The big phone companies that are merging this year are bulking up to compete not only for the loyalty of teen cell phone addicts and home Internet users, but also for billions of dollars in government spending on telecommunications.

Verizon Communication Inc.'s purchase of MCI Inc. would vault it from fifth to first place among the federal government's telecom suppliers. Sprint, which was ranked second, is eager to market Nextel's push-to-talk feature now that the companies have merged. And SBC Communications Inc. is set to evolve from a bit player to third place in federal contracting with its planned purchase of AT&T Corp.

The prize is the $6.33 billion that research firm Federal Sources Inc. (FSI) estimates the federal government will spend this year for voice and data transmission, wireless, network services, and equipment -- spending that keeps growing with greater demand and new technologies. Five years ago, the research firm said, the figure was $4.47 billion.

The consolidation of big phone companies comes as the government invests in advanced telecommunications systems and spends heavily on network security. Agencies are working toward connecting to a government-wide network and upgrading old-fashioned phone systems into modern data networks that can transmit documents, e-mail and video. In the military and the Department of Homeland Security, the emphasis is on setting up fast communications networks that can help key players share critical information on the battlefield or in combating terrorist threats at home.

As telecommunications mesh with broader information technology systems, phone companies find they are competing against giant defense contractors for the biggest federal projects or partnering with them as subcontractors.

"In everybody's mind, the scope of telecom is increasing," said Ray Bjorklund, a senior vice president at FSI. "The technologies that are available are increasing at a faster rate."

As categories blur, even the size of the federal telecommunications budget is hard to pin down. Another research firm, Input Inc., estimates it at $16 billion this fiscal year, growing to $21.4 billion in 2010.

Although the business and consumer markets were top considerations in the recent round of phone company mergers, executives said federal contracting also entered into the equation.

"One of the key reasons MCI is so attractive to Verizon is its strong history in government markets," said Peter Thonis, a spokesman for Verizon, which expects to close its deal to acquire MCI by the end of the year.

MCI had $720 million in prime contracts for various agencies last year, according to data compiled by FSI and Washington Technology magazine. Those figures do not include subcontracts, classified services to the intelligence community, or contracts with non-executive-branch agencies such as the U.S. Postal Service and judicial and legislative agencies.

Verizon had $177.3 million in prime contracts in 2004.

Thonis said MCI's national and international networks "are critical components of government communications systems."

MCI has more experience and expertise selling to the government than Verizon, said Jerry Edgerton, MCI's senior vice president of government markets. "We bring with us a spirit of competition that we think Verizon does not have," he said. At the same time, he said, the merger would enable the combined company to compete for more government dollars through Verizon's affiliation with Verizon Wireless.

The second-largest telecom contractor, Sprint, this month closed its merger with Reston-based Nextel Communications Inc. Sprint had $493.1 million in prime contracts with the federal government in 2004; Nextel was not among the top 100 federal contractors, according to FSI.

When the company combines its operations fully, it will have nearly 1,000 people working to sell to federal and state government agencies, said Tony D'Agata, vice president and general manager of government systems for Sprint Nextel Corp. Sprint is already a 16-year veteran of the federal contracting business, and Nextel, with its popular push-to-talk feature, is a mainstay among public-safety agencies, he said.

SBC, which operates mostly in a 13-state region, will get to play a major role at the federal level for the first time when it closes its acquisition of AT&T, the third-largest telecom contractor, with $433.7 million in prime federal contracts.

"The government solutions business is multifaceted," said Lou Addeo, president of AT&T Government Solutions, a unit of AT&T. He said it incorporates cyber-defense, Web hosting, data-mining, modeling and simulation -- services that were not part of a telecom package 20 years ago.

Basic phone service is an ever-decreasing part of what MCI sells to the government, said Edgerton of MCI, which serves agencies including the Department of Defense, the Social Security Administration, the Department of Health and Human Services, the Federal Aviation Administration, and the Postal Service.

An increasing share of federal telecommunications spending goes to companies that are not in the phone business -- such as defense giants Northrop Grumman Corp. and Lockheed Martin Corp., which serve as systems integrators, tying together telecom networks with databases and security systems that help them function.

Last week, for example, Northrop Grumman announced it won a $19 million contract with the Air Force to integrate the agency's phone and network operations in 100 locations. Verizon is among Northrop's subcontractors on that project. Also last week, Falls Church-based General Dynamics Corp. said it received an $18 million contract from the National Security Agency to develop a highly secure version of a cell phone combined with a personal digital assistant, or PDA.

Some smaller players say consolidation in the telecom industry could reduce competition for the government's business.

"It's clear that when you used to have four companies and now you have two, you have limited competition," said Diana L. Gowan, senior vice president and general manager of federal services for Qwest Communications International Inc., which had $183 million in prime federal contracts last year. Qwest lost out to Verizon in a bidding contest for MCI. "I think we still remain the fierce competitor and more agile than they will be because they will be so big."

But bigness in the industry has not raised red flags with the largest government customer.

"We believe that we will have the level of competition necessary to get very, very good prices for federal agency customers," said Mary Alice Johnson, a spokeswoman for the General Services Administration, the largest buyer of telecom services. "The size of the government market will help ensure that all competitors sharpen their pencils and give us the best prices possible."

Staff researcher Meg Smith contributed to this report.