MobilCom gets government lifeline

Up to 5,000 jobs at MobilCom are at risk

BERLIN, Germany -- The German Government has said it will do "everything necessary" to save stricken telecoms operator MobilCom.

France Telecom Chief Executive Michel Bon dumped cash-hungry German partner MobilCom on Friday, before resigning. (Full story)

The decision threatens the jobs of 5,000 MobilCom employees and comes just nine days before an election in Germany which has been dominated by the state of the economy, particularly the high level of unemployment.

German Government spokeswoman Charima Reinhard said Germany regretted the decision by France Telecom, which owns 28.5 percent of MobilCom.

EXTRA INFORMATION In-depth: Germany Decides 2002    VIDEO Michel Bon's resignation is likely to pave the way for a rights issue at France Telecom which could raise as much as $15 billion. Richard Quest speaks to Gautum Malkani from the Financial Times. Play video  The British-French mobile operator Orange says troubles at MobilCom are unlikely to have an impact on its own accounts. Liz George speaks to Graham Howe, deputy CEO of Orange. Play video

Government representatives will meet MobilCom in Berlin on Sunday, the economy ministry said.

A spokesman for the economy ministry said the government could not discuss any potential aid package until Economy Minister Werner Mueller met representatives from MobilCom.

In a statement, France Telecom said it would not "seek to take control of Mobilcom" and would "no longer respond to its requests for financial support."

The statement cited the "troubling situation" of the indebted German firm, its "structural difficulties" and "the weakness of its customer base."

Reinhard said on Friday: "As far as we know, MobilCom is a healthy company at its core that one can back with a clear conscience."

She said the German justice ministry would make sure France Telecom kept its obligations to MobilCom.

MobilCom's main shareholder and former Chief Executive Gerhard Schmid also suggested taking legal steps.

German Chancellor Gerhard Schroeder has offered to lead talks between MobilCom and its creditor banks.

Heide Simonis, premier of the German state of Schleswig Holstein, where MobilCom is based, said: "Whatever we can offer in way of help we will do."

France Telecom took 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 telecom bubble burst leaving operators with billions of euros of debt after aggressive expansion. France Telecom has built up a debt of about 70 billion euros.

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.