Freshfields Bruckhaus Deringer has been removed from its role as adviser to high-profile clients France Telecom and German mobile operator MobilCom on a joint venture set up between the two telecoms companies
In the original transaction, which saw France Telecom take a 28.5 per cent stake in MobilCom, the French company was advised by German firm Bruckhaus Westrick Heller Löber (now Freshfields). MobilCom was advised by Deringer Tessin Herrmann & Sedemund (now also Freshfields). However, the recent high-profile spat between the two telecoms companies has resulted in a potential conflict of interest and has seen Freshfields removed from the deal. Shearman & Sterling, led by corporate partner Georg Thoma, has been brought in to advise France Telecom. This is the first deal that France Telecom has instructed Shearman on in Germany, although the firm has a strong relationship with the company in France. It is not yet clear whether Freshfields will lose the clients indefinitely, but a complete breakdown in the joint venture, which now seems likely, may make further instructions difficult. Freshfields' lead partner for France Telecom Burkhard Bastuck said that the firm remains in contact with France Telecom. "We value the relationship and consider it an important client and we continue to work for France Telecom on a number of other matters," he said. However, he added that it was difficult to say how the situation would develop. "Our relationship covers other France Telecom issues and I have no indication that those are being affected," he said. France Telecom is a minority shareholder in MobilCom and the dispute centres around its financial obligations to the German company and the propriety of share dealings by the wife of majority shareholder and MobilCom chairman Gerhard Schmid.
"Our relationship covers other France Telecom issues and I have no indication that those are being affected" Burkhard Bastuck, Freshfields
France Telecom has been arguing that MobilCom's business plan is unrealistic, but it is reluctant to be seen to force the company into bankruptcy. MobilCom, on the other side, is claiming that France Telecom has breached its shareholder agreement by investing in German mobile towers. A legal battle would be likely to complicate MobilCom's attempts to refinance €4.7bn (£2.92bn) of debt due in July, but it is unlikely that working relationships between the two managements will be resumed. Allen & Overy is advising the banks, which include Deutsche Bank and Société Générale.