The plan, which also calls for the creation of a tracking stock for the company's consumer long-distance division, was approved late Monday by AT&T's board of directors, The New York Times reported Tuesday, citing people close to the company.
The remainder of AT&T would oversee its telephone network as well as the division serving business customers, the Times reported.
Board members of AT&T were reportedly meeting Monday to consider a plan, tagged Project Grand Slam, to split the company into four free-standing businesses. Analysts who follow AT&T said Wednesday is almost certain to bring some major change.
"I expect AT&T to announce something big on Wednesday and I hope that they go through with, yes, Project Grand Slam," said Patrick Comack, an analyst with Guzman & Co. "I think the Street needs to see a plan."
If spun off, AT&T's cable operations would become the nation's biggest.
In 1984, the former telephone monopoly spun off its local calling operations as seven Baby Bells, several of which have since merged. In 1996, AT&T spun off its communications equipment arm as Lucent Technologies Inc. and its computer division as NCR Corp.
AT&T is one of the nation's most widely held stocks after Metropolitan Life Insurance Co., Lucent and Avaya, an office phone system maker just spun off by Lucent.
Rumors have swirled for several weeks about the future of AT&T, whose stock price has languished as the company continues struggling under the demands of a sweeping overhaul.
Some of the speculation has AT&T considering a merger with British Telecommunications PLC. Other speculation has the company selling off some of the businesses chief executive C. Michael Armstrong has purchased in recent years for more than $100 billion.
AT&T, which is scheduled to release its third quarter earnings on Wednesday morning, has declined to comment on the rumors. A spokeswoman refused on Monday even to confirm whether the company's board was meeting.
AT&T's market valuation has dropped by about $70 billion since January, partly because of falling prices in the long-distance industry.
AT&T shares closed Monday at $27.63 in trading on the New York Stock Exchange, up 50 cents.