D.Telekom pressed to do M&A, looks at Sprint: sources (Reuters)
"Berlin is very clearly on an expansion course and is putting pressure on Deutsche Telekom," the source told Reuters on Monday, in opposition to the reason that speculation swirled the German company could bid for U.S. wireless phone company Sprint Nextel (S.N).
A source close to the company said Deutsche Telekom (DTEGn.DE) had been looking at Sprint Nextel since the U.S. company announced a huge goodwill writeoff in February. The person declared no settlement had been taken on whether to bid.
The Berlin government still owns about a third of the former state-owned company, has a representative on its supervisory committee and has a greater say in company decisions.
Asked about Sprint Nextel, a finance ministry spokesman declared: "We don't know anything round it. I am not either confirming nor denying anything."
Deutsche Telekom Chief Executive Rene Obermann has said he wants to grow the group's mobile phone business through acquisitions to compensate for a dwindling fixed-line business and has linked his performance to boosting the participate price.
Deutsche Telekom shares were down 1.9 percent at 11.57 euros by 1420 GMT, the leading decliner among German blue-chips (.GDAXI), in that case Sprint shares were 7.9 percent higher at $8.51.
Such a deal would vault Deutsche Telekom's T-Mobile USA one past AT&T (T.N) and Verizon Wireless (VZ.N) (VOD.L) to the number one disgrace among U.S. mobile phone service providers, but industrial art experts were disbelieving Telekom would draw apart it off.
"I cannot image that Telekom would decide to build this step at this stage," said Heinrich Ey, a fund manager at Allianz Global Investors.
MARKET POWER
Sanford C. Bernstein & Co analyst Craig Moffett estimated that Sprint commands 19 percent of the U.S. wireless market by subscribers, season T-Mobile holds 12 percent. Combined, they would go too far AT&T's 27 percent have a portion of, he said.
"Such market power concentration would likely draw very significant U.S. antitrust scrutiny," he said.
Ey said Sprint Nextel's low share price may make a takeover look attractive, but the allot would require heavy investment to integrate different network technologies.
Sprint, which has been struggling with network and customer service problems, has been running two networks that are different from T-Mobile's GSM infrastructure. Its new UMTS systems are expected to launch by mid-year.
Buying Sprint would also bind up management at a time when Deutsche Telekom is close to acquiring the Greek ruling power's picket in OTE (OTEr.AT), Ey added.
"Telekom wants to become less dependent put on the Germany business. OTE is a correct step in this regard, excepting Telekom would be doing itself no favors with Sprint," he said.
Deutsche Telekom declined to comment on any potential interest in Sprint Nextel. Sprint moreover declined to comment.
In March, a research report by Merrill Lynch fuelled speculation Deutsche Telekom might consider a takeover of the third-biggest U.S. wireless carrier. Deutsche Telekom's T-Mobile USA is the fourth-biggest U.S. operator.
Merrill said Sprint's operational problems would cause it to cut prices in any effort to keep and win customers, potentially starting a price hostility among U.S. operators, but one acquisition would preclude such a development.
Whether the German government would ultimately bind one’s self to Deutsche Telekom essentially congruous a U.S. guests is an open question, analysts have said.
Deutsche Telekom in September acquired SunCom Wireless for $1.6 billion in cash and bought U.S. wireless company VoiceStream in 2000 for $35 billion.
(Additional reporting by Tiffany Wu and Ritsuko Ando in New York; Editing by David Holmes)
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