The Valentia consortium, of which Sir Anthony O'Reilly is chairman, will have to increase its #1.221 a share offer for Eircom if it is to get the backing of the Eircom board, sources close to the telecom's company have indicated.

As the Eircom board met last night to consider the #1.241 a share bid from Mr Denis O'Brien's eIsland group and the Valentia bid, Eircom shares continued to trade strongly on the Dublin market. In heavy trading of almost five million shares, the price rose as high as #1.25 before closing five cents higher at #1.23 - higher than the Valentia offer but lower than eIsland's offer. In London, the shares closed on #1.24.

Valentia, in a letter sent to Eircom shortly before last night's board meeting, has left itself the option of increasing its bid. It is understood the consortium told Eircom it would offer "a minimum" of #1.221 for Eircom shares. In the letter, Valentia emphasised its "partnership" with the Employee Share Ownership Trust (ESOT), which it said stood to increase its "economic interest" in Eircom to 29.9 per cent if Valentia was successful. That indicates the ESOT might not necessarily have 29.9 per cent of the voting rights.

Sir Anthony has a small equity stake in Valentia. The main backers of the bid are four US investment groups - Soros, Warburg Pincus, Goldman Sachs and Provident Equity.

The Eircom board did not make a formal decision on either the Valentia offer or the higher eIsland bid last night and it is understood further discussions with both will take place over the next few days.

It is understood, however, that Valentia will be told that there is no possibility of the board recommending a lower offer, even though Valentia has the support in principle of the ESOT, which currently owns 14.9 per cent and has been promised an additional 15 per cent stake if Valentia is successful.

The ESOT, as a potential buyer of shares, wants the company sold at the lowest possible price as every additional cent on the eventual sale price is worth #22 million. Shareholders, however, will be expecting the Eircom board to press for the highest possible price, especially as they have suffered heavy losses on their initial investment. An ESOT spokesman would make no comment on suggestions that the trust was attempting to improve its position at the expense of the other Eircom shareholders. The two cent gap between the eIsland and Valentia offers is worth #44 million.

"It's impossible for Eircom management to recommend a bid unless it beats the eIsland offer of #1.241 and I don't see the point in them tabling a lower offer," said one analyst. He added that there was limited scope for further bids unless the bidder plans to justify a higher offer by cutting Eircom's cost base. This would put the bidder in direct conflict with the employees and the ESOT.

Meanwhile, sources close to eIsland were quick to take advantage of Valentia's lower offer. One source said the eIsland offer "is in the interests of 85 per cent of Eircom shareholders". The source said that eIsland "is very confident the board will try and maximise shareholder value and recommend its offer." EIsland has offered the ESOT the opportunity to increase its stake in the company to 24.9 per cent.