Cantillon: Eircom sits on the ransom strip for the proposed Three/O2 merger

If Three's gargantuan bid to buy O2 Ireland was a boomtime property development, then Eircom would be the proud holder of the proverbial "ransom strip".

A ransom strip holds the key to the success of a larger development . For example, a tiny right of way at the only access point for a new shopping centre becomes critical - and a strip’s owners always exploit their position.

No jam for the owners of the ransom strip? Then, sorry, but no development.

It has become increasingly obvious that Three and its parent Hutchison Whampoa will not get its €850 million offer for O2 past European regulators unless Eircom gives its imprimatur. Eircom's approval is its ransom strip.

And, boy, is the former state incumbent determined to wring as much as it can out of the deal.

When it became obvious that Telefonica wanted to get rid of O2 Ireland last year, Eircom dropped a few half hearted hints that it might like to buy it. In truth, it had neither the cash nor the energy to merge O2 and Meteor, and Hutchison killed it with a massive bid.

European regulators are now stalling on approving the deal because of nervousness over reducing network operators from four to three.

Objections from Vodafone, the long-time market leader, carry far less weight then objections from Eircom/Meteor, which would be much more likely to be disenfranchised by a merger of O2/Three. So what has it got so far?

Three has told the commission it is prepared to guarantee Meteor the continuance of a network-share deal to keep its costs down.

It has also floated the idea of transferring some of O2/Three’s valuable spectrum to Meteor, and the word is that it will do this for free.

There was even talk recently that Three had considered a cash payment to Meteor for its approval, although sources on all sides privately deny this.

Together with its commitment to offer cheap network access deals to new operators, all this means that the total cost to Hutchison of acquiring O2 could nudge towards €1 billion.

An expensive call.