Updated from 12:44 p.m. EDT

Deutsche Telekom's ( DT) first-half earnings report -- including a whopping $3.8 billion (3.9 billion euros) first half net loss resulting from acquisitions costs -- is a smoldering reminder of the late '90s merger frenzy.

Turmoil over its crushing debt load led to the ouster of CEO Ron Sommer last month. Despite that, the company managed to pare down debt to $62.8 billion in the first half, compared to $69.5 billion in the same period a year ago. Still, it has some ways to go before it reaches its target of $49 billion by the end of 2003. It also indicated that capital expenditures were reduced by 17.6% to $3 billion.

The reduction of its debt is likely to come from the divestiture of its money-draining U.S. operations, the nation's No. 6 wireless carrier VoiceStream. VoiceStream accounts for approximately $8 billion of its debt load, according to Sanford C. Bernstein analyst Alexander Trofimoff. That's probably why the company said it's keeping its options open regarding VoiceStream, which is reportedly discussing merging with Cingular.

"We are in the midst of a strategic review. It could be more divestments; it could mean some other things, which I won't reveal now," said Deutsche Telekom interim CEO Helmut Sihler during an early morning analyst meeting. "Everybody is talking to everybody?We have a number of options." Sihler told analysts the company plans to make a decision by the end of the year.

Cingular coincidentally yesterday announced it planned to lay off more than 2,500 to 3,000 employees, mostly coming from its sales staff, despite its expansions into the congested New York region last month. Cingular told investors earlier that it planned to cut capital expenditures by nearly $1 billion. Perhaps "Cingular cut its capex in anticipation of a deal," Trofimoff said. " Cingular may have already built something into those numbers. "

The deal was categorized as preliminary discussions at best and may fall apart at any time, according to a Wall Street Journal report yesterday.

For now, Europe's biggest phone company focused on stabilizing investor sentiment with a half-year earnings report that, for its blistering shortfalls, showed some progress. The company said revenue in the first half rose 14.6% to $25.2 billion, from $22 billion in the same period a year ago. In the second quarter alone, revenue rose 15% to $12.7 billion from $11.15 billion a year ago. Its debt fell to $62.8 billion from $69.5 billion, in part because of currency swings, the company said. The company is targeting total overall debt of $49 billion by the end of 2003.

Half year net losses ballooned to $3.8 billion from $342 million in the first half of 2001, largely due to amortization of goodwill related to acquisitions. Net losses in the second quarter were $1.96 billion, from net income of $8.8 billion in the same period a year ago. The company booked a $1.47 billion charge in the first half for goodwill amortization for VoiceStream and U.S. phone licenses.

T-Mobile, the company's mobile segment and its largest group, logged a first-half sales boost of 53% to $8.96 billion, from $5.86 billion from a year ago, and a 42% year-over-year jump in the second quarter to $4.58 billion from $3.23 billion in the same period a year ago. The gains were largely due to the fact that some acquisitions were not accounted for in the first six months of last year. It added 5.7 million subscribers globally from a year ago, with VoiceStream adding 526,000 net additional customers in the second quarter.

The company's American depositary receipts closed down a penny, or 0.09%, to $11.51 in Wednesday trading.