France Telecom SA has reached an “amicable” deal with German mobile carrier MobilCom AG that ends its obligation to help the company develop a 3G network. Under the agreement, France Telecom will participate in a plan to shut down the German UMTS business, contributing up to 580m euros ($580m).
The only prospect of a return from the deal is that France Telecom will get 90% of any proceeds on UMTS asset sold by MobilCom.
France Telecom owns 28.5% of MobilCom, and has in principal agreed to take responsibility for a large chunk of its 7bn euro ($7bn) debt. However, with its huge debt problems, the last thing that France Telecom needs is to foot the bill for a near-bankrupt German carrier rolling out a 3G network for its small band of customers.
Under the agreement, France Telecom shareholders will have to support the issue of perpetual securities in exchange for MobilCom loans that France Telecom would repurchase from banks and vendors for about 6bn euros ($6bn).
Mobilcom has also agreed to pay KPN’s E-Plus Mobilfunk unit 210m euros ($210m) to cancel their national roaming contract.