France Telecom’s huge losses – and resulting resignation of its top man – have sent shockwaves through the European telecoms industry and claimed a big victim. The casualty is German mobile phone company MobilCom – which has now confirmed it is filing for insolvency. Now German Chancellor Gerhard Schroder is said to be lobbying Paris in an attempt to make sure MobilCom does not collapse.

Insight

The inevitable has happened and the industry is now digesting a not altogether unpleasant scenario in Germany. With MobilCom insolvent and the Sonera/Telefonica joint venture mothballed, the German market has become considerably more attractive for the remaining incumbents. As Ericsson suggested a few days ago, most major markets will only be capable of supporting four or less 3G players.

There will be a temptation, fueled by an appetite for political gains in the race for the German premiership, to prolong MobilCom’s misery through state assistance. This would be an error. This is evidence of a competitive market in action and players must be allowed to fail if this system is to work effectively in the future. MobilCom’s assets, including a considerable network of dormant 3G base stations, will provide a useful advantage for one of the four remaining operators or, potentially, anyone brave enough enter the market as a new player.