BRITISH TELECOM APPEARS POISED TO BUY MCI.

Byline: Mark Landler The New York Times

In the most dramatic foray ever by a foreign company into the U.S. communications business, British Telecommunications could announce as early as Sunday that it has agreed to buy MCI, the nation's second-largest long-distance company, in a deal worth more than $22 billion, people close to the situation said Friday evening.

If the acquisition is approved by the boards of both companies in meetings today, it would be the first time a foreign company has taken control of a major U.S. telephone company. In fact, it would be the largest foreign takeover of any U.S. corporation, coming in a year when mergers and acquisitions are at a record-setting pace.

BT, as the British phone company is known, has held a partial stake in MCI since 1994. An outright merger would create a colossus bestriding the Atlantic, with $38 billion in annual sales, 182,000 employees, 42 million business and residential customers, and operations in 72 countries. Only NTT, the Japanese telephone giant, and AT&T would be larger, while Deutsche Telekom would be about the same size.

At a time of increasing demand for global communications networks, a BT-MCI deal would very likely put pressure on other U.S. and foreign companies to forge new international partnerships. And yet analysts said the bigger significance could be the new financial clout that MCI would wield within the United States as full-fledged competition breaks out in the local telephone business.

News of the proposed deal left Wall Street analysts and industry executives slack-jawed Friday, while government regulators and lawmakers said it would draw close scrutiny from the Clinton administration, which is seeking to pry open overseas markets for U.S. corporations.

``If this is just BT taking a larger stake in MCI, there's a lot less here than meets the eye,'' said Daniel Reingold, an analyst at Merrill Lynch. ``But if there's a big local strategy, then it gets interesting.''

British Telecom, which already owns 20 percent of MCI Communications Corp., plans to buy the remaining 80 percent with a combination of stock and cash that values MCI at about $36 a share, people familiar with the transaction said. MCI shares closed Friday at $30.25, up $5.125, in Nasdaq trading. BT's American Depository Receipts closed at $55.50, down $2.125.

The two companies would say Friday only that their boards were ``considering a possible strategic merger'' and that the proposed transaction could still fall through. The companies said they would complete their deliberations and make an announcement by Monday.

After that, the companies will have to satisfy federal regulators.

``This is landmark deal that will require some very careful thinking,'' said James H. Quello, a commissioner on the Federal Communications Commission. ``I am open-minded about it, but we will have to be reassured on having reciprocity with the British market.''

At the moment, federal law prohibits foreign companies from owning more than 25 percent of an American phone company. MCI received a waiver raising the cap to 35 percent for British Telecom's initial investment. FCC officials said Friday that the commission could lift the ownership cap if it determined that it was in the public interest to do so.

Edward J. Markey, D-Mass., the ranking minority member of the House subcommittee on telecommunications, said, ``I think Congress will examine very closely issues of reciprocity, fair market access, and what this deal would mean for U.S. jobs.''

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Chart: British Telecom and MCI alliance