Swisscom surrender hits Eircom share price

SWISSCOM caved into the Swiss government yesterday when it granted its controlling shareholder free rein to decide its future strategy, further dampening hopes that it would resurrect its bid for Eircom.

The government, which holds a 66% stake in Swisscom, said that it had decided to draw up the company's strategic goals for the next four years and reiterated it would block any foreign acquisitions. It added that Swisscom management had agreed to the decision.

Eircom shares lost more ground yesterday, shedding 1% to €1.94, as investors clinging to hopes of a successful takeover lost heart and sold out. The share price now languishes over 20% below the €2.45 peak reached when news of Swisscom's takeover approach was made public.

The share price had staged a minor rally earlier in the week when Swisscom management came out fighting with a statement that it wanted crunch talks with the Swiss government to clarify its future strategy and commercial freedom.

The Swiss government shocked markets last week with its intervention to block the Eircom takeover.

The move sent Eircom shares into free-fall and also hurt the Swisscom share price, as investors lost confidence in Swisscom management and its ability to run the company along commercial lines.

Speculation has been growing in recent days that Swisscom chief executive Jens Alder will step down in response to the government's refusal to endorse his strategy. The company is expected to announce its next move in the next few days.