Deutsche Telekom (DT) isn’t confirming or denying reports that it could be ready to set T-Mobile USA free as a separate, public entity.

The news – first reported by the Wall Street Journal – comes as T-Mobile struggles with lower sales and subscriber numbers. T-Mobile accounts for about one-quarter of Deutsche Telekom’s overall revenue.

Deutsche Telekom, the largest phone company in Europe, has lost considerable United States market share as AT&T Inc. and Verizon Communications Inc. get on the 4G, data-intensive bandwagon. T-Mobile still lives in 3G Land, even after Deutsche Telekom spent almost $3 billion in the first three quarters of 2009 to build out the T-Mobile network.

If T-Mobile does indeed go public, this would mark the first hot IPO in the telecom industry since 2007. That’s when MetroPCS wowed Wall Street with a billion-dollar offering. But activity died down after that, with just a couple of small go-public deals, as the recession set in. Momentum could pick up slightly in 2010 – Skype is expected to launch an IPO some time this year, now that it’s spun off by online auction giant eBay. If T-Mobile joins the fray, word should come by May, which is when Deutsche Telekom will hold its annual general meeting.

Deutsche Telekom has stewed for some time over what to do with T-Mobile. Late last year, rumor had it the Germany-based operator wanted to partner with companies such as MetroPCS, Clearwire and AT&T. None of that has come to fruition.