ATT <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 <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 <GTE> and United Telecommunications Inc <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.