Qwest Communications

(Q)

said Wednesday that it remained in talks with an unidentified telecommunications company about a possible acquisition.

The uncertainty surrounding Qwest's chances of being acquired and the fate of its acquisition of

U S West

(USW)

have battered the company's stock in recent sessions.

Qwest's reaffirmation of the talks followed an article in

The New York Times

on Wedneday that said

Deutsche Telekom

(DT) - Get Report

, widely believed to be Qwest's suitor, had essentially ended negotiations to acquire Qwest and U S West.

Qwest's stock closed down 2 7/16, or 4%, at 53 9/16. The stock has dropped about 16% since markets closed last Friday. Qwest disclosed late Sunday night that it has been in discussions with "a major telecommunications company" about acquiring it and U S West.

U S West was up 1 1/2, or 2%, at 69 5/8, while American depositary receipts of Deutsche Telecom were down 2 15/16, or 3%, at 92 1/4.

Qwest has not publicly acknowledged that it is being courted by the German phone giant, but analysts and other market watchers have pointed to Deutsche Telekom as the only likely suitor.

The New York Times

reported that Deutsche Telekom was spooked by Qwest's apparently ironclad deal for U S West, and it quoted an unidentified executive close to the discussions as saying the talks are "dead in the water."

On Wednesday, a Qwest spokesman, Tyler Gronbach, said the company was still holding talks with its unidentified suitor.

In its statement Sunday night, Qwest said its principal shareholder, the Denver billionaire Philip Anschutz, was supportive of transactions with the unidentified telecommunications company.

U S West reacted angrily to Qwest's announcement Sunday night, saying that it hadn't been informed of Qwest's talks, and that it intended to sue Qwest for a sum much higher than the agreed $800 million breakup fee if it tried to bust out of the companies' previously announced merger.

Qwest has since reiterated its interest in completing the U S West merger. That prospect could have soured Deutsche Telekom, which might be unwilling to pay extra to also acquire U S West and enter into the complex realm of U.S. local phone service providers.

If Deutsche Telekom has indeed given up on its quest for Qwest, it is expected to turn its sights to Bermuda-based

Global Crossing

(GBLX)

, which is building a global ground-based and trans-ocean fiber-optic telecommunications network.

U S West and Qwest, both based in Denver, had originally announced their merger deal last July, when Qwest's hostile bid for the local carrier eventually broke off a deal that U S West had previously struck with Global Crossing.

U S West's confidence in Qwest's commitment to the merger have also been called into question recently by press statements by Qwest Chairman Joseph Nacchio, who has raised concerns that the proposed merger might not pass regulatory muster.

Regulators might ultimately kill the deal because, as a regional Baby Bell company, U S West is not allowed to offer long-distance services in its 14-state home territory. Antitrust concerns would prohibit Qwest from offering long-distance service in those areas until those local phone markets become more competitive.