The two companies announced plans on Monday to pool their international operations and create a jointly owned, fast-growing telecommunications and Internet provider.

Officials at the US Federal Communications Commission, who have made brief comments on earlier telecom deals, were silent on Monday. A spokeswoman for the US justice department said the deal would be reviewed but declined further comment.

Regulators could be attracted to the AT&T-BT link because of its potential to generate more competition in two markets that are sorely in need of new players, attorneys said.

International long distance has long been plagued by high prices charged by state-owned monopolies and Internet service across the oceans is hobbled by undercapacity.

``Forget StevenSpielberg, this is the true summer blockbuster,'' said telecommunications attorney Nicholas Allard at Latham & Watkins. ``This has the potential to have a very

positive impact on international long distance and international Internet, but the one big caveat is, only if there is no abuse of market power.''

Such abuses could occur since the combined companies' operations would be by far the largest carrier of trans-Atlantic calls and cross-border calling within Europe. That could allow the companies to squeeze out competitors with predatory prices or discriminatory dealings, Allard said.

But a former top telecommunications regulator said conditions could be imposed to prevent such problems.

``Ultimately, I think it will get clearance but you may see some conditions,'' the former regulator said.

The companies could, for example, be required to allow competitors to terminate long-distance calls originating from BT's local network on the same terms as calls terminated by the new joint venture.

Anotherformer regulator compared the deal to the proposed merger of BT and MCI Communications Corp, which fell apart after WorldCom Inc outbid the British carrier.

``Assuming AT&T has a similar or greater amount of cross-oceanlines than MCI, then there's clearly a problem with the deal, but it's presumably fixable,'' the former regulator said.

Companies facing competition from the new AT&T-BT venture will likely also seek to drag out the approval process using tactics like those employed against the MCI-WorldCom deal. In that case, regulators ultimately required the divestiture of MCI's Internet business.

``People could raise some of the same issues raised against MCI and WorldCom,'' said an attorney John Clarke with Winthrop, Stimson, Putnam & Roberts in New York.

The joint venture structure, as opposed to an all-out merger, could help reassure regulators that improper behaviour can be eliminated, said George Reed-Dellinger, an industry analyst at HSBC Washington Analysis.

``The arrangement may appearmore arm's-length in nature, which could help it gain acceptability from a regulatory point of view,'' Reed-Dellinger wrote in a report on the deal issued on Monday.