The German government last night came to the rescue of MobilCom with an eleventh-hour bailout which will see the stricken telecoms group receive a €400m (£250m) loan.
MobilCom had been facing an insolvency filing this week. The dramatic intervention by Berlin came after France Telecom, its major shareholder, cut off funding on Thursday precipitating a liquidity crisis at the German mobile group.
The German Economy Minister, Werner Müller, said the package would be financed by two state-owned banks, Kreditanstalt für Wiederaufbau and the Schleswig-Holsteinische Landesbank, based in MobilCom's home state.
Mr Müller said €50m would be provided to MobilCom from today and other banks, including Deutsche Bank, had agreed to suspend debt repayments. The rescue package has to be approved by the European Commission and the funds repaid back to the banks.
MobilCom employs 5,500 people and with the German national election, in which unemployment is a major issue, just a week away, the ruling party was desperate to secure the company's immediate future. Earlier, Mr Müller said he believed MobilCom had justified claims against its French partner. "We have come to the conclusion that [MobilCom's] rights with regard to its agreement with France Telecom are certainly still valid and we will make that the basis of our talks," he told reporters in Berlin.
France Telecom, majority owned by the French state, bought 28.5 per cent of MobilCom in 2000 and signed an agreement under which it would provide funding for MobilCom's €8.4bn (£5.3bn) new third-generation mobile phone licence and the building of a network. However, France Telecom has been struggling to cope with its €70bn debt pile.
The details of the agreement between the two companies have not been made public but France Telecom has dismissed the threat of legal challenges from MobilCom. "We are prepared for that," Jean-François Pontal, a France Telecom board member, told the Welt am Sonntag newspaper. "MobilCom would do better to look to its future than to sue us."
Reports had said that MobilCom needed an immediate injection of €200m to continue.
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