NEW YORK (AP) _ America Online Inc. has rejected a takeover offer from AT&T Corp. to combine the world's largest online service with the biggest phone company, a published report said today.

The Financial Times, citing sources close to both companies, said AT&T chairman Michael Armstrong approached AOL several weeks ago with a tentative offer. But AOL officials told AT&T several days ago that they did not want to sell the company, the report said.

AOL's current stock-market value is more than $19 billion, and AT&T was willing to pay ``comfortably above that,'' the British business daily reported.

Spokeswomen from both companies declined to comment on the report.

The report sent AOL shares up $4.62 1/2, or 5 percent, to $93.62 1/2 in midday trading on the New York Stock Exchange. AT&T shares were up 75 cents at $62.68 3/4.

AT&T has been aggressively seeking ways to expand beyond its long-distance franchise since Armstrong took over in October, hoping to one day offer customers a package of long distance, local, wireless, paging and Internet services. The company agreed in January to acquire Teleport Communications for $11.3 billion in an attempt to gain quick entry into the local phone business.

AT&T has struggled to gain a significant foothold in the Internet service business. Its online service, AT&T WorldNet, has accumulated about 1.1 million customers since its 1995 launch, compared to AOL's worldwide membership of 12 million. AOL also operates CompuServe, a service with 2 million members.