Shares in Eircom rose by a further 3 per cent yesterday as takeover speculation continued to swirl around the company.

However, Babcock & Brown, the Australian investment group that holds a 12.5 per cent stake in Eircom, declined to comment on weekend media reports that it was set to launch a €2.35 per share bid for the group or that it had been behind the heavy trading in Eircom shares on Friday.

A spokeswoman for Babcock & Brown said the press reports were "just speculation about our stake and we don't have anything to say about that".

However, she confirmed that under Stock Exchange rules, the firm would have to disclose any change in its Eircom shareholding given the size of its stake.

Eircom also declined to comment. Shares in the company closed six cent or 3 per cent higher at €2.03, having been up by as much as 6 per cent earlier in the day. More than eight million shares changed hands in Dublin with a further 25 million traded in London where the stock added 2.9 per cent.

The shares have been highly sensitive to bid speculation since an abortive move on the company last year by Swisscom.

Other potential bidders mentioned in recent days include Belgacom and private equity firms.

However, market sources said Eircom was unlikely to be attractive to private equity groups given its high levels of debt. But a strategic investor, such as another European telecoms group, might be drawn to the company by the potential in its Meteor business as well as the strong economic and demographic factors underpinning its fixed-line business.

However, others in the market believe a bid is unlikely and the recent flurry is due to a combination of rumour and hedge fund activity.

"The stock just seems to be driven very much by rumour at the moment," said one trader. "There doesn't seem to be much fact to back up the latest rumours."

(Additional reporting: Reuters)