Norwegian telecoms group Telenor will almost certainly have to submit a third, higher, offer for Esat, as the Irish group's shares continued to trade strongly on the Nasdaq yesterday. Although the shares did not reach the $95 pre-Christmas high, trading was steady yesterday and it closed at $92 per share.

This is $7 above the revised offer price of $85 per share (compared to its initial $72 offer) which Telenor made on December 22nd. Analysts say the market clearly believes the company has still not offered enough. An observer suggested the next offer would have to top $100 per share.

Meanwhile, Esat Telecom confirmed last night that it was discussing alternative offers with third parties. It said shareholders had had ample time to consider the "merits and demerits of Telenor's revised offer. In a statement the Esat board also said it noted Telenor's subsequent statement that it reserved its right to increase its offer in certain circumstances. "There is no need for shareholders to take any action at this stage," it said.

The board said it had instructed its advisers to analyse the offer and would meet in due course to consider their advice. It will then issue a further statement to shareholders.

Any potential white knight will have to face opposition from Telenor, which is a 49.5 per cent shareholder in Esat Digifone, the second mobile phone operator. Although no definite names regarding a counter-bid have been mentioned, analysts say Esat's chief executive officer, Mr Denis O'Brien, "has not been sitting on his hands."

Analysts said a crucial role could be played by International Investment Underwriting (IIU), the investment vehicle of Mr Dermot Desmond which holds 1 per cent in Digifone.

Telenor sued IIU in a dispute over board representation when IIU reduced its stake from 10 per cent and relations between the two are strained, to say the least.

As part of the shareholders' agreement, it appears that IIU would not have to give first rights of refusal to Telenor and Esat, if it wanted to dispose of its 1 per cent stake. IIU could sell its stake to any other party, but has agreed that it could do so provided that party is not engaged in any mobile telecommunications in the Republic in competition with Esat Digifone.

In effect, it means that Esat and IIU could sell to a third party, giving it a 50.5 per cent majority in Digifone, which is the most lucrative part of Esat's business. But facing a disgruntled 49.5 per cent shareholder could still be a daunting task.

Whatever happens, analysts say Mr O'Brien has accepted the company is in play and will be taken over by another company some time next year.