AT&T WIRELESS GROUP FINANCIALS

                        (an integrated business of AT&T)

          AT&T Wireless Group is an integrated  business of AT&T Corp. and not a
      stand-alone  entity.  As AT&T Wireless  Group is a tracking stock of AT&T,
      separate  financial  statements  are  not  required  to be  filed.  We are
      providing these financial statements to provide additional  disclosures to
      investors  to allow  them to  assess  the  financial  performance  of AT&T
      Wireless Group. Presenting separate financial statements for AT&T Wireless
      Group  does not  indicate  that we have  changed  title to any  assets  or
      responsibility  for any  liabilities,  and does not  purport to affect the
      rights of any of AT&T's creditors. Holders of AT&T Wireless Group tracking
      stock do not have  claims  against  the  assets  of AT&T  Wireless  Group.
      instead,  AT&T Wireless  Group  shareholders  own a separate class of AT&T
      common  stock that is intended to reflect the  financial  performance  and
      economic value of AT&T's wireless services' businesses.

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                     Management's Discussion and Analysis of
                  Results of Operations and Financial Condition

      Overview

          AT&T  Wireless  Group is an  integrated  business of AT&T and is not a
      separate  legal entity.  On April 27, 2000,  AT&T completed an offering of
      15.6%, or 360 million shares,  of AT&T Wireless Group tracking stock at an
      offering price of $29.50 per share.  AT&T Wireless Group tracking stock is
      a class of AT&T common  stock,  which is intended to provide  holders with
      financial returns based on the financial performance and economic value of
      AT&T's wireless services'  businesses.  AT&T Wireless Group tracking stock
      issued in the offering  reflected only a portion of the authorized shares.
      The remaining 84.4% has been reserved for the benefit of AT&T Common Stock
      Group  (which  consists  of  the  operations  of  AT&T  other  than  those
      attributed  to AT&T  tracking  stocks) and is intended to be  reflected in
      AT&T common stock.

          AT&T  Wireless  Group  includes  the results of its mobility and fixed
      wireless  businesses,  as  well  as its  international  operations,  which
      primarily  include the earnings or losses associated with equity interests
      in international wireless communications ventures and partnerships.

          The combined  financial  statements of AT&T Wireless  Group  primarily
      include the legal entity  results of AT&T Wireless  Services,  Inc and its
      subsidiaries (AWS), AT&T Wireless Group, LLC (AWG), AT&T Wireless PCS, LLC
      and it  subsidiaries  (AWPCS),  and  Winston,  Inc.  and its  subsidiaries
      (Winston),  all of which are  direct  subsidiaries  of AT&T  Corp.,  as of
      December 31, 2000.  In February  2001,  the legal  entities of Winston and
      AWPCS as well as  certain  assets  of AWG  were  transferred  to AWS.  The
      remaining  assets and liabilities of AWG will be transferred  prior to the
      split-off.

          On  October  25,  2000,  AT&T  announced  its  decision  to present an
      exchange  offer to AT&T common  shareowners  to allow them to exchange any
      portion of shares of AT&T common stock for shares of AT&T  Wireless  Group
      tracking stock. On December 22, 2000, AT&T filed a registration  statement
      for the exchange offer with the Securities and Exchange Commission,  which
      was amended on February 23, 2001. AT&T anticipates that the exchange offer
      will be completed  during the second quarter of 2001.  AT&T Wireless Group
      will  continue  to be a part  of  AT&T  following  the  completion  of the
      exchange offer.

          Also on October 25, 2000, AT&T announced  its restructuring  plan.  In
      connection with their restructuring plan,  following the completion of the
      exchange  offer  and  subject  to  certain  conditions,  AT&T  intends  to
      split-off  AT&T Wireless  Group from AT&T.  These  conditions  include the
      receipt of a favorable  ruling on the split-off from the Internal  Revenue
      Service (IRS) and  satisfaction of conditions  contained in AT&T's new $25
      billion credit agreement, including the repayment of AT&T Wireless Group's
      intercompany  obligations to AT&T. The split-off,  which is anticipated to
      be completed in mid-2001, would include several steps. These steps include
      transferring  substantially  all of the  assets  and  liabilities  of AT&T
      Wireless Group to AT&T Wireless Services, Inc., mandatorily exchanging all
      issued and  outstanding  shares of AT&T  Wireless  Group  tracking  stock,
      including those issued in the exchange offer,  for shares of AT&T Wireless
      Services common stock,  and  distributing a majority of the shares of AT&T
      Wireless Services common stock held by AT&T Common Stock Group, to holders
      of AT&T common  stock on a pro rata  basis.  On February  14,  2001,  AT&T
      announced  its  intention  to  retain up to $3  billion  of shares of AT&T
      Wireless  Services  for its own account  for sale or  exchange  within six
      months of the split-off, subject to receipt of a satisfactory IRS ruling.
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          In  January  2001,   NTT   DoCoMo,   a   leading   Japanese   wireless
      communications company,  invested $9.8 billion in a security of AT&T that,
      like AT&T Wireless Group tracking  stock, is intended to reflect a portion
      of the financial  performance  and economic value of AT&T Wireless  Group.
      AT&T Wireless Group,  through AT&T Wireless Group, LLC, was allocated $6.2
      billion of the proceeds  from  DoCoMo's  $9.8 billion  investment in AT&T.
      AT&T retained the remaining $3.6 billion of the DoCoMo investment proceeds
      as  consideration  for the  reduction in AT&T's  retained  portion of AT&T
      Wireless Group's value.  Following the split-off,  this investment will be
      converted into approximately 16% of AT&T Wireless Services' common shares.
      DoCoMo  also  received  warrants  at an  exercise  price  of $35 per  AT&T
      Wireless  Group  tracking  share   equivalent   that  would  represent  an
      approximate additional 1.6% of AT&T Wireless Services' common shares after
      the split-off.  As part of this investment,  AT&T Wireless Group,  through
      AT&T Wireless  Services,  Inc., has entered into a strategic alliance with
      DoCoMo  to  develop  mobile  multimedia  services  on  a  global-standard,
      high-speed  wireless  network.  DoCoMo may require the  repurchase  of its
      investment at DoCoMo's  original  purchase price,  plus interest,  if AT&T
      does not complete the split-off by specified  dates  beginning  January 1,
      2002 or if AT&T  Wireless  Group  fails  to meet  specified  technological
      milestones.

      Acquisitions

          On December  29, 2000,  AT&T  Wireless  Group,  through AWS and AWPCS,
      completed the acquisition of a wireless system in Houston,  which covers a
      population  base of  approximately  five million  potential  customers and
      served  approximately 180 thousand subscribers as of the acquisition date.
      Also on December 29, 2000,  AT&T Wireless  Group's  equity  interest in AB
      Cellular,  an entity  which  owned  cellular  properties  in Los  Angeles,
      Houston and Galveston,  Texas, was redeemed.  In  consideration  for their
      equity interest,  AT&T Wireless Group,  through AWS,  received 100% of the
      net assets of the Los Angeles property.  The Los Angeles property covers a
      population base of  approximately 15 million  potential  customers and had
      approximately 1.3 million subscribers as of December 31, 2000. On November
      14, 2000, AT&T Wireless Group, through AWPCS, completed a transaction with
      their  affiliate  Telecorp  PCS  which  resulted  in AT&T  Wireless  Group
      acquiring  wireless systems in several New England markets.  On October 2,
      2000, AT&T Wireless Group,  through AWPCS,  completed the acquisition of a
      wireless   system  in   Indianapolis.   Combined,   the  New  England  and
      Indianapolis  markets cover a population  base of  approximately 4 million
      potential customers,  and served approximately 145 thousand subscribers as
      of their acquisition dates.

          On September 29, 2000, AT&T Wireless Group, through AWS, completed the
      acquisition of a wireless  system in San Diego,  which covers a population
      base of 3 million  potential  customers.  Also,  during the third quarter,
      AT&T Wireless Group,  through AWS, completed its acquisition of a wireless
      system on the Big Island of Hawaii.  Combined,  these two  markets  served
      more than 180 thousand subscribers as of their acquisition dates.

          In June 2000, AT&T Wireless Group, through AWS, closed the acquisition
      of the remaining 50% partnership interest it previously did not own in CMT
      Partners (Bay Area Properties). The Bay Area Properties cover a population
      base exceeding 7 million  potential  customers and, as of the  acquisition
      date,  served nearly 1 million  subscribers.  Also in June,  AT&T Wireless
      Group, through AWS, completed its acquisition of Wireless One Network, L.P
      (Wireless  One).  Wireless  One  owns and  operates  wireless  systems  in
      Northwest and Southwest  Florida covering a population base of 1.6 million
      potential  customers and had approximately 190 thousand  subscribers as of
      the acquisition date.
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          In February 2000, AWS and Dobson Communications Corporation, through a
      joint venture,  acquired American Cellular  Corporation.  AT&T contributed
      cash equal to AWS' interest in the joint venture to AT&T Wireless Group as
      of the date of the acquisition.  This acquisition  increased AT&T Wireless
      Group's  coverage in New York State and several mid-west markets by adding
      approximately 450 thousand subscribers as of the acquisition date.

      Forward-Looking Statements

          Except for the historical statements and discussions contained herein,
      statements  herein  constitute  "forward-looking  statements"  within  the
      meaning of Section 27A of the  Securities  Act of 1933 and Section 21 E of
      the  Securities  Exchange  Act  of  1934,  including  without  limitation,
      statements  concerning  future  business  prospects,   revenue,  operating
      performance,  working  capital,  liquidity,  capital  needs,  and  general
      industry  growth  rates and AT&T  Wireless  Group's  performance  relative
      thereto. These forward-looking  statements rely on a number of assumptions
      concerning  future  events,  including  AT&T Wireless  Group's  ability to
      achieve  a  significant   market   penetration   in  new  markets.   These
      forward-looking  statements are subject to a number of  uncertainties  and
      other factors,  many of which are outside AT&T Wireless  Group's  control,
      that could cause actual results to differ materially from such statements.
      AT&T and AT&T  Wireless  Group  disclaim any  intention or  obligation  to
      update or revise any  forward-looking  statements,  whether as a result of
      new information, future events or otherwise.

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                         Combined Results of Operations
                      For the Year Ended December 31, 2000
                 Compared With the Year Ended December 31, 1999

      Revenue

          Total revenue includes  wireless voice and data services,  the sale of
      handsets  and  accessories,  and  revenue  associated  with  the  aviation
      communications and fixed wireless operations.  AT&T Wireless Group records
      revenue as services  are  provided  or when the product is sold.  Services
      revenue  primarily  includes monthly recurring  charges,  airtime and toll
      usage charges, and roaming charges billed to subscribers for usage outside
      of AT&T  Wireless  Group's  network  as well as  charges  billed  to other
      wireless  providers  for roaming on AT&T  Wireless  Group's  network.  The
      revenue  and  related  expenses  associated  with the  sales  of  wireless
      handsets and  accessories  are recognized  when the products are delivered
      and  accepted  by the  customer,  as this is  considered  to be a separate
      earnings process from the sale of wireless services.

          Total revenue  increased  37.0% to $10,448  million for the year ended
      December 31, 2000,  compared with the prior year. Total revenue  increased
      29.6% for the year ended December 31, 2000,  compared with 1999,  adjusted
      to exclude the Bay Area  Properties  for the six months ended December 31,
      2000,  and to exclude  Vanguard  Cellular  for the period  January 2000 to
      April  2000,  to  correlate  results  with  1999,  due  to  the  May  1999
      acquisition.  The revenue  increase for the year ended  December 31, 2000,
      was primarily due to growth in our mobility  business  revenue,  including
      both growth in services and equipment revenue.

          Services  revenue for the year ended  December  31,  2000,  was $9,376
      million, an increase of $2,553 million, or 37.4%,  compared with 1999. The
      services  revenue  growth  was  driven by strong  consolidated  subscriber
      growth.  Additionally,  an  increase in average  monthly  revenue per user
      (ARPU) for the year ended December 31, 2000, compared with the prior year,
      contributed  to  the  revenue  growth.  AT&T  Digital  One  Rate  service,
      including  additional  calling plans  introduced in August 2000 as well as
      the AT&T Regional and Digital  advantage plans announced during the second
      quarter of 2000,  continue to contribute to growth in  subscribers as well
      as an increase in ARPU.

          As of December 31, 2000,  AT&T Wireless  Group had nearly 15.2 million
      consolidated  subscribers,  an increase of 58.5%,  compared with the prior
      year,  of  which  90.1%  were  digital  subscribers,  up from  79.2% as of
      December 31, 1999. Consolidated subscribers at December 31, 2000, included
      approximately  3.0 million  subscribers  associated with acquisitions that
      closed during 2000. Net consolidated  wireless subscriber additions in the
      year ended December 31, 2000, totaled nearly 2.6 million, a 67.5% increase
      over the prior year,  including  865 thousand  during the fourth  quarter.
      AT&T  Wireless  Group's  average  monthly  churn  rate for the year  ended
      December 31, 2000, was 2.9% compared with 2.6% for the year ended December
      31, 1999. AT&T Wireless  Group's  average  monthly churn increased  during
      2000 as a  result  of  competitive  pressures,  as  well as AT&T  Wireless
      Group's  efforts to expand the  customers  they serve to a broader base of
      consumer segments.  Total subscribers,  including  partnership  markets in
      which AT&T Wireless Group does not own a controlling  interest,  were over
      15.7 million at the end of 2000, a 28.9% increase over the prior year. Due
      to the redemption of AT&T Wireless  Group's interest in AB Cellular during
      the fourth quarter of 2000, the Houston market  subscribers of AB Cellular
      are no longer included in AT&T Wireless Group's total subscribers.  Ending
      total  subscribers   included   approximately  450  thousand   subscribers
      associated with AT&T Wireless Group's  acquisition of American Cellular in
      February 2000.
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          AT&T Wireless  Group's ARPU for the year ended  December 31, 2000, was
      $68.2, an increase of $2.4, or 3.6%,  compared with 1999. The increase was
      primarily due to increased  minutes of use per subscriber,  driven in part
      by the  continued  success of AT&T Digital One Rate service and other rate
      plans  introduced  in 2000.  AT&T Wireless  Group's ARPU trended  downward
      during the second half of 2000 as a result of market segmentation efforts.
      Despite this, AT&T Wireless Group's ARPU remained higher than the wireless
      industry  average during the year ended December 31, 2000,  excluding AT&T
      Wireless  Group.  As a result of our  market  segmentation  efforts,  AT&T
      Wireless  Group  anticipates  that ARPU will  decline in 2001  relative to
      2000.

          Equipment  revenue for the year ended  December 31,  2000,  was $1,072
      million, an increase of $268 million,  or 33.2%,  compared with 1999. This
      increase  was  primarily  due to a 53.6%  increase  in gross  consolidated
      subscriber  additions  during the year ended  December 31, 2000,  compared
      with 1999.  As an integral  part of the wireless  service  offering,  AT&T
      Wireless  Group  supplies to its  subscribers  a selection  of handsets at
      competitive prices, which are generally offered at or below cost.

      Costs of services

          Costs of  services  include  the costs to place calls over the network
      (including the costs to operate and maintain AT&T Wireless Group's network
      as well as roaming costs paid to other wireless providers) and the charges
      paid to connect calls on other networks, including those of AT&T.

          Costs of services for the year ended  December  31, 2000,  were $3,169
      million, an increase of $589 million,  or 22.9%,  compared with 1999. This
      increase was due primarily to growth in the mobility  subscriber  base and
      their increased minutes of use which resulted in an increase in the access
      and other  connection  charges  paid to connect  calls on other  networks,
      including  AT&T, as well as the costs to maintain  AT&T  Wireless  Group's
      network. The costs of services associated with AT&T Wireless Group's fixed
      wireless  business  increased  during  2000 as a result of the  commercial
      launch of  service  in several  markets.  Additionally,  during the fourth
      quarter, AT&T Wireless Group's costs of services included asset write-offs
      associated with changes in AT&T Wireless Group's strategy for markets that
      overlap with AT&T's broadband markets

      Costs of equipment sales

          Costs  of  equipment  sales  include  the  costs of the  handsets  and
      accessories provided to AT&T Wireless Group customers.  Costs of equipment
      sales for the year ended December 31, 2000 were $2,041  million.  This was
      an increase of $775 million,  or 61.2%,  compared with 1999. This increase
      was due  primarily to higher gross  subscriber  additions in 2000 compared
      with the prior year.

      Selling, general and administrative

          Selling,  general  and  administrative  expenses  for the  year  ended
      December 31, 2000, were $3,590  million,  compared with $2,663 million for
      the year ended December 31, 1999,  representing an increase of 34.8%. This
      increase was largely  attributable to higher  marketing and selling costs,
      primarily  advertising  and  commissions,  associated with the increase in
      gross  consolidated  subscriber  additions for the year ended December 31,
      2000, compared to 1999. Cost per gross subscriber  addition (CPGA),  which
      includes  the costs of handset  subsidies  recorded in costs of  equipment
      sales,  was $367 for both the year ended  December 31, 2000,  and 1999. In
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      addition,  growth in the wireless customer base resulted in an increase in
      information technology and customer care related expenses.

      Depreciation and amortization

          Depreciation and amortization expenses for the year ended December 31,
      2000, were $1,686 million, an increase of $433 million, or 34.5%, compared
      with 1999. This increase  primarily  resulted from growth in AT&T Wireless
      Group's  depreciable  asset base  resulting from capital  expenditures  to
      increase  the  capacity of the network and  improve  call  quality.  Total
      capital  expenditures were $4,287 million and $2,476 million for the years
      ended December 31, 2000 and 1999, respectively. Additionally, amortization
      expense,  which includes  amortization of licensing costs,  goodwill,  and
      other  intangibles,  increased for the year ended  December 31, 2000, as a
      result  of  the  1999  acquisitions  of  Vanguard  Cellular  and  Honolulu
      Cellular,  as well  as the  2000  acquisitions,  primarily  the  Bay  Area
      Properties and Wireless One which closed during June 2000.

