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Updated from 4:47 p.m. EST


VoiceStream Wireless


, currently in the throes of being acquired by Germany's

Deutsche Telekom

( DT), Wednesday posted a wider-than-expected fourth-quarter loss. At the same time, figures for revenue and new subscribers were lighter than expected.

VoiceStream Wireless also set a multiyear deal with

AOL Time Warner


to offer AOL Instant Messaging through VoiceStream's text messaging and high-speed wireless Internet service. VoiceStream will be North America's first GSM wireless service provider to carry the AOL Instant Messenger service, and the first to offer it to all of its wireless subscribers, VoiceStream said.

For the fourth quarter ended Dec. 31, the company recorded a net loss of $807 million, or $3.49 a diluted share, compared to a loss of $152 million, or $1.58 a share, a year earlier. The consensus estimate of analysts polled by

First Call/Thomson Financial

was for a loss of $2.70.

Weak, Weak, Weak

Revenue rose to $649.9 million from $163.8 million a year ago. That's an impressive rise, but the number still came in below the expectations of some analysts in the $718 million to $760 million range.

Net new subscribers came in at 602,000. Again, that number was lower than projections in the 700,000 range.

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As important as these key metrics are, the market is much more interested in whether Europe's largest telecommunications company will succeed in its pursuit of VoiceStream, based in Bellevue, Wash., as well as Georgia-based mobile operator




Despite concerns from some politicians over the German's government's majority stake in Deutsche Telekom, a number of analysts seem fairly certain that the

Securities and Exchange Commission

and the

Federal Communications Commission

will approve the deal.

The FCC can block foreign telcos that are more than 25%-owned by a foreign government from buying an American company if it's deemed that the deal isn't in the public interest. "I think there would be a waiver, unless someone can make the case that the deal threatens competition or national security," says Pantelis Michalopoulos, a lawyer with

Steptoe & Johnson

who has represented telcos before the FCC.

Should the deal go through on regulatory grounds, it would be "precedent-setting," he adds, enabling other foreign carriers with heavy government ownership to eye conquests in the U.S.


However, the deal could yet fall through on financial grounds. "Deutsche Telekom is getting uglier by the day, and I wouldn't rule out the possibility of a renegotiation," says Frank Marsala, an analyst at

ING Barings

. He rates VoiceStream a buy and his firm has done no underwriting for the company. He does not cover Deutsche Telekom.

Under the terms of the original deal, reached last summer, VoiceStream can pull the plug on the pairing if Deutsche Telekom's stock languishes below 33 euros for a certain period of time. The stock closed Wednesday trading on the Frankfurt exchange at 28.68 euros.

In a conference call this afternoon, John Stanton, chairman and chief executive of VoiceStream, affirmed the company's interest in an acquisition by Deutsche Telekom, despite the fact that the wireless sector "has gotten beat up pretty bad since last summer."

Shares of VoiceStream fell $3.31, or 3%, to $104.13 in regular Wednesday trading. They rose slightly to $104.38 in after-hours trading, according to

Island ECN