MobilCom rescue plan gets green light from EC

22 Jan 2003

The European Commission has ruled in favour of a EUR50 million state-backed rescue plan for faltering German mobile operator MobilCom. The aid package, which was granted in September 2002 in the guise of a government guaranteed loan, was paid to MobilCom by state-owned development bank KfW; a second German plan to provide additional funding in the form of an 80%-guaranteed loan of EUR112 million was put forward and duly granted by the State on 20 November. The Commission launched a formal investigation into the veracity of the first scheme and today reported its findings. The Commission now agrees that at the time the loan was proffered MobilCom was indeed facing an acute liquidity crisis due to its major shareholder France Télécom withdrawing financial support and under these circumstances qualifies as a company in difficulty. However, whilst the EC considers the EUR50 million crucial to keeping MobilCom afloat in the short-term, it is not yet convinced that a German authorities have demonstrated the need for the additional funding and has subsequently launched a formal inquiry into the second loan. The Commission has concerns that the additional cash is to be used to fund restructuring measures rather than to cover current expenditure.