Eircom's army of 488,000 shareholders are in for a nervous few months after the shares fell heavily yesterday, with further big falls feared before the sale of KPN and Telia's 770 million shares is completed.

After the 25 cents fall to a new closing low of €3.47 yesterday, Eircom shareholders are now sitting on an 11 per cent loss on their investment in July last year when more than half a million shareholders flocked to buy at the flotation price of €3.90.

The lucky ones are those who sold immediately after the flotation at prices of up to €5.00, as market sources believe that the 770 million shares being sold by KPN and Telia - which include about 115 million shares expected to be allocated to private investors - are likely to be sold for less than €3.30, with some market sources believing that the shares are unlikely to find institutional buyers at more than €3.00.

Eircom fell briefly as low as €3.30 during yesterday's trading but recovered to as high as €3.60 before later selling drove the share down to the €3.47 close. With the sale process for the KPN and Telia holdings likely to last three or four weeks, Eircom shares are likely to remain under pressure with some sources expecting some investors to sell and try to buy back at the price struck for the KPN and Telia 35 per cent stake.

Dealers expect that the eventual price struck following the roadshow and book-building to be at least a 10 per cent, and possibly as much as a 20 per cent, discount on the market price. While this is bad news for Eircom shares, lifting the uncertainty over the KPN and Telia stake should at least put a floor under the shares.