The Eircom board is becoming increasingly concerned about the poorly performing share price of Vodafone, the British company that has agreed to buy its mobile division, Eircell. It is understood that directors have requested that movements, not in line with the European telecoms sector, be monitored.
The board is believed to be treating seriously the approach by Mr Dermot Desmond's investment vehicle, International Investments & Underwriting (IIU). IIU contacted Eircom to seek information about the company last week and has also signed confidentiality agreements.
The entry of a second potential buyer of Eircom's fixed-line, non-mobile assets - following the earlier bid from the eIsland consortium - raises the prospect of a bidding war, which would benefit shareholders. Board members continue to insist that the eIsland bid of €1.10 per share is too low.
Eircom shares rose 10 cents, to €2.50 yesterday, buoyed partly by a minor rise in the European telecoms sector and also by the news of Mr Desmond's involvement. Shares in Vodafone also rose, by 3.4 per cent, to close at 189.5p sterling. However, this is below the 220p level at which Eircom can walk away from the deal without penalty. This clause applies during the ten days prior to the e.g.m. - tentatively scheduled for March 23rd - at which shareholders will vote on the deal.
Sources said yesterday that there would be no serious moves on talks to sell the non-mobile business until the Vodafone deal to buy Eircell was concluded. In addition to IIU, Mr Desmond and international investors, businessman Mr Pearse Flynn is also involved in the potential second bid. He has telecoms experience through his former roles with Newbridge Networks and French telecoms group Alcatel.
Although IIU has signed confidentiality agreements, it is up to Eircom to decide what information to provide and IIU is not automatically placed on an equal footing with eIsland, led by Esat founder Mr Denis O'Brien.
Corporate finance sources said the company would have to demonstrate its seriousness as an "offerer" to get certain information, but this was up to Eircom.
