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September 15, 2009

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Deutsche Telekom shares dip on report

SHARES in Germany's Deutsche Telekom fell 1.3 percent yesterday after a report that the telecoms group may bid for United States rival Sprint Nextel.

Such a deal would catapult Deutsche Telekom's T-Mobile USA unit past market leaders AT&T and Verizon to the number one spot, but would cost billions of euros.

"The market won't like Deutsche Telekom spending billions for a takeover now," a Frankfurt-listed trader said.

Shares in Deutsche Telekom fell 1.3 percent to 9.41 euros (US$13.68) in morning trade and were one of the sharpest decliners among German large caps.

Heino Ruland from Ruland Research said that considering Deutsche Telekom's net debt of some 51 billion euros, "a capital raising effort would be required in case of a bid taking place."

"Even though strategically it would be the best move forward, it will weigh on the share price firstly because of that potential capital raising effort but secondly because of the time span needed to return the US peer to profitability," Ruland added.

Britain's Sunday Telegraph newspaper reported that Deutsche Telekom had appointed Deutsche Bank to advise on a possible run at Sprint, valued at US$11 billion. A spokesperson at Deutsche Telekom declined to comment.

Speculation about a possible purchase of Sprint Nextel has circulated ever since the US company announced a large goodwill writeoff in February 2008 which sent its shares to a five-year low.

Deutsche Telekom slashed its full-year profit forecast in April this year.



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