The fate of MobilCom, the German mobile phone firm, is hanging by a thread after France Télécom terminated its co-operation framework agreement with the company and threatened to sever all ties.

The decision, which bankers say could herald a death sentence for MobilCom, is the latest development in a long-running dispute between the two companies over the amount of funding France Télécom will provide for MobilCom, in which it has a 28.31% stake.