Some years ago, Swisscom’s chief executive, Jens Alder, threw a party for a small group of friends at his elegant Zurich home. Realising early on that he had gone overboard on the catering, the then Alcatel executive rang a local radio station and asked the disc jockey to broadcast an open invitation to join the party. About 30 strangers duly turned up, polished off the food, and the party took off.

Last March, the 47-year-old Alder issued a different kind of invitation. This time the call was placed with Sir Anthony O’Reilly, chairman of Eircom. Flush with cash, and spurned or outbid in a number of takeover approaches in central Europe, Alder identified the heavily indebted Irish telecom company as a potential takeover target.

In late March, O’Reilly and Eircom’s chief executive, Phil Nolan, travelled to Zurich for a series of informal meetings with Alder and his fellow Swisscom executives. Despite the warm reception, the trail suddenly went cold and stayed that way for seven months.

O’Reilly and Nolan continued to pursue their strategy, pushing the boat out on Eircom’s broadband plan and committing to buy the mobile operator Meteor. Alder, on the other hand, was enjoying less luck. First he was outbid in a deal for Czesky Telecom in the Czech Republic, then he was overwhelmed by venture capital firms in the race for TDC in Denmark.

Last Wednesday, Eircom talks were suddenly back on track. UBS, advisers to Swisscom, logged two calls with the Irish telecom. The first sought exclusivity on takeover talks, the second indicated a price range.

Before last week’s events, analysts described the Eircom deal as “far-fetched”, insisting that Alder would need to “construct a logic” to do a deal. “They’re basically desperate,” one investment bank close to the Swiss management told the Financial Times two weeks ago.

Martin Mabutt, a Man Securities analyst, is much more blunt. “Eircom brings Swisscom nothing and is expensive to boot. A deal is possible, but we think it would be ill-advised. We can see no logic in a deal such as this apart from financial engineering.”

One man who can see the logic is Russell Chambers, managing director of UBS (UK), Swisscom’s adviser. It was Chambers who co-ordinated the flotation of the formerly state-owned Telecom Eireann in 1999. Then working for Merrill Lynch, Chambers was the “bull” who advised the government to price the public offering high.

That pleased the government, which wanted to extract the highest possible price for the company, but, despite an early spike in the post-flotation price, left ministers red-faced when 400,000 Irish investors eventually lost a third of their money.

THE Irish telecom sector is riven with corporate activity. Apart from the Swisscom approach and Eircom’s completion of the €420m deal to acquire Meteor, across town Telefonica is sizing up O2, the second biggest player in the domestic mobile market. Depending on the value attributed to O2’s Irish operations, there is about €5 billion of deals sitting on the table.

If Telefonica succeeds in acquiring O2, it will be the fourth legal entity to control the second mobile licence since it was awarded in 1996. If Swisscom acquires Eircom, it will be the fifth legal entity to control the incumbent telecom operator in the same period.

After the savaging of rookie investors in the original Eircom flotation in 1999, the ensuing deal frenzy has delivered huge profits for key investors. The Eircom employee share ownership plan (Esop), which owns 22% of the company, stands to make an estimated €1.4 billion from the various deals around Eircom.

If the Swisscom deal arrives, chief executive Nolan will realise a €860,000 gain on shares that he purchased in the rights issues associated with the Meteor deal less than a month ago. Babcock & Brown, the Australian venture fund that only landed on the Eircom shareholder register last month, would make a profit of €83m — or more than 30% in a month.

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