Rival’s $1.7-Billion Stake in AT&T; Moves Closer to Sale : Communications: British Telecom wound up with a 2% share when AT&T; bought McCaw.

NEW YORK —  AT&T; Corp. on Thursday began to pave the way for British Telecom to sell its $1.7-billion stake in AT&T;, ending an odd investment between the two rivals.

British Telecom for several weeks has owned about 2% of AT&T;, its largest competitor on the global telecommunications stage. British Telecom has already bought a 20% stake in MCI Communications Corp., AT&T;’s largest long-distance rival.

British Telecom wound up owning a piece of AT&T; when the U.S. company bought McCaw Cellular Communications in September. British Telecom had owned 17% of McCaw but said it would divest after the merger.

To untangle the knot, AT&T; provided the Securities and Exchange Commission with documents necessary for an underwritten secondary public offering of the nearly 36 million AT&T; shares British Telecom holds.

British Telecom can now sell its stake whenever and however it chooses.

“The method and the timing have not been decided,” said Jim Barron, a New York-based spokesman for British Telecom.

The company played the crowning role in the AT&T; and McCaw merger during a frenzied weekend in August, 1993, which culminated with AT&T; Chairman Bob Allen and British Telecom Chairman Iain Vallance chatting on New York’s Park Avenue.

Vallance then flew back to London and obtained the British Telecom board’s approval, the last thing AT&T; and McCaw needed to announce the deal.

AT&T;’s stock price has languished recently, partly on fears of the big British Telecom stake coming onto the market all at once. But AT&T; shares jumped $1.375 to $48.625 on the New York Stock Exchange Thursday. British Telecom was unchanged at $58.875.

AT&T; had to report one month’s financial performance of the combined AT&T-McCaw; in the documents. It said it earned $429 million, or 27 cents a share, on revenue of $6.3 billion in October, the first month of its fourth quarter.

Rick Miller, AT&T;’s chief financial officer, cautioned against drawing conclusions about the full quarter from one month’s performance. But he also said the results were “consistent with trends we have demonstrated in the first three quarters of 1994.”

With McCaw factored in, AT&T; earned $3.37 billion, or $2.16 a share, on revenue of $53.98 billion in the first nine months of the year.

In a telephone broadcast to financial analysts, Miller also tried to allay worries that AT&T; would soon face competition in long distance from local telephone companies or throw away a lot of money at the government’s radio spectrum auction that began this week.