MobilCom blames feud on losses

FRANKFURT, Germany -- MobilCom, the struggling German mobile phone operator, has blamed worse-than-expected losses on a bitter feud with France Telecom.

MobilCom has been pitched in a scrap with debt-laden France Telecom over the scope of the French group's funding and strategy commitments in Germany. It said the dispute had slashed profits by 90.3 million euros in the first quarter.

Germany's fifth-largest mobile phone operator, which is 28.5 percent owned by France Telecom (PFTE), said its loss widened to 116 million euros ($106 million) in the first three months of 2002 from 43.5 million euros a year ago.

Analysts polled by Reuters had expected a net loss of between 115 million euros and 14 million euros.

MobilCom's dispute escalated in February to the point where France Telecom was been forced to come up with a plan to buy out MobilCom Chief Executive Gerhard Schmid's 40 percent stake.

France Telecom is loathed to take on the German group's 5 billion euros to 6 billion euros debt pile, as it struggles to slash its own 61 billion euro debt. Credit rating agencies are itching to downgrade France Telecom's credit rating, which could force the company to pay millions of euros in extra interest payments.

According to Reuters, the French group is considering a two-stage bid for MobilCom, which would see a group of banks holding on to the stock and buying out smaller shareholders while it cuts its debt mountain.

The dispute began over France Telecom's contribution to an investment in third-generation wireless networks. The launch of such services are seen as the industry's holy grail to drive up profits as demand for new mobile phones stagnate and revenue from customers wanes.

MobilCom's loss before interest, tax, depreciation and amortisation (EBITDA) including the costs of starting up 3G networks, widened to 120.7 million euros from 34.8 million a year ago. And sales slid to 514.3 million euros from 728.7 million.

Shares in France Telecom dipped 2.2 percent to 20.29 euros in early Paris trading, while MobilCom was little changed at 16.97 euros in Frankfurt. MobilCom's stock hit a low of 9.72 euros in February at the height of the dispute.