MobilCom AG aims to cut up to 1,600 jobs, or almost one third of its workforce, as part of a restructuring plan to save the struggling German telecoms group, supervisory board sources said.
Around 800 jobs would be cut from the group's core service provider business and another 800 from its third generation (3G) mobile operations, the source told Reuters.
A MobilCom spokesman declined to comment. The plan, which aims to achieve savings of e110-130 million, must still be agreed with MobilCom's workers council. It has not yet been presented to the federal government or the state-owned Kreditanstalt fuer Wiederaufbau (KfW) development bank, the sources said, adding that "insolvency would be unavoidable" if the plan is rejected.
MobilCom was saved from the immediate threat of insolvency at the weekend when the German government put together a e400 million loan package from state banks to keep the group going after France Telecom cut off vital funding.
However, German business daily Handelsblatt said Landesbank Schleswig Holstein, one of the two banks involved in the bailout, had demanded that MobilCom's restructuring plan be reviewed by an outside auditor before it would release the e80 million loan it has included in the package.
Analysts remained sceptical the package would be enough to secure the long-term future of the loss-making group, which faces a tough task to improve profitability in its core mobile voice business while the future of its 3G operation is unclear.
"This is a temporary stay of execution for MobilCom, not a permanent solution," Gartner analyst Nigel Deighton said, adding that the aid package was in any case likely to face challenges from other operators who paid heavily for a 3G licence in 2000.
"It's pretty clear that the government has been interfering with the market," he said.
MobilCom shares were down eight pe cent at e2.69 at 1136 GMT, underperforming the Nemax 50 index, which was 4.5 per cent lower.
German Chancellor Gerhard Schroeder, facing a tight election at the weekend, said this week he would support MobilCom in talks with France Telecom and its main shareholder, the French government, in talks to secure the German unit's future. (Reuters)
The French giant has agreed to stand by a deal with banks and equipment vendors to swap some 5.8 billion euros in MobilCom debts due this month for a bond convertible into France Telecom shares. But the end of its funding commitment meant MobilCom would not have been able to continue normal operations.
MobilCom Chief Executive Thorsten Grenz and Economics Minister Werner Mueller were to meet on Wednesday to discuss their approach to talks with France Telecom.
France Telecom agreed to fund MobilCom's drive to build a network and offer 3G services when it took a 28.5 per cent stake in the German group in 2000 as a way into Europe's biggest telecoms market.
But it fell out with MobilCom's former CEO Gerhard Schmid over funding and strategy earlier this year and said last week it would suspend all further funding to the German company.
The bailout plan prompted EU Competition Commissioner Mario Monti on Tuesday to seek an explanation from Berlin.
The German finance ministry said the first 50 million euros of the package from KfW still required approval by the Commission but that it expected this to be granted shortly.
The bank said the funds had been made available on Monday but had not yet been claimed by the company.
Separately, German telecoms service firm 3U Telecom AG said it had offered to acquire MobilCom's fixed network activities, which may be sold as part of the restructuring.