Not just talk-talk this time.

Instead, the Australian investment bank has been busy buying shares and building up its stake as it prepared for the approach announced last week by Eircom. It's back to the old-fashioned way, or nearly.

Last Tuesday, Eircom announced it had received a preliminary approach from the Australian bank's acquisition vehicle, Babcock & Brown Capital, which "may or may not lead to an offer being made". By Friday, Eircom's new suitor had built its stake to around 20%, from the 12.5% it first bought in October.

The belief in the market is that Babcock & Brown's investment vehicle, an Australian fund, is likely to keep buying until it reaches the 29.9% threshold that would trigger a mandatory bid.

Meanwhile, the pace of proceedings is picking up.

JP Morgan has been appointed as lead adviser to Babcock & Brown Capital, and an Irish adviser is likely to be appointed this week. Probable contenders for that plum job are NCB Stockbrokers or Davy Stockbrokers. NCB, the first broker to buy for the Australians, has executed about 25% of Babcock & Brown Capital's share buying.

Last week, both Davy and Goodbody were in the market on behalf of Babcock & Brown Capital, but Goodbody would be in conflict as it is an adviser to Eircom alongside Morgan Stanley. Merrion Capital is off the field of contenders as well, as it is one of the advisers to the Eircom Employee Share Ownership Trust (Esot).

The Australians' communication strategy has also been fairly active. Babcock & Brown's man on the ground in Ireland, aviation industry veteran Colm Barrington, has been making informal introductions around town. A team from Babcock & Brown's London office, led by the company's John Shin, has been over and back to Dublin regularly, with the Australia-based top brass flying in for the big occasions, such as meeting Eircom head Phil Nolan.

Feelers have been put out to telecoms regulator Comreg and to government. It is understood Babcock & Brown is considering splitting the Eircom business into wholesale and retail operations, a move that regulators would be likely to welcome.

There has been more than one get-together with Comreg to sound out the regulator's views on such ideas.

Last Wednesday, at Babcock & Brown's request, a company team met officials from the Department of Communications, Marine & Natural Resources to notify the government of its interest in Eircom and to discuss the regulatory framework of the Irish telecoms market.

There has also been contact with JM Rothschild, adviser to the Eircom Esot, which owns 22% of the telco and will be looking for a sweet structuring of any takeover deal to minimise potential tax liabilities. It is still early days, but Babcock & Brown looks serious.

Babcock & Brown executive director Robert Topfer said last week that the group was expecting a fast response to its "friendly approach" to Eircom. If the price is right, it is likely to be pushing an open door.

Since the gubu-style collapse before Christmas of the Swisscom bid, there has been a widespread view that Eircom's life span under its current ownership is limited.

Against the backdrop of a consolidating European telecommunications market, a private equity or financial buyer for the company has been expected to emerge.

In the two months since the Swisscom bid fell apart, the price on offer for the former state telco has dropped. Markets have got tougher. The likely formal offer from Babcock & Brown is now speculated to be around the 2.30 mark, rather than over 2.40 which was mooted at the time of Swisscom's takeover approach.

A report last week from Citigroup suggested that the upside of a deal for Eircom shareholders might be limited. Citigroup estimated the "fair value" of Eircom at 1.90, suggested that a deal premium is already factored into the company's share price and rated the stock a 'highrisk hold'. The report predicted that it is "very unlikely" that a formal Babcock & Brown offer would be contested, "limiting the premium". It cautioned, however, that is it "still by no means a formality" that a deal will be done.

Goldman Sachs and Merrion Capital both upgraded their ratings on Eircom. Goldman Sachs noted, however, that Eircom looked expensive, was showing gross margin weakness in the fixed-line business and had limited "headcount reduction potential". Other analysts suggested that there is still some scope for Babcock & Brown to releverage.

On news of the approach by Babcock & Brown, Standard & Poor's last week placed all its Valentia ratings, including its 'BB+' long-term corporate credit rating, on CreditWatch with negative implications. Eircom already has debts of around 2bn, and it has been suggested that a Babcock & Brown deal could push that up by 1bn.

"The CreditWatch placement reflects the possibility that Valentia's credit quality could be weakened by the potential takeover if the transaction is substantially debtfinanced and results in higher leverage for the group, " said S&P credit analyst Michael O'Brien.

In an Australian media interview last week, Topfer said a key attraction for Babcock & Brown is Eircom's mobile business, Meteor.

Ownership of a mobile arm is something that most incumbent telcos do not have, Topfer said. Other potential pluses he identified included Eircom's control of the fixedline network, as well as the fact that it was operating in an under-penetrated broadband market in an economy with strong fundamentals.

Formal talks are expected to take place this week, though Eircom . . . not altogether surprisingly given its recent public scorching . . . is being very cagey.

Babcock & Brown's approach may still flush out another bidder, but the Australian company's stakebuilding puts it in pole position. One way or the other, whatever the outcome of this approach, heavy bets are now on the table that Eircom will have a new owner before the end of this year.