      Asset impairment and restructuring charges

          During the fourth quarter of 1999, AT&T Wireless Group recorded a $531
      million asset  impairment  charge  primarily  associated  with the planned
      disposal of wireless communications  equipment resulting from a program to
      increase capacity and operating efficiency of the wireless network.

      Other income

          Other income primarily  includes gains or losses on sales or exchanges
      of assets,  intercompany interest income on the note receivable from AT&T,
      and minority interests in consolidated subsidiaries.  Other income for the
      year ended December 31, 2000, was $534 million, compared with $122 million
      for the year ended  December  31,  1999.  The  increase for the year ended
      December 31, 2000, was due primarily to the pretax gain of $379 million on
      the  transactions   associated  with  AT&T  Wireless   Group's   affiliate
      investment in Telecorp PCS,  interest  income on the note  receivable from
      AT&T,  partially  offset by a pretax loss of $184 million  associated with
      the  acquisition of the Los Angeles  cellular  property  resulting from AB
      Cellular's  redemption  of AT&T  Wireless  Group's  equity  interest in AB
      Cellular, as well as pretax gains recorded in 1999.

      Interest expense

          Interest expense consists  primarily of interest on intercompany  debt
      due to AT&T less interest  expense  capitalized.  Interest expense for the
      year ended December 31, 2000, was $85 million,  a decrease of $51 million,
      or 37.4%,  compared  with 1999.  The decrease was due to higher  levels of
      capitalized  interest as a result of increased  capital  expenditures,  as
      well as lower levels of average outstanding debt due to AT&T. The decrease
      in the  average  outstanding  debt  due to AT&T  was  attributable  to the
      recapitalization  of $2.0  billion  of long  term debt due to AT&T into 9%
      cumulative preferred stock held by AT&T subsequent to the offering of AT&T
      Wireless Group tracking stock.  These decreases were partially offset by a
      higher rate of interest  charged on the  intercompany  debt in 2000 versus
      the prior year.

      Provision (benefit) for income taxes

          The provision  for income taxes for the year ended  December 31, 2000,
      was $141  million,  compared  with a benefit of $294  million for the year
      ended December 31, 1999. The effective  income tax rate for the year ended
      December  31,  2000 was 34.1%,  compared  with  43.2%,  for the year ended
      December 31, 1999.  The effective  rate for 2000 was impacted by increased
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      goodwill and other purchased  intangibles  amortization expense associated
      with  the  1999 and  2000  acquisitions  as well as the sale of a  foreign
      equity  investment during 2000. The effective income tax rate for 1999 was
      impacted by the benefit from a change in the valuation allowance and other
      estimates,   offset  by  amortization  of  goodwill  and  other  purchased
      intangibles.

      Net equity earnings (losses) from investments

          Net equity earnings  (losses) from  investments,  net of tax, was $388
      million of earnings for the year ended  December 31, 2000,  compared  with
      $19 million of losses for 1999.  The increase was  primarily due to a $372
      million  after-tax  gain  included in equity  earnings  for AT&T  Wireless
      Group's portion of the gain recognized by AB Cellular on the redemption of
      AT&T Wireless Group's equity interest in AB Cellular.

      Dividend requirements on preferred stock held by AT&T

          At December 31, 2000 and 1999,  AT&T Wireless  Group had  outstanding,
      $3.0 billion and $1.0 billion,  respectively,  of preferred  stock held by
      AT&T that pays  dividends at 9% per annum.  Long-term  debt due to AT&T of
      $2.0  billion was  recapitalized  into an  additional  $2.0  billion of 9%
      cumulative  preferred stock held by AT&T following the offering.  Dividend
      requirements on this preferred stock for the year ended December 31, 2000,
      were $130  million  and for the year ended  December  31,  1999,  were $56
      million,  net of  amounts  recorded  in  accordance  with the tax  sharing
      agreement.

                      FOR THE YEAR ENDED DECEMBER 31, 1999
                 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1998

      Revenue

          Total  revenue  for the year  ended  December  31,  1999,  was  $7,627
      million, an increase of $2,221 million, or 41.1%, compared with 1998. AT&T
      Wireless  Group's  1999  results  included  Vanguard  Cellular  since  its
      acquisition  on May  3,1999,  and  1998  results  included  its  messaging
      business  until its sale on  October  2, 1998.  Adjusted  to exclude  both
      Vanguard  Cellular  and its  messaging  business,  total  revenue for AT&T
      Wireless Group increased by 39.0% compared with 1998.

          The revenue increase was driven  primarily by consolidated  subscriber
      growth and rising  ARPU.  As of December  31,  1999,  ending  consolidated
      subscribers  increased  33.4%  compared  with 1998.  AT&T Digital One Rate
      service significantly  contributed to the increase in ARPU and subscribers
      by acquiring and retaining high value customers,  who have a significantly
      higher ARPU than an average subscriber.

          Services  revenue for the year ended  December  31,  1999,  was $6,823
      million, an increase of $2,044 million, or 42.8%, compared with 1998.

          As  of  December  31,  1999,  AT&T  Wireless  Group  had  9.6  million
      consolidated  subscribers,  an increase of 33.4%  compared  with the prior
      year,  of  which  79.2%  were  digital  subscribers,  up from  60.7% as of
      December  31,  1998.  Included in these  figures  were  approximately  700
      thousand  subscribers  from our  acquisition  of Vanguard  Cellular in May
      1999,  approximately  125 thousand  subscribers  from our  acquisition  of
      Honolulu Cellular in August 1999 and approximately 45 thousand subscribers
      from our acquisition of Bakersfield Cellular in April 1999. Including AT&T
      Wireless Group's  partnership  markets,  approximately  9.4 million of the
      12.2 million total  subscribers  were digital  subscribers  as of December
      31,1999.
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          AT&T  Wireless  Group's ARPU for the year ended  December 31, 1999 was
      $65.8, an increase of $8.2, or 14.2%, compared with 1998. The increase was
      primarily due to increased  minutes of use per subscriber,  driven in part
      by the success of AT&T Digital One Rate  service.  AT&T  Wireless  Group's
      ARPU  remained  significantly  higher than the wireless  industry  average
      during 1999, excluding AT&T Wireless Group.

          Equipment  revenue  for the  year  ended  December  31,  1999 was $804
      million,  an increase of $177 million,  or 28.2%,  compared with 1998. The
      increase  was  primarily  due to a 25.1%  increase  in gross  consolidated
      subscriber  additions in 1999  compared  with 1998. As an integral part of
      the wireless  service  offering,  AT&T Wireless  Group supplies to its new
      subscribers  a  selection  of handsets at  competitive  prices,  which are
      generally offered at or below cost.

      Costs of services

          Costs of  services  for the year ended  December  31, 1999 were $2,580
      million.  This was an increase of $1,152 million, or 80.7%,  compared with
      1998. The increase was due primarily to roaming  expenses  associated with
      the  success  of AT&T  Digital  One Rate  service as  off-network  roaming
      minutes of use  increased by 194.7% for the year ended  December 31, 1999,
      compared with 1998.

          Although  roaming  expenses  continued to impact  results for the year
      ended  December  31, 1999,  the rate of roaming  expense  growth  declined
      significantly  during  the latter  half of 1999,  as AT&T  Wireless  Group
      introduced  initiatives  to  aggressively  migrate  more minutes onto AT&T
      Wireless  Group's network as well as reduced  intercarrier  roaming rates.
      AT&T Wireless Group continued to seek to decrease roaming expenses through
      capital  spending  for  network  expansion,   acquisitions  and  affiliate
      launches.  Roaming  rates  also  declined  significantly  as a  result  of
      renegotiated  roaming  agreements and the  deployment of IRDB  technology,
      which  assists in  identifying  favorable  roaming  partners  in areas not
      included in AT&T Wireless Group's  network.  All of these efforts resulted
      in a reduction of approximately 18% in the average roaming rate per minute
      paid to other carriers for the year ended December 31, 1999, compared with
      1998.

      Costs of equipment sales

          Costs of  equipment  sales for the year ended  December  31, 1999 were
      $1,266 million.  This was an increase of $266 million, or 26.6%,  compared
      with 1998.  This  increase was  primarily  the result of  increased  gross
      subscriber   additions  in  1999  compared  with  1998.  Gross  subscriber
      additions  increased 25.1% for the year ended 1999 compared with the prior
      year.

      Selling, general and administrative

          SG&A expenses for the year ended December 31, 1999 were $2,663 million
      compared with $2,122  million for the year ended  December  31,1998.  This
      increase was due to higher marketing and selling costs associated with the
      increase in consolidated gross subscriber  additions in 1999 compared with
      1998, as well as the growth in customer care expenses  associated with the
      larger consolidated subscriber base.
<PAGE>
      Depreciation and amortization

          Depreciation and amortization expenses for the year ended December 31,
      1999 were $1,253  million,  an increase of $174  million,  or 16.1%.  This
      increase  primarily  resulted  from a larger  asset  base  and  additional
      amortization of goodwill and other purchased  intangibles  associated with
      the acquisition of Vanguard  Cellular.  Capital  expenditures for the year
      ended December 31, 1999 and 1998,  were $2,476 million and $1,136 million,
      respectively.

      Asset impairment and restructuring charges

          During the fourth quarter of 1999, AT&T Wireless Group recorded a $531
      million asset  impairment  charge  primarily  associated  with the planned
      disposal of wireless communications  equipment resulting from a program to
      increase capacity and operating efficiency of the wireless network.  Asset
      impairment and restructuring  charges for the year ended December 31, 1998
      were $120 million,  which  represented  the  write-down  of  unrecoverable
      assets associated with non-strategic businesses.

      Other income

          Other income for the year ended  December  31, 1999 was $122  million.
      Other income for the year ended  December 31, 1998 was $650  million.  The
      decrease  was due  primarily  to the pretax  gains on sales in 1998 of LIN
      Television  Corporation  of  $342  million,  SmarTone   Telecommunications
      Holdings Limited of $128 million and PriceCellular of $67 million.

      Interest expense

          Interest expense consists  primarily of interest on intercompany  debt
      due to AT&T.  Interest  was  charged at 7.25% per annum for the year ended
      December  31,  1999 and 7.75% per annum for the year  ended  December  31,
      1998.  Interest  expense  for the year ended  December  31,  1999 was $136
      million,  an increase of $16 million,  or 13.3%,  compared with 1998.  The
      increase was due to a higher level of average debt outstanding,  partially
      offset by the impact of the lower rate charged by AT&T in 1999.

      Provision (benefit) for income taxes

          The benefit for income taxes for the year ended  December 31, 1999 was
      $294  million,  compared  with a tax provision of $59 million for the year
      ended  December  31,  1998.  The  benefit  for  income  taxes  in 1999 was
      primarily  due to the pre-tax loss for the period  coupled with changes in
      the valuation  allowance  and other  estimates.  The effective  income tax
      rates for the years  ended  December  31,  1999 and 1998,  were  43.2% and
      31.6%,  respectively.  The effective income tax rate for 1998 was impacted
      by the effect of state taxes, net of federal benefit, and the amortization
      of  intangibles,  partially  offset  by  the  effects  of  changes  in the
      valuation allowance and other estimates.

      Net equity earnings (losses) from investments

          Net equity earnings (losses) from investments,  net of tax, was a loss
      of $19  million  for the year  ended  December  31,  1999,  compared  with
      earnings of $36 million for 1998.  The decrease was  primarily a result of
      increased  losses  associated  with affiliate  investments.  Additionally,
      equity  losses  increased  in  1999  compared  with  1998  due  to  losses
      associated with financial commitments related to certain investments.
<PAGE>
      Dividend requirements on preferred stock held by AT&T

          AT&T Wireless Group had $1.0 billion of preferred  stock held by AT&T,
      as of December  31, 1999 and 1998,  that paid  dividends  at 9% per annum.
      Dividend  requirements on this preferred stock for each of the years ended
      December  31, 1999 and 1998 were $56 million,  net of amounts  recorded in
      accordance with the tax sharing agreement.

                         LIQUIDITY AND CAPITAL RESOURCES

          The  continued   expansion  of  AT&T  Wireless   Group's  network  and
      footprint,  including  spectrum auctions,  and service offerings,  and the
      marketing and distribution of its products and services,  will continue to
      require substantial capital. AT&T Wireless Group has funded its operations
      by offering proceeds  attributed from AT&T,  intercompany  borrowings from
      AT&T and internally generated funds, as well as capital contributions from
      AT&T prior to the offering.  Capital  contributions from AT&T prior to the
      offering  included  acquisitions made by AT&T that have been attributed to
      AT&T  Wireless  Group.  Noncash  capital  contributions  from AT&T to AT&T
      Wireless Group related to acquisitions and initial  investments  funded by
      AT&T totaled $539 million,  $2,553 million, and $982 million for the years
      ended December 31, 2000, 1999, and 1998, respectively.

          The April 2000 offering of AT&T Wireless Group tracking stock resulted
      in net proceeds to AT&T after deducting underwriter's discount and related
      fees and expenses of $10.3 billion.  AT&T  attributed  $7.0 billion of the
      net proceeds to AT&T Wireless  Group in the form of an  intercompany  note
      receivable,  which was repaid by December 31, 2000, and was used primarily
      to fund acquisitions and capital expenditures.

          On  May  1,  2000,   following  the  offering,   AT&T  Wireless  Group
      recapitalized  $2.0 billion of outstanding  intercompany  indebtedness  to
      AT&T into an additional $2.0 billion of 9% cumulative preferred stock held
      by AT&T. In conjunction with the  recapitalization,  AT&T Wireless Group's
      long-term debt due to AT&T was  recapitalized to be 10 year term debt that
      bears interest at a fixed rate of 8.1% per annum.

          Currently, financing activities for AT&T Wireless Group are managed by
      AT&T on a centralized basis and are subject to the review of AT&T Wireless
      Group's  capital  stock  committee.  AT&T  Wireless  Group  capital  stock
      committee  is  selected  by  AT&T's  board of  directors  to  oversee  the
      interaction  between  businesses  of AT&T  Common  Stock  Group  and  AT&T
      Wireless  Group  in  accordance   with  the  AT&T  Wireless  Group  Policy
      Statement.  Under the AT&T Wireless Group Policy  Statement,  all material
      transactions  between AT&T Common Stock Group and AT&T Wireless  Group are
      determined  and  governed by a process of fair  dealing.  Sources for AT&T
      Wireless Group's future  financing  requirements may include the borrowing
      of funds,  including  additional  short-term  floating rate debt from AT&T
      and/or  third-party  debt.  Loans from AT&T to any member of AT&T Wireless
      Group have been made at interest  rates and on other terms and  conditions
      intended to be  substantially  equivalent to the interest  rates and other
      terms and conditions that AT&T Wireless Group would be able to obtain from
      third parties,  including the public markets,  as a non-affiliate  of AT&T
      without the benefit of any guaranty by AT&T. This policy contemplates that
      these  loans will be made on the basis set forth above  regardless  of the
      interest  rates and  other  terms and  conditions  on which  AT&T may have
      acquired the funds. If, however,  AT&T incurs any fees or charges in order
      to keep  available  funds for use by AT&T  Wireless  Group,  those fees or
      charges will be allocated to AT&T Wireless Group.
<PAGE>
          In association with the intended split-off of AT&T Wireless Group from
      AT&T announced on October 25, 2000, AT&T and AT&T Wireless Services,  Inc.
      anticipate  that  they  will  enter  into a  separation  and  distribution
      agreement  that will  govern the terms of the  split-off.  As part of this
      agreement,  AT&T  Wireless  Services  will agree,  upon  completion of the
      split-off,  to repay the full  amount of the  principal  and  accrued  but
      unpaid  interest or face value and accrued  but unpaid  dividends,  of all
      outstanding  indebtedness  owned by AT&T Wireless  Group to AT&T,  and all
      preferred stock in AT&T Wireless Group held by AT&T.

          On January 22, 2001,  AT&T closed their  transaction  with NTT DoCoMo.
      AT&T attributed  $6.2 billion of the approximate  $9.8 billion of proceeds
      received from DoComo to AT&T Wireless Group in the form of an intercompany
      note  receivable.  AT&T Wireless  Group intends to utilize the proceeds to
      continue executing their strategy to expand their capacity,  enlarge their
      footprint,  create  an  advanced  mobile  internet  and  invest  in  other
      strategic  growth  initiatives,   as  well  as  to  satisfy   intercompany
      obligations.

          On March 23, 2001,  AT&T  Wireless Group,  through AWS,  entered  into
      Competitive  Advance and Revolving Credit Facilities (the "Facilities") in
      the aggregate amount of $2.5 billion  consisting of an up to $1.25 billion
      364-day  Competitive  Advance and Revolving  Credit  Facility and an up to
      $1.25 billion Five-Year Competitive Advance and Revolving Credit Facility.
      The facilities are subject to a facility fee and  utilization fee and bear
      interest at variable rates based upon, in various cases,  LIBOR, the prime
      rate or the rates on overnight Federal funds transactions.  The Facilities
      may be used for general  corporate  purposes  and are subject to customary
      covenants,  representations  and  warranties  and  events of  default.  In
      addition,  the  Facilities  contain  financial  covenants  providing for a
      maximum  total debt to total  Consolidated  Operational  EBITDA  ratio (as
      defined  in the  facilities  agreement)  not to exceed 4:0 to 1:0 for AT&T
      Wireless Group and a minimum interest coverage ratio of 3.5:1.0.  From the
      date of the closing of the  Facilities  until the date of the split-off of
      AT&T Wireless Group,  AWS will be prohibited from declaring  and/or paying
      dividends.  The Facility  also  specifies  limitations  on AT&T's and AT&T
      Wireless Group's ability to consummate the split-off including a provision
      that  it  will  constitute  an  event  of  default  if  the  split-off  is
      consummated  without  obtaining a favorable  tax ruling from the IRS or an
      unqualified  tax opinion  that the  split-off  will  qualify as a tax-free
      transaction.  In addition, the existence of an obligation by AT&T Wireless
      Group to  repurchase  equity  interests  from  DoCoMo  may  under  certain
      circumstances constitute an event of default.

