ATT &lt;T> PHONE PROPOSAL TO HELP PROFITS

  American Telephone and Telegraph Co's
  proposal to deregulate its long distance phone service is
  unlikely to produce a radical change in phone rates, but it
  should help the company's profits, analysts said.
      "Deregulation will mean more pricing discounts for large
  volume users, but status quo for residential users," said
  PaineWebber Group analyst Jack Grubman.
      But the proposals will scrap the pricing formula that has
  constrained the company's profits in the long distance
  business, leading to higher profit margins, analysts said.
      ATT has long pushed for deregulation of its long-distance
  business, the profits of which have been limited by a regulated
  rate-of-return on the company's investments. The rate was cut
  last year to 12.20 from 12.75 pct.
      Earlier today the company proposed to the Federal
  Communications Commission to scrap the formula, cut the amount
  of time needed to approve rate proposals, and leave it up to
  its competitors to oppose it filings.
      MCI Communications Corp &lt;MCIC> made a similar filing
  yesterday, saying greater the moves would increase competition
  in the telephone business.
      Analysts said the proposals will allow ATT to cut costs in
  the long-distance unit, and increase its profit margins
  previously constrained by the rate of return. But many said
  they did not expect the proposals to lead to higher prices in
  the industry, simply because of the competition the phone
  industry giant faces.
      "You probably wouldn't see as much of a price decline,"
  said Gartner Group analyst Fritz Ringling. "But you wouldn't
  see a rise." Grubman said the proposals will allow ATT to
  selectively raise or lower prices, depending on the market. "It
  will give ATT a lot more flexibility," he said.
      ATT now faces a period of comment in which a number of
  companies will be able to respond to the proposals in FCC
  hearings.
      It may face at least one strong opponent, U.S. Sprint, the
  long distance joint venture between GTE Corp &lt;GTE> and United
  Telecommunications Inc &lt;UT>.
      "We think the Congress of the FCC should establish a
  reasonable rate of return. Someone should establish it," a U.S.
  Sprint spokesman said. But he added the company was not opposed
  to greater competition.
      It may also take some time for the proposals to go through,
  and in the process they may be altered by the various
  constituencies affected by the move.
      "There's so much complexity, so much inertia, so much
  bureacracy, that stricly speaking about the mechanisms, it
  won't happen that fast," said analyst Victor Krueger of the
  Gartner Group.
  

