Australian investment fund Babcock & Brown Capital has increased its stake in Eircom to 28.8 per cent, just below the 29.9 per cent level that would trigger a mandatory bid for the former State telecoms company.

The Australian firm is still awaiting a formal written response from Eircom, whose board met last Friday to discuss the unsolicited approach for the company. However, it is believed that discussions to open Eircom's books for a due diligence examination may be imminent.

Such an engagement is likely to concentrate on the price per share that Babcock & Brown might pay to complete a takeover of the Irish company.

The Australians have paid no more than €2.20 per Eircom share as they built up their stake, so they are unlikely to pay much more than that to conclude a deal.

However, Eircom was poised to realise a little above €2.40 per share when the company was to be sold to Swisscom, the company controlled by the Swiss government. Justifying a price at a significant discount to that proposed by Swisscom may prove difficult for Eircom.

In advance of talks on due diligence, Eircom is understood to have sought clarification from Babcock & Brown on a number of technical points associated with its approach. After the collapse last November of the Swisscom takeover, Eircom is said to have concentrated at least in the initial phase of the process on whether the Australians had the financial capacity to execute a transaction.

Swisscom's own due diligence of Eircom's books was almost complete when the Swiss government pulled the deal, so the Irish company does not want a repeat of that situation if it opens its books to Babcock & Brown.

However, it is understood that Australians believe they have satisfied Eircom on all the financial aspects of the deal they propose.

As yet, there has been no formal dialogue between Babcock & Brown and the Employee Share Ownership Trust, which controls 21.5 per cent of Eircom.