When the news broke that the UK company, Vodafone, was bidding for Eircell, it was clear that a break up of Eircom was on the cards. The expected bid by Mr Denis O'Brien for Eircom's fixed-line business brings this prospect into sharper focus. The move by Mr O'Brien has created further uncertainty about who will control telecommunications in the Republic, as the sector moves to the new era when companies plan to deliver a range of services to customers in their homes, or on their mobile phones.
Mr O'Brien, who recently departed from Esat Telecom after its sale to British Telecom, was a trenchant critic of the old Telecom Eireann. It was his drive and ambition which set Esat on the path to becoming a force in the telecommunications market and created real competition. Most agree that his decision to sell to British Telecom last year was a timely move. So what is he doing now trying to get involved again?
Mobile telephony may be the "sexy" end of the telecommunications market, with the promise of a new generation of handsets which will deliver a range of information and services. But Eircom's fixed-line operation - which supplies the main residential and business telephone market - still remains a large and profitable business. Last year, it had a turnover of €1.7 billion (£1.34 billion) and profits before interest, depreciation and tax of €660 million (£520 million).
With 1.6 million customers, it has valuable access to the bulk of the households in the Republic. It will face new competition in this area from the likes of cable company NTL, but equally new technology will also make it possible to deliver a range of multimedia services down old copper phone lines into homes and businesses.
Mr O'Brien has yet to launch his bid, but is thought likely to offer around €2.2 billion (£1.7 billion). This does not appear to fully value Eircom's fixed-line asset. Analysts believe that a price closer to €3 billion (£2.4 billion) would be a fairer value. His bid comes in a key period, with talks on a sale of Eircell to Vodafone well advanced. He may hope that shareholders will vote on the two deals at the same time and might approve them both, in an attempt to get a decent return on what has looked for the last few months as a bad investment. However shareholders would be well advised to judge each offer separately; as yet we do not know the full details of either.
The Eircom board appears to have decided - contingent on the final terms - to sell Eircell off to Vodafone. But if the board decides not to recommend Mr O'Brien's offer, then they will have to put forward an alternative strategy aimed at gaining a strong return from the fixed-line business. They must also plot a strategy for Eircom's multimedia interests, which may be sold or floated separately.
The decision to sell Eircell was a complete turnaround by Eircom and an apparent admission that the company could not develop independently. Now the Eircom board, facing the somewhat opportunistic move by Mr O'Brien, is under pressure to decide on the future of their traditional fixed-line business. The decisions it makes will be driven to a large extent by the short-term demands of shareholders. But they will also influence the future of the entire telecommunications industry in the Republic for years to come.