Schmid files for bankruptcy

18 Feb 2003

MobilCom founder Gerhard Schmid has filed for bankruptcy following the collapse of the German fixed and mobile operator’s share price. Mr Schimd founded MobilCom in 1991 and in the ensuing decade saw the company’s stock value soar to a 2000 high of EUR140 per share. However, a dispute with former major shareholder France Télécom – in which the French telco threatened to pull the plug on its partner – brought MobilCom close to bankruptcy in 2001, following which Schmid was contentiously ousted from his position as CEO. Schmid drew much criticism for his hardline stance at a critical time when both parties were endeavouring to broker an deal relating to a hotly disputed cooperation agreement signed in 2000. MobilCom had amassed billions of euros of debt in its bid to finance a drive to 3G technology, but Schmid’s intransigence threatened to scupper politically-backed efforts to save the group. MobilCom’s share price subsequently slumped by more than 80% in 2002 in the wake of fears over its long-term viability. Mr Schmid has said that his private estate of shares and property could be at risk.

In a separate story, MobilCom has agreed a preliminary deal to sell its entire fixed line business including its customer base to freenet.de for EUR35 million. MobilCom, which has a 76% stake in freenet.de, said the reason behind the sale was to capitalise on the synergies underlying its fixed line and internet access businesses. Improved integration of the two will improve efficiency and drive down costs, while infrastructure investments planned by freenet.de will guarantee its competitiveness in the long-term. The sale increases the value of freenet.de and simultaneously puts MobilCom in a better position to reduce its debts sooner than planned, if necessary.

Germany