Eircom shares traded at a discount to their flotation price of €1.55 for most of yesterday afternoon after a conditional market in the stock opened at 1 p.m.

The telecommunications firm's first few hours back on the markets were marked by frantic activity, with some 180 million Eircom shares changing hands between London and Dublin.

This represented more than one-third of its issued share capital and is particularly noteworthy because only 70 per cent of the firm was sold in the initial public offering (IPO).

The remainder is under the control of the firm's Employee Share Ownership Trust.

Dealers in Dublin said Eircom's shares had found good buying support at levels just beneath the flotation price.

The stock opened three cents beneath the offer level at €1.52 in Dublin and closed at €1.53 after trading as low as €1.48 at one point.

In London, where shares began trading at €1.55, Eircom closed at €1.54. The company was the second-busiest stock on the London market, and by far the most active in Dublin.

The shares will continue to be traded conditionally until Wednesday morning when they will take up a full listing in both markets. This practice is typical for IPOs.

Eircom's shares were priced on Thursday evening at the lower end of the €1.48-€1.75 range that had been set by the company before the IPO. Market commentators said the initial drop in the shares yesterday was a symptom of the difficult market conditions that surrounded the flotation.

They attributed the heavy volume of trading in the stock in part to speculative trading by hedge funds.

Eircom did not comment on the performance of its shares but a statement issued by the firm before trade began referred to "difficult" markets.

The company's chief executive, Mr Philip Nolan, expressed pleasure at the offering's positive reception.

"Investors have recognised the strengths and potential of the business," he said.

Eircom raised €300 million in fresh equity under the IPO. After costs such as professional fees have been paid, the net proceeds will stand at €253 million.

A secondary offering of 328 million shares owned by Sir Anthony O'Reilly's Lionheart Ventures, Providence Equity and Mr George Soros's private equity fund raised a further €500 million for the sellers. The float price gave Eircom a market capitalisation of €1.15 billion.

The identity of the shareholders who participated in the IPO was not released yesterday but sources have estimated that Irish fund mangers and private individuals accounted for about 30 per cent of shares available under the flotation.

Irish fund managers known to have bought in include AIB Investment Managers, Bank of Ireland Asset Management, Irish Life Investment Managers and Hibernian Investment Managers. In this way, thousands of Irish investors and pension fund holders will have an indirect holding in the firm.

These fund managers are likely to have bought in for the medium term with a view to drawing a promised yield of 7.1 per cent.