Eircom shares continued their dramatic slump on the Dublin market yesterday as investors brace themselves for the secondary offering of the 770 million shares held by KPN and Telia.

With Eircom closing down seven cents on €3.40, market sources believe that the likely placing price is declining by the day and that KPN and Telia may have to settle for a price below €3.00.

Trading in Eircom yesterday was volatile and, from the overnight €3.47, the shares tumbled to an intra-day low of €3.25 before recovering to end the day on €3.40.

There were signs, however, that the worst may be over with the selling pressure easing at those lower levels. But the shares are likely to remain severely depressed for the next few weeks as KPN and Telia complete the sale of their shares to institutional and retail investors.

With analysts speculating that the eventual price for the KPN and Telia shares will be at a discount of at least 10 per cent to the price in the market, it now seems increasingly likely that the final price struck for the 770 million shares will be close to €3.00, or possibly even less.

If that is the case, anybody interested in taking a punt on Eircom has little incentive to buy at current levels when they can buy the shares in the secondary offering at a substantial discount to the price in the market.

It is likely that about 15 per cent of the KPN/Telia holding - about 115 million shares - will be sold to private investors.