SNAP ANALYSIS: D.Telekom must make U.S. move or take back seat

By Nicola Leske, European Telecoms Correspondent

FRANKFURT (Reuters) - Deutsche Telekom will have to make an expensive acquisition if it wants to sustain its role in the cut-throat U.S. market -- even if that means cutting its dividend.

"Deutsche Telekom will have to decide to stay in the U.S. and grow at the cost of its dividend or to continue to give value but quit the U.S.," said Michael Kovacocy, a senior analyst at research group Metacommunicare.

Speculation has swirled about a takeover of U.S. rival Sprint Nextel -- valued at $11 billion -- by the German incumbent ever since the U.S. company announced a huge goodwill writeoff in February last year.

Deutsche Telekom, which will not comment on Sprint rumors, has vowed to keep an attractive dividend policy for shareholders including the German government, which owns around 30 percent of the company, and private equity firm Blackstone with just under 5 percent.

For the past two years its has paid out 0.78 euros per share. Its dividend yield is at 8.2 percent compared with France Telecom at 7.7 percent, Telefonica at 6.3 percent and Vodafone at 5.6 percent, according to Reuters Estimates.

"There is a strong commitment to key shareholders looking to extract value, but not enough growth at group level to continue high remuneration," Kovacocy said. "There is no real growth strategy, the emphasis currently is on extraction of value."

That may be changing.

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