Institutions in forefront of scramble for Telecom

Major financial institutional investors are believed to have bid strongly to purchase shares in Telecom Eireann, boding well for the flotation on the markets this week. Sources said that when the institutional offer closed last night, the indications of purchasing intentions from the institutions would cover the likely amount of shares available to this group more than 10 times over.

The strong response from financial institutions in Europe, the US and Ireland is believed to have led at least one of the advisers to the Government - the US investment bank, Merrill Lynch - to recommend an aggressive pricing strategy for the shares. Sources said that Merrill believed a price of £3.20 to £3.30 could be supported by the level of demand, but AIB Capital Markets, the Irish advisors, are believed to have taken a more cautious view, recommending a price close to the middle of the £2.95 range.

Sources said that the major financial institutions were keen to get hold of Telecom shares, seeing them as a strong "play" on the strong Irish economy. Major liquid stocks offering exposure to the economy are rare, the institutions also encouraged by the planned fall in the rate of corporation tax to 12.5 per cent by early in the next decade.

Telecom's advisors will inform the institutions on their allocations and the share price today. They are likely to allocate the shares to try to get a diversified base of strong investors who will wish to hold the stock.

The offer price and allocation of Telecom Eireann shares will not be announced until today. Bookmakers Paddy Power are confident that the shares will perform strongly when they begin trading and are offering the shortest odds of a price between £3.451/2 and £3.60 at the close of trading on Friday July 16th.

Paddy Power are offering odds of 11/4 on a July 16th closing price of £3.451/2 and £3.60. The bookmaker is offering the following odds on other closing prices: less than £2.841/2 - 6/1; between £2.851/2 and £3.15 - 6/1; between £3.151/2 and £3.30 - 3/1; between £3.301/2 and £3.45 - 5/2; between £3.601/2 and £3.90 - 5/1 and £3.901/2 and above - 7/1.