          On March 1, 2001,  AT&T  Wireless  Group,  through  AWS,  completed  a
      private placement of $6.5 billion in Senior Notes with maturity dates from
      2006 to 2031.  The notes pay  interest  at rates  ranging  from  7.350% to
      8.750% per annum,  and  include  customary  covenants.  The notes  include
      registration rights, such that AWS is required to exchange the notes for a
      new issue of notes  registered under the Securities Act of 1933 and are to
      be declared effect no later than 240 days after the issue date.

          AT&T performs  cash  management  functions on behalf of  AT&T Wireless
      Group.  Substantially all of AT&T Wireless Group's cash balances are swept
      to AT&T on a daily  basis,  where they are managed  and  invested by AT&T.
      Prior to the offering of AT&T Wireless Group tracking stock,  transfers of
      cash to and from AT&T were reflected as a component of combined attributed
      net assets,  with no interest income or expense  reflected.  Subsequent to
      the offering,  transfers  are reflected as changes in the note  receivable
      from AT&T.  Cash balances  maintained  and reported by AT&T Wireless Group
      primarily represent cash balances for which no right of offset exists with
      AT&T.
<PAGE>
          Net cash provided by operating  activities for the year ended December
      31,  2000,  was $1,635  million,  compared  with $867 million for the year
      ended  December  31,  1999.  The  increase in cash  provided by  operating
      activities was primarily due to an increase in operating  income excluding
      depreciation and amortization,  and the asset impairment and restructuring
      charge in 1999, resulting from revenue growth and expense leveraging,  and
      an increase in operating and payroll related accruals, partially offset by
      increases in inventories and accounts receivable.

          Net cash used in investing  activities for the year ended December 31,
      2000, was $10,525 million, compared with $2,123 million for the year ended
      December 31, 1999.  The  investing  activities  included on AT&T  Wireless
      Group's  statements of cash flows include cash expenditures or receipts of
      cash for  investing  transactions  directly  attributable  to the wireless
      group  operations,  and those legal  entities  that comprise the financial
      statements of AT&T Wireless  Group.  These amounts are  representative  of
      what AT&T Wireless Group would report on a stand-alone basis. The increase
      was due  primarily  to the  acquisitions  of wireless  systems in Houston,
      Indianapolis  and San Diego,  the Bay Area  Properties,  and Wireless One.
      Equity investment  purchases increased primarily due to the acquisition of
      equity  interests  in  international  ventures,   acquired  from  AT&T  in
      association  with their  acquisition  of MediaOne.  In  addition,  capital
      expenditures increased as a result of efforts to increase network capacity
      in existing markets as well as to expand the national footprint.

          Net cash  provided by financing  activities  for the year December 31,
      2000, was $8,947 million,  compared with $1,234 million for the year ended
      December 31, 1999.  The increase was primarily due to proceeds  attributed
      from the offering of AT&T Wireless Group tracking  stock,  short-term debt
      borrowed from AT&T as well as increased  transfers  from AT&T prior to the
      offering, to fund acquisitions and higher capital expenditures.

          Net cash provided by operating  activities for the year ended December
      31, 1999 was $867 million  compared  with $414 million of cash provided by
      operating  activities in 1998 primarily due to increased  operating income
      excluding  depreciation  and  amortization,  and the asset  impairment and
      restructuring  charges and larger  increases  in  operating  accruals  and
      accounts  payable.  These  increases  were offset by a higher  increase in
      accounts  receivable  driven by strong  revenue  growth.  Net cash used in
      investing  activities  for the year  ended  December  31,1999  was  $2,123
      million,  compared  with  $238  million  of  cash  provided  by  investing
      activities in 1998.  The  difference  was due primarily to higher  capital
      expenditures to upgrade and increase  capacity in existing markets as well
      as to expand the national  footprint,  and lower cash proceeds  associated
      with the sales of  equity  investments.  Net cash  provided  by  financing
      activities  for the  year  ended  December  31,  1999 was  $1,234  million
      compared  with $631 million of cash used in financing  activities  in 1998
      due to increased transfers and debt financing from AT&T to fund the higher
      capital expenditures during 1999.

          EBITDA, defined as earnings before interest and taxes, excluding other
      income, plus depreciation and amortization, is the primary measure used by
      the chief  operating  decision-makers  to measure  our ability to generate
      cash flow.  EBITDA may or may not be consistent  with the  calculation  of
      EBITDA for other public companies and should not be viewed by investors as
      an alternative to generally accepted  accounting  principles,  measures of
      performance  or to cash  flows from  operating,  investing  and  financing
      activities as a measure of liquidity.
<PAGE>
          EBITDA for the year  ended  December  31,  2000,  was $1,648  million,
      compared  with $587 million for the year ended  December  31, 1999.  On an
      operational  basis,  adjusted  to exclude  the 1999 asset  impairment  and
      restructuring  charge of $531 million,  EBITDA  increased  $530 million or
      47.3%.  The increase was primarily the result of revenue  growth and lower
      off-network  roaming  expenses.  These increases were partially  offset by
      increased customer acquisition costs associated with the increase in gross
      subscriber  additions,  increased network costs attributable to the growth
      in  subscribers  and  their  minutes  of use,  and  increased  information
      technology  and  customer  care  related  costs to  support  growth in the
      subscriber base.

          For our  mobility  business,  EBITDA for the year ended  December  31,
      2000,  was $1,884  million,  compared with $670 million for the year ended
      December 31, 1999.  Excluding the 1999 asset impairment and  restructuring
      charge, mobility EBITDA increased $686 million or 57.2%.

          For our fixed  wireless  business,  EBITDA for the year ended December
      31, 2000,  was a deficit of $228  million,  compared with a deficit of $75
      million  the year  ended  December  31,  1999.  Excluding  the 1999  asset
      impairment and restructuring  charge, fixed wireless EBITDA decreased $156
      million or 213.4%.

          EBITDA  margins  were  15.8% for the year  ended  December  31,  2000,
      compared with 14.7% for the year and December 31, 1999, excluding the 1999
      asset  impairment  and  restructuring  charge.  The  improvement in EBITDA
      margins for the year ended  December 31, 2000,  compared to the year ended
      December  31, 1999,  was  primarily  driven by revenue  growth and expense
      leveraging,  primarily  off-network roaming expenses,  partially offset by
      increased  customer  acquisition  and customer care costs  associated with
      growth in the subscriber base.

          EBITDA margins for our mobility business were 18.0% for the year ended
      December 31,  2000,  compared  with 15.7% for the year ended  December 31,
      1999, excluding the 1999 asset impairment and restructuring charge.

          EBITDA for the year ended December 31, 1999 was $587 million  compared
      with $736 million for the year ended December 31, 1998.  Excluding  pretax
      asset  impairment  and  restructuring  charges of $531 million in 1999 and
      $120  million  in  1998,   EBITDA  was  $1,118  million  for  1999,  which
      represented  an increase of $262  million,  or 30.6%,  compared with 1998.
      This  increase  was  attributable  to  increases  in total  revenue and an
      improving margin as SG&A expenses declined as a percentage of revenue.

          For our  mobility  business,  EBITDA for the year ended  December  31,
      1999,  was $670  million,  compared  with $794  million for the year ended
      December 31, 1998.  Excluding  pretax asset  impairment and  restructuring
      charges  of $528  million  in 1999 and $120  million  in 1998,  EBITDA was
      $1,198 million for 1999 compared with $914 million for 1998.

          Excluding   the   aforementioned    pretax   asset   impairment    and
      restructuring  charges in 1999 and 1998, EBITDA margins were 14.7% for the
      year ended December 31, 1999,  compared with 15.8% in 1998. The decline in
      EBITDA  margins  in 1999  compared  with  1998  was  driven  primarily  by
      increased  roaming  expenses,  as well as  increased  sales and  marketing
      expenses associated with a 25.1% increase in gross consolidated subscriber
      additions in 1999 compared with 1998.

          Excluding the aforementioned pretax asset impairment and restructuring
      charges in 1999 and 1998,  EBITDA  margins for our mobility  business were
      15.7% for the year ended  December 31, 1999,  compared  with 16.9% for the
      year ended December 31, 1998.
<PAGE>
                               FINANCIAL CONDITION

          Total assets were $35,302 million as of December 31, 2000, an increase
      of $11,790  million,  or 50.1%,  compared  with  December  31,  1999.  The
      increase was due primarily to increases in licensing costs,  goodwill, and
      property,  plant and equipment  associated with the acquisitions closed in
      2000,  including  the  acquisitions  of Wireless  One,  L.P. and  wireless
      systems in the San Francisco Bay Area,  San Diego,  Indianapolis,  Houston
      and Los  Angeles.  In  addition,  the  increase  in  property,  plant  and
      equipment was a result of significant  capital  expenditures  for the year
      ended  December 31,  2000.  These  increases  were  partially  offset by a
      decrease in  investments  as AT&T Wireless  Group  previously  held equity
      interests  in  portions  of the Bay Area  Properties,  and the Los Angeles
      market,  through  their  interest  in  AB  Cellular.  These  markets  were
      consolidated as of December 31, 2000.

          Total  liabilities  were  $10,384  million as of December  31, 2000, a
      increase of $889 million,  or 9.4%,  compared with December 31, 1999.  The
      increase was  primarily  due to  increases  in deferred  income taxes as a
      result of gains recorded during the fourth  quarter,  as well as increased
      marketing, business tax and other operating accruals. These increases were
      partially offset by a net decrease in intercompany indebtedness to AT&T.

          Combined  attributed net assets was $24,887 million as of December 31,
      2000, an increase of $10,880 million, or 77.7%, compared with December 31,
      1999.  The  increase  was  primarily  due to the  attribution  of offering
      proceeds to AT&T  Wireless  Group,  net  transfers  from AT&T prior to the
      offering  to  fund  capital  expansion  and  acquisitions,  as well as the
      additional $2.0 billion of preferred stock issued to AT&T.

                        RECENT ACCOUNTING PRONOUNCEMENTS

          In September  2000, the Financial  Accounting  Standards  Board (FASB)
      issued SFAS No. 140,  "Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities--A Replacement of FASB No. 125".
      This statement provides  accounting and reporting  standards for transfers
      and  servicing of financial  assets and  extinguishments  of  liabilities.
      Under these  standards,  after a transfer of financial  assets,  an entity
      recognizes  the  financial  and  servicing  assets  it  controls  and  the
      liabilities it has incurred,  derecognizes  financial  assets when control
      has been surrendered, and derecognizes liabilities when extinguished. This
      statement provides  consistent  standards for distinguishing  transfers of
      financial   assets  that  are  sales  from   transfers  that  are  secured
      borrowings.  This  statement is effective  for  transfers and servicing of
      financial assets and extinguishments of liabilities  occurring after March
      31, 2001.  AT&T  Wireless  Group does not expect that the adoption of SFAS
      No.  140  will  have a  material  impact  on its  results  of  operations,
      financial position or cash flows.

          In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
      Instruments and Hedging Activities".  Among other provisions,  it requires
      that entities recognize all derivatives as either assets or liabilities in
      the statement of financial  position and measure those instruments at fair
      value. Gains and losses resulting from changes in the fair values of those
      derivatives  would be accounted for depending on the use of the derivative
      and whether it qualifies for hedge accounting.  The effective date of this
      standard was delayed via the issuance of SFAS No. 137. The effective  date
      for SFAS No. 133 is now for fiscal  years  beginning  after June 15, 2000,
      though  earlier  adoption is encouraged  and  retroactive  application  is
      prohibited.  For AT&T Wireless Group, this means that the standard must be
      adopted no later than January 1, 2001. In June 2000,  the FASB issued SFAS
      No.  138,  "Accounting  for  Certain  Derivative  Instruments  and Certain
      Hedging  Activities"  as an  amendment  to SFAS No.  133.  This  statement
      provides clarification with regard to certain
<PAGE>
      implementation  issues under SFAS No. 133 on specific types of hedges. The
      adoption of SFAS No. 133 in January 2001,  did not have a material  impact
      to the AT&T Wireless Group's results of operations,  financial position or
      cash flows.  In  addition,  based on the types of  contracts  we currently
      have, AT&T Wireless Group does not anticipate that this standard will have
      a material impact on future results of AT&T Wireless Group.

                                SUBSEQUENT EVENTS

          In January 2001, AT&T Wireless Group executed  agreements with certain
      network   equipment   vendors,   related   to  the   development   of  its
      next-generation  network strategy.  These agreements require AT&T Wireless
      Group to buy equipment  from these  vendors  totaling  approximately  $1.8
      billion through 2004.

          Effective January 1, 2001, AT&T Wireless Group implemented the results
      of  a  review  of  the  estimated   service  lives  of  certain   wireless
      communications equipment,  primarily electronics.  Lives were shortened to
      fully depreciate all such equipment within seven years.  Similar equipment
      acquired  after  January 1, 2001,  will have  useful  lives no longer than
      seven years.

          On January 22, 2001, AT&T Wireless Group,  through AWS,  completed its
      previously  announced  transaction  with  DoCoMo.  See Note 1 for  further
      discussion of the transaction.

          On November 17, 2000,  AT&T Wireless Group announced that AT&T's board
      of directors  had approved an agreement  under which AT&T  Wireless  Group
      would   purchase   $200  in  Series  AA   preferred   stock  from   Dobson
      Communications  Corporation.  AT&T Wireless Group,  through AWS, completed
      this  transaction  on  February  8, 2001.  The Series AA  preferred  stock
      acquired  has  a  liquidation  preference  of  $1,000  per  share  and  is
      exchangeable  into Series A convertible  preferred stock. If the Series AA
      preferred  stock is exchanged into Series A convertible  preferred  stock,
      AT&T Wireless Group will increase its ownership  interest in Dobson, on an
      as converted to common stock basis,  from its current ownership of 4.6% to
      approximately 11.6%.

          On March 23, 2001,  AT&T  Wireless  Group,  through AWS,  entered into
      Competitive  Advance and Revolving Credit Facilities (the "Facilities") in
      the aggregate amount of $2.5 billion consisting of and up to $1.25 billion
      364-day  Competitive  Advance and Revolving  Credit  Facility and an up to
      $1.25 billion Five-Year Competitive Advance and Revolving Credit Facility.
      The facilities are subject to a facility fee and  utilization fee and bear
      interest at variable rates based upon, in various cases,  LIBOR, the prime
      rate or the rates on overnight Federal funds transactions.  The Facilities
      may be used for general  corporate  purposes  and are subject to customary
      covenants,  representations  and  warranties  and  events of  default.  In
      addition,  the  Facilities  contain  financial  covenants  providing for a
      maximum  total debt to total  Consolidated  Operational  EBITDA  ratio (as
      defined  in the  facilities  agreement)  not to exceed 4:0 to 1:0 for AT&T
      Wireless Group and a minimum interest coverage ratio of 3.5:1.0.  From the
      date of the closing of the  Facilities  until the date of the split-off of
      AT&T Wireless Group,  AWS will be prohibited from declaring  and/or paying
      dividends.  The Facility  also  specifies  limitations  on AT&T's and AT&T
      Wireless Group's ability to consummate the split-off including a provision
      that  it  will  constitute  an  event  of  default  if  the  split-off  is
      consummated  without  obtaining a favorable  tax ruling from the IRS or an
      unqualified  tax opinion  that the  split-off  will  qualify as a tax-free
      transaction.  In addition, the existence of an obligation by AT&T Wireless
      Group to  repurchase  equity  interests  from  DoCoMo  may  under  certain
      circumstances constitute an event of default.
<PAGE>
          On February 26, 2001, AT&T agreed to sell its entire interest in Japan
      Telecom for approximately  $1.35 billion.  The net after-tax  proceeds are
      expected to be approximately  $1 billion.  AT&T has indicated that the net
      after-tax  proceeds  will be split evenly  between AT&T and AT&T  Wireless
      Group.   AT&T  Wireless  Group   anticipates  that  it  will  recognize  a
      significant gain on the transaction.

          On March 1, 2001,  AT&T  Wireless  Group,  through  AWS,  completed  a
      private placement of $6.5 billion in Senior Notes with maturity dates from
      2006 to 2031.  The notes pay  interest  at rates  ranging  from  7.350% to
      8.750% per annum,  and  include  customary  covenants.  The notes  include
      registration rights, such that AWS is required to exchange the notes for a
      new issue of notes  registered under the Securities Act of 1933 and are to
      be declared effect no later than 240 days after the issue date.
<PAGE>
                          Report of Independent Accountants

      To the Board of Directors and Shareowners of AT&T Corp.:

          In our  opinion,  the  accompanying  combined  balance  sheets and the
      related  combined   statements  of  operations  and  changes  in  combined
      attributed  net assets and of cash flows present  fairly,  in all material
      respects,  the financial  position of AT&T Wireless  Group at December 31,
      2000 and 1999,  and the results of their  operations  and their cash flows
      for each of the three years in the period  ended  December  31,  2000,  in
      conformity with  accounting  principles  generally  accepted in the United
      States of America.  These financial  statements are the  responsibility of
      AT&T Wireless  Group's  management;  our  responsibility  is to express an
      opinion on these financial  statements  based on our audits.  We conducted
      our audits of these  statements  in  accordance  with  auditing  standards
      generally accepted in the United States of America,  which 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,   assessing  the  accounting
      principles  used  and  significant  estimates  made  by  management,   and
      evaluating the overall financial statement  presentation.  We believe that
      our audits provide a reasonable basis for our opinion.

