AT&T Announces Third Quarter Operational Profits Of 54 Cents Per Share, Pro Forma Revenues Increase 5.6 Percent.

NEW YORK--(BUSINESS WIRE)--Oct. 25, 1999--

Cash Earnings Were 62 Cents Per Share;

Operational Earnings, Excluding the TCI and

IBM Global Network Acquisitions, Grew 19.1 Percent

AT&T today announced that third quarter operational profits for the AT&T common stock group were 54 cents per share on a diluted basis, or $1.754 billion, including the operational impact of its acquisitions of TCI and portions of the IBM Global Network business. AT&T's third quarter operational earnings per share declined from 68 cents, or $1.836 billion, earned in the third quarter of 1998 due primarily to the impact of its merger with TCI.

AT&T's total pro forma revenues for the quarter were $16.306 billion, an increase of 5.6 percent compared to the $15.440 billion for the third quarter of 1998, including AT&T Broadband and Internet  Services (AB&IS), formerly TCI, and AT&T Global Network Services (AGNS), formerly the IBM Global Network.

Marking the seventh consecutive quarter of revenue growth, AT&T's third quarter revenues increased $719 million, or 5.3 percent, compared to the third quarter of 1998, excluding the impact of AB&IS and AGNS. AT&T's operational earnings per diluted share, excluding the impact of AB&IS and AGNS, were 81 cents, compared to 68 cents for the comparable 1998 quarter, an increase of 19.1 percent.

AT&T's third quarter reported earnings from continuing operations were 50 cents per share on a diluted basis, or $1.633 billion, compared to 78 cents per share, or $2.123 billion, for the third quarter of 1998. Reported results for the third quarter of 1999 include a gain from the sale of a business and reported results for the third quarter of 1998 include a net benefit from restructuring  and other charges. AT&T's total revenues, on a reported basis in the third quarter, increased 19.2 percent to $16.270 billion, compared to the $13.653 billion reported for the same period in 1998.

"Today's results are all about delivering on our commitments to investors by growing top-line revenues, meeting earnings targets and reducing our costs," said AT&T Chairman C. Michael Armstrong. "Our strong third quarter performance also reflects the benefits of our investments in growth areas such as wireless and outsourcing  services, where revenues were up by more than 40 percent each."

Today's earnings announcement refers only to AT&T common stock group and does not include the financial results of Liberty Media Group, which reports its results separately. A detailed explanation of AT&T's third quarter business unit performance can be found on the Internet at http://www.att.com/ir/

Third Quarter Continuing Operations Highlights

-- AT&T Business Services reported third quarter revenues of $6.276 billion, an increase of 5.0 percent, compared to $5.975 billion in revenues for the third quarter of 1998. The company's Consumer Services had $5.614 billion in revenues for the third quarter, a decline of 4.7 percent, compared to $5.889 billion for the year-ago quarter. Wireless Services grew third quarter revenues 44.2 percent on a reported basis. Adjusted to exclude the purchase of Vanguard Cellular in the second quarter of 1998 and the third quarter of 1998 sale of the messaging business, wireless revenues increased 40.9 percent from the year-ago quarter, the third consecutive quarter of 40 percent or higher growth. On a pro forma basis, AB&IS, excluding all closed cable partnerships and Excite@Home, had third quarter revenues of $1.442 billion, an increase of 6.7 percent, compared to $1.351 billion for the year-ago quarter. Revenues of the Other and Corporate units, including AGNS, climbed 141.9 percent in the third quarter to $888 million, compared to $369 million in the third quarter of 1998. AT&T Solutions, which is reflected in Other and Corporate results, including AGNS, reported third quarter revenues of $983 million versus $285 million for the year-ago quarter.

-- AT&T's business units delivered strong performances in operational EBITDA. Business Services reported operational EBITDA of $2.257 billion for the third quarter of 1999, an increase of 13.8 percent from the $1.983 billion reported for the same period last year. Consumer Services reported an increase in third quarter 1999 operational EBITDA of 22.9 percent to $2.393 billion, compared to $1.948 billion for the comparable 1998 period. Wireless Services reported operational EBITDA, excluding other income, of $404 million for the third quarter of 1999, an increase of 53.3 percent, compared to the $264 million reported for the same period last year. AB&IS pro forma operational EBITDA, excluding other income and closed transactions, decreased 24.9 percent in the third quarter of 1999 to $389 million, versus $518 million for the third quarter of 1998. Operational EBITDA for Other and Corporate, including AGNS, was a loss of $191 million for the third quarter of 1999, compared to a loss of $55 million for the third quarter of 1998. AT&T Solutions, including AGNS, reported operational EBITDA of $117 million, an increase of 32.3 percent from the $88 million reported in the third quarter of 1998.

-- Operational cash earnings per diluted share, including AB&IS and AGNS, were 62 cents in the third quarter of 1999. This excludes the amortization of franchise costs, goodwill associated with acquisitions and equity investments, and other purchased intangibles.

