Mergers have been commonplace in the telecom sector in recent years, and utility expert Roger Conrad expects this trend to continue. Supporting these mergers, he notes, has been industry competition, technological advances, less-stringent regulation, the natural advantages of scale and a glut of capacity.

The editor of The Utility Forecaster points out that these factors triggered dramatic industry consolidation beginning in the late 1990s, when Wall Street threw "tens of billions of dollars at hyped-up startups." More mergers, he says, are "almost surely on the way."

One likely takeover target? Alltel Communications (NYSE:AT). The company, says Conrad, has been a prolific consolidator of rural wireless assets in recent years and now serves more than 11 million customers nationwide. Debt, meanwhile, is half last year's levels because of the 2006 spinoff of its wireline assets as Windstream.

Conrad explains, "Low debt, low customer turnover and robust growth have already attracted takeover interest from private capital, as well as national wireless giants Verizon Wireless and Sprint Nextel."

And while he admits that the dividend isn't much and that shares are more volatile than higher-yielding stocks in the sector, he still feels that patient investors stand to garner a substantial payoff from "either continued growth or a premium takeover." He rates the stock a buy on any dip to 60 or lower.

On the other side of the takeover equation, he says, "Our favorite stock among would-be acquirers remains Verizon Communications (NYSE:VZ). Verizon owns 55% of Verizon Wireless and Vodafone(NYSE:VOD) the remaining 45% but, Conrad notes, "Rumors persist that Vodafone is on the verge of cashing out its interest to pursue other acquisitions."

He explains, "Should that occur, it would juice up Verizon's cash flow, and costs would likely be held down by swapping the company's interests in Italy. But even if there's no deal, the venture will continue to fuel the parent's growth with its industry-low churn rates, strong customer growth and immense capacity to up sell new data and entertainment services."

Meanwhile, he adds, Verizon's business division --- which he calls the "crown jewel" from the MCI merger --- is also gaining steam. And, he notes, overall wireline revenue rose during the last 12 months. The fiber optic build-out is beating benchmarks for revenue generation, cost control, and winning regulatory approval to offer cable television service.

Ultimately, he believes, moving customers from copper to fiber optics will "sharply cut Verizon's wireline costs, while providing numerous opportunities for revenue gains and integration with its wireless network." For now, he points to Verizon's high quality and its solid dividend. He recommends the stock up to $38."

Steven Halpern is the editor of TheStockAdvisors.com, a free, daily website that provides the latest investment ideas from the nation's leading financial newsletter advisors.