          AT&T Wireless Group is a fully integrated business unit of AT&T Corp.;
      consequently,  as indicated in Note 1, these combined financial statements
      have  been  derived  from  the  consolidated   financial   statements  and
      accounting  records of AT&T Corp.  and  reflect  certain  assumptions  and
      allocations.  Moreover, as indicated in Note 1, AT&T Wireless Group relies
      on AT&T Corp.  for  administrative,  management  and other  services.  The
      financial position,  results of operations and cash flows of AT&T Wireless
      Group could differ from those that would have  resulted had AT&T  Wireless
      Group operated  autonomously or as an entity  independent of AT&T Corp. As
      more fully discussed in Note 1, the combined financial  statements of AT&T
      Wireless Group should be read in conjunction with the audited consolidated
      financial statements of AT&T Corp.

      PRICEWATERHOUSECOOPERS LLP


      March 16, 2001
      New York, New York
<PAGE>
<TABLE>

                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)
                        COMBINED STATEMENTS OF OPERATIONS
                                  (In Millions)
<CAPTION>
                                                                                           For the Years Ended
                                                                                              December 31,

                                                                                        2000      1999    1998
      Revenue
      <S>                                                                              <C>       <C>      <C>
      Services revenue                                                                 $ 9,376   $6,823   $4,779
      Equipment revenue                                                                  1,072      804      627
                                                                                        ------   ------   ------
         Total revenue                                                                  10,448    7,627    5,406
                                                                                        ------   ------   ------

      Operating expenses

      Costs of services (excluding depreciation of $1,047, $732, $599, included below)   3,169    2,580    1,428
      Costs of equipment sales                                                           2,041    1,266    1,000
      Selling, general and administrative                                                3,590    2,663    2,122
      Depreciation and amortization                                                      1,686    1,253    1,079
      Asset impairment and restructuring charges                                            --      531      120
                                                                                        ------   ------   ------
      Total operating expenses                                                          10,486    8,293    5,749
                                                                                        ------   ------   ------
      Operating loss                                                                       (38)    (666)    (343)
      Other income                                                                         534      122      650
      Interest expense                                                                      85      136      120
                                                                                        ------   ------   ------
      Income (loss) before income taxes                                                    411     (680)     187
      Provision (benefit) for income taxes                                                 141     (294)      59
      Net equity earnings (losses) from investments                                        388      (19)      36
                                                                                        ------   ------   ------
      Net income (loss)                                                                    658     (405)     164
      Dividend requirements on preferred stock held by AT&T, net                           130       56       56
                                                                                        ------   ------   ------
      Net income (loss) after preferred stock dividends                                $   528   $ (461)  $  108
                                                                                        ------   ------   ------
</TABLE>

                   See Notes to Combined Financial Statements
<PAGE>



                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)
                             COMBINED BALANCE SHEETS
                                  (In Millions)
<TABLE>
<CAPTION>
                                                                                                 At December 31,
                                                                                                 2000      1999

                                     ASSETS
      <S>                                                                                     <C>       <C>
      Cash and cash equivalents                                                                  $ 62       $ 5
      Accounts receivable, less allowances of $193 and $130                                     1,892     1,300
      Inventories                                                                                 335       162
      Income tax receivable                                                                       118        --
      Deferred income taxes                                                                        93       127
      Prepaid expenses and other current assets                                                    82        34
                                                                                               ------    ------
      Total Current Assets                                                                      2,582     1,628
                                                                                               ------    ------
      Property, plant and equipment, net                                                        9,892     6,349
      Licensing costs, net of accumulated amortization of $1,761 and $1,519                    13,627     8,571
      Investments in and advances to unconsolidated subsidiaries                                3,385     4,502
      Goodwill and other assets, net                                                            5,816     2,462
                                                                                               ------    ------
      Total Assets                                                                            $35,302   $23,512
                                                                                               ------    ------

                                   LIABILITIES

      Accounts payable                                                                        $ 1,080   $   780
      Payroll and benefit-related liabilities                                                     432       291
      Due on demand notes payable                                                                 109       154
      Short-term debt due to AT&T                                                                 638        --
      Other current liabilities                                                                 1,395     1,072
                                                                                                -----     -----
      Total Current Liabilities                                                                 3,654     2,297
                                                                                                -----     -----
      Long-term debt due to AT&T                                                                1,800     3,400
      Deferred income taxes                                                                     4,659     3,750
      Other long-term liabilities                                                                 271        48
                                                                                               ------     -----
      Total Liabilities                                                                        10,384     9,495
                                                                                               ------     -----
      Minority Interest                                                                            41        20
      Combined Attributed Net Assets                                                           24,877    13,997
                                                                                               ------    ------
      Total Liabilities and Combined Attributed Net Assets                                    $35,302   $23,512
                                                                                               ------    ------
</TABLE>

                   See Notes to Combined Financial Statements
<PAGE>


                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)
        COMBINED STATEMENTS OF CHANGES IN COMBINED ATTRIBUTED NET ASSETS
                                  (In Millions)
<TABLE>
<CAPTION>
                                                                               For the Years Ended December 31,
                                                                                 2000        1999        1998
     <S>                                                                       <C>         <C>         <C>
      Combined Attributed Net Assets:
        Balance at beginning of year                                           $13,997     $11,532     $11,187
        Net income (loss) after preferred stock  dividends                         528        (461)        108
        Proceeds  attributed from offering of AT&T Wireless Group
          tracking stock                                                         7,000          --          --
        Proceeds from shares issued for employee plans                              41          --          --
        Preferred stock issued to AT&T                                           2,000          --          --
        Transfers from AT&T, net                                                 1,345       2,897         288
        Net revaluation of investments                                             (34)         29         (51)
                                                                               -------     -------     -------
      Balance at end of year                                                   $24,877     $13,997     $11,532
                                                                               -------     -------     -------
      Summary of Total Comprehensive Income:
        Net income (loss) after preferred stock dividends                      $   528     $  (461)    $   108
        Dividend requirements on preferred stock held by AT&T, net                 130          56          56
                                                                               -------     -------     -------
        Net income (loss)                                                          658        (405)        164
                                                                               -------     -------     -------
        Net revaluation of investments (net of taxes of $(22), $18, and $(31))     (34)         29         (51)
                                                                               -------     -------     -------
        Total Comprehensive Income                                             $   624     $  (376)    $   113
                                                                               -------     -------     -------
</TABLE>
                   See Notes to Combined Financial Statements
<PAGE>
                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)
                        COMBINED STATEMENTS OF CASH FLOWS
                                  (In Millions)
<TABLE>
<CAPTION>
                                                                                 For the Years Ended December 31,
                                                                                 --------------------------------
                                                                                   2000        1999        1998
                                                                                 --------    --------    --------
      <S>                                                                       <C>         <C>         <C>
      Operating activities
      Net income (loss)                                                         $     658   $    (405)  $     164
      Adjustments to reconcile net income (loss) to net cash provided by
        operating  activities:
        Net gains on sale/exchange of businesses and investments                     (362)        (99)       (600)
        Asset impairment and restructuring charges                                     --         531         120
        Depreciation and amortization                                               1,686       1,253       1,079
        Deferred income taxes                                                         585         (85)        (39)
        Net equity earnings from investments                                         (505)       (149)       (115)
        Minority interests in consolidated subsidiaries                               (28)        (17)        (35)
        Provision for uncollectible receivables                                       314         200          99
        Increase in accounts  receivable                                             (853)       (514)       (307)
        (Increase) decrease in inventories                                           (142)         27         (32)
        (Decrease) increase in accounts payable                                       (48)        (11)        123
        Net change in other operating assets and liabilities                          330         136         (43)
                                                                                ---------   ---------   ---------
        Net cash provided by operating activities                                   1,635         867         414
                                                                                ---------   ---------   ---------
      Investing activities
      Capital expenditures and other additions                                     (4,012)     (2,272)     (1,219)
      Net acquisitions of licenses                                                   (247)        (47)        (65)
      Equity investment distributions and sales                                       360         236       1,354
      Equity investment contributions, advances and purchases                      (1,645)       (284)       (156)
      Net (acquisitions) dispositions of businesses including cash acquired        (4,763)        244         324
      Deposits on long-lived assets                                                  (218)         --          --
                                                                                ---------   ---------   ---------
      Net cash (used in) provided by investing activities                         (10,525)     (2,123)        238
                                                                                ---------   ---------   ---------
      Financing activities
      Increase in short-term borrowings                                                --          65          43
      Net increase in short-term debt due to AT&T                                     638          --          --
      Increase in long-term debt due to AT&T                                          400         900         100
      Proceeds attributed from offering of AT&T Wireless Group
        tracking stock                                                              7,000          --          --
      Proceeds from shares issued for employee plans                                   41          --          --
      Dividend requirements on preferred stock, net                                  (130)        (56)        (56)
      Transfers from (to) AT&T, net                                                 1,001         344        (694)
      Other financing activities, net                                                  (3)        (19)        (24)
                                                                                ---------   ---------   ---------
      Net cash provided by (used in) financing activities                           8,947       1,234        (631)
                                                                                ---------   ---------   ---------
      Net increase (decrease) in cash and cash equivalents                             57         (22)         21
                                                                                ---------   ---------   ---------
      Cash and cash equivalents at beginning of year                                    5          27           6
                                                                                ---------   ---------   ---------
      Cash and cash equivalents at end of year                                  $      62   $       5   $      27
                                                                                ---------   ---------   ---------
</TABLE>
                   See Notes to Combined Financial Statements
<PAGE>

                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                      (In Millions Unless Otherwise Noted)

      1. Background and Basis of Presentation

      Background

          AT&T  Wireless  Group is an  integrated  business of AT&T and is not a
      separate  legal entity.  On April 27, 2000,  AT&T completed an offering of
      15.6%, or 360 million shares,  of AT&T Wireless Group tracking stock at an
      offering price of $29.50 per share.  AT&T Wireless Group tracking stock is
      a class of AT&T common  stock,  which is intended to provide  holders with
      financial returns based on the financial performance and economic value of
      AT&T's wireless services'  businesses.  AT&T Wireless Group tracking stock
      issued in the offering  reflected only a portion of the authorized shares.
      The remaining 84.4% has been reserved for the benefit of AT&T Common Stock
      Group  (which  consists  of  the  operations  of  AT&T  other  than  those
      attributed  to AT&T  tracking  stocks) and is intended to be  reflected in
      AT&T common stock.

          On  October  25,  2000,  AT&T  announced  its  decision  to present an
      exchange  offer to AT&T common  shareowners  to allow them to exchange any
      portion of shares of AT&T common stock for shares of AT&T  Wireless  Group
      tracking stock. On December 22, 2000, AT&T filed a registration  statement
      for the exchange offer with the Securities and Exchange Commission,  which
      was amended on February 23, 2001. AT&T anticipates that the exchange offer
      will be completed  during the second quarter of 2001.  AT&T Wireless Group
      will  continue  to be a part  of  AT&T  following  the  completion  of the
      exchange offer.

          Also on October 25, 2000,  AT&T announced its  restructuring  plan. In
      connection with its  restructuring  plan,  following the completion of the
      exchange  offer  and  subject  to  certain  conditions,  AT&T  intends  to
      split-off  AT&T Wireless  Group from AT&T.  These  conditions  include the
      receipt of a favorable  ruling on the split-off from the Internal  Revenue
      Service (IRS) and  satisfaction of conditions  contained in AT&T's new $25
      billion credit agreement, including the repayment of AT&T Wireless Group's
      intercompany  obligations to AT&T. The split-off,  which is anticipated to
      be completed in mid-2001, would include several steps. These steps include
      transferring  substantially  all of the  assets  and  liabilities  of AT&T
      Wireless Group to AT&T Wireless Services, Inc., mandatorily exchanging all
      issued and  outstanding  shares of AT&T  Wireless  Group  tracking  stock,
      including those issued in the exchange offer,  for shares of AT&T Wireless
      Services common stock,  and  distributing a majority of the shares of AT&T
      Wireless Services common stock held by AT&T Common Stock Group, to holders
      of AT&T common  stock on a pro rata  basis.  On February  14,  2001,  AT&T
      announced  its  intention  to  retain up to $3  billion  of shares of AT&T
      Wireless  Services  for its own account  for sale or  exchange  within six
      months of the split-off, subject to receipt of a satisfactory IRS ruling.

          In  January   2001,   NTT   DoCoMo,   a  leading   Japanese   wireless
      communications company,  invested $9.8 billion in a security of AT&T that,
      like AT&T Wireless Group tracking  stock, is intended to reflect a portion
      of the financial  performance  and economic value of AT&T Wireless  Group.
      AT&T Wireless Group,  through AT&T Wireless Group, LLC, was allocated $6.2
      billion of the proceeds  from  DoCoMo's  $9.8 billion  investment in AT&T.
<PAGE>
          AT&T  retained  the remaining  $3.6  billion of the DoCoMo  investment
      proceeds as consideration  for the reduction in AT&T's retained portion of
      AT&T Wireless Group's value. Following the split-off, this investment will
      be converted  into  approximately  16% of AT&T Wireless  Services'  common
      shares. DoCoMo also received warrants at an exercise price of $35 per AT&T
      Wireless  Group  tracking  share   equivalent   that  would  represent  an
      approximate additional 1.6% of AT&T Wireless Services' common shares after
      the split-off.  As part of this investment,  AT&T Wireless Group,  through
      AT&T Wireless  Services,  Inc., has entered into a strategic alliance with
      DoCoMo  to  develop  mobile  multimedia  services  on  a  global-standard,
      high-speed  wireless  network.  DoCoMo may require the  repurchase  of its
      investment at DoCoMo's  original  purchase price,  plus interest,  if AT&T
      does not complete the split-off by specified  dates  beginning  January 1,
      2002,  or if AT&T  Wireless  Group fails to meet  specified  technological
      milestones.

      Basis of Presentation

          AT&T Wireless Group is an integrated  business of AT&T.  AT&T Wireless
      Group includes the results of its mobility and fixed wireless  businesses,
      as well as its  international  operations,  which  primarily  include  the
      earnings or losses  associated  with  equity  interests  in  international
      wireless communications ventures and partnerships.  The combined financial
      statements reflect the results of operations,  financial position, changes
      in combined attributed net assets and cash flows of AT&T Wireless Group as
      if it were a separate  entity for all  periods  presented.  The  financial
      information  included  herein may not  necessarily  reflect  the  combined
      results  of  operations,  financial  position,  changes in equity and cash
      flows of AT&T Wireless  Group had it been a separate,  stand-alone  entity
      during the periods presented.  The combined  financial  statements of AT&T
      Wireless Group should be read in conjunction with AT&T's Form 10-K for the
      year ended December 31, 2000.

          The combined  financial  statements of AT&T Wireless  Group conform to
      generally   accepted   accounting   principles.   The  combined  financial
      statements reflect the assets, liabilities,  revenue and expenses directly
      attributable  to  AT&T  Wireless  Group,  as well  as  allocations  deemed
      reasonable by management, to present the results of operations,  financial
      position and cash flows of AT&T Wireless Group on a stand-alone basis. The
      allocation  methodologies  have  been  described  within  the notes to the
      combined financial statements where appropriate.

          The combined  financial  statements of AT&T Wireless  Group  primarily
      include the legal entity results of AT&T Wireless  Services,  Inc. and its
      subsidiaries (AWS), AT&T Wireless Group, LLC (AWG), AT&T Wireless PCS, LLC
      and its  subsidiaries  (AWPCS),  and Winston,  Inc.  and its  subsidiaries
      (Winston),  all of which were direct  subsidiaries  of AT&T  Corp.,  as of
      December 31, 2000.  In February  2001,  the legal  entities of Winston and
      AWPCS as well as  certain  assets  of AWG  were  transferred  to AWS.  The
      remaining  assets and liabilities of AWG will be transferred  prior to the
      split-off.

          The April 2000 offering of AT&T Wireless Group tracking stock resulted
      in net  proceeds  to AT&T,  after  deducting  underwriter's  discount  and
      related fees and expenses,  of $10.3 billion. AT&T attributed $7.0 billion
      of the  net  proceeds  to  AT&T  Wireless  Group,  in the  form  of a note
      receivable,  which was repaid by  December  31,  2000,  primarily  to fund
      acquisitions and capital expenditures. Interest on the note receivable was
      calculated  based upon the average  daily  balance  outstanding  at a rate
      equal to the one month London  InterBank  Offered  Rate (LIBOR)  minus six
      basis  points,  a rate intended to be equivalent to the rate AT&T Wireless
      Group would receive if it were a stand-alone entity.
<PAGE>
                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      1. Background and Basis of Presentation (Continued)

          Prior to the  offering of  AT&T wireless  group  tracking  stock,  the
      capital  structure  of AT&T  Wireless  Group had been  assumed  based upon
      AT&T's historical capital ratio adjusted for certain items. In determining
      the allocation  between short- and long-term debt and preferred  stock, we
      considered  factors such as  prospective  financing  requirements  for the
      business,  working capital commitments and future  requirements,  and peer
      group  analysis.  This  resulted in $3.4 billion in long-term  debt due to
      AT&T at December 31, 1999,  paying annual  interest at 7.25%. In addition,
      as of December 31, 1999,  AT&T Wireless Group had issued and  outstanding,
      $1.0 billion of 9% cumulative  preferred stock held by AT&T that,  subject
      to the  approval  of AT&T  Wireless  Group  capital  stock  committee,  is
      redeemable at the option of AT&T. The preferred  stock is included  within
      "Combined  attributed  net assets" on the  accompanying  combined  balance
      sheets.  On May 1, 2000,  following  the offering of AT&T  Wireless  Group
      tracking  stock,  $2.0  billion  of  AT&T  Wireless  Group's   outstanding
      long-term debt to AT&T was  recapitalized  into an additional $2.0 billion
      of 9% cumulative  preferred stock issued to AT&T. In conjunction  with the
      recapitalization, the remaining long-term debt due to AT&T of $1.8 billion
      was  recapitalized  to be 10 year term debt that bears interest at a fixed
      rate of 8.1% per annum.  The interest rate is intended to be substantially
      equivalent to the interest rate that AT&T Wireless  Group would be able to
      obtain  from  third   parties,   including  the  public   markets,   as  a
      non-affiliate of AT&T without the benefit of any guaranty by AT&T.