-- Total operating expenses, on an operational basis, for the third quarter were $12.857 billion compared to $10.814 billion for the third quarter of 1998. The increase reflects the TCI and AGNS acquisitions and higher depreciation and amortization expenses but was slightly offset by lower access and other interconnection costs.

-- Access and other interconnection expenses fell by 4.3 percent compared to the third quarter of 1998. The decline is due primarily to mandated access reform and lower negotiated international settlement rates. The decrease was partially offset by a long distance volume increase of 8.9 percent, which was the result of high-teen growth in Business Services volume combined with the expected mid-single-digit decline in Consumer Services long distance volumes, and increased per-line charges.

-- Network and other communications services expenses were $3.869 billion, an increase from the $2.648 billion reported for the year-ago quarter. Excluding AB&IS and AGNS, network and other communications services expenses increased 3.6 percent. The number of wireless subscribers grew as a result of the continued success of AT&T Digital One Rate service which has resulted in higher off-network roaming expenses. A portion of the network expense increase was also attributable to growth in AT&T Solutions' outsourcing unit. These increases were partially offset by network cost control initiatives and lower per-call compensation expense.

-- Amortization of goodwill and other purchased intangibles was $358 million in the third quarter of 1999 versus $62 million in the year-ago quarter. The increase was primarily due to the TCI merger. Other purchased intangibles arising from business combinations primarily include franchise costs, customer lists and licenses.

-- Depreciation and other amortization expenses in the third quarter of 1999 increased 36.9 percent, compared to the same quarter in 1998. Excluding AB&IS and AGNS, depreciation and other amortization expenses increased 14.7 percent due to growth in AT&T's depreciable  asset base resulting from the continued investment in the company's infrastructure throughout 1998 and 1999.

-- Selling, general and administrative (SG&A) expenses increased 9.4 percent compared to the third quarter of 1998. Excluding AB&IS and AGNS, SG&A expenses decreased 2.4 percent versus the year-ago quarter due primarily to AT&T's cost control initiatives. The decreases were partially offset by increased spending in AT&T's growth businesses, including wireless and AT&T Solutions' outsourcing unit. On a reported basis, SG&A as a percent of revenues was 21.2 percent for the third quarter of 1999, an improvement compared to the 23.0 percent for the third quarter of 1998 and 22.1 percent for the second quarter of 1999.

-- In the third quarter of 1998, the company recorded a net restructuring and other charges benefit of $517 million. This includes a $602 million gain from pension settlements related to the voluntary retirement offer offset by $85 million of expense related to the TCG merger, which closed during the third quarter of 1998.

-- AT&T's operational operating margin, excluding AB&IS and AGNS, for the third quarter was 24.5 percent, up from the 20.8 percent for the third quarter of 1998. This improvement was attributable to AT&T's continued growth in revenues and lower cost structure.

-- Interest expense increased $345 million in the third quarter of 1999 compared to the third quarter of 1998. The increase was primarily driven by a higher level of average debt outstanding associated with AT&T's acquisitions, partially offset by a lower average interest rate. AT&T continues to refinance or retire assumed debt, as practical, to lower its interest expense.

-- AT&T's effective tax rate for the third quarter of 1999 was 35.2 percent, down from 37.5 percent in the third quarter of 1998.

-- AT&T's capital expenditures for the first nine months of 1999 totaled $7.9 billion and primarily supports cable operations, data services, wireless services and business local services. AT&T expects capital expenditures to total between $11 and $12 billion for 1999.

Balance Sheet Highlights

-- AT&T's total assets at September 30, 1999, were $126.373 billion, an increase from the $59.550 billion reported at December 31, 1998. The increase is primarily due to the acquisitions of TCI and AGNS.

-- Total liabilities were $78.381 billion at September 30, 1999, an increase from the $33.919 billion reported at December 31, 1998. The increase primarily results from the acquisition of TCI, including deferred income taxes and debt, as well as an $8 billion bond offering and the issuance of short-term debt. These increases were partially offset by the retirement of $2.1 billion in long-term debt.

-- During the second quarter of 1999, Microsoft Corp. purchased $5.0 billion of convertible securities from a subsidiary trust holding solely subordinated debt of AT&T (recorded net of a $0.3 million discount).

-- In September, AT&T issued $450 million in bonds in an all minority-led bond offering. It was the largest bond offering ever exclusively led by all-minority investment firms.

-- AT&T's debt-to-capital ratio (debt divided by total debt and equity) was 42.6 percent at September 30, 1999, compared to 20.9 percent at December 31, 1998. Equity includes the $5.0 billion convertible securities issued to Microsoft Corporation and debt includes the $1.6 billion nonconvertible securities issued by TCI's subsidiary trusts.

