Berlin: European telecommunications companies are back on the prowl for big acquisitions. The former monopoly phone companies, facing weak domestic sales, saturated mobile markets, demanding regulators and a shortage of new markets on the continent, are under pressure to find ways to lift their stock prices and earnings, sometimes from governments that remain large shareholders.

Having largely recovered from the aftermath of a previous round of evercostlier acquisitions that contributed to the dot-com boom and bust, these companies are again looking to spend. But, chastened by that experience, they are doing so more cautiously.

Instead of breathlessly announcing megadeals to unquestioning shareholders, companies like France Telecom and Deutsche Telekom are testing the mood of skeptical investors by floating trial balloons about acquisitions they are weighing.

The latest took flight on Monday when a person close to Deutsche Telekom, the largest telecommunications company in Europe in terms of sales, said it was considering a bid for Sprint Nextel, the third-largest telecommunications operator in the United States after AT&T and Verizon Wireless, in a blockbuster deal that analysts said could be worth as much as 33.7 billion euros, or $52 billion.

The news came less than a month after reports that France Telecom was considering acquiring the Swedish-Finnish phone company TeliaSonera, which has a market value of about $38 billion.

In that case, investors gave a clear thumbs-down to France Telecom, driving down its stock more than 10% the day the idea was floated. On Monday, however, investors in Deutsche Telekom reacted in a neutral fashion; its shares closed down 13 cents at 11.62 euros.

Analysts said that reaction could give the company, based in Bonn, a green light to pursue talks with Sprint Nextel.

Shares of Sprint, which reported a 2007 loss of $29.6 billion, rose in afternoon US trading.“There is definitely a lot going on in the European telecom sector in terms of M&A at the moment,” said Harmut Paulus, a partner in corporate finance at KPMG in Frankfurt. “I expect that trend will continue.”

A pursuit of Sprint by Deutsche Telekom could stoke merger and acquisition activity in the European telecommunications sector. Analysts say recent deals have largely been driven by two strategies: a desire to cut costs through consolidation in established Western European markets, or to enter new, largely untapped markets.

The former is represented by a move last year by Telefonica of Spain, which spent 2.3 billion euros to join a group of Italian investors buying a controlling, 23.6% stake in Telecom Italia. In 2006, Telefonica spent 17.7 billion, or $35.4 billion, to buy 02,which operates networks in Britain, Ireland and Germany. Deutsche Telekom, meanwhile, has been looking at faster-growing emerging markets.

In March, it said it was ready to pay 2.5 billion euros for 20% of the former Greek monopoly, Hellenic Telecom, which owns mobile operators in Serbia, Romania, Macedonia, Albania and Bulgaria. At the same time, the German company said it was interested in acquiring total control of OTE, and is in talks with the Greek government about the transaction.

Source : DNA