Swisscom bid for Eircom 'a political illusion'

A Swisscom takeover of Eircom is "a political illusion", regardless of where the company's senior executives might stand on the matter, a spokesman for the Swiss finance ministry said yesterday.

The spokesman, Dieter Leutwyler, was responding to suggestions that the Swisscom board could try to push ahead with the purchase of Eircom without getting approval from the Swiss government.

The government owns 66 per cent of the company and has said it will block any foreign acquisition as long as it remains majority shareholder. "Swisscom say they can go on with a deal with Eircom but politically that's an illusion," Mr Leutwyler said. "The decision of the government is final."

The Swiss government will have "contact" with Swisscom at some point this week, according to the spokesman.

Pressure was building on Swisscom yesterday to clarify its position on Eircom, with shares in the Swiss company falling by 3 per cent, a large move for a defensive stock, to a 15-month low.

A spokeswoman for Swisscom declined to comment, pointing to the statement issued on Friday. At that stage, Swisscom said it needed to work in the interests of "all shareholders".

A further statement is expected over coming days, with Swiss news reports suggesting a Swisscom board meeting took place yesterday. A representative of the Swiss government sits on the board. Considerable commentary focused on the possibility that last week's events could force a change of management at the company.

Eircom's spokesman was also quiet yesterday, with the company likely to wait until Swisscom issues another statement before commenting.

The Eircom board is known to be monitoring the situation, even though no board meeting has been scheduled to discuss it specifically. It is thought Swisscom has not had any formal contact with Eircom since Friday.

"The ball is in Swisscom's court," said one source close to the situation last night. "Nobody expects the company is going to defy the government."

Shares in Eircom held up reasonably yesterday, having fallen by 16 per cent on Friday. They closed at €1.91, down three cent, with dealers noting that the company's generous dividend policy had offered it some support.

Analysts were trying to establish how the absence of bid speculation would affect Eircom's share price, with Tricia McEvoy at NCB sticking with a "fair value" of €1.94. In London, James Britton at Lehman Brothers predicted further short-term weakness for Eircom, particularly in light of the company's failure to win the most recent 3G licence.

"We do not see any other likely bidders for Eircom in the near term," Mr Britton said. In contrast, Bríd White at Merrion Stockbrokers pointed to "several potential acquirers", including Portugal Telecom, Telenor, Telefónica and TeliaSonera. She acknowledged however that none of these would be likely to pay the €2.42-plus that Swisscom was said to be offering.- (Additional reporting, Reuters)