Mobilcom's woes threaten Vodafone's German links

Vodafone's grip on the German mobile phone market could loosen due to the near-collapse of rival operator MobilCom.

France Télécom, which owns 28 per cent of MobilCom, last week pulled the plug on future funding. The move, which also led to the resignation of France Télécom's chairman Michel Bon, has caused a rift between the French and German governments.

Without fresh funding, MobilCom could be forced into insolvency this week. It is understood this could threaten around a tenth of Vodafone's 24 million German customers.

MobilCom doesn't own any telecoms assets and instead re-sells capacity on other operators' networks. As well as Vodafone, it has deals with T-Mobile and E-Plus. If the company collapses, these customers could be snapped up by other operators. MmO2, the mobile phone company spun out of BT that has 4m customers in Germany, could benefit.

The fate of MobilCom could be sealed today as representatives of the German government meet its chief executive Torsthen Grenz to discuss a possible bail-out. However, a company insider said even if the government offered credit guarantees, parts of MobilCom could become insolvent. This could include its subsidiary which owns a third-generation mobile licence.

Analysts believe this will be good news for other German operators. Trevor Brignall, a director in Cap Gemini Ernst & Young's telecoms team, said: "There is a good chance MobilCom will hand its licence back to the government because it won't want the liabilities of building out the network."

A consortium headed by Telefonica and Sonera has given its third-generation licence back to the German government.