Disappointment over the scrapping of merger talks with Spain's Telefonica could affect shares in the Dutch KPN Telecom group today, but the downside should be limited, with plenty of other potential linkups waiting in the wings, according to analysts.

KPN is in discussions with Eircom on how to dispose of the 21 per cent stake it built up as a strategic partner in the company before the former State monopoly's privatisation. The Dutch company is still seen as a possible takeover target itself. It is widely believed to be in talks with Japanese cellphone giant NTT DoCoMo and industry sources have said the two could be poised to strike a rival deal this coming week. KPN walked out of merger talks with Telefonica late on Friday because the Spanish group's board was not 100 per cent behind the venture. Some investors, chiefly the Spanish banks, had complained about the Dutch government's 43.5 per cent stake in KPN.