The Swiss government has said it will veto Swisscom's plans to take over Eircom, just as the market was expecting the Swiss group to make a firm bid. Una McCaffrey reports.
The decision, which effectively means the acquisition is off, sent Eircom's shares sharply lower and prompted considerable surprise and confusion in the market. It had been thought that an agreement between the two telecoms firms was imminent.
Doubts emerged yesterday, however, when the Swiss finance ministry said the government did not want Swisscom to get involved in a foreign acquisition.
A spokesman for the ministry, Dieter Leutwyler, said the government, which owns two-thirds of the former Swiss state phone company, did not want to get involved in the risks associated with a takeover abroad.
He also said that the government had instructed its representative on Swisscom's board to vote against any such deal.
Mr Leutwyler confirmed that the move had coincided with the government's decision to sell off its stake in Swisscom over the medium term.
In a statement on Thursday, the finance ministry said it would bring forward legislation that would allow it to sell its shares and thus "release itself from corporate risks". At that stage, the ministry also said it would be "advantageous" for Swisscom if it were to "improve its ability to enter into alliances".
The legislation that would allow the Swiss government to sell its shares in Swisscom and thus allow the company to operate independently will take at least a year to enact.
Swisscom issued a statement noting its obligation to act in "the best interests of all shareholders". It did not rule out a deal with Eircom, but said it would review the proposals made by the government "in the course of its regular decision-making process".
The company pointed out that the stance of the government did not relieve the board of its duty to act responsibly in the best interests of all shareholders.
This has been taken as a signal that the Swisscom management, who have had a team of 40 people in Dublin to examine Eircom's books, would consider opposing the government's position.
Dealers in Dublin were less than convinced by this last night, however, with most saying simply that the deal was "dead".
In a statement to the stock exchange, Eircom said that it had noted the Swisscom announcement. "Eircom has no further information and is not in a position to make any further statement at this time," the company concluded. It is thought the firm, which had granted Swisscom exclusive access to its financial data, is also shocked at the development.
As well as representing an embarrassment for Eircom, the expected failure of the Swisscom talks will mean the loss of a payout for former and current Eircom staff who control 21 per cent of the business.
Shares in Eircom closed at €1.94 in Dublin, down 36 cent.