Germany denies urging Deutsche Telekom to merge

FRANKFURT, May 13 (Reuters) - Germany's Finance Ministry dismissed as "speculation" on Tuesday a newspaper report that the ministry was suggesting a merger of Deutsche Telekom AG (DTEGn.DE) and France Telecom SA (FTE.PA).

"This is wild speculation," a ministry spokesman said of the report in the German business daily Handelsblatt. "Nobody at the top of the ministry will publicly now or in the future express an opinion on Deutsche Telekom's business opportunities."

The Handelsblatt, in a story to appear on Wednesday, reported that the ministry was urging Deutsche Telekom Chief Executive Rene Obermann to either merge with a partner or buy a rival this year.

France Telecom is Berlin's favourite choice, the newspaper reported, adding that, if a deal with France Telecom could not be reached, Obermann should target other European operators.

"In any case, the situation that the European telecoms market would consolidate and Deutsche Telekom would not be part of it should be prevented," the newspaper quoted a Finance Ministry source as saying.

A source familiar with the government's thinking told Reuters earlier this month that Berlin was pressing Deutsche Telekom to make large acquisitions in the hope of raising its sagging share price.

Deutsche Telekom is currently looking at a deal to buy a further 3 percent stake in Greece's OTE (OTEr.AT), after agreeing last month to acquire a 20 percent stake.

The Handelsblatt quoted a Ministry source as saying the government backed Obermann despite the push for a big acquisition.

"Obermann has our complete confidence the source was quoted as saying in the newspaper.

The Handelsblatt also reported that major Telekom shareholder Blackstone Group LP (BX.N) backed Obermann ahead of the company's annual meeting on Thursday.

"Obermann has completely turned around Telekom and we are extremely satisfied with his work," Blackstone manager Lawrence Guffey was quoted as saying in the paper. "He is one of the best chief executives in the 50 companies we have in our protfolio."

Guffey told the newspaper that Deutsche Telekom was not a short-term investment for Blackstone.

"Naturally, we would prefer a higher share price. But when we bought our stake in Telekom, it was clear there was a long way to go. We remain invested long-term in Telekom," he said.

Blackstone bought a 4.5 percent stake in Telekom in April two years ago at 14 euros a share. The shares closed at 11.66 euros on Tuesday. (Reporting by Sabine Ehrhardt; Editing by Andre Grenon)