Moody's Investment Service has lowered the credit rating for bond sales of Chesapeake & Potomac Telephone Co. of Virginia to Aa-3. An incorrect rating was reported Friday.

Moody's Investment Service yesterday lowered the gilt-edge credit rating of American Telephone & Telegraph Co. and 23 of its 24 local operating companies, declaring that the coming breakup of the Bell System will weaken all the AT&T companies financially.

The new, lower ratings will effect the value of bonds that are considered blue-chip investments, held by many thousands of Americans. They are expected to raise the cost of borrowing money through any new bonds issued by AT&T and its operating subsidiaries, which will become independent companies next Jan. 1 under a court-approved breakup of the Bell empire.

Eventually, the lower credit ratings could lead to higher telephone bills if local phone companies are forced pay higher interest rates on funds borrowed for expansion and improvements.

Moody's lowered the credit ratings of all the Bell System companies except Southern New England Telephone Co. The rating of AT&T itself was dropped one notch from Aaa--Moody's highest grade--to Aa-1.

The change in the ratings reflect Moody's belief in the decreased ability of AT&T and its operating companies to repay their debts. But all of the companies ended up with rankings in the top four grades. Moody's rating scale starts at Aaa, then Aa-1, Aa-2, Aa-3, A-1, A-2, etc.

The four Chesapeake & Potomac Telephone Companies lost their Aaa rating along with the most of the rest of the subsidiaries. C&P, the District of Columbia phone company, and C&P of Maryland were dropped to A-2 while C&P of Virginia and C&P of West Virginia were lowered to A-3.

"From the perspective of credit quality, the breakup of the Bell System must be viewed negatively," said Thomas J. McGuire, executive vice president and director of Moody's corporate department.

"The sum of the parts will not equal the whole. For different reasons and in different degrees the business risk in each of the parts will rise with divesture."

In a separate announcement reflecting the vast changes now occuring in America's telecommunications industry, Moody's upgraded the credit rating of one of AT&T's major new competitors for long distance business, MCI Communications Corp, from a speculative Ba-1 to Baa-3. Moody's said the change reflects its "belief that American Telephone & Telegraph will allow its market share to be reduced to concentrate on other revenue opportunities."

AT&T was forced to cut off its wholly owned local telephone companies under a court-approved agreement that settled federal antitrust charges. It will, however, retain its long distance service and manufacturing and research arms.

"We are witnessing a bold national experiment in competitive telecommunications. The result will be one of the most comprehensive reallignments of credit quality ever to occur in any industry," explained McGuire, Moody's executive vice president.

The bond market reacted nervously to Moody's mid-morning announcement; resale prices of Bell System bonds dropped between $10 to $20 on a face value of $1,000 while corporate bonds in general were down $2.50 to $5.

AT&T stock in consolidated New York Stock Exchange trading, however, rose 50 cents to $66.25 a share, despite a falling market. AT&T announced late yesterday the price of its proposed sale of 16 million new shares of common stocks would be priced at $66.25 a share. If there is enough demand, the underwriters can increase the amount of shares sold to as many as 17.6 million, which would raise a record $1.17 billion.

Moody's decision to lower AT&T's Aaa rating was immediately denounced as "harsh" and "not borne out by the facts" by the company's vice president and chief financial officer, William S. Cashel.

"For the most part," he said, "the financial position of the Bell companies' has been improving, not deteriorating."

He pointed out that another rating agency, Duff & Phelps, gave top marks to AT&T just a month ago. The other major rating agency, Standard & Poor's, said its analysts are meeting with AT&T officials.

Cashel's judgment was backed by some Wall Street analysts. "We believe Moody's is premature and the downgrading is likely to be erroneous," Alice Bradie of E. F. Hutton told Dow-Jones.

Fitch Investors Service Inc., a fourth rating firm, said it sees "no justification for a wholesale downgrading of the Bell System." It plans to retain its top-ranked Triple-A rating.

But the manager of a major institutional holder of AT&T bonds, William Foulk of New York State's $18.275 billion retirement fund, told Dow Jones' Capital Markets Report the Moody's downgrading was "fair." But he said the pension fund has no plans to sell any of the $223 million in Bell System bonds it owns.

The Bell System has 340 long and medium-term bond issues outstanding with a combined value of $45.8 billion. They make up 10 percent of the total bond market in the United States, and because they are so widely held by pension funds and insurance companies are the most actively traded.