Eircom shares have risen to their best levels since last August on the Dublin stock market, and at the closing level of €4.40 the shares - up 14 cents on the day - is now 13 per cent above last July's flotation price of €3.90.

Eircom was as high as €4.55 earlier in the day, but fell back towards the end of trading as some investors took their profit from the recent strength in the share price.

Dealers said that one reason behind yesterday's strength was the fact that Eircom shares virtually stood still last Friday while the European telecom sector soared on the back of Vodafone Airtouch's successful bid for Mannessmann.

Takeover speculation is also driving the Eircom share price ahead, with a growing view in the market that the sale of the Telia 14 per cent stake and the possible sale of KPN's 21 per cent stake will lead to a bid for the company, the biggest on the Irish market with a value of €9.7 billion.

Names regularly mentioned as potential bidders include Deutsche Telekom, SBC and Bell Atlantic.

Eircom has also been the focus of some bullish research notes from a number of Irish and international stockbrokers.

ABN-AMRO's Irish telecoms analyst Ms Jemma Houlihan has already put a sum-of-the-parts valuation of €4.90 on Eircom shares and believes that the price BT has paid for Esat supports her valuation of Eircom.

She also believes that Eircom is well equipped to counter any BT-led initiatives in pricing or technology.

The American investment bank Salomon Smith Barney has said that Eircom is undervalued against its European peer group and described it as "well-run, well positioned company". Salomon set a €4.77 price target for the share.