Weakness in the European telecoms sector was the main reason for another sharp fall in the value of Vodafone, the British company that is in the process of taking over Eircom's Eircell mobile phone subsidiary in an all-share deal.
Vodafone shares fell 4 per cent yesterday to a 24-month low of 190-1/2p sterling (€3.02) after the previous 4 per cent loss of Monday, when the shares plunged on fears that Vodafone's plan to sell its Infostrada business in Italy was close to collapse.
But the fall from 198p to 190-1/2p yesterday means the cash value of the Eircell takeover to Eircom shareholders has fallen to €1.43 (£1.12) per share compared to the cash value of €1.84 per share when the terms of the deal were struck in December. Eircom has the option to walk away from the Eircell sale without financial penalty once the Vodafone share falls below 220p sterling.
Despite the weakness in Vodafone shares, Eircom managed to recover from some early weakness on the Irish market yesterday to close up three cents on €2.50 in heavy volumes.
Since Eircom is selling twothirds of its assets to Vodafone, the Eircell sale will require the approval of shareholders at an extraordinary general meeting, expected to take place in late March or April.
If the deal fails, analysts believe it could have a catastrophic effect on Eircom's share price and, therefore, they think the deal will go through.
