Securities                   New York Stock Exchange
(Liquidation Amount $25 per Preferred Security)
6-1/4% Exchangeable Notes due August 15, 2001                 New York Stock Exchange
7.00% Exchangeable Notes due November 15, 2002                New York Stock Exchange
</TABLE>

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

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

    At February 29, 2000, 640,566,448 shares of MediaOne Group, Inc. common
stock were outstanding.

    At February 29, 2000, the aggregate market value of MediaOne Group, Inc.
voting stock held by non-affiliates was approximately $50,467,747,960.

    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 ____

                      DOCUMENTS INCORPORATED BY REFERENCE.

    Portions of the Registrant's definitive Proxy Statement issued in connection
with the 2000 Annual Meeting of Shareholders are incorporated by reference into
Parts II and III.

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

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--------------------------------------------------------------------------------
<PAGE>
                               TABLE OF CONTENTS
                                     PART I

<TABLE>
<CAPTION>
ITEM                                                                    PAGE
----                                                                    ----
<C>   <S>                                                               <C>
  1.  Business....................................................         1
  2.  Properties..................................................         4
  3.  Legal Proceedings...........................................         4
  4.  Submission of Matters to a Vote of Security Holders.........         5

                                  PART II

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

                                  PART III

 10.  Directors and Executive Officers of the Registrant..........         6
 11.  Executive Compensation......................................         6
 12.  Security Ownership of Certain Beneficial Owners and
        Management................................................         6
 13.  Certain Relationships and Related Transactions..............         6

                                  PART IV

 14.  Financial Statement Schedules, Reports on Form 8-K and
        Exhibits..................................................         7
</TABLE>

                                       i
<PAGE>
                                     PART I

ITEM 1. BUSINESS

  GENERAL

    MediaOne Group, Inc. ("MediaOne Group" or the "Company") is incorporated
under the laws of the State of Delaware and has its principal executive offices
at 188 Inverness Drive West, Englewood, Colorado 80112, telephone number
(303) 858-3000. MediaOne Group (NYSE: UMG) is one of the world's largest
broadband communications companies. For 1999, the businesses of MediaOne Group
produced $7.8 billion in proportionate revenue. (Financial information
concerning MediaOne Group's operations is set forth in the Consolidated
Financial Statements and Notes thereto, which begin on page 46.) At
December 31, 1999, MediaOne Group and its subsidiaries employed a total of
15,196 people.

    Prior to June 12, 1998, MediaOne Group was known as "U S WEST, Inc." On
June 12, 1998, U S WEST, Inc. (the "Old U S WEST") separated its businesses into
two independent public companies (the "Separation"). Until the Separation,
U S WEST, Inc. conducted its businesses through two groups: U S WEST Media Group
and U S WEST Communications Group. Upon the Separation, the Old U S WEST was
renamed "MediaOne Group, Inc." and retained the multimedia businesses of
U S WEST Media Group, except for U S WEST Dex, Inc., the domestic telephone
directory business, which became aligned with U S WEST Communications Group. The
telecommunications businesses of U S WEST Communications Group, along with the
domestic telephone directory business of U S WEST Dex, became an independent
public company and retained the "U S WEST, Inc." name.

    RECENT DEVELOPMENT

    On May 6, 1999 the Board of Directors of MediaOne Group approved a merger
agreement that provides for the merger of MediaOne Group with and into Meteor
Acquisition Inc., a wholly owned subsidiary of AT&T Corp. The merger will join
AT&T, a worldwide communications leader, with MediaOne Group, a leader in the
broadband communications industry, to create the leading carrier of end-to-end
communications services for consumers and businesses. We believe that the
combined company will be well-positioned to create and provide nationally
branded broadband services and to service new markets and exploit business
opportunities.

    OPERATIONS

    MediaOne Group is one of the largest broadband communications operators in
the United States. Among its investments, MediaOne Group holds a 25.51% interest
in Time Warner Entertainment Company, L.P. ("TWE"), a provider of cable
programming, filmed entertainment and broadband communications services that is
the second largest cable television system operator in the United States.

    BROADBAND COMMUNICATIONS--MEDIAONE NETWORKS.  As of December 31, 1999,
MediaOne Group's cable television systems passed approximately 8.6 million homes
and provided service to approximately 5.0 million cable subscribers. MediaOne
Group's systems are organized into six operating regions, including large
clusters in Atlanta, Massachusetts, California, Chicago, Florida, Detroit and
Minneapolis/ St. Paul. MediaOne Group believes that its operating scale in key
markets generates significant benefits, including operating efficiencies, and
enhances its ability to develop and deploy new broadband technologies and
services.

    MediaOne Group's cable services are marketed under the "MediaOne" brand and
are operated by its wholly owned subsidiary, MediaOne of Delaware, Inc.
("MediaOne"). MediaOne Group's cable systems offer customers various levels (or
"tiers") of cable programming services consisting of broadcast television
signals available off-the-air in any locality, televisions signals from
so-called "super stations" originating in distant cities (such as WGN), various
satellite-delivered non-broadcast channels (such as CNN, MTV, USA Network, ESPN,
the Discovery Channel and Nickelodeon), displays of information featuring news,

                                       1
<PAGE>
weather, stock and financial market reports and programming originated locally
by the systems (such as public, governmental and educational access channels).
MediaOne Group's systems also provide premium programming service to their
customers for an extra monthly charge. These premium programming services
include HBO, Cinemax, Showtime, The Movie Channel, Encore and regional sports
networks. Customers generally pay initial connection charges and fixed monthly
fees for a tier of programming services and additional fixed monthly fees for
premium programming services. MediaOne Group also offers pay-per-view
programming of movies and special events for an additional per-program charge.

    MediaOne Group's systems have channel capacity and addressability that are
among the highest in the cable industry. MediaOne Group's systems are located
primarily in suburban communities adjacent to major metropolitan markets and in
mid-sized cities that generally are densely populated and geographically
diverse. MediaOne Group believes that its technologically advanced broadband
networks and the demographic profile of its subscriber base, coupled with its
effective marketing, have been essential to its ability to sustain total monthly
revenue per basic subscriber that is among the highest in the cable industry.
MediaOne Group believes that the geographic diversity of its system clusters
reduces its exposure to economic, competitive or regulatory factors of any
particular region.

    MediaOne Group is upgrading its cable systems to create broadband hybrid
fiber-coax ("HFC") networks. These HFC networks will provide increased channel
capacity for the delivery of additional cable programming and facilitate the
delivery of additional services, such as telephony services, enhanced video
services, and high speed Internet access services. MediaOne Group is selectively
upgrading its systems and expects that it will have nearly 90% of its systems
upgraded by the end of 2000.

    BROADBAND COMMUNICATIONS--TIME WARNER CABLE.  MediaOne Group owns a 25.51%
priority capital and residual equity interest in TWE. The remaining interests in
TWE are owned by Time Warner, Inc. ("TWX"). TWE is engaged in the cable
programming, filmed entertainment and broadband communications businesses. TWE,
through Time Warner Cable, its cable division, is the second-largest cable
television system operator in the United States. Time Warner Cable offers cable
programming services over its networks similar to those offered by MediaOne
Group under the MediaOne brand. Like MediaOne Group, Time Warner Cable is
upgrading its cable systems to provide increased channel capacity and to
facilitate the delivery of additional services.

    In order to avoid disputes as to whether the AT&T merger would violate the
non-competition provisions of the TWE partnership agreement, on August 3, 1999,
MediaOne Group sent a notice of termination to TWE which terminated these
non-competition provisions as to MediaOne Group. The non-competition provisions
continue to apply to TWX. Delivery of the notice of termination permitted TWE to
terminate most of MediaOne Group's management rights in TWE, which it did on
August 4, 1999. Most of these rights would have terminated in any event upon the
change of control of MediaOne Group in the merger. The delivery of the
termination notice and the resulting termination of management rights is
irrevocable, however, even if the merger does not occur. The loss of these
management rights may have a material adverse effect on the value of MediaOne
Group's interest in TWE. Notwithstanding the notice of termination, MediaOne
Group retains certain rights under the partnership agreement, including the
right to approve such matters as a merger of TWE, TWE's entrance into new lines
of business and the issuance of new partnership interest.

    REGULATION.  The products and services of MediaOne Group are subject to
varying degrees of regulation. Under the Telecommunications Act of 1996 (the
"Telecommunications Act"), the regulation of all but basic service tier cable
and equipment and installation rates was discontinued effective March 31, 1999.
However, as described below, the rate regulation for cable systems covered by
MediaOne's social contract with the Federal Communications Commissions ("FCC")
remain subject to rate regulations until the social contract expires on
December 31, 2000. The Telecommunications Act also eliminated certain

                                       2
<PAGE>
cross-ownership restrictions among cable operations, broadcasters and multipoint
multichannel distribution services ("MMDS") operations, and removed barriers to
competition with local exchange carriers ("LECs").

    The social contract (as amended) is a six-year agreement covering most of
MediaOne's franchises. As part of the social contract, the Company agreed to,
among other things, invest at least $1.7 billion in domestic system rebuilds and
upgrades through the year 2000 to expand channel capacity and improve system
reliability and picture quality. As of December 31, 1998, the investment
commitment had been met. However, the Company must still upgrade all systems
covered by the social contract to a minimum of 550MHz, with at least half being
upgraded to 750 MHz. As of the end of 1998, 70% of customers in systems covered
by the social contract were served by systems with a channel capacity of 550 MHz
or greater, and 47% were served by 750 MHz systems.

    On October 8, 1999, the FCC revised its rules on the number of cable
subscribers that a company may reach and the method to identify cable ownership
interests that would be attributable to a company. The revised rules maintained
the original ruling that a cable operator may not own systems that reach more
than 30% of United States homes. The calculation of the number of United States
homes reached was modified, however, to include those households that subscribe
to broadcast satellite and other multi-channel video programming distributors,
effectively increasing the number of subscribers that a cable operator may
serve. The FCC has voluntarily stayed the ownership rules pending the outcome of
a court challenge to the original ownership rules. The Company believes that
these new rules will not prevent the closing of the AT&T merger.

    Cable television systems are also subject to local regulation, typically
imposed through the franchising process. Local officials may be involved in the
initial franchise selection, system design and construction, safety, rate
regulation, customer service standards, billing practices, community-related
programming and services, franchise renewal and imposition of franchise fees.

    Currently, seven local franchise authorities, representing less than three
percent of the Company's subscribers, are attempting to require MediaOne Group
to allow unaffiliated Internet service providers ("ISPs") to connect to the
cable network for the purpose of transmitting information between the ISP's
customers and the Internet. MediaOne Group believes that local governments,
including franchising authorities, lack authority to force cable companies to
provide network access to other ISPs and will vigorously defend against any such
forced access mandates.

    In June 1998, the FCC issued formal rules providing for the retail sale of
set-top television boxes which integrate security and non-security functions. On
January 1, 2005, cable companies will no longer be permitted to sell or lease
new integrated boxes to their subscribers. In addition, cable companies must
provide subscribers with related security modules that plug into set-top boxes
that are purchased from consumer electronics retailers by July 1, 2000. In
February 1999, MediaOne Group partnered with various manufacturers of digital
set-top boxes in order to provide an open conditional access system, which would
be compliant with domestic OpenCable-TM-specifications. In May 1999, the FCC
issued an interpretation of these rules which clarified that the segregation
requirements applied to digital and hybrid digital/analog boxes only.

    COMPETITION.  MediaOne Group's cable television systems generally compete
for viewer attention with other providers of video programming, including direct
broadcast satellite ("DBS") systems, MMDS systems, local multipoint distribution
services systems, satellite master antenna television ("SMATV") systems and
other cable companies providing services in areas where MediaOne Group operates.
In addition, certain LECs, including regional Bell operating companies
("RBOCs"), are beginning to offer video programming in competition with MediaOne
Group's cable services. In the past, federal cross-ownership restrictions have
limited entry by LECs into the cable television business. The Telecommunications
Act has eliminated many of these barriers, thereby enhancing the ability of LECs
to provide video programming in competition with MediaOne Group. The extent of
such competition in any

                                       3
<PAGE>
franchise area is dependent, in part, upon the quality, variety and price of the
programming provided by these services. Many of these competitive services are
generally not subject to the same local government regulation that affects cable
television. The cable television services offered by MediaOne Group also face
competition for viewers and advertising from other communications and
entertainment media, including off-air television broadcasting services, movie
theaters, video tape rentals and live sporting events. The competition faced by
MediaOne Group's cable systems may increase in the future with the development
and growth of new technologies.

    As MediaOne Group begins to offer additional services over its HFC networks,
MediaOne Group will face additional competition. MediaOne Group's high speed
Internet access and telephony services face competition from other providers,
including regional bell operating companies, LECs, inter-exchange carriers
("IXCs"), ISPs and other providers of local exchange and on-line services. The
degree of competition will be dependent upon the state and federal regulations
concerning entry, interconnection requirements and the degree of unbundling of
the LECs' networks. Competition will be based upon price, service quality,
breadth of services offered and, to a lesser extent, on price.

ITEM 2. PROPERTIES.

    MediaOne Group's principal physical assets consist of cable television
operating plant and equipment, including signal receiving, encoding and decoding
devices, headends and distribution systems and customer house drop equipment for
each of its cable television systems. The signal receiving apparatus typically
includes a tower, antenna, ancillary electronic equipment and earth stations for
reception of satellite signals. Headends, consisting of related electronic
equipment necessary for the reception, amplification and modulation of signals,
are located near the receiving devices. The physical components of cable
television systems require maintenance and periodic upgrading to keep pace with
technological changes.

    MediaOne Group owns or leases parcels of real property for signal reception
sites (antenna towers and headends), microwave facilities and business offices
in each of its market areas and owns most of its service vehicles. MediaOne
Group believes that its properties, both owned and leased and taken as a whole,
are in good operating condition and are suitable and adequate for MediaOne
group's business operations.

ITEM 3. LEGAL PROCEEDINGS.

    MediaOne Group, Inc. and its subsidiaries are subject to claims and
proceedings arising in the ordinary course of business. While complete assurance
cannot be given as to the outcome of any contingent liabilities, in the opinion
of MediaOne Group, any financial impact to which MediaOne Group and its
subsidiaries are subject is not expected to be material in amount to MediaOne
Group's operating results or its financial position.

                                       4
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    At a Special Meeting of Shareholders held in Englewood, Colorado on
October 21, 1999, the shareholders voted as follows to approve the adoption of
an Agreement and Plan of Merger among MediaOne Group, Inc., AT&T and Meteor
Acquisition Inc., a wholly owned subsidiary of AT&T, (the "Merger Agreement") by
which MediaOne Group, Inc. would be merged into Meteor Acquisition, Inc.:

<TABLE>
<CAPTION>
                                                 NUMBER OF VOTES   % OF VOTES VOTED
                                                 ---------------   ----------------
<S>                                              <C>               <C>
For:...........................................    468,329,972          98.706%
Against:.......................................      3,896,128            .821%
Abstain:.......................................      2,246,037            .473%
</TABLE>

                   EXECUTIVE OFFICERS OF MEDIAONE GROUP, INC.

    Pursuant to General Instructions G(3), the following information is included
as an additional item in Part I:

<TABLE>
<CAPTION>
        NAME                                   POSITION                         AGE      PRESENT POSITION
        ----                                   --------                         ---      ----------------
<S>                        <C>                                                <C>        <C>
A. Gary Ames               Executive Vice President                              55            1998(1)

Roger A. Christensen       Executive Vice President and Chief Administrative
                           Officer                                               51            1998

Frank M. Eichler           Executive Vice President--Law & Public Policy and
                           General Counsel                                       43            1998

Douglas D. Holmes          Executive Vice President--Strategy and Business
                           Development                                           39            1998

Charles M. Lillis          President, Chief Executive Officer and Chairman
                           of the Board                                          58            1998(2)

Janice C. Peters           Executive Vice President                              48            1998(3)

Richard A. Post            Executive Vice President and Chief Financial
                           Officer                                               41            1998
</TABLE>

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

(1) Mr. Ames is also President and Chief Executive Officer of MediaOne
    International, Inc.

(2) In connection with the Separation, Mr. Lillis became the President, Chief
    Executive Officer and Chairman of MediaOne Group, Inc. Mr. Lillis was
    previously President and Chief Executive Officer of the U S WEST Media
    Group.

(3) Ms. Peters is also President and Chief Executive Officer of MediaOne.

    Executive Officers are not elected for a fixed term of office, but serve at
the discretion of the Board of Directors.

    With the exception of Ms. Peters, who joined One 2 One in 1996, each of the
above executive officers has held a managerial position with Old U S WEST or an
affiliate of Old U S WEST since at least 1988.

                                       5
<PAGE>
                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

    The information required by this item is included in Note 26, Quarterly
Financial Data, on page 98. The US markets for trading in MediaOne Group common
stock are the New York Stock Exchange and the Pacific Stock Exchange. As of
January 31, 2000, MediaOne Group common stock was held by approximately 500,254
registered shareholders.

ITEM 6. SELECTED FINANCIAL DATA.

    Reference is made to the information set forth on pages 11 through 12.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS.

    Reference is made to the information set forth on pages 13 through 43.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

    Reference is made to the information set forth on pages 35 and 36.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

    Reference is made to the information set forth on pages 46 through 100.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE.

    Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

    The information required by this item with respect to executive officers is
set forth in Part I, page 5, under the caption "Executive Officers of MediaOne
Group, Inc."

    The information required by this item with respect to Directors is included
in the MediaOne Group definitive Proxy Statement relating to the Annual Meeting
of Stockholders held on June 4, 1999 (the "Annual Proxy Statement") under
"Election of Directors" and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

    The information required by this item is included in the Annual Proxy
Statement under "Election of Directors" and "Executive Compensation" and is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

    The information required by this item is included in the Annual Proxy
Statement under "Stock Ownership" and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    Not applicable.

                                       6
<PAGE>
                                    PART IV

ITEM 14. FINANCIAL STATEMENT SCHEDULES, REPORTS ON FORM 8-K AND EXHIBITS.

(a) Documents filed as part of this report:

<TABLE>
<CAPTION>
NUMBER                                                                                    PAGE
------                                                                               ---------------
<C>                     <S>                                                          <C>
                  (1)   Report of Independent Accountants..........................        44
                  (2)   Consolidated Financial Statements:
                        Consolidated Statements of Operations--for the years ended
                          December 31, 1999, 1998 and 1997.........................   46 through 47
                        Consolidated Balance Sheets as of December 31, 1999 and
                          1998.....................................................        48
                        Consolidated Statements of Cash Flows--for the years ended
                          December 31, 1999, 1998 and 1997.........................        49
                  (3)   Consolidated Statements of Shareowners' Equity
                          For the years ended December 31, 1999, 1998 and 1997.....        50
                        Notes to Consolidated Financial Statements.................  51 through 100
                  (4)   Consolidated Financial Statement Schedule:
                        II--Valuation and Qualifying Accounts......................        S-1
</TABLE>

    Financial statement schedules other than those listed above have been
omitted because the required information is contained in the financial
statements and notes thereto, or because such schedules are not required or
applicable.

(b) Reports on Form 8-K:

<TABLE>
<C>                     <S>                                                          <C>
                        MediaOne Group filed the following reports on Form 8-K during the fourth
                          quarter of 1999:
                  (i)   Current Report dated and filed on October 27, 1999 providing financial
                          statements, financial information and exhibits relating to the filing with
                          the Securities & Exchange Commission by MediaOne Group, Inc. of
                          26 million of 7.00% Premium Income Exchangeable Securities(SM)
                          ("PIES(SM)") due November 15, 2002 subject to exchange into ADRs
                          representing ordinary shares of Vodafone AirTouch Public Limited Company.

                 (ii)   Current Report dated and filed on November 3, 1999 providing notification of
                          a Press Release by MediaOne Group announcing its third quarter earnings
                          results.
</TABLE>

(c) Exhibits:

Exhibits identified in parentheses below are on file with the Securities and
Exchange Commission ("SEC") and are incorporated herein by reference. All other
exhibits are provided as part of this electronic submission.

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER
---------------------
<C>                     <C>       <S>
        (2-A)              --     Agreement and Plan of Merger dated as of May 6, 1999 by and
                                  among AT&T Corp., Meteor Acquisition Inc. and MediaOne
                                  Group, Inc. (Exhibit 2 to Current Report on Form 8-K dated
                                  and filed on May 6, 1999).
        (2-B)              --     Form of Separation Agreement between MediaOne Group, Inc.
                                  and U S WEST, Inc. (Exhibit 2-A to Form 10-K, for the
                                  fiscal year ended December 31, 1997, File No. 1-8611).
        (2-C)              --     Form of Employee Matters Agreement between MediaOne
                                  Group, Inc. and U S WEST, Inc. (Exhibit 2-B to Form 10-K,
                                  for the fiscal year ended December 31, 1997, File
                                  No. 1-8611).
        (2-D)              --     Form of Tax Sharing Agreement between MediaOne Group, Inc.
                                  and U S WEST, Inc. (Exhibit 2-C to Form 10-K, for the
                                  fiscal year ended December 31, 1997, File No. 1-8611).
</TABLE>

                                       7
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER
---------------------
<C>                     <C>       <S>
        (3-A)              --     Form of Restated Certificate of Incorporation of MediaOne
                                  Group, Inc. (Annex A-2 to definitive proxy statement on
                                  Schedule 14A dated April 20, 1998).
        (3-B)              --     Form of Amended and Restated Bylaws of MediaOne Group, Inc.
                                  (Exhibit 3(ii) to Current Report on Form 8-K dated June 24,
                                  1998, File No. 1-8611).
        (4-A)              --     Form of Amended and Restated Rights Agreement between
                                  MediaOne Group, Inc. and its Rights Agent (Exhibit 1 to
                                  Form 8-A filed on February 11, 1999 and Exhibit 4 to Current
                                  Report filed on Form 8-K dated February 9, 1999 and filed on
                                  February 11, 1999, File No. 1-8611).
        (4-B)              --     No instrument which defines the rights of holders of long
                                  and intermediate term debt of MediaOne Group, Inc. and all
                                  of its subsidiaries is filed herewith pursuant to
                                  Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this
                                  regulation, the Registrant hereby agrees to furnish a copy
                                  of any such instrument to the SEC upon request.
       (10-A)              --     MediaOne Group, Inc. Executive Short-Term Incentive Plan
                                  (Exhibit 10-A to Form 10-K, for the fiscal year ended
                                  December 31, 1998, File No. 1-8611).
       (10-B)              --     Amended MediaOne Group 1994 Stock Plan (Exhibit 10-B to
                                  Form 10-K, for the fiscal year ended December 31, 1998, File
                                  No. 1-8611).
       (10-C)              --     MediaOne Group Executive Life Insurance Plan (Exhibit 10-C
                                  to Form 10-K, for the fiscal year ended December 31, 1998,
                                  File No. 1-8611).
       (10-D)              --     MediaOne Group Executive Disability Plan (Exhibit 10-D to
                                  Form 10-K for the fiscal year ended December 31, 1998, File
                                  No. 1-8611).
       (10-E)              --     MediaOne Group Non-Qualified Pension Plan (Exhibit 10-E to
                                  Form 10-K for the fiscal year ended December 31, 1998, File
                                  No. 1-8611).
       (10-F)              --     MediaOne Group Mid-Career Pension Plan (Exhibit 10-F to
                                  Form 10-K for the fiscal year ended December 31, 1998, File
                                  No. 1-8611).
       (10-G)              --     MediaOne Group Deferred Compensation Plan (Exhibit 10-G to
                                  Form 10-K for the fiscal year ended December 31, 1998, File
                                  No. 1-8611).
       (10-H)              --     MediaOne Group Executive Financial Counseling Plan
                                  (Exhibit 10-H to Form 10-K for the fiscal year ended
                                  December 31, 1998, File No. 1-8611).
       (10-I)              --     MediaOne Group Executive Non-Qualified Stock Option
                                  Agreement (Exhibit 10-I to Form 10-K for the fiscal year
                                  ended December 31, 1998, File No. 1-8611).
       (10-J)              --     Form of LTIP Option Agreement (Exhibit 10-J to Form 10-K for
                                  the fiscal year ended December 31, 1998, File No. 1-8611).
       (10-K)              --     Form of Executive Restricted Stock Agreement (Exhibit 10-K
                                  to Form 10-K for the fiscal year ended December 31, 1998,
                                  File No. 1-8611).
       (10-L)              --     Form of Executive Retention Agreement (Restricted Stock
                                  Only) (Exhibit 10-L to Form 10-K for the fiscal year ended
                                  December 31, 1998, File No. 1-8611).
       (10-M)              --     Form of Executive Retention Agreement (Restricted Stock and
                                  Options) (Exhibit 10-M to Form 10-K for the fiscal year
                                  ended December 31, 1998, File No. 1-8611).
       (10-N)              --     Admission Agreement dated as of May 16, 1993 between Time
                                  Warner Entertainment Company, L.P. and U S WEST, Inc.
                                  (Exhibit 10 to Current Report filed on Form 8-K dated
                                  May 24, 1998, File No. 1-8611).
       (10-O)              --     Form of Executive Change of Control Agreement (Exhibit 10g
                                  to Form 10-Q for fiscal quarter ended June 30, 1998, file
                                  No. 1-8611).
       (10-P)              --     Form of Change of Control Agreement for Chief Executive
                                  Officer (Exhibit 10e to Form 10-Q for fiscal quarter ended
                                  June 30, 1998, File No. 1-8611).
       (10-Q)              --     Form of Business Unit Change of Control Agreement
                                  (Exhibit 10f to Form 10-Q for fiscal quarter ended June 30,
                                  1998, File No. 1-8611).
       (10-R)              --     Form of Executive Severance Agreement (Exhibit 10ab to
                                  Form 10-K for fiscal year ended December 31, 1995, File
                                  No. 1-8611).
         12                --     Computation of Ratio of Earnings to Fixed Charges of
                                  MediaOne Group, Inc.
</TABLE>

                                       8
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER
---------------------
<C>                     <C>       <S>
         21                --     Subsidiaries of MediaOne Group, Inc.
         23                --     Consent of Independent Accountants.
         24                --     Powers of Attorney.
         99                --     Annual Report on Form 11-K for the MediaOne Savings
                                  Plan/ESOP for the year ended December 31, 1999, to be filed
                                  by amendment.
</TABLE>

                                       9
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Englewood, State of Colorado, on March 23, 2000.

<TABLE>
<S>                                                    <C>  <C>
                                                       MediaOne Group, Inc.

                                                       By:             /s/ RICHARD A. POST
                                                            -----------------------------------------
                                                                         Richard A. Post
                                                                   EXECUTIVE VICE PRESIDENT AND
                                                                     CHIEF FINANCIAL OFFICER
</TABLE>

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

<TABLE>
<S>                                                    <C>
PRINCIPAL EXECUTIVE OFFICER

/s/ Charles M. Lillis*                                 Chairman of the Board, President and Chief Executive
                                                         Officer

PRINCIPAL FINANCIAL OFFICER:

/s/ Richard A. Post                                    Executive Vice President and Chief Financial Officer

DIRECTORS:

/s/ Kathleen A. Cote*

/s/ Robert L. Crandall*

/s/ Grant A. Dove*

/s/ Allan D. Gilmour*

/s/ Pierson M. Grieve*

/s/ Charles M. Lillis*

/s/ Charles P. Russ, III*

/s/ Louis A. Simpson*

/s/ John "Jack" Slevin*

/s/ Daniel W. Yohannes*
</TABLE>

<TABLE>
<S>   <C>                                                    <C>
*By:                   /s/ RICHARD A. POST
             --------------------------------------
                         Richard A. Post
              (FOR HIMSELF AND AS ATTORNEY-IN-FACT)

Dated March 23, 2000
</TABLE>

                                       10
<PAGE>
                              MEDIAONE GROUP, INC.

                              FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                     ----------------------------------------------------
                                                       1999       1998       1997       1996       1995
                                                     --------   --------   --------   --------   --------
                                                        DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
<S>                                                  <C>        <C>        <C>        <C>        <C>
FINANCIAL DATA:(1)
Sales and other revenues(2)........................  $  2,695   $  2,882   $  3,847   $  1,837   $  1,330
Income (loss) from continuing operations(3)........     3,514      1,430       (827)      (357)      (102)
Income from discontinued operations(1).............     --        25,208      1,524      1,535      1,423
Net income(4)......................................     3,531     26,305        697      1,178      1,317
Total assets.......................................    39,786     28,192     26,783     27,727     11,847
Total debt(5)......................................    10,179      5,422      8,963      8,806      2,073
Preferred stock subject to mandatory redemption,
  Preferred Securities and other(6)................     2,223      2,260      1,180      1,131        651
Shareowners' equity................................    16,766     12,789     11,324     11,549      7,948

OTHER DATA:
EBITDA(7)..........................................  $    877   $    943   $  1,287   $    430   $    294
Domestic statistics (in thousands):
  Cable subscribers................................     4,993      4,965      4,910      4,866        490
  Homes passed.....................................     8,560      8,512      8,373      8,294        848
  High speed data subscribers......................       220         84         21      --         --
  Residential telephone lines......................        88         13      --         --         --
Capital expenditures(5)............................  $  1,983   $  1,726   $  1,502   $    643   $    370

Proportionate EBITDA(7,8)..........................  $  2,611   $  1,878   $  1,620   $    659   $    497

MEDIAONE GROUP STOCK INFORMATION:(1,3,9)
Basic earnings (loss) per common share from:
  Continuing operations............................  $   5.62   $   2.18   $  (1.45)  $  (0.74)  $  (0.22)
  Discontinued operations..........................     --         40.51       0.57       0.58       0.52

Diluted earnings (loss) per common share from:
  Continuing operations............................      5.32       2.10      (1.45)     (0.74)     (0.22)
  Discontinued operations..........................     --         37.70       0.57       0.58       0.52

Average common shares outstanding (thousands):
  Basic common shares..............................   611,623    607,648    606,749    491,924    470,549
  Diluted common shares............................   654,911    652,955    606,749    491,924    470,549
Number of common shareowners of record.............   503,669    551,991    648,077    705,341    770,346
</TABLE>

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

(1) On June 12, 1998, U S WEST, Inc. ("Old U S WEST") separated its businesses
    into two independent public companies (the "Separation"). Prior to the
    Separation, Old U S WEST conducted its businesses through two groups:
    U S WEST Media Group ("Media Group") and U S WEST Communications Group
    ("Communications Group"). Upon the Separation, Old U S WEST was renamed
    MediaOne Group, Inc. ("MediaOne Group" or the "Company") and retained the
    businesses of Media Group, except for U S WEST Dex, Inc. ("Dex"), the
    domestic directory business. The telecommunications businesses of
    Communications Group became an independent public company and retained the
    "U S WEST, Inc." name ("New U S WEST"). In addition, Dex was aligned with
    New U S WEST. MediaOne Group has accounted for the distribution to
    shareowners of New U S WEST as a discontinuance of the businesses comprising
    New U S WEST. 1998 income from discontinued operations includes a gain on
    Separation of $24,461 ($40.25 per share of MediaOne Group Stock). See
    Note 25--Discontinued Operations--to the Consolidated Financial Statements.

(2) 1999, 1998, 1997 and 1996 sales and other revenues include $2,384, $2,191,
    $2,070 and $252, respectively, related to Continental Cablevision, Inc.
    ("Continental") which was acquired by MediaOne Group on November 15, 1996
    (the "Continental Acquisition"). In addition, 1998, 1997, 1996 and 1995
    sales and other revenues include $361, $1,428, $1,183, and $941,
    respectively, related to the domestic wireless operations which were sold on
    April 6, 1998.

(3) 1999 income from continuing operations includes a net gain of $1,530 ($2.50
    per share of MediaOne Group Stock) related to an investment in AirTouch
    Communications, Inc. stock, net gains of $314 and $4,084 ($0.51 and $6.68
    per share of MediaOne Group Stock, respectively) on the sale of domestic and
    international investments, respectively, a net charge of $1,688 ($2.76 per
    share of MediaOne Group Stock) for merger related activity, net loss from
    operations of $117 ($0.19 per share of MediaOne Group Stock) related to
    Continental, and a net charge

                                       11
<PAGE>
                              MEDIAONE GROUP, INC.

                              FINANCIAL HIGHLIGHTS

    of $30 ($0.05 per share of MediaOne Group Stock) related to the PrimeStar
    investment. 1998 income from continuing operations includes a net gain of
    $2,257 ($3.71 per share of MediaOne Group Stock) on the sale of the domestic
    wireless businesses, net gains of $44 ($0.08 per share of MediaOne Group
    Stock) on the sales of various domestic investments, net income of $20
    ($0.04 per share of MediaOne Group Stock) related to the domestic wireless
    businesses, net loss from operations of $384 ($0.63 per share of MediaOne
    Group Stock) related to Continental, and a net loss of $100 ($0.16 per share
    of MediaOne Group Stock) related to the PrimeStar investment. 1997 income
    from continuing operations includes net gains of $249 ($0.41 per share of
    MediaOne Group Stock) on the sales of various domestic and international
    investments, net income of $83 ($0.13 per share of MediaOne Group Stock)
    related to the domestic wireless businesses and net loss from operations of
    $356 ($0.59 per share of MediaOne Group Stock) related to Continental. 1996
    income from continuing operations includes net income of $96 ($0.19 per
    share of MediaOne Group Stock) related to the domestic wireless businesses,
    net loss from operations of $71 ($0.15 per share of MediaOne Group Stock)
    related to Continental and a charge of $19 ($0.04 per share of MediaOne
    Group Stock) related to the sale of MediaOne Group's cable television
    interests in Norway, Sweden and Hungary. 1995 income from continuing
    operations includes a gain of $95 ($0.20 per share of MediaOne Group Stock)
    from the merger of Telewest Communications plc with SBC CableComms (UK), net
    income of $58 ($0.12 per share of MediaOne Group Stock) related to the
    domestic wireless businesses and costs of $9 ($0.02 per share of MediaOne
    Group Stock) associated with the Recapitalization Plan discussed in
    footnote 9 below.

(4) 1999 net income was increased by an extraordinary gain of $17 ($0.03 per
    share of MediaOne Group Stock) for the early extinguishment of debt. 1998
    net income was reduced by an extraordinary item of $333 ($0.55 per share of
    MediaOne Group Stock) for the early extinguishment of debt in conjunction
    with the Separation. 1995 net income was reduced by an extraordinary item of
    $4 ($0.01 per share of MediaOne Group Stock) for the early extinguishment of
    debt.

(5) Debt at December 31, 1999, 1998, 1997 and 1996 includes debt related to the
    Continental Acquisition. Debt for years prior to 1998 excludes the capital
    assets segment which had been discontinued and held for sale, and the
    discontinued operations of New U S WEST which were distributed to
    shareowners effective June 12, 1998. Capital expenditures exclude the
    discontinued operations of New U S WEST, but include the capital assets
    segment in 1999.

(6) Includes Company-obligated mandatorily redeemable preferred securities of
    subsidiary trust holding solely Company-guaranteed subordinated debentures
    ("Preferred Securities") of $1,060 at December 31, 1999, $1,061 at
    December 31, 1998, $1,080 at December 31, 1997 and 1996, and $600 at
    December 31, 1995; preferred stock subject to mandatory redemption of $50 at
    December 31, 1999, $100 at December 31, 1998 and 1997, and $51 at
    December 31, 1996 and 1995; and minority interest in Centaur Funding of
    $1,113 at December 31, 1999 and $1,099 at December 31, 1998.

(7) MediaOne Group considers earnings before interest, taxes, depreciation,
    amortization and other ("EBITDA") an important indicator of the operational
    strength and performance of its businesses. EBITDA, however, should not be
    considered an alternative to operating or net income as an indicator of the
    performance of MediaOne Group's businesses, or as an alternative to cash
    flows from operating activities as a measure of liquidity, in each case
    determined in accordance with generally accepted accounting principles
    ("GAAP").

(8) Proportionate results represent the relative weight of the Company's
    ownership in each of its respective domestic and international equity
    ventures, combined with its consolidated results. Proportionate information
    is not intended to replace financial and operating data prepared in
    accordance with GAAP since proportionate results depart materially from
    GAAP. However, MediaOne Group believes that proportionate financial and
    operating data facilitate the understanding and assessment of its results.
    Proportionate EBITDA excludes domestic wireless EBITDA of $114, $398, $307
    and $226 for 1998, 1997, 1996 and 1995, respectively.

(9) Effective with the Separation on June 12, 1998, each outstanding common
    share of Media Group stock remains outstanding and represents one share of
    MediaOne Group common stock ("MediaOne Group Stock"). In addition, all
    shares of Communications Group stock were canceled. See Note 17--Earnings
    Per Share--to the Consolidated Financial Statements--for a discussion of
    Communications Group stock earnings per share. The average common shares of
    MediaOne Group Stock outstanding for the year ended December 31, 1996
    include 150,615,000 shares issued in connection with the Continental
    Acquisition. Effective November 1, 1995, each share of common stock of Old
    U S WEST was converted into one share each of Communications Group stock and
    Media Group stock (the "Recapitalization Plan"). Earnings per common share
    and dividends per common share for 1995 have been presented on a pro forma
    basis to reflect the two classes of stock as if they had been outstanding
    since January 1, 1995.

