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May 5, 2008

Deutsche Telekom is reportedly considering an acquisition bid for struggling U.S. carrier Sprint Wireless.

Yesterday, German magazine Der Spiegel reported that managers at the parent company of T-Mobile USA were looking into a possible takeover or potential merger.

However, Der Spiegel didn't name any sources.

For its part, the Wall Street Journal said that the German telekom was considering a tie-up.

It said acquiring Sprint Nextel would make T-Mobile the largest U.S. wireless provider. The report also said that deliberations were still at the beginning stages, however.

For Deutsche Telekom, this move would be in line with its continued expansion in markets outside of Europe. The United States has been a strong growth market for the telecommunications firm.

T-Mobile USA added 3.6 million customers in 2007, with revenues up to $19.3 billion from $17.1 billion compared to the previous year.

While arguments in favor of the merger include Sprint’s low share price and the immediate top of the market position the two could occupy after a merger, complications include different networks: T-Mobile is GSM-based and Sprint runs on CDMA, which could lead to costly integration.

Additionally, it's unclear whether U.S. regulators would approve a merger between the third and fourth largest carriers, since some could say it would tend to create a monopoly in the wireless segment of the industry.

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Source: The Der Spiegel Newspaper.