The Minister for Communications, Marine and Natural Resources, Noel Dempsey, has distanced himself from critical comments made by Fianna Fáil TD Noel O'Flynn about the possible takeover of Eircom.
A spokeswoman for Mr Dempsey said last night that Mr O'Flynn was "speaking for himself" when he accused Australian investment fund Babcock & Brown Capital of being motivated only by profit in its "assault" on Eircom.
Mr O'Flynn, chairman of the Joint Oireachtas Committee on Communications, voiced his concerns in the Sunday Business Post and then repeated them on RTÉ radio yesterday.
He claimed Babcock & Brown, which is mulling over an offer for Eircom, was not interested in the company's core operations and would have no incentive to develop them. He is particularly concerned about the company's debt, which commentators say would exceed €3 billion after a Babcock & Brown takeover.
Meanwhile ratings agency Moodys last night said it might downgrade Eircom if it doesn't improve its credit profile. Moodys said it would alter its outlook from stable to negative.
The agency said the change in outlook reflected "weaker than expected operating performance in the first nine months of the year which has resulted in a gradual weakening of credit metrics".
The agency said it was concerned that future cost savings would not be sufficient to offset the higher ongoing pension and sales and marketing costs and that the deterioration in the company's credit "metrics" might be sustained. Babock & Brown had gained control of at least 21.26 per cent of Eircom by the end of last week, with the market expecting further buying to take it up to 29.9 per cent over coming days.
Trade in the stock slowed yesterday, however, with about 10.5 million shares traded between Dublin and London. Eircom closed unchanged at €2.21. Any bid is expected to come at about €2.30, with sources suggesting that yesterday's slowing in business pointed to a new unwillingness among investors to sell much below this level.
Eircom told the market last Tuesday that Babcock & Brown had made a preliminary approach that may or may not lead to an offer. At that stage, the fund had already met officials representing the Government to inform them that an approach was imminent.
Mr Dempsey's spokeswoman said the meeting was essentially a "courtesy call" and did not cover any of the detail in Babcock & Brown's proposals for Eircom. It is thought the fund wants to split the firm into two parts by separating the network from retail operations.
While this was not discussed, Babcock & Brown did leave behind some documents for the Government's perusal. The spokeswoman said these had not yet been assessed and confirmed that the same documents had been lodged with Comreg, the telecoms regulator.
Babcock & Brown is thought to have included details of its meetings with the Government officials and Comreg in a letter sent to Eircom last week. The fund also confirmed early contact with the Employee Share Ownership Trust, which owns 21.5 per cent of the company and will play a crucial role in any takeover.
