VoiceStream in U.S. merger talks

LONDON, England -- VoiceStream Wireless, owned by debt-laden Deutsche Telekom, is in talks to merge with AT&T Wireless Services in a deal worth $10 billion, according to a report.

The deal would create the second-largest mobile phone operator in the U.S. but the talks may not result in a deal, the Wall Street Journal said. Both companies have held negotiations with other rivals but have not reached an agreement.

Deutsche Telekom (FDTE) acquired VoiceStream in 1999 for $31 billion to create a global wireless powerhouse but the deal has saddled Telekom with debt and has hurt the company's stock price. It has also contributed to calls for Telekom Chief Executive Ron Sommer to resign.

The talks come amid growing pressure on wireless operators in the U.S. to consolidate as subscriber growth slows and costs associated with rolling out high-speed networks climb.

With six companies fighting for a share of the market, many have been forced to offer lower rates to gain market share, now that 45 percent of Americans have mobile phones, the Journal said.

A deal between VoiceStream and AT&T Wireless, with more than 25 million subscribers, would create the No. 2 player behind Verizon Wireless (VZ), which is part owned by Vodafone Group (VOD). Together, AT&T Wireless and VoiceStream would have revenue of more than $25 billion.

AT&T Wireless (AWE) was spun off from AT&T Corp (T) last year and its stock has plunged as investors focus more on earning than the growth-at-any-costs model that many wireless operators have been following, the Journal said.