California-based AirTouch will acquire New Vector, U S West's domestic cellular operation, and U S West's interest in PrimeCo Personal Communications, an advanced wireless joint venture among three Baby Bell regional phone companies.

AirTouch will assume $2.2 billion of U S West debt and will also provide its stock to
U S West shareholders, tax free. The deal will also enable U S West to focus on its cable and phone operations.

"This is a win-win transaction because it brings certainty to the marketplace," said Frederick Moran, telecom analyst for Furman Selz. "It brings AirTouch terms that investors can live with that are not significantly dilutive, and U S West gets the necessary capital to push ahead with its plans for cable."

As for AirTouch, the company will develop a much wider wireless presence, which will loft it into the big leagues.

"Today there are only three companies with a national footprint in wireless: AT&T, Sprint and Nextel," said Michael Elling, a wireless analyst for Prudential Securities. "I think AirTouch could easily be number four. It would be four guys who would divvy up 100 percent of the market. I think there's a real opportunity here."

There is one potential snag: The deal is structured to be tax free. Congress is considering so-called "Morris trust" legislation which, if adopted as law, would eliminate the way this and other deals have achieved tax free status. In that case, U S West and AirTouch say they would continue their joint venture agreement.

But the betting is that the deal to beef up AirTouch and lighten U S West's debt load will go through.

On Friday, U S West Media Group (UMG) stock rose 3/8 to 17-5/8, while AirTouch (ATI) rose 1 to 24-1/2.