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MobilCom On Its Way to Immobility

September 13, 2002

Mobilcom files for insolvency after being ditched by debt-ridden France Telecom. The German Finance Minister is to meet MobilCom heads over the weekend for a rescue plan.

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Auf Widersehen MobilCom?Image: AP

MobilCom became the latest casulty in the collapsing world telecommunications market today after it was dumped by its mother company, ailing French telecommunications giant, France Telecom.

The German telecommunications company was forced to file for bankruptcy after the price of its shares plummed 50 percent as the markets closed on Thursday.

MobilCom had long maintained that it would not be able to survive if cash-partner France Telecom – who bought a 28.5 percent share of the company two years ago - pulled the plug.

German officials meet to save company

German Trade Union Officials warned that Mobilcom’s collapse will mean the loss of around 5,000 jobs. But the German government, which is facing national elections in nine days, vowed it would do “everything necessary” to save the stricken telecoms operator.

Mobilcom Thorsten Grenz
Mobilcom chairman of the board Thorsten Grenz shows the thump down during a press conference at the firm's headquarters in Buedelsdorf, some 140 kilometers (90 miles) north of Hamburg, northern Germany, on Thursday, Sept. 12, 2002. The board of France Telecom who owns currently 28.5 percent of Mobilcom will meet this afternoon amid speculation it could abandon Mobilcom, a move that could force the German operation to declare bankruptcy. (AP Photo/Heribert Proepper)Image: AP

The German finance minister, Werner Müller will meet with MobilCom chief, Thorsten Grenz (photo) for crisis talks on Sunday.

Government spokesperson Charima Reinhardt was convinced the company would be saved.

“MobilCom’s core business is, as far as we know, in good health and we can move ahead with a clear conscience,” she said on Friday.

Nonetheless, MobilCom's demise is one thing German Chancellor Gerhard Schröder can do without facing the final days of a tough re-election campaign with 10 percent of the population unemployed.

Growth through acquisition

Paris-based France Telecom – which is partly state-owned – said it simply could not continue to finance loss-making MobilCom. The company is already straining under a debt of more than 70 billion euro, amassed though a recent strategy of growth by acquisition.

Under the stewardship of Michael Bon - who was appointed in September 1995 - France Telecom bought into various European telecommunications companies, including paying $37 million in cash (37.6 million euro) and stock for UK mobile operator, Orange in May 2000 and making an ill-fated investment into cable operator NTL in 1999.

Bon resigned on Thursday after France Telecom announced first-half losses of 12.2 billion euro. And European stocks had slumped for the second straight session by midday on Friday after the company failed to say how it will tackle its massive 70 billion euro debt pile.

Next generation of mobile phones felled giant

Analysts directly attribute the collapse of the world telecommucations market to the over-enthuastic bidding for next generation UMTS mobile communication licences.

MobilCom had already bid for one of the six German 3G licences, shelling out a massive 8.4 billion euro for it. France Telecom agreed at the time to bankroll MobilCom’s early 3G development