AT&T's net income fell 42 per cent, to $1.15 billion, or 36 cents a share, from $1.99 billion, or 75 cents a share, a year ago.

Excluding several one-time items, operational earnings were $1.84 billion, or 57 cents a share, down 16 per cent from 68 cents a share a year ago.

The operating results beat Wall Street expectations of 55 cents a share, according to research firm First Call/Thomson Financial. Pro Forma revenues grew 5.9 per cent, to $16.34 billion from $15.42 billion a year ago.

While the company topped Wall Street's estimates in the fourth quarter, it said its first quarter operational profits will fall below expectations because of higher marketing and promotional costs.

AT&T expects its first quarter earnings to be 50-54 cents a share, below analysts' expectations of 58 cents a share, according to First Call/Thomson Financial.

Shares of AT&T, the No 1 US long-distance telephone company, fell 1/2 to 50 on the New York Stock Exchange amid weakness throughout the telecommunications sector.

"A good portion of the performance you're going to see overall for AT&T is going to come in the second half of the year," new chief financial officer Chuck Noski told analysts in a conference call.

The company reiterated that it expects its operational earnings for the full year to be $2.10 to $2.15 a share.

"We're delivering on our commitments to investors while aggressively executing our long-term growth strategy," said AT&T chairman C Michael Armstrong.

"In 2000, we'll continue to be focused on meeting our financial commitments, scaling our broadband and wireless operations, and accelerating growth throughout our business," he said.

AT&T has been expanding in fast-growing businesses such as cable television, data and Internet services to offset its shrinking consumer long-distance business.

During the fourth quarter, sales to businesses grew 6 per cent, to $6.3 billion, while sales to consumers fell 4.5, per cent to $5.4 billion.Wireless revenues, including AT&T's recent acquisition of Vanguard Cellular Systems, increased 41.6 per cent to $2.1 billion.

Wireless subscribers grew 33.4 per cent to 9.6 million, and average revenue per user increased almost 11 per cent to $66.80 a month. AT&T plans to launch a tracking stock for its wireless operations later this year.

Revenues in the broadband unit, which includes its recent acquisition of cable television company Tele-Communications Inc., increased 7.9 per cent to $1.5 billion.

AT&T, which is set to become the No 1 US Cable television operator through its planned purchase of MediaOne Group said it may take an unspecified charge in the first half of 2000 for costs related to its acquisitions and its plans to cut $2 billion in costs by the end of the year.

AT&T said it may cut workers in the slower-growing segments of its business, such as consumer long distance, as part of its cost-cutting plan.

AT&T's fourth-quarter operating expenses increased to $13.069 billion from $10.655 billion a year ago due to the acquisitions of Tele-Communications and International Business Machines Corp.'s global data network.