Eircom announced plans to raise €423 million in a share issue yesterday to fund its proposed acquisition of the State's third mobile phone company, Meteor.

It also signalled that it is going ahead with its plan to apply for a third generation (3G) mobile licence from the State to help it expand Meteor's mobile services.

The licence, which will cost the firm €44 million immediately and a further €70 million over 10 years, is being sold by the Commission for Communications Regulation (ComReg). Bids are due to be submitted by September 9th and a result will be announced in October this year.

Eircom's prospectus for the rights issue said yesterday that Eircom's directors believe that it has "sufficient resources to pay the licensing fees and fund the roll out of 3G". Analysts estimate this may cost up to €400 million.

Meteor is also preparing a separate bid for the 3G licence in case its planned merger with Eircom is halted by the Competition Authority. Smart Telecom is also likely to submit a licence bid.

Meanwhile, Eircom's prospectus for the share issue shows that it plans to issue 313 million new shares, representing 29 per cent of its enlarged issued ordinary share capital. The five for 12 rights issue will be priced at €1.35 per ordinary share, a 24 per cent discount to the closing price of €1.78 on August 29th.

The rights issue is fully underwritten by Eircom's brokers Morgan Stanley and Goodbody Stockbrokers, the firm said .

When Eircom announced the planned acquisition of Meteor in July, it had said it was targeting a rights issue priced at €1.10 per share. However, traders said yesterday there was still strong demand for Eircom's shares.

Shares in Eircom closed up five cent at €1.83