                                       12
<PAGE>
                              MEDIAONE GROUP, INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

    Some of the information presented in or in connection with this report
constitutes "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. Factors that could
cause actual results to differ from expectations include: (i) greater than
anticipated competition from new entrants into the cable and wireless
communications markets, and from direct broadcast satellite systems,
(ii) changes in demand for the Company's products and services,
(iii) regulatory changes affecting the cable and telecommunications industries,
(iv) a change in economic conditions in the various markets served by MediaOne
Group's operations, including international markets, that could adversely affect
the level of demand for cable, wireless or other services offered by the
Company, (v) greater than anticipated competitive activity requiring new pricing
for services, (vi) higher than anticipated start-up costs associated with new
business opportunities, (vii) higher than anticipated employee levels, capital
expenditures, and operating expenses, (viii) consumer acceptance of broadband
services, including telephony and data services, and wireless services,
(ix) increases in fraudulent activity with respect to broadband and wireless
services, or (x) delays in the development of anticipated technologies, or the
failure of such technologies to perform according to expectations.

AT&T MERGER

    On May 6, 1999, MediaOne Group, Inc. ("MediaOne Group" or the "Company")
entered into an agreement with AT&T Corp. ("AT&T") to merge its operations with
those of AT&T, and terminated the merger agreement previously entered into with
Comcast Corporation ("Comcast"). On October 21, 1999, MediaOne Group's
shareowners approved the merger with AT&T. The transaction is expected to close
in the second quarter of 2000, subject to legal and regulatory approval. See
Note 1--Business Overview--to the Consolidated Financial Statements for a
detailed discussion of the AT&T / MediaOne Group merger.

BUSINESS DESCRIPTION

    MediaOne Group is a diversified global broadband communications company
having the capability to offer video, high speed Internet access and telephone
services simultaneously over its broadband network. Domestically, the Company
serves approximately 5.0 million cable customers and passes 8.6 million homes.
MediaOne Group's cable systems include large clusters in Atlanta, Massachusetts,
California, Chicago, Florida, Detroit and Minneapolis/St. Paul. The cable
systems offer customers various levels of cable programming services, including
premium programming services such as HBO, Cinemax, Showtime, The Movie Channel
and Encore, as well as pay-per-view movies and special events. The domestic
cable and broadband operations of the Company are managed by MediaOne of
Delaware, Inc. ("MediaOne"), a subsidiary of MediaOne Group. The Company's high
speed Internet access service is available in 14 areas nationwide, providing its
customers with a continuous, direct link to the Internet over the Company's
broadband network. Telephone service is available in seven metro areas providing
clearer and more cost-effective telephone service to its customers.

    In addition to its domestic cable operations, the Company also holds
significant domestic cable and broadband investments including an investment in
Time Warner Entertainment Company L.P. ("TWE" or "Time Warner Entertainment"),
the second largest provider of cable television services in the United States,
and interests in programming that include E! Entertainment Television and New
England Cable News. MediaOne Group also holds an interest in a joint venture
with Time Warner, Inc., ("Time Warner"), TWE, Time Warner
Entertainment-Advance/Newhouse Partnership, Microsoft Corporation ("Microsoft")

                                       13
<PAGE>
and Compaq Computer Corporation to provide high speed Internet access services
under the "RoadRunner" brand name (the "RoadRunner Joint Venture").

    Internationally, the Company holds interests in various cable and broadband,
and wireless properties. During 1999, as a result of the anticipated merger with
AT&T, MediaOne Group formalized a plan to sell its international broadband and
wireless investments. In conjunction with the AT&T merger, the Company sold its
investments in Mercury Personal Communications ("One 2 One"), Cable Plus, a.s.
and A2000. In addition, the Company entered into definitive agreements to sell
its interest in Telewest Communications plc ("Telewest") to Microsoft, and its
interests in most of its Central European wireless ventures, including Polska
Telefonia Cyfrowa, Westel 900, Westel Radiotelefon, and Russian
Telecommunications Development Corporation. See Note 7--Net Investment in
International Ventures--and Note 23--Subsequent Events--to the Consolidated
Financial Statements.

THE SEPARATION

    Prior to June 12, 1998, MediaOne Group was known as "U S WEST, Inc." ("Old
U S WEST"). On June 12, 1998, Old U S WEST separated its businesses into two
independent public companies (the "Separation"). Until the Separation, Old
U S WEST conducted its businesses through two groups: U S WEST Media Group (the
"Media Group") and U S WEST Communications Group (the "Communications Group").
Upon the Separation, Old U S WEST was renamed "MediaOne Group, Inc." and
retained the multimedia businesses of Media Group, except for U S WEST
Dex, Inc. ("Dex"), the domestic directory business. The telecommunications
businesses of the Communications Group became an independent public company and
retained the "U S WEST, Inc." name ("New U S WEST"), and Dex was aligned with
New U S WEST (the "Dex Alignment"). See Note 1--Business Overview--to the
Consolidated Financial Statements.

    The Company accounted for the distribution of New U S WEST stock to the
Communications Group stockholders, and to the Media Group stockholders for the
Dex Alignment, as a discontinuance of the businesses comprising New U S WEST.
Because the distribution was non pro-rata, as compared with the businesses
previously attributed to Old U S WEST's two classes of stock, the distribution
was accounted for at fair value and resulted in a gain of $24,461, or $40.25
basic earnings per share of MediaOne Group common stock ("MediaOne Group
Stock"), net of $114 of Separation costs (net of tax benefits of $37). See
Note 25--Discontinued Operations--to the Consolidated Financial Statements.

    In conjunction with the Separation, MediaOne Group refinanced substantially
all of the indebtedness issued or guaranteed by Old U S WEST through a
combination of tender offers, prepayments and consent solicitations (the
"Refinancing"). Long-term debt outstanding of $4.9 billion was redeemed,
resulting in an extraordinary loss of $333, net of tax benefits of $209, or
$0.55 basic loss per MediaOne Group Stock. The loss was the result of
refinancing costs, including the difference between the market and face value of
the debt redeemed and a charge for unamortized debt issuance costs. See
Note 10--Debt--to the Consolidated Financial Statements.

OTHER

    On September 2, 1999, holders of the Company's Series C Cumulative
Redeemable Preferred Stock (the "Series C Preferred Stock") exercised options to
receive common shares of Financial Security Assurance Holdings Ltd. ("FSA") held
by the Company. As a result of the exercise of the FSA options, the Series C
Preferred Stock was effectively redeemed, resulting in an after tax charge to
equity of $28 (net of $18 of tax benefits) or $(0.04) basic loss per share of
MediaOne Group Stock. See Note 15--Preferred Stock Subject to Mandatory
Redemption--to the Consolidated Financial Statements.

    On June 1, 1999, the Company redeemed the 11.0 percent senior subordinated
debentures of MediaOne with a carrying value of $345. The debt extinguishment
resulted in an after tax gain of $17 (net of income tax expense of $11), or
$0.03 basic earnings per share of MediaOne Group Stock, primarily

                                       14
<PAGE>
related to the write-off of excess debt premiums. The gain is reflected as an
extraordinary item in the Consolidated Statements of Operations.

    The following discussion is based on MediaOne Group's Consolidated Financial
Statements prepared in accordance with generally accepted accounting principles
("GAAP").

RESULTS OF OPERATIONS--CONTINUING OPERATIONS--1999 COMPARED WITH 1998

<TABLE>
<CAPTION>
                                                                                         CHANGE
                                                                                   -------------------
                                                               1999       1998        $          %
INCOME (LOSS) FROM CONTINUING OPERATIONS:                    --------   --------   --------   --------
<S>                                                          <C>        <C>        <C>        <C>
Income from continuing operations..........................  $ 3,514    $ 1,430    $ 2,084      --
Adjustments to reported income from continuing operations:
  (Gain) loss on investments:
    Sales of domestic investments..........................     (314)       (34)      (280)     --
    Sales and exit costs of international
      investments--net.....................................   (4,084)       (10)    (4,074)     --
    Exchange of AirTouch investment........................   (1,530)     --        (1,530)     --
    Sale of domestic wireless investment...................    --        (2,257)     2,257      --
    PrimeStar investment...................................       30        100        (70)    (70.0)
  Merger costs.............................................    1,688      --         1,688      --
  Minority interest--Centaur...............................       13      --            13      --
  Domestic wireless operations(1)..........................    --           (20)        20      --
                                                             -------    -------    -------     -----
Normalized loss from continuing operations.................  $  (683)   $  (791)   $   108     (13.7)
                                                             =======    =======    =======     =====
</TABLE>

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

(1) Represents the operations of the domestic wireless businesses which were
    sold to AirTouch Communications, Inc. ("AirTouch") effective 4/6/98.

<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                                                    -------------------
BASIC EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS      1999       1998        $          %
AVAILABLE FOR MEDIAONE GROUP COMMON STOCK:                    --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
Earnings from continuing operations available for common
  stock.....................................................   $ 5.62     $ 2.18     $ 3.44      --
Adjustments to reported earnings from continuing operations:
  (Gain) loss on investments:
    Sales of domestic investments...........................    (0.51)     (0.06)     (0.45)     --
    Sales and exit costs of international
      investments--net......................................    (6.68)     (0.02)     (6.66)     --
    Exchange of AirTouch investment.........................    (2.50)     --         (2.50)     --
    Sale of domestic wireless investment....................    --         (3.71)      3.71      --
    PrimeStar investment....................................     0.05       0.16      (0.11)    (68.8)
  Merger costs..............................................     2.76      --          2.76      --
  Minority interest--Centaur................................     0.02      --          0.02      --
  Domestic wireless operations(1)...........................    --         (0.04)      0.04      --
  Loss on redemption of Series C Preferred Stock............     0.04      --          0.04      --
  Loss on redemption of Preferred Securities................    --          0.09      (0.09)     --
                                                               ------     ------     ------     -----
Normalized loss from continuing operations available for
  common stock..............................................   $(1.20)    $(1.40)    $ 0.20     (14.3)
                                                               ======     ======     ======     =====
</TABLE>

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

(1) Businesses were sold in April 1998.

    The table above normalizes for significant one-time items that aid in the
comparability of the Company's performance year over year. Routine acquisitions
and dispositions are normalized within the revenues and operating income
discussions which follow.

                                       15
<PAGE>
    The decrease in normalized loss from continuing operations during 1999 was
primarily a result of decreased equity losses in unconsolidated ventures,
increased interest and dividend income in 1999, and the loss recognized in 1998
related to an interest rate swap on the Company's investment in AirTouch
preferred stock. The decrease was partially offset by minority interest expense
in Centaur Funding as a result of the securities' issuance in December 1998.

SALES AND OTHER REVENUES

<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                                                    -------------------
                                                                1999     1998(1)       $          %
                                                              --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
Domestic cable and broadband................................   $2,686     $2,467     $ 219        8.9
International...............................................        7         24       (17)     (70.8)
Corporate and other.........................................        2         30       (28)     (93.3)
                                                               ------     ------     -----      -----
  Current operations........................................    2,695      2,521       174        6.9
Domestic wireless(2)........................................    --           361      (361)      --
                                                               ------     ------     -----      -----
Total.......................................................   $2,695     $2,882     $(187)      (6.5)
                                                               ======     ======     =====      =====
</TABLE>

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

(1) 1998 amounts have been reclassified to conform with the current year
    presentation.

(2) Businesses were sold in April 1998.

    MediaOne Group sales and other revenues decreased during 1999 primarily as a
result of the sale of the domestic wireless businesses in April, 1998, partially
offset by growth in domestic cable and broadband revenues. Normalized for
acquisitions and dispositions, total revenues increased $238, or 9.7 percent,
during 1999, due primarily to growth in domestic cable and broadband revenues.

DOMESTIC CABLE AND BROADBAND

<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                                                    -------------------
                                                                1999       1998        $          %
REVENUES                                                      --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
  Basic Cable(1)............................................   $1,774     $1,673      $101        6.0
  Premium...................................................      328        322         6        1.9
  Pay-per-view..............................................       73         52        21       40.4
  Advertising...............................................      204        157        47       29.9
  Equipment & Installation..................................      190        176        14        8.0
  Other(1)..................................................        3          3      --         --
                                                               ------     ------      ----       ----
Video.......................................................    2,572      2,383       189        7.9
New Products................................................      114         50        64       --
PrimeStar...................................................    --            34       (34)      --
                                                               ------     ------      ----       ----
  Total revenues............................................   $2,686     $2,467      $219        8.9
                                                               ======     ======      ====       ====
</TABLE>

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

(1) 1998 amounts have been reclassified to conform with the current year
    presentation.

    Domestic cable and broadband revenues increased during 1999 due primarily to
increased video and new products revenues, partially offset by the lack of
PrimeStar, Inc. ("PrimeStar") direct broadcast services ("DBS") revenues in
1999. Normalized for the one-time effects of cable system acquisitions and
dispositions, total domestic cable and broadband revenues increased
10.9 percent during 1999.

    BASIC CABLE.  Basic cable services revenues increased during 1999 due
primarily to a five percent increase in revenue per average cable subscriber and
increased basic subscribers. At December 31, 1999,

                                       16
<PAGE>
basic cable subscribers were 4,993,000, an increase of 1.7 percent compared with
the same period in 1998, normalized for the effects of cable system acquisitions
and dispositions. The increase in revenue per subscriber is the result of
expanded channel offerings, repackaging of services and increased rates.

    PREMIUM.  Premium service revenues increased during 1999 due primarily to
improved premium service customer growth as a result of the launch of "NexTV" in
September 1998, partially offset by discounting of premium service packages.
NexTV is a repackaging of the Company's premium services into related premium
channels. At December 31, 1999, premium units were 4,392,000, an increase of
7.1 percent compared with the same period in 1998, normalized for the effects of
cable system acquisitions and dispositions.

    At December 31, 1999, digital subscribers totaled 56,000 and digital
market-ready homes were 1,482,000, encompassing six digital markets.
Market-ready homes are those potential customers which are connected to the
broadband network and which could be provided and billed for service. Digital
NexTV services are available in Atlanta, Boston, Cleveland, Detroit, Pompano,
Florida, and Richmond, Virginia.

    PAY-PER-VIEW.  Pay-per-view revenues increased during 1999 due primarily to
the offering of various major sporting events in 1999 compared with one major
sporting event in 1998. In addition, growth in digital subscribers during 1999,
providing higher impulse pay-per-view capability, has resulted in greater movie
and other product purchases. During 1999, purchases of pay-per-view movies and
other products have increased 10 percent on a normalized basis.

    ADVERTISING.  Advertising revenues increased during 1999 primarily as a
result of growth in local and national advertising sales as compared with the
same period in 1998.

    EQUIPMENT AND INSTALLATION.  Equipment and installation revenues increased
in 1999 due primarily to subscribers upgrading converter boxes, slightly offset
by free installation programs offered during the second quarter of 1999.

    OTHER.  Other revenues include revenues received for guides and
miscellaneous revenues, offset by franchise fee payments.

    VIDEO.  Video revenue per average cable subscriber was $43.08 per month for
the year-ended December 31, 1999, an increase of 6.8 percent, compared with
$40.33 for the same period in 1998. Adjusted for the one-time effects of cable
system acquisitions and dispositions, video revenue per average cable subscriber
increased 6.5 percent during 1999 as a result of increased rates and expanded
channel offerings, as well as growth in advertising and pay-per-view revenues.

    Video revenues increased 7.9 percent during 1999, normalized for the
one-time effects of cable system acquisitions and dispositions.

    NEW PRODUCTS.  New products revenues increased during 1999 due primarily to
customer growth in high speed Internet access services, as well as the launch of
residential telephone services during 1998 and 1999. Normalized for
dispositions, new products revenues increased $75, or 192.3 percent, during 1999
compared with new products revenues of $39 in 1998.

    At December 31, 1999, MediaOne Group had approximately 220,000 high speed
Internet customers compared with 84,000 customers for the same period in 1998.
High speed Internet access services were available to 5,333,000 market-ready
homes at December 31, 1999, compared with 3,535,000 for the same period in 1998.
High speed Internet access services are available in 14 metro areas in the
following states: California, Florida, Georgia, Illinois, Massachusetts,
Michigan, Minnesota, New Hampshire, Ohio and Virginia.

    During the second quarter of 1999, the Company completed the transition of
its high speed Internet customers to the "RoadRunner" brand name. In addition,
as per the agreement to the RoadRunner Joint Venture, the responsibility for the
maintenance of the Internet network, the development of national content and the
provisioning of technical customer support will now be provided by the joint
venture.

                                       17
<PAGE>
    At December 31, 1999, MediaOne Group had approximately 66,000 residential
telephone customers with 88,000 telephone lines, compared with 11,000
residential telephone customers with 13,000 telephone lines as of the same
period in 1998. Residential telephone services were available to 1,671,000
market-ready homes as of December 31, 1999, compared with approximately 530,000
market-ready homes for the same period in 1998. Residential telephone services
were available in seven metro areas within the states of California, Florida,
Georgia, Massachusetts, Virginia, and Michigan, which was launched in
April 1999.

    Effective March 31, 1999, MediaOne Group sold its investments in Continental
Fiber Technologies, Inc. and Alternet of Virginia, Inc., providers of business
telephony services, (the "CLEC Businesses"). During 1998, these businesses
contributed telephony revenues of $14 and operating losses of $3 which have been
included as part of new products revenues and domestic cable and broadband
operating loss.

    PRIMESTAR.  Subsequent to April 1, 1998, MediaOne Group no longer reflects
PrimeStar DBS services revenues as it contributed its PrimeStar subscribers and
certain related assets to PrimeStar (the "PrimeStar Contribution"). See
Note 3--Domestic Acquisitions, Dispositions and Other--to the Consolidated
Financial Statements.

    INTERNATIONAL.  International revenues represent the consolidated operations
of Cable Plus a.s. ("Cable Plus"), a cable operator in the Czech Republic.
Effective April 1, 1999, the Company no longer consolidated the operations of
Cable Plus as the entity was held for sale, and subsequently sold in
October 1999. See Note 7--Net Investment in International Ventures--to the
Consolidated Financial Statements.

    CORPORATE AND OTHER.  Corporate and other revenues decreased during 1999 due
to adjustments associated with the discontinuance of insurance policies on
cellular phones.

    DOMESTIC WIRELESS.  On April 6, 1998, MediaOne Group sold its domestic
wireless businesses to AirTouch. See Note 4--Investment in Vodafone
Group/AirTouch Communications--to the Consolidated Financial Statements.

OPERATING INCOME (LOSS)

<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                                                    -------------------
                                                                1999     1998(1)       $          %
                                                              --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
Domestic cable and broadband................................   $(253)     $(159)     $ (94)      59.1
International...............................................      (3)       (17)        14      (82.4)
Corporate and other.........................................    (115)      (156)        41      (26.3)
                                                               -----      -----      -----      -----
  Current operations........................................    (371)      (332)       (39)      11.7
Domestic wireless (2).......................................    --           93        (93)      --
                                                               -----      -----      -----      -----
Total.......................................................   $(371)     $(239)     $(132)      55.2
                                                               =====      =====      =====      =====
</TABLE>

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

(1) 1998 amounts have been reclassified to conform with the current year
    presentation.

(2) Businesses were sold in April 1998.

    During 1999, MediaOne Group's operating loss increased due primarily to the
sale of its domestic wireless businesses in 1998. Also contributing were
increased depreciation and amortization charges on the continuing upgrade of the
Company's domestic cable networks, partially offset by operating income from the
capital assets segment.

    MediaOne Group's earnings before interest, taxes, depreciation, amortization
and other ("EBITDA") for 1999 were $877, compared with $943 during the same
period in 1998. Excluding the effect of the

                                       18
<PAGE>
domestic wireless operations, EBITDA would have been $795 in 1998, resulting in
a 10.3 percent increase in EBITDA during 1999. MediaOne Group considers EBITDA
an important indicator of the operational strength and performance of its
businesses. EBITDA, however, should not be considered an alternative to
operating or net income as an indicator of the performance of MediaOne Group's
businesses, or as an alternative to cash flows from operating activities as a
measure of liquidity, in each case determined in accordance with GAAP.

    DOMESTIC CABLE AND BROADBAND.  Domestic cable and broadband operating losses
increased during 1999 due primarily to greater depreciation and amortization
expense on the continuing upgrade of the Company's cable networks, as well as a
one-time $25 depreciation and amortization charge related to the deferral of a
cable system trade with Tele-Communications, Inc., now owned by AT&T, (the "TCI
trade") until such time as the merger of MediaOne Group with AT&T is completed.
Depreciation and amortization expense on the TCI trade properties had been
suspended during 1998 pending the disposition of these properties. Partially
offsetting the increase in depreciation expense was the suspension in 1999 of
$50 in depreciation and amortization expense related to cable systems held for
sale during the year, and a one-time charge of $28 in the first quarter of 1998
for depreciation and amortization expense suspended in 1997 on cable systems
held for sale, which were subsequently retained.

    During 1999, EBITDA for domestic cable and broadband operations was $980, an
increase of $39, or 4.1 percent, compared with $941 in 1998. Revenue increases
of $219, or 8.9 percent, exceeded increased programming costs of $85, or
14.8 percent, and increased operating, general and administrative costs of $95,
or 10.0 percent. Of those amounts, the PrimeStar Contribution provided revenue
decreases of $34 and cost decreases of $30, including $14 of programming costs,
to total domestic cable and broadband EBITDA for the period. Normalized for the
one-time effects of cable system acquisitions and dispositions, domestic cable
and broadband EBITDA increased $47, or 5.0 percent, during 1999 compared with
normalized EBITDA of $933 for 1998.

    Video EBITDA was $1,034 for 1999, an increase of $39, or 3.9 percent,
compared with $995 during 1998. Normalizing for acquisitions and dispositions,
video EBITDA increased $40, or 4.0 percent, compared with normalized video
EBITDA of $994 for 1998.

    New products EBITDA was a loss of $(54) in 1999, a decrease in losses of $4,
or 6.9 percent, compared with an EBITDA loss of $(58) in 1998. New products
revenue increases of $64, or 128.0 percent, were offset by new products costs
increases of $60, or 55.6 percent, primarily for the offering of residential
telephone services. Normalizing for dispositions, new products EBITDA loss
decreased $7, or 11.5 percent during 1999, compared with an EBITDA loss of $(61)
for the same period in 1998.

    Programming costs were $660 for 1999, an increase of $85, or 14.8 percent,
over 1998. Excluding programming costs related to PrimeStar DBS services,
programming costs increased 17.6 percent. The normalized increase was primarily
a result of programmer rate increases, expanded channel offerings and growth in
subscribers, as well as fees paid in 1999 to the RoadRunner Joint Venture to
provide high speed Internet access services to MediaOne Group's customers.

    Operating, general and administrative costs were $1,046 during 1999, an
increase of $95, or 10.0 percent, over 1998. Increases in operating, general and
administrative costs were primarily a function of adding customer service
employees; spending on marketing and advertising to deploy new products and to
drive subscriber growth; and spending on specific initiatives to improve the
operations of the Company. During 1999, MediaOne Group incurred initiatives
costs of $53 to improve reporting and billing systems, consolidate and build-out
call centers, and create customer databases to serve customers more effectively,
and Year 2000 incremental remediation costs of $18. Total initiatives spending
and Year 2000 incremental costs increased $43 during 1999, compared with total
costs of $28 in 1998.

    INTERNATIONAL.  International operating losses represent the consolidated
operations of Cable Plus and Russian Telecommunications Development Corporation
("RTDC"), a Russian venture which holds various

                                       19
<PAGE>
wireless investments. Effective April 1, 1999, MediaOne Group no longer
consolidates RTDC's results as the entity is held for sale.

    CORPORATE AND OTHER.  Corporate and other operating losses have decreased
during 1999 due to operating income from the capital assets segment and
decreased international overhead costs.

INTEREST EXPENSE AND OTHER

<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                                                    -------------------
                                                                1999       1998        $          %
                                                              --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
Interest expense............................................   $ (449)    $(491)     $   42      (8.6)
Equity losses in unconsolidated ventures....................     (256)     (417)        161     (38.6)
Gains (losses) on investments:
  Sales of domestic investments.............................      510        54         456      --
  Sales and exit costs of international investments--net....    6,582        16       6,566      --
  Exchange of AirTouch investment...........................    2,482      --         2,482      --
  Sale of domestic wireless investment......................    --        3,869      (3,869)     --
  PrimeStar investment......................................      (49)     (163)        114     (69.9)
Minority interest expense in Centaur Funding................     (122)     --          (122)     --
Guaranteed minority interest expense........................      (95)      (74)        (21)     28.4
Merger costs................................................   (1,810)     --        (1,810)     --
Other income--net...........................................      309        83         226      --
</TABLE>

    INTEREST EXPENSE.  Interest expense decreased during 1999 due primarily to
the assumption by New U S WEST of $3.9 billion of debt related to the Dex
Alignment, the refinancing in 1998 which resulted in lower interest rate
commercial paper outstanding, the assumption in 1998 of $1,350 in debt by
AirTouch as a result of the sale of the Company's domestic wireless businesses
to AirTouch, and various debt redemptions and maturities in 1999 totaling
approximately $600. The reduction in interest expense was partially offset by
the issuance in 1999 of $1.7 billion of private placement debt, the
$1.5 billion note to AT&T, and $1.1 billion of debt exchangeable into Vodafone
ADRs, and the issuance in the third quarter of 1998 of $1.7 billion of debt
exchangeable into AirTouch common stock. MediaOne Group's weighted average
borrowing cost was 6.2 percent in 1999, compared with 7.28 percent in 1998.

    EQUITY LOSSES IN UNCONSOLIDATED VENTURES.  Equity losses during 1999
decreased due primarily to greater earnings of $212 from domestic ventures,
partially offset by increased losses of $51 from international ventures.
Effective April 1, 1999, equity losses from international ventures include the
results of operations of Cable Plus and RTDC as these investments are no longer
consolidated with the Company's results of operations. In addition, during
fourth-quarter 1999, equity method accounting was suspended on the Company's
investments in India and Russia as these investments had been reduced below zero
as a result of the recognition of equity losses and debt guarantees.

    Equity earnings from domestic ventures have increased due to one-time gains
recognized by TWE during 1999, and the absence of losses from the investment in
PrimeCo Personal Communications, L.P. ("PrimeCo") as it was sold to AirTouch in
April 1998. Equity losses from international ventures increased due primarily to
greater equity losses from Telewest, partially offset by improved results from
the international wireless ventures.

    As of April 1, 1999, MediaOne Group suspended recording equity losses for
the RoadRunner Joint Venture as its investment had been reduced to zero and the
Company had no future funding commitments to the venture. Unrecognized equity
losses during 1999 related to the RoadRunner Joint Venture totaled approximately
$50.

                                       20
<PAGE>
GAINS (LOSSES) ON INVESTMENTS

    SALES OF DOMESTIC INVESTMENTS.  During 1999, gains on the sales and
redemptions of domestic investments included the following gains: (a) $383 ($235
after tax) on the exchange of Time Warner and Cox Communications ("Cox") cable
systems, and various other cable systems, (b) $50 ($31 after tax) on the
exercise of an option for FSA shares held by the Company, (c) $44 ($27 after
tax) on the sale of the CLEC Businesses, (d) $21 ($14 after tax) on the
redemption of FSA shares for debt exchangeable into common stock ("DECS"), and
(e) $12 ($7 after tax) on the sales of miscellaneous assets from the capital
assets group. During 1998, MediaOne Group sold: (a) shares of Sportsline
USA, Inc. resulting in a pretax gain of $12 ($8 after tax), (b) a cable
programming investment resulting in a pretax gain of $17 ($10 after tax),
(c) various domestic cable investments resulting in a pretax gain of $16 ($10
after tax), and (d) miscellaneous items resulting in a pretax gain of $9 ($6
after tax).

    SALES AND EXIT COSTS OF INTERNATIONAL INVESTMENTS--NET.  During 1999,
MediaOne Group sold its international investments in: (a) One 2 One for a pretax
gain of $6,012 ($3,711 after tax), (b) A2000 for a pretax gain of $154 ($94
after tax), (c) shares of Cable and Wireless Optus Limited ("Optus") for a
pretax gain of $155 ($95 after tax), (d) Cable Plus for a pretax gain of $74
($45 after tax), (e) Telenet for a pretax gain of $44 ($27 after tax), and
(f) various other international investments resulting in a pretax gain of $29
($14 after tax). In addition, during the fourth quarter of 1999, the Company
recorded a pretax gain of $157 ($97 after tax) related to the dilution of its
investment in Telewest as a result of a Telewest share offering, and during the
second quarter of 1999, the Company recorded a charge of $43 ($28 after tax)
related to its plan to exit its international investments. See Note 7--Net
Investment in International Ventures--to the Consolidated Financial Statements.
During 1998, MediaOne Group sold shares of Optus and miscellaneous items
resulting in a pretax gain of $16 ($10 after tax).

    EXCHANGE OF AIRTOUCH INVESTMENT.  During June 1999, AirTouch merged its
operations into Vodafone Group Public Limited Company ("Vodafone"), which
resulted in MediaOne Group's investment in AirTouch being exchanged and modified
into an investment in Vodafone. The transaction resulted in a net pretax gain of
$2,482 ($1,530 after tax) to the Company. See Note 4--Investment in Vodafone
Group/ AirTouch Communications--to the Consolidated Financial Statements.

    PRIMESTAR INVESTMENT.  During 1999, MediaOne Group recorded a pretax loss of
$49 ($30 after tax) related to PrimeStar funding obligations. During the fourth
quarter of 1998, MediaOne Group recorded a charge of $163 ($100 after tax) to
reduce the carrying amount of its investment in PrimeStar. See Note 3--Domestic
Acquisitions, Dispositions and Other--to the Consolidated Financial Statements.

    MINORITY INTEREST EXPENSE IN CENTAUR FUNDING.  Minority interest expense in
Centaur Funding represents dividends and accretion on the three series of
preferred shares (the "Preference Shares") issued in December 1998 by Centaur
Funding Corporation ("Centaur"), a special purpose entity consolidated by
MediaOne Group, for gross proceeds of $1.1 billion. During 1999, minority
interest expense in Centaur also includes a $21 extraordinary dividend paid by
Centaur to its Series B and Series C Preference Shares holders to mirror the
extraordinary dividend paid by AirTouch in August 1999 as a result of the
Vodafone merger. The dividend was paid since the Series B and Series C
Preference Shares are referenced to the AirTouch preferred shares; dividend or
redemption activity of the AirTouch preferred shares requires a similar action
of the Series B and Series C Preference Shares.

    GUARANTEED MINORITY INTEREST EXPENSE.  Guaranteed minority interest expense
has increased during 1999 due primarily to the exchange of MediaOne Group's 7.96
and 8.25 percent Company-obligated mandatorily redeemable preferred securities
of subsidiary trust holding solely Company-guaranteed subordinated debentures
("Preferred Securities") for 9.30 and 9.50 percent Preferred Securities in
mid-June 1998, and the issuance in October 1998 of $500 face value of
9.04 percent Preferred Securities. The Preferred Securities were exchanged in
conjunction with the Separation.

                                       21
<PAGE>
    MERGER COSTS.  As a result of the Company's anticipated merger with AT&T,
MediaOne Group incurred total pretax merger costs of $1,810 ($1,688 after tax)
during 1999. The majority of such costs consisted of a charge of $1,500 to
terminate the Company's previous merger agreement with Comcast. The remaining
costs represented employee bonuses paid in accordance with the AT&T merger
agreement, as well as change in control payments triggered as a result of the
shareowners' approval to merge with AT&T, and miscellaneous legal and advisory
fees.

    OTHER INCOME--NET.  Other income during 1999 increased primarily due to
income earned on cash balances resulting from asset sales and debt issuances
during the period, the recognition of $62 of income in 1999 for a fee paid by
Optus to the Company as a result of having met certain performance measures, and
the recognition in 1998 of a $70 loss related to an interest rate swap agreement
associated with the AirTouch preferred stock. In addition, other income
increased due to dividend income from the Company's investment in AirTouch
preferred stock, partially offset by increased foreign exchange transaction
losses associated with loans to international ventures and the conclusion of TWE
management fees in 1998.

PROVISION FOR INCOME TAXES FOR CONTINUING OPERATIONS

<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                                                    -------------------
                                                                1999       1998        $          %
                                                              --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
Provision for income taxes..................................  $(3,217)   $(1,208)   $(2,009)    --
Effective tax rate..........................................     47.8%      45.8%
</TABLE>

    The increase in the 1999 effective tax rate is primarily a result of merger
costs, gains on the sales of investments and the loss on the PrimeStar
investment. Excluding merger costs, the effective tax rate would have been
39.0 percent in 1999. The effective tax rate for 1998 would have been
32.8 percent excluding the gain on the sale of the domestic wireless businesses.
The increase in the adjusted effective tax rate during 1999 was due to the
Company recording pretax income during the year, as opposed to a pretax loss
during 1998.

RESULTS OF OPERATIONS--CONTINUING OPERATIONS--1998 COMPARED WITH 1997

<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                                                    -------------------
                                                                1998       1997        $          %
INCOME (LOSS) FROM CONTINUING OPERATIONS:                     --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
Income (loss) from continuing operations....................   $1,430    $  (827)    $2,257      --
Adjustments to reported income (loss) from continuing
  operations:
  Domestic wireless operations(1)...........................      (20)       (83)        63     (75.9)
  (Gain) loss on investments:
    Sales of domestic investments...........................      (34)      (121)        87     (71.9)
    Sales of international investments......................      (10)      (128)       118     (92.2)
    Sale of domestic wireless investment....................   (2,257)     --        (2,257)     --
    Loss on PrimeStar investment............................      100      --           100      --
                                                               ------    -------     ------     -----
Normalized loss from continuing operations..................   $ (791)   $(1,159)    $  368     (31.8)
                                                               ======    =======     ======     =====
</TABLE>

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

(1) Operations were sold in April 1998.

                                       22
<PAGE>

<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                                                    -------------------
BASIC EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS      1998       1997        $          %
AVAILABLE FOR MEDIAONE GROUP COMMON STOCK:                    --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
Earnings (loss) from continuing operations available for
  common stock..............................................   $ 2.18     $(1.45)    $3.63       --
Adjustments to reported earnings (loss) from continuing
  operations:
  Domestic wireless operations(1)...........................    (0.04)     (0.13)     0.09      (69.2)
  (Gain) loss on investments:
    Sales of domestic investments...........................    (0.06)     (0.20)     0.14      (70.0)
    Sales of international investments......................    (0.02)     (0.21)     0.19      (90.5)
    Sale of domestic wireless investment....................    (3.71)     --        (3.71)      --
    PrimeStar investment....................................     0.16      --         0.16       --
  Loss on redemption of Preferred Securities................     0.09      --         0.09       --
                                                               ------     ------     -----      -----
Normalized loss from continuing operations available for
  common stock..............................................   $(1.40)    $(1.99)    $0.59      (29.6)
                                                               ======     ======     =====      =====
</TABLE>

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

(1) Operations were sold in April 1998.

    The decrease in normalized loss from continuing operations was primarily a
result of decreased equity losses generated by unconsolidated international
ventures and decreased interest expense due to lower debt levels at MediaOne
Group. The table above normalizes for significant one-time items that aid in the
comparability of the Company's performance year over year. Routine acquisitions
and dispositions are normalized within the discussions of revenues and operating
income which follow.

SALES AND OTHER REVENUES(1)

<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                                                    -------------------
                                                                1998       1997        $          %
                                                              --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
Domestic cable and broadband................................   $2,467     $2,323     $  144       6.2
International...............................................       24         18          6      33.3
Corporate and other(2)......................................       30         78        (48)    (61.5)
                                                               ------     ------     ------     -----
  Current operations........................................    2,521      2,419        102       4.2
Domestic wireless(3)........................................      361      1,428     (1,067)    (74.7)
                                                               ------     ------     ------     -----
Total.......................................................   $2,882     $3,847     $ (965)    (25.1)
                                                               ======     ======     ======     =====
</TABLE>

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

(1) Amounts have been reclassified to conform with the current year
    presentation.

(2) Includes wholly-owned international directories which were sold in the
    latter part of 1997

(3) Operations were sold in April 1998.

    MediaOne Group sales and other revenues decreased during 1998 primarily as a
result of the sales of the domestic wireless businesses in April 1998, and the
wholly-owned international directories businesses during the latter part of
1997. Normalized for acquisitions and dispositions, total revenues increased
10.7 percent during 1998, due primarily to increases from the domestic cable and
broadband operations.