The foregoing are "forward-looking statements" which are based on management's beliefs as well as on a number of assumptions concerning future events made by and information currently available to management. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside AT&T's control, that could cause actual results to differ materially from such statements. For a more detailed description of the factors that could cause such a difference, please see AT&T's filings with the Securities and Exchange Commission. AT&T disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

NOTE TO FINANCIAL MEDIA: AT&T Chairman C. Michael Armstrong, Chief Financial Officer Dan Somers and members of the executive team will discuss the company's performance in a two-way conference call for financial analysts at 8:30 a.m. Eastern time today. Reporters are invited to listen to the call. From the U.S., callers should dial 800-288-8960 to access the call. Callers outside the U.S. should dial 612-288-0318.

An audio rebroadcast of the conference call will be available from 11 a.m. Eastern time on Monday, October 25, 1999 until midnight on October 27, 1999. To listen to the audio rebroadcast, U.S. callers can call 800-475-6701 and enter access code 470291. Outside the U.S., the rebroadcast is available by dialing 320-365-3844, and then entering the access code 470291. In addition, Internet rebroadcasts of the call will be available on the AT&T website beginning later today. The website address is http://www.att.com/ir/

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AT&T Group
Combined Statements of Income (Unaudited)
                                     For the Three      For the Nine
                                      Months Ended      Months Ended
Dollars in Millions                   September 30,     September 30,
(except per share amounts)          1999       1998    1999      1998

Revenues...........................$16,270   $13,653  $46,057  $39,695

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

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

Other income (expense)...............  (409)     156     (334)   1,169
Interest expense.....................   459      114    1,108      322
Income from continuing operations
 before income taxes................. 2,521    3,398    6,976    5,148
Provision for income taxes...........   888    1,275    2,679    1,901
Income from continuing operations.... 1,633    2,123    4,297    3,247
Income from discontinued operations (net of
  taxes of $6 YTD 1998)..............     -        -        -       10
Gain on sale of discontinued operations(net
  of taxes of $799 YTD 1998).........     -        -        -    1,290
Extraordinary loss (net of taxes of $80 in
  3Q 1998 and YTD 1998)..............     -      137        -      137
Income Available to AT&T Shareowners.$1,633  $ 1,986  $ 4,297  $ 4,410

Weighted average common shares and
  potential common shares
   (millions)(a)                      3,334    2,706    3,140    2,715

Per Common Share - Basic:
Income from continuing operations....$ 0.51  $  0.79  $  1.41  $  1.21
Income from discontinued operations..     -        -        -        -
Gain on sale of discontinued operations   -        -        -     0.48
Extraordinary loss...................     -     0.05        -     0.05
Total................................$ 0.51  $  0.74  $  1.41  $  1.64

Per Common Share - Diluted:
Income from continuing operations....$ 0.50  $  0.78  $  1.39  $  1.20
Income from discontinued operations..     -        -        -        -
Gain on sale of discontinued
 operations..........................     -        -        -     0.47
Extraordinary loss...................     -     0.05        -     0.05
Total................................$ 0.50  $  0.73  $  1.39  $  1.62

Dividends declared per common share..$ 0.22  $  0.22  $  0.66  $  0.66

1998 amounts have been restated to conform with our current
presentation and reflect the 3-for-2 stock split.

(a) Amounts represent the weighted-average shares assuming
dilution from the potential conversion of debt and equity securities
and the potential exercise of outstanding stock options and other
performance awards. Basic shares, assuming no dilution, were 3,195
million, 2,686 million, 3,045 million and 2,692 million for the three
months ended September 30, 1999, September 30, 1998, the nine months
ended September 30, 1999 and September 30, 1998, respectively.



EPS Reconciliation
                                     For the three months ended
(Dollars in millions, except  September 30, 1999 (1) September 30, 1998 (2)
 per share amounts)

                              After-tax Diluted EPS  After-tax Diluted EPS
Income from continuing operations
     attributable to AT&T Group $1,633   $0.50         $2,123    $0.78
Add:
Net loss of Cablevision and
      Excite@Home ($307 pretax)    190    0.06              -        -
Less:
Pension settlement gain ($602 pretax) and TCG merger-
 related expenses ($85 pretax)       -      -             287     0.10
Gain on sale of business            69   0.02               -        -
Operational earnings from continuing
     operations attributable
       to AT&T Group            $1,754  $0.54          $1,836    $0.68

(1) Included in AT&T's reported results for the three months ended
September 30, 1999, is a gain on the sale of a portion of AT&T's
ownership interest in AT&T Canada ($110 million pretax) as well as the
loss impact of Cablevision Systems Corp. and Excite@Home.

(2) During the third quarter 1998, AT&T recorded a net pretax
restructuring benefit of $517 million . This benefit resulted from the
settlement of pension obligations for former employees who accepted
the company's Voluntary Retirement Incentive Program offer, partially
offset by TCG merger-related expenses.

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