Australian investment group Babcock & Brown Capital has become the biggest shareholder in Eircom, which it is considering buying. Babcock and Brown Capital has confirmed that it now holds 253.7 million Eircom shares, representing 23.6% of the company. The new shares were bought at a price of €2.20.

B&B has now overtaken the Employee Share Ownership Trust (ESOT) as the biggest shareholder in Eircom. The ESOT holds around 22% of Eircom. If B&B increased its stake to 29.9%, the move would trigger a mandatory offer for the company.

The Australian firm said it is focused on the potential for growth in the Irish telecommunications market at three levels. The first is the general Irish economy as it said incumbent telecos tend to track underlying GDP. Secondly, it wants to focus on Eircom's expansion in the mobile and broadband markets and thirdly, the new services to be delivered over next generation networks.

'For Eircom to grow with the general economy, expand its services and enter new markets it will be imperative that it upgrades, extends and improves its network,' commented Babcock & Brown Capital's Executive Director Robert Topfer.

He said that the company was not a typical private equity investor in this regard. He said that the wider Babcock and Brown group are long term holders and developers of infrastructure assets.

'Our vision of Eircom leading the growth of the Irish telecommunications market is not dependent on a split of the retail and wholesale businesses,' he said.

'However, BCM is open to exploring that possibility if it facilitates growth in the market or enhances the ability of the network business to upgrade its network and invest in NGN. With the right regulatory environment, BCM believes that a split of this nature may well provide the opportunity to achieve both outcomes concurrently,' Mr Topfer concluded.

Eircom said last month it had received an approach from the Babcock and Brown that may or may not lead to an offer being made for the company. The approach by the Australian fund was the second to the former state monopoly in four months and came days after Eircom reported weaker-than-expected earnings figures.

In November, Swiss phone group Swisscom said it was in talks to buy Eircom, but those plans were blocked by the Swiss government. Swisscom had reportedly been prepared to pay between €2.40-2.50 a share for the company, but analysts have said it is unclear whether B&B would be ready to pay that.

Eircom shares closed unchanged at €2.21 in Dublin.