The value of the Vodafone/ Eircell deal to Eircom shareholders increased by more than 6 per cent yesterday after Vodafone shares rose strongly in line with widespread gains on international markets, particularly in technology and telecom shares.

Vodafone shares closed yesterday up 131/2p on £2.19 sterling. The terms of the recommended bid for Eircell provide 0.9478 Vodafone shares for every two shares in the de-merged Eircell. Yesterday's closing Vodafone price and a euro/sterling exchange rate of €0.62 puts a current value of €1.67 on each Eircell share. Assuming a price of €1.10 a share for a sale of the Eircom fixed line business to either Mr Denis O'Brien eIsland consortium or Mr Dermot Desmond's IIU, the combined value of the two deals is currently €2.77 per Eircom share.

This compares with the €3.90 flotation price of July 1999. Eircom itself closed up seven cents yesterday on €2.54.

Vodafone has now risen more than 20 per cent from its £1.78 sterling low of late February, although it is still some way off the £2.47 sterling when the purchase of Eircell was announced in mid-December. At yesterday's close, the share is just short of the price below which Eircom can withdraw from the sale of Eircell without financial penalty. But given that the Eircom board has already recommended the deal at well below that figure, the £2.20 sterling cut-off point is unlikely to become a factor.

Assuming the Eircell deal goes through and Eircom shareholders get an allocation of Vodafone shares, those shareholders will hope sterling remains strong and that the euro does not make any significant gains against the British currency. As holders of sterling-denominated assets, the higher the value of sterling, the more euros Irish holders of Vodafone shares will receive when they sell their shares.