France Telecom announces huge loss; Cuts funds of German Mobilcom wireless affiliate leading Mobilcome to certain bankruptcy
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French firm cuts off funds for German cellphone affilliate
ASSOCIATED PRESS
PARIS, Sept. 13 France Telecom, nearly drowning in debt and forced to hunt for new leadership following the resignation of its chairman, on Friday announced a record loss and the end of its costly funding for Mobilcom — a move expected to push the German cellphone affiliate toward bankruptcy.
THE WORRISOME state of the French telecommunication giant’s finances prompted the government, France Telecom’s majority shareholder, to announce that it would pump new cash into the company and not let it go under. The government promised “a very substantial reinforcement” of funding for the company.
France Telecom is “a symbol of our country’s industrial and technological success,” a Finance Ministry statement said. “If necessary, the government will take measures enabling the company to avoid all financing problems.”
Michel Bon, who submitted his resignation at a France Telecom board meeting on Thursday, joined a growing list of telecom chiefs to have lost their jobs in the economic crunch hurting the industry. Ron Sommer quit July 16 as head of Deutsche Telekom, Europe’s biggest telecommunications company. Sir Peter Bonfield resigned from British Telecommunications PLC at the end of January.
France Telecom said Bon resigned because of the scale of the losses announced Friday.
The company reported a $11.9 billion net loss for the first half of 2002, its biggest loss since the company went public in 1997. That compared with a net profit of $1.9 billion in the same period last year. The company said its debts grew to a whopping $68.3 billion.
The results “showed the best operating performance in France Telecom’s history but were combined with provisions that led to a historic loss,” said company spokesman Bruno Janet.
Finance Minister Francis Mer said a successor for Bon would be named by early next month. France Telecom said Bon would stay on as chairman until a successor is named.
The respected newspaper Le Monde said Thursday that Thierry Breton, chairman of electronics company Thomson Multimedia, had agreed to take over. However, the government denied the report.
Mer said the government, which has a 55 percent stake in France Telecom, would work with Bon’s successor to determine a recovery strategy for the beleaguered firm.
“We need to create the right conditions to re-establish the credibility of the company,” Mer said in a radio interview. “It’s a magnificent company. We just need to give them back the resources with which to work.”
France’s Telecom’s losses were worsened by a $7.1 billion write-off on investments in Mobilcom, the money-losing cellphone venture 28.5 percent owned by France Telecom.
In a statement, France Telecom said its directors agreed at Thursday’s board meeting “not to seek to take control of Mobilcom and to 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.”
“An excessive number” of firms were awarded licenses to build next-generation phone networks like Mobilcom’s, France Telecom’s statement added. It also blamed German rules governing telecommunications, saying there was a “lack of flexibility of the German regulatory framework necessary for market consolidation.”
The head of Mobilcom, Thorsten Grenz, had warned Thursday that Mobilcom likely would have to apply for bankruptcy protection within days if France Telecom stopped funding. Mobilcom has more than 5,000 employees.
Faced with the prospect of another high-profile bankruptcy just a week before national elections, the German government said Friday it was considering financial aid to keep Mobilcom afloat. |
