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ComputerWire: IT Industry Intelligence

France Telecom SA was poised for victory in the battle for control of German wireless operator MobilCom AG on Friday when CEO Gerhard Schmid cleared his office at the company's Buedelsdorf headquarters. His departure was a condition for a syndicate of 17 banks offering the company a 4.7bn euros ($4.6bn) lifeline.

But though France Telecom representative Eric Bouvier left an executive board meeting Friday, saying: "Everything is solved", the difficulties are just beginning for the debt-laden French incumbent.

At some stage it will have to negotiate with Schmid to buy his holding of close on 50% in the company. MobilCom stock has been trading strongly at 9.15 euros ($8.8) in anticipation of a deal and while France Telecom is believed to be ready to bid around the 10 euros ($9.71) level, sources close to Schmid suggests it would have to be around the 17 euros ($16.51) level.

To add to the anguish at the company's Paris headquarters, Schmid has hinted strongly that he would be interested in running another mobile phone venture and Viag, the loss-making German arm of UK operator mmo2 plc, could well be a target. Thus any payment made to Schmid could add to competition that MobilCom will face in the French market.

With its huge debt problems, France Telecom would hope to pay for MobilCom shares with those from its Orange SA subsidiary, though these are currently languishing at 5.13 ($4.98) euros, after an IPO at 10 euros ($9.71) last year.

Under its deal with the banks, France Telecom is offering to swap the 4.7bn euros ($4.6bn) in MobilCom debt for a 4.2bn euro ($4.1bn) bond, convertible into its own shares.

While anxious for Orange to have a presence in Europe's biggest market, MobilCom has caused nothing but problems for France Telecom since it acquired a 28.5% stake. It began its feud with Schmid when it objected to providing the finance for the roll-out of 3G services, a bill that could have topped at least $2.5bn.

© ComputerWire

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