Advisers to Babcock & Brown Capital are believed to have met advisers to the Eircom employee share ownership plan (Esop) as the Australian investment group mulls a bid for the telecoms company.

Market sources said yesterday that Babcock & Brown had been active in preparing a takeover proposal and was ready to move with a full bid.

As yet, there have been no formal meetings between Babcock & Brown and the Esop, whose support would be critical to the success of any takeover proposal. But the parties are thought to have engaged through their advisers on a preliminary basis.

It is believed that full funding is in place for a takeover, although it is still possible that the investment firm could look to join forces with another party.

Some believe a domestic or industry partner could make an approach from Babcock & Brown more palatable to the trust that holds 21 per cent of Eircom for current and former staff.

Without this, the investment firm's lack of industry expertise could be seen as a problem for the Esop, one source suggested.

The latest indications suggest a bid is not due imminently, since any buyer would almost certainly try to win the trust's approval before proceeding with a takeover move.

Babcock & Brown is said to want to split Eircom into two parts, separating the firm's network operations from the rest of the business, including the recently-acquired Meteor mobile business.

Shares in Eircom added a further two cent, or nearly 1 per cent, to €2.05 yesterday, although trading in the stock was more muted than in recent days.

In Dublin, just under four million shares traded while in London, close to nine million shares changed hands as the stock gained 1.5 per cent. Babcock & Brown currently owns 12.5 per cent of Eircom, but has refused to comment on reports that it is planning to launch a bid at €2.35 per share for the company.

It has also declined to say whether or not it has been adding to its stake in Eircom in recent days. However, given the size of its existing shareholding in Eircom, the Australian firm is obliged to notify the Irish Stock Exchange of any change to its stake in the coming days.

Eircom has been the subject of persistent takeover speculation since an abortive move on the company last year by Swisscom.

Despite its high debt levels, the potential in its mobile business, allied to the strong economic factors underpinning its fixed-line business are seen as attractive to would-be purchasers.