MobilCom posts huge 3G write-down
Troubled German mobile operator MobilCom has taken a €9.9bn ($9.84bn) write-down on its abandoned 3G plans as part of its plans to slim down after a cash crisis almost forced it into bankruptcy.
MobilCom also announced a restructuring plan, which includes cutting a third of its workforce and concentrating on its roots, by serving customers with mobile airtime brought from other operators.
For its third quarter to September 30, MobilCom posted a net loss of €2.86bn ($2.84bn) compared with a net loss of €42.2m ($41.9m) a year ago, on revenue of €580m ($576.7m), down from 608.8m euros ($605.4m).
The figures could have been a lot worse for the Buedelsdorf, Germany-based carrier, if France Telecom had not agreed to cover a massive chunk of the write-down as part of its divorce from the carrier. France Telecom has agreed to cover €4.8bn ($4.7bn) in MobilCom's bank loans, €1.2bn ($1.19bn) in vendor financing, and €1bn ($999m) of shareholder loans it has pumped into MobilCom over the past two years.
France Telecom will also pay up to €580m($576m) to cover MobilCom's costs for winding down its 3G investments plans. In turn, it will receive 90% of all proceeds MobilCom might receive in selling its 3G assets, including the biggest item, a license acquired for €8.4bn ($8.35bn).
MobilCom had originally faced collapse after France Telecom, its main financial backer, refused to continue funding the loss-making operator. The disagreement centered on a row between France Telecom and the MobilCom founder and CEO, Gerhard Schmid over future 3G roll-out plans. The result saw Schmid ousted as CEO in June.
The German government, fearing job losses during a tightly fought general election, stepped in with a rescue plan. This involved France Telecom (which owns 28.5% of MobilCom) agreeing to take responsibility for a large chunk of its €7bn ($7bn) debt, but only if Gerhard Schmid had no further say in the company. This remained a sticking point until a couple of weeks ago when Schmid finally agreed to hand over his 32% stake in the carrier to a trustee.