Colt and Mobilcom Cut 2,600 European Jobs

Another round of job cuts swept the European telecoms industry yesterday as Colt cut 800 jobs and ailing German mobile phone company Mobilcom made almost half its workforce redundant.

Colt Telecom also reduced the value of its communications network, which spans 13 countries, by more than a fifth because of the continuing slump in demand.

In Germany Mobilcom cut 1,850 jobs from a total workforce of 4,200 and announced plans to halt the roll-out of its third generation mobile phone network to save money. Mobilcom lost €173m (£108m) in the second quarter of the year.

The German mobile phone operator was plunged into crisis this month when France Télécom, which owns 28.5%, refused to provide further funds. It still has 5m customers and is hoping to return its core business to the black, in part by slashing costs.

Halting its roll-out of 3G will save cash in the short-term, but analysts expressed concern that the business would risk losing its licence.

Mobilcom is understood to be well ahead of the timetable laid down by the terms of the licence and can put the project on hold for several months without having it revoked.

"There has to be consolidation in the 3G sector in Germany and they are hoping to be part of that. They are saying they can't develop 3G on their own but they have a licence and believe that it does have value," said one source.

Colt estimates that the 800 job losses throughout its European network and at all levels, will save up to £40m.

In February the company cut 500 jobs, closed seven of its 18 web hosting centres and wrote off £175m from its internet hosting business and network.

Yesterday Colt admitted that the market has continued to deteriorate, warning that it expects revenues for the third quarter to be flat. The company expects earnings before exceptionals and charges for the third quarter to be about £17m, up from £14.7m in the second quarter.

Savings rather than a pick-up in business will play a significant role in the improvement. As a result Colt is writing down the value of its assets by £550m. Colt estimates its 12,500km European fibre-optic network is worth £2bn, less than half what it cost.

The French government said it will announce a new head at France Télécom to replace Michel Bon on Wednesday.