MobilCom to file for insolvency

The collapse of MobilCom threatens the jobs of 5,000 workers

FRANKFURT, Germany -- MobilCom, the troubled German mobile phone operator, says it will file for insolvency after its partner, France Telecom, cut its ties with the group.

However, a spokesman said MobilCom may delay filing for insolvency until next week after the German government said it would meet with the ailing telecom group to work out a solution to save the company.

MobilCom Chief Executive Thorsten Grenz announced the filing after France Telecom decided late on Thursday to stop providing financial assistance to the group, which is about 6 billion euros ($5.9 billion) in debt.

The collapse of MobilCom threatens the jobs of more than 5,000 employees.

France Telecom's decision angered MobilCom's majority shareholder and former chief executive, who labelled the move as irresponsible and illegal.

"Driven entirely by its own interests, France Telecom has stolen away from its responsibilities,'' Gerhard Schmid said in a statement.

"It is now up to the courts to decide on what is in my opinion the scandalous and illegal conduct of France Telecom.''

Gerhard Schmid says France Telecom has acted irresponsibly

Schmid, who made the comment before the insolvency announcement on Friday, controls about 50 percent of MobilCom shares along with his wife. As a result of the planned filing, they stand to lose the entire value of their holdings.

The premier of the German state of Schleswig Holstein, where MobilCom is based, also entered the debate over the fate of the group.

Heide Simonis said: "Whatever we can offer in way of help we will do," but she ruled out taking on MobilCom's debt load.

Analysts also held out little hope that MobilCom would be rescued from insolvency.

"There's no investor in sight and one would have to be found very quickly,'' Klaus Baumann, an analyst at SES Research in Hamburg, told Reuters.

France Telecom purchased a 28.5 percent stake in MobilCom two years ago in an attempt to tap into Europe's biggest telecom market. It agreed to provide financial support to MobilCom to fund the acquisition of new wireless licences and network equipment.

However, the deal began to turn sour when the telecom bubble burst, leaving operators with billion of euros of debt after aggressive expansion. France Telecom has built up a debt of about 70 billion euros.

MobilCom has seen its value nearly wiped out as its shares plunged from a high of 47.49 euros on July 31, 2000. Its shares were down 50 percent at 0.90 euros in midday Frankfurt trading on Friday.

MobilCom is the latest in a growing list of high-profile German companies to collapse this year, resulting in thousands of job losses. Others include media group Kirch, construction giant Holzmann and engineering group Babcock Borsig.

The health of corporate Germany has become a sensitive political issue.

With just over a week before a national election, Chancellor Gerhard Schroeder faces tough competition from his opponent Edmund Stoiber.

Schroeder came to office with a pledge to turn the economy around. Instead, the economy slipped into recession in the second half of last year and is now struggling to recover.

The unemployment rate has remained above 9 percent, while business and consumer confidence has weakened.