                                       23
<PAGE>
DOMESTIC CABLE AND BROADBAND

<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                                                    -------------------
REVENUES                                                        1998       1997        $          %
--------                                                      --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
Basic Cable(1)..............................................   $1,673     $1,508      $165       10.9
Premium.....................................................      322        326        (4)      (1.2)
Pay-per-view................................................       52         55        (3)      (5.5)
Advertising.................................................      157        129        28       21.7
Equipment & Installation....................................      176        153        23       15.0
Other(1)....................................................        3         23       (20)     (87.0)
                                                               ------     ------      ----      -----
Video.......................................................    2,383      2,194       189        8.6
New Products................................................       50         20        30       --
PrimeStar...................................................       34        109       (75)     (68.8)
                                                               ------     ------      ----      -----
Total revenues..............................................   $2,467     $2,323      $144        6.2
                                                               ======     ======      ====      =====
</TABLE>

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

(1) Amounts have been reclassified to conform with the current year
    presentation.

    Domestic cable and broadband revenues increased during 1998 due primarily to
increased video revenues, partially offset by the lack of PrimeStar DBS revenues
in the last three quarters of 1998. Normalized for the one-time effects of cable
system acquisitions and dispositions, a change in classification of late fee
revenues, and the discontinuance of PrimeStar DBS revenues, total domestic cable
and broadband revenues increased 10.6 percent during 1998.

    BASIC CABLE.  Basic cable services revenues increased during 1998 due
primarily to a 9.5 percent increase in revenue per average cable subscriber and
increased basic subscribers. At December 31, 1998, basic cable subscribers were
4,965,000, an increase of 1.0 percent compared with the same period in 1997,
normalized for the effects of cable system acquisitions and dispositions. The
increase in revenue per subscriber is the result of expanded channel offerings,
repackaging of services and increased rates.

    PREMIUM.  Premium service revenues decreased during 1998 due primarily to
discounting of premium service packages, movements of certain premium service
packages to basic, and a migration of customers to lower priced premium service
packages. In an effort to improve premium service revenues, the Company
repackaged its premium services and launched "NexTV" in September 1998, a
packaging program which clusters related premium channels. At December 31, 1998,
premium units were 4,176,000, an increase of 3.6 percent compared with the same
period in 1997, normalized for the effects of cable system acquisitions and
dispositions.

    PAY-PER-VIEW.  Pay-per-view revenues decreased during 1998 due to a lack of
major sporting events in 1998 as compared with 1997. The decline was slightly
offset by increased revenues on movies.

    ADVERTISING.  Advertising revenues increased during 1998 as a result of
expanded channel capacity, growth in local and national advertising sales, and
increased rates.

    EQUIPMENT AND INSTALLATION.  Equipment and installation revenues increased
in 1998 due primarily to subscribers upgrading converter boxes.

    OTHER.  The decrease in other revenues during 1998 is due primarily to the
classification of late fee revenues in 1998; late fee revenues were reflected in
"other revenues" during 1997, whereas in 1998 these revenues are classified as
an offset to "selling, general and administrative expenses."

    VIDEO.  Video revenue per average cable subscriber was $40.33 per month for
the year-ended December 31, 1998, an increase of 6.8 percent, compared with
$37.76 for the same period in 1997.

                                       24
<PAGE>
Adjusted for the one-time effects of cable system acquisitions and dispositions
and a change in classification of late fee revenues, video revenue per average
cable subscriber increased 7.8 percent during 1998. Video revenue per average
cable subscriber has increased as a result of expanded channel offerings,
repackaging of services and increased rates.

    Video revenues increased 9.4 percent during 1998, normalized for the
one-time effects of cable system acquisitions and dispositions, and for the
change in classification of late fee revenues.

    NEW PRODUCTS.  New products revenues increased during 1998 due primarily to
the launch and customer growth of high speed Internet access services in new
markets, and growth in business dedicated telephony services.

    At December 31, 1998, MediaOne Group had approximately 84,000 high speed
Internet customers compared with 21,000 high speed Internet customers for the
same period in 1997. High speed Internet access was available to over 3 million
market-ready homes.

    On June 15, 1998, MediaOne Group formed the RoadRunner Joint Venture with
Time Warner, TWE and Time Warner Entertainment-Advance/Newhouse Partnership to
deliver high speed Internet access services under the "RoadRunner" brand name.
The joint venture is responsible for maintaining connections to the Internet,
providing technical customer support and developing national content. The
parties to the joint venture operate their respective high speed Internet access
businesses and are responsible for their respective customers' billing and
customer service issues. Accordingly, MediaOne Group continues to reflect high
speed Internet access services revenues in its consolidated results, as well as
a service fee payable to the RoadRunner Joint Venture for services provided.

    MediaOne Group began offering residential telephone services during 1998. As
of December 31, 1998, residential telephone services were available to
approximately 530,000 market-ready homes.

    PRIMESTAR.  Subsequent to April 1, 1998, MediaOne Group no longer reflects
PrimeStar DBS services revenues as it contributed its PrimeStar subscribers and
certain related assets to PrimeStar.

    INTERNATIONAL.  International revenues represent the consolidated operations
of Cable Plus. Such operations were sold in 1999.

    CORPORATE AND OTHER.  The decrease in corporate and other revenues during
1998 was due to the sale of the Company's wholly-owned international directory
operations in the United Kingdom and Poland in June and October 1997,
respectively.

    DOMESTIC WIRELESS.  On April 6, 1998, MediaOne Group sold its domestic
wireless businesses to AirTouch.

                                       25
<PAGE>
OPERATING INCOME (LOSS)(1)

<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                                                    -------------------
                                                                1998       1997        $          %
                                                              --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
Domestic cable and broadband................................   $(159)     $(111)     $ (48)      43.2
International...............................................     (17)       (28)        11      (39.3)
Corporate and other(2)......................................    (156)      (184)        28      (15.2)
                                                               -----      -----      -----      -----
  Current operations........................................    (332)      (323)        (9)       2.8
Domestic wireless (3).......................................      93        353       (260)     (73.7)
                                                               -----      -----      -----      -----
Total.......................................................   $(239)     $  30      $(269)      --
                                                               =====      =====      =====      =====
</TABLE>

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

(1) Amounts have been reclassified to conform with the current year presentation

(2) Includes wholly-owned international directories which were sold in the
    latter part of 1997.

(3) Businesses were sold in April 1998.

    During 1998, MediaOne Group's operating income decreased $269 to a loss of
$239, primarily a result of selling the domestic wireless businesses in
April 1998. Excluding the effects of the domestic wireless businesses, operating
income has decreased primarily as a result of greater depreciation and
amortization expenses from the domestic cable and broadband operations,
partially offset by decreased operating losses from the wholly-owned
international directories operations which were sold in 1997.

    MediaOne Group's EBITDA for 1998 was $943, compared with $1,287 during the
same period in 1997. Excluding the effect of the domestic wireless operations,
EBITDA would have been $795 in 1998, compared with $754 in the same period of
1997. MediaOne Group considers EBITDA an important indicator of the operational
strength and performance of its businesses. EBITDA, however, should not be
considered an alternative to operating or net income as an indicator of the
performance of MediaOne Group's businesses, or as an alternative to cash flows
from operating activities as a measure of liquidity, in each case determined in
accordance with GAAP.

    DOMESTIC CABLE AND BROADBAND.  Domestic cable and broadband operating losses
increased during 1998 due primarily to increased depreciation and amortization
expense. As MediaOne Group continues to upgrade its cable networks, depreciation
expense will continue to increase. During the first quarter of 1998, there was a
one-time increase to depreciation and amortization expense of $28 related to the
termination of the sale of cable systems in Minnesota. Depreciation and
amortization expense had been suspended on these systems in 1997 while they were
held for sale. This increase was offset by a reduction to depreciation and
amortization expense of $29 for systems held for sale during 1998.

    During 1998, EBITDA for domestic cable and broadband operations was $941, an
increase of $11, or 1.2 percent, compared with $930 in 1997. Revenue increases
of $144, or 6.2 percent, exceeded increased programming costs of $50, or
9.5 percent, and increased operating, general and administrative costs of $83,
or 9.6 percent. Of those amounts, the PrimeStar Contribution provided revenue
decreases of $75 and cost decreases of $63, including $25 of programming costs,
to total domestic cable and broadband EBITDA for the period. Normalized for the
one-time effects of cable system acquisitions and dispositions, domestic cable
and broadband EBITDA increased 2.2 percent.

    Video EBITDA was $995 for 1998, an increase of $47, or 5.0 percent, compared
with $948 during 1997. Normalizing for acquisitions and dispositions, and
excluding Year 2000 implementation costs of $13 during 1998, video EBITDA was
$1,008 for 1998, an increase of $57, or 6.0 percent, compared with 1997.

                                       26
<PAGE>
    New Products EBITDA losses were $(58), an increase in losses of $(24), or
70.6 percent, compared with EBITDA losses of $(34) in 1997. New Products revenue
increases of $30 were more than offset by New Products costs increases of $54
during the period.

    Programming costs were $575 for 1998, an increase of $50, or 9.5 percent,
over 1997. Excluding programming costs related to PrimeStar DBS services,
programming costs increased 15.7 percent. The normalized increase was primarily
a result of greater programming costs per subscriber as a result of rate
increases, expanded channel offerings and growth in subscribers.

    Operating, general and administrative costs were $951 during 1998, an
increase of $83, or 9.6 percent, over 1997. Increases in operating, general and
administrative costs were primarily a function of increases in employee costs
due to improvements in customer service, marketing and advertising costs
associated with the deployment of new products, such as high speed Internet
access and residential telephone services, as well as NexTV, and spending on
initiatives to improve the operations of the Company. These cost increases were
partially offset by decreased costs related to the PrimeStar Contribution.
During 1998, MediaOne Group incurred costs of $15 to improve reporting and
billing systems, and to create customer databases to serve customers more
effectively, and costs of $13 for incremental Year 2000 implementation costs,
for a total of $28.

    INTERNATIONAL.  The decrease in international operating losses was primarily
the result of increased revenues and decreased operating expenses of the
broadband operations, due primarily to efficiency gains and reduced headcount.

    CORPORATE AND OTHER.  The decrease in corporate and other operating losses
during 1998 is due to a $30 charge in 1997 for management changes and moving
costs related to relocating MediaOne's operations from Boston to Denver, and a
decrease of $11 during 1998 due to the sales in 1997 of the wholly-owned
international directories operations. The decrease was partially offset by
increased corporate overhead costs during 1998.

INTEREST EXPENSE AND OTHER

<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                                                    -------------------
                                                                1998       1997        $          %
                                                              --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
Interest expense............................................   $(491)     $(678)     $ 187      (27.6)
Equity losses in unconsolidated ventures....................    (417)      (909)       492      (54.1)
Gains (losses) on investments:
  Sales of domestic investments.............................      54        206       (152)     (73.8)
  Sales of international investments........................      16        215       (199)     (92.6)
  Gain on sale of domestic wireless investment..............   3,869       --        3,869       --
  PrimeStar investment......................................    (163)      --         (163)      --
Guaranteed minority interest expense........................     (74)       (87)        13      (14.9)
Other income--net...........................................      83         16         67       --
</TABLE>

    INTEREST EXPENSE.  Interest expense decreased during 1998 due primarily to
the June 12, 1998 assumption by New U S WEST of $3.9 billion of debt related to
the Dex Alignment, the Refinancing which resulted in lower interest rate
commercial paper outstanding, and the assumption of $1,350 in debt by AirTouch
as a result of the sale of the Company's domestic wireless businesses to
AirTouch. The reduction in interest expense was partially offset by the
third-quarter 1998 issuance of $1,686 of debt exchangeable into AirTouch common
stock and a charge of $16 related to the termination of various interest rate
swap agreements. The swap agreements were terminated since the long term debt
underlying the instruments was refinanced at the time of the Separation.
MediaOne Group's weighted average borrowing cost was 7.28 percent in 1998,
compared with 6.95 percent in 1997.

                                       27
<PAGE>
    EQUITY LOSSES IN UNCONSOLIDATED VENTURES.  Equity losses decreased during
1998 due predominantly to a $200 charge in 1997 to write down the carrying value
of the investment in Malaysia to its fair value of zero and to recognize
probable funding commitments in connection with a shareholder support agreement
related to the investment in Indonesia. In addition, during 1998, the Company
suspended equity method accounting for the Company's investments in Malaysia and
Indonesia, compared with equity losses recognized in 1997 of $71 and $46,
respectively.

    Also contributing to the decrease in equity losses during 1998 were overall
improvements from the international wireless investments and the absence of
losses from the investment in PrimeCo, which was sold to AirTouch on April 6,
1998.

GAINS (LOSSES) ON INVESTMENTS

    SALES OF DOMESTIC INVESTMENTS.  During 1998, MediaOne Group sold:
(a) shares of Sportsline USA, Inc. resulting in a pretax gain of $12 ($8 after
tax), (b) a cable programming investment resulting in a pretax gain of $17 ($10
after tax), (c) various domestic cable investments resulting in a pretax gain of
$16 ($10 after tax) and (d) miscellaneous items resulting in a pretax gain of $9
($6 after tax). During 1997, the Company sold shares of Teleport Communications
Group, Inc. ("TCG") for a pretax gain of $162 ($96 after tax), and shares of
Time Warner for a pretax gain of $44 ($25 after tax).

    SALES OF INTERNATIONAL INVESTMENTS.  During 1998, MediaOne Group sold shares
of Optus, resulting in a pretax gain of $9 ($6 after tax), and a miscellaneous
item, resulting in a pretax gain of $7 ($4 after tax). During 1997, the Company
sold (a) its 90 percent interest in Fintelco, S.A. ("Fintelco") for a pretax
gain of $135 ($80 after tax), (b) its five percent interest in a French wireless
venture for a pretax gain of $51 ($31 after tax), and (c) U S WEST Polska, its
wholly owned directory operation in Poland, for a pretax gain of $29 ($17 after
tax).

    SALE OF DOMESTIC WIRELESS INVESTMENT.  On April 6, 1998, MediaOne Group sold
its domestic wireless businesses to AirTouch. Consideration for the sale
consisted of (i) debt reduction of $1,350, (ii) the issuance to MediaOne Group
of $1,650 in liquidation preference of dividend bearing AirTouch preferred stock
(fair value of $1,493), and (iii) the issuance to MediaOne Group of 59,314,000
shares of AirTouch common stock. The transaction resulted in a pretax gain of
$3,869, ($2,257 after tax). The Company's investment in AirTouch stock was
exchanged for Vodafone shares plus cash in June 1999, as a result of the merger
of Vodafone and AirTouch. See Note 4--Investment in Vodafone Group/AirTouch
Communications--to the Consolidated Financial Statements.

    PRIMESTAR INVESTMENT.  During the fourth quarter of 1998, MediaOne Group
recorded a charge of $163 ($100 after tax) to reduce the carrying amount of its
investment in PrimeStar. In December 1998, PrimeStar management provided a
business plan to its board of directors, of which MediaOne Group is a part.
Additionally, in early 1999, PrimeStar announced that it was selling its DBS
medium-power business and assets to Hughes Electronics Corporation ("Hughes").
Based on the review of PrimeStar's business plan and on the anticipated sale to
Hughes, MediaOne Group believed that it would not receive proceeds on the sale
of its investment in PrimeStar, and therefore, reduced the carrying amount of
its investment to zero. See Note 3--Domestic Acquisitions, Dispositions and
Other--to the Consolidated Financial Statements.

    GUARANTEED MINORITY INTEREST EXPENSE.  Guaranteed minority interest expense
decreased $21 during 1998 due primarily to the cash redemption on June 12, 1998,
of $301 face value of 7.96 Preferred Securities and $237 face value of
8.25 percent Preferred Securities. The decrease was partially offset by the
issuance in October 1998 of $500 face value of 9.04 percent Preferred
Securities.

    OTHER INCOME--NET.  Other income during 1998 was favorably impacted by
decreased foreign exchange transaction losses of $51, dividend income of $66
earned on the AirTouch preferred stock received in connection with the sale of
its domestic wireless operations to AirTouch, and the lack of minority interest

                                       28
<PAGE>
expense of $37 from the domestic wireless operations due to the sale of these
operations. Such improvements were partially offset by a $50 loss related to an
interest rate swap agreement associated with the AirTouch preferred stock and a
related $20 loss for the purchase of a new interest rate option. See
Note 4--Investment in Vodafone Group/AirTouch Communications--to the
Consolidated Financial Statements.

(PROVISION) BENEFIT FROM INCOME TAXES FOR CONTINUING OPERATIONS

<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                                                    -------------------
                                                                1998       1997        $          %
                                                              --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
(Provision) benefit for income taxes........................  $(1,208)    $ 380     $(1,588)      --
Effective tax rate..........................................     45.8%     31.5%
</TABLE>

    The increase in the effective tax rate is primarily a result of the gain on
the sale of the domestic wireless businesses. Excluding the gain on the sale of
the domestic wireless businesses, the effective tax rate would have been
32.8 percent.

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES

<TABLE>
<CAPTION>
                                                                        YEAR ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Cash provided by operating activities.......................    $518       $564       $995
</TABLE>

    Cash provided by operating activities decreased during 1999 due to merger
costs paid during 1999 and the lack of operating cash from the domestic wireless
operations which were sold in April 1998. Partially offsetting the decrease was
the receipt of $365 of net income tax benefits in 1999, primarily for the
carryback of the 1998 taxable loss to the 1996 consolidated tax return, and the
receipt of $12 in international dividends from Westel Radiotelefon and Westel
900, the Company's European wireless investments in Hungary.

    Cash provided by operating activities decreased during 1998 due primarily to
the sale of the domestic wireless operations in April 1998, as well as the
payment of interest and Separation costs during the year. Partially offsetting
the decrease in cash provided by operating activities were increased tax
receipts of $85 from the Communications Group, the receipt of $51 in
international dividends, primarily from Westel Radiotelefon and Westel 900, and
the receipt of $40 in dividends from the AirTouch preferred stock.

    MediaOne Group expects that cash from operations will not be adequate to
fund expected cash requirements in 2000. Additional funding will come from cash
on hand and asset sales.

INVESTING ACTIVITIES

<TABLE>
<CAPTION>
                                                                        YEAR ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Cash provided by (used for) investing activities............   $4,856    $(2,401)   $(1,222)
</TABLE>

    Total capital expenditures at MediaOne Group were $1,983, $1,726 and $1,522
during 1999, 1998 and 1997, respectively. The majority of capital expenditures
were devoted to upgrading the domestic cable network and preparing for the
provision of new and enhanced products and services. In 2000, capital
expenditures are expected to range between $1.3 billion and $1.5 billion,
primarily for the domestic cable and broadband business.

                                       29
<PAGE>
    During 1999, the Company invested $130 in international ventures, net of a
$19 return of capital from a wireless investment in the United Kingdom. The
remaining investments made in 1999 were primarily capital contributions and
shareholder loans to cable investments in Belgium, the Netherlands, Poland,
Japan, and Singapore, as well as wireless ventures in India and Indonesia.

    During 1998, the Company invested $583, net of a $45 return of capital from
a wireless investment in the United Kingdom. Included in this amount was a total
investment in Telewest of $525, made up of (a) $131 as a result of the Company's
participation in a rights offering by Telewest in connection with that company's
acquisition of General Cable, and (b) $394 by purchasing an additional
175 million Telewest shares from another Telewest shareholder. The remaining
international investments made during 1998 were capital contributions to its
cable investments in Belgium, the Netherlands, Japan and Singapore.

    For 1997, the Company invested $334 in international ventures in Belgium,
India, Indonesia and Japan, and the purchase of an additional 40 percent
interest in Fintelco. The total investment in Fintelco was subsequently sold in
October 1997.

    The Company anticipates that investments in international ventures will
approximate $30 in 2000 to fund the continued expansion in the Slovak Republic
and India.

    Subsequent to year-end, MediaOne Group entered into an agreement to sell its
Japanese cable and telephony investment. As part of the sale proceeds, the
Company will be reimbursed for any capital contributions made after June 30,
1999, which totaled $41 as of December 31, 1999.

    During 1999, 1998 and 1997, the Company invested $104, $108 and $249,
respectively, in domestic ventures, including $55 funded in 1999 related to the
Company's funding obligations of PrimeStar. The remaining investments in
domestic ventures for 1999 related to investments in various Internet content
service providers. For investments made in 1998 and 1997, $64 and $213,
respectively, related to contributions to PrimeCo for network build activity.
PrimeCo was sold to AirTouch on April 6, 1998.

    MediaOne Group anticipates that the RoadRunner Joint Venture will require
investor funding in 2000. As the Company suspended recording equity losses for
the RoadRunner Joint Venture in April 1999, any capital contributions made by
the Company to the joint venture will be expensed, up to the amount of
unrecorded equity losses which approximate $50 as of December 31, 1999.

    MediaOne Group purchased various domestic cable systems and investments in
1998 totaling $92. Such purchases included a cable system in Michigan for $57
which serves approximately 31,000 cable subscribers.

    During the first quarter of 1997, the Company paid the cash portion of the
Continental Acquisition consideration of $1,150 to the Continental shareowners.

                                       30
<PAGE>
    During 1999, MediaOne Group sold various investments resulting in net
proceeds of $6,507 comprised of the following:

<TABLE>
<CAPTION>
INVESTMENT DESCRIPTION                                        CASH PROCEEDS
----------------------                                        -------------
<S>                                                           <C>
International investments:
  One 2 One.................................................      $5,607
  A2000.....................................................         229
  Optus shares..............................................         164
  Cable Plus................................................         150
  Telenet...................................................          95
  Listel....................................................          55
  Lyonnaise and other.......................................          29

CLEC Businesses.............................................          82
Miscellaneous assets of capital assets group................          64
Cable television systems sales..............................          32
                                                                  ------
Total.......................................................      $6,507
                                                                  ======
</TABLE>

    In addition, in 1999, MediaOne Group received cash proceeds of $534 upon the
exchange of its investment in AirTouch common stock for Vodafone ADRs and $9.00
per share cash proceeds. MediaOne Group also received $16 on the maturity of an
option for FSA shares held by the Company, $11 on investment maturities, and net
proceeds of $5 from various asset transactions, net of payments of $9 made to
TWE and Cox Communications on the swap of cable systems.

    During 1998, MediaOne Group sold various investments resulting in net
proceeds of $241, comprised of the following: (a) net proceeds of $77 related to
the PrimeStar Contribution, (b) various cable systems for net proceeds of $50,
(c) residual shares in Enhance Financial Services Group, Inc., and shares of
SportsLine USA, Inc. and Optus for total net proceeds of $46, (d) a cable
programming investment for net proceeds of $38, and (e) miscellaneous
investments for net proceeds of $30. In addition, MediaOne Group paid a net
amount of $164 related to other activities as follows: (a) paid $215 related to
the settlement of an interest rate swap agreement and the purchase of a related
put option, (b) received proceeds of $71 on the sale of a note receivable,
(c) restricted $26 of cash related to Centaur, and (d) received $6 for
miscellaneous asset sales.

    Throughout 1997, the Company monetized nonstrategic assets, including
various domestic and international investments. Such asset sales generated total
proceeds of $2,058. Proceeds from sales of international investments totaled
$887, domestic investments totaled $931, assets held for sale totaled $231, and
disposals of property, plant and equipment totaled $9. International sales
consisted of: (a) a five percent interest in a French wireless venture for
proceeds of $81, (b) a 90 percent interest in Fintelco for proceeds of $641,
(c) Thomson Directories, the directory operation in the United Kingdom, and
U S WEST Polska, the directory operation in Poland, for net proceeds of $121 and
$27, respectively, and (d) other miscellaneous international investment sales
for proceeds of $17. Domestic sales were comprised of the sale of shares of TCG,
for net proceeds of $678, shares of Time Warner, for net proceeds of $220, and
miscellaneous asset sales, for proceeds of $33.

FINANCING ACTIVITIES

<TABLE>
<CAPTION>
                                                                        YEAR ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Cash provided by (used for) financing activities............   $1,682    $(2,885)    $(801)
</TABLE>

                                       31
<PAGE>
DEBT AND OTHER FINANCING ACTIVITY

    Total debt at December 31, 1999 was $10,179, an increase of $4,757 compared
with December 31, 1998. The increase in debt outstanding was due primarily to
new debt issuances totaling $2.8 billion, and non-cash transactions made up of
the issuance of a $1.5 billion note payable to AT&T for the funding of the
Comcast merger termination fee and a $1.4 billion increase in the fair market
value of certain debt issued in 1998 whose redemption value is derived from the
underlying shares' fair market value. Debt increases during the period were
partially offset by debt maturities and redemptions totaling approximately $600.
The remaining change in debt outstanding was due primarily to the repayment of
commercial paper using the income tax refund received and proceeds generated by
asset sales. See Note 10--Debt--to the Consolidated Financial Statements.

    In November 1999, MediaOne Group issued 26 million of 7.0 percent
exchangeable notes (the "1999 Exchangeable Notes") with a total face value of
$1,129, for net proceeds of $1,098. The 1999 Exchangeable Notes mature on
November 15, 2002, and are mandatorily redeemable into cash and/or Vodafone
American Depository Receipts ("ADRs"). Proceeds from the debt offering were
invested in short term instruments, to be used for general corporate purposes.

    On September 23, 1999, MediaOne SPC VI ("MediaOne SPC VI"), a wholly-owned
subsidiary of MediaOne Group, issued $717 of floating rate debt at 3-month LIBOR
plus 0.5 percent and paid $216 to fix and pre-fund interest payments on the debt
(the "Zero Coupon Swap"). The floating rate debt matures in equal quarterly
installments beginning in the second quarter of 2003 and ending in the fourth
quarter of 2005. Net proceeds from the debt offering were invested in short term
instruments, to be used for general corporate purposes.

    On June 3, 1999, MediaOne SPC IV ("MediaOne SPC IV"), a wholly-owned
subsidiary of MediaOne Group, issued $1,128 of floating rate debt at 3-month
LIBOR plus 0.5 percent and paid $321 for a Zero Coupon Swap to fix and pre-fund
interest payments on the debt. The floating rate debt matures in equal quarterly
installments beginning in the second quarter of 2003 and ending in the second
quarter of 2005. Net proceeds from the debt offering were used for general
corporate purposes. As a result of the Vodafone merger, $105 of the debt issued
by MediaOne SPC IV was repaid in August 1999 using the $9.00 per share cash
proceeds received on the exchange of AirTouch common stock into Vodafone ADRs.

    On June 1, 1999, MediaOne Group redeemed 11.0 percent senior subordinated
debentures with a carrying value of $345, including a debt premium of $45. The
debt extinguishment resulted in an extraordinary gain of $17 (net of income tax
expense of $11). In addition, the Company redeemed a third-party note for its
carrying value of $12. MediaOne Group financed the redemptions with cash on
hand.

    On May 15, 1999, DECS originally issued in 1996 matured and were redeemed
for FSA shares held by the Company. The redemption resulted in a pretax gain of
$21 ($14 after tax).

    On December 15, 1998, Centaur issued the Preference Shares for total net
proceeds of $1,099, net of issuance costs of $31. Dividend and redemption
payments on certain of the Preference Shares may only be made to the extent
Vodafone pays dividends or redeems its outstanding preferred shares held by the
Company. See Note 13--Minority Interest in Centaur Funding--to the Consolidated
Financial Statements. Proceeds from the issuance of the Preference Shares were
loaned to a subsidiary of the Company and used for general corporate purposes.

    In October 1998, MediaOne Group issued $500 of 9.04 percent Preferred
Securities for net proceeds of $484. The proceeds from the issuance were used to
redeem outstanding commercial paper and for general corporate purposes. MediaOne
Group guarantees the payment of interest and redemption amounts to holders of
the Preferred Securities.

    During August and September, 1998, MediaOne Group issued approximately
$1,686 of 6.25 percent exchangeable notes (the "1998 Exchangeable Notes") for
net proceeds of $1,642. The notes mature on

                                       32
<PAGE>
August 15, 2001, and are mandatorily redeemable at MediaOne Group's option into
cash and/or AirTouch common stock. As a result of the Vodafone merger in
June 1999, the terms of the 1998 Exchangeable Notes were modified so that the
redemption value of the notes is based on Vodafone ADRs rather than AirTouch
common stock. The number of Vodafone ADRs to be exchanged for each 1998
Exchangeable Note and/or the cash equivalent varies based upon the fair value of
Vodafone ADRs.

    In December 1998, MediaOne Group also redeemed DECS originally issued in
1995. Such DECS were redeemed with shares of Enhance Financial Services
Group, Inc., held by the Company.

    On June 12, 1998, MediaOne Group tendered $4.9 billion notional amount of
long term debt. Also on June 12, 1998, MediaOne Group tendered for cash $301
face value of the 7.96 percent Preferred Securities and $237 face value of the
8.25 percent Preferred Securities originally issued in 1995 and 1996,
respectively. The cash redemption amount of $5.5 billion for the long term debt
and $582 for the Preferred Securities was financed with floating-rate commercial
paper with a weighted average interest rate of 5.85 percent. In addition, in
accordance with the terms of the Separation Agreement, New U S WEST funded to
MediaOne Group $3.9 billion related to the Dex Alignment. Such funds were used
to repay a portion of the commercial paper issued in connection with the
Refinancing.

    During 1997, the Company redeemed its zero coupon subordinated notes, which
had a recorded value of $268. In addition, MediaOne redeemed a 10.625 percent
senior subordinated note with a recorded value of $110, including a premium of
$10. The Company financed both redemptions with floating-rate commercial paper.

    In June 1997, the Company acquired cable systems serving approximately
40,000 subscribers in Michigan for cash of $25 and the issuance of approximately
$50 in liquidation value of Old U S WEST Series E Preferred Stock (the
"Series E Preferred Stock"). Effective with the Separation, the Series E
Preferred Stock remains outstanding and represents shares of Series E Preferred
Stock of MediaOne Group. The Series E Preferred Stock is redeemable at the
Company's option beginning five years from the date of issuance. The
stockholders have the right to elect cash upon redemption, or to convert their
shares into MediaOne Group Stock based on a predetermined formula.

MEDIAONE GROUP CREDIT RATINGS

    The following table provides credit ratings for MediaOne Group, primarily
debt issued by MediaOne Group Funding, Inc., the financing subsidiary of
MediaOne Group, and MediaOne. The credit ratings are all investment grade.
MediaOne Group does not guarantee the outstanding senior and subordinated debt
of MediaOne.

<TABLE>
<CAPTION>
                                                         DUFF & PHELPS   STANDARD & POOR'S   MOODY'S
                                                         -------------   -----------------   --------
<S>                                                      <C>             <C>                 <C>
MEDIAONE GROUP
Senior Unsecured Debt..................................      BBB               BBB             Baa1
Commercial Paper.......................................      D-2               A-2             P-2
Preferred Securities...................................      BBB-              BB+             ba2
Centaur Preferred Shares-Series A......................   Not Rated         Not Rated          aa1
Centaur Preferred Shares-Series B & C..................   Not Rated          BBB+(1)            a3

MEDIAONE
Senior Debt............................................      BBB               BBB             Baa2
</TABLE>

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

(1) In February 1999, Standard & Poor's announced a methodology change for the
    rating of Preferred Securities and other similar instruments which is
    reflected above. This change is not a credit event.

    MediaOne Group's senior unsecured debt and MediaOne's senior debt were
placed on credit watch with positive implications as a result of the Company's
anticipated merger with AT&T. The Centaur

                                       33
<PAGE>
preferred shares Series B and Series C were placed on credit watch for a
possible downgrade by Standard & Poor's as a result of Vodafone's acquisition
plans.

DIVIDENDS

    The Company paid dividends on the Communications Stock totaling $519 and
$992 in 1998 and 1997, respectively. MediaOne Group no longer pays dividends on
the Communications Stock as it has been canceled effective June 12, 1998, as a
result of the Separation.

CASH FROM DISCONTINUED OPERATIONS

    Cash from discontinued operations was $4,953 in 1998 through the date of the
Separation, and $1,091 in 1997. Such amounts consisted primarily of fundings to
MediaOne Group for common dividends paid to Communications Stock shareowners,
dividends paid by Dex to MediaOne Group, proceeds from the issuance of
Communications Stock, and debt fundings and repayments between MediaOne Group
and New U S WEST. Also included in the 1998 amounts were the $3.9 billion of
debt assumed by New U S WEST in connection with the Dex Alignment, as well as
$152 of net costs reimbursed to MediaOne Group as a result of the Separation and
the Refinancing. The $3.9 billion payment by New U S WEST was used by MediaOne
Group to repay commercial paper issued in the Refinancing.

OTHER FINANCING ACTIVITIES

    COMMITMENTS AND DEBT GUARANTEES.  At December 31, 1999, MediaOne Group's
international commitments and debt guarantees totaled approximately $330. This
amount includes approximately $50 of outstanding debt guarantees assumed by
MediaOne Group upon its acquisition of additional ownership interests in TITUS
Communications Corporation, a broadband network operation in Japan, and Chofu
Cable Television, a cable operation in Japan.

    As a result of an investment sale in 1999, an international subsidiary of
the Company has been released as a guarantor of approximately $880 in debt.
During 1999 and 2000, MediaOne Group entered into agreements to sell various
international investments, and subsequent to 1999, certain other international
investments were sold. Upon completion of the sales of these investments in the
year 2000, the Company's international commitments and debt guarantees will be
reduced by approximately $250.

    MediaOne Group's domestic commitments and debt guarantees at December 31,
1999 totaled approximately $180. This amount reflects the Company's release on a
$75 letter of credit for PrimeStar as a result of PrimeStar's closing on the
sale of its medium-powered business. The Company remains a guarantor for
PrimeStar on a $25 letter of credit, which is included in the above total.

    DEBT FACILITIES.  MediaOne Group maintains 364-day and 5-year revolving bank
credit facilities totaling $2.0 billion to support its commercial paper program
and to provide financing, all of which were available as of December 31, 1999.

    SHELF REGISTRATIONS.  Under a registration statement filed with the
Securities and Exchange Commission as of October 8, 1999, MediaOne Group is
permitted to issue up to approximately $3.9 billion of new debt securities.

    SHARE REPURCHASE.  On August 7, 1998, the Board of Directors of MediaOne
Group authorized the repurchase of up to 25 million shares of the Company's
common stock. The shares may be repurchased over the next three years, dependent
on market and financial conditions. During 1999 and 1998, MediaOne Group
purchased and placed into treasury approximately 830,000 and 8,682,000 shares of
MediaOne Group Stock for a total costs basis of $46 and $352, respectively. From
January 1, 2000 through February 29, 2000, the Company purchased 7,379,900
shares of MediaOne Group Stock for a total cost basis of $428.

                                       34
<PAGE>
    Prior to the Separation, Old U S WEST purchased and placed into treasury $31
of Communications Stock. All outstanding shares of Communications Stock held as
treasury stock by Old U S WEST were canceled as of the Separation date.

    PREFERRED STOCK REDEMPTIONS.  Effective November 15, 1999, MediaOne Group
called for redemption the outstanding shares of the Company's 4.5 percent
Series D Convertible Preferred Stock (the "Series D Preferred Stock"). The
Company issued a total of 39,576,000 shares of MediaOne Group Stock in exchange
for 19,997,525 shares of Series D Preferred Stock. See Note 16--Shareowners'
Equity--to the Consolidated Financial Statements.

    On September 2, 1999, the Series C Preferred Stock holders exercised options
to receive common shares of FSA held by the Company. As a result of the exercise
of this option, the Series C Preferred Stock was effectively redeemed. See
Note 15--Preferred Stock Subject to Mandatory Redemption--to the Consolidated
Financial Statements.

RISK MANAGEMENT

    MediaOne Group is exposed to market risks arising from changes in interest
rates, foreign exchange rates and equity prices. Derivative financial
instruments are used to selectively manage these risks. MediaOne Group does not
use derivative financial instruments for trading purposes.

    INTEREST RATE RISK MANAGEMENT.  MediaOne Group is exposed to interest rate
risk from its cash and cash equivalents balances, investments in AirTouch
preferred stock and other debt securities, and debt issued by the Company.

    A 10 percent decline in the December 31, 1999 weighted average interest
rates affecting the Company's investments, partially offset by the AT&T note,
the Series A Preference Shares and other miscellaneous floating rate debt for
which the Company is liable, would result in an approximate $20 decline in net
income. Conversely, a 10 percent increase in the December 31, 1999 weighted
average interest rates would result in an approximate $20 increase in net
income. The change in the Company's exposure to interest rate risk is due
primarily to the large cash and cash equivalents balance at December 31, 1999 as
compared with the balance in 1998, partially offset by the AT&T note.

    FOREIGN EXCHANGE RISK MANAGEMENT.  MediaOne Group selectively enters into
forward and option contracts to manage the market risks associated with
fluctuations in foreign exchange rates after considering offsetting foreign
exposures among international operations. The use of forward and option
contracts allows MediaOne Group to fix or cap the cost of firm foreign
investment commitments, the amount of foreign currency proceeds from sales of
foreign investments, the repayment of foreign currency denominated receivables
and the repatriation of dividends. The market values of foreign exchange
positions, including hedging instruments, are continuously monitored and
compared with predetermined levels of acceptable risk. All foreign exchange
contracts have maturities of one year or less. As of December 31, 1999, the
Company had no foreign exchange contracts outstanding.

