Deutsche Bank, one of the advisers to Valentia Telecommunications, has emerged as the holder of 8.4 per cent of Eircom. The vast majority of the shares are held on behalf of clients who have built up large positions in the former Telecom Eireann during the takeover battle between Valentia, chaired by Sir Anthony O'Reilly and its rival eIsland.

Valentia bid justmore than €3 billion (£2.36 billion) for Eircom last week, securing the backing of the Eircom board as well as a "concert party" of shareholders controlling in excess of 52 per cent.

Only 58 million of the 185 million shares held by Deutsche Bank and its subsidiaries are included in the concert party holdings. The bank has already disclosed its interest in the Valentia concert party but only revealed the full extent of its holding yesterday in order to comply with Irish company law.

The other shares, representing 5.7 per cent of Eircom are held on behalf of clients, mostly opportunist high-risk investment funds - called hedge funds. They have taken large positions in the hope of making profits on small movements in Eircom's share price during the takeover battle.

The hedge funds are not included in the concert party because Deutsche only holds them on their behalf and can only sell them if instructed to do so. Although the funds can all be expected to accept the current Valentia offer, because its is the highest bid on the table, they would quickly shift their support if a higher bid emerged.

The prospect of a counter bid from eIsland remains remote. The consortium, led by businessman Mr Denis O'Brien is still concentrating its efforts on breaking up the Valentia concert party.

JP Morgan and Investment Bank of Ireland - the advisers to eIsland - were yesterday talking to Salmon Smith Barney, the bank advising the Eircom Employee Share Ownership Trustee which has a 14.9 per cent shareholding.

The ESOT remains firmly wedded to the Valentia Consortium because it has been invited to become part of the consortium and increase its stake to 29.9 per cent. Although eIsland has offered a similar stake it has not - until now - offered to let the ESOT join its consortium.

Yesterday's talks centred on whether the ESOT wanted to discuss becoming part of the eIsland proposal. The board of the ESOT met yesterday to review the issue and also the process by which the Valentia offer of €1.365 per share will be put to a ballot of its 13,000 members. The ESOT also has to ballot members on eIsland's offer of €1.36 per share.

An ESOT source said last night that no decision has been taken on the ballots and further details are being sought by the ESOT from eIsland.

If eIsland can reach agreement with the ESOT on this issue then the difference between the two offers - from the ESOT's perspective - will have narrowed considerably. The trust will pay roughly the same price - €200 million - for its 29.9 per cent stake. The difference will be what it does with the balance of the roughly €400 million it gets for the original 14.9 per cent stake. Under the Valentia proposal it will be re-invested in Eircom while eIsland propose distributing it to ESOT beneficaries.

The Minister for Finance, Mr McCreevy will be required to amend existing legislation if the ESOT is to participate in the Valentia consortium.