          During  December 2000, AT&T Wireless  Group,  through AWS,  obtained a
      short-term revolving loan from AT&T, which is included in "Short-term debt
      due to AT&T" in the accompanying  combined balance sheets. At December 31,
      2000,  the amount  outstanding  under the loan was $638,  paying  interest
      monthly at the average seven-day commercial paper rate, which was 8.37% at
      December 31, 2000.  The revolving  loan matures on December 29, 2001.  The
      loan was repaid in full in January 2001.

          Changes  in  combined  attributed  net  assets  prior to the  offering
      primarily  represented net transfers to or from AT&T,  after giving effect
      to the net income or loss of AT&T  Wireless  Group during the period,  and
      were  assumed to be  settled in cash.  AT&T's  capital  contributions  for
      purchase business  combinations and initial  investments in joint ventures
      and  partnerships  which AT&T  attributed to AT&T Wireless Group have been
      treated as noncash transactions prior to the offering.

          AT&T performs cash management functions on behalf of the AT&T Wireless
      Group.  Substantially  all of the AT&T Wireless  Group's cash balances are
      swept to AT&T on a daily  basis,  where they are managed  and  invested by
      AT&T.  Prior to the offering of the AT&T Wireless  Group  tracking  stock,
      transfers  of cash to and from  AT&T  were  reflected  as a  component  of
      combined  attributed  net  assets,  with no  interest  income  or  expense
      reflected. Subsequent to the offering, transfers were reflected as changes
      in the note  receivable  from or  short-term  debt  payable to AT&T.  Cash
      balances  maintained  and reported by the AT&T  Wireless  Group  primarily
      represent cash balances for which no right of offset exists with AT&T.
<PAGE>
                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      1. Background and Basis of Presentation (Continued)

          General  corporate  overhead related to AT&T's corporate  headquarters
      and common support  divisions has been allocated to AT&T Wireless Group as
      it was not deemed  practicable to specifically  identify such common costs
      to AT&T Wireless Group.  These allocations were based on the ratio of AT&T
      Wireless  Group's  external  costs and  expenses  to  AT&T's  consolidated
      external costs and expenses, adjusted for any functions that AT&T Wireless
      Group performs on its own. However, the costs of these services charged to
      AT&T Wireless Group are not necessarily indicative of the costs that would
      have been incurred if AT&T Wireless  Group had performed  these  functions
      entirely as a stand-alone  entity,  nor are they  indicative of costs that
      will be charged or incurred in the future.

          Consolidated  income tax provision,  related tax payments or  refunds,
      and  deferred tax  balances of AT&T have been  allocated to AT&T  Wireless
      Group based  principally  on the taxable  income and tax credits  directly
      attributable  to AT&T  Wireless  Group.  These  allocations  reflect  AT&T
      Wireless Group's  contribution to AT&T's  consolidated  taxable income and
      the consolidated  tax liability and tax credit  position.  The AT&T Common
      Stock  Group and AT&T  Wireless  Group  have  entered  into a tax  sharing
      agreement that provides for tax sharing payments based on the taxes or tax
      benefits of a  hypothetical  affiliated  group  consisting  of AT&T Common
      Stock  Group  and  AT&T  Wireless  Group.  Based  on this  agreement,  the
      consolidated tax liability before credits is allocated between the groups,
      based on each group's  contribution to consolidated  taxable income of the
      hypothetical  group.  For  purposes of the tax sharing  agreement,  the 9%
      cumulative  preferred  stock  held  by AT&T  is  treated  as if it were an
      intercompany  debt instrument and,  accordingly,  tax sharing payments are
      calculated by treating  coupon payments on the preferred stock as interest
      expense to AT&T  Wireless  Group and interest  income to AT&T Common Stock
      Group.  Consolidated tax credits of the  hypothetical  group are allocated
      between groups based on each group's contribution to each tax credit.

      2. Summary of Significant Accounting Policies Cash Equivalents

          All highly liquid  investments  with original  maturities of generally
      three months or less are considered to be cash equivalents.

      Cash Flows

          For  purposes  of  the  combined   statements   of  cash  flows,   all
      transactions  between AT&T  Wireless  Group and AT&T,  except for purchase
      business  combinations  and  initial  investments  in joint  ventures  and
      partnerships  which were  funded by AT&T and  contributed  by AT&T to AT&T
      Wireless  Group prior to the offering,  have been  accounted for as having
      been  settled in cash at the time the  transaction  was  recorded  by AT&T
      Wireless Group.

      Inventories

          Inventories,  which consist  principally of handsets and  accessories,
      are  recorded  at the  lower  of  cost  or  market.  Cost  is  principally
      determined by the first-in,  first-out (FIFO) method. Market is determined
      using replacement cost.
<PAGE>
                              AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      2.  Summary  of  Significant   Accounting  Policies  (Continued)

      Property, Plant and Equipment

          Property,  plant and equipment are recorded at cost,  unless impaired,
      and  depreciation is determined  based upon the assets'  estimated  useful
      lives.  Depreciation is calculated on a  straight-line  basis according to
      the following useful lives:

          Wireless communications systems and other equipment         3-15 years
          Building and improvements                                   5-20 years

          When  AT&T  Wireless  Group sells,  disposes  or retires  assets,  the
      related  gains or losses are included in operating  results.

          During 1998,  AT&T Wireless Group completed  a review of the estimated
      service lives of certain wireless  communications  equipment. As a result,
      effective  January 1, 1998, the estimated  service lives of such equipment
      were changed from 12 years to varying periods ranging primarily from seven
      to ten years, with certain assets being changed to 15 years,  depending on
      the  nature of the  equipment.  The net  impact of these  changes  to 1998
      results was an annual  increase in depreciation  expense of  approximately
      $42 and an annual reduction in net income of  approximately  $26. See Note
      14  for  further  discussion  associated  with  an  additional  change  in
      depreciable lives.

      Software Capitalization

          AT&T Wireless  Group  capitalizes  certain  direct  development  costs
      associated with internal-use software,  including external direct costs of
      materials and services,  and payroll costs for employees  devoting time to
      the software  projects.  These costs are included  within other assets and
      are amortized  over a period not to exceed five years  beginning  when the
      asset  is   substantially   ready  for  use.  Costs  incurred  during  the
      preliminary  project stage, as well as maintenance and training costs, are
      expensed  as  incurred.  AT&T  Wireless  Group  also  capitalizes  initial
      operating-system  software  costs and amortizes  them over the life of the
      associated hardware.

          AT&T  Wireless  Group  also  capitalizes  costs  associated  with  the
      development of application  software incurred from the time  technological
      feasibility is established  until the software is ready to provide service
      to customers.  These capitalized costs are included in property, plant and
      equipment and are amortized over a useful life not to exceed five years.

      Licensing Costs

          Licensing  costs are  primarily  incurred  to  acquire  cellular  (850
      megahertz) and PCS (1900 megahertz) licenses. In addition, licensing costs
      include costs incurred to acquire 38 gigahertz and 2.3 gigahertz licenses.
      Amortization  begins with the  commencement of service to customers and is
      computed using the straight-line method over periods of 35 or 40 years.
<PAGE>
                              AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      2.  Summary  of  Significant   Accounting  Policies  (Continued)

      Capitalized Interest

          AT&T Wireless  Group  capitalizes  interest which is applicable to the
      construction  of additions  to  property,  plant,  and  equipment  and the
      acquisitions  of licenses until the assets are placed into service.  These
      costs are amortized over the related assets' estimated useful lives.

      Investments

          Investments  in which AT&T Wireless  Group,  primarily held by AWS and
      AWPCS,  exercises significant influence but which AT&T Wireless Group does
      not control are  accounted for under the equity  method.  Under the equity
      method,  investments  are stated at initial cost and are adjusted for AT&T
      Wireless  Group's  subsequent  contributions  and its share of earnings or
      losses, and distributions.  The excess of the carrying value of investment
      over the  underlying  book  value of the  investee's  net  assets is being
      amortized over periods ranging from 20 to 40 years.

            Investments   in  which  AT&T  Wireless  Group  has  no  significant
      influence  over the  investee  are  accounted  for under the cost  method.
      Investments  covered under the scope of Statement of Financial  Accounting
      Standards (SFAS) No. 115,  "Accounting for Certain Investments in Debt and
      Equity Securities," are classified as "available for sale" and are carried
      at fair value. Unrealized gains or losses, net of tax, are included within
      combined attributed net assets as "Net revaluation of investments".

      Goodwill

          Goodwill  is the excess of the  purchase  price over the fair value of
      net assets acquired in business combinations  accounted for as a purchase.
      Goodwill is amortized on a straight-line  basis over periods not exceeding
      40 years.

      Valuation of Long-Lived Assets

          Long-lived  assets such as property,  plant and  equipment,  licensing
      costs,  goodwill,  investments and  capitalized  software are reviewed for
      impairment  whenever events or changes in circumstances  indicate that the
      carrying  amount may not be  recoverable.  It is reasonably  possible that
      these assets could become impaired as a result of  technological  or other
      industry changes.  For assets AT&T Wireless Group intends to hold for use,
      if the total of the expected future  undiscounted  cash flows is less than
      the carrying  amount of the asset, a loss is recognized for the difference
      between the fair value and  carrying  value of the asset.  For assets AT&T
      Wireless  Group intends to dispose of, a loss is recognized for the amount
      that the  estimated  fair  value,  less  costs to sell,  is less  than the
      carrying value of the assets.  In addition,  in accordance with Accounting
      Principles Board Opinion No. 17, "Intangible  Assets", AT&T Wireless Group
      continues to evaluate the amortization periods to determine whether events
      or circumstances warrant revised amortization periods. Additionally,  AT&T
      Wireless  Group  periodically  evaluates  the useful lives of its wireless
      communications   systems   and  other   equipment   based  on  changes  in
      technological and industry conditions.
<PAGE>
                              AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      2.  Summary  of  Significant   Accounting  Policies  (Continued)

      Revenue Recognition

          Wireless  services revenue is recognized based upon minutes of traffic
      processed and contracted  fees.  Customer  activation fees, along with the
      related costs,  are deferred and amortized over the customer  relationship
      period.  The  revenue  and related  expenses  associated  with the sale of
      wireless  handsets and  accessories  are recognized  when the products are
      delivered  and accepted by the  customer,  as this is  considered  to be a
      separate earnings process from the sale of wireless services. During 2000,
      we adopted  Securities and Exchange  Commission Staff Accounting  Bulletin
      No. 101, "Revenue Recognition in Financial  Statements".  The adoption did
      not have a material  impact on our  results  of  operations  or  financial
      condition.

      Advertising and Promotional Costs

          Costs  of  advertising   and  promotions  are  expensed  as  incurred.
      Advertising and promotional  expenses were $618,  $386, and $344, in 2000,
      1999 and 1998, respectively.

      Income Taxes

         AT&T Wireless  Group is not a separate  taxable  entity for federal and
      state income tax purposes  and its results of  operations  are included in
      the  consolidated  federal  and state  income tax  returns of AT&T and its
      affiliates. AT&T Wireless Group's provision or benefit for income taxes is
      based upon its  contribution  to the overall  income tax liability of AT&T
      and its affiliates as described in Note 1.

      Issuance of Common Stock By Affiliates

          Changes in AT&T Wireless Group's proportionate share of the underlying
      equity of a subsidiary  or equity method  investee,  which result from the
      issuance of additional equity securities by such entity, are recognized as
      increases or decreases in combined attributed net assets.

      Use of Estimates

          The  preparation of financial  statements in conformity with generally
      accepted  accounting  principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure  of  contingent  assets  and  liabilities  at the  date  of the
      financial statements, and revenue and expenses during the period reported.
      Actual results could differ from those estimates.  Estimates are used when
      accounting for certain items such as the allowance for doubtful  accounts,
      depreciation and amortization,  taxes,  valuation of investments and asset
      impairment and restructuring charges.

      Reclassifications

          Certain  reclassifications  have been made to prior  year  amounts  to
      conform with current year presentations.
<PAGE>
                              AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      2.  Summary  of  Significant   Accounting  Policies  (Continued)

      Concentrations

          AT&T Wireless  Group  purchases a substantial  portion of its wireless
      infrastructure  equipment from three major suppliers.  Additionally,  four
      primary  vendors  provide AT&T Wireless  Group's  multi-network  handsets.
      Further, AT&T Wireless Group relies on one vendor to provide substantially
      all  of its  billing  services.  Loss  of any  of  these  suppliers  could
      adversely  impact  operations  temporarily  until a comparable  substitute
      could be found.  AT&T  Wireless  Group  does not have a  concentration  of
      available sources of labor or services,  nor does AT&T Wireless Group have
      any  significant  concentration  of business  transacted with a particular
      customer, that could, if suddenly eliminated, severely impact operations.

      3. Recent Accounting Pronouncements

          In September  2000, the Financial  Accounting  Standards  Board (FASB)
      issued SFAS No. 140,  "Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities--A Replacement of FASB No. 125".
      This statement provides  accounting and reporting  standards for transfers
      and  servicing of financial  assets and  extinguishments  of  liabilities.
      Under these  standards,  after a transfer of financial  assets,  an entity
      recognizes  the  financial  and  servicing  assets  it  controls  and  the
      liabilities it has incurred,  derecognizes  financial  assets when control
      has been surrendered, and derecognizes liabilities when extinguished. This
      statement provides  consistent  standards for distinguishing  transfers of
      financial   assets  that  are  sales  from   transfers  that  are  secured
      borrowings.  This  statement is effective  for  transfers and servicing of
      financial assets and extinguishments of liabilities  occurring after March
      31, 2001.  AT&T  Wireless  Group does not expect that the adoption of SFAS
      No.  140  will  have a  material  impact  on its  results  of  operations,
      financial position or cash flows.

          In  June  1998,  the   FASB  issued  SFAS  No.  133,  "Accounting  for
      Derivative Instruments and Hedging Activities". Among other provisions, it
      requires  that  entities  recognize  all  derivatives  as either assets or
      liabilities  in the  statement  of financial  position  and measure  those
      instruments at fair value.  Gains and losses resulting from changes in the
      fair values of those  derivatives  would be accounted for depending on the
      use of the derivative and whether it qualifies for hedge  accounting.  The
      effective  date of this  standard was delayed via the issuance of SFAS No.
      137. The effective date for SFAS No. 133 is now for fiscal years beginning
      after June 15, 2000, though earlier adoption is encouraged and retroactive
      application is prohibited.  For AT&T Wireless  Group,  this means that the
      standard must be adopted no later than January 1, 2001. In June 2000,  the
      FASB issued SFAS No. 138,  "Accounting for Certain Derivative  Instruments
      and Certain  Hedging  Activities"  as an amendment  to SFAS No. 133.  This
      statement  provides  clarification  with regard to certain  implementation
      issues  under SFAS No. 133 on specific  types of hedges.  The  adoption of
      SFAS No. 133 in January 2001,  did not have a material  impact to the AT&T
      Wireless Group's results of operations,  financial position or cash flows.
      In  addition,  based on the types of contracts  we  currently  have,  AT&T
      Wireless Group does not anticipate that this standard will have a material
      impact on future results of AT&T Wireless Group.
<PAGE>
                              AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      4. Acquisitions and Dispositions

          During 2000, 1999 and 1998,  AT&T Wireless  Group,  through AWS, AWPCS
      and  Winston,  completed  certain  transactions  as  part  of its  overall
      strategy to expand its wireless  footprint  and divest  itself of non core
      interests.  The net pretax  gains  recognized  were $362,  $99 and $600 in
      2000,  1999 and 1998,  respectively.  The pretax gains and losses from the
      sale and  exchange  transactions  are  included  in "Other  income" in the
      accompanying   combined  statements  of  operations.   A  summary  of  the
      significant transactions follows.

          In November  1998,  AT&T  Wireless  Group,  through AWS, and BellSouth
      combined their jointly owned cellular  properties in Los Angeles,  Houston
      and  Galveston,  Texas,  plus cash, to form AB Cellular  Holding,  LLC (AB
      Cellular),  which owned,  controlled and supervised all three  properties.
      AT&T Wireless Group held a 55.62% equity interest in AB Cellular, however,
      held a 50% voting interest,  therefore,  this investment was accounted for
      under the equity  method.  Pursuant to the AB Cellular  Limited  Liability
      Company   Agreement,   there  were  redemption   provisions  that  allowed
      BellSouth,  commencing in December 2000, to alter the ownership  structure
      of AB  Cellular  pursuant  to one of three  options.  On December 4, 2000,
      BellSouth  announced its election to have AB Cellular  exercise its option
      to redeem AT&T Wireless  Group's 55.62% equity  interest.  On December 29,
      2000, AB Cellular completed the redemption of AT&T Wireless Group's 55.62%
      equity  interest in AB Cellular,  and in exchange,  AT&T  Wireless  Group,
      through AWS,  received 100% of the net assets of the Los Angeles  cellular
      property.  As a  result  of  the  redemption,  AB  Cellular  recognized  a
      significant  gain on the transaction  based on the estimated fair value of
      the net  assets  of the  Los  Angeles  cellular  property  on the  date of
      redemption.  AT&T Wireless  Group's net equity earnings for the year ended
      December 31, 2000, included $372 reflecting its proportionate share of the
      gain. The net assets of the Los Angeles cellular property were recorded at
      fair value and resulted in a pretax loss of $184 to AT&T  Wireless  Group.
      The excess of the fair value of the Los Angeles cellular property over the
      fair  value  of net  tangible  assets  received,  based  on a  preliminary
      allocation,  totaled  $3,174 and has been  assigned  to  licensing  costs,
      goodwill and other  intangible  assets and is being amortized over periods
      of five to 40 years. We may make refinements to the allocation of the fair
      value of assets  acquired  in future  periods  as the  related  fair value
      appraisals of certain assets and liabilities are finalized. As a result of
      this  transaction,  AT&T  Wireless  Group's  results  include  a  non-cash
      reduction to investments of $3,756,  associated with the redemption of its
      equity interest in AB Cellular.