    MediaOne Group is exposed to foreign exchange risk associated with its cash
deposits, and a cost method investment denominated in British Pounds. A
hypothetical 10 percent adverse change in the British Pound exchange rate as
compared with the U. S. dollar would reduce the market value of the cash
deposits and investment by approximately $20 as of December 31, 1999.

    The reduction in the Company's exposure to foreign currency risk on
financial instruments as of December 31, 1999 as compared to the same period in
1998 is primarily due to the sale of MediaOne Group's investments in One 2 One
and Cable Plus, offset by an increase in the value of the Company's cost method
investment.

    EQUITY-PRICE RISK MANAGEMENT.  MediaOne Group is exposed to market risks
associated with equity security prices related to its investments in marketable
equity securities. On a selective basis, MediaOne

                                       35
<PAGE>
Group enters into option contracts and exchangeable debt instruments to manage
risks associated with fluctuations in equity security prices.

    The table below presents the approximate impact of hypothetical movements in
the equity security prices related to MediaOne Group's combined position in
marketable equity securities and derivative contracts. The hypothetical change
in stock prices movements is based upon the historical trading volatility of the
stocks.

<TABLE>
<CAPTION>
                                                           HYPOTHETICAL
                                                             CHANGE IN
                                                       12/31/99 STOCK PRICE    INCREASE IN   DECREASE IN
                                                       ---------------------   FAIR MARKET   FAIR MARKET
INVESTMENT                                             INCREASE    DECREASE       VALUE         VALUE
----------                                             ---------   ---------   -----------   -----------
<S>                                                    <C>         <C>         <C>           <C>
Vodafone common stock including Exchangeable Notes
  and Collars........................................     30%         30%         $  380        $  440
Time Warner Telecom..................................     50%         50%            380           380
Internet related investments.........................     50%         50%            230           230
All other investments................................     30%         30%            110           110
                                                                                  ------        ------
Total................................................                             $1,100        $1,160
                                                                                  ======        ======
</TABLE>

    The change in the Company's exposure to equity price risk as of
December 31, 1999 is primarily due to the higher value of the Vodafone shares,
partially offset by the Exchangeable Notes and the Collars, and the receipt of
Time Warner Telecom shares from the TWE partnership.

    The changes in interest rates, foreign exchange rates and equity security
prices are based on hypothetical movements in future market rates and are not
necessarily indicative of actual results that may occur. Future gains and losses
will be affected by actual changes in interest rates, foreign exchange rates,
equity security prices, and changes in derivative financial instruments employed
during the year.

COMPETITIVE AND REGULATORY ENVIRONMENT

CABLE AND BROADBAND--DOMESTIC

    REGULATORY.  The Company's products and services are subject to varying
degrees of regulation. The Cable Television Consumer Protection and Competition
Act of 1992 (the "1992 Cable Act") provided for the regulation of rates for
certain tiered video services and for equipment and installation charges. Under
the Telecommunications Act of 1996 (the "Telecommunications Act"), the
regulation of all but basic service tier cable and equipment and installation
rates was discontinued effective March 31, 1999 for the cable industry. The
Telecommunications Act also eliminated certain cross-ownership restrictions
among cable operations, broadcasters and multi-point multi-channel distributions
services ("MMDS") operations and removed barriers to competition with local
exchange carriers ("LECs").

    Rates in the Company's systems covered by its Social Contract with the
Federal Communications Commission (the "FCC") remain subject to rate regulation
until the Social Contract expires on December 31, 2000. The Social Contract, as
amended, is a six-year agreement covering most of the Company's franchises. As
part of the Social Contract, the Company agreed to, among other things, invest
at least $1.7 billion in domestic system rebuilds and upgrades through the year
2000 to expand channel capacity and improve system reliability and picture
quality. The investment commitment was met as of the end of 1998, and
70 percent of systems covered by the Social Contract had been upgraded to a
minimum of 550 MHz and 47 percent had been upgraded to 750 MHz. The Company is
continuing its efforts to upgrade systems covered by the Social Contract to a
minimum of 550 MHz and has substantially completed the upgrade to 750 MHz of at
least half of the systems covered by the Social Contract.

    On October 8, 1999, the FCC revised its rules on the number of cable
subscribers that a company may reach and the method to identify cable ownership
interests that would be attributable to a company. The

                                       36
<PAGE>
revised rules maintained the original ruling that a cable operator may not own
systems that reach more than 30 percent of United States homes. The calculation
of the number of United States homes reached was modified, however, to include
those households that subscribe to broadcast satellite and other multi-channel
video programming distributors, effectively increasing the number of subscribers
that a cable operator may serve. The FCC has voluntarily stayed the ownership
rules pending the outcome of a court challenge to the original ownership rules.
The Company believes that these new rules will not prevent the closing of the
AT&T merger.

    Cable television systems are also subject to local regulation, typically
imposed through the franchising process. Local officials may be involved in the
initial franchise selection, franchise service area, construction standards,
safety, rate regulation of the lowest tier of service and equipment and
installation rates, customer service standards, billing practices,
community-related programming and services, franchise renewal, and imposition of
franchise fees.

    Currently, seven local franchise authorities, representing less than three
percent of the Company's subscribers, are attempting to require MediaOne Group
to allow unaffiliated Internet service providers ("ISPs") to connect to the
cable network for the purpose of transmitting information between the ISPs'
customers and the Internet. MediaOne Group believes that local governments,
including franchising authorities, lack authority to force cable companies to
provide network access to other ISPs and will vigorously defend against any such
forced access mandates.

    In June 1998, the FCC issued formal rules providing for the retail sale of
set-top television boxes which integrate security and non-security functions. On
January 1, 2005, cable companies will no longer be permitted to sell or lease
new integrated boxes to their subscribers. In addition, cable companies must
provide subscribers with related security modules that plug into set-top boxes
that are purchased from consumer electronics retailers by July 1, 2000. In
February 1999, MediaOne Group partnered with various manufacturers of digital
set-top boxes in order to provide an open conditional access system, which would
be compliant with domestic OpenCable-TM- specifications. In May 1999, the FCC
issued an interpretation of the above rules which clarified that the segregation
requirements applied to digital and hybrid digital/ analog boxes only.

    COMPETITION.  MediaOne Group's cable television systems generally compete
with other providers of video programming for viewer attention and advertising
dollars. Competitors include service providers such as television broadcasters,
DBS, MMDS, local multi-point distribution services ("LMDS"), satellite master
antenna service ("SMATV"), video tape rentals stores, movie theaters and live
sporting events. In addition, as a result of the Telecommunications Act, certain
LECs, including Regional Bell Operating Companies ("RBOCs"), are beginning to
offer video programming in competition with the Company's cable services. The
competition faced by the Company's cable systems is likely to increase in the
future with the development and growth of new technologies.

    As MediaOne Group continues to offer additional services over its hybrid
fiber-coax ("HFC") networks, MediaOne Group will face additional competition.
Both the high speed Internet access and telephone services offered by MediaOne
Group will face competition from other providers, including RBOCs and other
incumbent LECs, interexchange carriers ("IXCs"), ISPs and other providers of
local exchange and on-line services. The degree of competition will be dependent
upon the state and federal regulations concerning entry, interconnection
requirements and the degree of unbundling of the incumbent LECs' networks.
Competition will be based upon product, service quality, breadth of services
offered, and to a lesser extent on price.

    In November 1999, Congress passed the Satellite Home Viewer Improvement Act
of 1999, which was signed by the President. This law allows DBS carriers to
retransmit local television channels to their subscribers, making DBS much more
competitive with cable systems. Such retransmission will require consent of the
local channel owners after May 30, 2000.

                                       37
<PAGE>
INTERNATIONAL

    The Company's international broadband and wireless communications businesses
also face significant competition in their respective markets. Competition is
based upon price, geographic coverage and the quality of the services offered.

CONTINGENCIES

    During 1998, certain cable subsidiaries of the Company in Florida, Michigan,
and Ohio were named as defendants in various class action lawsuits challenging
such subsidiaries' policies for charging late payment fees when customers fail
to pay for subscriber services in a timely manner. MediaOne Group does not
anticipate that these lawsuits will have a material impact on the Company's
results of operations.

YEAR 2000 READINESS

    The statements made herein relating to the Year 2000 are designated as Year
2000 Readiness Disclosures for purposes of the Year 2000 Information and
Readiness Disclosure Act.

    At the date of this filing, the Company has experienced no material Year
2000 failures and, to MediaOne Group's knowledge, neither have any of its key
vendors, suppliers or customers.

    MediaOne Group incurred approximately $52 of costs to implement its Year
2000 compliance program through the fourth quarter of 1999, of which $6
represented capitalized expenditures. Of the total costs incurred, approximately
$45 were incremental to MediaOne Group. The funding of these costs was managed
by the Company through its liquidity and capital resources plan.

FUTURE IMPLEMENTATION OF NEW ACCOUNTING STANDARDS

    In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133--An Amendment of SFAS No. 133," which deferred the effective
date of SFAS No. 133 until fiscal years beginning after June 15, 2000. As a
result, the Company will adopt SFAS No. 133 in the year 2001. SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. Among other things, the statement requires that an
entity recognize all derivative instruments on the balance sheet as either
assets or liabilities, and to account for those instruments at fair value. The
Company is evaluating the impact of SFAS No. 133.

    On December 3, 1999, the SEC issued Staff Accounting Bulletin ("SAB")
No. 101, "Revenue Recognition in Financial Statements." SAB No. 101 summarizes
the SEC's views on the application of GAAP to revenue recognition. The Company
has reviewed SAB No. 101 and believes it is in compliance with the SEC's
interpretation of revenue recognition.

OUTLOOK

    The outlook section contains "forward looking information" within the
meaning of the Private Securities Litigation Reform Act of 1995. Although
MediaOne Group believes that its expectations are based on reasonable
assumptions within the bounds of its knowledge of its business and operations,
there can be no assurance that actual results will not differ materially from
its expectations. For a detailed listing of factors that could cause actual
results to differ from the Company's expectations, see the "Safe Harbor
Language" on page 13, incorporated herein by reference.

DOMESTIC CABLE AND BROADBAND BUSINESS

    The following expectations are based on the cable systems held as of
December 31, 1999, and could be impacted by cable system acquisitions,
dispositions or trades, as well as the AT&T merger.

                                       38
<PAGE>
    CONSOLIDATED REVENUES.  The Company expects total revenue growth in the low
teens during 2000. Total revenue includes video, high speed Internet access,
telephone and other services. Revenue growth will be driven by the following:

     (i) Subscriber growth--As of year-end 2000, subscriber growth is expected
         to range between 1.5 and 1.7 percent, on a comparable basis.

     (ii) Digital video subscribers growth--By year-end 2000, the Company
          anticipates having 300,000 digital subscribers.

    (iii) High speed Internet access subscribers growth--By year-end 2000, the
          Company anticipates doubling its high speed Internet access customers
          to approximately 400,000 customers.

     (iv) Telephone customers growth--The digital telephone customer base is
          expected to more than double by year-end 2000, to 150,000 digital
          telephone subscribers.

    CONSOLIDATED EBITDA.  EBITDA growth is expected to be in the low to mid
teens in 2000, aided in part by high speed Internet access services which is
expected to be EBITDA positive during 2000, and decreased EBITDA losses from
telephone services.

                                * * * * * * * *

    MediaOne Group from time to time engages in preliminary discussions
regarding restructurings, dispositions and other similar transactions. Any such
transaction may include, among other things, the transfer of certain assets,
businesses or interests, or the incurrence or assumption of indebtedness, and
could be material to the financial condition and results of operations of the
Company. There is no assurance that any such discussions will result in the
consummation of any such transaction.

                                       39
<PAGE>
SELECTED PROPORTIONATE FINANCIAL DATA

    The following table reflects the significant entities included in MediaOne
Group's Consolidated Financial Statements and the percent ownership by industry
segment. The proportionate financial and operating data for these entities are
summarized in the proportionate data tables that follow.

<TABLE>
<CAPTION>

<S>  <C>                           <C>                           <C>
               DOMESTIC                                  INTERNATIONAL
<CAPTION>
         CABLE AND BROADBAND           CABLE AND BROADBAND         WIRELESS COMMUNICATIONS
<S>  <C>                           <C>                           <C>
<CAPTION>
 C       MediaOne of Delaware
<S>  <C>                           <C>                           <C>
 O               100%
 N
 S
 O
 L
 I
 D
 A
 T
 E
 D

                 TWE                      Telewest (UK)                 One 2 One (UK)
                25.51%                        27.2%                          50%
                                           A2000 (KTA)             (Sold in October, 1999)
                                          (Netherlands)                   Westel 450
                                               50%                        (Hungary)
 E                                  (Sold in September, 1999)                49%
 Q                                       Cable Plus a.s.                  Westel 900
 U                                       (Czech Republic)                 (Hungary)
 I                                            97.1%                          49%
 T                                   (Sold in October, 1999)               EuroTel
 Y                                           Telenet                   (Czech & Slovak
                                            (Belgium)                     Republics)
 M                                             25%                          24.5%
 E                                   (Sold in November, 1999)      Polska Telefonia Cyfrowa
 T                                    Singapore Cablevision                (Poland)
 H                                         (Singapore)                      22.5%
 O                                             25%                         Russian
 D                                     Titus Communications           Telecommunications
                                          Corp. (Japan)              Development Corp.(1)
                                               60%                         (Russia)
                                      Chofu Cable Television                66.5%
                                             (Japan)               BPL Cellular Limited(1)
                                              33.3%                        (India)
                                                                             49%
</TABLE>

(1) During fourth-quarter 1999, the Company no longer includes the operations of
    RTDC and BPL Cellular Limited in proportionate results to reflect the
    suspension of their equity losses in consolidated results.

                                       40
<PAGE>
SELECTED PROPORTIONATE FINANCIAL DATA (CONTINUED)
PROPORTIONATE RESULT OF OPERATIONS--1999 COMPARED WITH 1998

    The following table and discussion is not required by GAAP or intended to
replace the Consolidated Financial Statements prepared in accordance with GAAP.
It is presented supplementally because MediaOne Group believes that
proportionate financial and operating data facilitate the understanding and
assessment of its Consolidated Financial Statements. The table does not reflect
financial data of the capital assets segment. The financial information included
below departs materially from GAAP because it aggregates the revenues and
operating income of entities not controlled by MediaOne Group with those of the
consolidated operations of MediaOne Group.

<TABLE>
<CAPTION>
                                                                                          CHANGE
                                                                                    -------------------
                                                                1999     1998(1)       $          %
                                                              --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
PROPORTIONATE REVENUES
Domestic cable and broadband(2).............................   $6,044     $5,591      $453        8.1
International...............................................    1,715      1,456       259       17.8
Corporate and other(3)......................................        7         85       (78)     (91.8)
                                                               ------     ------      ----      -----
  Total proportionate revenues(4)...........................   $7,766     $7,132      $634        8.9
                                                               ======     ======      ====      =====
PROPORTIONATE EBITDA(5)
Domestic cable and broadband(2).............................   $2,322     $1,741      $581       33.4
International...............................................      352        205       147       71.7
Corporate and other.........................................      (63)       (68)        5       (7.4)
                                                               ------     ------      ----      -----
  Total proportionate EBITDA(4).............................   $2,611     $1,878      $733       39.0
                                                               ======     ======      ====      =====
</TABLE>

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

(1) 1998 amounts have been reclassified to conform with the current year
    presentation.

(2) The proportionate results are based on MediaOne Group's 25.51 percent pro
    rata priority and residual equity interests in reported TWE results. The
    reported TWE results are prepared in accordance with GAAP and have not been
    adjusted to report TWE's results on a proportionate basis.

(3) Primarily includes international directories.

(4) Amounts exclude proportionate revenues for the domestic wireless operations
    of $354 and proportionate EBITDA of $114 for 1998.

(5) Proportionate EBITDA represents MediaOne Group's equity interest in the
    entities multiplied by the entity's EBITDA. As such, proportionate EBITDA
    does not represent cash available to MediaOne Group.

                                       41
<PAGE>
SELECTED PROPORTIONATE FINANCIAL DATA (CONTINUED)
PROPORTIONATE RESULTS OF OPERATIONS--1999 COMPARED WITH 1998

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,             CHANGE
                                                              -------------------   -------------------
PROPORTIONATE STATISTICS (IN THOUSANDS)                         1999       1998      AMOUNT       %
---------------------------------------                       --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
Cable and broadband:(1)
  Domestic video subscribers................................    4,993      4,965         28       0.6
  Domestic homes passed.....................................    8,560      8,512         48       0.6
  Domestic HSD subscribers..................................      220         84        136      --
  Domestic telephone lines..................................       88         13         75      --

  International video subscribers...........................      432        993       (561)    (56.5)
  International homes passed................................    2,101      2,581       (480)    (18.6)
  International telephone lines.............................      523        487         36       7.4

International wireless:
  Subscribers...............................................    1,183      1,734       (551)    (31.8)
  POPs......................................................   17,394     72,754    (55,360)    (76.1)
</TABLE>

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

(1) The proportionate statistics exclude MediaOne Group's 25.51 percent pro rata
    priority and residual equity interests in reported TWE results.

    Normalized for the one-time effects of acquisitions, dispositions and other
asset transactions, proportionate revenues increased $905, or 13.2 percent, and
EBITDA increased $277, or 15.2 percent.

    DOMESTIC CABLE AND BROADBAND.  During 1999, normalized for the one-time
effects of cable system acquisitions and dispositions, proportionate revenues
increased $569, or 10.4 percent. This is a result of increases in subscribers
and revenue per subscriber mainly due to expanded channel offerings, repackaging
of services and increased rates. Normalized for the one-time effects of cable
system acquisitions and dispositions, proportionate EBITDA increased $125, or
7.4 percent. This increase is primarily a result of higher revenues, partially
offset by higher programming fees, increased personnel costs related to customer
service initiatives and costs associated with the deployment of high speed data
services. Proportionate EBITDA related to TWE operations increased
77.1 percent. TWE's results benefited from improved cable, programming and
filmed entertainment operations, and gains realized by asset sales.

    INTERNATIONAL.  During 1999, normalized for asset dispositions,
international cable and broadband proportionate revenues increased $80, or
18.9 percent, due primarily to customer growth at Telewest, and normalized
proportionate international wireless revenues increased $361, or 26.7 percent,
due to the 73.2 percent increase in the international wireless subscriber base
to 1,183,000, on a comparable basis. The digital wireless operations in Hungary,
the Czech and Slovak Republics, and Poland contributed significantly to the
increase.

    During the same period, normalized international cable and broadband
proportionate EBITDA increased $31, or 81.6 percent, primarily due to a decrease
in MediaOne Group international staff costs and improved operations at Telewest.
Normalized international wireless proportionate EBITDA increased $106, or
59.9 percent, due to the increase in the international wireless subscriber base.

    Proportionate international cable subscribers totaled 432,000 at
December 31, 1999, a 15.5 percent increase over last year on a comparable basis.
Telewest's cable television subscribers increased 10.5 percent over last year on
a comparable basis.

                                       42
<PAGE>
SELECTED PROPORTIONATE FINANCIAL DATA (CONTINUED)
PROPORTIONATE RESULTS OF OPERATIONS--1999 COMPARED WITH 1998

    CORPORATE AND OTHER.  Corporate and other reflects corporate operations and
the results of the international directories operations located in South
America. During 1999, corporate proportionate revenues decreased $24, to a loss
of $(4), primarily due to adjustments associated with the discontinuance of
insurance policies on cellular phones, and other proportionate revenues
decreased $54 due to the sale of the South American international directories
operations in June 1999.

    Corporate EBITDA losses decreased $10, or 14.5 percent, to a loss of $(59)
primarily due to decreased costs. Other EBITDA losses decreased $5, to a loss of
$(4), due primarily to the sale of the South American international directories
operations.

                                       43
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareowners of MediaOne Group, Inc.:

    We have audited the accompanying Consolidated Balance Sheets of MediaOne
Group, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1999
and 1998, and the related Consolidated Statements of Operations, Shareowners'
Equity and Cash Flows for each of the three years in the period ended
December 31, 1999. These consolidated financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and this schedule based on our audits.

    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of MediaOne Group,
Inc. and subsidiaries as of December 31, 1999 and 1998, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with generally accepted
accounting principles.

    Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule appearing on page S-1 of
this Form 10-K is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in our audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP
Denver, Colorado,
February 28, 2000.

                                       44
<PAGE>
                              REPORT OF MANAGEMENT

    The Consolidated Financial Statements of MediaOne Group have been prepared
in conformity with generally accepted accounting principles applied on a
consistent basis. The integrity and objectivity of information in these
financial statements, including estimates and judgments, are the responsibility
of management, as is all other financial information included in this report.

    MediaOne Group maintains a system of internal accounting controls designed
to provide reasonable assurance as to the integrity and reliability of financial
statements, the safeguarding of assets and the prevention and detection of
material errors or fraudulent financial reporting. Monitoring of such systems
includes an internal audit program designed to objectively assess the
effectiveness of internal controls and recommend improvements therein.

    Limitations exist in any system of internal accounting controls based upon
the recognition that the cost of the system should not exceed the benefits
derived. MediaOne Group believes that the Company's system does provide
reasonable assurance that transactions are executed in accordance with
management's general or specific authorizations and is adequate to accomplish
the stated objectives.

    The independent certified public accountants, whose report is included
herein, were engaged to express an opinion on our Consolidated Financial
Statements. Their opinion is based on procedures performed in accordance with
generally accepted auditing standards, including examining, on a test basis,
evidence supporting the amounts and disclosures in the Consolidated Financial
Statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.

    In an attempt to assure objectivity, the financial information contained in
this report is subject to review by the Audit Committee of the Board of
Directors. The Audit Committee is composed of outside directors who meet
regularly with management, internal auditors and independent auditors to review
financial reporting matters, the scope of audit activities and the resolution of
audit findings.

                                          Charles M. Lillis
                                          PRESIDENT AND CHIEF EXECUTIVE OFFICER

                                          Richard A. Post
                                          EXECUTIVE VICE PRESIDENT AND
                                          CHIEF FINANCIAL OFFICER

February 28, 2000

                                       45
<PAGE>
                              MEDIAONE GROUP, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                   DOLLARS IN MILLIONS
<S>                                                           <C>        <C>        <C>
Sales and other revenues....................................  $ 2,695    $ 2,882    $ 3,847

Operating expenses:
  Cost of sales and other revenues..........................    1,069      1,013      1,255
  Selling, general and administrative.......................      749        926      1,305
  Depreciation and amortization.............................    1,248      1,182      1,257
                                                              -------    -------    -------
    Total operating expenses................................    3,066      3,121      3,817
                                                              -------    -------    -------
Operating income (loss).....................................     (371)      (239)        30

Interest expense............................................     (449)      (491)      (678)
Equity losses in unconsolidated ventures....................     (256)      (417)      (909)
Gains (losses) on investments:
  Sales of domestic investments.............................      510         54        206
  Sales and exit costs of international investments--net....    6,582         16        215
  Exchange of AirTouch investment...........................    2,482      --         --
  Sale of domestic wireless investment......................    --         3,869      --
  PrimeStar investment......................................      (49)      (163)     --
Minority interest expense in Centaur Funding................     (122)     --         --
Guaranteed minority interest expense........................      (95)       (74)       (87)
Merger costs................................................   (1,810)     --         --
Other income--net...........................................      309         83         16
                                                              -------    -------    -------
Income (loss) from continuing operations before income
  taxes.....................................................    6,731      2,638     (1,207)
(Provision) benefit for income taxes........................   (3,217)    (1,208)       380
                                                              -------    -------    -------
Income (loss) from continuing operations....................    3,514      1,430       (827)

Income from discontinued operations--net of tax:
  Results of operations.....................................    --           747      1,524
  Gain on Separation........................................    --        24,461      --
                                                              -------    -------    -------
Income before extraordinary item............................    3,514     26,638        697
Extraordinary item--early extinguishment of debt--net of
  tax.......................................................       17       (333)     --
                                                              -------    -------    -------
NET INCOME..................................................  $ 3,531    $26,305    $   697
                                                              =======    =======    =======
Preferred stock dividends and accretion.....................      (49)       (55)       (52)
Loss on redemption of preferred securities..................      (28)       (53)     --
                                                              -------    -------    -------
EARNINGS AVAILABLE FOR COMMON STOCK(1)......................  $ 3,454    $26,197    $   645
                                                              =======    =======    =======
</TABLE>

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

(1) In 1998 the Company distributed $25,345 as a dividend to New U S WEST
    stockholders upon the Separation representing the fair value of the
    businesses comprising New U S WEST.

   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.

                                       46
<PAGE>
                              MEDIAONE GROUP, INC.

               CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                   IN THOUSANDS, EXCEPT
                                                                    PER SHARE AMOUNTS
<S>                                                           <C>        <C>        <C>
MEDIAONE GROUP STOCK(1)

BASIC EARNINGS (LOSS) PER COMMON SHARE:
  Income (loss) from continuing operations..................  $   5.62   $   2.18   $  (1.45)
  Income from discontinued operations(2)....................     --          0.26       0.57
  Gain on Separation........................................     --         40.25      --
  Extraordinary item--early extinguishment of debt..........      0.03      (0.55)     --
                                                              --------   --------   --------
Basic earnings (loss) per common share......................  $   5.65   $  42.14   $  (0.88)
                                                              ========   ========   ========
BASIC AVERAGE COMMON SHARES OUTSTANDING.....................   611,623    607,648    606,749
                                                              ========   ========   ========
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
  Income (loss) from continuing operations..................  $   5.32   $   2.10   $  (1.45)
  Income from discontinued operations(2)....................     --          0.24       0.57
  Gain on Separation........................................     --         37.46      --
  Extraordinary item--early extinguishment of debt..........      0.03      (0.51)     --
                                                              --------   --------   --------
Diluted earnings (loss) per common share(3).................  $   5.34   $  39.29   $  (0.88)
                                                              ========   ========   ========
DILUTED AVERAGE COMMON SHARES OUTSTANDING...................   654,911    652,955    606,749
                                                              ========   ========   ========
</TABLE>

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

(1) For additional earnings per share information of MediaOne Group Stock and
    earnings per share information of Communications Stock, see
    Note 17--Earnings Per Share--to the Consolidated Financial Statements.

(2) Amounts represent the operations of U S WEST Dex, Inc., which were
    discontinued as of June 12, 1998.

(3) Amounts may not add due to rounding of components.

   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.

                                       47
<PAGE>
                              MEDIAONE GROUP, INC.
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
                                                              DOLLARS IN MILLIONS
<S>                                                           <C>        <C>
                                     ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 7,471    $   415
  Accounts and notes receivable, less allowance for credit
    losses of $20 and $31, respectively.....................      489        255
  Income tax receivable.....................................    --           375
  Current portion of deferred tax asset.....................       69         74
  Prepaid and other.........................................       29         33
  Marketable securities.....................................       62         48
                                                              -------    -------
Total current assets........................................    8,120      1,200

Property, plant and equipment-net...........................    5,090      4,069
Investment in Vodafone Group / AirTouch Communications......    8,718      5,919
Investment in Time Warner Entertainment.....................    2,597      2,442
Net investment in international ventures held for sale......      938      --
Net investment in international ventures....................    --         1,344
Intangible assets--net......................................   11,507     11,647
Other assets................................................    2,816      1,571
                                                              -------    -------
Total assets................................................  $39,786    $28,192
                                                              =======    =======

                       LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
  Short-term debt...........................................  $ 1,506    $   569
  Accounts payable..........................................      350        332
  Employee compensation.....................................       92         80
  Deferred revenue and customer deposits....................      174         87
  Current income taxes payable..............................    1,552      --
  Other.....................................................      571        546
                                                              -------    -------
Total current liabilities...................................    4,245      1,614

Long-term debt..............................................    8,673      4,853
Deferred income taxes.......................................    7,711      6,035
Deferred credits and other..................................      168        641

Commitments and contingencies

Minority interest in Centaur Funding........................    1,113      1,099
Company-obligated mandatorily redeemable preferred
  securities of subsidiary trust holding solely
  Company-guaranteed subordinated debentures................    1,060      1,061
Preferred stock subject to mandatory redemption.............       50        100
Shareowners' equity:
  Series D Preferred Stock--$1.00 per share par value,
    20,000,000 shares authorized, zero and 19,999,478 shares
    issued and outstanding..................................    --           927
Common shares--
  MediaOne Group Stock--$0.01 per share par value,
    2,000,000,000 shares authorized, 669,148,081 and
    630,915,792 issued, and 647,361,370 and 603,475,920
    outstanding, respectively...............................   11,448     10,324
  Retained earnings.........................................    4,123        669
  Accumulated other comprehensive income....................    1,195        869
                                                              -------    -------
Total shareowners' equity...................................   16,766     12,789
                                                              -------    -------
Total liabilities and shareowners' equity...................  $39,786    $28,192
                                                              =======    =======
</TABLE>

   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.

                                       48
<PAGE>
                              MEDIAONE GROUP, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                   DOLLARS IN MILLIONS
<S>                                                           <C>        <C>        <C>
OPERATING ACTIVITIES
Net income..................................................   $3,531    $ 26,305   $   697
Adjustments to net income:
  Discontinued operations...................................    --           (747)   (1,524)
  Gain on Separation........................................    --        (24,461)    --
  Extraordinary (gain) loss on debt extinguishment..........      (17)        333     --
  Depreciation and amortization.............................    1,248       1,182     1,257
  Equity losses in unconsolidated ventures..................      256         417       909
  Merger costs..............................................    1,810       --        --
  Gains on sales of domestic investments....................     (510)        (54)     (206)
  Net gain on sales and exit costs of international
    investments.............................................   (6,582)        (16)     (215)
  Gain on exchange of AirTouch investment...................   (2,482)      --        --
  Gain on sale of domestic wireless investment..............    --         (3,869)    --
  Loss on PrimeStar investment..............................       49         163     --
  Deferred income taxes and amortization of investment tax
    credits.................................................    1,509       1,579      (149)
  Provision for uncollectibles..............................       31          42        74
Distribution from unconsolidated ventures...................       12          51         9
Separation costs paid.......................................    --           (140)    --
Changes in operating assets and liabilities
  Accounts and notes receivable, and other current assets...     (211)        120      (207)
  Accounts payable and accrued liabilities..................      127        (304)      239
  Current income taxes payable..............................    1,927       --        --
Other-net...................................................     (180)        (37)      111
                                                               ------    --------   -------
Cash provided by operating activities.......................      518         564       995
                                                               ------    --------   -------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment..............   (1,983)     (1,726)   (1,522)
Payment to Continental Cablevision shareowners..............    --          --       (1,150)
Investments in international ventures.......................     (130)       (583)     (334)
Investments in domestic ventures............................     (104)       (108)     (249)
Purchase of miscellaneous assets............................    --            (92)      (25)
Proceeds from sales of investments..........................    6,507         241     1,827
Proceeds on exchange of investment in AirTouch..............      534       --        --
Cash from net investment in assets held for sale............    --             31       231
Other-net...................................................       32        (164)    --
                                                               ------    --------   -------
Cash provided by (used for) investing activities............    4,856      (2,401)   (1,222)
                                                               ------    --------   -------
FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term debt...........     (314)        728    (3,556)
Proceeds from issuance of long-term debt-net................    2,330       1,642     4,123
Proceeds from issuance of Preferred Securities-net..........    --            484     --
Proceeds from issuance of common stock......................       97         144       106
Proceeds from issuance of Centaur Funding Preference
  Shares-net................................................    --          1,099     --
Repayments of long-term debt................................     (333)     (5,447)     (379)
Repayments of Preferred Securities..........................    --           (582)    --
Purchases of treasury stock.................................      (46)       (383)      (53)
Dividends paid on common stock..............................    --           (519)     (992)
Dividends paid on preferred stock...........................      (52)        (51)      (50)
                                                               ------    --------   -------
Cash provided by (used for) financing activities............    1,682      (2,885)     (801)
                                                               ------    --------   -------
Cash provided by discontinued operations....................    --          4,953     1,091
                                                               ------    --------   -------
CASH AND CASH EQUIVALENTS
  Increase..................................................    7,056         231        63
  Beginning balance.........................................      415         184       121
                                                               ------    --------   -------
  Ending balance............................................   $7,471    $    415   $   184
                                                               ======    ========   =======
</TABLE>

   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.

                                       49
<PAGE>
                              MEDIAONE GROUP, INC.

                 CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
<TABLE>
<CAPTION>

                                    PREFERRED    COMMON    RETAINED
                                      STOCK      STOCK     EARNINGS      LESOP
                                     AMOUNT      AMOUNT    (DEFICIT)   GUARANTEE
                                    ---------   --------   ---------   ----------
                                                 DOLLARS IN MILLIONS
<S>                                 <C>         <C>        <C>         <C>
BALANCE DECEMBER 31, 1996.........    $920      $10,741    $     17      $ (91)
Issuance of Communications
  Stock...........................                  138
Issuance of MediaOne Group Stock..                   40
Purchase of treasury stock........                  (53)
Common dividends declared ($2.14
  per Communications share).......                           (1,034)
Preferred dividends...............       3                      (52)
Other.............................                   10          13         45
Comprehensive Income:
  Net income......................                              697
  Market value adjustments for
    debt and equity securities,
    net...........................
  Foreign currency translation....
    Other comprehensive income,
      net.........................
Total comprehensive income........
                                      ----      -------    --------      -----
BALANCE DECEMBER 31, 1997.........     923       10,876        (359)       (46)
Issuance of Communications
  Stock...........................                   24
Distribution of New U S WEST......                 (421)    (24,924)
Issuance of MediaOne Group Stock..                   81
Purchase of treasury stock........                 (383)
Common dividends declared ($0.535
  per Communications share).......                             (260)
Preferred dividends and
  accretion.......................       4                      (55)
Loss on redemption of Preferred
  Securities......................                              (53)
Other.............................                  147          15         46
Comprehensive Income:
  Net income......................                           26,305
  Market value adjustments for
    debt and equity securities and
    Exchangeable Notes, net.......
  Foreign currency translation....
    Other comprehensive income,
      net.........................
Total comprehensive income........
                                      ----      -------    --------      -----
BALANCE DECEMBER 31, 1998.........     927       10,324         669      --
Issuance of MediaOne Group Stock..                   97
Exchange of Series D Preferred
  Stock...........................    (931)         931
Purchase of treasury stock........                  (46)
Preferred dividends and
  accretion.......................       4                      (49)
Loss on redemption of Series C
  Preferred Stock.................                              (28)
Other.............................                  142
Comprehensive Income:
  Net income......................                            3,531
  Market value adjustments for
    debt and equity securities and
    Exchangeable Notes, net.......
  Foreign currency translation....
    Other comprehensive income,
      net.........................
Total comprehensive income........
                                      ----      -------    --------      -----
BALANCE DECEMBER 31, 1999.........    $--       $11,448    $  4,123      $--
                                      ====      =======    ========      =====

<CAPTION>
                                               ACCUMULATED OTHER
                                          COMPREHENSIVE INCOME/(LOSS)
                                    ----------------------------------------
                                                    UNREALIZED
                                      FOREIGN     GAIN/(LOSS) ON
                                     CURRENCY     DEBT AND EQUITY              COMPREHENSIVE
                                    TRANSLATION     SECURITIES       TOTAL         INCOME
                                    -----------   ---------------   --------   --------------
                                                       DOLLARS IN MILLIONS
<S>                                 <C>           <C>               <C>        <C>
BALANCE DECEMBER 31, 1996.........     $ (39)         $    1         $  (38)
Issuance of Communications
  Stock...........................
Issuance of MediaOne Group Stock..
Purchase of treasury stock........
Common dividends declared ($2.14
  per Communications share).......
Preferred dividends...............
Other.............................
Comprehensive Income:
  Net income......................                                                $   697
  Market value adjustments for
    debt and equity securities,
    net...........................                        24             24
  Foreign currency translation....       (56)                           (56)
                                                                     ------
    Other comprehensive income,
      net.........................                                      (32)          (32)
                                                                                  -------
Total comprehensive income........                                                $   665
                                       -----          ------         ------       =======
BALANCE DECEMBER 31, 1997.........       (95)             25            (70)
Issuance of Communications
  Stock...........................
Distribution of New U S WEST......
Issuance of MediaOne Group Stock..
Purchase of treasury stock........
Common dividends declared ($0.535
  per Communications share).......
Preferred dividends and
  accretion.......................
Loss on redemption of Preferred
  Securities......................
Other.............................
Comprehensive Income:
  Net income......................                                                $26,305
  Market value adjustments for
    debt and equity securities and
    Exchangeable Notes, net.......                       943            943
  Foreign currency translation....        (4)                            (4)
                                                                     ------
    Other comprehensive income,
      net.........................                                      939           939
                                                                                  -------
Total comprehensive income........                                                $27,244
                                       -----          ------         ------       =======
BALANCE DECEMBER 31, 1998.........       (99)            968            869
Issuance of MediaOne Group Stock..
Exchange of Series D Preferred
  Stock...........................
Purchase of treasury stock........
Preferred dividends and
  accretion.......................
Loss on redemption of Series C
  Preferred Stock.................
Other.............................
Comprehensive Income:
  Net income......................                                                $ 3,531
  Market value adjustments for
    debt and equity securities and
    Exchangeable Notes, net.......                       329            329
  Foreign currency translation....        (3)                            (3)
                                                                     ------
    Other comprehensive income,
      net.........................                                      326           326
                                                                                  -------
Total comprehensive income........                                                $ 3,857
                                       -----          ------         ------       =======
BALANCE DECEMBER 31, 1999.........     $(102)         $1,297         $1,195
                                       =====          ======         ======
</TABLE>

   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.

