MCI Communications the second US long-distance phone company, said yesterday it was in talks to be acquired by British Telecom (BT) in what would be one of the biggest mergers ever.

Industry analysts said that if a deal emerges, it would send shudders throughout the worldwide telecommunications industry, and present an especially tough challenge for AT&T the leading US phone company.

British Telecom already holds a 20 per cent stake in MCI. Industry analysts speculated that a deal could be worth about $22.1 billion (£13.47 billion).

Analysts were speculating on $40 a share, which would value MCI at $28 billion, and leave British Telecom with a bill for $22.1 billion for the 80 percent of the company it does not already own.

Washington-based MCI said it expected the talks to be concluded this weekend. "MCI anticipates that its deliberations will be concluded this weekend and an announcement will be made prior to Monday morning," it said.

Analysts said a combination of the two companies would be a good fit in the super-competitive US long distance phone industry, where MCI and the number three company, Sprint, have been battling an ailing AT&T Corp.

"This is AT&T's worst nightmare. (AT&T Chief Executive) Bob Allen will not get a wink of sleep this weekend," said consultant Mr Jeffrey Kagan, of Kagan Telecom.

The British Telecom-MCI deal would be the largest between a British and American company, and it would rank as the second biggest ever involving a US company, behind the $30.6 billion buyout of RJR Nabisco.