NEW YORK - As telephone, computing, publishing and entertainment industries converge on the information superhighway, some investors are hoping for company alliances to turn into mergers.

But experts say megabids involving well known players will be rare, and transactions will be mostly limited to smaller players in niche markets.

``The smaller and mid-sized players will see some mergers, the bigger ones less so,'' said consultant Jeffrey Kagan, president of Kagan Telecom Associates.

The difficulties in mergers are in putting a future value on businesses each company contributes to an embryonic market.

The problems are illustrated by 1993's $20 billion merger plan between Bell Atlantic Corp. and cable TV group Tele-Communications Inc. This was torpedoed partly by a regulatory change which cut TCI's value.

``It was the merger that couldn't happen because of the variety of businesses they were putting together and the complexities of valuation,'' said Dave Goodtree, a consultant at Forrester Research.

``Further on, one of the biggest challenges is cashing in on the mergers, overcoming cultural and strategic differences,'' said Dwight Allen of Deloitte & Touche's new telecommunications group.

``It will be difficult to value what each party brings to a merger,'' said Philip Sirlin of brokers Wertheim Schroder.

So for now the dominant theme will be large companies competing at one level, and cooperating at another.

The information superhighway describes networks with the capacity to carry interactive and multimedia information as well as conventional TV and telephone, directly into the home and the office.

These products and services are seen worth hundreds of billions of dollars by the end of the decade.

Regulation, though still to be crystalized in detail, will follow a classic path of allowing all players access to all markets, analysts say. Dominant players will ultimately have to open networks at a fair price to smaller competitors.

But some areas are ripe for mergers and takeovers.

Equipment providers with niche skills will seek each other out to rival big players like AT&T Corp. which have everything the superhighway makers need under one roof.

AT&T created this capability by far-sighted and often huge takeovers of computing firm NCR Corp., McCaw Cellular Communications and Ziff-Davis's online service, Interchange.

Germany's Siemens AG has already created a $1 billion one-stop shop for superhighway equipment with Sun Microsystems Inc. and Scientific-Atlanta Inc.

The biggest opportunities are to buy small companies holding key skills to make the superhighway happen.

Analyst Jeff Sadler of Equitable Securities says a handful of telecom equipment firms with skills in broadband networking are ripe for takeover.

These include C-COR Electronics Inc., ANTEC Corp., TSX Corp., Pico Products Corp. and Harmonic Lightware Corp.

Goodtree's favorites for takeover are Fore Systems Inc., which is bringing video capability to office-type computer networks, local phone firm MFS Communications Inc., and Ralph Ungermann's business multimedia firm First Virtual Corp.

``Fore will either become a really big company or it will be bought out,'' Goodtree said.

Large content providers -- publishers, entertainment firms, and news groups such as Walt Disney Co. and Time Warner Inc. -- need to ensure as many networks as possible carry their information.

This does not preclude alliances, but non-exclusive distribution deals must not be jeopardized, so takeovers are much less likely here.

Likewise major software firms such as Microsoft Corp. and Oracle Corp., providing vital management and operating software for many different networks, are unlikely to cross their industry boundaries for mergers.

Uncertainties are pervasive. Phone companies and cable television firms are paying billions to build new broadband networks but they don't know how much consumers will pay for those new services.

This material is copyrighted and may not be republished without permission of the originating newspaper or wire service. NewsHound is a service of the San Jose Mercury News. For more information call 1-800-818-NEWS.