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German company considering a bid for Sprint Corp.

Deal would make Deutsche Telekom a global operation

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FRANKFURT, Germany — Ron Sommer, the chief executive of Deutsche Telekom, has more than $100 billion to spend and wants to buy something big in the United States.

Now, with regulators in the United States and Europe vowing to block WorldCom Inc.'s purchase of Sprint Corp., the dapper but intense 50-year-old faces the biggest decision of his career.

Few companies fit better than Sprint into Sommer's dream of transforming Deutsche Telekom from a big local player to a truly global operator. Sprint's nationwide wireless network would complete Telekom's European wireless operations, and its high-speed Internet backbone network would shore up Telekom's ability to deliver high-speed services on both sides of the Atlantic. At the same time, few executives have been more outspoken in public about their lust for making big acquisitions — particularly in the United States.

For more than a year, Sommer has routinely described the United States as a top priority and he recently boasted that he had a war chest of more than $100 billion to make deals.

Telekom executives also say the main reason they did not bid for Sprint the last time around was their contractual agreement at the time with France Telecom.

At the time Worldcom reached its agreement to buy Sprint, Deutsche Telekom and France Telecom had agreed not to increase their existing 10 percent stakes in Sprint without the other's permission.

That agreement has since been abandoned by both sides, which means that Deutsche Telekom is in theory free to make a bid for Sprint. France Telecom, concentrating on its European operations, has shown no interest in making a bid of its own for Sprint.

But executives close to Deutsche Telekom caution that there are a host of issues that could get in the way of a bid for Sprint. The executives say Telekom has already sent indirect feelers to Sprint but has not made any decision about a bid and would not even consider talks unless Worldcom and Sprint officially call off their $119 billion merger.

They note that Telekom has also made new overtures to Qwest Communications International, which operates high-speed fiber optic networks and is now completing the purchase of US WEST Inc.

Sommer entered into talks with Qwest several months ago but abandoned the effort because of conflicts between Qwest and US WEST. But Qwest apparently remains appealing to Sommer, and a deal may be more feasible now that Qwest has fully acquired US WEST.

Under its merger agreement with WorldCom, Sprint is prohibited from entering talks with another company until the WorldCom merger is officially called off by both sides.

Industry executives widely expect that to happen quite soon, because the merger has been adamantly opposed by antitrust officials at both the U.S. Justice Department and the European Commission in Brussels, Belgium.

But one person close to Telekom cautioned Tuesday that Sprint might still not be ready to discuss a new merger for some time to come. Given the political sensitivities of a foreign company acquiring a major American telecommunications carrier like Sprint, moreover, Telekom executives are not about to consider a hostile or unsolicited bid.

Indeed, Telekom executives have been rattled by anti-foreign rumblings from Congress, where Sen. Ernest Hollings, D-S.C., has petitioned the Federal Communications Commission to block foreign companies from acquiring American telecommunication carriers.

Deutsche Telekom, once Germany's state-owned telephone monopoly, is now a publicly listed corporation that faces intense competition in every area except local telephone service. (The German government still owns 57 percent of its stock.)

Sommer has an enormous amount of capital at his disposal. Telekom raised $14.5 billion in fresh cash last week from a global bond offering that was carried out in dollars, euros and yen. That comes on top of nearly $10 billion from a secondary stock offering last year. Telekom has raised additional billions through the initial public offering of its T-Online Internet subsidiary as well as through the sale of several regional cable television networks.

Perhaps most important, Telekom has approved the issuance of billions of new shares, which can be used as currency to make acquisitions.

"I have absolutely no doubt that Telekom will make more than $100 billion in acquisitions in the next 12 months," said one industry analyst.

But Deutsche Telekom also faces enormous capital outlays. It will have to spend billions of dollars to acquire licenses for "third-generation" wireless services across Europe that cover mobile phones that may be able to offer Web browsing and video conferences. Following an auction for licenses in Britain earlier this year, Telekom pledged to pay 4 billion pounds ($6.4 billion) for a British wireless license — not including the costs it will assume for building a new network. Auctions in Germany, starting at the end of this month, could yield even higher prices. And Telekom appears intent on bidding in other countries as well.

Thus far, Sommer has signaled that he would pursue his "international strategy" even as he bids aggressively on new European wireless services.

Exactly how he juggles his various goals remains to be seen. Sommer is also mindful of the fact that his biggest international expansion efforts have thus far been failures.

His global alliance with France Telecom and Sprint, established in the early 1990s, collapsed in bitter acrimony with his French partners as all three companies found it impossible to chart a coordinated strategy. His bid two years ago to merge with Telecom Italia was rejected by the Italian company's shareholders. His bid to acquire Qwest earlier this year was thwarted as well.

If Sommer makes a big move on Sprint this time, people close to him say, he wants it to succeed.