Swisscom forced to drop Irish bid

Swisscom has four million mobile phone subscribers

Swisscom, Switzerland's leading telecoms firm, has abandoned takeover talks with Ireland's Eircom after the Swiss government objected to the deal.

The government - which owns 66% of the company - said it would not support the move, arguing that foreign deals could limit domestic investment.

It retains control of Swisscom despite its partial privatisation in 1998.

Swisscom said it would avoid foreign deals until a new strategy is agreed, which may see the state sell its stake.

Domestic limits

Swisscom has been looking to develop abroad, arguing that its potential for domestic growth is limited and that Swiss customers will benefit from international tie-ups.

Under the circumstances Swisscom sees no possibility of a takeover bid Swisscom

It approached Eircom, Ireland's largest telecoms firm, about a potential deal in November although no formal bid was made.

However, it confirmed on Monday that it had ceased discussions.

"The public controversy surrounding questions related to the Swiss government's majority holding in Swisscom, plans for acquisitions abroad and the payout policy, has given rise to uncertainty among shareholders, customers and employees," Swisscom said.

"Under the circumstances Swisscom sees no possibility of a takeover bid."

Clarity needed

Swisscom has agreed to put all foreign deals on hold until the government publishes its strategic goals for the 2006-9 period.

These are likely to include a commitment to sell its Swisscom stake.

Swisscom said "clear-cut statements" were needed on options for full privatisation and the firm's international strategy in order to ensure confidence among other investors.

At the same time, it pledged to develop new services in Switzerland with planned investment of more than 647m euros (£437m).