          On  November 13, 2000,  TeleCorp PCS, Inc.  (Telecorp)  completed  its
      merger  agreement  with  Tritel,  Inc.,  as part  of a stock  transaction.
      Pursuant  to the  terms  of the  agreement,  each  company  merged  with a
      separate newly formed  subsidiary of a new holding  company named TeleCorp
      PCS, Inc., upon consummation of the transaction. Prior to the merger, AT&T
      Wireless Group,  through AWPCS,  held equity interests in each of TeleCorp
      and  Tritel  which  were  both  affiliates  of  AT&T  Wireless  Group.  In
      connection  with the merger,  AT&T Wireless Group  contributed to TeleCorp
      PCS, Inc., rights to acquire wireless licenses in Wisconsin and Iowa, paid
      approximately  $20 in cash  and  extended  the term of its  brand  license
      agreement  through July 2005,  in exchange for  approximately  9.3 million
<PAGE>
                              AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      4. Acquisitions and Dispositions (Continued)

      additional common shares in the newly combined  company.  This transaction
      brought AT&T  Wireless  Group's  equity  stake in the combined  company to
      approximately  23%,  assuming the conversion of all currently  convertible
      preferred stock to common stock. In a separate  transaction with TeleCorp,
      AT&T  Wireless  Group,  through  AWPCS,  completed  an exchange of certain
      wireless  licenses  and  rights  to  acquire  additional  licenses  in the
      Wisconsin  and  Iowa   markets,   as  well  as  made  a  cash  payment  of
      approximately $80. In return,  AT&T Wireless Group received TeleCorp's PCS
      licenses  and  wireless  systems  in  several  New  England  markets.  The
      acquisition   of  the  wireless   systems  was  recorded  as  a  purchase.
      Accordingly,  the operating results have been included in the accompanying
      combined financial statements since the date of acquisition. The excess of
      aggregate  fair value of total assets  acquired over the fair value of net
      tangible assets acquired, based on a preliminary allocation,  totaled $268
      and has been assigned to licensing  costs,  goodwill and other  intangible
      assets  and is being  amortized  over  periods  of five to 40 years.  AT&T
      Wireless  Group  recognized  a pretax gain of $379  associated  with these
      transactions.

          On October 2, 2000, AT&T Wireless Group, through AWPCS,  completed its
      acquisition of a wireless system in Indianapolis for approximately $530 in
      cash.  The  transaction  was  recorded  as a  purchase.  Accordingly,  the
      operating  results of Indianapolis  have been included in the accompanying
      combined financial statements since the date of acquisition. The excess of
      aggregate  purchase  price  over the fair  value  of net  tangible  assets
      acquired,  based on a  preliminary  allocation,  totaled $494 and has been
      assigned to licensing costs,  goodwill and other intangible  assets and is
      being amortized over periods of five to 40 years. We may make  refinements
      to the allocations of the purchase prices in future periods as the related
      fair value appraisals of certain assets and liabilities are finalized.

          On June 19, 2000,  AT&T Wireless  Group  announced  that it had signed
      definitive agreements to acquire wireless systems in the San Francisco Bay
      Area, San Diego and Houston.  On December 29, 2000,  AT&T Wireless  Group,
      through AWS and AWPCS, completed the acquisition of the wireless system in
      Houston for  approximately  $1.0 billion in cash.  On September  29, 2000,
      AT&T  Wireless  Group,  through  AWS,  completed  the  acquisition  of the
      wireless system in San Diego, for approximately  $500 in cash. On June 29,
      2000,  AT&T Wireless  Group,  through AWS,  completed the  acquisition  of
      Vodafone Airtouch plc's 50% partnership  interest in CMT Partners (the Bay
      Area  Properties),  which  holds a  controlling  interest in five Bay Area
      markets  including  San  Francisco and San Jose,  for  approximately  $1.8
      billion in cash,  thereby  giving  AT&T  Wireless  Group a 100%  ownership
      interest  in  this  partnership.   These  transactions  were  recorded  as
      purchases.  Accordingly,  the operating  results of the acquired  entities
      have been included in the accompanying combined financial statements since
      their dates of  acquisition.  The excess of aggregate  purchase price over
      the fair  value of net  tangible  assets  acquired,  based on  preliminary
      allocations,  totaled  $3,082 and has been  assigned to  licensing  costs,
      goodwill and other  intangible  assets and is being amortized over periods
      of five to 40 years.  We may make  refinements  to the  allocations of the
      purchase prices in future periods as the related fair value  appraisals of
      certain assets and  liabilities  are finalized.  Prior to  consummation of
      this  transaction,  AT&T Wireless  Group's 50%  ownership  interest in CMT
<PAGE>
                              AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      4. Acquisitions and Dispositions (Continued)

      Partners was  accounted  for as an equity  investment.  As a result of the
      transaction,  $190 was  reclassified  from  investments to goodwill on the
      accompanying combined balance sheet.

            On June 1, 2000,  AT&T Wireless  Group,  through AWS,  completed its
      acquisition of the assets of Wireless One Network, L.P., for $859 in cash,
      acquiring  wireless  systems  in  Northwest  and  Southwest  Florida.  The
      transaction was recorded as a purchase. Accordingly, the operating results
      of Wireless  One Network,  L.P.,  have been  included in the  accompanying
      combined financial statements since the date of acquisition. The excess of
      aggregate  purchase  price  over the fair  value  of net  tangible  assets
      acquired totaled $792 and has been assigned to licensing  costs,  goodwill
      and other intangible assets and is being amortized over periods of five to
      40 years.

          In June 2000, AT&T Wireless  Group,  through AWS, sold its interest in
      two equity investments for cash resulting in pretax gains of approximately
      $141.

          On August 2, 1999, AT&T,  through AWPCS,  completed its acquisition of
      Honolulu Cellular Telephone Company for $194 in cash. AT&T contributed its
      interest in Honolulu Cellular to AT&T Wireless Group as of the acquisition
      date. This transaction was accounted for as a purchase.  Accordingly,  the
      operating  results  of  Honolulu  Cellular  Telephone  Company  have  been
      included in the accompanying  combined financial statements since the date
      of acquisition. The excess of aggregate purchase price over the fair value
      of net tangible  assets  acquired  totaled $154, and has been allocated to
      licensing costs and goodwill and is being amortized over 40 years.

          On May 3, 1999, AT&T,  through  Winston,  acquired  Vanguard  Cellular
      Systems,  Inc.  (Vanguard) and has contributed its interest in Vanguard to
      AT&T Wireless  Group as of the date of  acquisition.  Under the agreement,
      each Vanguard  shareholder was entitled to elect to receive either cash or
      AT&T stock in exchange for their Vanguard shares subject to the limitation
      that the  overall  consideration  would  consist of 50% AT&T stock and 50%
      cash. Consummation of the merger resulted in the issuance of approximately
      12.6  million  AT&T  shares  and  payment  of $485 in cash.  In  addition,
      Vanguard had approximately $550 in debt, which was subsequently  repaid by
      AT&T. The merger with Vanguard was recorded as a purchase. Accordingly the
      operating  results of  Vanguard  have been  included  in the  accompanying
      combined financial statements since the date of acquisition. The excess of
      aggregate  purchase  price  over the fair  value  of net  tangible  assets
      acquired totaled $1,436 and has been assigned to licensing costs, goodwill
      and other intangible assets and is being amortized over periods of five to
      40 years. Additionally,  AT&T Wireless Group recorded $241 in deferred tax
      liabilities associated with this transaction.

          In April 1999, AT&T Wireless Group,  through AWS, acquired Bakersfield
      Cellular  Telephone  Company in exchange for several  cellular  markets in
      Texas and cash of $77. The  acquisition  was  accounted for as a purchase.
      The excess of aggregate purchase price, including markets exchanged,  over
      the fair value of net tangible assets acquired  totaled $104, and has been
      allocated to licensing  costs and goodwill and is being  amortized over 40
      years.
<PAGE>
                              AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      4. Acquisitions and Dispositions (Continued)

          In addition to the  acquisitions  of Honolulu  Cellular,  Vanguard and
      Bakersfield  Cellular,  AT&T Wireless Group,  through AWS and other direct
      subsidiaries  of AT&T,  acquired other cellular  markets in Utah,  Oregon,
      California,  Idaho, and Louisiana  during 1999. All of these  acquisitions
      were accounted for as purchases.  The excess of aggregate  purchase prices
      over the fair value of net tangible assets acquired  totaled $220, and has
      been allocated to licensing costs and is being amortized over 40 years.

          In June 1999, AT&T  Wireless Group, through AWS, sold  its interest in
      WOOD-TV for cash resulting in a pretax gain of $88.

          In May 1999, AT&T Wireless Group,  through AWPCS,  sold its net assets
      in the geographic  area of San Juan,  Puerto Rico,  including a portion of
      the PCS license,  to TeleCorp PCS,  Inc. for cash and  preferred  stock of
      TeleCorp resulting in a pretax gain of $11.

          In the fourth  quarter of 1998,  AT&T Wireless  Group,  through AWPCS,
      sold its net assets in the geographic area of Norfolk, Virginia, including
      a portion of the PCS license,  to Triton PCS  Holdings,  Inc. for cash and
      preferred stock of Triton resulting in a pretax gain of $29.

          Also in the  fourth  quarter of 1998,  AT&T  Wireless  Group,  through
      AWPCS,  sold a  portion  of its net  assets  in the  geographic  areas  of
      Cincinnati and Dayton,  Ohio,  including portions of the PCS licenses,  to
      Cincinnati Bell Wireless, LLC for cash and an ownership interest. A pretax
      gain of $24 was recognized on this transaction.

          On October 2,1998, AT&T Wireless Group,  through AWS, sold its one-way
      messaging  services  business and a narrowband  PCS license to  Metrocall,
      Inc. in exchange for cash and preferred stock of Metrocall.  A pretax loss
      of $5 was recognized on this transaction. AT&T Wireless Group subsequently
      distributed its investment in the preferred stock of Metrocall to AT&T.

          In the second quarter of 1998, AT&T Wireless Group, through AWS, sold,
      for cash, its interest in two equity  investments  and  recognized  pretax
      gains of $195.

          In the first quarter of 1998, AT&T Wireless Group,  through AWS, sold,
      for cash,  its equity  interest in LIN  Television  Corp. and recognized a
      pretax gain of $342.

      5. Asset Impairment and Restructuring Charges

          During the fourth quarter of 1999, AT&T Wireless Group recorded a $531
      asset impairment charge primarily  associated with the planned disposal of
      certain  wireless  communications  equipment  resulting  from a program to
      increase  capacity and operating  efficiency of the wireless  network.  As
      part of a multi-vendor program,  contracts have been executed with certain
      vendors to replace  significant  portions of the  wireless  infrastructure
      equipment  in the  Western  United  States and the  metropolitan  New York
      markets.  The program is intended to provide AT&T Wireless  Group with the
      newest technology  available and allow it to evolve to new next-generation
      digital   technology,   which  is  designed  to  provide  high-speed  data
      capabilities.
<PAGE>
                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      5. Asset Impairment and Restructuring Charges (Continued)

          The planned disposal of the existing wireless infrastructure equipment
      required an  evaluation of asset  impairment  in accordance  with SFAS No.
      121,   "Accounting  for  the  Impairment  of  Long-Lived  Assets  and  for
      Long-Lived  Assets to be Disposed Of," to write-down these assets to their
      fair value,  which was estimated by discounting  the expected  future cash
      flows  to be  generated  by  these  assets  from  their  use and  eventual
      disposition through the date of disposal.  Since the assets will remain in
      service  from the date of the  decision to dispose of these  assets to the
      disposal   date,   the   impairment   has  been  recorded  as  accumulated
      depreciation  and the  remaining  net  book  value of the  assets  will be
      depreciated  over  this  shortened   period.  As  of  December  31,  2000,
      approximately  $320 of the asset impairment  reserve has been utilized for
      assets that have been  disposed of and written off. The remaining net book
      value of these assets was  approximately  $23 at December 31, 2000,  which
      will be depreciated over an estimated remaining useful life of 3 months.

          During 1998,  AT&T Wireless Group  recorded a pretax asset  impairment
      charge of $120, which  represented the write-down of unrecoverable  assets
      associated with nonstrategic businesses.

      6. Supplementary Financial Information

                   Supplementary Income Statement Information
                                                           For Ihe Years Ended
                                                               December 31,
                                                            2000   1999   1998
                                                            ----   ----   ----
      Other income:
        Interest income                                     $146   $  4   $ 15
        Minority interests in consolidated subsidiaries       28     17     35
        Net gains on sale/exchange of businesses and
          investments                                        362     99    600
        Miscellaneous, net                                    (2)     2     --
                                                            ----   ----   ----
          Total Other Income                                $534   $122   $650
                                                            ----   ----   ----
<PAGE>
                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      6. Supplementary Financial Information (Continued)

                     Supplementary Balance Sheet Information

                                                              At December 31,
                                                              2000      1999
                                                            --------  --------
      Property, plant and equipment, net:
        Wireless communications systems and other equipment $14,319   $10,127
        Land, buildings and improvements                        316       255
                                                            -------   -------
          Total property, plant and equipment                14,635    10,382
                                                            -------   -------
        Accumulated depreciation                             (4,743)   (4,033)
                                                            -------   -------
        Property, plant and equipment, net                  $ 9,892   $ 6,349
                                                            -------   -------
      Goodwill and other assets, net:
        Goodwill                                            $ 4,937   $ 2,303
        Accumulated amortization                               (241)     (168)
                                                            -------   -------
        Goodwill, net                                         4,696     2,135
                                                            -------   -------
        Other assets                                          1,384       544
        Accumulated amortization                               (264)     (217)
                                                            -------   -------
        Other assets, net                                     1,120       327
                                                            -------   -------
        Goodwill and other assets, net                      $ 5,816   $ 2,462
                                                            -------   -------
      Included in other current liabilities:
        Advertising and promotion accruals                  $   179   $   162
        Business tax accruals                                   258       139


                      Supplementary Cash Flow Information

                                                            For the Years Ended
                                                                December 31,
                                                            -------------------
                                                            2000   1999   1998
                                                            ----   ----   ----
      Interest payments, net of amounts capitalized         $ 85   $136   $120
      Income tax (refunds) payments                         (202)   (41)   177

<PAGE>
                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      7. Investments

          AT&T  Wireless  Group,   primarily   through  AWS  and  AWPCS,   holds
      investments in ventures and partnerships  that provide AT&T Wireless Group
      access  to  additional   domestic  and  international   wireless  markets.
      Substantially  all of these investments are accounted for under the equity
      method.

          At December 31, 2000 and 1999,  AT&T Wireless  Group had equity method
      investments  of $3,080 and $4,409,  respectively.  Amortization  of excess
      carrying value of $25, $19 and $52 in 2000,  1999 and 1998,  respectively,
      is  reflected as a component  of net equity  earnings in the  accompanying
      combined  statements  of  operations.  At December 31, 2000 and 1999,  the
      carrying  value of  investments  accounted  for  under the  equity  method
      exceeded our share of the underlying  reported net assets by approximately
      $446 and $551,  respectively.  AT&T Wireless Group received  distributions
      based on its equity  interest in these  investments of $201, $232 and $233
      for the years ended December 31, 2000, 1999 and 1998, respectively.

          Ownership of significant equity investments is as follows:
                                                       At December 31,
                                                  -------------------------
                                                       2000       1999
                                                  ------------ ------------
AB Cellular                                         N/A    (1)  55.62%  (1)
CMT Partners                                        N/A    (2)  50.00%  (2)
ACC Acquisitions, LLC                              50.00%  (3)   N/A    (3)
Triton PCS Holdings, Inc                           16.71%  (4)  16.80%  (4)
TeleCorp PCS, Inc.                                 22.99%  (5)  15.67%  (5)
Tritel, Inc                                         N/A    (6)  21.64%  (6)
Cincinnati Bell Wireless, LLC                      19.90%  (7)  19.90%  (7)
Alaska Native Wireless, LLC                        39.90%  (8)   N/A    (8)
Rogers Wireless Communications, Inc                16.65%  (9)  16.65%  (9)
Japan Telecom                                       5.00  (10)   N/A   (10)
EuroTel Praha, spol. s.r.o                         24.50% (11)   N/A   (11)
Far EasTone Telecommunications, ltd                22.70% (12)  13.87% (12)
----------
      (1) See Note 4 for further  discussion  related to the  redemption of AT&T
          Wireless Group's equity interest in AB Cellular in December 2000.

      (2)  See  Note 4  related  to AT&T  Wireless  Group's  acquisition  of the
           remaining 50% interest in CMT Partners in June 2000.

