In A Terrible Year For European Telecoms

By Author: NARUTO
Total Articles: 2
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n a terrible year for European telecoms, the past few weeks have been particularly bad. First came the news earlier this month that France Telecom, in dire straits itself, was backing away from previous plans to support MobilCom, the German mobile and Internet operator in which it has a 28.5 % stake. This then threw the German government into disarray, threatening as it did 5,500 German jobs just days before voters went to the polls in a general election, which took place on Sunday September 22nd. Gerhard Schroder, in a tough fight for re-election as Germany's chancellor, stepped in with a euro 400 million Omega Replica rescue package of dubious legality that calls into question the whole movement towards privatisation in Europe. Then the French government, still France Telecom's majority shareholder, forced out its chairman, Michel Bon, without having a successor lined up to replace him, and started making plans to raise billions of euros to prop the company up. Now the European Commission is investigating whether the German rescue package is legal, or whether ...
... it breaches EU-wide rules against government subsidies.

France Telecom's withdrawal of support for MobilCom should not have come as a surprise. The company had splashed out euro 3.74 billion on its 28.5% stake in MobilCom at the height of the telecoms bubble in March 2000, and Mr. Bon had later agreed, in a letter, to spend euro 10 billion on its expansion plans. After the bubble burst, it became obvious that the ambitious targets of the mobile-phone industry were unlikely to be achieved, and Mr. Bon tried to go slow on the investment plans. This year, the two companies have been bickering publicly for months over how much France Telecom would invest.

It is somewhat surprising that the German government apparently failed to take any interest in MobilCom until just a few days before France Telecom decided to pull out, when Mr. Schroder made a last-ditch attempt to come up with political fudge.

But, a skilled politician like Mr. Schroder was not to be bested, and on September 16th, he appeared to have saved MobilCom and some 5 , 500 jobs when he persuaded two state-owned regional banks to put up the euro 400 million that it needed to keep going . The European Commission is investigating the terms of these loans to see if they breach European Union rules on state aid. There is a strong chance that they will, as MobilCom may not be a going concern without such loans. A report commissioned by France Telecom to help its managers decide whether to continue investing concluded that its customer base is eroding and its customer-satisfaction ratings are low. Furthermore, the Cartier Replica other mobile operators in Germany may also object that an ailing rival has been kept in business with government money. However, the European Commission investigation will take some time. The key point for Mr. Schroder is that he was seen to do something last week to save jobs just before voters had to decide whether he was going to keep his.