                                       50
<PAGE>
                              MEDIAONE GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

NOTE 1: BUSINESS OVERVIEW

    MediaOne Group, Inc. ("MediaOne Group" or the "Company") is a diversified
global broadband communications company with domestic operations incorporating
large clusters in Atlanta, Massachusetts, California, Chicago, Florida, Detroit,
and Minneapolis/St. Paul, having the capability to offer video, high speed
Internet access and telephone services simultaneously over its broadband
network. Among its domestic investments, MediaOne Group owns an investment in
Time Warner Entertainment Company, L.P. ("TWE" or "Time Warner Entertainment"),
which provides cable programming, filmed entertainment and broadband
communications services, and is the second largest cable television system
operator in the United States. The Company also owns an interest in a joint
venture to provide high speed Internet access services under the "RoadRunner"
brand name (the "RoadRunner Joint Venture").

    Internationally, the Company owns various investments in international
broadband and wireless ventures. As a result of the anticipated merger with AT&T
Corp. ("AT&T") described below, MediaOne Group formalized a plan during 1999 to
sell its international broadband and wireless investments, and, as a result,
these investments are classified as held for sale on the Consolidated Balance
Sheets. See Note 7--Net Investment In International Ventures--to the
Consolidated Financial Statements.

AT&T MERGER

    On May 6, 1999, MediaOne Group entered into an agreement with AT&T to merge
its operations with those of AT&T, and terminated the merger agreement
previously entered into with Comcast Corporation ("Comcast"). On October 21,
1999, MediaOne Group's shareowners approved the merger with AT&T. The
transaction is expected to close in the second quarter of 2000, subject to legal
and regulatory approval.

    Under the terms of the AT&T definitive merger agreement, MediaOne Group
shareowners will have the right to receive, for each share of MediaOne Group
common stock ("MediaOne Group Stock"), (i) 1.4912 shares of AT&T common stock,
(ii) $85.00 in cash, or (iii) .95 of a share of AT&T common stock and cash of
$30.85. Since AT&T has agreed to pay a set amount of AT&T common stock in the
merger, MediaOne Group shareowners who elect to receive all AT&T common stock or
all cash may be subject to proration in the event that the common stock to be
issued is over or under subscribed. With respect to MediaOne Group shareowners
who receive AT&T common stock, if the volume-weighted average sale price of the
AT&T common stock for the 20 trading days ending three trading days prior to the
effective date of the merger (the "AT&T Price") is between $51.30 and $57.00 per
share, an additional amount in cash will be paid so that the total value of the
AT&T common stock (based on the AT&T Price) and cash received per share of
MediaOne Group Stock will be $85.00. If the AT&T Price is less than $51.30 per
share, the additional cash payment will be made based on an assumed AT&T Price
of $51.30 per share, and the total value of cash and AT&T common stock (based on
the AT&T Price) received per share of MediaOne Group Stock will be less than
$85.00. If the AT&T Price is above $57.00 per share, the total value of cash and
AT&T common stock (based on the AT&T Price) received per share of MediaOne Group
Stock will be more than $85.00. If a shareowner chooses the AT&T stock plus cash
election, the maximum additional cash payment would be $5.42 per share of
MediaOne Group Stock. If a shareowner chooses the AT&T stock election, the
maximum additional cash payment would be $8.50 per share of MediaOne Group
Stock.

                                       51
<PAGE>
                              MEDIAONE GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1: BUSINESS OVERVIEW (CONTINUED)
    In order to avoid disputes as to whether the AT&T merger would violate the
non-competition provisions of the TWE partnership agreement, on August 3, 1999,
MediaOne Group sent a notice of termination to TWE which terminated these
non-competition provisions as to MediaOne Group. See Note 6--Investment in Time
Warner Entertainment--to the Consolidated Financial Statements.

    In addition, Time Warner, Inc. ("Time Warner") has expressed its view that,
absent Time Warner's consent, completion of the AT&T merger will violate the TWE
partnership agreement unless AT&T and MediaOne Group delay completion of the
merger at least until August 3, 2000, one year following delivery of the
termination notice. While AT&T and MediaOne Group disagree with this view, if
Time Warner's view prevails and if Time Warner does not consent to an earlier
closing, AT&T and MediaOne Group may have to delay completing the merger to
August 3, 2000. Any such delay could delay the ability to realize the expected
financial and operating benefits of the merger.

    During 1999, MediaOne Group incurred total pretax merger costs of $1,810,
comprised primarily of the $1.5 billion fee paid to Comcast to terminate the
Company's merger agreement with Comcast as outlined in the Comcast merger
agreement. The fee was funded by AT&T on the Company's behalf and AT&T received
in exchange a note payable from MediaOne Group. See Note 10--Debt--to the
Consolidated Financial Statements. Merger costs also included $310 of costs
related to employee bonuses paid in accordance with the AT&T merger agreement,
as well as change of control payments made to select employees which were
triggered as a result of the shareowners' approval to merge with AT&T, and
miscellaneous legal and advisory fees.

THE SEPARATION

    Prior to June 12, 1998, MediaOne Group was known as "U S WEST, Inc." ("Old
U S WEST"). On June 12, 1998, Old U S WEST separated its businesses into two
independent public companies (the "Separation"). Until the Separation, Old
U S WEST conducted its businesses through two groups: U S WEST Media Group (the
"Media Group") and U S WEST Communications Group (the "Communications Group").
Upon Separation, Old U S WEST was renamed "MediaOne Group, Inc." and retained
the multimedia businesses of Media Group, except for U S WEST Dex, Inc. ("Dex"),
the domestic directory business. The telecommunications businesses of the
Communications Group became an independent public company and retained the
"U S WEST, Inc." name ("New U S WEST"). In addition, Dex was aligned with New
U S WEST (the "Dex Alignment").

    The Separation was consummated pursuant to the terms of a separation
agreement between MediaOne Group and New U S WEST (the "Separation Agreement").
The Company accounted for the distribution of New U S WEST stock to the
Communications Group stockholders, and to the Media Group stockholders for the
Dex Alignment, as a discontinuance of the businesses comprising New U S WEST.
See Note 25--Discontinued Operations--to the Consolidated Financial Statements.

    Prior to the Separation, Old U S WEST had outstanding two separate classes
of common stock which reflected the performance of its two groups. The
performance of Media Group was reflected by the U S WEST Media Group common
stock (the "Media Stock") and the performance of the Communications Group was
reflected by the U S WEST Communications Group common stock (the "Communications
Stock"). Upon Separation, and in accordance with the Separation Agreement, each
outstanding share of Media Stock remains outstanding and represents one share of
MediaOne Group Stock. Each issued and outstanding share of Communications Stock
was redeemed for one share of New U S WEST common stock. See
Note 16--Shareowners' Equity--to the Consolidated Financial Statements.

                                       52
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                              MEDIAONE GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1: BUSINESS OVERVIEW (CONTINUED)
    In connection with the Dex Alignment, (i) each holder of Media Stock
received as a dividend .02731 shares of New U S WEST common stock for each share
of Media Stock held (the "Dex Dividend"), and (ii) $3.9 billion of Old
U S WEST debt was refinanced by New U S WEST.

    In connection with the Separation, MediaOne Group refinanced substantially
all of the indebtedness issued or guaranteed by Old U S WEST through a
combination of tender offers, prepayments and consent solicitations (the
"Refinancing"). On June 12, 1998, $4.9 billion notional medium and long-term
debt was redeemed for a total cash redemption amount of $5.5 billion. MediaOne
Group extinguished the debt by issuing commercial paper at a weighted-average
interest rate of 5.85 percent. In accordance with the Separation Agreement, New
U S WEST funded to MediaOne Group $3.9 billion related to the Dex Alignment. The
Company used the funds to repay a portion of the amount of commercial paper
issued in connection with the Refinancing. Debt extinguishment costs related to
the Refinancing totaled $333 (net of income tax benefits of $209) and are
reflected in the Consolidated Statements of Operations as an extraordinary item.
In addition to refinancing costs, such costs included the difference between the
market and face value of the debt redeemed and a charge for unamortized debt
issuance costs. MediaOne Group financed the debt extinguishment costs by issuing
commercial paper, net of a $140 reimbursement by New U S WEST for shared costs.
Remaining commercial paper issued in connection with the Refinancing was
subsequently repaid with proceeds generated from a debt offering in
August 1998. See Note 10--Debt--to the Consolidated Financial Statements.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    BASIS OF PRESENTATION.  The Consolidated Financial Statements include the
accounts of the Company and its majority-owned subsidiaries. Effective
January 1, 1999 for the Consolidated Statements of Operations, and December 31,
1998 for the Consolidated Balance Sheets, the Consolidated Financial Statements
include the activity of the capital assets segment. Prior to this time, the
capital assets segment had been reported as a net investment in assets held for
sale. See Note 24--Net Investment In Assets Held For Sale--to the Consolidated
Financial Statements. All significant intercompany amounts and transactions
within continuing operations have been eliminated. Investments in less than
majority-owned ventures not held for sale are generally accounted for using the
equity method.

    Certain reclassifications within the Consolidated Financial Statements have
been made to conform to the current year presentation.

    USE OF ESTIMATES.  The preparation of financial statements in conformity
with generally accepted accounting principles ("GAAP") requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

    CASH AND CASH EQUIVALENTS.  Cash and cash equivalents include highly liquid
investments with original maturities of three months or less that are readily
convertible into cash and are not subject to significant risk from fluctuations
in interest rates.

    PROPERTY, PLANT AND EQUIPMENT.  The investment in property, plant and
equipment, including construction materials, is carried at cost less accumulated
depreciation. Additions, replacements and substantial betterments are
capitalized. Costs for normal repair and maintenance of property, plant and
equipment are expensed as incurred.

                                       53
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                              MEDIAONE GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    MediaOne of Delaware, Inc. ("MediaOne"), the domestic cable and broadband
subsidiary of the Company, provides for depreciation of certain property, plant
and equipment using various straight-line group methods and remaining economic
lives. When depreciable property, plant and equipment accounted for on the group
methods is retired, the original cost less the net salvage value is generally
charged to depreciation. The Company's remaining assets are depreciated using
the straight-line method. Gains or losses on disposal are included in income.

    The Company depreciates buildings between 10 to 35 years, cable distribution
systems between 3 to 15 years, and general purpose computers and other between 3
to 20 years.

    Interest related to qualifying construction projects, including construction
projects of equity method investees, is capitalized and reflected as a reduction
of interest expense. Amounts capitalized were $16, $19 and $36 for the years
ended 1999, 1998 and 1997, respectively.

    COMPUTER SOFTWARE.  On January 1, 1999, the Company adopted Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use." SOP 98-1 requires that certain costs of internal
use software, whether purchased or developed internally, be capitalized and
amortized over the estimated useful life of the software. Capitalized software
costs are amortized over periods ranging up to 5 years. All other computer
software costs not meeting the criteria of SOP 98-1 are expensed.

    At December 31, 1999 and 1998, capitalized computer software of $147 and
$89, respectively, are recorded as a component of property, plant and equipment.
MediaOne amortized capitalized computer software costs of $42, $13 and $10 in
1999, 1998 and 1997, respectively.

    INTANGIBLE ASSETS.  Intangible assets are recorded when the cost of acquired
companies exceeds the fair value of their net tangible assets. The costs of
identified intangible assets and goodwill are amortized by the straight-line
method over periods ranging from 5 to 25 years. These assets are evaluated for
impairment with other related assets, using the methodology as prescribed by
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of."

    INVESTMENTS IN DEBT AND EQUITY SECURITIES.  Debt and marketable equity
securities are classified as available for sale and are carried at fair market
value with unrealized gains and losses included in equity as a component of
other comprehensive income.

    FOREIGN CURRENCY TRANSLATION.  Assets and liabilities of international
subsidiaries and investments are translated at year-end exchange rates, and
income statement items are translated at average exchange rates for the year.
Resulting translation adjustments are included in equity as a component of other
comprehensive income. Gains and losses resulting from foreign currency
transactions are included in income.

    FINANCIAL INSTRUMENTS.  Synthetic instrument accounting is used for interest
rate swaps if the index, maturity, and amount of the instrument match the terms
of the underlying debt. Net interest accrued is recognized over the life of the
instruments as an adjustment to interest expense and is a component of cash
provided by operating activities. Any gain or loss on the termination of an
instrument that qualifies for synthetic instrument accounting would be deferred
and amortized over the remaining life of the original instrument.

    Deferral accounting is used for foreign currency forward and purchased
option contracts which qualify for and are designated as hedges of firm equity
investment commitments and for forward and purchased

                                       54
<PAGE>
                              MEDIAONE GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
option contracts which qualify as hedges of future debt issues or investments in
debt and equity securities. To qualify for deferral accounting, the contracts
must have a high inverse correlation to the exposure being hedged, and reduce
the risk or volatility associated with changes in foreign exchange rates,
interest rates, or equity prices. Qualified foreign exchange contracts are
carried at market value with gains and losses recorded in equity until sale of
the investment. Qualified interest rate contracts are associated with the
related debt and amortized as yield adjustments. Qualified interest rate and
equity contracts associated with investments in debt or equity securities are
carried at market value, with gains and losses recorded to the associated
investment account. Any gain or loss on the termination of a contract that
qualifies for deferral accounting would be deferred and accounted for with the
underlying transaction being hedged. If a contract does not maintain the
required correlation with the hedged item, deferral accounting is terminated and
a gain or loss is recognized in the Consolidated Statement of Operations for the
difference between the change in the fair value of the contract and the change
in the fair value of the hedged item.

    Market value accounting is used for derivative contracts which do not
qualify for synthetic instrument or hedge accounting. Market value accounting is
also used for foreign exchange contracts designated as hedges of foreign
denominated receivables and payables. These contracts are carried at market
value in other assets or liabilities with gains and losses recorded as other
income or expense. The Company does not enter into derivative financial
instruments for trading purposes.

    STOCK OPTIONS.  MediaOne Group accounts for its stock incentive plans in
accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees." The Company also follows the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." See
Note 18--Stock Incentive Plans--to the Consolidated Financial Statements.

    REVENUE RECOGNITION.  Cable television, local telephone and high speed
Internet access services are generally billed monthly in advance, and revenues
are recognized the following month when services are provided. Revenues derived
from other cable television services, including pay-per-view and advertising,
are recognized as the service is provided. Installation revenue is recognized as
the service is provided, to the extent of direct selling costs, in accordance
with SFAS No. 51, "Financial Reporting by Cable Television Companies."

    On December 3, 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 summarizes the SEC's views on the application of GAAP
to revenue recognition. The Company has reviewed SAB No. 101 and believes that
it is in compliance with the SEC's interpretation of revenue recognition.

    ADVERTISING COSTS.  Costs related to advertising are expensed as incurred.
Advertising expense was $75, $114 and $206 in 1999, 1998 and 1997, respectively.

    INCOME TAXES.  The provision for income taxes consists of an amount for
taxes currently payable or receivable and an amount for tax consequences
deferred to future periods.

    EARNINGS PER COMMON SHARE.  MediaOne Group computes basic and diluted
earnings per common share in accordance with SFAS No. 128, "Earnings Per Share."
See Note 17--Earnings Per Share--to the Consolidated Financial Statements.
Unless otherwise indicated, all per share amounts in the notes to the
Consolidated Financial Statements are computed based on basic weighted average
common shares outstanding.

                                       55
<PAGE>
                              MEDIAONE GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    NEW ACCOUNTING STANDARDS.  On January 1, 1999, MediaOne Group adopted
SOP 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 required,
among other things, that the costs related to start-up activities of a new
entity, facility, product or service be expensed. Adoption of SOP 98-5 did not
have a material impact on the financial position or results of operations of the
Company.

    FUTURE IMPLEMENTATION OF NEW ACCOUNTING STANDARDS.  In June 1999, the
Financial Accounting Standards Board issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133--An Amendment of SFAS No. 133," which deferred the
effective date of SFAS No. 133 until fiscal years beginning after June 15, 2000.
As a result, the Company will adopt SFAS No. 133 in the year 2001. SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. Among other things, the statement requires that an
entity recognize all derivative instruments on the balance sheet as either
assets or liabilities, and to account for those instruments at fair value. The
Company is evaluating the impact of SFAS No. 133.

NOTE 3: DOMESTIC ACQUISITIONS, DISPOSITIONS AND OTHER

    CABLE SYSTEMS.  During third quarter of 1999, MediaOne Group, Time Warner
Cable, a division of Time Warner and TWE, and Cox Communications, Inc., ("Cox")
completed the exchange of certain cable systems previously announced. Effective
July 31, 1999, MediaOne Group exchanged cable systems in Ohio and Maine, serving
approximately 280,000 subscribers, for Time Warner Cable cable systems in
Massachusetts and New Hampshire, serving approximately 240,000 subscribers, and
$40 in cash. Effective August 31, 1999, MediaOne Group exchanged cable systems
in California, serving approximately 67,000 subscribers, and $39 in cash for
Time Warner Cable cable systems in Georgia, serving approximately 72,000
subscribers; and MediaOne Group cable systems in Connecticut and Rhode Island,
serving approximately 51,000 subscribers, and cash of $10 for Cox cable systems
in Massachusetts, serving approximately 54,000 subscribers.

    As a result of the cable system trades with Time Warner Cable and Cox,
MediaOne Group recognized a pretax gain of $368 ($226 after tax). The pretax
gain is net of a $26 deferred gain related to a cable system traded with TWE, of
which MediaOne Group owns a 25.51 percent interest. The deferred gain will be
amortized to earnings over 15 years.

    MediaOne Group accounted for the cable systems acquired in the trades under
the purchase method of accounting. The excess of the purchase price over the
fair market value of net tangible assets acquired totaled $435 and will be
amortized over 25 years. The purchase price allocation is based on preliminary
information and may be modified upon the receipt of final asset appraisals.

    On October 13, 1998, MediaOne Group and Tele-Communications, Inc. ("TCI")
signed a definitive agreement to exchange certain of MediaOne Group's cable
television systems in Illinois and Michigan for certain of TCI's cable
television systems in South Florida and California (the "TCI trade"). In
March 1999, TCI was acquired by AT&T. Effective on June 1, 1999, due to the
proposed merger of MediaOne Group with AT&T, the companies deferred closing on
the TCI trade until the merger with AT&T is completed. If the merger with AT&T
does not occur, the TCI trade will take place as planned. In the meantime, the
Company's cable systems in Illinois and Michigan will continue to be owned by
MediaOne Group, but will be managed by AT&T, and the AT&T cable systems in South
Florida and California will remain under both the ownership and management of
AT&T. As a result of the deferral of the TCI trade, the Company

                                       56
<PAGE>
                              MEDIAONE GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3: DOMESTIC ACQUISITIONS, DISPOSITIONS AND OTHER (CONTINUED)
recorded a $25 one-time depreciation and amortization charge to catch-up for
depreciation and amortization expense suspended in the fourth quarter of 1998.
Depreciation and amortization expense was suspended on these properties while
they were held for sale.

    During the first quarter of 1999, MediaOne Group sold its cable television
systems in Reno, Nevada and Mammoth and June Lake, California for total proceeds
of $32, resulting in a pretax gain of $14. The cable systems served
approximately 10,000 and 7,000 subscribers, respectively.

    In December 1998, the Company acquired Time Warner's cable systems in the
cities of Dearborn and Wayne, Michigan for $57. The systems serve approximately
31,000 subscribers. In addition, during 1998, MediaOne Group sold various cable
television systems in California, Idaho, Iowa and Washington, serving
approximately 33,000 subscribers, for total proceeds of $50.

    ROADRUNNER JOINT VENTURE.  On June 15, 1998, MediaOne Group formed the
RoadRunner Joint Venture with Time Warner, TWE and Time Warner
Entertainment-Advance/Newhouse Partnership ("TWE/AN") to deliver high speed
Internet access services. The parties to the joint venture contributed certain
of their respective high speed Internet access assets into the RoadRunner Joint
Venture in exchange for common equity interests of approximately 31.4 percent
for MediaOne Group, 10.7 percent for Time Warner, 25.0 percent for TWE and
32.9 percent for TWE/AN. Taking into account MediaOne Group's ownership in TWE,
the Company would hold a 43.2 percent proportionate ownership in the venture. In
addition, Microsoft Corporation and Compaq Computer Corporation each contributed
$212.5 million for a respective 10 percent preferred equity investment in the
RoadRunner Joint Venture. The preferred shares are convertible into a combined
20 percent common equity interest in the RoadRunner Joint Venture. MediaOne
Group provides high speed Internet access services under the "RoadRunner" brand
name.

    Assuming the conversion of the preferred shares and taking into account
MediaOne Group's ownership in TWE, MediaOne Group would hold a proportionate
diluted common equity interest in the RoadRunner Joint Venture of approximately
34.6 percent. MediaOne Group accounts for its investment in the RoadRunner Joint
Venture under the equity method of accounting. As of April 1, 1999, MediaOne
Group suspended recording equity losses for the RoadRunner Joint Venture as its
investment had been reduced to zero and the Company had no future funding
commitments to the venture. Unrecognized equity losses for the joint venture
during 1999 totaled approximately $50.

    The RoadRunner Joint Venture is responsible for maintaining connections to
the Internet, providing technical customer support and developing national
content. The parties to the joint venture operate their respective high speed
Internet access businesses and are responsible for their respective customers'
billing and customer service issues. Accordingly, MediaOne Group continues to
reflect high speed Internet access service revenues in its consolidated results,
as well as a service fee payable to the RoadRunner Joint Venture for services
provided.

    OTHER.  Effective on March 31, 1999, MediaOne Group sold its investments in
Continental Fiber Technologies, Inc. and Alternet of Virginia, Inc., providers
of business telephony services in Jacksonville, Florida and Richmond, Virginia,
respectively, for net proceeds of $82. The sale resulted in a pretax gain of
$44. In addition, the capital assets group sold various leveraged leases for net
proceeds of $64 and a pretax gain of $12.

    PRIMESTAR.  Prior to April 1, 1998, the Company held a 10.4 percent interest
in PrimeStar Partners, L.P. ("Old PrimeStar"). In addition, MediaOne Group
distributed PrimeStar direct broadcast

                                       57
<PAGE>
                              MEDIAONE GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3: DOMESTIC ACQUISITIONS, DISPOSITIONS AND OTHER (CONTINUED)
satellite ("DBS") services to subscribers in its service areas and, as a result,
reflected consolidated operating results with respect to such subscribers. On
April 1, 1998, the Company contributed its interest in Old PrimeStar, as well as
its PrimeStar subscribers and certain related assets, to PrimeStar, Inc.
("PrimeStar"), a newly formed entity, in exchange for an approximate 10 percent
interest in PrimeStar and $77 in cash (the "PrimeStar Contribution").

    In December 1998, PrimeStar management provided a business plan to its board
of directors, of which MediaOne Group is a part. Additionally, in January 1999,
Hughes Electronics Corporation ("Hughes") entered into an agreement to purchase
PrimeStar's DBS assets. Based on its review of PrimeStar's business plan and on
the anticipated sale to Hughes, the Company believed it would not receive
proceeds on the sale of its investment in PrimeStar. As a result, MediaOne Group
recorded a charge of $163 ($100 after tax) to reduce the carrying amount of its
investment in PrimeStar to zero as of December 31, 1998.

    On March 31, 1999, certain PrimeStar shareholders, including MediaOne Group,
signed a separate funding agreement to cover various operation and transition
costs of the PrimeStar DBS medium-power business. On April 28, 1999, PrimeStar
received required consents from lenders and closed the DBS medium-power business
sale. As a result of these transactions, MediaOne Group was released as
guarantor on a $75 letter of credit for PrimeStar. The Company remains a
guarantor for PrimeStar on a $25 letter of credit. During 1999, MediaOne Group
funded $55 in connection with the PrimeStar funding agreement, of which $49 ($30
after tax) was expensed in 1999.

NOTE 4: INVESTMENT IN VODAFONE GROUP / AIRTOUCH COMMUNICATIONS

    AIRTOUCH TRANSACTION.  On April 6, 1998, MediaOne Group sold its domestic
wireless businesses to AirTouch Communications, Inc. ("AirTouch") in exchange
for (i) debt assumption of $1,350, (ii) the issuance to MediaOne Group of $1,650
in liquidation preference of 5.143 percent dividend bearing AirTouch preferred
stock (fair value of $1,493), and (iii) the issuance to MediaOne Group of
59,314,000 shares of AirTouch common stock. The domestic wireless businesses
included cellular communication services provided to 2.6 million customers in
12 western and midwestern states and a 25 percent interest in PrimeCo Personal
Communications, L.P. ("PrimeCo"). The transaction resulted in a pretax gain of
$3,869 ($2,257 after tax).

    VODAFONE/AIRTOUCH MERGER.  Effective on June 30, 1999, AirTouch merged its
operations into a subsidiary of Vodafone Group Public Limited Company
("Vodafone"). Under the terms of the Vodafone merger, each share of AirTouch
common stock was converted into $9.00 in cash plus 1/2 of a Vodafone American
Depository Receipt ("ADR"). The AirTouch preferred stock, consisting of 825,000
shares each of AirTouch 5.143 percent Class D Cumulative Preferred Stock,
Series 1998, (the "Class D ATI Shares") and 5.143 percent Class E Cumulative
Preferred Stock, Series 1998, (the "Class E ATI Shares" and together with the
Class D ATI Shares, the "ATI Shares"), remained outstanding as preferred shares
of AirTouch, a subsidiary of Vodafone, with the following modifications:
(a) the early redemption option on the Class D ATI Shares was eliminated,
(b) the maturity date on the Class E ATI Shares was extended to April 1, 2020,
and (c) an extraordinary dividend of $25.00 per share, or a total of $21, was
paid on August 16, 1999 on each Class E ATI Share.

    MediaOne Group recognized a pretax gain of $2,482 ($1,530 after tax) on the
exchange and modification of its AirTouch common and preferred shares into
Vodafone ADRs and preferred shares, and received $534 in cash related to its
investment in AirTouch common stock. The pretax gain was the result of the
difference between the cost basis and fair market value of the investment in
AirTouch as of the

                                       58
<PAGE>
                              MEDIAONE GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4: INVESTMENT IN VODAFONE GROUP / AIRTOUCH COMMUNICATIONS (CONTINUED)
effective date. MediaOne Group accounts for its investment in Vodafone under the
cost method of accounting, as available for sale securities.

    In October 1999, Vodafone executed a five for one stock split of its
Vodafone ADRs. References to Vodafone shares prior to the stock split will be
referred to in the Notes to the Consolidated Financial Statements as
"pre-split." On a consolidated basis as of December 31, 1999, MediaOne Group
held a total of approximately 148,284,000 Vodafone ADRs.

    VODAFONE COLLAR.  During May and September 1999, the Company contributed
11,662,000 shares of AirTouch common stock to MediaOne SPC IV ("MediaOne
SPC IV"), and 3,600,000 pre-split shares of its investment in Vodafone ADRs to
MediaOne SPC VI ("MediaOne SPC VI"), both wholly-owned subsidiaries of MediaOne
Group. MediaOne SPC IV subsequently entered into a series of purchased and
written options (the "SPC IV Collar") on its AirTouch common shares and issued
$1,128 in debt. MediaOne SPC VI also entered into a series of purchased and
written options (the "SPC VI Collar" and together with the SPC IV Collar, the
"Collars") on its Vodafone ADRs and issued $717 in debt. See Note 10--Debt--to
the Consolidated Financial Statements. Upon the Vodafone merger in June 1999,
the SPC IV Collar was automatically transferred to Vodafone ADRs and the put and
call prices were adjusted accordingly. As of December 31, 1999, MediaOne SPC IV
holds approximately 29,154,000 Vodafone ADRs and MediaOne SPC VI holds
approximately 18,000,000 Vodafone ADRs.

    The Collars have been designated and are effective as a hedge of the market
risk associated with the Company's investment in Vodafone ADRs. The Collars are
therefore carried at intrinsic value with gains or losses recorded in equity as
a component of other comprehensive income together with any change in the fair
value of the Vodafone ADRs. As of December 31, 1999, the Company recorded a loss
in equity of $19 related to the Collars.

    At expiration of the SPC IV Collar, the Company will receive cash if the
market value of a Vodafone ADR is less than approximately $34.00 per share,
effectively eliminating downside risk on the stock below $34.00. Conversely, if
the market value of a Vodafone ADR is greater than approximately $49.00 per
share, the Company will be required to pay cash which will be offset by the
corresponding increase in the value of the Vodafone ADRs. The SPC IV Collar
expires quarterly, in equal installments, starting in the second quarter of 2003
and ending in the second quarter of 2005.

    At expiration of the SPC VI Collar, the Company will receive cash if the
market value of a Vodafone ADR is less than approximately $40.00 per share,
effectively eliminating downside risk on the stock below $40.00 per share.
Conversely, if the market value of a Vodafone ADR is greater than approximately
$58.00 per share, the Company will be required to pay cash which will be offset
by the corresponding increase in the value of the Vodafone ADRs. The SPC VI
Collar expires quarterly, in equal installments, starting in the second quarter
of 2003 and ending in the fourth quarter of 2005.

    MediaOne Group intends to use proceeds from the sale of the Vodafone ADRs to
fund any cash obligations related to the Collars.

    AIRTOUCH INTEREST RATE SWAP AGREEMENT.  Prior to the Vodafone merger,
MediaOne Group accounted for its investment in AirTouch stock under the cost
method of accounting, as available for sale securities. The AirTouch preferred
stock was reported at fair value on the Consolidated Balance Sheet, in
accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." To minimize MediaOne Group's exposure to fluctuations in the
fair value of the AirTouch preferred stock, the Company entered into an interest
rate swap agreement in April 1998 and an interest rate option

                                       59
<PAGE>
                              MEDIAONE GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4: INVESTMENT IN VODAFONE GROUP / AIRTOUCH COMMUNICATIONS (CONTINUED)
agreement in October 1998. The interest rate swap agreement matured in
October 1998, and the interest rate option agreement in December 1998.

    During September 1998, the change in the value of the AirTouch preferred
stock and interest rate swap did not achieve the required correlation to
continue deferral accounting. Consequently, the Company recognized a net loss of
$31 (net of income tax benefits of $19) in other income for the change in the
fair value of the AirTouch preferred stock not offset by the fair value of the
interest rate swap agreement, in accordance with SFAS No. 80, "Accounting for
Futures Contracts." In addition, the Company recorded a charge of $12 (net of
income tax benefits of $8) for the purchase of the interest rate option offset
by a gain on the portion of the interest rate option associated with the
issuance of Company-obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely Company-guaranteed subordinated debentures
("Preferred Securities"). The gain on the interest rate option associated with
the Preferred Securities was $6 (net of income tax expense of $4).

NOTE 5: OPERATING SEGMENTS

    The Company reports on its operating segments in accordance with SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
Operating segments are components of an enterprise for which separate financial
information is available and which is evaluated regularly by the Company's chief
operating decision maker, or decision making group, in deciding how to allocate
resources and assess performance. Operating segments are managed separately and
represent strategic business units that offer different products and serve
different markets.

    The Company's reportable segments include: (1) domestic cable and broadband,
(2) international services, and (3) other. The domestic cable and broadband
segment is comprised of MediaOne and Multimedia Ventures. MediaOne consists of
cable television properties serving 5.0 million domestic subscribers and passing
8.6 million domestic homes. Multimedia Ventures includes the Company's equity
interest in Time Warner Entertainment. The international services segment
includes the cable and broadband and wireless communications operations located
abroad, in addition to international corporate overhead. Other includes the
discontinued operations of New U S WEST, capital assets (which was held for sale
until December 31, 1998), investments in domestic interactive services, the
domestic wireless business (which was sold in April 1998 in conjunction with the
AirTouch Transaction), the international directories operations (of which the
wholly owned operations in the United Kingdom and Poland were sold in 1997), and
corporate overhead.

    MediaOne Group believes that proportionate financial data facilitates the
understanding and assessment of its results. Therefore, "Sales and Other
Revenues" for each segment is presented on a proportionate basis. Proportionate
results reflect the relative weight of MediaOne Group's ownership in each of its
respective domestic and international equity ventures together with the
consolidated results of its subsidiaries. In addition, the Company believes
earnings before interest, taxes, depreciation, amortization and other ("EBITDA")
is an important indicator of the operating performance of its businesses. As
such, EBITDA is also presented, on a proportionate basis, for each segment. The
computation of EBITDA excludes gains on asset sales, equity losses, guaranteed
minority interest expense, and restructuring charges. Adjustments made to "Sales
and Other Revenues" and EBITDA to arrive at proportionate results are reversed
in the column labeled "Eliminations and Adjustments," in conformance with SFAS
No. 131, so that in total, "Sales and Other Revenues" and EBITDA reflect
consolidated results. All other line items presented in the tables reflect
consolidated results.

                                       60
<PAGE>
                              MEDIAONE GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5: OPERATING SEGMENTS (CONTINUED)
    Consolidated results for the operating segments reflect the accounting
policies described in Note 2--Summary of Significant Accounting Policies--to the
Consolidated Financial Statements. Intersegment sales and transfers are
accounted for at fair value as if the sales were to third parties. For
proportionate results, the ventures' management determines its accounting
policies.

    Industry segment financial information follows:

<TABLE>
<CAPTION>
                                        DOMESTIC CABLE
                                         & BROADBAND
                                    ----------------------
                                               MULTIMEDIA                                ELIMINATIONS
                                    MEDIAONE   VENTURES(1)   INTERNATIONAL    OTHER     & ADJUSTMENTS    CONSOLIDATED
                                    --------   -----------   -------------   --------   --------------   ------------
<S>                                 <C>        <C>           <C>             <C>        <C>              <C>
1999
Sales and other revenues..........  $ 2,686      $3,358         $1,715       $     7        $(5,071)        $ 2,695
EBITDA(2).........................      980       1,342            352           (63)        (1,734)            877
Net income (loss).................     (161)        114          3,954          (376)       --                3,531
Equity gains (losses) in
  unconsolidated ventures.........      (10)        170           (392)          (24)       --                 (256)
Total assets......................   17,270       3,394          1,885        17,237        --               39,786
Investments in equity ventures....       38       2,597            741             5        --                3,381
Capital expenditures..............    1,960       --                 1            22        --                1,983
1998
Sales and other revenues..........  $ 2,467      $3,124         $1,456       $   439        $(4,604)        $ 2,882
EBITDA(2).........................      941         800            205            46         (1,049)            943
Net income (loss).................     (536)        (11)          (317)       27,169        --               26,305
Equity gains (losses) in
  unconsolidated ventures.........      (24)          7           (352)          (48)       --                 (417)
Total assets......................   16,003       2,551          2,308         7,330        --               28,192
Investments in equity ventures....       46       2,442          1,083            71        --                3,642
Capital expenditures..............    1,618       --                12            96        --                1,726
1997
Sales and other revenues..........  $ 2,323      $2,887         $1,230       $ 1,471        $(4,064)        $ 3,847
EBITDA(2).........................      930         711             77           300           (731)          1,287
Net income (loss).................     (402)        (21)          (488)        1,608        --                  697
Equity gains (losses) in
  unconsolidated ventures.........      (22)         13           (775)         (125)       --                 (909)
Total assets......................   15,719       2,534          2,164         6,366        --               26,783
Investments in equity ventures....       61       2,486            624           523        --                3,694
Capital expenditures..............    1,216       --                21           265        --                1,502
</TABLE>

------------------------
(1) Multimedia Ventures includes MediaOne Group's 25.51 percent equity interest
    in TWE, as well as domestic cable overheads. The reported TWE results are
    prepared in accordance with GAAP and have not been adjusted to report TWE's
    investments accounted for under the equity method on a proportionate basis.

(2) EBITDA should not be considered an alternative to operating or net income as
    an indicator of the performance of MediaOne Group's businesses, or as an
    alternative to cash flows from operating activities as a measure of
    liquidity, in each case determined in accordance with GAAP.

                                       61
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5: OPERATING SEGMENTS (CONTINUED)

    A portion of general and administrative costs, including executive
management, legal, tax, accounting and auditing, treasury, strategic planning
and public policy services, are directly assigned to the Company's subsidiaries
based on actual utilization or are allocated based on operating expenses, number
of employees, external revenues, average capital and/or average equity.

    Total assets are those assets and investments that are used in, or pertain
to, each segment's operations. The "Other" column includes primarily cash; debt
and equity securities; net assets of discontinued operations and net investment
in assets held for sale for the capital assets segment in 1997; the domestic
wireless businesses; investments in domestic interactive services; and other
corporate assets.

