Eircom shares have come under renewed pressure as uncertainty over the 14 per cent stake held by Swedish group Telia dominated the Irish market.
At the close, Eircom was down 5 cents at a new low of €2.78, having dealt as low as €2.70 in earlier trading. Dealers reported plenty of stock on offer - more than 3 million shares traded - even at those record low levels, with hardly a buyer in sight.
Dealers believe that there is little prospect of any real improvement in Eircom shares until the situation regarding the Telia shareholding is clarified.
Even then, there is a belief in the market that if Telia agrees to a voluntary "lock-up" of its shares, the Eircom price is unlikely to reach a level where KPN would be able to sell its 21 per cent stake at much above a token profit.
KPN indicated its plans to sell when Eircom shares were trading at €3.47. At yesterday's close of €2.78, the shares are edging towards the effective cost of €2.54 at which both KPN and Telia bought their respective 21 and 14 per cent holdings when the £1.2 billion clawback by the Government is taken into account.
At this stage, relations between Eircom and Telia, and between KPN and Telia, are at an all-time low, with Eircom forced to remind Telia of its legal obligations to sell its stake by the end of August unless Eircom itself agrees to waive this obligation.
This commitment dates back to the collapsed merger between Telia and Norwegian group Telenor where Telia agreed to sell its Eircom stake to avoid a conflict of interest with Telenor's part ownership of Esat Digifone. Even though that proposed merger collapsed amid a welter of recriminations, Eircom has taken the view that Telia's obligation to sell its 14 per cent stake still stands.
Eircom sources have indicated, however, that there is no question of the company taking legal action to force Telia to sell and have merely "reminded them of their obligations". But there is a belief that, if Telia does not give a clear indication this week that it is either selling its stake or a clear commitment to lock it up, then Eircom could still end up taking legal action.
Despite persistent efforts by both Eircom and KPN to get Telia to clarify the situation, there is a belief in both Dublin and Amsterdam that the Swedes do not seem to fully appreciate the seriousness of the situation - particularly as it applies to KPN's plans to sell its 21 per cent stake. Every cent over the €2.54 effective cost of buying its stake is worth €4.6 million in profit to KPN, based on the 463 million shares involved in the secondary offering.
From a situation four weeks ago when KPN might have expected to make a reasonable profit on its Eircom stake, the Dutch group is now close to being forced to abandon the sale, or else suffer a loss. It is understood that there is no question of KPN taking a loss on its investment and that the secondary share offering will be abandoned unless Telia gives a clear commitment by the end of this week.
Some sources believe that Telia management has been sidetracked in the past couple of weeks by its negotiations to take a majority stake in the Norwegian telecoms group NetCom.
