Eircom declines on market return

The company is Ireland's main telephone service provider

Shares in Eircom, Ireland's former state telecoms monopoly, have dropped after the firm returned to the stock market following a two-year absence.

The shares stood at 1.51 euros each in conditional trading in London, against an issue price of 1.55 euros.

The flotation is set to deliver handsome returns for the group of investors who bought the firm in 2001.

The consortium included investors such as financier George Soros and ex-rugby international Tony O'Reilly.

'Attractive' investment

The big-name investors were part of the Valentia consortium that took Eircom private in November 2001 after paying 3bn euros (£2bn; $3.8bn) for the firm.

Mr Soros and Mr O'Reilly are thought to have put up an initial stake of about 474m euros.

At the time, the purchase was controversial because many small retail investors were out of pocket following the bursting of the tech bubble.

But according to Tricia McEvoy, telecoms analyst at NCB Stockbrokers, the Valentia consortium stands to make a return of 60-70% on its investment.

"When they took the company private in November 2001, it was a highly leveraged transaction," she told the BBC's World Business Report.

"So they've made very good returns form their time with Eircom."

Priced to go

Eircom is hoping that the performance of the shares will be better this time around after demand for the new issue was relatively strong.

"Short term, I think Eircom is very attractive," said Philip Carney, a fund manager at Hibernian Investment.

Unrestricted buying and selling of the shares is due to begin on Wednesday.

The 1.55 euro price tag for the shares - which valued the firm at more than 1.1bn euros - was towards the lower end of the offer range, because of "difficult market conditions".

The sale is the largest share offering in Europe so far this year, raising about 300m euros for the company which it plans to use to cut debt.

Private investors could end up owning 70% of the firm with Eircom employees holding the remaining 30%.