    The following table presents a geographic breakout for proportionate
revenues and EBITDA and a reconciliation to consolidated amounts:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,                                         1999       1998       1997
-----------------------                                       --------   --------   --------
<S>                                                           <C>        <C>        <C>
PROPORTIONATE REVENUE:
  United States.............................................   $6,040     $5,966     $6,571
  United Kingdom............................................      999        856        609
  Central Europe............................................      625        510        378
  Asia and other............................................      102        154        353
                                                               ------     ------     ------
Proportionate revenue.......................................    7,766      7,486      7,911
Less: Proportionate adjustments.............................   (5,071)    (4,604)    (4,064)
                                                               ------     ------     ------
  Consolidated revenues.....................................   $2,695     $2,882     $3,847
                                                               ======     ======     ======
PROPORTIONATE EBITDA:
  United States.............................................   $2,261     $1,779     $1,937
  United Kingdom............................................      185        106        (23)
  Central Europe............................................      202        169        102
  Asia and other............................................      (37)       (62)         2
                                                               ------     ------     ------
Proportionate EBITDA........................................    2,611      1,992      2,018
Less: Proportionate adjustments.............................   (1,734)    (1,049)      (731)
                                                               ------     ------     ------
  Consolidated EBITDA.......................................   $  877     $  943     $1,287
                                                               ======     ======     ======
</TABLE>

NOTE 6: INVESTMENT IN TIME WARNER ENTERTAINMENT

    On September 15, 1993, the Company acquired 25.51 percent pro-rata priority
capital and residual equity interests ("equity interests") in Time Warner
Entertainment for an aggregate purchase price of $2.553 billion. The remaining
interest in TWE is owned by Time Warner. TWE owns and operates substantially all
of the entertainment assets previously owned by Time Warner, consisting
primarily of its filmed entertainment, programming-HBO and cable television
businesses.

    In order to avoid disputes as to whether the AT&T merger would violate the
non-competition provisions of the TWE partnership agreement, on August 3, 1999,
MediaOne Group sent a notice of termination to TWE which terminated these
non-competition provisions as to MediaOne Group. The non-competition provisions
continue to apply to Time Warner. Delivery of the notice of termination
permitted TWE to terminate most of MediaOne Group's management rights in TWE,
which it did on August 4, 1999. Most of these rights would have terminated in
any event upon the change of control of

                                       62
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6: INVESTMENT IN TIME WARNER ENTERTAINMENT (CONTINUED)
MediaOne Group in the merger. The delivery of the termination notice and the
resulting termination of management rights is irrevocable, however, even if the
merger does not occur. The loss of these management rights may have a material
adverse effect on the value of MediaOne Group's interest in TWE. Notwithstanding
the notice of termination, MediaOne Group retains certain rights under the
partnership agreement, including the right to approve such matters as a merger
of TWE, TWE's entrance into new lines of business and the issuance of new
partnership interests.

    The Company has an option to increase its pro-rata priority capital and
residual equity interests in TWE from 25.51 percent up to 31.84 percent
depending upon cable operating performance. The option is exercisable, in whole
or in part, between January 1, 1999 and May 31, 2005, for an aggregate cash
exercise price ranging from $1.25 billion to $1.8 billion, depending upon the
year of exercise. Either TWE or the Company may elect that the exercise price
for the option be paid with partnership interests rather than cash.

    Pursuant to the TWE Partnership Agreement, there are four levels of capital.
From the most to least senior, the capital accounts are: senior preferred (held
by the general partners); A preferred priority capital (held pro rata by the
general and limited partners); B preferred priority capital (held by the general
partners); and residual equity capital (held pro rata by the general and limited
partners). Of the $2.553 billion contributed by the Company, $1.658 billion
represents a preferred priority capital and $895 represents residual equity
capital. The TWE Partnership Agreement provides for special allocations of
income and distributions of partnership capital. Partnership income, to the
extent earned, is allocated as follows: (1) to the partners so that the economic
burden of the income tax consequences of partnership operations is borne as
though the partnership was taxed as a corporation ("special tax allocations");
(2) to the partners' preferred capital accounts in order of priority described
above, at various rates of return ranging from 8 percent to 13.25 percent; and
(3) to the partners' residual equity capital accounts according to their
residual partnership interests. To the extent partnership income is insufficient
to satisfy all special allocations in a particular accounting period, the
unearned portion is carried over until satisfied out of future partnership
income. Partnership losses generally are allocated in reverse order, first to
eliminate prior allocations of partnership income, except senior preferred and
special tax income, next to reduce initial capital amounts, other than senior
preferred, then to reduce the senior preferred account, and finally, to
eliminate special tax allocations.

                                       63
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6: INVESTMENT IN TIME WARNER ENTERTAINMENT (CONTINUED)
    A summary of the contributed capital and priority capital rates of return
follows:

<TABLE>
<CAPTION>
                                                                   PRIORITY CAPITAL
                                                                       RATES OF         TIME      LIMITED PARTNERS
                                                                        RETURN         WARNER       (OWNERSHIP %)
                                      UNDISTRIBUTED   CUMULATIVE     (% PER ANNUM     GENERAL    -------------------
            PRIORITY OF                CONTRIBUTED     PRIORITY       COMPOUNDED      PARTNERS     TIME     MEDIAONE
        CONTRIBUTED CAPITAL            CAPITAL(A)     CAPITAL(B)    QUARTERLY)(D)      8.00%      WARNER     GROUP
------------------------------------  -------------   ----------   ----------------   --------   --------   --------
<S>                                   <C>             <C>          <C>                <C>        <C>        <C>
Senior preferred....................      $ -0-         $-0-(c)           8.00%        100.00%     --         --
A Preferred priority capital........      5,600         14,500           13.00%         63.27%    11.22%     25.51%
B Preferred priority capital........      2,900          7,700           13.25%        100.00%     --         --
Residual equity capital.............      3,300          3,300         --               63.27%    11.22%     25.51%
</TABLE>

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

(a) Represents the estimated fair value of net assets contributed as of
    formation of TWE, excluding partnership income or loss allocated thereto.

(b) Cumulative priority capital is not necessarily indicative of the fair value
    of the underlying priority capital interests.

(c) Net of $2,100 of cumulative cash distributions received by Time Warner.

(d) To the extent income allocations are concurrently distributed, the priority
    capital rates of return on the A preferred capital and the B preferred
    capital are 11% and 11.25%, respectively.

    Cash distributions are required to be made to the partners to permit them to
pay income taxes at statutory rates based on their allocable taxable income from
TWE ("Tax Distributions"). The aggregate amount of such Tax Distributions is
computed generally by reference to the taxes that TWE would have been required
to pay if it were a corporation. Tax Distributions are paid to the partners on a
current basis. For distributions other than those related to taxes or the senior
preferred, the TWE Partnership Agreement requires certain cash distribution
thresholds be met to the limited partners before the general partners receive
their full share of distributions. No cash distributions have been made to the
Company.

    The Company accounts for its investment in TWE under the equity method of
accounting. The excess of fair market value over the book value of total
partnership net assets implied by the Company's initial investment was
$5.7 billion. This excess is being amortized on a straight-line basis over
25 years. The Company's recorded share of TWE operating results represents
allocated TWE net income adjusted for the amortization of the excess of fair
market value over the book value of the partnership net assets. As a result of
this amortization and the special income allocations described above, the
Company's recorded pretax share of TWE's operating results before extraordinary
item was $170, $7 and $11 in 1999, 1998 and 1997, respectively. The Company's
1999 recorded pretax share of TWE's operating results is net of a $21 deferred
gain on the exchange of cable systems with MediaOne Group. MediaOne Group will
amortize the gain to income over the next 15 years.

    As consideration for its expertise and participation in the cable operations
of TWE, the Company earned a management fee of $130 over five years, ending in
September 1998. The fee was payable over a four-year period beginning in 1995,
and final payment was received in September 1998. Management fees of $18 and $26
were recorded to other income in 1998 and 1997. In addition, MediaOne purchases
cable television programming from TWE and Time Warner at market prices. These
services totaled $171, $168 and $110 in 1999, 1998 and 1997, respectively.

                                       64
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6: INVESTMENT IN TIME WARNER ENTERTAINMENT (CONTINUED)
    Summarized financial information for TWE is presented below:

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
SUMMARIZED OPERATING RESULTS                                    1999       1998       1997
----------------------------                                  --------   --------   --------
<S>                                                           <C>        <C>        <C>
Revenues....................................................  $13,164    $12,246    $11,318
Operating expenses(1,2).....................................    8,937     10,527      9,874
Interest and other expense, net(3,4)........................   (1,318)    (1,301)      (722)
Income before income taxes and extraordinary item...........    2,909        418        722
Income before extraordinary item............................    2,759        326        637
Net income..................................................    2,759        326        614
</TABLE>

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

(1) Includes depreciation and amortization of $1,364, $1,436 and $1,370, in
    1999, 1998 and 1997, respectively.

(2) Operating expenses for 1999 include a net pretax gain of approximately $215
    related to the early termination of a long-term distribution agreement with
    Metro-Goldwyn-Mayer, Inc., a net pretax gain of $97 related to the sale of
    an interest in CanalSatellite, and a one-time non-cash pretax charge of $106
    relating to certain Warner Bros.' retail stores. Operating expenses are also
    reflected net of $2,119, $90 and $200 of net pretax gains related to the
    sale or exchange of certain cable television systems in 1999, 1998 and 1997,
    respectively.

(3) Includes corporate services of $73 in 1999, and $72 in each of 1998 and
    1997, and minority interest expense of $422, $264 and $305 in 1999, 1998 and
    1997, respectively.

(4) 1998 interest and other expense includes a charge of approximately $210
    principally to reduce the carrying value of TWE's interest in PrimeStar.
    1997 interest and other expense includes a gain of approximately $250
    related to the sale of TWE's interest in E! Entertainment Television, Inc.

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
SUMMARIZED FINANCIAL POSITION                                   1999       1998
-----------------------------                                 --------   --------
<S>                                                           <C>        <C>
Current assets(1)...........................................  $ 5,311    $ 4,183
Noncurrent assets(2)........................................   19,532     18,047
Current liabilities.........................................    5,723      4,936
Noncurrent liabilities, including minority interests........   11,971     11,584
Senior preferred capital....................................    --           603
Partners' capital(3)........................................    7,149      5,107
</TABLE>

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

(1) Includes cash of $517 and $87 at December 31, 1999 and 1998, respectively.

(2) Includes a loan receivable from Time Warner of $400 at December 31, 1998.

(3) Contributed capital is based on the estimated fair value of the net assets
    that each partner contributed to the partnership. The aggregate of such
    amounts is significantly higher than TWE's partners' capital as reflected in
    this Summarized Financial Position, which is based on the historical cost of
    the contributed net assets.

    TIME WARNER TELECOM.  On July 14, 1998, MediaOne Group received an
18.85 percent ownership interest in Time Warner Telecom, Inc. ("TW Telecom") as
a result of TWE, TWE-A/N and Time Warner

                                       65
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6: INVESTMENT IN TIME WARNER ENTERTAINMENT (CONTINUED)
contributing the assets and liabilities of the Time Warner competitive local
exchange business (the "Time Warner Telecom Business") into a newly formed
entity. The Time Warner Telecom Business had been jointly operated by the
parties to provide telephony services to business customers in their respective
cable markets. TWE and TWE-A/N distributed their ownership interest in TW
Telecom on a pro rata basis to Time Warner, MediaOne Group and Advance/Newhouse.
Since the investment in TW Telecom resulted from a distribution by TWE, MediaOne
Group's investment balance in TWE was reduced in 1998 by $48, the book value of
the TW Telecom investment attributable to MediaOne Group.

    In May 1999, TW Telecom completed an initial public offering of its common
stock. As of December 31, 1999, TW Telecom shares had a fair market value of
$49.94 per share, resulting in the Company recording $716 of gross unrealized
gains on its investment. MediaOne Group accounts for its investment in TW
Telecom under the cost method of accounting, as available for sale securities,
and includes the investment in "Other Assets" in the Consolidated Balance Sheet.

NOTE 7: NET INVESTMENT IN INTERNATIONAL VENTURES

    As a result of the anticipated merger with AT&T, MediaOne Group formalized a
plan during 1999 to sell its international broadband and wireless investments,
including its international consolidated entities, Cable Plus a.s. ("Cable
Plus"), a cable operator in the Czech Republic, and Russian Telecommunications
Development Corporation ("RTDC"), a Russian venture that holds various wireless
investments. The carrying value of the net investments in international ventures
are reflected as "net investments in international ventures held for sale" on
the Consolidated Balance Sheet for 1999. In addition, during 1999, the results
of operations of Cable Plus and RTDC are no longer consolidated with MediaOne
Group's results but are rather reflected as part of "equity losses in
unconsolidated ventures" in the Consolidated Statements of Operations.

    As a result of the decision to exit its international businesses, the
Company recorded a $43 charge ($28 after tax) during 1999. The exit charge
includes employee severance and foreign income tax settlement costs of $33 for
122 people, and lease termination, relocation and other costs of $10. The charge
is reflected as a component of "gains on investments--sales and exit costs of
international investments--net" in the Consolidated Statement of Operations.
During 1999, the Company paid $6 related to this charge and 44 people left under
the exit plan.

    COMBINED FINANCIAL RESULTS OF INTERNATIONAL EQUITY INVESTMENTS.  The
following table reflects summarized combined financial information for the
Company's investments in international ventures accounted for on the equity
method. For 1999, the information presented excludes a portion of the
fourth-quarter 1999 activity related to the Company's investments in BPL
Cellular Limited ("BPL Cellular") in India and RTDC since MediaOne Group
suspended equity method accounting for these investments as the investments had
been reduced below zero due to the recognition of equity losses and debt
guarantees. Any suspended equity losses on these investments will need to be
recognized to the extent MediaOne Group funds additional amounts to these
ventures in the future. For 1999 and 1998, the information presented excludes
activity related to the Company's investments in Binariang SDN BHD in Malaysia
and PT ARIAWEST International ("ARIAWEST") in Indonesia. Both investments were
determined to be

                                       66
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7: NET INVESTMENT IN INTERNATIONAL VENTURES (CONTINUED)
impaired at the end of 1997 and the Company terminated or suspended equity
method accounting on these investments in 1998.

<TABLE>
<CAPTION>
                                                                        YEAR ENDED
                                                                       DECEMBER 31,
                                                              ------------------------------
COMBINED RESULTS OF OPERATIONS                                  1999       1998       1997
------------------------------                                --------   --------   --------
<S>                                                           <C>        <C>        <C>
Revenues....................................................   $3,352     $4,031     $3,353
Operating income (loss).....................................       90       (161)      (601)
Net loss....................................................     (642)      (948)    (1,696)
</TABLE>

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
COMBINED FINANCIAL POSITION                                     1999       1998
---------------------------                                   --------   --------
<S>                                                           <C>        <C>
Current assets..............................................  $ 1,071    $ 1,535
Property, plant and equipment--net..........................    8,580      7,889
Other assets................................................      628      2,541
                                                              -------    -------
Total assets................................................  $10,279    $11,965
                                                              =======    =======
Current liabilities.........................................  $ 1,706    $ 1,630
Long-term debt..............................................    6,111      7,388
Other liabilities...........................................      194      1,177
Equity......................................................    2,268      1,770
                                                              -------    -------
Total liabilities and equity................................  $10,279    $11,965
                                                              =======    =======
</TABLE>

INVESTMENT DISPOSITIONS, ANNOUNCED AGREEMENTS AND OTHER

    ONE 2 ONE.  On October 1, 1999, MediaOne Group sold its 50 percent ownership
in Mercury Personal Communications ("One 2 One"), a wireless operation in the
United Kingdom, to Deutsche Telekom for $5.7 billion, including approximately
$190 for the repayment of shareholder loans owed to the Company. In connection
with the sale of One 2 One, the Company entered into put options to minimize its
exposure to declines in the exchange rate on the British Pound, for a cost of
approximately $75. In September 1999, the Company unwound certain of the put
options and entered into forward contracts related to the British Pound. The put
options and forward contracts expired in October 1999. The cost of the put
options and the settlement value on the forward contract was included in the
calculation of the gain on the sale of One 2 One. The sale resulted in a pretax
gain of $6,012 ($3,711 after tax).

    TELEWEST.  On October 4, 1999, the Company signed an agreement to sell its
interest in Telewest Communications plc ("Telewest"), a cable and
telecommunications provider in the United Kingdom, to Microsoft Corporation
("Microsoft") for approximately 30 million shares of Microsoft common stock with
a value of approximately $3.7 billion as of December 31, 1999. The terms and
conditions of the sale are subject to certain approvals. The sale is expected to
occur in 2000.

    In the fourth quarter of 1999, the Company entered into an agreement with
Microsoft whereby the Company has the option to sell its Flextech plc
("Flextech") shares to Microsoft at a fixed price. As of December 31, 1999,
MediaOne Group owned approximately 10,519,000 Flextech shares.

    During the fourth quarter of 1999, Telewest notified its shareholders of its
intention to raise cash through a rights offering and use the proceeds to fund
the acquisition of the remaining 50 percent of Cable

                                       67
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7: NET INVESTMENT IN INTERNATIONAL VENTURES (CONTINUED)
London plc. MediaOne Group's interest in Telewest was diluted to 27.2 percent as
the Company did not participate in the rights offering. The Company recorded a
pretax gain of $157 ($97 after tax) to recognize the increase in the value of
its interest in Telewest.

    At December 31, 1999 and 1998, the Company's interest in Telewest, which is
the only equity method investment for which a quoted market price is available,
had a market value of $3,527 and $1,803, respectively.

    On September 1, 1998, Telewest acquired General Cable plc ("General Cable"),
a cable provider in the United Kingdom, for approximately $1.1 billion in stock
and cash. Telewest raised cash for the acquisition through a rights offering to
its existing shareholders, including MediaOne Group. MediaOne Group purchased
85 million new Telewest shares at a cost of $131. In addition, the Company
recorded a gain in equity of $39, net of deferred taxes of $25, related to
Telewest's acquisition of General Cable. On November 10, 1998, MediaOne Group
purchased an additional 175 million Telewest shares from Southwestern Bell
International Holdings at a price of $2.25 per share, or $394. At December 31,
1998, the Company held a 29.9 percent interest in Telewest.

    A2000.  On September 3, 1999, United Pan-Europe Communications N.V. ("UPC")
purchased MediaOne Group's interests in A2000, a cable operator located in the
Netherlands, for proceeds of $229, including $14 for the repayment of
shareholder loans and receivables owed to the Company. The sale resulted in a
pretax gain of $154 ($94 after tax).

    CABLE PLUS.  On October 27, 1999, the Company sold its interest in Cable
Plus to UPC for proceeds of $150. The sale resulted in a pretax gain of $74 ($45
after tax).

    CENTRAL EUROPEAN WIRELESS.  On October 22, 1999, MediaOne Group agreed to
sell its interests in most of its Central European wireless ventures for
$2 billion. These ventures include Polska Telefonia Cyfrowa, a wireless operator
located in Poland, Westel 900 and Westel Radiotelefon, wireless operators
located in Hungary, and RTDC. This transaction is expected to close in early
2000.

    In July 1998, Westel 900 repurchased shares of its stock. This repurchase
resulted in an increase in MediaOne Group's interest in Westel 900 to
49.0 percent from 46.6 percent.

    LISTEL.  On June 2, 1999, the Company sold its interest in Listel, a South
American directories operation, to BellSouth Corporation, for proceeds of $55
and a pretax gain of $20 ($9 after tax).

    LYONNAISE.  On September 8, 1999, the Company sold its interest in Lyonnaise
Communications, a cable operator in France, for proceeds of $22, which resulted
in a pretax gain of $10 ($6 after tax).

    OPTUS SHARES.  During the first half of 1999, the Company disposed of its
remaining investment in shares of Cable & Wireless Optus Limited ("Optus"), for
net proceeds of $164 and a gain of $155 ($95 after tax). MediaOne Group had
received 13.6 million shares of Optus in the first quarter of 1999 as a result
of having met certain performance measures at Optus and purchased 5.6 million
additional Optus shares related to the Company's anti-dilution rights. In
addition, MediaOne Group had received 50 million Optus shares in November 1998
when it converted a note with Optus into Optus shares. The Company also acquired
24.2 million Optus shares, related to MediaOne Group's anti-dilution rights, in
1998 for $30. Such shares were subsequently sold in 1998 for $39, realizing a
gain of $9 ($6 after tax).

                                       68
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7: NET INVESTMENT IN INTERNATIONAL VENTURES (CONTINUED)
    In addition, during 1999, MediaOne Group recognized a $62 commission fee
from Optus in income. The Company earned the fee as a result of Optus having met
certain performance measures.

    TELENET.  On November 19, 1999, MediaOne Group sold its interest in Telenet,
a cable operator located in Belgium, to the remaining shareholders of Telenet
for proceeds of $98, resulting in a gain of $44 ($27 after tax). In connection
with the sale of Telenet, the Company entered into put options to minimize its
exposure to declines in the exchange rate on Euro Dollars, for a cost of
approximately $3. The cost of the put options was included in the calculation of
the gain on the sale of Telenet.

    If within one year of MediaOne Group's sale to the Telenet shareholders this
interest is subsequently sold, the Company is entitled to receive approximately
62 percent of the difference between the new transaction price and MediaOne
Group's sale price.

    WATCHMARK.  On July 16, 1999, MediaOne Group sold WatchMark, a wholly owned
wireless network management software operation, to Lucent Technologies for
proceeds of $7, resulting in a pretax loss of $1.

    TITUS AND CHOFU.  During the second and third quarters of 1999, the Company
increased its ownership in TITUS Communication Corporation ("TITUS"), a
broadband network operation in Japan, and Chofu Cable Television ("Chofu"), a
cable operation in Japan. As part of the acquisition, MediaOne Group assumed
outstanding debt guarantees totaling approximately $50. During fourth quarter
1999, the Company made additional capital contributions, further increasing
MediaOne Group's investment in TITUS to a total interest of 60 percent. As of
December 31, 1999, MediaOne Group's interest in Chofu was 33.3 percent.
Subsequent to year-end 1999, the Company entered into an agreement to sell its
interests in TITUS and Chofu. See Note 23--Subsequent Events--to the
Consolidated Financial Statements.

    ARIAWEST.  On May 13, 1999, ARIAWEST reached an agreement to restructure its
debt into a non-recourse debt facility. MediaOne Group will evaluate any
probable funding obligations as they arise.

    OTHER.  In 1997, MediaOne Group recorded a charge related to its investment
in ARIAWEST for probable funding commitments. During fourth-quarter 1999, the
Company redesignated $37 of this charge to RTDC for RTDC's debt guarantees and
accounts receivable.

                                       69
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7: NET INVESTMENT IN INTERNATIONAL VENTURES (CONTINUED)
    The Company's key equity method investments in international ventures
follow:

<TABLE>
<CAPTION>
                                                                  PERCENTAGE OF
                                                                    OWNERSHIP
                                                                   DECEMBER 31,
                                                              ----------------------
VENTURE(1)                                                      1999          1998
----------                                                    --------      --------
<S>                                                           <C>           <C>
CABLE AND BROADBAND
Telewest Communications, United Kingdom.....................    27.2          29.9
A2000 (KTA), Netherlands(2).................................    --            50.0
Telenet, Belgium(2).........................................    --            25.0
Singapore Cablevision, Singapore............................    25.0          25.0
Titus Communications Corp., Japan...........................    60.0          25.0
Chofu Cable Television, Japan...............................    33.3          19.1
WIRELESS
One 2 One, United Kingdom(2)................................    --            50.0
Delta Telecommunications, Russia(3),(4).....................    42.5          42.5
Moscow Cellular Communications, Russia(3),(4)...............    22.0          22.0
Westel Radiotelefon, Hungary................................    49.0          49.0
Westel 900 GSM Mobile Telecommunications, Hungary...........    49.0          49.0
Eurotel Praha, Czech Republic...............................    24.5          24.5
Eurotel Bratislava, Slovak Republic.........................    24.5          24.5
Polska Telefonia Cyfrowa, Poland............................    22.5          22.5
BPL Cellular Limited, India(4)..............................    49.0          49.0
</TABLE>

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

(1) MediaOne Group sold its 50 percent investment in a South American directory
    operation in June 1999.

(2) MediaOne Group sold its interest in these investments during 1999.

(3) Investments are held by RTDC, owned 66.5 percent by the Company.

(4) The Company suspended equity method accounting for RTDC and BPL Cellular in
    the fourth quarter of 1999.

    At December 31, 1999 and 1998, the difference between the carrying amount
and the Company's interest in the underlying equity of its international
ventures was approximately $250 and $160, respectively.

    FOREIGN CURRENCY TRANSACTIONS.  The Company selectively enters into forward
and purchased option contracts to manage the market risks associated with
fluctuations in foreign exchange rates after considering offsetting foreign
exposures among international operations. The use of forward and purchased
option contracts allows the Company to fix or cap the cost of firm foreign
investment commitments, the amount of foreign currency proceeds from sales of
foreign investments, the repayment of foreign currency denominated receivables
and the repatriation of dividends. All foreign exchange contracts have
maturities of one year or less. The use of such contracts was limited in 1999
and 1998. There were no foreign exchange contracts outstanding as of
December 31, 1999 and December 31, 1998.

                                       70
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7: NET INVESTMENT IN INTERNATIONAL VENTURES (CONTINUED)
    Forward contracts were selectively used to hedge foreign denominated
proceeds from the sale of foreign investments and foreign denominated
receivables during 1999 and 1998. Foreign currency pretax hedging losses of $1
was included in each of 1999 and 1998. The counterparties to these contracts are
major financial institutions. The Company is exposed to credit loss in the event
of nonperformance by these counterparties. The Company does not have significant
exposure to an individual counterparty and does not anticipate nonperformance by
any counterparty.

    For the years ended 1999, 1998 and 1997, the Company recorded foreign
currency transaction pretax losses of $4, pretax gains of $13, and pretax losses
of $40, respectively.

NOTE 8: PROPERTY, PLANT AND EQUIPMENT

    The composition of property, plant and equipment follows:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Land and buildings..........................................   $  308     $  117
Cable distribution systems..................................    4,754      3,736
General purpose computers and other.........................      947        785
Construction in progress....................................      677        299
                                                               ------     ------
                                                                6,686      4,937
Less accumulated depreciation...............................    1,596        868
                                                               ------     ------
Property, plant and equipment--net..........................   $5,090     $4,069
                                                               ======     ======
</TABLE>

    Depreciation expense was $729, $657 and $727 for the years ended 1999, 1998
and 1997, respectively.

NOTE 9: INTANGIBLE ASSETS

    The composition of intangible assets follows:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Identified intangibles, primarily franchise value...........  $ 9,487    $ 9,089
Goodwill....................................................    3,635      3,741
                                                              -------    -------
                                                               13,122     12,830
Less accumulated amortization...............................    1,615      1,183
                                                              -------    -------
Total intangible assets--net................................  $11,507    $11,647
                                                              =======    =======
</TABLE>

    Amortization expense for 1999, 1998 and 1997 was $519, $525 and $530,
respectively.

                                       71
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: DEBT

SHORT-TERM DEBT

    The components of short-term debt follow:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Notes payable:
  Commercial paper..........................................   $--         $216
  AT&T note.................................................    1,500      --
Current portion of long-term debt...........................        6       353
                                                               ------      ----
Total.......................................................   $1,506      $569
                                                               ======      ====
</TABLE>

    MediaOne Group maintains 365-day and 5-year revolving bank credit facilities
totaling $2.0 billion to support its commercial paper program and to provide
financing, all of which were available as of December 31, 1999. The weighted
average interest rate on commercial paper was 6.09 percent at December 31, 1998.

    SHORT-TERM DEBT ISSUANCE.  As a result of the termination of the Comcast
merger, AT&T funded the $1.5 billion termination fee to Comcast on behalf of
MediaOne Group, and MediaOne Group issued a note payable to AT&T. The AT&T note
bears interest at 3-month LIBOR plus 0.15 percent and matures on December 31,
2000. The note is due on demand at any time following consummation of the merger
between the Company and AT&T.

    SHORT-TERM DEBT MATURITIES.  On May 15, 1999, $254 of Debt Exchangeable for
Common Stock ("DECS") matured. In accordance with the terms of the original debt
issuance, the DECS were redeemed for shares of Financial Security Assurance
Holdings Ltd. ("FSA") held by the Company, resulting in a pretax gain of $21
($14 after tax).

    On December 15, 1998, $130 of DECS matured and were redeemed for shares of
Enhance Financial Services Group, Inc. ("Enhance") held by MediaOne Group, in
accordance with the terms of the original debt issuance. In addition, the
Company settled an option issued in 1997 for the purchase of MediaOne Group's
residual shares of Enhance common stock at the DECS' maturity resulting in a
pretax gain of $9. As a result of both transactions, the Company has disposed of
its ownership in shares of Enhance.

    In connection with the sale of the domestic wireless businesses in
April 1998, AirTouch assumed $1,350 of short-term debt from MediaOne Group.

LONG-TERM DEBT

    EXCHANGEABLE NOTES.  During 1999 and 1998, the Company issued debt
mandatorily redeemable at MediaOne Group's option into (i) Vodafone ADRs held by
MediaOne Group, (ii) the cash equivalent, or (iii) a combination of cash and
Vodafone ADRs, (the "Exchangeable Notes"). The maturity value of the
Exchangeable Notes varies based upon the fair market value of a Vodafone ADR.

                                       72
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: DEBT (CONTINUED)
    Following is a summary of the Exchangeable Notes outstanding:

<TABLE>
<CAPTION>
EXCHANGEABLE NOTES                                               1999              1998
------------------                                           -------------   -----------------
<S>                                                          <C>             <C>
Interest Rate..............................................   7.0 percent      6.25 percent
Number of Shares...........................................   26 million       29 million(1)
Maturity Date..............................................  Nov. 15, 2002     Aug. 15, 2001
Issuance Date..............................................    Nov. 1999     Aug. & Sept. 1998
Gross Proceeds on Issuance.................................     $1,129            $1,686
Issuance Price per Share...................................    $43.4375           $58.125

New cost basis:(2)
  Total....................................................       n/a             $2,529
  Per share................................................       n/a             $87.212
</TABLE>

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

    (1) As a result of the exchange of two shares of AirTouch common stock for
       one Vodafone ADR, and the five for one split of Vodafone ADRs, the
       redemption value of the 1998 Exchangeable Notes is now based on
       72,500,000 Vodafone ADRs.

    (2) As a result of the exchange of AirTouch common stock for Vodafone ADRs
       and $9.00 cash proceeds per share, the cost basis for the 1998
       Exchangeable Notes was revised as shown.

    Debt proceeds were used by the Company to reduce outstanding commercial
paper and for general corporate purposes.

    The redemption formula for the 1999 Exchangeable Notes is as follows:

    (a) If the fair market value of a Vodafone ADR is greater than or equal to
       $51.2563, each 1999 Exchangeable Note is equivalent to 0.8475 of a
       Vodafone ADR;

    (b) If the fair market value of a Vodafone ADR is less than or equal to
       $43.4375, each 1999 Exchangeable Note is equivalent to one Vodafone ADR;
       or

    (c) If the fair market value of a Vodafone ADR is less than $51.2563 but
       greater than $43.4375 per share, each 1999 Exchangeable Note is
       equivalent to a fraction of a Vodafone ADR equal to (i) the issuance
       price per 1999 Exchangeable Note of $43.4375 divided by (ii) the fair
       market value of one Vodafone ADR.

    Upon issuance of the 1998 Exchangeable Notes, their maturity value was based
on the fair market value of AirTouch common stock. As a result of the Vodafone
merger in June 1999, the terms of the 1998 Exchangeable Notes were modified so
that the maturity value of the debt would be based on the fair market value of
Vodafone ADRs. The redemption formula was also modified for the five for one
Vodafone stock split.

                                       73
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: DEBT (CONTINUED)
    The number of Vodafone ADRs to be exchanged at maturity for each 1998
Exchangeable Note, and/or the cash equivalent, will be based upon a redemption
value of $9.00 in cash plus 2 1/2 times the fair market value of a Vodafone ADR
(the "Maturity Price"), as follows:

    (a) If the Maturity Price is greater than or equal to $71.75 per share, each
       1998 Exchangeable Note is equivalent to .8101 of the Maturity Price;

    (b) If the Maturity Price is less than or equal to $58.125 per share, each
       1998 Exchangeable Note is equivalent to the Maturity Price; or

    (c) If the Maturity Price is less than $71.75 per share but greater than
       $58.125 per share, each 1998 Exchangeable Note is equivalent to $58.125.

    The Exchangeable Notes are being accounted for as indexed debt instruments
since the maturity value of the Exchangeable Notes is dependent upon the fair
market value of the underlying Vodafone ADRs. For the 1999 debt issuance, the
Company has eliminated the market risk on a decline in value of Vodafone ADRs
below $43.4375 per share on 26,000,000 of the 148,284,000 Vodafone ADRs held by
the Company. Conversely, MediaOne Group would be entitled to 15.25 percent of
the fair market value in excess of $51.2563 per Vodafone ADR on 26,000,000
Vodafone ADRs. For the 1998 debt issuance, the Company has eliminated the market
risk on a decline in value of Vodafone ADRs below $19.65 per share on 72,500,000
of the 148,284,000 Vodafone ADRs held by the Company. Conversely, MediaOne Group
would be entitled to approximately 19 percent of the fair market value in excess
of $25.10 per share on 72,500,000 Vodafone ADRs. At December 31, 1999, the
Vodafone ADRs had a fair market value of $49.50 per share.

    Since the Vodafone ADRs are a cost method investment being accounted for as
"available for sale" securities under SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," changes in the maturity value of the
Exchangeable Notes are being recorded in equity as unrealized gains or losses.

    The Exchangeable Notes are unsecured obligations of MediaOne Group, ranking
equally in right of payment with all other unsecured and unsubordinated
obligations of MediaOne Group.

    FLOATING RATE DEBT.  On June 3, 1999 and September 23, 1999, MediaOne SPC IV
and MediaOne SPC VI issued approximately $1,128 and $717 of floating rate debt,
respectively, at 3-month LIBOR plus 0.5 percent. MediaOne SPC IV and MediaOne
SPC VI also paid $321 and $216, respectively, to fix and pre-fund interest
payments on approximately $1.1 billion and $700 notional amount of their
respective debt through interest swap agreements (the "Zero Coupon Swap"). The
MediaOne SPC IV debt and corresponding Zero Coupon Swap mature in equal
quarterly installments beginning in the second quarter of 2003 and ending in the
second quarter of 2005. The MediaOne SPC VI debt and corresponding Zero Coupon
Swap mature in equal quarterly installments beginning in the second quarter of
2003 and ending in the fourth quarter of 2005. The Company has therefore
deferred the costs of the Zero Coupon Swaps and will amortize the costs as
adjustments of interest expense associated with the respective floating rate
debt. As a result of the amortization and payments received under the Zero
Coupon Swap, the Company expects to have a fixed effective interest rate of
5.91 percent on the MediaOne SPC IV debt and 6.02 percent on the MediaOne SPC VI
debt.

    In August 1999, MediaOne SPC IV redeemed approximately $105 of its floating
rate debt for face value. The debt was redeemed with the cash proceeds received
in June 1999 from the exchange of the Company's investment in AirTouch common
stock for Vodafone ADRs. In addition, the Company received

                                       74
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: DEBT (CONTINUED)
proceeds of $30 upon the termination of the corresponding portion of the Zero
Coupon Swap which had a carrying value of approximately $29.

    The assets of MediaOne SPC IV, which are primarily the 29,154,000 Vodafone
ADRs, are not available to pay the creditors of any member of the Company except
the creditors of MediaOne SPC IV. The assets of MediaOne SPC VI, which are
primarily the 18,000,000 Vodafone ADRs, are not available to pay the creditors
of any member of the Company except the creditors of MediaOne SPC VI.

    LONG-TERM DEBT REDEMPTIONS.  On June 1, 1999, the Company redeemed the
11.0 percent senior subordinated debentures of MediaOne with a carrying value of
$345. The debt extinguishment resulted in an after tax gain of $17 (net of
income tax expense of $11) primarily related to the write-off of excess debt
premiums. The gain is reflected as an extraordinary item in the Consolidated
Statement of Operations. MediaOne Group also redeemed a third-party note for its
carrying value of $12. MediaOne Group financed the redemptions with cash on
hand.

    OTHER.  In conjunction with the Refinancing in 1998, MediaOne Group assumed
from Old U S WEST $351 of medium and long-term debt securities which remained
outstanding after the Refinancing. The debt securities had already been
allocated to MediaOne Group's operations prior to the Separation.

