AT&T offers $62 billion in cash, stock and assumed debt and preferred equity for MediaOne Group

In addition, the cash portion of the AT&T offer will be increased to offset up to a 10 percent decline from AT&T’s closing stock price of $57.00 per share on April 21, 1999. This will maintain a value of $85.00 for every MediaOne share if AT&T’s stock trades between $57 and $51.30 per share. If AT&T’s stock price increases, MediaOne shareowners will enjoy the full upside appreciation. AT&T said the stock portion of the offer will be tax-free to MediaOne shareowners.

In a letter to MediaOne Chairman and CEO Charles M. Lillis, AT&T Chairman and CEO C. Michael Armstrong said AT&T’s offer is clearly a superior value for MediaOne shareowners in terms of value and growth prospects for the combined companies.

AT&T’s offer represents a premium of 17 percent, or $8.6 billion, over the current value of Comcast’s offer and 26 percent over MediaOne’s current trading price. Unlike Comcast, AT&T is offering cash, as well as stock, and the cash portion of the offer is structured to protect MediaOne shareowners against some fluctuation in AT&T’s stock price. In addition, the shares AT&T is offering have full voting rights and pay a cash dividend, while Comcast’s shares issued in the proposed merger do not.

“This acquisition is not only an investment in AT&T’s future,” said Armstrong. “It’s also an investment in the future of a competitive communications market in the U.S.

“Combining AT&T and MediaOne means that far more American consumers will have a choice in local phone service,” he added. “Together, AT&T and MediaOne will bring broadband video, voice and data services to more communities, more quickly than we could separately or, in MediaOne’s case, with any other company.

“Ever since the Telecommunications Act of 1996 was passed, Americans have been waiting for someone to run another wire to their homes to give them a choice in local phone service and deliver the advanced services they expect in a competitive market,” Armstrong said. “Our earlier acquisition of Tele-Communications, Inc. and now our proposal for MediaOne Group should leave no doubt that we are serious about doing just that.”

AT&T intends to divest over a period of time certain non-strategic MediaOne assets currently valued at approximately $18 to $20 billion. The company also has plans to continue its aggressive efforts to reduce overall AT&T operating expenses by an additional $2 billion by the end of the 2000. The majority of the expense reductions will be in network costs, SG&A expenses, lower access fees paid to local exchange companies for handling long distance calls and more streamlined operations and systems. Additional savings in the range of at least $175 to 200 million will result from synergies in combining the former TCI and MediaOne cable operations.

AT&T plans to issue 626 million additional shares in the transaction. The company expects dilution to earnings per share of approximately 30 cents in the first full year of combined operation, resulting from additional shares outstanding and the cost of financing, partially offset by expense reductions and synergies. Following the purchase of MediaOne, cash earnings, which is net income per share plus acquisition goodwill, will decline by less than 10 cents per share. In addition, the acquisition over time will accelerate earnings, cash flow and revenue growth. It also will reduce the percentage of AT&T’s revenues that come from slower growth businesses such as consumer long distance.

AT&T said it is confident in its ability to complete the acquisition by the end of 1999, which is at least as quickly as the proposed Comcast merger. Because AT&T believes the transaction will advance the public interest by increasing competition, the company does not expect to encounter significant legal obstacles. AT&T also said it anticipates no difficulty in arranging financing for the cash portion of its offer and expects to have $30 billion of financing in place by April 30. Chase Manhattan Bank and Goldman Sachs Credit Partners L.P. already have each committed to provide $5 billion of the financing.

With the acquisition of MediaOne, AT&T’s owned and operated cable systems will pass approximately 26.5 million households, giving AT&T a significant presence in 18 of the top 20 markets. The addition of MediaOne’s cable systems will expand AT&T’s national coverage in key markets such as Boston, Atlanta, Richmond and Los Angeles.

In addition, AT&T will hold minority interests in a number of cable systems, including those owned by Time Warner Entertainment. AT&T will not be the operator of these systems. The company said that following its acquisition of MediaOne, it looks forward to strengthening its existing relationship with Time Warner in a way that accelerates the ability of the companies to deliver cable telephony and data services.

AT&T plans to combine MediaOne’s Denver-based headquarters with AT&T’s Denver-headquartered Broadband & Internet Services business unit. Both groups will report to Leo J. Hindery, Jr., president and chief executive officer of the company’s Broadband & Internet Services unit.

The company said Amos B. Hostetter participated in the development of AT&T’s offer for MediaOne. Hostetter is former chairman and CEO of Continental Cablevision, and former CEO of U.S. West Media Group, the two predecessors of MediaOne. Upon completion of the transaction, Hostetter will become non-executive chairman of AT&T’s Broadband & Internet Services unit, complementing the leadership of Hindery. Following completion, Hostetter also will join AT&T’s Board of Directors. In addition, AT&T will invite a current MediaOne board member to join the AT&T board.

