Eircom shares may come under pressure today following its loss in the race for the final 3G licence, which is going to Smart Telecom.
As Swisscom's due diligence on Eircom continues, it warned yesterday that it was not prepared to endanger its partnership with Vodafone. Such remarks by the head of Swisscom's mobile unit, Carsten Schloter, are seen by informed sources as an "additional risk in the transaction" under discussion with Eircom.
The former State monopoly is buying mobile operator Meteor, which competes directly with Vodafone in the Irish market.
Meteor is a distant third behind Vodafone and O2, but a takeover of Eircom by Swisscom would put it in competition with a group that owns 25 per cent of its mobile unit, Swisscom Mobile.
Eircom's failure to secure the last 3G licence in the current batch might also place a limit on the long-term growth potential of the mobile business. Even though a licence-holder must build a network before providing a service, sources said Eircom's failure to win out against Smart Telecom reflected badly on the company.
Vodafone is an essential partner for Swisscom Telecom, providing technology and roaming services. Asked if a deal with Eircom would threaten the relationship with Vodafone, as analysts have feared, Mr Schloter said: "This partnership is so successful that we would do nothing to endanger it."
Swisscom's mobile unit paid Vodafone 352 million Swiss francs (€227.58 million) in the previous year for roaming rights, customer access to its internet portal Vodafone Live and other services. Swisscom is currently performing a due diligence examination into Eircom, after the Irish group granted it exclusive access to its books in return for an indicative offer of a little over €3.40 per share. Eircom stock closed unchanged last night at €2.27, although news of the 3G situation came too late to affect trading.
With Eircom's agreement last summer to buy Meteor the biggest single factor behind the Swiss group's move for the company, the extent to which the absence of a 3G licence might affect the price Swisscom might ultimately offer remains unclear.
While Eircom is considered a willing seller at the right price, Swisscom has warned that a deal is not certain. No other firm has declared an interest. - (Additional reporting: Reuters)
