Europe's telecommunications market resembles the starting line of a huge sailboat race, with hundreds of hopeful participants jockeying for the best wind when the starting signal goes off.

The signal is to come in 1998, when European Union members are to dismantle their state telecom monopolies and open up to outside competitors.A flotilla of newcomers - not just conventional telecom operators, but utilities, railroads and even steel companies - are chasing a slice of the market.

But the scene is changing too fast to permit reliable forecasting.

In April 1993, AT&T Corp., the U.S. telecommunications giant, vowed to ''dig up the streets of Britain" if it got a license to provide telephone services, drawing skeptical responses from European telecom executives.

Last month, just before announcing its break-up into three separate companies, AT&T called Europe's bluff, announcing that it will launch a nationwide telephone service in Britain in head-on competition with British Telecom. Starting January, it will use the fiber network of U.S.-owned City of London Telecommunications to offer full service to business customers in London and other cities.

Residential service will follow in the spring.

Newcomers to Europe are pursuing a mouthwatering market, with the phone services alone worth around $190 billion in 1996, according to Dataquest, a British telecom consultancy.

But the monopolies aren't standing still.

Deutsche Telekom, its control over the world's third largest market drawing to an end, is being privatized, shedding labor and planning a listing on the New York Stock Exchange. France Telecom is suddenly bumping into competition at home, particularly in the corporate sector, where domestic and foreign firms are chipping away at its client base.

Of the estimated 2,400 multinationals in the world, some 800 have facilities in Europe, providing a solid customer base for telecom operators until full liberalization in 1998. The European market for corporate outsourcing will be worth around $1.7 billion in 1996, more than double the 1993 figure, according to Dataquest.

Some 50 top companies, including American Express, Rank Xerox and International Computers Ltd., set up a "club" - called the European Virtual Private Users Association - to buy cheaper calls to their plants, suppliers and distributors.

The monopolies are striking back.

Deutsche Telekom and France Telecom, for example, plan to invest over $1 billion in an alliance for a business data transmission service and an additional $4.2 billion on a 20 percent stake in Sprint Corp., the third largest U.S. long-distance telephone operator, to obtain a global reach.

The two planned alliances could fall afoul of regulators on both sides of the Atlantic. Karel Van Miert, the EU's competition commissioner, says he won't give the green light to the Franco-German project unless Paris and Bonn pledge to open up their domestic markets.

Deutsche Telekom and France Telecom are desperate to catch up with their more nimble competitor, British Telecom, which struck a $5.3 billion alliance with MCI Communications Corp., the second largest U.S. long distance operator. AT&T, which had hoped to link up with the French and German monopolies, backed off for fear of rejection by antitrust authorities. Instead, it struck an alliance with Unisource, which groups the national telecom operators of the Netherlands, Sweden, Spain and Switzerland.

Britain, where many newcomers set up base, is probably the most open market in the world with more than 150 firms licensed to offer telecom services. But after a decade of liberalization, British Telecom retains nearly 90 percent of the market, its 20-million-strong customer base dwarfing the 300,000 clients of its main independent rival, Mercury.

And it will be extremely difficult to challenge British Telecom because it owns 97 percent of the connections to British homes and businesses.

Nevertheless, competition is seeping through even into the most protected markets, with U.S. companies being sought as allies for their business and technological savvy. MFS Communications, for example, has just received the first license in France to build a fiber optic network for business customers - a 12-mile loop in Paris - in cooperation with France Telecom.

The firm, which already has built systems in London and Stockholm, has won a license for a network in Frankfurt.

The locals also are piling into the market, with utilities and railroad companies running telecom cable alongside their transmission grids and tracks. Eleven European railroads formed a joint venture to build a continental telecom network along their tracks. A U.S. firm, Global Telesystems Group, got involved as well, becoming a partner.

In Germany, RWE Energie AG, the country's second largest electricity generator, is hoping to use its 2,700 miles of glass fiber cable for high- quality voice transmission. Veba AG plans to invest around $4 billion in telecom over the next decade and has spent over $1 billion buying a 10.5 percent stake in Britain's Cable and Wireless.

The telecom bug has also bitten Germany's industrial giants, including Thyssen AG, the steel group, and Mannessman AG, better known for making pipes.