PARIS—France Telecom and its mobile subsidiary Orange said they terminated the cooperation framework agreement with MobilCom and Gerhard Schmid, which the companies entered in March 2000. France Telecom said the termination follows a series of breaches by Schmid and MobilCom.
France Telecom said Schmid and the MobilCom supervisory board have repeatedly misinterpreted the CFA by alleging that France Telecom and Orange’s rights to approve important decisions were not enforceable. In addition, Schmid breached a number of articles in connection with transactions between MobilCom and Millennium, a company owned by Schmid’s wife, France Telecom said. It added that Schmid failed to repay about $66.3 million as of June 6 as requested by the supervisory board.
“France Telecom/Orange have clear legal grounds to terminate the CFA and, in consideration of the loss of confidence that has occurred between France Telecom/Orange and Mr. Schmid and MobilCom, France Telecom/Orange have no option but to terminate the CFA,” France Telecom said in a statement.
The French company had recommended that Schmid either resign or be dismissed. However, Schmid refused to resign, and the supervisory board rejected motions to dismiss him after it was learned that Millennium borrowed money from MobilCom.
Orange holds 28.5 percent of German company MobilCom, which owns a third-generation license in Germany. Schmid owns 36 percent of MobilCom. The two groups have openly disagreed on MobilCom’s 3G buildout and business plans.