    Since the capital assets segment is no longer accounted for as "held for
sale," its results are reflected in the Company's Consolidated Balance Sheets.
At December 31, 1999 and 1998, the Company's consolidated debt balances included
$150 and $155 of long-term debt associated with the capital assets segment,
respectively. Long-term debt of the capital assets segment primarily represents
non recourse loans issued in September 1997 by MediaOne Financial
Services, Inc. ("Financial Services"), a subsidiary of the Company and a member
of the capital assets segment, which are securitized by certain finance
receivables of Financial Services. The loans bear interest at an average rate of
6.9 percent and mature in April, 2009.

    MediaOne Group's long-term debt components are as follows:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Exchangeable Notes..........................................   $4,248     $1,702
Senior unsecured notes, debentures and medium-term notes....    2,333      2,346
Secured debt................................................    1,893        154
Senior subordinated debt....................................    --           300
Capital lease obligations...................................        7          1
Other.......................................................    --            89
Unamortized discount-net....................................       (3)     --
Unamortized premium-net.....................................      195        261
                                                               ------     ------
Total.......................................................   $8,673     $4,853
                                                               ======     ======
</TABLE>

    Senior unsecured notes and debentures totaling $2.0 billion as of
December 31, 1999 were assumed by the Company in connection with its acquisition
of Continental Cablevision, Inc. ("Continental") in 1996, and are not guaranteed
by the Company. These notes and debentures limit MediaOne's ability to, among
other things, pay dividends, create liens, incur additional debt, dispose of
property, investments and leases, and require certain minimum ratios of cash
flow to debt and cash flow to related fixed charges.

                                       75
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: DEBT (CONTINUED)
    Interest rates and maturities of long-term debt at December 31, 1999 follow:

<TABLE>
<CAPTION>
                                                              MATURITIES
                                         ----------------------------------------------------
                                                                                      THERE-     TOTAL      TOTAL
INTEREST RATES                             2001       2002       2003       2004      AFTER       1999       1998
--------------                           --------   --------   --------   --------   --------   --------   --------
<S>                                      <C>        <C>        <C>        <C>        <C>        <C>        <C>
Above 5% to 6%.........................   $--        $--         $341       $455      $  227     $1,023     $    1
Above 6% to 7%.........................    3,119         37       214        291         411      4,072      1,948
Above 7% to 8%.........................    --         1,132      --            5          42      1,179         45
Above 8% to 9%.........................      200      --          100       --         1,375      1,675      1,680
Above 9% to 10%........................    --         --         --         --           525        525        528
Above 10%..............................    --         --         --         --         --         --           300
                                          ------     ------      ----       ----      ------     ------     ------
                                          $3,319     $1,169      $655       $751      $2,580      8,474      4,502
                                          ======     ======      ====       ====      ======
Capital lease obligations and other....                                                               7         90
Unamortized discount--net..............                                                              (3)     --
Unamortized premium--net...............                                                             195        261
                                                                                                 ------     ------
Total..................................                                                          $8,673     $4,853
                                                                                                 ======     ======
</TABLE>

    Interest payments, net of amounts capitalized, were $404, $709 and $572 for
1999, 1998 and 1997, respectively, of which $16, $33 and $47, respectively,
related to the capital assets segment.

INTEREST RATE RISK MANAGEMENT

    The objective of an interest rate risk management program is to minimize the
total cost of debt over time and the interest rate variability. This is achieved
through the use of interest rate swaps, which adjust the ratio of fixed- to
variable-rate debt. Under an interest rate swap, the Company agrees with another
party to exchange interest payments at specified intervals over a defined term.
Interest payments are calculated by reference to the notional amount based on
the fixed- and variable-rate terms of the swap agreements. Apart from the Zero
Coupon Swaps discussed above, MediaOne Group had no other swaps or interest rate
contracts outstanding as of December 31, 1999.

    During fourth-quarter 1996, the Company purchased $1.5 billion notional of
put options on U. S. Treasury Bonds to protect against an increase in interest
rates in conjunction with the 1997 refinancing of debt assumed from Continental.
The contracts closed in January 1997 and a gain of $5 was deferred. The gain was
recognized in 1998 in conjunction with the Refinancing as part of the loss on
debt extinguishment.

NOTE 11: FAIR VALUES OF FINANCIAL INSTRUMENTS

    Fair values of cash equivalents, other current amounts receivable and
payable, and short-term debt approximate carrying values due to their short-term
nature.

    The carrying values of mandatorily redeemable preferred stock and long-term
receivables approximate the fair values based on quoted market prices or
discounted future cash flows. The carrying values of foreign exchange contracts
approximate the fair values based on estimated amounts the Company would receive
or pay to terminate such agreements. It is not practicable to estimate the fair
value of financial guarantees because there are no quoted market prices for
similar transactions.

                                       76
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11: FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
    The fair values of interest rate swaps are based on estimated amounts the
Company would receive or pay to terminate such agreements taking into account
current interest rates and creditworthiness of the counterparties. The fair
values of the Zero Coupon Swaps are based on discounting future cash flows using
current interest rates.

    The fair values of the Collars are calculated using an option valuation
model that includes dividends, volatility, price of underlying instrument and
interest rates.

    The fair values of long-term debt and Preferred Securities and minority
interest in Centaur Funding are based on quoted market prices where available
or, if not available, are based on discounting future cash flows using current
interest rates.

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                           -----------------------------------------
                                                                  1999                  1998
                                                           -------------------   -------------------
                                                           CARRYING     FAIR     CARRYING     FAIR
                                                            VALUE      VALUE      VALUE      VALUE
                                                           --------   --------   --------   --------
<S>                                                        <C>        <C>        <C>        <C>
Debt--net (includes short-term portion)..................  $10,179    $10,241     $5,422     $5,861
Zero Coupon Swaps--assets................................     (460)      (499)     --         --
                                                           -------    -------     ------     ------
Debt--net................................................  $ 9,719    $ 9,742     $5,422     $5,861
                                                           =======    =======     ======     ======
Minority interest in Centaur Funding.....................  $ 1,113    $ 1,159     $1,099     $1,169
                                                           =======    =======     ======     ======
Preferred Securities.....................................  $ 1,060    $ 1,044     $1,061     $1,073
                                                           =======    =======     ======     ======
</TABLE>

    The unamortized cost and estimated market value of debt and equity
securities follow:

<TABLE>
<CAPTION>
                                              DECEMBER 31, 1999                               DECEMBER 31, 1998
                                ---------------------------------------------   ---------------------------------------------
                                             GROSS        GROSS                              GROSS        GROSS
                                           UNREALIZED   UNREALIZED     FAIR                UNREALIZED   UNREALIZED     FAIR
SECURITIES                        COST       GAINS      LOSSES(1)     VALUE       COST       GAINS        LOSSES      VALUE
----------                      --------   ----------   ----------   --------   --------   ----------   ----------   --------
<S>                             <C>        <C>          <C>          <C>        <C>        <C>          <C>          <C>
Equity securities.............   $6,075      $2,825        $(737)     $8,163     $3,045      $1,609       $--         $4,654
Debt securities...............    1,637       --             (94)      1,543      1,782           2          (19)      1,765
                                 ------      ------        -----      ------     ------      ------       ------      ------
Total.........................   $7,712      $2,825        $(831)     $9,706     $4,827      $1,611       $  (19)     $6,419
                                 ======      ======        =====      ======     ======      ======       ======      ======
</TABLE>

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

(1) Gross unrealized losses on equity securities represent the fair market value
    of the Collars, which have a zero cost basis.

    Investments in debt and equity securities are classified as available for
sale and are carried at market value. Debt and equity securities primarily
represent Vodafone ADRs and preferred stock during 1999, and AirTouch preferred
and common securities during 1998. The AirTouch shares were received in
April 1998 as a result of the sale of the Company's domestic wireless businesses
to AirTouch. Net unrealized gains and losses on marketable securities are
included in comprehensive income as a component of equity. The market value of
these securities is based on quoted market prices where available or, if not
available, is based on discounting future cash flows using current interest
rates.

    As of December 31, 1999, contractual maturities of investments in debt
securities held by MediaOne Group were as follows: $72 less than one year, $66
from one to 5 years, and $1,405 greater than 5 years

                                       77
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11: FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
through 2026. Investments in debt securities may not be held to their
contractual maturities as the Company may sell these securities in response to
liquidity needs and changes in interest rates.

NOTE 12: LEASING ARRANGEMENTS

    The Company has entered into operating leases for office facilities,
equipment and real estate. Rent expense under operating leases was $43, $56 and
$74 in 1999, 1998 and 1997, respectively. Future minimum lease payments as of
December 31, 1999, under noncancelable operating leases follow:

<TABLE>
<CAPTION>
YEAR
----
<S>                                                           <C>
2000........................................................    $ 35
2001........................................................      25
2002........................................................      22
2003........................................................      19
2004........................................................      18
Thereafter..................................................      40
                                                                ----
Total.......................................................    $159
                                                                ====
</TABLE>

NOTE 13: MINORITY INTEREST IN CENTAUR FUNDING

    On December 15, 1998, Centaur Funding Corporation ("Centaur"), a special
purpose entity consolidated by MediaOne Group, issued three series of preferred
shares to external investors (the "Preference Shares") as well as $25 of common
securities. The Company owns all of the outstanding common securities,
representing a 9.9 percent voting interest in Centaur. Centaur was formed for
the principal purpose of raising capital through the issuance of the Preference
Shares. The net proceeds from the issuance of the Preference Shares were loaned
to MediaOne SPC II, LLC ("MediaOne SPC II"), a subsidiary of MediaOne Group (the
"MediaOne SPC II Notes"). Principal and interest payments on the MediaOne SPC II
Notes are expected to be Centaur's principal source of funds to make dividend
and redemption payments on the Preference Shares. In addition, the dividend
payments and certain redemption payments on the Preference Shares will be
determined by reference to the dividend and redemption activity of the ATI
Shares. See Note 4--Investment in Vodafone Group/AirTouch Communications--to the
Consolidated Financial Statements. The ATI Shares are owned by MediaOne SPC II.
Payments on the Preference Shares are neither guaranteed nor secured by MediaOne
Group. The sole assets of Centaur are the MediaOne SPC II Notes and the proceeds
from the sale of the common securities, which may be invested in certain
eligible investments as outlined in Centaur's articles of incorporation.

    The ATI Shares, 75 percent of the outstanding common stock of MediaOne
International Holdings, Inc., (the "International Stock"), and a certain
intercompany note receivable from MediaOne of Colorado, a wholly owned
subsidiary of the Company, to MediaOne SPC II and certain other assets are
properties of MediaOne SPC II and are not available to pay creditors of any
member of the Company, other than creditors of MediaOne SPC II. The
International Stock owned by MediaOne SPC II may be transferred or dividended by
MediaOne SPC II to another member of MediaOne Group if such transfer or dividend
is in compliance with certain covenants and limitations. MediaOne SPC II is a
limited liability company, the membership interest of which is owned by MediaOne
SPC I LLC ("MediaOne SPC I"), a wholly owned subsidiary of the Company. That
membership interest is the property of MediaOne SPC I

                                       78
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13: MINORITY INTEREST IN CENTAUR FUNDING (CONTINUED)
and is not available to pay creditors of any member of MediaOne Group, other
than creditors of MediaOne SPC I.

    The three series of Centaur Preference Shares are as follows:

<TABLE>
<CAPTION>
                                                  SERIES A       SERIES B        SERIES C        TOTAL
                                                  --------      ----------      ----------      --------
<S>                                               <C>           <C>             <C>             <C>
Dividend Rate...................................  Variable            9.08%           None
Maturity Date...................................      None       4/21/2020(1)    4/21/2020(1)
Shares Outstanding..............................       400         934,500         715,500
Book Value......................................  $     98      $      910      $      105       $1,113
                                                  ========      ==========      ==========       ======
Liquidation Value...............................  $    100      $      934      $      716       $1,750
                                                  ========      ==========      ==========       ======
Voting Interest in Centaur......................      11.1%           49.0%           30.0%
</TABLE>

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

(1) Maturity dates of the Series B and Series C Preference Shares are referenced
    to the ATI Shares.

    The Auction Market Preference Shares, Series A (the "Series A Preference
Shares") have a liquidation value of two hundred and fifty thousand dollars per
share, and were recorded at their liquidation value less issuance costs of $3.
Dividends on the Series A Preference Shares are payable quarterly as and when
declared by Centaur's Board of Directors out of funds legally available.

    The 9.08 percent Cumulative Preference Shares, Series B (the "Series B
Preference Shares") have a liquidation value of one thousand dollars per share,
and were recorded at their liquidation value less issuance costs of $25.
Dividends on the Series B Preference Shares are payable quarterly in arrears
when declared by Centaur's Board of Directors out of funds legally available. In
addition, dividends may be declared and paid only to the extent that dividends
have been declared and paid on the ATI Shares.

    The Preference Shares, Series C (the "Series C Preference Shares") have a
liquidation value of one thousand dollars per share at maturity, and were
recorded at their fair value of $96 less issuance costs of $3. The value of the
Series C Preference Shares will be accreted to reach its liquidation value upon
maturity.

    Certain redemption payments on the Series B and Series C Preference Shares
will be determined by reference to the redemption of the ATI Shares. On May 13,
1999, as a result of the Vodafone merger, Centaur mailed notices to the holders
of the Series B and Series C Preference Shares that described the manner in
which the terms of the Series B and Series C Preference Shares would be deemed
modified to reflect the changes to the ATI Shares, pursuant to the Articles of
Association of Centaur, without any action of the holders of such shares. The
revised redemption schedule was modified so that the maturity date on the
Class E ATI Shares is now April 1, 2020. The Class E ATI Shares represent
50 percent of the ATI Shares. Consequently, if Vodafone redeems all of the
Class E ATI Shares, Centaur must redeem 50 percent of the outstanding Series B
and Series C Preference Shares. In addition, all of the Class D ATI Shares
mature on April 21, 2020. If Vodafone redeems all of the Class D ATI Shares,
then Centaur would be obligated to redeem the same percentage of the Series B
and Series C Preference Shares. See Note 4--Investment in Vodafone
Group/AirTouch Communications--to the Consolidated Financial Statements.

                                       79
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13: MINORITY INTEREST IN CENTAUR FUNDING (CONTINUED)

    The $21 extraordinary dividend payment on the Class E ATI Shares was
allocated to the Series B and Series C Preference Shares on a pro-rata basis
based on the liquidation value of the Series B Preference Shares and on the
accreted value of the Series C Preference Shares as of June 30, 1999, and is
reflected as "minority interest expense in Centaur Funding" in the Consolidated
Statements of Operations. The amount allocated to the Series B Preference Shares
was reflected as a one-time extraordinary dividend and was paid to the holders
in August 1999 following the payment in August 1999 on the Class E ATI Shares.
The amount allocated to the Series C Preference Shares was reflected as an
increase in Centaur's obligation upon maturity.

    The Series A, Series B and Series C Preference Shares are recorded as
"Minority interest in Centaur Funding" on the Consolidated Balance Sheets of the
Company. The Series B Preference Shares rank equally with the Series C
Preference Shares as to redemption payments and upon liquidation, and the
Series B and Series C Preference Shares rank senior to the Series A Preference
Shares and the common shares of Centaur as to redemption payments and upon
liquidation.

    The Series B Preference Shares rank senior to the Series A Preference Shares
and the common shares with respect to dividend payments. Centaur may only pay a
dividend to its common shareholder when its assets, including the MediaOne
SPC II Notes, exceed the liquidation preference and accumulated and unpaid
dividends on the Series B and Series C Preference Shares by $28 after paying the
common dividends, and when it has a cash balance, including qualified
investments, in excess of $28 after paying the common dividend.

    At December 31, 1999 and 1998, Centaur held $27 and $26, respectively, in
cash for its exclusive use. Since Centaur's cash management options are limited
to non-affiliated, risk-free investments, and it is restricted from loaning up
to $28 in cash to MediaOne Group and its subsidiaries, Centaur's cash balance is
not included in the Company's cash and cash equivalents balance. Instead,
Centaur's cash balance has been classified in the Consolidated Balance Sheets of
the Company as a component of "Other Assets."

NOTE 14: COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
         SUBSIDIARY TRUST HOLDING SOLELY COMPANY--GUARANTEED SUBORDINATED
         DEBENTURES

    The following table summarizes the Preferred Securities outstanding as of
December 31, 1999:

<TABLE>
<CAPTION>
PREFERRED SECURITIES       7.96%            8.25%           9.30%            9.50%           9.04%        TOTAL
--------------------   --------------   -------------   --------------   -------------   -------------   --------
<S>                    <C>              <C>             <C>              <C>             <C>             <C>
Subsidiary...........   Financing I     Financing II      Finance I       Finance II     Finance III
Maturity Date........  Sept. 30, 2025   Oct. 29, 2036   Sept. 30, 2025   Oct. 29, 2036   Dec. 31, 2038
Shares Outstanding...       1,312,910       1,185,618       10,658,108       8,520,289      20,000,000
Book Value...........             $33             $30             $274            $223            $500    $1,060
                       ==============   =============   ==============   =============   =============    ======
Liquidation Value....             $33             $30             $266            $213            $500    $1,042
                       ==============   =============   ==============   =============   =============    ======

Value at Issuance....             $33             $30             $274            $224            $500
Common Securities....              19              15                9               7              15
                       --------------   -------------   --------------   -------------   -------------
Subordinated Debt
  Securities.........             $52             $45             $283            $231            $515
                       ==============   =============   ==============   =============   =============
</TABLE>

                                       80
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14: COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
         SUBSIDIARY TRUST HOLDING SOLELY COMPANY--GUARANTEED SUBORDINATED
         DEBENTURES (CONTINUED)
THE EXCHANGE OFFER

    On June 12, 1998, MediaOne Group tendered for cash or exchange all of the
outstanding Preferred Securities (the "Exchange Offer"). At that time, the
Company had outstanding $600 face value of 7.96 percent Preferred Securities of
Old U S WEST Financing I ("Financing I"), a subsidiary of Old U S WEST, and $480
face value of 8.25 percent Preferred Securities of Old U S WEST Financing II
("Financing II"), a subsidiary of Old U S WEST. Of the total outstanding, $301
face value of 7.96 percent Preferred Securities and $237 face value of
8.25 percent Preferred Securities were redeemed for cash. The cash redemption
amount of $570 was financed by issuing commercial paper at a weighted average
interest rate of 5.85 percent, which was subsequently repaid with net proceeds
from the 1998 Exchangeable Notes issuance. See Note 10--Debt--to the
Consolidated Financial Statements.

    In addition, $266 face value of 7.96 percent Preferred Securities of
Financing I were exchanged for $274 fair value of 9.30 percent Preferred
Securities issued by MediaOne Finance Trust I ("Finance I"), a subsidiary of
MediaOne Group, and $213 face value of 8.25 percent Preferred Securities of
Financing II were exchanged for $224 fair value of 9.50 percent Preferred
Securities issued by MediaOne Finance Trust II ("Finance II"), a subsidiary of
MediaOne Group. The Preferred Securities of Finance I and Finance II were
recorded upon issuance at fair value of $25.75 and $26.30 per security,
respectively. Finance I and Finance II also issued $9 and $7, respectively, of
common securities which are held by MediaOne Group. With the exception of the
dividend rates, the terms and maturity of the Finance I and Finance II Preferred
Securities are substantially the same as those of the Financing I and
Financing II Preferred Securities.

    The Preferred Securities of Financing I and Financing II which were neither
redeemed for cash nor exchanged for new Preferred Securities remain outstanding
and their respective common securities were retained by MediaOne Group.

    As a result of the Exchange Offer, MediaOne Group recorded a charge to
equity of $53, (net of tax benefits of $28). Such charge represented redemption
costs, including the difference between the face and market value of the
securities, and a charge for unamortized issuance costs. Also included was a
charge of $19 related to market value premiums on the exchanged securities.

    On October 23, 1998, MediaOne Finance Trust III ("Finance III"), a
subsidiary of MediaOne Group, issued $500 of 9.04 percent Preferred Securities
and $15 of common securities. The common securities are held by MediaOne Group.

    Total proceeds from the issuance of the Preferred Securities and the common
securities of Financing I and Financing II (the "Old Trusts"), and Finance I,
Finance II and Finance III, (the "New Trusts", and collectively with the Old
Trusts, "the Trusts"), were used to purchase Subordinated Deferrable Interest
Notes (the "Subordinated Debt Securities") from MediaOne Group Funding, Inc.
("MediaOne Funding"), a wholly owned subsidiary of MediaOne Group, the
obligations under which are fully and unconditionally guaranteed by MediaOne
Group (the "Debt Guarantees"). The Subordinated Debt Securities have the same
interest rate and maturity date as the Preferred Securities to which they
relate. The sole assets of the Trusts are and will be the Subordinated Debt
Securities and the Debt Guarantees. In the Exchange Offer, the Subordinated Debt
Securities that relate to the remaining outstanding Preferred Securities of the
Old Trusts were assumed by MediaOne Group and the related Debt Guarantees were
extinguished.

                                       81
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14: COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
         SUBSIDIARY TRUST HOLDING SOLELY COMPANY--GUARANTEED SUBORDINATED
         DEBENTURES (CONTINUED)
    MediaOne Group has guaranteed the payment of interest and redemption amounts
to holders of the Preferred Securities when the Trusts have funds available for
such payments (the "Payment Guarantee") as well as the Company's and MediaOne
Funding's undertaking to pay all of the costs, expenses and other obligations
(the "Expense Undertaking") of the Old Trusts and the New Trusts, respectively.
The Payment Guarantee and the Expense Undertaking, including MediaOne Group's
guarantee with respect thereto, considered together with MediaOne Funding's
obligations under the indenture and Subordinated Debt Securities and MediaOne
Group's obligations under the indenture, declaration and Debt Guarantees,
constitute a full and unconditional guarantee by MediaOne Group of the Trusts'
obligations under the Preferred Securities. The interest and other payment dates
on the Subordinated Debt Securities are the same as the distribution and other
payment dates on the Preferred Securities. Under certain circumstances, the
Subordinated Debt Securities may be distributed to the holders of Preferred
Securities and common securities in liquidation of the Trusts.

    All of the Subordinated Debt Securities are redeemable by the Company or
MediaOne Funding at a redemption price of $25.00 per security, plus accrued and
unpaid interest. If the Company or MediaOne Funding redeems the Subordinated
Debt Securities, the Trusts are required to concurrently redeem their respective
Preferred Securities at $25.00 per share plus accrued and unpaid distributions.
The 9.30 percent and the 7.96 percent Subordinated Debt Securities are
redeemable in whole or in part at any time on or after September 11, 2000. The
9.50 percent and the 8.25 percent Subordinated Debt Securities are redeemable in
whole or in part at any time on or after October 29, 2001. The 9.04 percent
Subordinated Debt Securities are redeemable in whole or in part at any time on
or after October 28, 2003.

NOTE 15: PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION

    SERIES E PREFERRED STOCK.  On June 30, 1997, Old U S WEST acquired cable
systems serving approximately 40,000 subscribers in Michigan for cash of $25 and
the issuance of 996,562 shares of Old U S WEST Series E Preferred Stock (the
"Series E Preferred Stock") with a fair value of $50. Dividends are payable
quarterly at the annual rate of 6.34 percent. The Series E Preferred Stock was
recorded at fair value of $50.00 per share at June 30, 1997, which was equal to
its liquidation value. Effective with the Separation, the Old U S WEST Series E
Preferred Stock remains outstanding and represents shares of MediaOne Group
Series E Preferred Stock. Upon redemption, the preferred stockholders may elect
to receive cash or convert their Series E Preferred Stock into MediaOne Group
Stock. Cash redemption is equal to the Series E Preferred Stock's liquidation
value of $50.00 per share, plus accrued dividends. The number of shares of
MediaOne Group Stock to be received upon conversion is based on a formula of
$47.50 per share divided by the then current market price of MediaOne Group
Stock. The conversion rate is subject to adjustment by the Company under certain
circumstances. The Series E Preferred Stock ranks senior to MediaOne Group's
common stock, and is subordinated to any senior debt and the Preferred
Securities.

    The Series E Preferred Stock is redeemable as follows: (a) the Company may
call for redemption all or any part of the Series E Preferred Stock beginning on
June 30, 2002; (b) on a yearly basis beginning August 1, 2007, and continuing
through August 1, 2016, the Company will redeem 49,704 shares of Series E
Preferred Stock, and on June 30, 2017, all of the remaining outstanding shares
of Series E Preferred Stock; or (c) all of the outstanding Series E Preferred
Stock shall be redeemed upon the occurrence of certain

                                       82
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15: PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION (CONTINUED)
events, including the dissolution or sale of all or substantially all of
MediaOne Group. Pursuant to the AT&T merger agreement, each share of the
Company's Series E Preferred Stock will be converted into one share of a newly
created AT&T series E preferred stock with substantially the same rights as the
MediaOne Group Series E Preferred Stock.

    SERIES C PREFERRED STOCK.  On September 2, 1994, Old U S WEST issued to Fund
American Enterprises Holdings Inc. 50,000 shares of a class of 7 percent
Series C Cumulative Redeemable Preferred Stock (the "Series C Preferred Stock")
for a total of $50. Beginning on September 2, 1999, MediaOne Group had the
option to redeem the Series C Preferred Stock for one thousand dollars per share
plus unpaid dividends and a redemption premium. On September 2, 1999, holders of
the Series C Preferred Stock exercised options to receive common shares of
Financial Security Assurance Holdings Ltd. ("FSA") held by the Company with a
fair market value of $96. As a result of the exercise of the FSA options, the
Series C Preferred Stock was effectively redeemed, resulting in an after tax
charge to equity of $28 (net of tax benefits of $18). The Company also
recognized a pretax gain in income of $50 ($31 after tax) based upon the
difference in the fair market value and carrying value of the FSA shares
surrendered. The Company did not have to pay a redemption premium since the
Series C Preferred Stock holders exercised the option to receive FSA shares.

NOTE 16: SHAREOWNERS' EQUITY

    SERIES D PREFERRED STOCK.  On October 1, 1999, MediaOne Group issued
redemption notices to its 4.5 percent, 20 year, Series D Preferred Stock (the
"Series D Preferred Stock") holders indicating that, effective on November 15,
1999, Series D Preferred Stock holders would receive .744 of a share of MediaOne
Group Stock per share of Series D Preferred Stock. The redemption formula was
based on the Series D Preferred Stock liquidation value of $50.00 per share,
divided by 95 percent of the average of the daily closing price of MediaOne
Group Stock for the ten consecutive trading days ending on November 10, 1999.
The Series D Preferred Stock holders also had the option to convert their shares
prior to November 15, 1999 at a ratio of 1.98052 shares of MediaOne Group Stock
per share of Series D Preferred Stock, which a majority did. A total of
39,576,000 shares of MediaOne Group Stock were issued in exchange for the
Company's Series D Preferred Stock. The 19,999,478 shares of Series D Preferred
Stock were originally issued on November 15, 1996, to shareowners of Continental
as partial consideration for the purchase of Continental.

    COMMON STOCK.  Other activity for 1999 represents $121 of tax benefits on
stock option exercises, an $11 gain on the exercise of a call option on MediaOne
Group Stock, and $10 of miscellaneous costs. For 1998, other activity includes
$44 of tax benefits on stock option exercises, a $39 gain related to the
acquisition of General Cable by Telewest, a $39 gain on the exercise of a call
option on shares of the Company's stock, and miscellaneous activity of $25.

    SHARE REPURCHASE.  On August 7, 1998, the Board of Directors of MediaOne
Group authorized the repurchase of up to 25 million shares of the Company's
common stock over the next three years, dependent on market and financial
conditions. During 1999, MediaOne Group purchased and placed into treasury
830,000 shares of MediaOne Group Stock at an average purchase price of $56.06
per share, or a total cost basis of $46. In addition, MediaOne Group issued
6,483,000 common shares out of treasury to execute the conversion of Series D
Preferred Stock into common stock. The treasury shares had an average cost of
$41.80 per share, for a total cost basis of $271. During 1998 and 1997, MediaOne
Group purchased

                                       83
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16: SHAREOWNERS' EQUITY (CONTINUED)
and placed into treasury approximately 8,682,000 and 2,838,000 shares of
MediaOne Group Stock at an average purchase price per share of $40.51 and
$18.71, for a total cost basis of $352 and $53, respectively. Prior to the
Separation, Old U S WEST purchased and placed into treasury $31 of
Communications Stock. All outstanding shares of Communications Stock held as
treasury stock by Old U S WEST were canceled as of the Separation date.

    OTHER.  As a result of the Separation the distribution of New U S WEST was
accounted for at fair value, resulting in a reduction in 1998 of $24,924 to
retained earnings and $421 to common stock, representing the fair value of the
businesses comprising New U S WEST previously held by Old U S WEST.

    Following is a roll-forward of share activity during the three years ended
December 31, 1999:

<TABLE>
<CAPTION>
                                                                       COMMON SHARES
                                                              -------------------------------
                                                              MEDIAONE GROUP   COMMUNICATIONS
                                                                  STOCK            STOCK
                                                              --------------   --------------
                                                                      (IN THOUSANDS)
<S>                                                           <C>              <C>
BALANCE DECEMBER 31, 1996...................................     608,863           480,457
  Issuance of Communications Stock..........................                         4,058
  Issuance of MediaOne Group Stock..........................       1,783
  Purchase of treasury stock................................      (2,838)
                                                                 -------          --------
BALANCE DECEMBER 31, 1997...................................     607,808           484,515
  Issuance of Communications Stock..........................                         1,101
  Distribution of New U S WEST..............................                      (485,042)
  Issuance of MediaOne Group Stock..........................       4,350
  Purchase of treasury stock................................      (8,682)             (574)
                                                                 -------          --------
BALANCE DECEMBER 31, 1998...................................     603,476           --
                                                                                  ========
  Issuance of MediaOne Group Stock..........................       5,139
  Issuance for Series D Preferred Stock.....................      33,093
  Issuance of treasury stock for Series D...................       6,483
  Purchase of treasury stock................................        (830)
                                                                 -------
BALANCE DECEMBER 31, 1999...................................     647,361
                                                                 =======
</TABLE>

    COMPREHENSIVE INCOME.  MediaOne Group discloses comprehensive income in
accordance with the provisions of SFAS No. 130, "Reporting Comprehensive
Income." Comprehensive income includes net income and other non-owner changes to
equity not included in net income, such as foreign currency translation and
unrealized gains or losses on debt and equity securities.

    The majority of the unrealized gains on debt and equity securities during
1999 relate to the Company's investment in Vodafone ADRs and preferred stock,
totaling $852 (net of deferred taxes of $542), as well as $466 (net of deferred
taxes of $251) in unrealized gains on its investment in TW Telecom which offered
its shares in an initial public offering in May 1999. In addition, prior to the
exchange of AirTouch shares into Vodafone shares during June 1999, MediaOne
Group had recorded gains of $1,302 (net of deferred taxes of $817) on its
investment in AirTouch. Of the total reclassifications in 1999, $1,302 (net of
deferred taxes of $817) relate to gains realized upon the exchange and
modification of AirTouch

                                       84
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16: SHAREOWNERS' EQUITY (CONTINUED)
common and preferred stock for Vodafone ADRs and preferred stock, and $26 (net
of deferred taxes of $16) relate to foreign currency translation adjustments on
the sale of various international investments during the year.

    Of the total net unrealized gains on debt and equity securities during 1998,
$826 (net of deferred taxes of $530), relate to the Company's investment in
AirTouch common and preferred stock. During 1998, MediaOne Group recorded an
unrealized gain of $147 related to its investment in AirTouch preferred stock.
This unrealized gain was fully offset by a loss on an interest rate swap
agreement which was designed to minimize the Company's exposure to fluctuations
in the fair value of the AirTouch preferred stock as a result of interest rate
changes.

    The following table presents the components of other comprehensive income
and their related tax impacts. It also presents reclassification adjustments
related to gains realized on the sale of debt and equity securities, and
international investments.

<TABLE>
<CAPTION>
                                                                 FOR THE YEAR ENDED DECEMBER 31,
                                 ------------------------------------------------------------------------------------------------
                                              1999                             1998                             1997
                                 ------------------------------   ------------------------------   ------------------------------
                                   PRE-                 AFTER-      PRE-                 AFTER-      PRE-                 AFTER-
                                   TAX        TAX        TAX        TAX        TAX        TAX        TAX        TAX        TAX
                                 --------   --------   --------   --------   --------   --------   --------   --------   --------
<S>                              <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Unrealized gain on debt and
  equity securities and
  Exchangeable Notes...........  $ 2,802    $(1,080)   $ 1,722     $1,556     $(601)      $955      $ 271      $(109)     $ 162
Less: Reclassification for
  gains realized in net
  income.......................   (2,258)       865     (1,393)       (20)        8        (12)      (231)        93       (138)
                                 -------    -------    -------     ------     -----       ----      -----      -----      -----
Net unrealized gain............      544       (215)       329      1,536      (593)       943         40        (16)        24
                                 -------    -------    -------     ------     -----       ----      -----      -----      -----
Foreign currency translation
  loss.........................      (44)        15        (29)        (6)        2         (4)       (92)        36        (56)
Less: Reclassification for
  losses realized in net
  income.......................       42        (16)        26      --         --         --         --         --         --
                                 -------    -------    -------     ------     -----       ----      -----      -----      -----
Net foreign currency
  translation loss.............       (2)        (1)        (3)        (6)        2         (4)       (92)        36        (56)
                                 -------    -------    -------     ------     -----       ----      -----      -----      -----
Other comprehensive income
  (loss).......................  $   542    $  (216)   $   326     $1,530     $(591)      $939      $ (52)     $  20      $ (32)
                                 =======    =======    =======     ======     =====       ====      =====      =====      =====
</TABLE>

    EMPLOYEE STOCK OWNERSHIP PLAN.  MediaOne Group sponsors a defined
contribution savings plan for substantially all employees of MediaOne Group,
except for foreign national employees. The Company matches a percentage of
eligible employee contributions with shares of MediaOne Group Stock.
Participants are fully vested in the Company match contribution. The Company
recognizes expense based on the cash payments method. During 1999, 1998 and
1997, MediaOne Group's contributions to the plan were $20, $8 and $9,
respectively.

    During 1998 and 1997, MediaOne Group maintained a Leveraged Employee Stock
Ownership Plan ("LESOP"). Shares in the LESOP were used to fund Company match
contributions as principal and interest were paid on the debt. Borrowings
associated with the LESOP, which were unconditionally guaranteed by Old
U S WEST, were included in the Consolidated Balance Sheets of the Company and
corresponding amounts were recorded as reductions to shareowners' equity. The
borrowings were repaid in May 1998, in connection with the Separation. At
December 31, 1998, there were no remaining shares of MediaOne Group Stock to be
allocated.

                                       85
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16: SHAREOWNERS' EQUITY (CONTINUED)
    SHAREHOLDER RIGHTS PLAN.  The Board of Directors has adopted a shareholder
rights plan which, in the event of a takeover attempt, would entitle existing
shareowners to certain preferential rights. The rights expire on April 6, 2009,
and are redeemable by MediaOne Group at any time prior to the date they would
become effective.

NOTE 17: EARNINGS PER SHARE

    The following table reflects the computation of basic and diluted earnings
(loss) per share for MediaOne Group Stock, in accordance with the provisions of
SFAS No. 128, "Earnings Per Share." Earnings per share information is also
reflected for Communications Stock during 1998 and 1997 since the stock was
outstanding at that time. Dilutive securities represent the incremental weighted
average shares from potential share issuances associated with MediaOne Group
stock options in 1999 and 1998, and Communications Group stock options in 1998,
as well as the pro rated conversion in 1999 and the assumed conversion in 1998
of the convertible Series D Preferred Stock for MediaOne Group Stock. Diluted
earnings (loss) and related per share amounts for 1997 do not include potential
share issuances associated with stock options and the convertible Series D
Preferred Stock since the effect would have been antidilutive on the loss from
continuing operations. The calculation of diluted shares for 1999 did not
include stock options for approximately 3,310,000 potential share issuances
since the effect would have been antidilutive.

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                  (SHARES IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
MEDIAONE GROUP STOCK:
Income (loss) from continuing operations....................   $3,514    $ 1,430     $(827)
  Preferred stock dividends and accretion...................      (49)       (55)      (52)
  Loss on redemption of preferred securities................      (28)       (53)       --
                                                               ------    -------     -----
Income (loss) from continuing operations available to
  MediaOne
  Group Stock shareowners used for basic earnings (loss) per
    share...................................................    3,437      1,322      (879)
  Preferred stock dividends and accretion on assumed
    conversion..............................................       44         49      --
                                                               ------    -------     -----
Income (loss) from continuing operations available to
  MediaOne
  Group Stock shareowners used for diluted earnings (loss)
    per share...............................................   $3,481    $ 1,371     $(879)
                                                               ======    =======     =====
Income from discontinued operations used for basic and
  diluted earnings per share:
  Results of operations(1)..................................    --       $   158     $ 347
                                                               ======    =======     =====
  Gain on Separation........................................    --       $24,461      --
                                                               ======    =======     =====
Extraordinary item--early extinguishment of debt--net of
  tax.......................................................   $   17    $  (333)    $--
                                                               ======    =======     =====
</TABLE>

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

(1) Represents the operations of Dex, which were discontinued on June 12, 1998.

