T-Mobile USA's top two shareholders want the wireless provider to be on the way to new profitability by the middle of next year -- or else -- according to the latest report of many swirling around the company.

Another option -- a perennial one -- would have T-Mobile's German parent Deutsche Telekom acquire Sprint Nextel, but that deal would be fraught with spectrum compatibility problems. Sprint uses CDMA while T-Mobile is building its network on Advanced Wireless Spectrum (AWS.) More troubling is Nextel's old spectrum, which has had interference conflicts with the public safety spectrum.

There's more: where would Sprint's WiMax drive fit in an acquisition?

TheFinancial Times reported Tuesday that the German government, which owns 32% of Deutsche Telekom and 5%-owner Blackstone private equity group are pressuring the telecommunications giant to turn around T-Mobile USA by mid-year 2010. Earlier, the UK's Sunday Telegraph reported that Deutsche Telekom had hired banking advisors to explore purchasing Sprint, the third largest US wireless provider. T-Mobile USA is the fourth largest.

Sprint recently said it is moving to raise $500 million in a public offering, but it will need more than that to adequately fund its moves to 3G and 4G networks as well as to help finance its WiMax partnership with Clearwire. Sprint has a market cap of $12 billion, but a net debt of more than $16 billion, according to recent figures

While the major US wireless service providers -- including Verizon Wireless and AT&T -- are flooding the market with advanced phones and new pre-paid plans, the issue of spectrum now becomes the paramount differentiator. Exactly how it all will shake out is still murky. LTE is looked at as an eventual goal for most providers, but that won't be in place widely for years.

"There is a debate about whether T-Mobile USA has a temporary problem -- global recession -- or a strategic one: that it is simply too small to achieve the necessary economies of scale to be profitable," the Financial Times stated, citing a source it said was familiar with the thinking of Deutsche Telekom's shareholders.

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