Eircom insists the Denis O'Brien-led eIsland consortium be precluded from bidding for the company for two years if it fails in its current offer, it has emerged. Eircom has refused to comment on the matter.
Meanwhile, Mr Leslie Buckley, who is part of the eIsland consortium, said it would not be increasing the offer, which he termed "very rich". The consortium is bidding for Eircom's fixed-line operations.
Mr Buckley said that since eIsland offered €2.25 billion (£1.77 billion), European telecoms stocks had shed 15-20 per cent of their value. "I think this makes it a very rich offer."
In an interview with Mr Shane Kenny on RTE's Evening Busi- ness News, he said the company had got "very limited" correspondence from Eircom. Mr Buckley was also very dismissive of reports of a possible bid by Dr Tony O'Reilly for the fixed-line operations. "There has been absolutely no evidence that such a bid is taking place," he added.
Other sources said last night that Eircom's insistence of a non-bid clause for two years, if the talks fail, was standard in such negotiations. Eircom had not rejected the bid, but had written to eIsland indicating the offer was considerably below what the board considered Eircom's fixedline business to be worth. Mr Buckley's comments came as a new broker's report argued that Eircom's non-mobile business was worth significantly more as a combined entity than it would be if its fixed-line telecom and new business operations were sold off separately. New business operations include Internet providers Eircom.net and Indigo, and its Golden Pages directories business.
According to Merrion Stockbrokers analyst Mr John Coolican, the fixed-line and new business operations are worth €1.47 a share in total if separated from each other but €1.65 a share when combined as a single unit. "The valuation difference arises because the sale of the fixed-line business on a standalone basis would leave the new business without the operational or brand synergies of a telco partner," he says. Mr Coolican also values the fixed-line business at €2.6 billion, 16 per cent higher than the €2.2 billion offer from Mr O'Brien's eIsland consortium.
Mr Coolican's view that the non-mobile businesses are worth more as a combined entity may put increased pressure on the Eircom board to reject the eIsland offer, which is for the fixed-line business alone. Even then, the €2.2 billion on offer from eIsland is thought by analysts to undervalue the Eircom fixed-line business.
Mr Coolican's valuation for the Eircell business - set to be sold to Vodafone for €5.1 billion - and the combined fixed-line and new business operations is €3.96 a share. While this is only slightly above last year's €3.90 flotation price for Eircom, Mr Coolican says two factors provide substantial upside from this price - a potential competitive bid for the fixed-line business and a firm bid for the combined fixed-line and new business operations.
Meanwhile the outcome of a ballot of one of the four trade unions in Eircom, the Communications Workers' Union (CWU) - which would empower the unions to take industrial action if they do not like the outcome of the planned sale of Eircell to Vodafone - is likely to be revealed this morning.
