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Analysts expressed skepticism Monday after a Wall Street Journal report said that Deutsche Telekom was weighing a bid to take over U.S. peer Sprint Nextel, citing doubts over Deutsche Telekom''s ability to finance a deal and difficulties related to antitrust approval.

"Sprint has a market cap of $22 billion (and) Deutsche Telekom a cash position of around EUR2 billion at the end of 2007," Merck Finck analyst Theo Kitz said. "To finance the deal, Deutsche Telekom either has raise debt or exercise a capital hike. Both are not popular at the market."

Kitz has a hold rating on Deutsche Telekom''s shares, which, at 1102 GMT, were down EUR0.09, or 0.8%, at EUR11.69 in a flat overall market.

A deal of this type could catapult the German telecommunications giant''s wireless arm, T-Mobile USA, to the No. 1 position in the U.S., the WSJ report said. Deutsche Telekom''s deliberations are at a preliminary stage and management could still walk away, people familiar with the matter said.

UniCredit analysts also saw obstacles to a combination, but said such a deal would carry some business logic.

"A combination of the two operators would reduce the number of players in the market and form the largest mobile operator in the U.S.," UniCredit analysts said. "That means the merger would have a certain industry rationale."

UniCredit analysts, who have a buy rating on the share, said the German government stake in Deutsche Telekom was already a problem when the Bonn-based company acquired Voicestream, which is now T-Mobile USA.

They also point out that a deal would have to be financed and that Deutsche Telekom is currently negotiating to further raise its stake in Greece''s Hellenic Telecommunications Organization SA (OTE), making the U.S. appear less likely at this time.

Analysts at Landesbank Baden-Wuerttemberg said they doubted that antitrust authorities would approve such a transaction, given that a deal would cut the number of national U.S. operators to three from four. LBBW analysts added that the U.S. government wouldn''t welcome a foreign-owned company taking control of the country''s largest mobile phone operator.

T-Mobile is a distant No. 4 in the U.S. wireless market, the WSJ report said, but is eager to expand. By acquiring Sprint Nextel, it could roughly triple its client base in the U.S. and surpass leaders AT&T and Verizon Wireless, a joint venture of Verizon Communications and Vodafone Group.

Acquiring Sprint Nextel, however, would hand Deutsche Telekom another large restructuring task along with its German operations, the WSJ report said. Sprint Nextel has been struggling to retain customers, and its revenue slipped to $40.1 billion last year from $41 billion in 2006.

A Deutsche Telekom spokesman declined to comment whether the German former state monopoly telecom operator was considering a takeover of Sprint Nextel.

Sprint Nextel shares closed Friday unchanged at $7.29.



Source:Dow Jones Newswires