Financial: AT&T's First Quarter Pre-Split Operational Profits; Were $1.00 Per Share, Post-Split of 67 cents, On Revenue Increase of 6.1 Percent - Company Financial Information

EDGE, On & About AT&T, May 3, 1999

AT&T Tuesday announced that first quarter operational profits for the AT&T common stock group were $1.00 per share on a diluted basis before the company's recently completed three-for-two stock split and excluding the impact of its merger with Tele-Communications Inc. (TCI). Post-split operational earnings per share were 67 cents on a diluted basis, an increase of 45.7 percent compared to earnings of 46 cents per share for the first quarter of 1998. Total revenues for the quarter rose 6.1 percent, compared to the same period last year, excluding TCI. The increase marks AT&T's fifth consecutive quarter of growth in total revenues.

AT&T completed its merger with TCI on March 9, 1999. Including the operational impact of TCI, AT&T's operational earnings per share on a pre-split diluted basis were 92 cents (or post-split of 61 cents) compared to 69 cents for the comparable 1998 quarter (or 46 cents on a post-split basis). These results exclude AT&T's investment in the publicly traded companies Cablevision Corp. and At Home Corp.

Tuesday's earnings report from AT&T refers only to AT&T common stock group and does not include the results of Liberty Media Group, which will report results separately. AT&T's first quarter earnings from continuing operations on a reported basis, including TCI, were 38 cents per share on a post-split diluted basis (or pre-split diluted basis of 57 cents), compared to 48 cents per share for the first quarter of 1998 (or pre-split diluted basis of 71 cents). First quarter 1999 reported results were primarily impacted by a charge for research and development associated with the TCI merger. The year-ago first quarter was impacted by a local asset impairment charge. Both periods also include gains from sales of certain nonstrategic businesses.

AT&T's total revenues for the quarter, excluding TCI, jumped 6.1 percent to $13.613 billion, compared to $12.831 billion in the first quarter of 1998. AT&T's business services, wireless services, AT&T Solutions and international operations and ventures all contributed to the revenue growth. As anticipated, these increases were partially offset by a decline in consumer services revenues. AT&T's total revenues on a reported basis for the first quarter, including TCI, increased 9.9 percent to $14.096 billion compared to $12.831 billion reported for the year-ago quarter.

"Our focus on execution is working," said AT&T Chairman C. Michael Armstrong. "For the fifth consecutive quarter, top-line revenues are up and SG&A expenses are down. That allowed us to meet investor expectations by increasing operational earnings, excluding TCI, 46 percent, while continuing to invest in future growth."

First Quarter Continuing Operations Highlights: * AT&T's business services unit reported first quarter revenues of $6.214 billion, an increase of 7.5 percent compared to $5.779 billion in revenues for the first quarter of 1998.

The company's consumer services unit had $5.486 billion in revenues for the first quarter, a decline of 3.4 percent compared to $5.680 billion for the year-ago quarter. Wireless services grew first quarter revenues 40 percent, adjusted for the sale of AT&T's messaging business in October 1998. Revenues of the company's other and corporate unit, which includes AT&T Solutions and international operations and ventures, climbed 69.1 percent in the first quarter to $351 million compared to $208 million in the first quarter of 1998. On a pro forma basis for a full quarter, AT&T's broadband and Internet services unit (which consists of businesses acquired in the TCI merger) increased revenues 7 percent to $1.309 billion compared to $1.223 billion for the first quarter of 1998 (excluding all announced cable partnerships and At Home Corp.). A detailed explanation of AT&T first quarter business unit performance can be found at http://www.att.com/ir/

* Total operating expenses for the first quarter declined slightly, to $10.774 billion, compared to $10.826 billion for the first three months of 1998. These expenses exclude TCI as well as restructuring and other charges. The decline reflects lower access and other interconnection costs and a continued reduction in selling, general and administrative expenses, partially offset by higher depreciation and amortization expenses.

On a reported basis, total operating expenses increased 4.6 percent for the first quarter of 1999 to $11.953 billion, compared to $11.427 billion for the year-ago quarter.

* Access and other interconnection expenses, both including and excluding TCI, fell by 5.2 percent, compared with the first quarter of 1998. The decline can be attributed to FCC-mandated reductions in per-minute access expenses and lower negotiated international settlement rates, partially offset by volume increases in business services.

* Network and other communications services expenses, excluding the impact of the merger, increased 3.6 percent year-over-year, driven primarily by higher off-network roaming charges and higher costs of wireless handsets, both attributable to the success of AT&T Digital One Rate service. The increase was also partly attributable to the growth in AT&T Solutions. These increases were partly offset by lower per call compensation expense resulting from FCC-mandated rate reductions in the first quarter of 1999. Including the impact of the TCI merger, these expenses increased $326 million, or 12.8 percent, compared with first quarter of 1998.