AT&T’s advisors on the transaction are Goldman, Sachs & Co. and Wachtell, Lipton, Rosen & Katz.

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.

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April 22, 1999

Mr. Charles M. Lillis

Chairman and Chief Executive Officer

MediaOne Group, Inc.

188 Inverness Drive West

Englewood, Colorado 80112

Dear Chuck:

AT&T is pleased to offer to acquire all of MediaOne Group for cash and AT&T common stock. AT&T will pay $30.85 in cash, subject to upward adjustment, and .95 of a share of AT&T common stock, for each share of MediaOne common stock. Based on today’s closing price, our cash and stock offer has a value of $87.375 per MediaOne share.

AT&T will support the value of this offer by increasing the amount of cash per share to offset up to a 10% decline in AT&T’s stock price from yesterday’s closing price of $57 per share. With this feature, we provide downside protection for the value of our proposal, while MediaOne shareholders will realize all the upside of any increases in AT&T’s stock price.

The stock portion of our offer will be tax-free to MediaOne shareholders. If you wish, we would also be happy to discuss with you a structure that would give MediaOne shareholders the ability to elect between cash and AT&T shares, subject to the same aggregate proportion of cash and stock.

Our offer represents a 17%, or $8.6 billion, premium to the value of MediaOne’s previously proposed merger with Comcast based on the closing price of Comcast’s shares today. This is a 44% premium to the trading price of the MediaOne shares prior to announcement of its merger agreement with Comcast and a 26% premium to today’s MediaOne closing price. In addition, the future value of the AT&T shares we are offering, which are voting, cash dividend-paying shares, is far greater and more reliable than the non-voting, non-cash dividend-paying Comcast shares.

In developing this proposal, we have worked together with Amos B. Hostetter, the former chairman and chief executive officer of Continental Cablevision and former chief executive officer of U S WEST Media Group. Upon consummation of the transaction, Mr. Hostetter would become the non-executive chairman of AT&T’s Broadband & Internet Services business unit and would join the AT&T board of directors. We would also expect to invite one of MediaOne’s current directors to join the AT&T board upon completion of the merger.

The combination of our two companies is truly a powerful opportunity for both companies and our shareholders, as well as for employees, and will provide significant benefits to the American public. The merger will accelerate our ability to bring a wide array of broadband services to consumer and business customers across the nation. The AT&T and MediaOne networks are complementary, and together they will be digital, high speed and nationwide. With the addition of the MediaOne local broadband systems, we will offer customers superior connections for not only traditional video services, but also new competitive voice and data services. In particular, this will enhance our ability to deliver competitive local telephone services to millions of Americans.

Beyond our network, AT&T offers MediaOne access to unparalleled technology and service capabilities to enhance its offers and increase its services to its communities. These technology and service attributes will provide MediaOne with long-term sustainable advantages.

The combination will also allow us to join the management talents of our two companies. With our Broadband & Internet Services group headquartered in Denver, we will be able to combine readily and smoothly with MediaOne’s Denver-based headquarters.

We are quite confident of our ability to complete this transaction as quickly, if not more quickly, than the proposed Comcast merger. We have received commitments from Chase Manhattan Bank and Goldman Sachs Credit Partners L.P. aggregating $10 billion towards a credit facility. As lead arrangers, they have also advised us that they are highly confident of their ability to raise financing for the balance of the cash portion of our offer. In addition, our legal advisors are confident of our ability to obtain all necessary approvals in a timely manner.

We believe that our merger is fully consistent with the policy underlying the ownership limits that were contained in the now-suspended FCC cable ownership rules and is strongly in the public interest. However, should any questions arise with respect to this issue, we are ready to take such actions as are necessary to ensure timely legal and regulatory approval of the merger.

Given the clear superiority of our offer to the proposed Comcast merger, we would like to meet with you and your advisors as soon as possible to finalize a definitive agreement between our companies. The offer is, of course, subject to entering into such an agreement. In this regard, we are ready to enter into a merger agreement comparable to the Comcast agreement. We are also ready to exchange confidential information immediately.

We are committed to bringing an AT&T/MediaOne combination to a successful conclusion and would be delighted to discuss any aspect of our proposal. We look forward to meeting at the earliest opportunity to conclude this mutually beneficial transaction for both our companies. In addition, we and our advisors will be happy to meet with MediaOne at any time to answer any questions about our proposal.

Sincerely,