Eircom shareholders will have to give their approval before any proposed sale of Eircell to Vodafone AirTouch can proceed. This is because the mobile company accounts for such a significant part of its parent company's business.

Shareholders will be able to express their views at a meeting along the lines of last month's marathon a.g.m. It is unlikely to be as acrimonious an affair, as shareholders could be voting to give themselves up to €4 billion (£3.15 billion) worth of Vodafone AirTouch shares.

Eircom shares continued to make gains yesterday on the back of confirmation that it was in talks with Vodafone about the possibility of a sale of all or part of Eircell. They closed at €2.87, up 12 cents on the day, having peaked at €2.95.

This was just five cents away from the €3 figure at which chief executive Mr Alfie Kane and other senior executives would get share options next month.

More than 5.5 million shares changed hands in Dublin and London yesterday, but they still have a considerable distance to go before they reach the €3.90 flotation price at which most shareholders came on board last year.

Negotiations between Eircom and Vodafone continue this week and could be concluded by the end of the month.

The size of Eircell relative to its parent means that, under stock exchange rules, the approval of shareholders must be sought.

By voting for the sale of Eircell, shareholders would be effectively voting to break up the company after less than two years in existence. The rump of the former State-owned company almost certainly would be split into its Internet and fixed-line business and sold off.

Some shareholders, including the Eircom Employee Share Ownership Plan Trustee, which holds 15 per cent of the group on behalf of past and present workers, may not be in favour of a break-up. Last month's a.g.m. was a prolonged affair with many small shareholders castigating the board of the company. Mr Kane, in particular, was singled out for criticism over the share price.

All the votes at the meeting were carried thanks to proxies held by chairman Mr Ray MacSharry on behalf of the main institutional shareholders and also the alliance of KPN and Telia which owns 35 per cent of the company. Any sale of Eircell recommended by the board could expect to get the backing of the institutional investors. Approval from the floor at the extraordinary general meeting would then be a formality. But the occasion would give dissident shareholders the chance to criticise the board once again.

Enterprise, the British services company announced yesterday that its utility services division ARM was in talks with Eircom to form a joint venture that would take over the operations of Eircom's cable laying division. Eircom has already announced that it plans to shed 3,500 jobs from its core business by means of joint ventures.

ARM carries out work for British Telecom, United Utilities, Scottish Power and the Department of Education in Northern Ireland.