The contract, for which the Saudi Arabian Ministry of Posts and Telecommunications has signed a letter of intent, calls for the building of a fully digital communications network, to be completed by the beginning of the next decade.
The awarding of the contract to AT&T follows lobbying by President Bill Clinton, and comes in the wake of the decision by the Saudi government to place most of a dollars 6bn aircraft order with US companies Boeing and McDonnell Douglas.
Robert Allen, chairman of AT&T, said 'we appreciate the support that the entire Clinton Administration has provided'.
Analysts viewed winning the contract as a coup for AT&T in the international telecommunications equipment market, seeing off challengers such as Siemens and Ericsson Telephone Co.
AT&T described the contract as being the largest in telecommunications history outside the US. The project involving the installation of 1.5 million digital lines,will double the capacity of Saudi Arabia's facilities.