British Telecom (BT) and Telenor have agreed terms which will give the Norwegian group an option to either take up to 49.9 per cent of Esat or sell its shareholding in Esat's mobile operator. Meanwhile, the ESB is threatening to block the process in the High Court on Monday if BT does not agree terms regarding the future of Ocean, a joint venture telecoms company between the two.

Following two days of tough negotiations, Telenor can exchange its 49.5 per cent in mobile operator Esat Digifone for 33 per cent of the Esat group. It then has an option to buy a further 16.9 per cent for $624 million. However, if it does not take the 33 per cent stake, it must sell its Digifone stake for $1.24 billion. It follows BT's emergence on Tuesday as a "white knight" for Esat, offering $2.5 billion to buy the group, thus fending off Telenor $1.9 billion hostile bid. The bid took Telenor, which is a joint venture partner with BT in some other markets, by surprise.

Just hours after yesterday's BT-Telenor deal was announced the ESB got permission in the High Court to seek an interlocutory injunction on Monday to restrain BT from proceeding with the acquisition of shares in Esat. An ESB spokesman said last night that discussions between the parties were ongoing. He said the company had no wish to take court action "but it is vitally important for the State-owned company to get appropriate value of its investment - in the interest of electricity customers".

BT and the ESB began talks earlier this week, following news of the BT offer. The two companies have been building the Ocean brand - which does not have a mobile element in the Republic for the past 18 months. The ESB asked BT to come back with options. It is understood that BT made a cash offer to the ESB yesterday.

A BT spokesman said last night that the company was still in discussions with ESB about Ocean's future. He said it hoped to come to an agreement. "We still expect to complete the deal as planned," he said.

The BT-Telenor deal was concluded late on Thursday night and it too had featured threats of court action. BT had bought Mr Dermot Desmond's investment vehicle, International Investment Underwriting's (IIU's) 1 per cent stake. IIU's entitlement to sell it, without giving Telenor first refusal, was hotly disputed.

Yesterday Telenor said it was very satisfied with the deal it had struck with BT. Mr Morten Sorby, managing director of Telenor International said the company "would like to stress that this is a very successful outcome for us. Our original objective was to get a strong position in the Irish market, and we got that." Yesterday, BT chief executive Sir Peter Bonfield said his company was delighted to have reached agreement with Telenor. "We look forward to building further on the excellent working relationship we have with them," he said.

Mr Sorby said the deal with BT gave Telenor "a very appealing choice". He said Telenor was in a very good position. It could choose to realise its investment in Digifone to date, an investment which had shown very good growth, and represented good value - or with BT as a strong partner it could develop opportunities in the Irish market, "even better than we could have done alone".

Mr Sorby said that Telenor and BT would sit down "and produce a plan" when the BT offer goes unconditional. Once the offer goes unconditional BT should be able to acquire whatever Esat shares are outstanding.

Mr Sorby said both companies would be anxious to devise a future plan for Esat as quickly as possible, but he said the time frame could be several months.

Mr Sorby said Telenor had also wanted the position to "shift the Digifone holding into a liquid position (Esat had held the other 49.5 per cent), and the new structure would change this. However, he refused to be drawn on whether Telenor was likely to sell the stake.

He added that the two companies could work together, bringing different synergies to the business.