WorldCom, America's second biggest long-distance call carrier, abandoned its $120bn (£80bn) merger with rival Sprint yesterday after regulatory and court challenges threatened to torpedo the deal. The collapse of the merger paves the way for Deutsche Telekom to make a bid for Sprint, in which it has a 10% stake.

Ron Sommer, chief executive of Deutsche Telekom, has said the German group's strategy as making its presence in the US as big as its operations across Europe. WorldCom and Sprint were forced to abort their merger because of demands by the US justice department to divest Sprint's internet, long-distance and local telephone operations, leaving it only the mobile phone division. A day later the deal was further knocked back by Mario Monti, the European competition commissioner.

WorldCom said the demands made by the US justice department would have eliminated the customer benefits and "financial synergies" which supported the proposal. Bernie Ebbers, chief executive of WorldCom, said: "We very much regret that our merger with Sprint was not allowed to proceed. The benefits of this merger were clear and compelling."

Sprint is the third largest long distance carrier in America and together with WorldCom and AT&T the companies control 80% of that market. Regulators were concerned the merger would lead to less innovation and higher prices.