Eircom has lodged an objection with the European Commission to the proposed takeover of Esat Telecom by British Telecom (BT).

The former State company is believed to be arguing that the $2.5 billion (€2.6 billion) deal will lead to BT holding a dominant position for international services.

Eircom - which is still by far the dominant player in its home market - has lodged the objection with the merger task force unit of the European Commission. It fears that the combined group will control many of the key telecoms traffic routes between Ireland, Britain and the US.

Sources said last night that they were not surprised that Eircom had objected. "It is unlikely to delay the deal but if the Commission - which invited submissions on the merger proposal - receives enough objections, it will be forced to examine them in great detail," said a source.

However, one source said the Commission was surprised by the objection.

Esat is the Republic's second-biggest telecoms company, but is still far behind Eircom in terms of market share. The BT takeover will, however, give it far more clout and financial muscle.

Another source said companies usually object to such takeovers "in order to get the Commission to tease out all the issues".

It is thought that NTL, which bought Cablelink last year for £535 million (€679 million), has also lodged an objection. An NTL representative could not be contacted.

It is understood that Eircom is objecting to the deal on several grounds.

It is arguing that the takeover puts the enlarged company in a dominant position because of a number of aspects. Ocean (part of British Telecom) distributes the Concert services in the Republic. Concert is a joint venture arrangement between the giant long-distance carrier AT&T in the US and BT. A source said last night that it offered services featuring products such as frame relay and high-speed transmission systems in several countries - which are very attractive to multinationals such as Microsoft.

Esat is linked to Global One, now owned by Deutsche Telekom and can get keen rates for international services delivery through this connection. Eircom is also said to be objecting to Esat's link with international telecoms group Infonet, which distributes some services through PostGem/Ireland On line.

"The Commission may impose certain conditions on the deal," said a source, "but I doubt if they will block it completely."