Eircom's badly bruised shareholders must now decide how to vote on the sale of the Eircell mobile phone subsidiary to Vodafone. Next week they will receive the Vodafone offer document and a circular from Eircom detailing the transaction and setting out the voting resolutions for its extraordinary general meeting on May 11th.

If the deal goes ahead, shareholders will be left with both Vodafone shares and their existing Eircom shares, an Eircom that does not include Eircell.

Their decision therefore has two main elements: is Vodafone paying enough for Eircell and what is the outlook for Vodafone and Eircom shares after the deal? The latter boils down to an assessment of the management, strategic direction and outlook of both companies.

Is Vodafone paying enough? At current share prices and based on the industry measure of enterprise value to subscriber, Vodafone is paying #2,400 (£1,890) per Eircell subscriber. ABN Amro analyst Jemma Houlihan said this was on the same valuation multiple as Vodafone's own mobile business and more than double the valuation paid for the publicly quoted Libertel in the Netherlands and Mobistar in Belgium and was "a fair price".

Whether Eircom could get more for Eircell by waiting until the market for telecoms improves is debatable. On the plus side, it is a strong business whose value would be expected to respond to a stronger market. On the negative side, the competitive environment for the business is intensifying so Eircell's value may have peaked and the issue of 3G licences would need to be tackled.

The Vodafone deal is a tax-free all-share offer with no cash involved. The process would involve demerging Eircell from Eircom into a new company called Eircell 2000. Eircom shareholders will get one share in Eircell 2000 for every share they hold in Eircom and will continue to hold their existing Eircom shares. Vodafone will acquire Eircell 2000 by giving each shareholder 0.9478 Vodafone shares for every two Eircell 2000 shares they hold. At Vodafone's £2.055 sterling price yesterday Eircom shareholders are getting shares worth #1.57 for every Eircell share. Most analysts feel Vodafone is one of the best positioned companies to succeed in the difficult international telecoms market although there are some concerns about its expenditure on 3G licences, associated roll-out costs and possible competing technologies.

Analysts generally see an effective share swop of Eircom for Vodafone shares as offering shareholders more potential upside when the market recovers. Slightly bearish on Vodafone, Ms Houlihan is forecasting the price could rise to about £2.20 sterling which would give Eircom shareholders about #1.71.

Shareholders will also have their old Eircom shares which Ms Houlihan has valued at about #1.03 - less than the #1.10 offered by Denis O'Brien's consortium, eIsland. At current levels there is probably some upside in the shares but Eircom's own assessment of its future prospects after the proposed Vodafone transaction does not suggest a great future, though it may be a fairly realistic view.

Eircom has warned that competition will mean that revenue growth and operating margins in the fixed-line business will be under pressure.

Refocusing on core activities, cost-cutting, reducing capital investment and cutting the value of some existing multimedia assets and investments sounds like a retrenching company. Paying out 50 to 60 per cent of post tax earnings in dividends suggests a company with little or no ambition for future growth.

Operating in a mature fixed-line market the Eircom shares will not be attractive to growth investors. At current levels they could attract some value investors but that will depend on whether Eircom management is seen as capable of delivering profit growth. And yesterday's defensive strategic statement provided little evidence that this will be the case.

As one market source commented, "this looks like a company being primed for sale". Probably the best hope for some real improvement in the Eircom share price would be a bidding battle for the operation between the parties who have made "approaches" - Mr Denis O'Brien and a consortium involving International Investment and Underwriting.

For shareholders the sum of the parts will remain well below the #3.90 Eircom flotation price. Eircom closed yesterday at #2.48, up 13 cents on the day. The deal would be worth about #2.67 at yesterday's Vodafone closing price and taking the indicative offer from Mr O'Brien into account. Given Eircom's performance to date this could be the best its shareholders can expect.