France Tel strikes MobilCom deal

PARIS, France -- France Telecom has reached an agreement with creditors of MobilCom to convert its German mobile partner's debt into to shares, paving the way for a takeover by French group.

MobilCom's 17 lending banks have also agreed to extend the deadline for repayment of loans worth 4.7 billion euros ($4.64 billion) to September 30 from July 31. The decision gives embattled France Telecom some breathing

France Telecom said on Wednesday it had concluded a memorandum of understanding with the creditor banks, following a verbal agreement in June, to swap MobilCom's debt for securities that can be converted into France Telecom shares.

MobilCom said the extension of the loans "is in part subject to the condition subsequent that a memorandum of understanding between France Telecom and the bank consortium remains effective."

The swap deal -- which will enable France Telecom to make an offer for the 71.5 percent of MobilCom it does not already own -- is contingent on the group hammering out a deal with telecoms equipment suppliers Nokia and Ericsson to roll over a separate 1.1 billion euro loan to MobilCom, which was meant to help finance a new-generation mobile network in Germany.

"Talks are still going on with Nokia and Ericsson. They are taking a long time but that shouldn't be read as a negative sign," a France Telecom spokesman told Reuters.

France Telecom -- which built up a debt of 61 billion euros after an aggressive expansion spree -- is anxious to strike a deal with the banks in order to keep a foothold in Germany, which is Europe's largest telecoms market.

Shares in France Telecom (PFTE), which had fallen more than 60 percent since it was floated five years ago, were up 1.3 percent to 15.50 euros at midday Paris trading on Wednesday.