As far as we know, Mobilcom is a healthy company at its core

German government

Mobilcom said on Friday that it would file for insolvency next week after losing crucial financial backing from its part-owner France Telecom.

The move puts up to 5,000 jobs at risk just days ahead of federal elections scheduled for 22 September.

A government spokeswoman said Chancellor Gerhard Schroeder had offered to lead negotiations with Mobilcom's creditors.

"As far as we know, Mobilcom is a healthy company at its core that one can back with a clear conscience," she said.

German officials were reported to have been in touch with their French counterparts in the hope of persuading state-owned France Telecom to review its decision.

Political fallout

A further round of job losses would be politically damaging to Chancellor Schroeder's socialist government, which has presided over a string of corporate collapses this year.

Recent high-profile corporate failures include construction giant Holzmann and the Kirch media group, both of which cost thousands of jobs.

France Telecom, itself facing a serious cash shortage, decided to stop supporting Mobilcom late on Thursday.

Mobilcom, hit by the telecoms sector downturn, had become heavily dependent on cash injections from its parent firm to meet its operating and debt servicing costs.

The company is due to pay its creditors a total of 4.7bn euros (£3bn; $4.6bn) in September alone.

Analysts said Mobilcom was unlikely to find alternative sources of financial support.

"There's no investor in sight and one would have to be found very quickly," said Klaus Baumann of Hamburg-based SES Research.

Dispute

France Telecom's decision to cut off Mobilcom's lifeline drew strong criticism from its main shareholder and former chief executive Gerhard Schmid.

"France Telecom has stolen away from its responsibilities," he said, accusing the French telephone firm of "scandalous and illegal conduct".

Mr Schmid, who owns about 50% of Mobilcom's stock, resigned as chief executive earlier this year after a bitter dispute with France Telecom over budget planning.

He had campaigned for France Telecom, which currently controls about 28% of Mobilcom, to buy the company outright.

Mobilcom, in common with many other European telecoms firms, built up heavy debts acquiring third generation mobile licences and building the networks to run 3G services.

But investors subsequently deserted the company as doubts over the long-term viability of 3G telephone services took hold, leaving its finances in a precarious state.

Mobilcom shares slipped below the symbolic one euro level on Thursday, valuing the company at just 35 million euros - a fraction of its peak market capitalisation of 7 billion euros in July 2000.