Eircom shares have fallen to yet another new low on the Dublin market, as speculation intensified that 21 per cent shareholder KPN may be forced to abandon the planned sale of its entire stake. Eircom fell as low as €2.80 yesterday before closing down three cents on €2.83.
Market sources now believe that unless Swedish telecoms group Telia decides soon to "lock up" its 14 per cent, the share price is set to remain depressed and this will force KPN to abandon the sale of its own stake.
When the initial £283 million cost of buying into Eircom and the £1.2 billion clawback by the Government are taken into account, analysts believe that the effective cost of KPN and Telia's stake is €2.54 a share.
It is thought unlikely that, given the current depressed level of the share price, KPN would do much better than break even on its investment in Eircom if it sold its shares at the required discount to the current price in the market.
Market sources believe that it is highly unlikely that KPN would adopt such a course and rather than break even or even take a loss, the Dutch group will postpone the sale.
According to market sources, the only way Eircom shares could recover to a level which might allow KPN to go ahead with its share sale is if Telia formally "locks up" its 14 per cent stake for a period of six months.
It has been expected that the Swedish group would make such a move, but so far Telia has not done so.
Eircom itself and KPN are thought to have strongly pressed for such a commitment from Telia and informed sources believe that intense pressure is likely to be put on Telia by KPN over the next few days. "If Telia does not give a commitment in the next few days, then KPN is going to have to pull the secondary placing," said one broker.
But even if Telia does give a lock-up commitment, market sources believe that the current lack of interest in telecom shares worldwide is likely to limit any recovery in the Eircom share price.
And certainly there is little prospect of the shares getting back to the €3.47 level they were at when KPN announced its plans to sell. Next month's bonus issue of 88 million shares to Eircom shareholders will add to the negative technical position.
The bonus issue is for shareholders who are on the share register at the anniversary of last year's flotation. Shareholders will receive one bonus share for every 25 held - equivalent to a bonus of 4 per cent.
