Nov. 9 (Bloomberg) -- Swisscom AG, Switzerland's largest telephone company, may buy Ireland's Eircom Group Plc in a third attempt to acquire a phone business outside its stagnant home market.

``Swisscom confirms that is has entered into discussions with Eircom in relation to a possible transaction,'' the Bern, Switzerland-based company said in a statement today. Dublin- based Eircom, Ireland's biggest phone company, has a market value of about 2.47 billion euros ($2.9 billion).

Swisscom Chief Executive Jens Alder tried and failed to buy stakes in Telekom Austria AG and Cesky Telecom AS in the past 15 months in an effort to revive revenue growth. The purchase of Eircom would add 2 million fixed-line customers in Ireland and give Swisscom access to the country's mobile-phone market.

``Everybody is trying to find growth somewhere else,'' said Jacques-Antoine Demaurex at Banque Bonhote & Cie SA in Neuchatel, Switzerland, which oversees $1.5 billion including Swisscom shares. ``I would prefer them to return money to shareholders.''

Shares of Eircom fell half a cent, or 0.2 percent, to 2.32 euros in Dublin. The company's stock has gained 48 percent this year. Swisscom shares dropped 0.7 percent to 421 francs in Zurich, giving the company a market value of 25.9 billion francs ($20 billion).

Sales Decline

Swisscom sales last year stood at 10 billion francs, almost unchanged from 2003, and down from 14.5 billion francs in 2002, according to Bloomberg data. Swisscom releases third-quarter earnings on Nov. 10 and may report a 27 percent increase in quarterly profit to 482 million francs, the median estimate of eight analysts surveyed by Bloomberg showed. Sales may have dropped 5.7 percent to 2.38 billion francs.

Eircom has offered Swisscom exclusive rights to examine its financial accounts, the Irish Times reported today, without saying where it got the information. Swisscom has offered between 2.40 euros and 2.50 euros a share, the Financial Times reported, citing unidentified people familiar with the situation.

At 2.50 euros per share the company would be valued at 2.66 billion euros, more than 4 times its earnings before interest, tax, depreciation and amortization in the 12 months through March 2005. Telefonica SA's purchase of a controlling stake in Cesky Telecom AS, the biggest phone network in the Czech Republic, valued the company at 6.4 times Ebitda.

Share Repurchase

A takeover could affect any plans by Swisscom to buy back shares next year, said analysts including Steven Frey at Bank Leu AG in Zurich. The company in May announced a 2 billion- franc buyback plan for this year after cutting its 2005 forecasts because of increased competition from companies such as Cablecom Holding AG.

``Eircom looks like a second or third best choice,'' said Frey, who has a ``hold'' rating on Swisscom stock. ``The share buyback could be at stake in 2006.''

A takeover of Eircom would mark the fourth time the company has changed hands since 1999, when it first sold shares to the public. The company was bought by a group including billionaires Tony O'Reilly and George Soros in November 2001 for 3 billion euros.

Eircom, which controls 79 percent of Ireland's fixed-line phone market, returned to the stock market in March 2004, when O'Reilly, Soros and their partners held a public offering.

International acquisitions have returned to Europe's phone industry after operators overcame the debt burdens they amassed on acquisitions and on buying wireless licenses at the start of the decade. On Oct. 31 Telefonica, Spain's largest telephone company, agreed to buy Britain's largest wireless company by customers O2 Plc for 17.7 billion pounds ($31 billion).

Mobile Market

Eircom agreed this year to buy Irish mobile operator Meteor, an acquisition that gives it access to a market where consumers spend about 50 percent more on mobile calls than in the U.K., Germany and Italy.

Eircom plans to double Meteor's share of the Irish mobile market to 20 percent within four years. Meteor had 410,000 subscribers as of June 2005, compared with O2's 1.53 million and Vodafone Group Plc's 1.98 million.

Swisscom will make a further announcement ``when appropriate,'' it said in the statement today. There is no certainty an offer will be made, the company said. Swisscom spokeswoman Pia Colombo declined to further comment when contacted by Bloomberg.

To contact the reporter on this story: Dorothee Enskog at denskog@bloomberg.net Fergal O'Brien in Dublin at fobrien@bloomberg.net.

Last Updated: November 9, 2005 12:27 EST