      (3) On  February  28,  2000,  AWS and  Dobson  Communications  Corporation
          (Dobson)  acquired  American  Cellular  Corporation,  through  a joint
          venture, ACC Acquisitions,  LLC, for approximately $2.4 billion.  AT&T
          contributed  cash equal to AWS'  interest in the joint venture to AT&T
          Wireless Group as of the date of the acquisition.  The acquisition was
          funded  with  non-recourse  bank  debt by the joint  venture  and cash
          equity  contributions  of  approximately  $400  from  each  of the two
          partners. Dobson is responsible for day-to-day management of the joint
          venture,  which is equally owned and jointly  controlled by Dobson and
          AT&T Wireless Group. Accordingly,  this investment is accounted for as
          an equity method  investment in the  accompanying  combined  financial
          statements.
<PAGE>
                              AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      7. Investments (Continued)

      (4) During  1998,  AT&T  Wireless  Group,  through  AWPCS,  entered into a
          venture with Triton PCS  Holdings,  Inc. to build and operate  digital
          wireless networks in the Southeast and MidAtlantic areas of the United
          States.  AT&T Wireless  Group  contributed  licenses to the venture in
          exchange  for  preferred  stock.  The effect of the above  transaction
          resulted  in  a  non-cash  reclassification  of  license  balances  of
          approximately  $101 to  investments.  Additionally  during  the fourth
          quarter of 1998,  AT&T Wireless  Group,  through  AWPCS,  sold its net
          assets  in the  geographic  area of  Norfolk,  Virginia,  including  a
          portion of the PCS license,  to Triton for cash and  preferred  stock.
          Ownership  percentages  reflect  AT&T  Wireless  Group's  ownership of
          common  stock,   assuming  conversion  of  all  currently  convertible
          preferred  shares to common stock.  In addition,  AT&T Wireless Group,
          through AWPCS,  holds redeemable  preferred shares in this investment,
          which are not currently  convertible to common stock.  These preferred
          shares have certain liquidation preference rights.

      (5) During  1998,  AT&T  Wireless  Group,  through  AWPCS,  entered into a
          venture with TeleCorp PCS, Inc. to build and operate digital  wireless
          networks  in  portions   of  New  England  and  the   Midwestern   and
          Southeastern United States.  AT&T Wireless Group contributed  licenses
          to the  venture in exchange  for  preferred  stock.  The effect of the
          above transaction  resulted in a non-cash  reclassification of license
          balances of  approximately  $40 to  investments.  Additionally  in May
          1999, AT&T Wireless Group sold,  through AWPCS,  its net assets in the
          geographic area of San Juan,  Puerto Rico,  including a portion of the
          PCS license,  to TeleCorp for cash and  preferred  stock.  In November
          2000,  Telecorp  completed a merger with Tritel.  See Note 4 regarding
          the  discussion  of the merger.  Ownership  percentages  reflect  AT&T
          Wireless Group's ownership of common stock, assuming conversion of all
          currently  convertible  preferred shares to common stock. In addition,
          AT&T Wireless Group holds, through AWPCS,  redeemable preferred shares
          in this  investment,  which are not  currently  convertible  to common
          stock.  These  preferred  shares have certain  liquidation  preference
          rights.

      (6) In January 1999,  AT&T Wireless Group,  through AWPCS,  entered into a
          venture  with  Tritel,  Inc. to build and  operate a digital  wireless
          network across parts of the Southwestern  United States. AT&T Wireless
          Group  contributed  licenses to the venture in exchange for  preferred
          stock.  The  effect of the above  transaction  resulted  in a non-cash
          reclassification   of  license  balances  of   approximately   $94  to
          investments.  In  November  2000,  Telecorp  completed  a merger  with
          Tritel.  See  Note 4  regarding  the  discussion  of the  merger.  The
          December  31,  1999,  ownership  percentage  reflected  AT&T  Wireless
          Group's  ownership  of  common  stock,   assuming  conversion  of  all
          convertible  preferred  shares,  as of December  31,  1999,  to common
          stock.  In addition,  the AT&T Wireless  Group,  through  AWPCS,  held
          redeemable   preferred  shares  as  of  December  31,  1999,  in  this
          investment,   which  were  not  convertible  to  common  stock.  These
          preferred shares had certain liquidation preference rights.
<PAGE>
                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      7. Investments (Continued)

      (7) During the fourth quarter of 1998,  AT&T Wireless Group sold,  through
          AWPCS,  a  portion  of its  net  assets  in the  geographic  areas  of
          Cincinnati and Dayton,  Ohio,  including portions of the PCS licenses,
          to Cincinnati Bell Wireless,  LLC for cash and an ownership  interest.
          The effect of this transaction resulted in a non-cash reclassification
          of license balances of approximately $20 to investments.

      (8) During November 2000, AT&T Wireless Group,  through AWPCS, joined with
          others in the  formation of a venture,  Alaska Native  Wireless,  LLC,
          which  participated in the Federal  Communication  Commissions' recent
          auction of license  spectrum in the 1900 megahertz band, which is used
          to provide wireless services.  AT&T Wireless Group provided funding to
          the joint venture  through a combination of a  non-controlling  equity
          interest  and debt  securities  of  Alaska  Native  Wireless  totaling
          approximately  $229 as of December 31, 2000.  AT&T Wireless  Group has
          made certain future  commitments  related to this joint  venture.  See
          Note 12 for further discussion of outstanding commitments.

      (9) In August  1999,  AT&T and  British  Telecommunications  plc through a
          newly  created joint venture  acquired a 33.3%  ownership  interest in
          Rogers Wireless  Communications,  Inc.,  formerly Rogers Cantel Mobile
          Communications, Inc., for approximately $934 in cash. AT&T contributed
          its  interest in the joint  venture to AT&T  Wireless  Group as of the
          date of acquisition.  The investment is owned equally by AT&T Wireless
          Group,   through  AWS,  and  British   Telecommunications   plc.  This
          investment  is accounted  for under the equity  method  because of our
          ability to elect  certain  members of the board of  directors  of this
          entity, which we believe provides us with significant influence.

      (10)In the first  quarter  of 2000,  AT&T  Wireless  Group  was  allocated
          one-half of AT&T's interest in Japan Telecom,  which is held through a
          joint venture with British  Telecommunications plc. This investment is
          accounted for under the equity method  because of our ability to elect
          certain  members of the board of directors  of this  entity,  which we
          believe  provides  us  with  significant  influence.  See  Note 14 for
          discussion of subsequent events associated with Japan Telecom.

      (11)On October 2, 2000,  AT&T Wireless Group,  through AWS,  completed its
          acquisition of several interests in international ventures,  including
          Eurotel Praha in the Czech  Republic,  acquired by AT&T as a result of
          its acquisition of MediaOne in June 2000. AT&T Wireless Group acquired
          these interests from AT&T for  approximately $1 billion in cash, which
          was determined based upon a third party valuation.  Additionally, AT&T
          Wireless Group assumed deferred tax liabilities totaling approximately
          $200 which were transferred from AT&T.

      (12)On December 8, 2000, AT&T Wireless Group,  through AWS,  exercised its
          options  to  purchase   additional  shares  of  stock  in  its  equity
          investment in Far EasTone Telecommunications, ltd. AT&T Wireless Group
          paid  approximately  $205 for the additional  shares and increased its
          ownership percentage to 22.70%.

<PAGE>
                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      7. Investments (Continued)

          The combined  results of operations and the financial position of  the
      significant equity method investments are summarized below.

                     Condensed Income Statement Information

                                                    For the Years Ended
                                                        December 31,
                                                 --------------------------
                                                   2000     1999     1998
                                                 -------- -------- --------
      Revenue                                    $15,221  $ 3,466  $ 2,065
      Operating income (loss)                        287     (141)     448
      Net income (loss)                            1,002     (190)     453

          Condensed  income  statement  information  includes  the results of AB
      Cellular and CMT Partners  prior to their  consolidation  by AT&T Wireless
      Group.  The net income in 2000 includes the gain recognized by AB Cellular
      associated with the redemption of AT&T Wireless Group's equity interest in
      December 2000.

                       Condensed Balance Sheet Information

                                                                As of
                                                             December 31,
                                                           ----------------
                                                             2000     1999
                                                           -------  -------

      Current assets                                       $ 4,024  $ 2,900
      Noncurrent assets                                     21,792    8,867
      Current liabilities                                    2,439    1,215
      Noncurrent liabilities                                10,008    3,131

          Current assets are comprised  primarily of cash,  accounts  receivable
      and other current assets. Noncurrent assets are comprised primarily of net
      goodwill  and other  assets,  net  licenses  and net  property,  plant and
      equipment.  Current  liabilities  are  comprised  primarily  of  operating
      accruals  and  accounts  payable.  Noncurrent  liabilities  are  comprised
      primarily of long-term debt and deferred income taxes.

          AT&T Wireless Group also has investments  accounted for under the cost
      method of accounting.  Under this method,  investments are stated at cost,
      and earnings are  recognized to the extent  distributions  are received in
      excess of accumulated earnings of the investee.  Distributions received in
      excess of  accumulated  earnings  are  recognized  as a  reduction  of our
      investment balance.  These investments,  which are covered under the scope
      of SFAS No. 115, "Accounting  for Certain  Investments in  Debt and Equity
      Securities,"  are  classified as  "available-for-sale"  and are carried at
      fair value with any  unrealized  gain or loss,  net of tax, being included
      within  our  other  comprehensive   income  as  a  component  of  combined
      attributed net assets.
<PAGE>
                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      8. Income Taxes

          AT&T Wireless Group is  not a separate taxable  entity for federal and
      state income tax purposes  and its results of  operations  are included in
      the  consolidated  federal  and state  income tax  returns of AT&T and its
      affiliates,  as  described  in Note  1.  The  following  table  shows  the
      principal reasons for the difference between the effective income tax rate
      and the United States federal statutory income tax rate:

                                                        For the Years Ended
                                                            December 31,
                                                       ------ ------ ------
                                                        2000   1999   1998
                                                       ------ ------ ------
U.S. federal statutory income tax rate                    35%    35%    35%
Federal income tax at statutory rate                   $ 144  $(238) $  65
State and local income taxes, net of federal
  income tax effect                                       --    (20)     5
Dividends received deduction                              --     --     (2)
Amortization of intangibles                               19     17     12
Sale of foreign investment                               (31)    --     --
Change in valuation allowance and other estimates         --    (50)   (17)
Other differences, net                                     9     (3)    (4)
                                                       ------ ------ ------
Provision (benefit) for income taxes                   $ 141  $(294) $  59
                                                       ------ ------ ------
Effective income tax rate                               34.1%  43.2%  31.6%
 Provision (benefit) for income taxes:
   Current:
     Federal                                           $(370) $(207) $  83
     State and local                                     (74)    (2)    15
                                                       ------ ------ ------
                                                        (444)  (209)    98
                                                       ------ ------ ------
   Deferred:
     Federal                                           $ 499  $ (41) $ (38)
     State and local                                      86    (44)    (1)
                                                       ------ ------ ------
                                                       $ 585  $ (85) $ (39)
                                                       ------ ------ ------
Provision (benefit) for income taxes                   $ 141  $(294) $  59
                                                       ------ ------ ------

          Deferred  income tax liabilities are taxes AT&T Wireless Group expects
      to pay in future  periods.  Similarly,  deferred  income  tax  assets  are
      recorded  for  expected  reductions  in taxes  payable in future  periods.
      Deferred  income taxes arise  because of  differences  in the book and tax
      bases of certain assets and liabilities.

<PAGE>

                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      8. Income Taxes (Continued)

          Deferred income tax liabilities and assets consist of the following:
<TABLE>
<CAPTION>
                                                                                            At December 31,
                                                                                            --------------
                                                                                             2000    1999
                                                                                            ------  ------
          <S>                                                                             <C>       <C>
          Long-term deferred income tax liabilities:
           Property, plant and equipment and licenses                                     $(3,618)  $(3,246)
           Investments                                                                       (989)     (508)
           Other                                                                              (74)      (49)
                                                                                          -------   -------
             Total long-term deferred income tax liabilities                              $(4,681)  $(3,803)
                                                                                          -------   -------
          Long-term deferred income tax assets:
           Net operating loss/credit carryforwards                                        $    37   $    65
           Valuation allowance                                                                (15)      (12)
                                                                                          -------   -------
             Total net long-term deferred income tax assets                                    22   $    53
                                                                                          -------   -------
          Net long-term deferred income tax liabilities                                   $(4,659)  $(3,750)
                                                                                          -------   -------
          Current deferred income tax liabilities:
             Total current deferred income tax liabilities                                $    --   $    --
                                                                                          -------   -------
          Current deferred income tax assets:
           Employee benefits                                                              $    11   $    11
           Reserves and allowances                                                             65       101
           Other                                                                               17        15
                                                                                          -------   -------
             Total current deferred income tax assets                                     $    93   $   127
                                                                                           -------  --------
          Current deferred income tax assets                                              $    93   $   127
                                                                                          --------  --------
</TABLE>
          At December 31,  2000,  AT&T  Wireless  Group had net  operating  loss
      carryforwards  for federal and state  income tax purposes of $21 and $619,
      respectively,  expiring through 2019. AT&T Wireless Group also has federal
      tax credit carryforwards of $29 which are not subject to expiration.  AT&T
      Wireless  Group  recorded a valuation  allowance to reflect the  estimated
      amount of deferred  tax assets  which,  more likely than not,  will not be
      realized by AT&T Wireless Group.

          The  realization of AT&T Wireless  Group's  deferred tax assets is not
      dependent  upon the  consolidated  tax  group of AT&T.  On a stand  alone,
      separate  company  basis,  AT&T Wireless  Group has  sufficient  reversing
      taxable temporary  differences to warrant  recognition of its deferred tax
      assets  without  the need for any  additional  valuation  allowance.  AT&T
      Wireless Group received  payments under its tax sharing  arrangement  with
      AT&T for the net domestic tax losses and credits it had  generated.  These
      payments were recorded as a reduction to the related deferred tax assets.
<PAGE>

                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      8. Income Taxes (Continued)

          AT&T  previously  announced that it intends to split-off AT&T Wireless
      Group (see Note 1). If it were  determined  that the  split-off  failed to
      qualify as a tax-free transaction,  a tax liability would be created which
      would have a material effect on AT&T Wireless  Group.  In addition,  there
      may be tax costs  associated  with the  split-off  that  result  from AT&T
      Wireless Group ceasing to be a member of the AT&T  consolidated tax return
      group, as well as from pre-split  transactions,  If incurred,  these costs
      could be material to AT&T Wireless Group's results.

      9. Employee Benefit Plan

          AT&T  Wireless  Group  sponsors a savings plan for the majority of its
      employees.  The plan allows  employees  to  contribute  a portion of their
      pretax income in accordance with specified guidelines.  The plan matches a
      percentage of employee  contributions  up to certain limits.  In addition,
      AT&T   Wireless   Group  may  make   discretionary   or   profit   sharing
      contributions.  Contributions  amounted to $60, $37 and $31 in 2000,  1999
      and 1998, respectively.

      10. Stock-Based Compensation Plans

          Under the AT&T 1997 Long-term  Incentive Program (Program),  which was
      effective June 1, 1997, and amended on May 19, 1999 and on March 14, 2000,
      AT&T grants stock options,  performance shares, restricted stock and other
      awards on AT&T  common  stock as well as stock  options  on AT&T  Wireless
      Group tracking stock.

          Under the  Program,  there  were 150  million  shares of common  stock
      available  for grant with a maximum of 22.5  million  common  shares  that
      could be used for awards other than stock options.  Beginning with January
      1, 2000, the remaining  shares  available for grant at December 31, of the
      prior year,  plus 1.75% of the shares of AT&T common stock  outstanding on
      January 1 of each year become  available for grant.  There is a maximum of
      37.5 million  shares that may be used for awards other than stock options.
      The  exercise  price of any stock  option is equal to the stock price when
      the option is  granted.  Generally,  the  options  vest over three or four
      years and are exercisable up to 10 years from the date of grant.

          Under  the  Program,  performance  share  units  are  awarded  to  key
      employees  in the  form of  either  common  stock  or cash at the end of a
      three-year  period  based on AT&T's total  shareholder  return and certain
      financial performance targets. Under the 1987 Long-term Incentive Program,
      performance  share  units  with the same  terms  were also  awarded to key
      employees  based on AT&T's  return-to-equity  performance  compared with a
      target.
<PAGE>
                               AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      10. Stock-Based Compensation Plans (Continued)

          On April 27, 2000 AT&T  created a new class of stock and  completed an
      offering  of AT&T  Wireless  Group  tracking  stock.  Under the Program as
      amended on March 14,  2000,  5% of the  outstanding  AT&T  Wireless  Group
      tracking shares became  available for grant with a maximum of 1.25% of the
      outstanding  shares  that  may be used  for  awards  other  than  options.
      Beginning  with January 1, 2001 the remaining  AT&T Wireless  Group shares
      available  for  grant  at  December  31 of the  prior  year  plus  2.0% of
      outstanding  AT&T Wireless Group tracking shares on January 1 of each year
      become  available  for grant.  The  exercise  price of any stock option is
      equal to the stock  price  when the  option  is  granted.  Generally,  the
      options vest over two to three and one half years and are  exercisable  up
      to 10 years from the date of grant. In 2000 there were no grants of awards
      other than stock  options.  On April 27, 2000,  AT&T granted AT&T Wireless
      Group tracking stock options to  substantially  all AT&T and AT&T Wireless
      Group employees.

          Under the AT&T 1996 Employee  Stock  Purchase  Plan (Plan),  which was
      effective  July 1,  1996,  AT&T is  authorized  to issue up to 75  million
      shares of AT&T common stock to its eligible employees.  Under the terms of
      the  Plan,  employees  may have up to 10% of their  earnings  withheld  to
      purchase AT&T's common stock.  The purchase price of the stock on the date
      of exercise  is 85% of the  average  high and low sale prices of shares on
      the New York  Stock  Exchange  for that day.  Under  the  Plan,  AT&T sold
      approximately  1,127 thousand  shares to AT&T Wireless Group  employees in
      2000,  approximately  424 thousand  shares in 1999 and  approximately  535
      thousand shares in 1998.