                                       86
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17: EARNINGS PER SHARE (CONTINUED)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                  (SHARES IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
MEDIAONE GROUP STOCK:
Weighted average number of shares used for basic earnings
  (loss) per share..........................................  611,623    607,648    606,749
Effect of dilutive securities:
  Stock options.............................................    8,683      6,368      --
  Series D Preferred Stock..................................   34,605     38,939      --
                                                              -------    -------    -------
Weighted average number of shares used for diluted earnings
  (loss) per share..........................................  654,911    652,955    606,749
                                                              =======    =======    =======
BASIC EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations.......................................  $  5.62    $  2.18    $ (1.45)
                                                              =======    =======    =======
Discontinued operations-results of operations(1)............    --       $  0.26    $  0.57
                                                              =======    =======    =======
Discontinued operations-gain on Separation..................    --       $ 40.25      --
                                                              =======    =======    =======
Extraordinary item-early extinguishment of debt-net of
  tax.......................................................  $  0.03    $ (0.55)     --
                                                              =======    =======    =======
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations.......................................  $  5.32    $  2.10    $ (1.45)
                                                              =======    =======    =======
Discontinued operations-results of operations(1)............    --       $  0.24    $  0.57
                                                              =======    =======    =======
Discontinued operations-gain on Separation..................    --       $ 37.46      --
                                                              =======    =======    =======
Extraordinary item-early extinguishment of debt-net of
  tax.......................................................  $  0.03    $ (0.51)     --
                                                              =======    =======    =======

COMMUNICATIONS STOCK:(2)
Income from discontinued operations used for basic and
  diluted earnings per share(3).............................             $   589    $ 1,177
                                                                         =======    =======
Weighted average number of shares used for basic earnings
  per share.................................................             484,972    482,751
Effect of dilutive securities--Stock options................               4,097      --
                                                                         -------    -------
Weighted average number of shares used for diluted earnings
  per share.................................................             489,069    482,751
                                                                         =======    =======
BASIC AND DILUTED EARNINGS PER COMMON SHARE:
Basic earnings per share from discontinued operations(3)....             $  1.21    $  2.43
                                                                         =======    =======
Diluted earnings per share from discontinued
  operations(3).............................................             $  1.20    $  2.43
                                                                         =======    =======
</TABLE>

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

(1) Represents the operations of Dex, which were discontinued on June 12, 1998.

(2) The Communications Stock was canceled on June 12, 1998, effective with the
    Separation.

(3) Represents the operations of the Communications Group, which were
    discontinued on June 12, 1998, and included with New U S WEST.

                                       87
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 18: STOCK INCENTIVE PLANS

    MediaOne Group maintains stock incentive plans for executives, other
employees and nonemployees, primarily members of the Board of Directors. The
Amended MediaOne Group 1994 Stock Plan (the "Plan") is administered by the Human
Resources Committee of the Board of Directors with respect to officers,
executive officers and outside directors, and by a special committee with
respect to all other eligible employees and eligible nonemployees.

    As of December 31, 1999, the maximum aggregate number of shares of MediaOne
Group Stock that could have been granted in any calendar year for all purposes
under the Plan was one percent of the shares outstanding (excluding shares held
in treasury) on the first day of such calendar year. In the event that fewer
than the full aggregate number of shares available for issuance in any calendar
year were issued in any such year, the shares not issued may be added to the
shares available for issuance in any subsequent year or years. Options granted
vest over periods up to three years and may be exercised no later than 10 years
after the grant date.

    The compensation cost that has been included in income in accordance with
APB Opinion No. 25, "Accounting for Stock Issued to Employees," was $12, $26 and
zero in 1999, 1998 and 1997, respectively, all of which related to modifications
of stock option terms.

    MediaOne Group has adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," but continues to account for the Plan
under APB Opinion No. 25. Had compensation cost for the Plan been determined
consistent with the fair value based accounting method under SFAS No. 123, the
pro forma net income and earnings per share for both the MediaOne Group Stock
and Communications Stock would have been the following.

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                         ------------------------------------------------------------------
                                                 1999                   1998                   1997
                                         --------------------   --------------------   --------------------
                                                                                                    BASIC
                                                      BASIC                  BASIC       NET      EARNINGS
                                           NET      EARNINGS      NET      EARNINGS     INCOME     (LOSS)
                                          INCOME    PER SHARE    INCOME    PER SHARE    (LOSS)    PER SHARE
                                         --------   ---------   --------   ---------   --------   ---------
<S>                                      <C>        <C>         <C>        <C>         <C>        <C>
MEDIAONE GROUP STOCK:
  As reported..........................   $3,531      $5.65     $25,716     $42.14      $(480)     $(0.88)
  Pro forma............................    3,453       5.52      25,681      42.08       (501)      (0.91)

COMMUNICATIONS STOCK:
  As reported..........................       --         --          --         --      1,177        2.43
  Pro forma............................       --         --          --         --      1,164        2.41
</TABLE>

    The fair value based method of accounting for stock-based compensation plans
under SFAS No. 123 recognizes the value of options granted as compensation cost
over the options' vesting period and has not been applied to options granted
prior to January 1, 1995.

                                       88
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 18: STOCK INCENTIVE PLANS (CONTINUED)

    Following are the weighted-average assumptions used in connection with the
Black-Scholes option-pricing model to estimate the fair value of options granted
during 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                             ---------------------------------------
                                                               1999           1998           1997
                                                             ---------      ---------      ---------
<S>                                                          <C>            <C>            <C>
MEDIAONE GROUP STOCK:
  Risk-free interest rate..................................       4.86%          5.53%          6.40%
  Expected life............................................  4.0 years      4.5 years      5.0 years
  Expected volatility......................................       30.0%          30.0%          30.0%
  Weighted average grant date fair value...................     $15.49         $12.53          $7.81

COMMUNICATIONS STOCK:
  Risk-free interest rate..................................     --             --               6.40%
  Expected dividend yield..................................     --             --               5.80%
  Expected life............................................     --             --          4.0 years
  Expected volatility......................................     --             --               25.0%
  Weighted average grant date fair value...................     --             --              $5.70
</TABLE>

    Data for outstanding options under the Plan is summarized as follows:

<TABLE>
<CAPTION>
                                                     MEDIAONE GROUP STOCK     COMMUNICATIONS STOCK
                                                    ----------------------   -----------------------
                                                                 WEIGHTED-                 WEIGHTED-
                                                                  AVERAGE                   AVERAGE
                                                    NUMBER OF    EXERCISE     NUMBER OF    EXERCISE
                                                      SHARES       PRICE       SHARES        PRICE
                                                    ----------   ---------   -----------   ---------
<S>                                                 <C>          <C>         <C>           <C>
Outstanding December 31, 1996.....................  14,114,094    $17.49      11,412,915    $26.67
                                                    ----------    ------     -----------    ------
  Granted.........................................   8,733,782     20.33       9,491,642     34.87
  Exercised.......................................  (1,371,529)    16.30      (2,648,569)    25.41
  Canceled or expired.............................  (1,027,388)    18.35        (637,411)    27.54
                                                    ----------    ------     -----------    ------
Outstanding December 31, 1997.....................  20,448,959    $18.74      17,618,577    $31.23
                                                    ----------    ------     -----------    ------
  Granted.........................................   6,088,849     36.40
  Dex Adjustment..................................     827,038      0.90
  Separation......................................      --         --        (17,618,577)    --
  Exercised.......................................  (4,391,697)    17.46
  Canceled or expired.............................  (1,239,154)    21.84
                                                    ----------    ------     -----------    ------
Outstanding December 31, 1998.....................  21,733,995    $23.13         --          --
                                                    ----------    ------     ===========    ======
  Granted--market value...........................   9,766,947     58.30
  Granted--above market value.....................   3,309,800     70.03
  Exercised.......................................  (5,250,732)    19.84
  Canceled or expired.............................  (1,175,523)    44.25
                                                    ----------    ------
Outstanding December 31, 1999.....................  28,384,487    $40.57
                                                    ==========    ======
</TABLE>

                                       89
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 18: STOCK INCENTIVE PLANS (CONTINUED)
    The number of exercisable options under the Plan and the weighted-average
exercise prices follow:

<TABLE>
<CAPTION>
                                             MEDIAONE GROUP STOCK             COMMUNICATIONS STOCK
                                       --------------------------------   ----------------------------
                                          NUMBER       WEIGHTED-AVERAGE    NUMBER     WEIGHTED-AVERAGE
EXERCISABLE OPTIONS AT:                  OF SHARES      EXERCISE PRICE    OF SHARES    EXERCISE PRICE
-----------------------                -------------   ----------------   ---------   ----------------
<S>                                    <C>             <C>                <C>         <C>
December 31, 1997....................    7,235,685          $16.54        5,299,955        $25.72
December 31, 1998....................    9,742,450           18.30               --            --
December 31, 1999....................   17,346,718           32.94               --            --
</TABLE>

    The following table summarizes the status of outstanding and exercisable
options under the Plan at December 31, 1999. The total options outstanding
represent 4.6 percent of the MediaOne Group common shares outstanding.

<TABLE>
<CAPTION>
                                       OUTSTANDING OPTIONS                   EXERCISABLE OPTIONS
                           -------------------------------------------   ---------------------------
                                           WEIGHTED-
                                            AVERAGE        WEIGHTED-                     WEIGHTED-
                                           REMAINING        AVERAGE                       AVERAGE
                             NUMBER       CONTRACTUAL      EXERCISE        NUMBER        EXERCISE
RANGE OF EXERCISE PRICES   OUTSTANDING   LIFE (YEARS)        PRICE       EXERCISABLE       PRICE
-------------------------  -----------   -------------   -------------   -----------   -------------
<S>                        <C>           <C>             <C>             <C>           <C>
MEDIAONE GROUP STOCK
$13.17 - $16.95..........   3,664,423        4.78           $15.42        3,661,995       $15.42
$17.06 - $19.03..........   3,029,850        6.37            18.13        2,780,745        18.14
$19.10 - $21.27..........   3,228,041        6.80            20.48        2,643,616        20.31
$21.45 - $36.75..........   3,391,128        7.72            30.15        2,786,687        29.96
$37.00 - $44.38..........   2,348,938        8.28            39.12          614,417        37.84
$45.25 - $46.69..........   5,577,272        8.94            46.68        1,183,240        46.68
$46.81 - $69.88..........     720,839        8.59            50.60          398,692        48.16
$70.03 - $70.03..........   3,271,100        9.01            70.03        3,271,100        70.03
$70.06 - $79.69..........     877,703        9.38            77.76            6,133        75.21
$81.63 - $81.63..........   2,275,193        9.33            81.63               93        81.63
                           ----------        ----           ------       ----------       ------
                           28,384,487        7.73           $40.57       17,346,718       $32.94
                           ==========        ====           ======       ==========       ======
</TABLE>

    A total of 13,076,747, 6,088,849 and 8,733,782 MediaOne Group Stock options
were granted in 1999, 1998 and 1997, respectively. A total of 9,491,642
Communications Stock options were granted in 1997. The modified MediaOne Group
Stock options were not significant in 1999 and 1998, and the Communications
Stock options were not significant in 1997. The exercise price for the majority
of the MediaOne Group Stock options granted in 1999, as well as all of the 1998
and 1997 MediaOne Group and Communications Stock grants, excluding modified
options, equals the market price on the grant date.

    Approximately 8,213,000 and 4,046,000 shares of MediaOne Group Stock were
available for grant under the plans in effect at December 31, 1999 and 1998,
respectively. Approximately 36,598,000 shares of MediaOne Group Stock were
authorized but unissued under the Plan at December 31, 1999.

                                       90
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 19: EMPLOYEE BENEFITS

MEDIAONE GROUP PLANS

    The MediaOne Group defined benefit pension plan covers substantially all of
its employees, except for foreign national employees. Management benefits are
based on a final pay formula. MediaOne Group uses the projected unit credit
method for the determination of pension cost for financial reporting and funding
purposes. MediaOne Group's policy is to fund amounts required under the Employee
Retirement Income Security Act of 1974; no funding was required in 1999, 1998
nor 1997.

    MediaOne Group also sponsors a nonqualified pension plan which pays
supplemental pension benefits to key executives in addition to amounts received
under the MediaOne Group pension plan. The obligation and annual expense for
this plan are included in the 1999 and 1998 pension detail below.

    MediaOne Group provides certain health care and life insurance benefits to
retired employees. MediaOne Group uses the projected unit credit method for the
determination of postretirement medical and life costs for financial reporting
purposes.

    Net periodic benefit costs for pension benefits were $9 in 1999 and $3 in
1998, and $2 in each of 1999 and 1998 for other postretirement benefits.

    Below is a reconciliation of the change in the fair value of the plan assets
for the pension and postretirement plans for 1999 and 1998:

<TABLE>
<CAPTION>
                                                                                                  OTHER
                                                                    PENSION                   POSTRETIREMENT
                                                                   BENEFITS                      BENEFITS
                                                                 DECEMBER 31,                  DECEMBER 31,
                                                              -------------------         ----------------------
                                                                1999       1998             1999          1998
                                                              --------   --------         --------      --------
<S>                                                           <C>        <C>              <C>           <C>
Fair value of plan assets at beginning of year..............    $218       $--              $  5          $--
  Actual return on plan assets..............................      34         10             --            --
  Contributions for non-qualified plan......................       4          4             --            --
  Assets transferred from Old U S WEST......................    --          194             --               4
  Assets due (to) from Old U S WEST.........................     (11)        19             --               1
  Rollovers.................................................       1       --               --            --
  Benefits paid.............................................     (29)        (9)            --            --
                                                                ----       ----             ----          ----
Fair value of plan assets at end of year(1).................    $217       $218             $  5          $  5
                                                                ====       ====             ====          ====
</TABLE>

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

(1) Pension assets include MediaOne Group stock of $1 for 1998.

                                       91
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 19: EMPLOYEE BENEFITS (CONTINUED)
    Below is a reconciliation of the change in the benefit obligation for the
pension and postretirement plans for 1999 and 1998:

<TABLE>
<CAPTION>
                                                                                                 OTHER
                                                                    PENSION                 POSTRETIREMENT
                                                                   BENEFITS                    BENEFITS
                                                                 DECEMBER 31,                DECEMBER 31,
                                                              -------------------         -------------------
                                                                1999       1998             1999       1998
                                                              --------   --------         --------   --------
<S>                                                           <C>        <C>              <C>        <C>
Net benefit obligation at beginning of year.................    $200       $--              $ 25       $--
  Service cost..............................................      16          8                1          1
  Interest cost.............................................      14          6                2       --
  Liability transferred from Old U S WEST...................    --          190             --           23
  Rollover..................................................       1       --               --         --
  Actuarial (gain) loss.....................................     (16)         5               (8)         1
  Benefits paid.............................................     (29)        (9)            --         --
                                                                ----       ----             ----       ----
Net benefit obligation at end of year.......................    $186       $200             $ 20       $ 25
                                                                ====       ====             ====       ====
</TABLE>

    The following table represents the funded status of the pension and
postretirement plans at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                                                  OTHER
                                                                    PENSION                   POSTRETIREMENT
                                                                   BENEFITS                      BENEFITS
                                                                 DECEMBER 31,                  DECEMBER 31,
                                                              -------------------         ----------------------
                                                                1999       1998             1999          1998
                                                              --------   --------         --------      --------
<S>                                                           <C>        <C>              <C>           <C>
Funded status at end of year................................    $ 31       $ 18             $(15)         $(20)
  Unrecognized actuarial (gain) loss........................     (64)       (47)              (2)            5
  Unrecognized prior service cost...........................      17         20                1             1
  Unrecognized net transition asset.........................      (6)        (7)            --            --
                                                                ----       ----             ----          ----
Net accrued liability at end of year........................    $(22)      $(16)            $(16)         $(14)
                                                                ====       ====             ====          ====
</TABLE>

    The actuarial assumptions used to account for the plans are as follows:

<TABLE>
<CAPTION>
                                                        PENSION
                                                        BENEFITS             OTHER POSTRETIREMENT BENEFITS
                                                 ----------------------   -----------------------------------
WEIGHTED AVERAGE ASSUMPTION AS OF DECEMBER 31,     1999          1998           1999               1998
----------------------------------------------   --------      --------   ----------------   ----------------
<S>                                              <C>           <C>        <C>                <C>
Discount rate................................      7.5%         6.75%           7.5%              6.75%
Expected return on assets....................     8.75%         8.75%          8.75%              8.75%
Rate of compensation increase................     4.00%         4.00%           N/A                N/A
Health care cost trend on covered charges....      N/A           N/A      8% decreasing to   8% decreasing to
                                                                            an ultimate        an ultimate
                                                                           trend of 5% in     trend of 5% in
                                                                                2011               2011
</TABLE>

    A one percent change in the assumed healthcare cost trend rate would have
increased the accumulated postretirement benefit obligation by $3 in 1999 and by
$4 in 1998, and decreased it by $3 in each of 1999 and 1998. The impact on
service and interest cost components would not have been material.

                                       92
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 19: EMPLOYEE BENEFITS (CONTINUED)
OLD U S WEST PLANS

    Prior to the Separation, MediaOne Group participated in the employee
benefits plans sponsored by Old U S WEST. Since both MediaOne Group and New U S
WEST belonged to a single pension and postretirement plan, assets were not
segregated until Separation. Pension and postretirement benefit costs were
allocated to MediaOne Group based on the ratio of MediaOne Group's service cost
to total service cost. MediaOne Group's share of the net pension credit for 1997
was $(3). MediaOne Group's share of the net postretirement costs for 1997 was
$4.

NOTE 20: INCOME TAXES

    The components of the provision (benefit) for income taxes follow:

<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
FEDERAL:
  Current...................................................   $1,460     $ (372)    $(210)
  Deferred..................................................    1,195      1,358      (137)
                                                               ------     ------     -----
                                                                2,655        986      (347)
                                                               ------     ------     -----
STATE AND LOCAL:
  Current...................................................      215        (14)      (20)
  Deferred..................................................      271        203       (26)
                                                               ------     ------     -----
                                                                  486        189       (46)
                                                               ------     ------     -----
FOREIGN:
  Current...................................................       33         15        (1)
  Deferred..................................................       43         18        14
                                                               ------     ------     -----
                                                                   76         33        13
                                                               ------     ------     -----
Provision (benefit) for income taxes........................   $3,217     $1,208     $(380)
                                                               ======     ======     =====
</TABLE>

    The Company received $365 for income taxes in 1999, and paid $24 and $636
for income taxes in 1998 and 1997, respectively, inclusive of the discontinued
operations of New U S WEST and the capital assets segment. Income taxes paid for
the discontinued operations of New U S WEST, through the Separation date of
June 12, 1998, were $379 and $906 in 1998 and 1997, respectively.

                                       93
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 20: INCOME TAXES (CONTINUED)
    The effective tax rate differs from the statutory tax rate as follows:

<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                       (IN PERCENT)
<S>                                                           <C>        <C>        <C>
Federal statutory tax rate..................................    35.0       35.0       35.0
State income taxes--net of federal effect...................     3.7        3.5        2.5
Foreign taxes--net of federal effect........................     0.3       (1.8)      (0.7)
Goodwill amortization.......................................     0.7       (4.5)      (4.7)
Other.......................................................    (0.7)       0.6       (0.6)
                                                                ----       ----       ----
Subtotal without gain on sale of domestic wireless and AT&T
  Note......................................................    39.0       32.8       31.5
Gain on sale of domestic wireless...........................    --         13.0       --
AT&T Note...................................................     8.8       --         --
                                                                ----       ----       ----
Effective tax rate..........................................    47.8       45.8       31.5
                                                                ====       ====       ====
</TABLE>

    The components of the net deferred tax liability follow:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Intangible assets...........................................   $2,592     $2,685
Property, plant and equipment...............................      340        284
State deferred tax liability--net of federal effect.........    1,035        867
Leases......................................................      540        557
Investment in Vodafone Group / AirTouch Communications......    2,477      1,978
Investments.................................................      466      --
AT&T Note...................................................      525      --
Other.......................................................        2         95
                                                               ------     ------
  Deferred tax liabilities..................................    7,977      6,466
                                                               ------     ------
Merger related costs........................................       90      --
State deferred tax asset--net of federal effect.............       73         87
Other accrued liabilities...................................      206        189
Investments.................................................    --           203
Net operating loss and tax credit carryforwards.............      118        127
Valuation allowance.........................................     (269)      (279)
Foreign currency translation adjustment.....................    --            57
Other.......................................................      117        121
                                                               ------     ------
  Deferred tax assets.......................................      335        505
                                                               ------     ------
Net deferred tax liability..................................   $7,642     $5,961
                                                               ======     ======
</TABLE>

    In connection with the acquisition of Continental in November 1996, the
Company acquired operating loss carryforwards of approximately $217 for federal
income tax purposes, expiring in various years through 2011. The Company also
acquired investment tax credit carryforwards of approximately $41, expiring in
various years through 2005. Due to potential use limitations, a valuation
allowance of $269 has been

                                       94
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 20: INCOME TAXES (CONTINUED)
established for the carryforwards and for a deferred tax asset associated with
an investment. If the realization of the carryforwards or deferred tax asset
becomes more likely than not in future periods, any reduction in the valuation
allowance will be allocated to reduce goodwill and acquired intangible assets.

    The current portion of the deferred tax asset was $69 and $74 at
December 31, 1999 and 1998, respectively, resulting primarily from
compensation-related items and other accrued expenses. Foreign operations
contributed pretax income of $6,284 during 1999, and pretax losses of $336 and
$604 during 1998 and 1997, respectively.

NOTE 21: CAPITAL ASSETS

    The accounts of the capital assets segment are reflected in the Company's
Consolidated Balance Sheets for 1999 and 1998, and in the Consolidated
Statements of Operations for 1999. Prior to this time, the capital assets
segment was considered a discontinued operation and, in accordance with GAAP,
was accounted for as a "net investment in assets held for sale." See
Note 24--Net Investment in Assets Held for Sale--to the Consolidated Financial
Statements.

    The remaining assets of the capital assets segment primarily represent long
term lease finance receivables which will be run-off. These receivables are
reflected in "Other Assets" in the Consolidated Balance Sheets.

    Finance receivables primarily consist of contractual obligations under
long-term leases with maturity dates ranging from 2000 to 2016 that MediaOne
Group intends to run off. Certain leases contain renewal options and buyout
provisions. These long-term leases consist mostly of leveraged leases related to
aircraft and power plants. For leveraged leases, the cost of the assets leased
is financed primarily through nonrecourse debt which is netted against the
related lease receivable. The components of finance receivables follow:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Receivables.................................................   $  636     $  671
Unguaranteed estimated residual values......................      394        431
                                                               ------     ------
                                                                1,030      1,102
Less: Unearned income.......................................      327        338
     Credit loss and other allowances(1)....................      139        138
                                                               ------     ------
Finance receivables--net....................................   $  564     $  626
                                                               ======     ======
</TABLE>

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

(1) Includes allowance for credit losses of $13 in each of 1999 and 1998.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET CREDIT RISK--FINANCIAL GUARANTEES

    MediaOne Group retained certain risks in asset-backed obligations related to
the commercial real estate portfolio. As of December 31, 1999, the principal
amounts insured on asset-backed obligations was $267 for maturity terms up to
five years. As of December 31, 1998, the principal amounts insured on asset-
backed obligations were $146 that mature within five years and $138 for maturity
terms ranging from 5 to 10 years, for a total principal amount insured of $284.

                                       95
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 21: CAPITAL ASSETS (CONTINUED)
    Concentrations of collateral associated with insured asset-backed
obligations follow:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
TYPE OF COLLATERAL                                              1999       1998
------------------                                            --------   --------
<S>                                                           <C>        <C>
Commercial mortgages:
  Commercial real estate....................................    $ 28       $ 37
  Corporate secured.........................................     239        247
                                                                ----       ----
Total.......................................................    $267       $284
                                                                ====       ====
</TABLE>

ADDITIONAL FINANCIAL INFORMATION

    Information for Financial Services, a member of the capital assets segment,
follows:

<TABLE>
<CAPTION>
                                                                   YEAR ENDED OR AS OF
                                                                       DECEMBER 31,
                                                              ------------------------------
SUMMARIZED FINANCIAL INFORMATION                                1999       1998       1997
--------------------------------                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Revenue.....................................................    $ 11       $ 17      $   23
Net finance receivables.....................................     564        625         824
Total assets................................................     826        858       1,208
Total debt..................................................     151        199         363
Total liabilities...........................................     785        846       1,121
Equity......................................................      41         12          87
</TABLE>

NOTE 22: COMMITMENTS AND CONTINGENCIES

    MediaOne Group's commitments and debt guarantees totaled approximately $330
for its international investments and $180 for its domestic investments as of
December 31, 1999.

    During 1999, certain cable subsidiaries of the Company in Florida, Michigan,
and Ohio were named as defendants in various class action lawsuits challenging
such subsidiaries' policies for charging late payment fees when customers fail
to pay for subscriber services in a timely manner. The Company anticipates that
these lawsuits will not have a material impact on its results of operations.

NOTE 23: SUBSEQUENT EVENTS

    On January 28, 2000, MediaOne Group signed an agreement to sell its Japanese
cable and telephony investments for $225 plus the repayment of capital
contributions made to the Japanese ventures after June 30, 1999. At
December 31, 1999, the Company had made capital contributions of $41 that would
be subject to repayment at the closing of the sale. MediaOne Group will also be
released from guarantees given to support debt at certain of the Japanese
ventures. At December 31, 1999, the amount of these debt guarantees totaled
$132.

    On February 7, 2000, the Company signed a definitive agreement to sell its
equity interest in the Trip.com, an online travel services company, to Galileo
International, Inc., for cash and stock valued at approximately $70. This sale
is subject to regulatory approvals.

                                       96
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 23: SUBSEQUENT EVENTS (CONTINUED)

    On February 15, 2000, MediaOne Group sold its 25 percent interest in
Singapore Cablevision ("Singapore") to Singapore Technologies for $218. As a
result of the sale, MediaOne Group's commitments disclosed in
Note 22--Commitments and Contingencies--to the Consolidated Financial Statements
were reduced by $47.

NOTE 24: NET INVESTMENT IN ASSETS HELD FOR SALE

    As of December 31, 1998, the disposal of assets held for sale of the capital
assets segment was substantially completed. Therefore, the accounts of the
capital assets segment are reflected in the Company's Consolidated Balance
Sheets for 1999 and 1998, and in the Consolidated Statements of Operations for
1999. See Note 21--Capital Assets--to the Consolidated Financial Statements for
the continuing operations. Prior to this time, the capital assets segment had
been accounted for in accordance with SAB No. 93, issued by the SEC, which
required discontinued operations not disposed of within one year of the
measurement date to be accounted for prospectively in continuing operations as a
"net investment in assets held for sale." The remaining assets of the capital
assets segment primarily represent long term lease finance receivables.

    MediaOne Real Estate, Inc. ("Real Estate") sold various assets during 1998,
and 1997 for proceeds of $182, and $88, respectively. The sales proceeds were in
line with estimates. Proceeds from sales were primarily used to repay related
debt. As of December 31, 1998, the Company had substantially completed the
liquidation of this portfolio.

    Building sales and operating revenues of the capital assets segment were
$208 and $116 in 1998 and 1997, respectively. During 1998 and 1997, income or
losses from the capital assets segment were deferred and included within the
reserve for assets held for sale.

NOTE 25: DISCONTINUED OPERATIONS

    In accordance with 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," the
Consolidated Financial Statements for 1998 and 1997 reflect New U S WEST as a
discontinued operation. Revenues and expenses, and the cash flows of New
U S WEST have been separately classified in the Consolidated Statements of
Operations and Statements of Cash Flows.

    The Company has accounted for the distribution of New U S WEST common stock
to the holders of Communications Stock, and to the holders of MediaOne Group
Stock for the Dex Alignment as a discontinuance of the businesses comprising New
U S WEST. The measurement date for discontinued operations accounting purposes
is June 4, 1998, the date upon which Old U S WEST's shareowners approved the
Separation. Because the distribution was non pro-rata, as compared with the
businesses previously attributed to Old U S WEST's two classes of shareowners,
it was accounted for at fair value. The distribution resulted in a gain of
$24,461, net of $114 of Separation costs (net of tax benefits of $37).
Separation costs included cash payments under severance agreements of $45 and
financial advisory, legal,

                                       97
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 25: DISCONTINUED OPERATIONS (CONTINUED)
registration fee, printing and mailing costs. Separation costs also included a
one-time payment to terminate the sale of the Minnesota cable systems.

<TABLE>
<CAPTION>
                                                                  YEAR ENDED
                                                                 DECEMBER 31,
                                                              -------------------
SUMMARIZED OPERATING RESULTS                                    1998       1997
----------------------------                                  --------   --------
<S>                                                           <C>        <C>
Revenues....................................................   $5,454    $11,479
Operating income............................................    1,412      2,776
Income before income taxes..................................    1,187      2,429
Income tax expense..........................................     (440)      (902)
                                                               ------    -------
Income before extraordinary item............................      747      1,527
Extraordinary item--debt extinguishment--net of tax.........    --            (3)
                                                               ------    -------
Net income of discontinued operations.......................   $  747    $ 1,524
                                                               ======    =======
</TABLE>

NOTE 26: QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     QUARTERLY FINANCIAL DATA
                                                             -----------------------------------------
                                                              FIRST      SECOND     THIRD      FOURTH
                                                             QUARTER    QUARTER    QUARTER    QUARTER
                                                             --------   --------   --------   --------
<S>                                                          <C>        <C>        <C>        <C>
1999
Sales and other revenues...................................   $  665    $   662     $ 675      $ 693
Income (loss) from continuing operations before income
  taxes....................................................     (148)       667       275      5,937
Income (loss) from continuing operations...................     (111)      (176)      148      3,653
Net income (loss)..........................................     (111)      (159)      148      3,653

MEDIAONE GROUP STOCK
Basic earnings (loss) per common share:
  Income (loss) from continuing operations.................   $(0.21)   $ (0.31)    $0.18      $5.79
  Total basic earnings (loss) per common share.............    (0.21)     (0.29)     0.18       5.79

Diluted earnings (loss) per common shares:
  Income (loss) from continuing operations.................   $(0.21)   $ (0.31)    $0.18      $5.55
  Total diluted earnings (loss) per common share...........    (0.21)     (0.29)     0.18       5.55

1998
Sales and other revenues(1)................................   $  972    $   641     $ 626      $ 643
Income (loss) from continuing operations before income
  taxes....................................................     (328)     3,716      (244)      (506)
Income (loss) from continuing operations...................     (222)     2,174      (184)      (338)
Income from discontinued operations--net of tax(2).........      434     24,774      --         --
Net income (loss)(2).......................................      212     26,615      (184)      (338)
</TABLE>

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

(1) Sales and other revenues include revenues related to the domestic wireless
    operations of $341 and $20 for the first and second quarters of 1998,
    respectively. The domestic wireless operations were sold on April 6, 1998.

(2) Income from discontinued operations includes $87 and $72 related to Dex, and
    $347 and $241 related to the Communications Group for the first and second
    quarters of 1998, respectively.

                                       98
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 26: QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)

<TABLE>
<CAPTION>
                                                                      QUARTERLY FINANCIAL DATA
                                                              -----------------------------------------
                                                               FIRST      SECOND     THIRD      FOURTH
                                                              QUARTER    QUARTER    QUARTER    QUARTER
                                                              --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
1998
MEDIAONE GROUP STOCK:
Basic earnings (loss) per common share:
  Income (loss) from continuing operations..................   $(0.38)    $ 3.46     $(0.32)    $(0.58)
  Income from discontinued operations per common share......     0.14      40.28      --         --
  Total basic earnings (loss) per common share..............    (0.24)     43.19      (0.32)     (0.58)

Diluted earnings (loss) per common shares
  Income (loss) from continuing operations..................   $(0.38)    $ 3.24     $(0.32)    $(0.58)
  Income from discontinued operations per common share......     0.14      37.53      --         --
  Total diluted earnings (loss) per common share............    (0.24)     40.27      (0.32)     (0.58)

COMMUNICATIONS STOCK:
Earnings from discontinued operations per common share:
  Basic earnings............................................   $ 0.72     $ 0.50     $--        $--
  Diluted earnings..........................................     0.72       0.49      --         --
</TABLE>

    First-quarter 1999 net loss includes a gain of $76 ($0.13 per share of
MediaOne Group Stock) related to the sale of Optus shares, a gain of $43 ($0.07
per share of MediaOne Group Stock) related to the sale of domestic cable systems
and investments, a charge of $40 ($0.07 per share of MediaOne Group Stock)
related to the Company's investment in PrimeStar, and a charge of $15 ($0.03 per
share of MediaOne Group Stock) for merger costs incurred by the Company.
Second-quarter 1999 net loss includes a gain of $1,530 ($2.52 per share of
MediaOne Group Stock) related to the exchange of the Company's investment in
AirTouch stock, a net gain of $14 ($0.02 per share of MediaOne Group Stock)
related to the sale of domestic investments, a charge of $3 (no per share
impact) on the sale and exit costs of international investments, a charge of
$1,497 ($2.47 per share of MediaOne Group Stock) for the Comcast termination fee
and other merger related costs incurred by the Company, and a charge of $13
($0.02 per share of MediaOne Group Stock) for an extraordinary dividend paid to
the Centaur Preference Shares holders as a result of the Vodafone/AirTouch
merger. Third-quarter 1999 net income includes a gain of $257 ($0.42 per share
of MediaOne Group Stock) related to the sale of domestic cable systems and
investments, a net gain of $102 ($0.17 per share of MediaOne Group Stock)
related to the sale of international investments, and a charge of $9 ($0.01 per
share of MediaOne Group Stock) for other merger related costs. Fourth-quarter
1999 net income includes a gain of $3,909 ($6.20 per share of MediaOne Group
Stock) related to the sale of international investments, a net charge of $167
($0.26 per share of MediaOne Group Stock) for merger related activity, and
income of $10 ($0.02 per share of MediaOne Group Stock) related to the Company's
investment in PrimeStar.

    First-quarter 1998 net income includes net income of $15 ($0.03 per share of
MediaOne Group Stock) related to the domestic wireless businesses and a gain of
$10 ($0.02 per share of MediaOne Group Stock) related to the sale of a domestic
cable programming investment. Second-quarter 1998 net income includes a gain of
$24,461 ($40.16 per share of MediaOne Group Stock) related to the Separation, a
gain of $2,257 ($3.71 per share of MediaOne Group Stock) related to the sale of
MediaOne Group's domestic wireless businesses, gains of $14 ($0.02 per share of
MediaOne Group Stock) related to various domestic investment sales, net income
of $5 ($0.01 per share of MediaOne Group Stock) related to the domestic

                                       99
<PAGE>
                              MEDIAONE GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 26: QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)
wireless businesses, and a charge of $333 ($0.55 per share of MediaOne Group
Stock) for the early extinguishment of debt. Third-quarter 1998 net income
includes gains of $2 (no per share impact) on sales of miscellaneous domestic
cable systems and a charge of $25 ($0.04 per share of MediaOne Group Stock)
related to an interest rate swap agreement which did not qualify for deferral
accounting. Fourth-quarter 1998 net income includes gains of $8 ($0.01 per share
of MediaOne Group Stock) related to sales of various domestic investments, gains
of $10 ($0.02 per share of MediaOne Group Stock) related to sales of various
international investments, a charge of $100 ($0.16 per share of MediaOne Group
Stock) related to a write-down to zero of the Company's investment in PrimeStar,
and a charge of $18 ($0.03 per share of MediaOne Group Stock) related to the
termination of an interest rate swap agreement and the purchase of an interest
rate option.

<TABLE>
<CAPTION>
                                                               MARKET PRICE
                                                             (WHOLE DOLLARS)
                                                     --------------------------------
PER SHARE MARKET AND DIVIDEND DATA                      HIGH        LOW       CLOSE     DIVIDENDS
----------------------------------                   ----------   --------   --------   ---------
<S>                                                  <C>          <C>        <C>        <C>
1999
MEDIAONE GROUP STOCK
  First quarter....................................   $70.0000    $46.1250   $63.4375    $ --
  Second quarter...................................    81.8125     60.0000    74.3750      --
  Third quarter....................................    78.9375     64.0000    68.3125      --
  Fourth quarter...................................    83.0000     66.3750    76.8125      --

1998
MEDIAONE GROUP STOCK
  First quarter....................................   $37.1875    $27.0000   $34.7500    $ --
  Second quarter...................................    44.2500     34.1875    43.9375      --
  Third quarter....................................    50.1250     40.0000    44.4375      --
  Fourth quarter...................................    47.0000     33.4375    47.0000      --
COMMUNICATIONS STOCK
  First quarter....................................   $56.7500    $43.3750   $54.6250    $0.5350
  Second quarter (thru 6/12/98)(1).................    58.0000     49.5625    50.5000      --
</TABLE>

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

(1) The Communications Stock was canceled on June 12, 1998, effective with the
    Separation.

                                      100