France Telecom's Achilles heels: 3G and MobilCom

date: July 1, 2002

Just as France Telecom decided to slow down its 3G spending citing a delay in introducing the new services, more bad news came its way on the MobilCom front.

It now seems that the operators, Deutsche Telekom, Vodafone and E-Plus, from whom MobilCom rents out the network time for its own mobile services, have threatened a review of the contract if France Telecom enforces a takeover. That review could result in the German operator selling off its 4.9 million customers to these carriers.

"If there is a change in ownership, the premises of our contracts with MobilCom change and we have to talk," said Philipp Schindera, a T-Mobile spokesman. According to Schindera, T-Mobile had to approve any change in MobilCom's ownership, failing which it could terminate the contract. This would force MobilCom to sell its subscriber base. "If the subscribers had to be sold, they could only be sold to us or another reseller operating on our network," he added.

Although Schindera claimed that his company would not cut off MobilCom's subscribers, he pointed out that an insolvency administrator could use the subscriber base to pay MobilCom's liabilities to T-Mobile.

Losing the subscriber base would also place MobilCom at a huge disadvantage when it comes to launching its own 3G services. Which in turn is sure to put added pressure on France Telecom's plans for next generation services in light of its own 3G investment delay and Orange's threat of delaying its 3G operations in the UK.

Orange had, only a few days back, warned that it would have to deliberately slow down the work on its planned UK 3G operations unless the country's regulator, Oftel, took a more 'lenient' view over existing mobile phone charges. The remarks have been triggered by the regulator's probe into termination charges, which Oftel considers too high.

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