The private equity group has recently re-iterated its desire to split the telcos into two constituent parts: one controlling the network and the other supplying telephone and internet services to residential and business users but run completely separately from the network side. Babcock's corporate finance manager Robert Topfer, who led the 2.4bn takeover of Eircom earlier this year, said last week that the move would benefit both Babcock and the wider Irish telecoms industry.

From Babcock's point of view, a split is clearly attractive. Separating out the retail arm would be the first step towards a sale, as Babcock has hinted at, which would free up capital and help it to pay down the debt burden on the network side of the business.

In a recent report on the European telecommunications industry, investment bank Bear Stearns estimated that, across the EU, fixed-line telcos such as Eircom could release up to 123bn in capital by spinning out their retail divisions.

Babcock's offer document for Eircom also expresses the view that separating the network side of the business might make it easier to raise finance to invest in new technology and improve its infrastructure and the range of services that can be offered to its customers. The network business, with its stable and predictable cash flow should, in theory, attract a better credit rating and be able to raise money more cheaply.

Following a split Babcock would, effectively, be running a utility business granting access to Eircom's cable and copper wire in return for line rental income. Eircom retail would be on the outside looking in, competing for access to its former parent's network with all the other players in the market and on the same terms.

There is also evidence that Topfer's vision of an all round win-win scenario is not as far-fetched as it might seem.

The regulator, Comreg, has already indicated that it would be prepared to consider a break-up of the company and that it sees several advantages to such a move.

In a document produced last year on the future of the telecommunications market in Ireland, the regulator acknowledged that, at least in theory, breaking up Eircom would remove any incentive that the company currently has to discriminate in favour of its own retail division.

As it stands, Eircom has no good reason to play ball with alternative operators such as BT, Smart and Magnet, all of which are seeking access to its network through a process known as local loop unbundling. Why should it let them gain entry to the closely guarded last mile of copper wire linking Eircom's exchanges to every house in the country? It has to defend its retail division's revenue and market share and, so far, has set its stall out to delay unbundling as far as possible in order to protect that.

BT Ireland chief executive Danny McLaughlin said the defensive posture was frustrating but understandable.

"Eircom is performing an entirely natural act in looking after its monopoly. It's not a registered charity last time I checked, " he said.

But with the network decoupled from its retail arm, Eircom would have every reason to encourage "access seekers", as the alternative telecoms companies are known in industry parlance.

Indeed Stephen Young, principal analyst at technology and telecoms consultants Ovum, believes that splitting may be the only way to achieve effective competition. "Some form of separation between wholesale and retail businesses may end up being the only way to guarantee equality of treatment between an incumbent's own retail activities and those of competing service providers, " he said.

James Allen, principal analyst with London-based telecommunications consultancy Analysys, said the main concern for both the regulator and the other telcos would be ensuring that the playing field is indeed level.

Allen referred to the stringent conditions imposed on BT by British regulator Ofcom prior to the spin-out of its network business, Openreach, as one example of how that has been accomplished elsewhere. Under British competition law, consumers are entitled to go directly to court to seek damages if Openreach fails to measure up to any one of a number of "undertakings".

The undertakings cover issues such as quality of service, speed of connecting customers and other procedures.

He noted, however, that for many of the access seekers the jury is still out on whether the creation of Openreach last September has been a success. An Ofcom survey during the summer concluded that there were "encouraging signs of growing trust in BT within the industry". But it also admitted that "most respondents stated that they had not seen any specific improvements so far but felt that it was too soon to comment".

Allen cautioned that such an approach "isn't an option in other countries" and would require legislative intervention in Ireland to amend both Comreg's powers and Irish competition law.

BT's Danny McLaughlin said a split could potentially be good news for Eircom's competitors. "It might make Eircom retail a harder job if they're not part of the group, " he said.

That would depend on regulation being put in place to ensure all access seekers, including Eircom retail, were treated equally.

"If they are going to go down that road, I would expect that there will be some industry consultation as part of that, " he said.

Otherwise splitting up the company, which McLaughlin said based on BT's experience would be a lengthy and difficult process, would simply result in "one monopoly becoming two monopolies".