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Cable stocks surge on merger mania

Cable stocks get a boost from news of AT&T's surprise bid to buy MediaOne, yet another example of the mad rush for bandwidth in the communications industry.

Cable stocks got a boost today from news of AT&T's surprise bid to buy MediaOne, yet another example of the mad rush for bandwidth in the communications industry.

AT&T's $62 billion offer for MediaOne, aimed at beating Comcast's previous bid, is only the latest in a string of mergers, cable system swaps, and alliances in the cable industry.

Aside from stock in MediaOne, which closed more than 11 percent higher, Jones Intercable, Adelphia Communications, Cablevision, and Century Communications posted strong gains on Wall Street.

The promise of a cable as a new conduit for the delivery of voice and data has thrust a formerly tight-knit industry to the forefront of the telecommunications revolution.

To take advantage of these new opportunities, the cable industry is rapidly consolidating to grab a share of the new market. Yet the flurry of mergers and acquisitions has left competitors with an increasingly shrinking pool of possible partners, according to analysts.

Jones gained nearly 10 percent while Century was up nearly 7 percent and Adelphia added 4 percent. Cablevision shares gained more than 8 percent and Cox Communications posted more modest gains.

Shares in @Home Network, a cable-based high-speed Net access provider controlled by AT&T, also performed well, gaining nearly 9 percent at the close of market trading.

But analysts say that AT&T's bid to buy MediaOne may signal the last of the large cable acquisitions in the near term, rather than spark a flurry of continued acquisition deals.

"Most of the biggest guys are gone. It's pretty much slim pickings at this point," said Philip Wohl, a telecommunications analyst with financial publisher S&P Equity Group. "It's going to be hard for an MCI or a Sprint to duplicate [AT&T's] effort. They've pretty much beat everyone to the punch."

In addition to AT&T's megamerger with the former Tele-Communications Incorporated and its proposed purchase of No. 3 MediaOne, a number of smaller cable operators have been gobbled up--or are in the process of being acquired--by the so-called middle tier of cable operators.

Last month, Adelphia announced it would acquire Century. Coupled with its proposed acquisition of Harron Communications, Adelphia is expected to have about 5 million subscribers, landing the company solidly in the increasingly fatter middle tier of the market.

Just yesterday Cox agreed to buy Media General, a 260,000-subscriber strong cable operator, but the deal was drowned out by the commotion created by AT&T's MediaOne bid.

Comcast, with about 4.5 million subscribers, recently closed its acquisition of a controlling stake in the smaller Jones and agreed to buy Greater Philadelphia Cablevision.

Hoping to capitalize on the upward movement of cable stock valuations, Microsoft co-founder Paul Allen reportedly intends to take his rapidly growing Charter Communications public.

Charter has been among the most aggressive in adding smaller cable companies to its stable. The cable operator will have about 3 million subscribers after a number of deals involving Marcus Cable, Helicon Cable Communications, Greater Media, Rifkin Acquisition Partners, InterMedia, and Renaissance Media Group, are completed.