FTSE rally pauses near 2-month high as Petrofac slump weighs

* Blue-chip FTSE 100 edges 0.1 pct lower

* Petrofac slumps 23.7 pct after guidance

* Aviva (Other OTC: AIVAF - news) falls on possible deal to buy Friends Life

* BT gets boost as it looks at mobile options (Adds quote, detail, updates prices)

By Alistair Smout

LONDON, Nov 24 (Reuters) - Britain's top share index edged lower but remained near a two-month high on Monday, weighed down by a slump in Petrofac after it predicted a low net profit.

Telecom BT was boosted by speculation it would expand into mobile communications, but insurer Aviva was hit by its bid for peer Friends Life.

The benchmark blue-chip FTSE 100 index was down 0.1 percent at 6,746.65 points by 1144 GMT, failing to build on the 1.1 percent rally sparked by China's surprise interest rate cut on Friday, which helped secure a fifth straight week of gains.

Petrofac sank 23.7 percent, its worst one-day percentage drop ever, after the oil and gas services firm said it expected net profit in 2015 to be around $500 million, well below consensus estimates.

Atif Latif, director of trading at Guardian Stockbrokers, called the fall "overdone" and said the stock had value over the medium term.

Petrofac traded at a price-to-earnings discount to sector peers Saipem (Other OTC: SAPMY - news) , John Wood Group and Technip even before the morning's fall.

Aviva fell 4.9 percent after saying on Friday it had agreed terms on a possible deal to buy rival Friends Life for 5.6 billion pounds ($8.8 billion), as British pension reforms put pressure on insurers to find new business. Friends Life rose 4.7 percent.

Traders said that while the deal made strategic sense for the insurance firm, the 15 percent premium to Friends Life's share price was not good value.

Conversely, BT rose 2.7 percent after being linked with the purchase of EE and O2.

"The Aviva deal smells like an expensive deal, but perhaps they're staking their claim, knowing that competitors will shy away from a challenge," Chris Beauchamp, market analyst at IG (LSE: IGG.L - news) , said.

"For BT, it's necessary for them to do a deal to compete in on a broader front. Perhaps when details of the price come out, there will be similar falls in BT (as in Aviva)." (Editing by Ruth Pitchford)