Eircom is expected to launch a rights issue to raise at least €350 million when it unveils its plans to buy Meteor for €420 million next week.
The company is in pole position to buy the Republic's smallest mobile operator after the only other suitor, Smart Telecom, announced yesterday that it was withdrawing its bid.
Meteor's owner, US operator Western Wireless, is selling the Irish business as part of a sell-off of all non-American mobile operators.
It invited bids four weeks ago and the result of the auction was expected before the end of the month.
Smart is understood to have tabled a bid of €435 million. In a statement, it said that its board and that of its partner, Virgin Mobile, had decided that the transaction was no longer in the interests of either company or their shareholders.
Their withdrawal means the price tag for Meteor will settle at the €420 million that Eircom is understood to have bid for the mobile telecoms company.
Sources yesterday said Eircom was hoping to announce the deal and accompanying rights issue at its annual general meeting on Monday.
The extent of the planned rights issue goes beyond earlier market projections, which ranged around the €250 million mark.
The rights issue is likely to take place towards the end of the summer. As is normal under such offerings, new shares will be sold at a discount to Eircom's share price at the time.
The company closed at €1.83 last night, down two cent on the day.
When considering the merits of the Meteor deal, analysts have focused on Eircom's debts of near €2 billion. A rights issue provides an alternative to adding to this debt burden.
Eircom is also expected to require funds in the near term to pay for the State's final 3G licence. Along with Meteor and several other players, it has applied for the licence.
If it is successful, it will require a payment of close to €50 million to the State's communications regulator in the first year. At the same time, further investment would be required to bring Meteor's network up to 3G standards.
Smart Telecom's statement yesterday made it clear that it and Virgin were not happy with the bidding process for Meteor, which was managed by Deutsche Bank. The pair said there was "an absence of sufficient due diligence material being made available to prospective bidders". It is understood that the partnership did not get all the information it had requested during the bidding process.
However, they added that they would jointly pursue other opportunities in the Irish market.
Virgin was a significant minority shareholder in the Smart bid. The other backers were Glen Dimplex founders Martin Naughton and Lochlann Quinn, a former AIB chairman, and Brendan Murtagh of construction technology company Kingspan.
