Denis O'Brien's eIsland consortium has accused the Eircom board of "heel dragging" and failing to "exercise its fiduciary duty to shareholders" following its decision to reject its increased bid for the company.

A spokesman for the consortium said it wrote to the board seeking a full explanation why its proposed offer would not be put to Eircom shareholders.

A spokesman for Eircom yesterday acknowledged receipt of the letter from eIsland regarding the board's decision to recommend Sir Anthony O'Reilly's Valentia consortium's offer to shareholders despite the higher offer from Mr O'Brien's group. "The company will continue with the very professional and fair approach it has demonstrated to all parties throughout the bidding process," he said.

EIsland's revised bid offered Eircom shareholders #1.32 a share in cash against #1.27 from Valentia. EIsland also provided an alternative of #1.255 a share in cash with a guaranteed #0.12 in warrants that can be cashed in after three years. Valentia has offered an immediate #1.25 plus a maximum of #0.07 in warrants after three years.

EIsland is particularly incensed with the dismissal of its latest proposed offer by the board as being "not yet sufficiently developed". The spokesman said the proposed offer was made in the same way as the previous seven it had put to Eircom. "The description of our proposed offer as undeveloped belies belief after eight months of our work on this process," he said.

Sources close to Eircom suggest the board could not put this proposal as a viable alternative for shareholders to consider because more than 50 per cent of its shareholders, including KPN and Telia known as Comsource and the Employee Share Ownership Trust, have given irrevocable undertakings to back the Valentia bid. These undertakings would have made it impossible for eIsland's bid to succeed.

The board would also need further information with regard to the warrants. Details such as what would happen if the company was sold within three years and what guarantees and credit ratings would be attached to them would have to be disclosed.

Informed sources suggest the only way eIsland can upset the sale of Eircom to Valentia is for it to come in with an offer of #1.355 a share which would release the major shareholders from their undertakings to Valentia. Such a bid would cost eIsland a further #60 million and would force the Eircom board to reconsider its options.

EIsland will now await a reply from Eircom to the issues it has raised surrounding its latest bid before deciding on its next move. Legal action to test the status of acceptances by Comsource of the Valentia bid is now thought unlikely.

Eircom shareholders will be issued with the Valentia offer document at the end of July. There is then 60 days during which 80 per cent acceptance of the deal must be secured for it to proceed.