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D.Telekom JV could jump Sprint hurdles

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ATHLETICS/Deutsche Telekom is struggling in two of its most important international markets and desperately needs to find a quick fix. Its proposed joint venture with France Telecom is a graceful way to establish a leading position in the UK market. But buying Sprint Nextel in the United States looks far less sensible.

A takeover of its rival would catapult Deutsche Telekom past AT&T and Verizon to U.S. number one position. However, the deal looks a costly way to get its operations there growing again. Talk of a bid for Sprint Nextel by T-Mobile USA — the business Deutsche Telekom acquired when it bought VoiceStream in 2000 — is hardly new.

But Monday’s fall in the German company’s share price on the latest report that it is looking at a bid suggests investors still have misgivings about the idea.

After all, Deutsche Telekom forked out $25 billion in shares and cash to buy VoiceStream at the top of the market, piling on debt which almost brought the telecoms group to its knees but failed to deliver the major market presence it wanted. Its strategy since then has been all over the place. It first looked at selling  the U.S. business, before apparently changing tack by considering buying a rival.

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