Preopen Trading: VoiceStream Leaps in Early Action; Futures Negative

Talk of a deal with Deutsche Telekom has VoiceStream hot on Instinet and Island, but the futures are pointing lower.
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(Updated from 7:22 a.m. EDT)

VoiceStream Wireless

(VSTR)

was ringing off the hook this morning, on news of its potential acquisition by

Deutsche Telekom

(DT) - Get Report

. Shares of VoiceStream were lately up 15 1/16 to 140 in early action, according to

Instinet

. The stock last traded at 142.875 on

Island

, which uses decimal pricing.

Deutsche Telekom is in serious talks to acquire VoiceStream Wireless,

The Wall Street Journal

reported, in a deal that could be valued at significantly more than $40 billion. DT's interest in VoiceStream could prompt Japan's wireless giant

NTT DoCoMo

to step up its efforts to buy VoiceStream, the

Journal

said. In the past few months, NTT DoCoMo has discussed to acquire a stake in VoiceStream, the

Journal

said, citing news reports.

The German telecom giant's bid comes as the company is considering a bid for

Sprint

(FON)

. Deutsche is also said to be considering a bid for

Qwest Communications

(Q)

.

German stock markets fell today on concerns that Deutsche Telekom's takeover attempt could be too costly. Germany's

Xetra Dax

was down 0.6%. After midsession, France's

CAC 40

was down 0.4% while the U.K.'s

FTSE 100

up 0.5% (see today's

European Midday Update for more). Japan's

Nikkei 225

lost 0.4% overnight, while Hong Kong's

Hang Seng

rose 0.7% (see today's

Asian Markets Update for more).

The

S&P 500 futures on

Globex

lately were down 3 to 1488.5, more than 2 points below

fair value as calculated by

Prudential Securities

. The thinly traded

Nasdaq 100

futures were off 1.7 to 3811.

Earlier: VoiceStream Sizzles on Deal Speculation

LONDON -- Reports that

Deutsche Telekom

(DT) - Get Report

has made overtures to

VoiceStream Wireless

(VSTR)

could leave

Sprint

(FON)

standing alone when the music stops in the latest round of telecom musical chairs.

It is widely believed that Deutsche Telekom's acquisitive ambitions wouldn't end with a purchase of VoiceStream, a nationwide wireless phone carrier, and that the company would go on to pursue additional targets. Sprint, which is facing opposition from the

Justice Department

in its attempted merger with

WorldCom

(WCOM)

, has been considered a likely partner for the German telecommunications company that is seeking a U.S. partner.

However, a purchase of VoiceStream would make Sprint a less likely partner for Deutsche Telekom, argued Martijn de Bruin, an equity salesman with

Banc of America Securities

in London, for the simple reason that the technologies of the two companies are incompatible.

VoiceStream uses global system for mobile communications, or GSM, which is the standard in Europe. In buying Sprint, Deutsche Telekom would also be buying Sprint PCS, the company's mobile arm, which operates on a different network that isn't compatible with GSM.

"The technologies don't mix," de Bruin said. "Your wireless assets don't combine."

Instead, de Bruin argues that

Qwest Communications

(Q)

would be a more suitable addition to a Deutsche-VoiceStream menage since its wireless network is compatible with VoiceStream's. Talks between Deutsche Telekom and Qwest broke down earlier this year as Qwest was in the midst of completing and acquisition of

U S West

.

More importantly, buying Qwest would solve a problem for Deutsche Telekom in its own backyard. Qwest has teamed with Dutch telecom operator

KPN

in a joint venture that at the end of this month will inaugurate several new networks linking major German cities.

"For Deutsche Telekom, Qwest-KPN is its main competitor in the German market," de Bruin said. "If they bought Qwest, the main competitor disappears."

Shares of VoiceStream traded in Germany jumped 13.15 euros, or 9.8%, to 147.50 euros ($140.70); while Deutsche Telekom shares declined 2.14 euros, or 3.5%, to 59.40 euros. Sprint was dipped 1.80 euros, or 3.2%, to 53.70 euros, and Qwest declined 50 European cents, or 0.9%, to 56.50. WorldCom was off 1.50 euros, or 3.1%, to 47 euros. (Like many U.S. companies, these shares are also listed on some foreign exchanges.)

Of course, Deutsche Telekom's efforts to purchase any U.S. company could run into serious barriers. Certain U.S. senators say they would oppose such a deal as it would violate a

Federal Communications Commission

regulation that prevents the transfer of radio licenses to companies that are more than 25% owned by foreign governments. Deutsche Telekom, once a German state-owned monopoly, has been privatized, although the government still owns more than 50% of its shares.

More broadly, the markets will be focusing on the earnings of several U.S. companies, including

Yahoo!

(YHOO)

, which, according to analysts polled by

First Call/Thomson Financial

, is expected to earn 10 cents a share for its second quarter, compared with 5 cents a year earlier. Yahoo! shares changed hands down 2 euros, or 1.72%, to 114 euros.

At 7 a.m. EDT, the September

S&P 500 futures were down 1.4 points, or 1.68 points below

fair value, which was little indication for the open. The

Nasdaq 100

futures were 12 points lower to 3816, also little indication for large-cap tech stocks in the early going. Fair value helps determine the tone of futures trading, often a good indication for how the securities market will open.