Using a theory of polarizable fluids, we extend a variational treatment of an excess electron to the many-electron case corresponding to finite metal concentrations in metal-ammonia solutions (MAS). We evaluate dielectric, optical, and thermodynamical properties of MAS at low metal concentrations. Our semianalytical calculations based on a mean-spherical approximation correlate well with the experimental data on the concentration and temperature dependencies of the dielectric constant and the optical absorption spectrum. The properties are found to be mainly determined by the induced dipolar interactions between localized solvated electrons, which result in the two main effects: the dispersion attractions between the electrons and a sharp increase in the static dielectric constant of the solution. The first effect creates a classical phase separation for the light alkali metal solutes (Li, Na, K) below a critical temperature. The second effect leads to a dielectric instability, i.e., polarization catastrophe, which is the onset of metallization. The locus of the calculated critical concentrations is in a good agreement with the experimental phase diagram of Na-NH(3) solutions. The proposed mechanism of the metal-nonmetal transition is quite general and may occur in systems involving self-trapped quantum quasiparticles.