VoiceStream is considering a merger with Cingular Wireless, a deal that, if completed, would put the company on similar footing to the largest wireless operation in the U.S.

According to a report published in The Wall Street Journal, the talks are at an early stage. VoiceStream is a unit of Germany's Deutsche Telekom ( DT), while Cingular is owned by SBC Communications ( SBC) and BellSouth ( BLS).

The report also indicated that VoiceStream is still holding merger talks with AT&T Wireless ( AWE), continuing discussions that began a few weeks ago.

VoiceStream has about 8 million subscribers, and Cingular has around 22 million users. Verizon Wireless, a joint venture of Verizon Communications ( VZ) and the U.K.'s Vodafone ( VOD), has about 30 million customers. The report said analysts are valuing VoiceStream at between $10 billion and $15 billion.

Cingular likely would be the controlling shareholder of the merged company if an agreement was reached along the lines of the current talks, according to the report. Industry observers have been speculating for months that the telecom and wireless industries would see consolidation as companies try to deal with the slump that has pummeled the sector for nearly two years.

Following the report, Deutsche Telekom's shares were up 2 cents to $11.53. BellSouth and SBC were lower by more than 5%, but that could be reflecting a UBS Warburg downgrade of the regional Bell companies.

Elsewhere in the wireless sector, AT&T Wireless was up 4%. Sprint PCS ( PCS) was gaining almost 10%, and Nextel ( NXTL) was advancing 2%. Verizon was down 3%, and Vodafone was off 2%.