          AT&T and AT&T Wireless Group apply Accounting Principles Board Opinion
      No.  25,   "Accounting   for  Stock  Issued  to  Employees,"  and  related
      interpretations in accounting for its plans. Accordingly,  no compensation
      expense has been recognized for its stock-based  compensation  plans other
      than  for   performance-based   and  restricted  stock  awards  and  stock
      appreciation  rights  (SARs).  Compensation  costs  charged  against  AT&T
      Wireless Group's results of operations for AT&T performance-based  awards,
      restricted  stock awards and SARs for AT&T Wireless  Group  employees were
      not material in any periods presented.

          AT&T  and  AT&T  Wireless  Group  have  adopted  the   disclosure-only
      provisions of SFAS No. 123, "Accounting for Stock-Based  Compensation." If
      AT&T Wireless Group had elected to recognize  compensation  costs based on
      the  fair  value at the date of grant  for  AT&T  awards  granted  to AT&T
      Wireless  Group  employees in 2000,  1999 and 1998,  and for AT&T Wireless
      Group awards granted to AT&T Wireless Group employees in 2000,  consistent
      with the  provisions  of SFAS No. 123,  AT&T  Wireless  Group's net income
      (loss) would have been adjusted to reflect additional compensation expense
      resulting in the following pro forma amounts:

                                                      For the Years Ended
                                                         December 31,
                                                      -------------------
                                                       2000   1999   1998
                                                       ----   ----   ----
               Net Income (loss)                       $481  $(464)  $127
<PAGE>
                              AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      10. Stock-Based Compensation Plans (Continued)


          The pro forma effect on net income for 1998 may not be  representative
      of the pro forma effect on net income  (loss) of future years  because the
      SFAS No. 123 method of accounting for pro forma  compensation  expense has
      not been applied to options  granted prior to January 1, 1995, as all such
      options were fully vested by the end of 1998.

          There were  approximately  53,308  thousand AT&T Wireless  Group stock
      options granted to AT&T Wireless Group employees  during 2000. At the date
      of grant the weighted- average exercise price of these options granted was
      $29.23.  The  weighted-average  fair value at date of grant was $14.43 and
      was estimated using the Black-Scholes  option-pricing model. The following
      weighted-average assumptions were applied: (i) expected volatility rate of
      55.0%, (ii) expected life of 4 years and (iii) risk-free  interest rate of
      6.52%.

          AT&T granted  approximately 1,082 thousand, 9,438 thousand  and 10,503
      thousand stock options to AT&T Wireless Group employees  during 2000, 1999
      and  1998,  respectively.  At the  date  of  grant,  the  weighted-average
      exercise price for AT&T options  granted to AT&T Wireless Group  employees
      during 2000, 1999 and 1998 were $48.05,  $59.35 and $41.86,  respectively.
      The weighted-average fair values at date of grant for AT&T options granted
      to AT&T Wireless Group  employees  during 2000, 1999 and 1998 were $14.26,
      $15.36 and $9.80, respectively, and were estimated using the Black-Scholes
      option-pricing  model.  The following  weighted-average  assumptions  were
      applied  for 2000,  1999 and 1998,  respectively:  (i)  expected  dividend
      yields of 1.7%,  1.7% and 2.1%, (ii) expected  volatility  rates of 31.2%,
      27.2% and 23.8%,  and (iii) risk-free  interest rates of 6.69%,  4.71% and
      5.27% and (iv) expected lives of 3.9 years, 4.9 years and 4.5 years.

      11. Fair Values of Financial Instruments

          The  carrying   amounts  of  cash  and  cash   equivalents,   accounts
      receivable,   accounts  payable  and  other  current   liabilities  are  a
      reasonable  estimate of their fair value due to the  short-term  nature of
      these instruments. The fair value of the short-term and long-term debt due
      to AT&T approximates its carrying value.

      12.Commitments and Contingencies

          In the normal course of business,  AT&T  Wireless  Group is subject to
      proceedings,  lawsuits and other claims.  Such matters are subject to many
      uncertainties   and  outcomes   are  not   predictable   with   assurance.
      Consequently,  AT&T  Wireless  Group is unable to  ascertain  the ultimate
      aggregate amount of monetary liability or financial impact with respect to
      these matters at December 31, 2000. AT&T Wireless Group also makes routine
      filings with the Federal  Communications  Commission and state  regulatory
      authorities.  These matters could affect the operating  results of any one
      quarter when resolved in future  periods.  However,  AT&T  Wireless  Group
      believes that after final disposition any monetary  liability or financial
      impact to us beyond that provided for at year-end would not be material to
      our annual combined financial statements.
<PAGE>
                              AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      12. Commitments and Contingencies (Continued)

          During January 2001,  AT&T closed its previously  announced  agreement
      with DoCoMo. Pursuant to this agreement, DoCoMo may require the repurchase
      of its investment at DoCoMo's original  purchase price, plus interest,  if
      AT&T does not complete the split-off by specified dates beginning  January
      1, 2002, or if AT&T Wireless Group fails to meet  specified  technological
      milestones.  See  Note 1 for  further  discussion  related  to the  DoCoMo
      investment.

          AT&T Wireless Group has entered into various purchase  commitments for
      network  equipment as well as handsets,  related to the development of its
      next-generation  strategy.  Those commitments  totaled $432 as of December
      31, 2000. These commitments expire between 2001 and 2004.

          During  November  2000,  AT&T Wireless Group joined with others in the
      formation of a venture, Alaska Native Wireless,  which participated in the
      Federal  Communication  Commission's recent auction of license spectrum in
      the 1900 megahertz band,  which is used to provide wireless  services.  In
      January 2001,  the auction was completed,  and Alaska Native  Wireless was
      the high bidder on approximately  $2.9 billion in licenses.  AT&T Wireless
      Group has committed to fund $2.6 billion to Alaska Native Wireless to fund
      Alaska  Native  Wireless'  purchase of licenses.  As of December 31, 2000,
      AT&T Wireless Group funded  approximately $229 of the commitment through a
      combination of a  non-controlling  equity  interest and debt securities of
      Alaska Native  Wireless.  Additionally,  in February  2001,  AT&T Wireless
      Group funded an additional $80. The remaining  approximate $2.3 billion of
      additional  funding will be made when such licenses are granted,  and will
      take the form of non-convertible  notes of Alaska Native Wireless.  At the
      fifth  anniversary  of the first date on which licenses won in the auction
      are granted to Alaska Native  Wireless,  and in addition to other means by
      which they may transfer their interests, the other owners of Alaska Native
      Wireless have the right to require AT&T Wireless  Group to purchase  their
      equity  interests.  If this right were  exercised five years after license
      grant, the purchase price could be as much as approximately $950 and would
      be  payable,  at AT&T  Wireless  Group's  option,  in  cash or  marketable
      securities.  The right to require AT&T  Wireless  Group to purchase  these
      interests may be exercised before the five-year anniversary of the license
      grant if the conditions of certain FCC  regulations  restricting  the free
      transferability  of  certain  licenses  offered  in this  auction  are met
      earlier. If the right were exercised earlier,  the purchase price would be
      calculated in generally the same way as if exercised at five years, except
      that a discount would be applied. In certain  circumstances,  if a winning
      bid of Alaska Native  Wireless is rejected or if any license granted to it
      is revoked,  AT&T Wireless  Group would be obligated to  compensate  other
      owners  for  making   capital   available  to  the  venture.   In  certain
      circumstances,  if the grant of the licenses is challenged,  AT&T Wireless
      Group  may be  obligated  to  purchase  the  interests  of  other  owners.
      Depending on when such revocation or challenge takes place, the amount may
      be material but will be less than the $950 purchase price described above.
<PAGE>
                              AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      12. Commitments and Contingencies (continued)

          AT&T Wireless  Group  leases land,  buildings  and  equipment  through
      contracts that expire in various years through 2037.  Rental expense under
      operating leases was $271 in 2000, $205 in 1999, and $181 in 1998.     The
      following  table shows  the  future  minimum  rental  payments  due  under
      noncancelable operating leases at December 31, 2000.

           2001       2002       2003       2004       2005       Later Years
           ----       ----       ----       ----       ----       -----------
           $328       $291       $243       $200       $133          $214

         During  2000  and  1999,  AT&T  Wireless  Group  expensed  $28 and $82,
      respectively,  for losses  associated with commitments  related to certain
      equity  investments.  Included  in the 1999 loss of $82 was AT&T  Wireless
      Group's commitment of $63 to fund the long-term debt obligations of one of
      its equity  investments,  which  fully  satisfied  AT&T  Wireless  Group's
      commitment for this equity investment.

          AT&T Wireless  Group also has various other purchase  commitments  for
      materials,  supplies and other items  incidental to the ordinary course of
      business which are not significant individually, nor in the aggregate.

      13. Related Party Transactions

         As  discussed in Note 1, AT&T has provided  necessary  working  capital
      requirements  to  AT&T  Wireless  Group,  through  AWG  and  AWS,  via  an
      attribution of a portion of the offering  proceeds,  intercompany debt and
      preferred stock, as well as capital  contributions  prior to the offering.
      Intercompany debt is reflected in the accompanying combined balance sheets
      as  "Short-term  debt  due to  AT&T"  and  "Long-term  debt  due to  AT&T"
      Preferred  stock held by AT&T is  included  in  "Combined  attributed  net
      assets" in the  accompanying  combined balance sheets.  In addition,  AT&T
      Wireless Group loaned the proceeds back to AT&T via an  intercompany  note
      receivable.

         Intercompany  interest  income on the note receivable from AT&T for the
      year ended  December 31, 2000,  totaled  $143.  There was no  intercompany
      interest  income  for the years  ended  December  31,  1999 and 1998.  The
      intercompany  interest  income was determined  based upon the  methodology
      described  in  Note  1  and  is  included   within  other  income  in  the
      accompanying combined statements of operations.

          Intercompany  debt and  interest  expense was  assumed  based upon the
      methodology  discussed in Note 1.  Intercompany debt was $2,438 and $3,400
      at December  31, 2000 and 1999,  respectively,  of which $638  represented
      short-term debt at December 31, 2000.  Intercompany  interest  expense was
      $196,  $214,  and $190,  for the years ended  December 31, 2000,  1999 and
      1998,  respectively,  of which $123,  $88 and $75, was  capitalized  as of
      December 31, 2000, 1999, and 1998, respectively.

          The 9%  cumulative  preferred  stock held by AT&T was $3.0 billion and
      $1.0  billion as of December 31, 2000,  and 1999,  respectively.  Dividend
      requirements  were $130,  $56 and $56,  for the years ended  December  31,
      2000, 1999 and 1998, respectively.
<PAGE>
                              AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      13. Related Party Transactions (continued)

         AT&T Wireless  Group,  through AWS,  purchases  long distance and other
      network-related  services from AT&T at market-based  prices. For the years
      ended December 31, 2000,  1999 and 1998,  these amounts totaled $241, $170
      and  $65,  respectively.  These  amounts  are  reflected  within  costs of
      services in the accompanying combined statements of operations.

          AT&T has  allocated  general corporate  overhead  expenses,  including
      finance,  legal,  marketing,  use of the AT&T brand, planning and strategy
      and human  resources  to AT&T  Wireless  Group,  as well as costs for AT&T
      employees who directly support AT&T Wireless Group,  amounting to $56, $40
      and  $42,  for  the  years  ended  December  31,  2000,   1999  and  1998,
      respectively.  These  amounts are  included  within  selling,  general and
      administrative   expenses  in  the  accompanying  combined  statements  of
      operations and were determined based on the methodology  described in Note
      1.

          Also  included in selling,  general and  administrative  expenses  are
      charges paid to AT&T related to AT&T Wireless  Group's  direct sales force
      who were employees of AT&T, as well as commissions  and marketing  support
      costs  reimbursed to AT&T for costs incurred to acquire  customers on AT&T
      Wireless Group's behalf. Effective April 1, 2000, the aforementioned sales
      force became employees of AT&T Wireless Group,  through AWS. These charges
      amounted to $67, $223 and $65, for the years ended December 31, 2000, 1999
      and 1998, respectively.

          AT&T  Wireless  Group,  through AWS,  purchases  their  administrative
      telephone  services from AT&T.  These amounts are included within selling,
      general and administrative expenses and totaled $104, $69, and $50 for the
      years ended December 31, 2000, 1999 and 1998, respectively.

          AT&T  Wireless  Group,  through  AWS,  sells  receivables  to AT&T for
      wireless  customers whose wireless  charges are combined  ("bundled") with
      their long  distance  charges into one bill.  Accounts  receivable  in the
      accompanying  combined  balance sheets included $97 and $83 as of December
      31, 2000 and 1999, respectively, associated with receivables from AT&T for
      these bundled  customers.  Selling,  general and  administrative  expenses
      included $38, $36 and $22 for the years ended December 31, 2000,  1999 and
      1998,  respectively,  and costs of services included $38, $29 and $14, for
      the years ended December 31, 2000, 1999, and 1998,  respectively,  for the
      billing and collection fees charged by AT&T.

          AT&T  Wireless  Group,  through  AWS,  utilizes  the  AT&T  remittance
      processing  organization to process customer payments into AT&T's lockbox.
      AT&T Wireless  Group paid $23, $22 and $12, to AT&T for  reimbursement  of
      its costs  associated with these services for the years ended December 31,
      2000, 1999 and 1998, respectively.  These costs are included with selling,
      general  and   administrative   expenses  on  the  accompanying   combined
      statements of operations.
<PAGE>
                             AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      14. Subsequent Events

          In January 2001, AT&T Wireless Group executed  agreements with certain
      network   equipment   vendors,   related   to  the   development   of  its
      next-generation  network strategy.  These agreements require AT&T Wireless
      Group to buy equipment  from these  vendors  totaling  approximately  $1.8
      billion through 2004.

          Effective January 1, 2001, AT&T Wireless Group implemented the results
      of  a  review  of  the  estimated   service  lives  of  certain   wireless
      communications equipment,  primarily electronics.  Lives were shortened to
      fully depreciate all such equipment within seven years.  Similar equipment
      acquired  after  January 1, 2001,  will have  useful  lives no longer than
      seven years.

          On January 22, 2001, AT&T Wireless Group,  through AWS,  completed its
      previously  announced  transaction  with  DoCoMo.  See Note 1 for  further
      discussion of the transaction.

          On  November 17, 2000,  AT&T  Wireless  Group  announced  that  AT&T's
      board of directors  had approved an  agreement  under which AT&T  Wireless
      Group  would  purchase  $200 in  Series AA  preferred  stock  from  Dobson
      Communications  Corporation.  AT&T Wireless Group,  through AWS, completed
      this  transaction  on  February  8, 2001.  The Series AA  preferred  stock
      acquired  has  a  liquidation  preference  of  $1,000  per  share  and  is
      exchangeable  into Series A convertible  preferred stock. If the Series AA
      preferred  stock is exchanged into Series A convertible  preferred  stock,
      AT&T Wireless Group will increase its ownership  interest in Dobson, on an
      as converted to common stock basis,  from its current ownership of 4.6% to
      approximately 11.6%.

          On March 23, 2001,  AT&T  Wireless  Group,  through AWS,  entered into
      Competitive  Advance and Revolving Credit Facilities (the "Facilities") in
      the aggregate amount of $2.5 billion  consisting of an up to $1.25 billion
      364-day  Competitive  Advance and Revolving  Credit  Facility and an up to
      $1.25 billion Five-Year Competitive Advance and Revolving Credit Facility.
      The facilities are subject to a facility fee and  utilization fee and bear
      interest at variable rates based upon, in various cases,  LIBOR, the prime
      rate or the rates on overnight Federal funds transactions.  The Facilities
      may be used for general  corporate  purposes  and are subject to customary
      covenants,  representations  and  warranties  and  events of  default.  In
      addition,  the  Facilities  contain  financial  covenants  providing for a
      maximum  total debt to total  Consolidated  Operational  EBITDA  ratio (as
      defined  in the  facilities  agreement)  not to exceed 4:0 to 1:0 for AT&T
      Wireless Group and a minimum interest coverage ratio of 3.5:1.0.  From the
      date of the closing of the  Facilities  until the date of the split-off of
      AT&T Wireless Group,  AWS will be prohibited from declaring  and/or paying
      dividends.  The Facility  also  specifies  limitations  on AT&T's and AT&T
      Wireless Group's ability to consummate the split-off including a provision
      that  it  will  constitute  an  event  of  default  if  the  split-off  is
      consummated  without  obtaining a favorable  tax ruling from the IRS or an
      unqualified  tax opinion  that the  split-off  will  qualify as a tax-free
      transaction.  In addition, the existence of an obligation by AT&T Wireless
      Group to  repurchase  equity  interests  from  DoCoMo  may  under  certain
      circumstances constitute an event of default.
<PAGE>
                             AT&T WIRELESS GROUP
                        (an integrated business of AT&T)

               NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
                      (In Millions Unless Otherwise Noted)

      14. Subsequent Events (continued)

          On February 26, 2001, AT&T agreed to sell its entire interest in Japan
      Telecom for approximately  $1.35 billion.  The net after-tax  proceeds are
      expected to be approximately  $1 billion.  AT&T has indicated that the net
      after-tax  proceeds  will be split evenly  between AT&T and AT&T  Wireless
      Group.   AT&T  Wireless  Group   anticipates  that  it  will  recognize  a
      significant gain on the transaction.

          On March 1, 2001,  AT&T  Wireless  Group,  through  AWS,  completed  a
      private placement of $6.5 billion in Senior Notes with maturity dates from
      2006 to 2031.  The notes pay  interest  at rates  ranging  from  7.350% to
      8.750% per annum,  and  include  customary  covenants.  The notes  include
      registration rights, such that AWS is required to exchange the notes for a
      new issue of notes  registered under the Securities Act of 1933 and are to
      be declared effective no later than 240 days after the issue date.