Verizon Communications Inc. and two unions representing 65,000 workers who had threatened to strike within hours agreed Sunday on a new three-year contract that provides 10.5% wage increases and changes in retirement benefits.

The pact, which must be ratified by union members, was hailed as a "breakthrough agreement in many ways" by Communications Workers of America President Larry Cohen.

The deal "provides a framework for growth at Verizon and a good standard of living with careers for our members," Cohen said.

It also extends union recognition to 600 former MCI technicians who had sought it since joining Verizon two years ago, the union said. Verizon said another 900 temporary employees would be regularized.

Verizon's Executive Vice President Marc C. Reed said the contract will allow the company to remain "focused on delivering to our customers the best in broadband, communications and entertainment."

No date was immediately set for union members to vote on the deal, which consists of many smaller contracts.

The Communications Workers of America and the International Brotherhood of Electrical Workers had threatened to strike at 12:01 a.m. Monday if no agreement was reached.

A walkout could have delayed installations and repairs of telephone and broadband lines. An 18-day strike in 2000 left a backlog of 230,000 orders and repair requests.

A previous contract expired a week ago, but union members continued working as negotiators hammered out the new one.

Company spokesman Eric Rabe said both sides bargained by phone and e-mail Saturday, broke for a few hours of rest and resumed talks Sunday afternoon.

Job security and health care were among the main points of contention. They were negotiated in 2003, after a threatened strike was averted when federal mediators joined the talks. That settlement was for a five-year contract.

The proposed new contract applies to workers in 10 northeastern and mid-Atlantic states and Washington, D.C., 50,000 of them CWA members and 15,000 in the IBEW.

IBEW president Ed Hill said the talks "met our goals to protect the retirees who helped to build this company and ... ensure future jobs for union members."

The union workers are in the traditional telephone part of the company, which is engaged in the labor-intensive process of replacing most of its copper phone lines with optical fiber. Verizon Wireless, the company's big growth driver, has few union employees.

A key element of the agreement was a provision for the company to contribute a fixed dollar amount per year of service toward future retiree health care costs. In addition, Verizon said it and the unions would work together on a health care reform initiative.