Eircom shares gave up some of their gains to close 2.5 per cent weaker at €2.34 as the market digested news of the preliminary takeover approach for the company from Swisscom, the telco controlled by the Swiss state.

There was heavy trading in Eircom stock again in Dublin and London, with a total of almost 29 million shares changing hands in the two markets.

With Eircom's board planning a formal discussion next week about the approach from Swisscom, observers in the market said the fall in the share's value reflected calmer trading after frenetic buying on Wednesday when news of the approach emerged.

Separately, regulators in the the stock exchange are conducting a routine examination of share trades in Eircom a month ago around the time that a newspaper named Swisscom as a bidder for the company. Eircom swiftly said then that it was "not currently in discussion with that company or any other".

That routine examination of dealing in the stock was extended in the past 24 hours to include trades up to and after the time of Eircom's statement to the stock exchange on Wednesday.

While the share price rose 16 per cent to near €2.40 on Wednesday night, there is still doubt in the market that Swisscom would proceed with a formal bid for Eircom should it succeed, against market expectations, in its ongoing efforts to acquire the Danish firm TDC.

Swisscom is ranked third behind two private equity consortiums in that sale, which is already in due diligence. There was no comment from TDC yesterday when asked when it expected to conclude a deal.

However, Swisscom's preliminary approach for Eircom is not believed to be contingent on the outcome of the Danish deal.

The company has made two requests of the Eircom directors in an approach that values the Irish company at €2.40-€2.50 per share.

The first request is that Eircom agrees to deal exclusively with Swisscom's advisers. The second is that the Irish company opens its books for a detailed due diligence examination.

While Eircom is likely to allow due diligence to go ahead on the basis of the directors' fiduciary duty, it is not clear whether the directors would be willing to make a commitment at this early stage in the process to deal only with Swisscom.

The reference in the company's statement to "a potential offeror" indicates that no other party has expressed an interest in making an approach for the company.

In research issued yesterday, the US banking giant Citigoup said it was not certain that the approach would lead to a formal offer and said such an offer "is very unlikely to be contested, limiting the premium".

The bank said Eircom was less attractive to other potential suitors because it has already been owned by private equity investors who extracted the easily attainable efficiencies from the business.

"Adding further leverage to the business is not feasible. This will not deter Swisscom: it will simply refinance the debt as it leverages its own balance sheet," Citigroup said.

"Even after the acquisition of Meteor, Eircom is still in the main a fixed-line operator. Most other telecom operators looking to make acquisitions are in pursuit of at at least some revenue growth - most of these opportunities lie in mobile."

Despite the analysis that rival bids may not emerge, the coming days will show whether any other group has used the heavy trading of the past two days to build up a strategic stake in Eircom.

The Australian group Babock & Brown, which has built up a 12.5 per cent shareholding this autumn, is not believed to have purchased any further shares since Wednesday.

No talks with Eircom's investors are likely until such time as a formal bid emerges, assuming the satisfactory completion of due diligence. The most crucial dialogue would be with a employee share option trust that can use its 21 per cent of the company to block a takeover deal.