After months of speculation on Wall Street, it looks like MCI is finally up for grabs.

Leucadia National ( LUK), a New York-based insurance company and value investor, sought approval from U.S. antitrust regulators Monday to acquire at least 50% of MCI's common stock.

Shares of MCI and rival AT&T ( T) jumped 8% and 3%, respectively, on word of the move, which some investors see as an early sign of the long-awaited consolidation in the telecom sector.

If nothing else, Leucadia's interest suggests there may be some hope for hard-hit telecom stocks. Price wars and industry instability have crushed share prices across the sector over recent months. AT&T, for one, has lost a third of its value off highs reached this year.

"This could start a whole new round of mating dances," says Forrester analyst Lisa Pierce.

Bell Curve

Leucadia jumped into the phone business in 2002 when it acquired the failed Williams Communications, which emerged from Chapter 11 as WilTel. The deal gave Leucadia one of the nation's largest and most modern communications networks. The addition of MCI would give Leucadia an enviable business and government customer list as well as an enormous network. Leucadia representatives weren't available for comment.

Many investors have expected the Bells -- Verizon ( VZ), SBC ( SBC), BellSouth ( BLS) and Qwest ( Q) -- to broaden their scope by acquiring outfits like AT&T, MCI and Sprint ( FON). Tie-ups could help the big local phone companies, stuck with a declining core business, to serve lucrative government agencies and large corporations.

While previous informal discussions among telecom industry players have led to little formal action, Leucadia's move Monday may torpedo the torpor, says Pierce. "Since there is now evidence of at least one serious suitor, I think it could help speed up the process a bit," says Pierce, whose firm consults to all the major phone companies.

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