Telecom Eireann shareholders will have been less than pleased to see their new investments weaken during the past few days but should take heart that analysts are still very positive about its future prospects.

Merrill Lynch, which acted as an adviser to the Government on the flotation, has initiated coverage of the stock. In its first research note, the brokers recommend that investors should buy more Telecom Eireann shares in the market. The brokers believe the share is a good long-term buy and predict it could rise to €4.90 (£3.86) from its initial flotation price of €3.90 (£3.07).

Over the next five years, it is forecasting a 7 per cent rise in company revenue. The Irish telecommunications market is attractive because of the room for development due to the relatively low usage of telecomunications services here compared to the rest of Europe.