Swisscom's hopes of reviving its bid for Eircom were finally dashed yesterday after the Swiss government put a bar on it buying other national phone companies. The news sent Eircom shares as low as €1.90 as investors took the statement as conclusive proof that the prospect of a €2.40-plus bid for the Irish company was dead. Claire Shoesmith reports.

More than eight million Eircom shares changed hands on the Irish stock exchange yesterday.

The shares recovered slightly towards the end of the day, however, closing down 1 per cent overall at €1.94. Shares of Swisscom dropped 1.6 per cent.

Yesterday's statement from the Swiss government clarifies its position of a week ago, which appeared to rule out a bid for Eircom by calling a halt to foreign acquisitions ahead of a public offering.

However, some hope remained this week as Swisscom sought clarification of the government's position.

That clarification came yesterday when the Swiss government said that it planned to draw up new strategic goals for Swisscom and, until they are adopted, the group may not buy any foreign company that has a public service function.

This appears to effectively rule out Eircom as, under its licence from the communications regulator, ComReg, the Irish group is legally obliged to provide a universal telephone service throughout the Republic.

In a statement, Swisscom said it had noted the decision by the Swiss government and would take it into account. The company's spokeswoman did not return calls seeking comment.

Meanwhile Eircom, which has consistently refused to comment on the situation, said last night that it would maintain its silence.

"Until the definitive adoption of the new strategic goals (for 2006-2009), the applicable interpretation of the overseas strategy is that the company is not entitled to acquire stakes in telecommunications companies," the finance ministry said in a statement.

"Swisscom's board of directors provided assurances that no decisions concerning involvement in a foreign telecommunications company... would be taken before the entry into force of the strategic goals," the statement added.

The government said that the ban, which is in effect until December 21st, applied to all overseas telecoms firms that had a public service function in both fixed line and mobile services - which would include Eircom.

"It applies to the companies that are legally bound to provide basic telephone service in a particular country because it could lead to potential political difficulties," a Swiss finance ministry spokesman said, without naming the companies.

The statement did not give any indication whether or not the government would restrict foreign acquisitions under the guidelines to be drafted for the next four years.

Swisscom's management has agreed to the conditions, the government added in its statement, but the company did not confirm that this was the case.

Earlier this week, Swisscom entered into talks with the government to clarify an earlier move by Berne to block expansion abroad amid political infighting over the potential takeover of the Irish telecoms group.

The company saw some 1.2 billion Swiss francs (€778 million) wiped off its market value after the government's announcement to stop foreign acquisitions last week.

The government's decision to block foreign ambitions was put on the agenda by the populist, pro-business Swiss People's Party and also found support from the country's liberal party FDP. - (Additional reporting, Reuters)