Eircom sags on doubts about Swisscom bid

Eircom shares slipped yesterday amid fears that a possible €2.5 billion bid for the company may not materialise.

The stock drifted yesterday, opening at €2.27 and dropping to €2.19 at one stage, before recovering some ground to close at €2.21 in Dublin yesterday.

Investors sold close to 1.2 million shares in the company on the Dublin market. Brokers attributed the stock's unpopularity to emerging doubts about the bid from Switzerland's state telecom, Swisscom.

The Swiss group has made a preliminary approach to the company and is looking at Eircom's books after being granted exclusive access earlier this month.

It is reported to be willing to pay just over €2.40 per share for the Republic's dominant fixed-line operator, which would value it at close to €2.5 billion. However, it has not committed to an offer for for the company.

The markets have also been spooked by the news this week that Eircom lost out in the race to win the fourth and final licence to operate a third generation (3G) mobile network. This was seen as a blow to the company, which is seeking ways to re-enter the Republic's mobile market.

Eircom has already agreed to buy the State's third mobile operator, Meteor, for €420 million, pending Competition Authority approval.

However, analysts said yesterday Eircom could still enter the 3G market as a virtual operator, offering services through somebody else's network.

Comments from the head of Swisscom's mobile unit, Carsten Schloter, have also cast doubt over the bid. Mr Schloter this week said that the company did not want to endanger its partnership with mobile operator, Vodafone. Vodafone provides Swisscom with mobile technology and roaming services.

If the Meteor deal goes ahead, Eircom will be in direct competition with Vodafone, which is the biggest operator in the Republic's mobile market. However, Swisscom's chief executive, Jens Adler, made it clear yesterday that the company was still in the race.

Speaking at a conference in Barcelona yesterday, Mr Adler, whose company is on the acquisitions trail in Europe, would not rule out attempting to buy both Eircom and Danish player Teledenmark (TDC).

"I would love to do one that makes sense but I can't rule out the possibility that there might be another one . . . " he said.

However, Swisscom's chances of winning TDC suffered a blow yesterday when it was confirmed that a consortium of Apax, Blackstone, Kohlberg Kravis Roberts, Permira and Providence had lodged a formal bid for the company. Eircom was beaten to the fourth 3G licence by fixed-line rival Smart, which has a strategic partnership with Chinese technology provider, Huawei.

A partnership of Smart and UK operator, Virgin Mobile, also bid for Meteor earlier this year.

Earlier this week, Eircom reported that it had earnings of €149 million in the second quarter of the year, broadly in line with market expectations.