'LET'S GET MARRIED!'

In a deal that will create the country's second largest broadband provider, Comcast Corp. will purchase MediaOne Group Inc. for $60 billion in stock.

The agreement was announced last week after what Comcast President Brian Roberts called an "intense" weekend negotiation between his company, the No. 4

U.S. cable operator, and No. 3 MediaOne. "We worked late into the night, and finally the boards said, 'Let's get married!'" he said.

If approved by the Justice Department and the FCC, the product of that union-which will retain the Comcast name-will have 11 million domestic subscribers and 18 million homes passed-12.5 million of those by hybrid fiber/coax upgraded for two-way traffic.

The merger idea arose as the companies were in discussion with AT&T over forming partnerships similar to the carrier's deal with Time Warner. "We found that we worked together better than we ever would have imagined," said MediaOne CEO Charles Lillis. They also found that Comcast competed in 55% of MediaOne's markets. The deal will give the new company dominant clusters in most of the country's top 20 cable markets.

And getting bigger fast is the point. "Scale is critical," Lillis said. "We're at a point in this industry where important policy issues are being settled, important technology choices are being made. This merger produces a company that is very large and a pure broadband play with an extraordinary balance sheet."

To further purify that broadband specialization, MediaOne will dispose of its interest in One2One, a small U.K. mobile phone operator.

"It's an effort to focus resources on one transport mode, cable, and on all the things that can be done with that," said Jack Dieroff, an analyst with Gleason Mott Investing. "Take that money, put it into finishing the last 30% of that network upgrade, and start rolling out product to fill those pipes."

One potential product is voice. With about 10,000 phone customers in New England, Georgia and California, MediaOne has been much more active in deploying cable telephony than Comcast.

Roberts also alluded to the ongoing efforts by AT&T to line up broadband partners for its cable telephony. "This enables us now to sit down and have more meaningful telephony discussions [with AT&T]," he said. "At the same time, we can do telephony on our own."

The purchase makes a partnership with the new Comcast more important than ever to AT&T. "AT&T has to do a deal with these guys, period," said Michael Harris, president of Kinetic Strategies. "Michael Armstrong's stated goal is two-thirds cable telephony coverage in the U.S., and these guys alone get them close to 60%."

One question that now looms large is the intertwined fates of @Home, in which Comcast holds a 12% stake along with AT&T, Cablevision and Cox Communications; and RoadRunner, a joint venture owned by MediaOne, Time Warner, Microsoft and others. Roberts and Lillis said the two services would coexist in the new company. But those statements have not kept analysts from seeing a potential urge to merge in this, the first direct link between the two on-line cable services.

"There's certainly an increased gravitational pull," said Harris. "But there would be such a culture clash that I can't see these two working together." More likely, he said, would be for Time Warner to redefine RoadRunner as a content service-a programmer like HBO-and then seek carriage for that service over the @Home network.