Feeds

France Telecom cuts off MobilCom

Playing hardball

  • alert
  • submit to reddit

Seven Steps to Software Security

ComputerWire: IT Industry Intelligence

French incumbent telecoms company France Telecom SA could have found a way to squeeze itself out of the restrictive agreement that bound it to supply finance for German mobile operator MobilCom AG's roll-out of 3G services, a bill that could have topped at least $2.5bn.

This agreement could also have crippled France Telecom by forcing it to consolidate MobilCom's $6bn debts onto its own balance sheet because of a clause in the agreement that would have forced a buy-out to be launched by France Telecom in the event of a serious disagreement between shareholders.

France Telecom initially tried to maneuver out of this situation by organizing a syndicate of banks to buy up MobilCom CEO Gerhard Schmid's 42% stake in the company. However, this deal failed when the regulators blocked the deal. France Telecom, which directly owns a 28.3% stake in MobilCom, is now claiming that the basis of its original agreement between the two companies made in March 2000, which called for France Telecom to invest in the build-out of MobilCom's third-generation network, is now invalid.

Yesterday, France Telecom sent MobilCom a letter terminating the cooperation framework agreement (the original 2000 agreement), claiming that MobilCom and its CEO have broken a number of conditions of the deal. The letter says that MobilCom's supervisory board have misinterpreted the agreement by not allowing France Telecom to approve important strategic decisions and that Schmid has broken a number of German corporate laws with the transactions between MobilCom and Millennium, his wife's investment fund.

Finally, France Telecom claims that a 70m euro ($65.1m) loan repayment that was to be made to France Telecom by June 6 has not been made. Schmid has also refused to resign in connection with this failure, and the supervisory board will not make him. France Telecom therefore claims that it has "clear legal grounds" to end the relationship.

This is likely to push up France Telecom's share price because it is now not obliged to buy out MobilCom or invest capital in the company, although MobilCom, which was not available for comment at time of going to press, will probably mount a challenge to the legal basis of France Telecom's withdrawal from the agreement.

© ComputerWire.

The smart choice: opportunity from uncertainty

More from The Register

next story
Auntie remains MYSTIFIED by that weekend BBC iPlayer and website outage
Still doing 'forensics' on the caching layer – Beeb digi wonk
Apple orders huge MOUNTAIN of 80 MILLION 'Air' iPhone 6s
Bigger, harder trouser bulges foretold for fanbois
GoTenna: How does this 'magic' work?
An ideal product if you believe the Earth is flat
Telstra to KILL 2G network by end of 2016
GSM now stands for Grave-Seeking-Mobile network
Seeking LTE expert to insert small cells into BT customers' places
Is this the first step to a FON-a-like 4G network?
Yorkshire cops fail to grasp principle behind BT Fon Wi-Fi network
'Prevent people that are passing by to hook up to your network', pleads plod
BlackBerry: Toss the server, mate... BES is in the CLOUD now
BlackBerry Enterprise Services takes aim at SMEs - but there's a catch
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.