Swedish telecom group Telia is set to announce the disposal of its 14 per cent shareholding in Eircom - currently valued at around £924 million - once its merger with Telenor is cleared by the European Commission Merger Taskforce. Eircom's share price closed yesterday at £3.11 (€3.95), five cents above its flotation price.
It is thought that KPN, the Dutch telecom group, which is Telia's joint venture partner in Eircom, may opt to buy 8.9 per cent of the shareholding with the remaining 5.1 per cent (worth £336 million) being placed with institutions. This would mean KPN would have to pay £588 million for the shareholding.
KPN will be unable to buy more than 8.9 per cent because that would bring it beyond a 29.9 per cent shareholding, which means it would have to mount a full offer for Eircom shares.
The Telia/Telenor merger will involve disposing of the shareholding in Eircom to overcome a potential conflict of interest. Telenor has a 49.5 per cent stake in Esat Digifone, the second mobile phone operator.
The merger taskforce will make divesting of the Digifone or Eircom stakes a pre-condition of merger approval. Sources said the sale of the stake would have to take place within about three months.
There had been considerable speculation about which stake would be divested. However, analysts point out that the industry sees major future growth coming from wireless and Internet-related activity. The Digifone stake is an extremely lucrative one with strong future potential.
Ms Gemma Houlihan, telecoms analyst with ABN-AMRO, said that when Telenor and Telia announced the merger they had said they would concentrate more on their worldwide mobile operations.
Both Telia and KPN must make additional payments to the Exchequer on January 31st next, as part of the original strategic alliance deal. Observers said it was not certain KPN would exercise its option to buy the further 8.9 per cent.
However, Ms Houlihan said it was more likely that KPN would buy the stake: "If they don't, there is no point in being there," she said.
